Danen — Annual Report 2018

Jul 5, 2019

Stock Symbol ： 3686

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Danen Technology Corporation

2018 Annual Report

Notice to readers

This English-version annual report is a summary translation of the Chinese version and is not an official document of the shareholders’ meeting. If there is any discrepancy between the English and Chinese versions, the Chinese version shall prevail.

Website of Annual Report:

Market Observation Post System: http://mops.twse.com.tw/mops/web/index Corporate website: http://www.danentech.com Print date ： June 19 [th] , 2019

1. Spokesperson and deputy Spokesperson:

Spokesperson: Wang, Jung-Chun

Title: Assistant Vice President Tel: (03)473-8788

E-mail address:pr@danentech.com

Deputy Spokesperson: Lin, Su-Ying

Title: Deputy Director Tel: (03)473-8788

E-mail address: pr@danentech.com

1. Addresses and phone numbers of headquarters, branch offices and factories:

2. (1). Headquarters and Wafer Plant 1

Address: No. 599 Huannan Rd., Guanyin Dist., Taoyuan City, Taiwan Tel: (03)473-8788

• (2). Wafer Plant 2

Address: No. 639 Huannan Rd., Guanyin Dist., Taoyuan City, Taiwan Tel: (03)473-8788

• (3). Wafer Plant 3

Address: No.868 Huannan Rd., Guanyin Dist., Taoyuan City, Taiwan

Tel: (03)473-8788

1. Stock transfer agency:

Name: Agency department of Chinatrust Commercial Bank

Address: F5, No. 83, Sec. 1, Chongqing South Rd, Zhongzheng Dist., Taipei City

Tel: (02)6636-5566 website: http://www.chinatrust.com.tw

1. CPA of Financial Report in recent years:

Name of firm: PwC Taiwan

Names of accountants: Lai, Zongxi, Zhi, Bing-Jun

Address: F27, No. 333, Sec. 1, Keelung Rd., Taipei City 11012 Tel: (02)2729-6666 website: http://www.pwc.tw

1. Names and inquiry methods of oversea exchanges for flotation of securities: None

2. Corporate website: http://www.danentech.com

Table of Contents

I. Report to shareholders ...................................................................................................................... 1 II. Company profile .............................................................................................................................. 5 1. Date of Incorporation ............................................................................................................... 5 2. Company History ..................................................................................................................... 5 III. Corporate Governance Report ....................................................................................................... 7 1. Organization ............................................................................................................................. 7 2. Directors, Supervisors and Management Team ....................................................................... 9 3. Implementation of corporate governance .............................................................................. 18 4. Information Regarding the Company‟s accountant fee .......................................................... 52 5. Replacement of CPA .............................................................................................................. 53 6. Whether the chairman, president, manager responsible for financing or accounting have held posts in the accounting firm of CPA or in its related enterprises within recent year ......................................................................................................................... 53 7. Shareholding alienation and changes of directors , supervisors, managers and the shareholders with more than 10% shares in recent year and up to the date of Annual Report publication ............................................................................................................. 53 8. The information of relationships among the top 10 shareholders .......................................... 54 9. The shares of the same reinvestment enterprises held by directors, supervisors, managers of the company or the enterprises directly or indirectly controlled by the company, and consolidating the shares and shareholding ratio ......................................... 54 IV. Capital Overview .......................................................................................................................... 55 1. Capital and shares .................................................................................................................. 55 2. Debt of the company .............................................................................................................. 60 3. Preferred stock of the company ............................................................................................. 60 4. GDR of the company ............................................................................................................. 60 5. Employee Stock Option Certificates and restricted stocks .................................................... 60 6. New share issue under merge or transfer ............................................................................... 61 7. Financial plan and execution status ....................................................................................... 61 V. Operational Highlights .................................................................................................................. 62 1.Business Activities ........................................................................................................... 62 2. Market and Sales Overview ................................................................................................... 70 3. Human Resources .................................................................................................................. 76 4. Environmental Protection Expenditure .................................................................................. 77 5.Labor Relations ................................................................................................................. 77 6. Important Contracts................................................................................................................ 79 VI. Financial overview ....................................................................................................................... 80 1. Five-year financial statement summary ................................................................................. 80 2. Five-year financial status analysis ......................................................................................... 82

1. Audit committee reports for recent years ............................................................................... 84 4. Financial Report of recent years ............................................................................................ 84 5. Financial Report verified by accountants for recent years ..................................................... 85 6. The impact to company financial condition if any financial turnover troubles within the company or subsidiary up to the date of annual report publication .................................. 85 VII. Review of Financial Conditions, Financial Performance, and risk accessment ......................... 86 1. Financial status ....................................................................................................................... 86 2. Financial performance ............................................................................................................ 87 3. Cash flow ............................................................................................................................... 88 4. The impacts of major capital spending on business in recent fiscal years ............................. 89 5. Reinvestment policies, main reasons for profits and losses, improvement plans and investment plans of coming year ....................................................................................... 89 6. Analysis of risk factors and assessments ............................................................................... 89 7. Other important matters ......................................................................................................... 93 VIII. Special Disclosure ..................................................................................................................... 97 1. Relevant information about related enterprises ..................................................................... 97 2. Information of private equity in latest year and up to the date of Annual Report publication ................................................................................................ 97 3. Shares of the company held or disposed by the subsidiaries ................................................. 97 4. Other necessary supplementary disclosure ............................................................................ 97 5. Significant impacts to shareholder equity and security price which violate Provision 2 Item 2 Article 36 of Securities Exchange Act in latest year up to the date of Annual Report publication ............................................................................................................. 97

I. Report to shareholders

To our Shareholders,

2018 is the year which the solar industry experienced the most volatility in recent years, It has experienced the challenges and changes of US Section 201, the 61 new policy of China, the defensive tariffs of India, and the EU solar products MIP removal, the overall industrial supply chain is in a state of extreme instability. Particularly, China‟s "61 new policy" has a great impact on the entire industrial of China and Taiwan. According to the preliminary statistics of the industry research institute, China's solar grid connection in 2018 is about 44.5GW, ranking first in the world, 11.4GW of the US, and India and Japan are in the third and fourth largest markets in the world. The market broke through 1 GW scale for the first time of Taiwan.

In the first quarter of 2018, due to the stimulus period of China's market policy, the overall supply chain price could still be maintained. However, prices began to fall in the second quarter, and the China Energy Bureau announced the "61 new policy" at the end of May, which drastically lowered the subsidies for photovoltaic power plants. As a result, the overall supply chain prices continued to fall sharply, especially the multi-crystalline silicon wafers fell about 60% , the worst. The sharp drop of the wafer market price has greatly affected the company's revenue. In response to such fierce market conditions, the company immediately adjusted capacity utilization, strictly selected orders, and flexibly adjusted product sales strategies and combinations according to market demand to reduce operating losses.

Looking into 2019, according to the estimation of the industry research institute, although the global market still has the opportunity to maintain growth, especially emerging markets such as Southeast Asia, North Africa, the Middle East and Latin America have risen since 2018, and the GW-class market numbers has grown from 6 of 2016 to 15 of 2019, showing the trend of continued decentralization of the global market. In addition, although the solar industry has been reduced in profitability recently due to the subsidy reduction, the overall solar energy installation target of 2025 is 20GW according to the policy. In the following years, the installation amount will continue to maintain more than 1 GW, and the growth of domestic system installation market can be expected in the next few years.

Overviewed by the development trend of solar energy at domestic and abroad and driven by the green energy policy of non-nuclear homes in Taiwan, the global solar market has the opportunity to show a continuous growth trend, which will enable Taiwan's domestic market demand and industrial supply chain to develop in the downstream direction. However, with the environment of sharp decline in the price of products of the market, it is difficult for the supply chain manufacturers to restore the condition that the industry can greatly increase the capacity

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utilization rate. The opportunity for this industrial transformation still depends on the new policy adjustments of the government and major markets, hope to change the current supply and demand relationship, and increase long-term demand, then create the possibility of continuous operation in the future. Taiwan's supply chain has undergone a miserable operation in 2018 and actively seeks for opportunities and transformation. Many players have announced that they will enter or expand the module business and power plant construction to grasp the business opportunities of Taiwan's non-nuclear homes, but the future industrial operation environment and market supply and demand changes are un-predictable. This is still the biggest challenge that the industry continues to face. The Company will continue to focus on its current sound financial position and more flexible operating strategies, pay close attention to the industry and market conditions, properly plan the mid to long-term business direction, and enable the company's operations to have a new direction and return to profitable growth.

1. 2018 Operating Report

• (1) Implementation of Business Plan

Unit: NT$ K; %

Item	2018	2017	Growth rate
Operating Revenue	522,534	948,607	(44.92%)
Gross Profit (loss)	(796,195)	(621,200)	(28.17%)
Operating Income (loss)	(855,987)	(688,071)	(24.40%)
Income before tax (loss)	(1,842,302)	(689,447)	(167.21%)
Net Income (loss)	(1,846,800)	(690,750)	(167.36%)
Total comprehensive loss	(1,846,800)	(690,750)	(167.36%)
EPS(NT$)	(5.28)	(1.98)	(166.67%)

The operating revenue of 2018 was influenced by the weak demand and significant price drop of multi c-Si products at 2H 2018.

(2) Budget implementation

The disclosure of 2018 budget implementation is not necessary since the company did not public the prediction.

• (3) Financial Status and Profitability

Unit: NT$ K; %

	Item	2018	2017
Financial Status	Ratio of liabilities to assets（％）	18.68	8.60
Solvency	Current ratio（％）	331.46	332.29

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	Item	2018	2017
	Quick ratio（％）	304.01	275.97
Profitability	Return on assets（％）	(79.24)	(19.21)
	Return on stockholder‟s equity（％）	(89.71)	(20.76)
	Gross profit（％）	(152)	(66)
	Net income percentage（％）	(353)	(73)
	EPS(NT$)	(5.28)	(1.98)

(4) Status of research and development

In 2018, the RD team of the company have dedicated to new materials and new technology development process, the specific achievements are as follows:

• A. Through the modification of the furnace hardware and optimization of the crystal growth technology, the crystallization process was converted from G5 to G6 ingots, saving 17% of electricity power and reducing manufacturing costs by 25%.

• B. Introducing diamond wire cutting technology to reduce the wafer production cost by 20%, and significantly increase the capacity of the machine to further enhance competitiveness.

2. Highlights of 2018 Business Operation Plan

• (1) Operating guidelines and Prospect

• A. Focus on the reduction of operating cash loss as the main operational objective.

• B. Actively looking for non-solar industry opportunities with development potential.

• C. Proficient in new market technology changes and new product demand trends to build future market capabilities.

• D. Adjusting different industry cooperation strategies and investing necessary resources to enhance the company's new competitiveness.

• (2) Number of sales forecast and its basis

(2) Number of sales forecast and its basis
	Unit：mt
Product	Number of sales forecast
Multi c-Si Solar Products (includingwafers)	850

The number of sales forecast for the year 2019 is based on customers‟ demands and market trends, meanwhile taking into consideration of supply chain price change and the sales target was finalized according to the Company's operating target.

• (3) Sales and production policies

• A. Control the industry's highest quality product technology and maintain market influence.

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• B. Increase productivity to meet company operational goals at each stage. Actively expand potential new business customers through strategic partnerships.

• C. Strengthen the control of new technologies and materials, and invest in new generation technologies to create new operational capabilities.

• (4) Future company development strategy

• A. Familiar with key technologies of new business to develop new products through investment in manpower and resources.

• B. Actively introduce new materials or technologies and capture new markets and customer opportunities.

• C. Develop process technology for new products and effectively improve the team's new operational capabilities.

• D. Strengthen the integration and relationship among different industries, actively invest in mid to long-term strategic technology, and grasp the opportunities and values of future industrial development.

• (5) Influenced by external competitive environment, laws & regulations and overall business operation environment

Because solar energy is an inexhaustible source of energy, the supply chain relied on the subsidies of governments to make the solar industry flourish in the past. Looking forward to the future, under the carbon reduction agreement reached at the World Climate Summit, countries around the world will continue to invest in the policy support and development of the alternative energy industry. Together with domestic policies to promote the "2025 renewable energy development goals" , future market development is still can be expected. However, due to the supply and demand challenges caused by changes of major market policies, it is still necessary for supply chain players to face and find a responsive strategy. How to continue the operation in a difficult environment in the future will be a great test and problem.

Finally, I would like to thank all shareholders for the support and encouragement to the company, on behalf of all my colleagues and members of the board, I would like to express the most sincere appreciations and thanks again.

Chairman Fang, Jenn-Ming President Fang, Jenn-Ming Chief Accounting manager Lin, Su-ying

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II. Company profile

1. Date of Incorporation:

November 9[th] , 2007

2. Company History

Date 2007.11 2007.11 2007.12 2008.02 2008.03 2008.07 2008.09 2008.10 2008.12 2009.08 2009.09 2009.10 2009.12 2010.01 2010.01 2010.02 2010.06 2010.07 2010.07 2010.08 2011.01 2011.03 2011.08 2011.08 2011.10 2012.10

Milestones Official establishment of Danen Technology Cooperation with NT$ 1 million start-up capital. With NT$ 249 million SPO, after that, the paid-up capital reached NT$ 250 million. With NT$ 65 million SPO, after that, the paid-up capital reached NT$ 315 million. Wafer Plant 1 construction started and ground breaking. With NT$ 565 million SPO, after that, the paid-up capital reached NT$ 880 million. Wafer Plant 1 building finished and the first batch of equipment installation completed and first batch of wafer trials succeeded. The products passed the verification of customers. With NT$ 30 million SPO, after that, the paid-up capital reached NT$ 910 million. Won ISO 9001 (2008) certification. With NT$ 350 million SPO, after that, the paid-up capital reached NT$ 1.26 billion. Application for public offer. Registered for GEM, code 3686. Passed certifications of ISO14001 and OHSAS18001. Received Certificate for Hi-tech Enterprise or Enterprise with Successful Technology with Market potential by MOEA/IDB. With NT$ 150 million SPO, after that the paid-up capital reached NT$ 1.41 billion. Wafer Plant 2 started to be constructed. With NT$ 66,582,000 convertible Equity warrant, after conversion, the paid-up capital reached NT$ 1,476,582,000. With NT$ 168 million SPO, after that, the paid-up capital reached NT$ 1,644,582,000. Listed in Taiwan Stock Exchange Corporation. Wafer Plant 2 was completed. Wafer Plant 3 started to be constructed. With NT$ 368million SPO, after that, the paid-up capital reached NT$ 2,012,582,000 SPO from retained earnings with a figure of NT$ 2,4150,990, after that the paid-in capital reached NT$ 2,036,732,990 Top 500 excellent exporters / importers awarded by Ministry of Economic Affairs 1staward of the top 500 fastest growing high-tech company in Asia area by Deloitte 2nd award of the top 500 fastest growing high-tech company in Asia area by Deloitte

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2013.02	With NT$ 600million SPO, after that, the paid-in capital reached
	NT$ 2,636,732,990
2013.04	Product and provide the highest efficiency and the best yield solar wafer in solar
	industry
2013.07	Issued NT$ 11.5 million restricted stocks, after capital increase, the paid-up capital
	reached NT$ 2,648,232,990
2014.02	With NT$ 850 million SPO, after that the paid-up capital reached
	NT$ 3,098,232,990
2015.01	Wrote off restricted stocks with a figure of NT$ 1,475,000, after capital decrease,
	the paid-up capital reached NT$ 3,496,757,990
2015.12	Wrote off restricted stocks with a figure of NT$ 180,000, after capital decrease, the
	paid-up capital reached NT$ 3,496,267,990
2016.04	Rewarded with top 6-20% ranking in 2015 by 2ndcorporate governance review
2017.04	Rewarded with top 6-20% ranking in 2016 by 3ndcorporate governance review
2017.04	Investment in Bio-chip & Gene technology company with NT$155M
2018.04	Rewarded with top 6-20% ranking in 2017 by 4thcorporate governance review

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III. Corporate Governance Report

1. Organization

1.1 Organization Chart

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Audit committee
Board of Directors
Compensation review committee
Internal Auditor
Chairman
President‟s office
CSR promotion working Team
Business Operations Center
Finance & Administration Technology & Operation
Accounting Engineering Management
Division
Department Division Division
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1.2 Major Corporate Functions

Department	Functions
Internal Auditor	(1) Assist functional Departments in adjusting and correcting errors during the implementation of rules and systems. (2) Establish systematic and institutionalized regulations to assess and audit the operation risks and deficiencies. (3) Conduct auditing on regular or irregular basis to ensure the operation performance and the progresses of improvement in all aspects of business operation. (4) Execute all inspections of Internal control and auditing affairs assigned by the managements.
CSR promotion working team	(1) Establish, review policy and system for corporate social responsibility working targets.

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	(2) Promote related businesses and activities for corporate social responsibility. (3) Routine report to BOD for CSR activities.
Finance & Accounting Department	(1) The integration of budget preparation ,cashfund utilization and scheduling , Bank transaction management (2) Analysis and the compilation of various costs, taxes and income withholding declarations and financial statements (3) Convene the management of shareholders' meetings and board of directors and management related documents and announcements
Administration Division	(1) Responsible for the purchases of supplies, materials and equipments , planning and execution regard to insurance, import and export related affairs. (2) General administration service, asset management and public affairs‟ planning and execution. (3) Plant, office automation and management of IT related software and hardware systems. (4) Product promotion, market strategy and product optimization management . (5) Customer relationshipand annual businessplan and execution.
Technology & Engineering Division	(1) Reduced production costs, improvement of productivity and product quality control . (2) Achieved the safety target of manufacturing environment set by SHE. (3) Product conversion efficiency,process yield and quality improvement. (4) Improve the efficiency of production equipment and achievement rate of each target. (5) Planningand management execution of factoryfacilities and system operation.
Operation Management Division	(1) Establish and manage the system of employee recruitment and assignment. (2) Planning and implementation of compensation and incentive programs. (3) Establishment and management of intellectual property and reward system. (4) The management of IP dispute resolution and related matters concerning legal litigation. (5) Planningand management of operational risk analysis and risk reduction strategy.

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2. Directors, Supervisors and Management Team

2.1 Directors and supervisors

March 31[th] , 2018 unit: one thousand share;%

Title	Nationality/ Country of Origin	Name	Gender	Date Elected	Term (Years)	Date First Elected	Shareholding when Elected	Shareholding when Elected	Current Shareholding	Current Shareholding	Spouse & Minor Shareholding	Spouse & Minor Shareholding	Shareholding by Nominee Arrangement	Shareholding by Nominee Arrangement	Experience（Education）	Other Position	Executives, Directors or Supervisors who are spouses or within two degrees of kinship	Executives, Directors or Supervisors who are spouses or within two degrees of kinship	Executives, Directors or Supervisors who are spouses or within two degrees of kinship
							Shares	％	Shares	％	Shares	％	Shares	％			Title	Name	kinship
Chairman	R.O.C.	Fang, Jenn-Ming	male	2017.5.26	3	2007.11.05	5,116	1.46	5,116	1.46	1,012	0.29	0	0	1.M.B.A of MIT 2.Graduate of Physics Department of Tsinghua University 3.Wafer Plant assistant vice-president of Winbond 4.Marketing executive of memory BU of Winbond	President of Danen Technology Cooperation	N/A	N/A	N/A
Vice- Chairman	R.O.C.	Jen, Chao-Ming	male	2017.5.26	3	2009.11.27	953	0.27	953	0.27	6,377	1.82	0	0	1..M.A. Tech. M of MIT 2.Graduate of EE Department of University of Missouri Columbia 3.Business and Product Marketing Director and Director of Strategy and Investment of Quanta Computer	1.Independent director of Howteh Technology 2. Supervisor of Centrillion Taiwan Corporation	N/A	N/A	N/A
Director	R.O.C.	Chuang, Bi-Yang	male	2017.5.26	3	2017.5.26	0	0	50	0.01	0	0	0	0	1. Master of business administration of West Texas A&M University, USA) 2.Master of Science from National Tsing Hua University 3.B.S. from National Tsing Hua University 4.Supervisor of Taimide Tech. INC. 5.Director andpresident of Onstatic	1.Supervisor of Taimide Tech. Inc 2.Director of Trillion Science Inc.	N/A	N/A	N/A

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Title	Nationality/ Country of Origin	Name	Gender	Date Elected	Term (Years)	Date First Elected	Shareholding when Elected	Shareholding when Elected	Current Shareholding	Current Shareholding	Spouse & Minor Shareholding	Spouse & Minor Shareholding	Shareholding by Nominee Arrangement	Shareholding by Nominee Arrangement	Experience（Education）	Other Position	Executives, Directors or Supervisors who are spouses or within two degrees of kinship	Executives, Directors or Supervisors who are spouses or within two degrees of kinship	Executives, Directors or Supervisors who are spouses or within two degrees of kinship
							Shares	％	Shares	％	Shares	％	Shares	％			Title	Name	kinship
															Tech Co. 6. Chairman and President of ASIA UNION ELECTRONIC CHEMICAL CROP. 7.Director of UPC Technology Corp.
Independent Director	R.O.C.	Tsai, Wen-Jing	male	2017.5.26	3	2009.11.27	0	0	0	0	0	0	0	0	1.Master of NCCU 2.Graduate of Accounting Department of Taiwan University 3.Vice director of Ching-Long CPA Firm 4.Manger of Deloitte 5.CEO of Tax system department in Certified Public Accountant Association 6.Vice chair of Tax system department in Certified Public Accountant Association	1.Director of KW CPAs Firm 2.Director of Topview Optronics Corp. 3. Independent director of Applied BioCode Corporation.	N/A	N/A	N/A
Independent Director	R.O.C.	Lin, Her-Yuan	male	2017.5.26	3	2014.6. 18	0	0	0	0	0	0	0	0	1.MSEE of University of Missouri。 2.Biological bachelor of mechanical and electronic of National Taiwan University 3.General manager of Industrial Technology Investment Cooperation 4. Senior vice-president of WK Technology Fund. 5.Senior vice-president of AsiaVest Partners 6.Senior manager of Intel Cooperation	1. Director of GVT Fund GP Ltd. 2. Director ofGVT CAPITAL MANAGEMENT CO., LTD. 3.President of Industrial Technology Investment Corporation 4. Director of TMI Holding Corporation 5. Director of Gridow Inc 6. Director of S2C TECH INC. 7. Director ofHWTrek Corporation 8. Director ofTPT Corporation Limited	N/A	N/A	N/A

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Title	Nationality/ Country of Origin	Name	Gender	Date Elected	Term (Years)	Date First Elected	Shareholding when Elected	Shareholding when Elected	Current Shareholding	Current Shareholding	Spouse & Minor Shareholding	Spouse & Minor Shareholding	Shareholding by Nominee Arrangement	Shareholding by Nominee Arrangement	Experience（Education）	Other Position	Executives, Directors or Supervisors who are spouses or within two degrees of kinship	Executives, Directors or Supervisors who are spouses or within two degrees of kinship	Executives, Directors or Supervisors who are spouses or within two degrees of kinship
							Shares	％	Shares	％	Shares	％	Shares	％			Title	Name	kinship
Independent Director	R.O.C.	Chao, Yi-long	male	2017.5.26	3	2014.6. 18	0	0	0	0	0	0	0	0	1.Doctor of Business Administration of Ohio State University 2. MS of Business school of National Taiwan University. 3. BS of Chemical Engineering of National Taiwan University 4. State Economic and Trade Commission of R.O.C. 5.member of MOEAITC 6.Dean of International Business school of National Taiwan University and director of Institute 7. President and vice-president of Consumer Report. 8. Deputy Secretary General of Consumer Foundation,R.O.C.	1. Professor of National Taiwan University school of Management 2. Independent director of Ruentex Development Co., Ltd. 3. Independent director of Taiwan Tobacco and Liquor Co.	N/A	N/A	N/A

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Title	Nationality/ Country of Origin	Name	Gender	Date Elected	Term (Years)	Date First Elected	Shareholding when Elected	Shareholding when Elected	Current Shareholding	Current Shareholding	Spouse & Minor Shareholding	Spouse & Minor Shareholding	Shareholding by Nominee Arrangement	Shareholding by Nominee Arrangement	Experience（Education）	Other Position	Executives, Directors or Supervisors who are spouses or within two degrees of kinship	Executives, Directors or Supervisors who are spouses or within two degrees of kinship	Executives, Directors or Supervisors who are spouses or within two degrees of kinship
							Shares	％	Shares	％	Shares	％	Shares	％			Title	Name	kinship
Independent Director	R.O.C.	Su, Tsung-Tsan	female	2017.5.26	3	2017.5.26	22	0.01	52	0.01	0	0	0	0	1.International Senior Managers Program (ISMP) / Harvard Business School, USA 2.Doctor of Philosophy / Princeton University, USA 3.Bachelor of Science / National Tsing-Hua University 4.Director of Material and Chemical Research Laboratories, ITRI 5.Supervisor of Nanotechnology Development Center, ITRI 6.Director of planning division, ITRI	1. Standing director of Taiwan Nanotechnology Industry Development Association.(TNIDA) 2.Director of Safety and Health Technology Center 3. Supervisor of FineArt Technology Co., Ltd.	N/A	N/A	N/A

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2.1.1 Major shareholders of institutional shareholders: none

2.1.2 Major shareholders of the Company‟s major institutional shareholders: none

2.1.3 Professional qualifications and independence analysis of directors:

Criteria Names	Meet One of the Following Professional Qualification Requirements, Together with at Least Five Years Work Experience	Meet One of the Following Professional Qualification Requirements, Together with at Least Five Years Work Experience	Meet One of the Following Professional Qualification Requirements, Together with at Least Five Years Work Experience	Independence Criteria(Note)	Independence Criteria(Note)	Independence Criteria(Note)	Independence Criteria(Note)	Independence Criteria(Note)	Independence Criteria(Note)	Independence Criteria(Note)	Independence Criteria(Note)	Independence Criteria(Note)	Independence Criteria(Note)	Number of Other Public Companies in Which the Individual is currently Serving as an Independent Director
	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 Specialist 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 Areas 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
Fang, Jenn-Ming	－	－	ˇ	－	－	－	ˇ	ˇ	ˇ	ˇ	ˇ	ˇ	ˇ	0
Jen, Chao-Ming	－	－	ˇ	ˇ	－	－	ˇ	ˇ	ˇ	ˇ	ˇ	ˇ	ˇ	1
Chuang, Bi-Yang	－	－	ˇ	ˇ	ˇ	ˇ	ˇ	ˇ	ˇ	ˇ	ˇ	ˇ	ˇ	0
Tsai, Wen-Jing	－	ˇ	ˇ	ˇ	ˇ	ˇ	ˇ	ˇ	ˇ	ˇ	ˇ	ˇ	ˇ	1
Lin, Her-Yuan	－	－	ˇ	ˇ	ˇ	ˇ	ˇ	ˇ	ˇ	ˇ	ˇ	ˇ	ˇ	0
Chao, Yi-long	ˇ	－	ˇ	ˇ	ˇ	ˇ	ˇ	ˇ	ˇ	ˇ	ˇ	ˇ	ˇ	2
Su, Tsung-Tsan	－	－	ˇ	ˇ	ˇ	ˇ	ˇ	ˇ	ˇ	ˇ	ˇ	ˇ	ˇ	0

Note: Please tick the corresponding boxes that apply to the directors or supervisors during the two years prior to being elected or during the term of office.

• (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. Not applicable in cases where the person is an independent director of the Company, its parent company, or any subsidiary in which the Company holds, directly or indirectly, more than 50% of the voting shares.

(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 outstanding shares of the Company or ranking in the top 10 in holdings.

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

(5) Not a director, supervisor, or employee of a corporate shareholder who directly holds 5% or more of the total number of outstanding shares of the Company or who holds shares ranking in the top five holdings.

(6) Not a director, supervisor, officer, or shareholder holding 5% or more of the shares, of a specified company or institution which has a financial or business relationship with the Company.

(7) Not a professional individual who is 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. These restrictions do not apply to any member of the remuneration committee who exercises power pursuant to Article 7 of the “regulations governing the establishment and exercise of power of remuneration committees of companies whose stock is listed on the TWSE or traded on the TPEx“.

• (8) Not having a marital relationship, or a relative within the second degree of kinship to any other director of the Company. (9) Not been a person of any conditions defined in Article 30 of the Corporate Law.

(10) Not a governmental, institutional person or its representative as defined in Article 27 of the Corporate Law.

• 13 -

2.2 Management Team

											April 29th, 2019Unit: shares	April 29th, 2019Unit: shares	April 29th, 2019Unit: shares	April 29th, 2019Unit: shares	April 29th, 2019Unit: shares
Title	Nationality / Country of Origin	Name	Gender	Date Effective	Shareholding		Spouse & Minor Shareholding		Shareholding by Nominee Arrangement		Experience（Education）	Other Position	Managers who are Spouses or Within Two Degrees of Kinship
					Shares	％	Shares	％	Shares	％			Title	Name	kinship
President	R.O.C.	Fang, Jenn-Ming	male	2008.01.02	5,116,409	1.46%	1,012,000	0.29%	0	0%	MBA of MIT BS of Physics Department of Tsinghua University Assistant vice-president of Winbond Wafer Plant Business executive of Winbond memory product BU	N/A	N/A	N/A	N/A
Assistant Vice President	R.O.C.	Wang, Jung-Chun	male	2016.10.01	643,564	0.18%	0	0%	0	0%	BS of EE department of CYCU Director of Process integration Division of Winbond Director of outsourcing service of memory products of Winbond Electronics Corporation Director of QA Division of Winbond	N/A	N/A	N/A	N/A

• 14 -

2.3 Compensation of directors, supervisors, president, and vice President

2.3.1 Compensation of directors

Unit: NT$ thousands

Title	Name	Remuneration	Remuneration	Remuneration	Remuneration	Remuneration	Remuneration	Remuneration	Remuneration	Ratio of Total Remuneration (A+B+C+D) to Net Income (%)	Ratio of Total Remuneration (A+B+C+D) to Net Income (%)	Relevant Remuneration Received by Directors Who are Also Employees	Relevant Remuneration Received by Directors Who are Also Employees	Relevant Remuneration Received by Directors Who are Also Employees	Relevant Remuneration Received by Directors Who are Also Employees	Relevant Remuneration Received by Directors Who are Also Employees	Relevant Remuneration Received by Directors Who are Also Employees	Relevant Remuneration Received by Directors Who are Also Employees	Relevant Remuneration Received by Directors Who are Also Employees	Ratio of Total Compensation (A+B+C+D+E+ F+G) to Net Income (%) n	Ratio of Total Compensation (A+B+C+D+E+ F+G) to Net Income (%) n	Compensation Paid to Directors from an Invested Company Other than the Company‟s Subsidiary
		Base Compensation (A)		Severance Pay (B)		Bonus to Directors (C)		Allowances (D)				Salary, Bonuses, and Allowances (E)		Severance Pay (F)		Profit Sharing- Employee Bo (G)(note2)
		The company	All companies in the consolidated financial statements(note1)	The company	Companies in the consolidated financial statements(note1)	The company	Companies in the consolidated financial statements(note1)	The company	Companies in the consolidated financial statements(note1)	The company	Companies in the consolidated financial statements(note1)	The company	Companies in the consolidated financial statements(note1)	The company	Companies in the consolidated financial statements(note1)	The company		Companies in the consolidated financial statements		The company	Companies in the consolidated financial statements
																Cash	Stock	Cash	Stock
Chairman	Fang, Jenn-Ming	1,140	－	－	－	－	－	12	－	(0.06%)	－	4,200	－	－	－	－	－	－	－	(0.29%)	－	－
Director	Jen, Chao-Ming	600	－	－	－	－	－	10	－	(0.03%)	－	－	－	－	－	－	－	－	－	(0.03%)	－	－
Director	Chuang, Bi-Yang	570	－	－	－	－	－	8	－	(0.03%)	－	－	－	－	－	－	－	－	－	(0.03%)	－	－
Independent Director	Tsai, Wen-Jing	240	－	－	－	－	－	18	－	(0.01%)	－	－	－	－	－	－	－	－	－	(0.01%)	－	－
Independent Director	Lin, Her-Yuan	240	－	－	－	－	－	20	－	(0.01%)	－	－	－	－	－	－	－	－	－	(0.01%)	－	－
Independent Director	Chao, Yi-long	240	－	－	－	－	－	20	－	(0.01%)	－	－	－	－	－	－	－	－	－	(0.01%)	－	－
Independent Director	Su, Tsung-Tsan	240	－	－	－	－	－	16	－	(0.01%)	－	－	－	－	－	－	－	－	－	(0.01%)	－	－

Note 1 ： The company is exempted from preparing Consolidated Statements.

Note 2 ： This statement is not applicable for the company due to losses after tax in 2018.

• 15 -

Range of compensation	Name of directors	Name of directors	Name of directors	Name of directors
	Total of (A+B+C+D)		Total of (A+B+C+D+E+F+G)
	The company	Companies in the consolidated financial statements	The company	Companies in the consolidated financial statements
Under NT$ 2,000,000	Fang, Jenn-Ming, Jen, Chao-Ming, Chuang, Bi-Yang, Tsai, Wen-Jing, Lin, Her-Yuan, Chao, Yi-long,	-		-
			Jen, Chao-Ming,
			Chuang, Bi-Yang
			Tsai, Wen-Jing,
			Lin, Her-Yuan,
			Chao, Yi-long ,
			Su, Tsung- Tsan
	Su,Tsung-Tsan
NT$2,000,001 ~ NT$5,000,000	-	-	-	-
NT$5,000,001 ~ NT$10,000,000	-	-	Fang,Jenn-Ming	-
NT$10,000,001 ~NT$15,000,000	-	-	-	-
NT$15,000,001 ~ NT$30,000,000	-	-	-	-
NT$30,000,001~NT$50,000,000	-	-	-	-
NT$50,000,001 ~NT$100,000,000	-	-	-	-
Over NT$100,000,000	-	-	-	-
Total	7 persons	-	7 persons	-

Note1: The Company is exempted from preparing Consolidated Statements

2.3.2 Compensation of supervisors: Not applicable (We have replaced supervisors with audit committee

composed by four independent directors selected by general shareholder meeting in 2017)

2.3.3 Compensation of president and vice president:

								Units: NT$ thousands; One Thousand Shares	Units: NT$ thousands; One Thousand Shares	Units: NT$ thousands; One Thousand Shares	Units: NT$ thousands; One Thousand Shares	Units: NT$ thousands; One Thousand Shares	Units: NT$ thousands; One Thousand Shares	Units: NT$ thousands; One Thousand Shares
Title	Name	Salaries (A)		Retirement allowance or pension (B)		Bonuses and special preferential expenses (C)		Employee rewards(D) (Note2)				Ratio of total amount of A, B, C and D to net profits after tax (Note 3)		Whether have gained reinvestment career fees from others except for subsidiaries
		Our company	All companies in Financial Statement (Note 1)	Our company	All companies in Financial Statement (Note 1)	Our company	All companies in Financial Statement (Note 1)	Our company		All companies in Financial Statement (Note 1)		Our company	All companies in Financial Statement (Note 1)
								Cash dividends	Cash dividends	Cash dividends	Cash dividends
President	Fang, Jenn-Ming	5,077	─	76	─	759	─	─	─	─	─	(0.32%)	─	─
Vice President	Wu , Yu-Yi

Note1: The Company is exempted from preparing Consolidated Statements

Note2: The Company is exempted from paying employee rewards due to losses after tax in 2018

16

Compensation range table

	Compensation range table	Compensation range table
Payroll range of president and vice president in the company	Names of president and vice president
	The company	Companies in the consolidated financial statements
Under NT$ 2,000,000	Wu Yu-Yi	─
NT$2,000,001 ~ NT$5,000,000	Fang Jenn-Ming	─
NT$5,000,001 ~ NT$10,000,000	─	─
NT$10,000,001 ~ NT$15,000,000	─	─
NT$15,000,001 ~ NT$30,000,000	─	─
NT$30,000,001 ~ NT$50,000,000	─	─
NT$50,000,001 ~ NT$100,000,000	─	─
Over NT$100,000,000	─	─
Total	2 persons	─

Note 1: The Company is exempted from preparing Consolidated Statements

• 2.3.4 Name of managers who received employee rewards and the distribution conditions: The Company is exempted from distributing employee rewards due to operating losses after tax in 2018.

• 2.3.5 Compare and report the payroll ratio via profit /loss amount of directors to all company and president/vice president to all company in the recent two years, and explain the relationships between payroll policies, standards and combinations, and the formation, review procedure of payroll, as well as corporation operating performance and future risk factors of the company.

• 2.3.5.1 The ratio via profit /loss amount of directors to all company and president/vice president to all company of the recent two years in financial statements.

Unit: NT$ thousands; %

			Unit: NT$ thousands; %	Unit: NT$ thousands; %
Title	Total payrolls		Ratio of total payrolls to net profit/loss after tax
	Year 2017	Year 2018	Year 2017	Year 2018
BOD directors	7,608	7,574	(1.10%)	(0.41%)
President and vice president	6,822	5,912	(0.99%)	(0.32%)

• 2.3.5.2 The relationships between payroll policies, standards and combinations, and the formation, review procedure of payroll, as well as corporation operating performance and future risk factors of the company .The payrolls of directors are defined and granted by the articles of incorporation, industrial standards and the corporate operating performance and go through an evaluation process of BOD and committee performance, then paid after the approval of Board of directors meeting. No more than 3% profit can be reserved for the board directors in a fiscal year. The payrolls are

17

including salaries, bonuses and employee stock option certificates, which are based on the functional responsibilities, contributions as well as reference for industrial standards.

3. Implementation of corporate governance:

3.1 Board diversity status:

The status of directors‟ abilities is as follows ：

Title	Name	Gender	Business management ability	Leadership and Decision- making ability	Knowledge of the industry	Accounti ng and financial analysis ability	Marketing
Chairman	Fang, Jenn-Ming	Male	V	V	V
Director	Jen, Chao-Ming	Male	V	V	V
Director	Chuang, Bi-Yang	Male	V	V	V
Independent director	Tsai, Wen-Jing	Male	V	V		V
Independent director	Lin, Her-Yuan	Male	V	V	V
Independent director	Chao, Yi-long	Male	V	V			V
Independent director	Su, Tsung-Tsan	Female	V	V	V

3.2 Board of directors meeting attendance:

The board of directors convened six meetings in 2018. The directors‟ attendance status is as follows.

follows.
Title	Name	Attendance in person	By proxy	Attendance Rate in Person(%)	Notes
Chairman	Fang, Jenn-Ming	6/6	0	100.00%	None
Director	Jen, Chao-Ming	5/6	1	83.33%	None
Director	Chuang, Bi-Yang	4/6	2	66.67%	None
Independent director	Tsai, Wen-Jing	5/6	1	83.33%	None
Independent director	Lin, Her-Yuan	6/6	0	100.00%	None
Independent director	Chao, Yi-long	6/6	1	100.00%	None
Independent director	Su, Tsung-Tsan	5/6	1	83.33%	None
Independent director	Cheng, Yu	6/6	0	100.00%	None

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Annotations:

• (1) If there are circumstances referred to in Article 14-3 of the Securities and Exchange Act and resolutions of the directors‟ meetings objected to by independent directors or subject to qualified opinion and recorded or declared in writing, the dates of the meetings, sessions, contents of motion, all independent directors‟ opinions and the company‟s response should be specified: None

• (2) The execution in Bills of Interest by directors shall be noted with names of directors, bill contents, reason for avoiding conflicts of interest as well as voting engagements: Date of board directors meetings: June 19[th] , 2018

• Bill contents: Lubricating aluminum sheet material technical case of HE-MING Technology Co., Ltd.

• Directors shall avoid conflicts of interest: Director Chuang, Bi-Yang

• Reasons for avoiding conflicts of interest and the voting engagements: According to article 206 of Company Act, except the non-participation of director Chuang, Bi-Yang in the vote, the case was approved without objections after the chairman‟s seeking for directors‟ opinions.

• (3) Measures taken to strengthen the functionality of the board:

• a. The company has appointed personnel to collect and disclose the company information, all the information shall be made public based on the laws and decrees can be properly disclosed in a timely manner to improve information transparency.

• b. We have approved to stipulate “Evaluation methods for the performance of board of directors meeting and functional committees” at the board director meeting on March 25[th] , 2015, and planned to conduct year performance evaluation after the end of the year. The performance evaluation results will be completed before the first Board directors meeting and functional committees meeting of following year. The results of 2017 has been presented at the board director meeting held on February 18[th] , 2019, all the evaluation indicators reached consensuses among board members and no improvement action needed at the same period.

• c. Since 2014, we have replaced supervisors with audit committee, which was composed with all the independent directors. So far, twenty-one meetings have been held successfully.

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3.3 Audit Committee:

Four independent directors were elected by shareholders‟ meeting on May 26[th] , 2017 and we have replaced supervisors with audit committee according to Securities Exchange Act on June 18[th] , 2014. Total 4 (A) audit committee meetings were held in the previous year. The attendances of the independent directors were as follows:

Title	Name	Attendance in person (B)	By proxy	Attendance rate in person (%) 【Ｂ/Ａ】	Notes
Independent director	Tsai, Wen-Jing	4/4	0	100.00%	None
Independent director	Lin, Her-Yuan	4/4	0	100.00%	None
Independent director	Chao, Yi-long	4/4	0	100.00%	None
Independent director	Su, Tsung-Tsan	3/4	1	75.00%	None
Annotations: (1) If there are the circumstances referred to in Article 14-5 of the Securities Exchange Act and resolutions which were not approved by the audit committee but approved by two thirds or more of board directors meeting, the dates of meetings, sessions, contents of motion, resolutions of the audit committee and the company‟s response to the audit committee‟s opinion should be specified: None (2) If there are independent directors‟ avoidance of motions in conflict of interest, the directors‟ names, contents of motion, causes for avoidance and voting should be specified: None (3) Communications between the independent directors, the company's chief internal auditor and CPAs (e.g. the items, methods and results of audits in corporate finance or operations, etc.) a. The internal auditors have communicated the result of the audit reports to the members of the audit committee periodically, and have presented the findings of all audit reports in the quarterly meetings of the audit committee. The company's chief internal auditor should inform the members of the audit committee on the regular reporting. b. Under the requirement of Accounting Principle no.39, the company‟s CPAs have presented the findings or the comments for the annual financial reports in audit committee meeting, The communication matters should cover key audit matters, related insider trading, lawsuit, regulation following , internal control and make sure no discrepancy between CPAs and management team. Beside, CPAs need to have direct E-mail access channel with independent directors to ensure the communication efficiency.

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3.4 Corporate governance implementation status and deviations from “The corporate governance

best-practice principles for TWSE/TPEx listed companies”

best-practiceprinciples for	TWSE/TPEx listed companies”	TWSE/TPEx listed companies”	TWSE/TPEx listed companies”
Assessment item	Implementation status			Implementation deviations and the reason(s)
	Yes	No	Explanation
(1) Does Company follow “corporate governance implementation principle” to establish and disclose its corporate governance practices?	ˇ		The company has established the corporate governance practice regulations according to [Corporate governance best practice principles for TWSE/TPEx listed companies] in 2014 and presented the revision by board directors meeting on March 25, 2015, November 7, 2016, and May 10, 2019 which were disclosed on market observation post system and corporate websites. (http://www.danentech.com/investor_cg_more.a spx?ID=5)	None
(2) Shareholding structure & shareholder equity a. Does company have internal operation procedures for handling shareholders‟ suggestions, concerns, disputes and litigation matters. If yes, have these procedures been implemented accordingly? b. Does company possess the list of major shareholders and beneficial owners of these major shareholders? c. Has the Company built and executed the risk management system and “firewall” between the Company and its affiliates? d. Has the Company established internal rules for prohibiting insider trading on undisclosed information?	ˇ		a. According to internal operation procedures, the relevant competent departments of the company are responsible for handling the recommendations, doubts, disputes and lawsuits of shareholders related, moreover, we also have spokesman, deputy spokesman and investor E-mail box, audit committee mailbox, accusation letter box for good faith management to make the information disclosure for and communication with interested parties smoothly. The boxes are disclosed on the corporate websites. (http://www.danentech.com/investor_cir.aspx) b. The Company has possessed the name lists of major shareholders and those who actually control the major shareholders, based on the shareholders list provided by stock service agent on a regular basis. And disclose the shareholding status of more than 10% shares big holders regularly under the regulations. c. The company has established [Operating methods for transactions among conglomerates, specific company, and related parties] according to Article 17 of [Corporate governance best practice principles for TWSE/TPEx listed companies]. Besides, we also examine the risk management mechanism and firewall for the financial and business relations with related parties on a regular basis within the company. d. In order to protect the shareholders‟ equity and make sure the equality among shareholders into practice, we have passed the [management procedures for preventing insider trading] against directors, managers and employees to regulate relevant conducts.	None
(3) Composition and responsibilities of the board directors a. Has the Company established a diversification policy for the composition of	ˇ		a. The company has established multiple guidelines such as gender, expertise as well as background of directors in [Corporate governance practice regulations] and [Method for director elections] according to Article 20 of [Corporate governance best practice principles for TWSE/TPEx listed companies].	None

21

Assessment item	Implementation status	Implementation status	Implementation status	Implementation deviations and the reason(s)
	Yes	No	Explanation
~~its board directors and~~ has it been implemented accordingly? b. Other than the compensation committee and the Audit committee which are required by law, does the company plan to set up other Board committees? c. Has the company established methodology for evaluating the performance of its board directors, on an annual basis? d. Does the company regularly evaluate its external accountants‟ independence?			~~Furthermore, we have put the director election~~ into practice when it is necessary. Please refer to page 9-13 and page 18 for more details of professional background and expertise of directors. b. The company has established compensation committee and Audit committee based on the laws and by now, there are no other functional committees. The Board will authorize to establish other committees when it is necessary. c. The company has approved and stipulated “Evaluation methods for the performance of Board directors and functional committees” at the board meeting on March 25th, 2015 and conduced yearly performance evaluation in regard to the meeting attendance, meeting engagement, annual training hours and other items of appraises after the end of year. The performance evaluation results will be finished before the first Board meeting and functional committee meeting of following year. Moreover, the 55 evaluation items of 2018 according to “Evaluation methods for the performance of Board meeting and functional committees” have been implemented and finished on January 10th, 2019 and reported on February 18th, 2019 at the board meeting. The evaluation result of board directors and functional committees performance in 2018 showed us the engagement of Board meeting in company‟s operations, improvements of resolution quality of Board as well as internal control, all of which have reached consensuses among board directors. d. The company conducts at least one evaluation in independence of CPA annually, which consists of 6 aspects and 18 items including accountant‟s ethics, impact from self-interests, self-evaluation, familiarity, effects of stress and special circumstances on independence. The evaluation of 2018 has been completed on February 5th, 2018 and the accountant independence statement has been received. Furthermore, the results e. Demonstrated that CPA of the company was equipped with independence. The evaluation result was submitted to audit committee and board meetings for approval on February 27th, 2018. More details for accountant independence statement can refer to attached table 1.

22

Assessment item	Implementation status	Implementation status	Implementation status	Implementation deviations and the reason(s)
	Yes	No	Explanation
(4) Does the company set up a unique department which is dedicated to or assigned with responsibility of corporate governance promotion?	ˇ		a. According to “Corporate social responsibility best practice principles”, the company established CSR promotion team at January 2015, and focused the work on corporate governance, business integrity policy, set up prevention system and audit the execution, then report to BOD on a regular basis. The promotion team representative are president andassistant Vice President, and other members including functional departments such as finance, HR, QA, manufacturing and environmental protection departments; The execution of corporate social responsibilities is based on five aspects, such as corporate governance, employee care, partnership, environmental sustainability and community participation and promote the work within corporate governance, business integrity and CSR. b. The company has assigned a dedicated person, who responsible for BOD and committee requested material and information collection and support BOD and shareholder meetings related affairs. Among these activities, once investor conference, 6 times BOD meetings, prepared and finished all these tasks and activities, and make sure the CSR working team reported to BOD at regular basis. c. The representative of CSR promotion team should have more than three years‟ experience of either legal, finance and meeting coordination; job responsibility including the material and information support to members of BOD, and help BOD members to follow regulations and following the necessary work of BOD and shareholder‟s meeting and other affairs, confirm the training requirement of BOD, help to call the investor conference meeting and 6 times of BOD meetings and make sure all procedures are all following regulation, not only meeting minutes but also the post announcements, all related affairs which belong to CSR team‟s responsibility are all need to report to BOD.	None
~~(5) Has the company~~ established a channel of communication with its stakeholders and created a stakeholders section on the company website? And respond to stakeholders‟ questions on corporate responsibilities subject?	ˇ		~~The company has established special~~ communication sections for stakeholders, designated spokesman and deputy spokesman and created E-mail boxes for investors, audit committee and accusation letter mailbox for business integrity. The stakeholders including banks, creditors, employees, suppliers, customers and the interested parties of the company can present recommendations and responses in these special sections to safeguard the interests and rights of stakeholder parties. Specially-assigned personnel in these contact channels are responsible for handling these affairs according to internal procedures. The relevant information are disclosed on the corporate website.	None

23

Assessment item	Implementation status	Implementation status	Implementation status	Implementation deviations and the reason(s)
	Yes	No	Explanation
			~~(http://www.danentech.com/investor~~_~~cir.aspx)~~
(6) Has the Company appointed a professional stock agent for shareholders‟ meetings?	ˇ		The Company has entrusted the shareholders‟ meeting related affairs to professional stock service agent-- CTBC Bank Co., Ltd.	None
(7) Information disclosure a. Has the company established a corporate website to disclose information regarding its finance, business and corporate governance status? b. Does the company use other information disclosure channels (such as maintaining an English website, designating staff to handle information collection and disclosure, appointing spokespersons, webcasting investors conference etc.)?	ˇ		a. The company has established corporate website (http://www.danentech.com) and apart from disclosing the financial and corporate governance information, we also declare and disclose the business and financial information on Market observation post system regularly or irregularly according to the regulations. b. The company has established both Chinese and English websites and designated personnel to perform related work and disclose information according to the responsibilities; the spokesperson in the company is vice president Wang, Jung-Chunand the deputy spokesperson is deputy director Lin, Su-Ying .	None
~~(8) Has the company~~ disclosed other information to facilitate a better understanding of its corporate governance practices (e.g. including but not limited to employee rights and care, investor relations, supplier relations, rights of stakeholders, directors‟ training records, the implementation of risk management policies and risk evaluation measures, the implementation of customer relations policies, and purchasing insurance	ˇ		~~a. The company has defined and disclosed~~ corporate governance regulations in the corporate governance section of corporate website, annual report, company regulations and Market Observation Post System and set task force to operate according to the procedures. b. The company has set up employee welfare committee, implemented pension system, conducted employee educational training courses, paid employee group insurance and arranged regular physical examinations and other benefits to promote a more harmonious industrial and labor relations. c. The company has disclosed the corporate information public according to laws and protected the rights and interests of investors. d. The company kept smooth communications with customers and suppliers and maintained good AR/AP positions and relationships with them. e. The company provides training courses information for all the directors from time to time and the directors attend such training	None

24

Assessment item	Implementation status	Implementation status	Implementation status	Implementation deviations and the reason(s)
	Yes	No	Explanation
~~for BOD directors)?~~			~~courses according to [Implementation~~ procedures of continuing educations for directors and supervisors of TWSE Listed and TPEx listed companies] and all the directors have finished the further training hours regulated by laws in 2018. More details for these training information of our directors can be seen from attached Table 1. f. The company has set up internal control systems and relevant governance methods and handled business according to these systems and regulations. g. The company has purchased liability insurance for directors and managers, and reported to BOD accordingly. h. The company has uploaded meeting handbook of shareholders‟ meeting and related documents on Market observation post system 30 days before general shareholder meeting. i. The company has clearly demonstrated the BOD director election nomination system in articles of corporate association. j. The company has uploaded the annual report to Market observation post system 14 days before general meeting since 2016.
(9) The improvement status for the result of corporate governance evaluation announced by Taiwan Stock Exchange corporation a. In 2018, the company actively uploaded the English version of the notice of meeting in advance, disclosing the information of the independent directors attending, explaining the setting and terms of responsibility for the company's CSR team personnel, exposing the director's compensation as specified in the company's articles of association, and taking into account the results of the directors' performance evaluation. Expose the establishment of corporate social responsibility governance team and the work of regular reports to the board of directors. Put more efforts in the items of 2018 new revision and 2017 evaluation results, such as item 1.9: The company will meet the requirement of uploading English report 30 days in advance before the shareholders meeting. Item 2.20: The company has at least one independent director on the board attending each meeting and exposing in the annual report. Item 2.21: The company sets up a full-time corporate governance staff to be responsible for corporate governance related matters, and explains the operation and implementation of the CSR unit set-up in the annual report and company website. Item 3.14: The company's annual report exposes the link between directors' performance evaluation and salary compensation. Item 4.1: The company sets up an appropriate governance structure to set and review corporate social responsibility policies and systems or related management policies, and expose these matters to the annual report and company website. b. The company plan to enhance the disclosure of Chinese version information as well as English version at annual report and website: Item 4.6: Does the company refer to international human rights conventions and formulate policies to protect human rights and specific management programs, and expose them to the company's website and annual report. c. The company will follow the new indices of 2019 corporate governance evaluation system, and focus on the necessary improvement of corporate governance dedicated activities. The annual report reveals in detail the reasons for the discussion and the resolution of the compensation committee, and the company's handlingof the BOD members' opinions. At the same time,the company's

• a. In 2018, the company actively uploaded the English version of the notice of meeting in advance, disclosing the information of the independent directors attending, explaining the setting and terms of responsibility for the company's CSR team personnel, exposing the director's compensation as specified in the company's articles of association, and taking into account the results of the directors' performance evaluation. Expose the establishment of corporate social responsibility governance team and the work of regular reports to the board of directors. Put more efforts in the items of 2018 new revision and 2017 evaluation results, such as item 1.9: The company will meet the requirement of uploading English report 30 days in advance before the shareholders meeting. Item 2.20: The company has at least one independent director on the board attending each meeting and exposing in the annual report. Item 2.21: The company sets up a full-time corporate governance staff to be responsible for corporate governance related matters, and explains the operation and implementation of the CSR unit set-up in the annual report and company website. Item 3.14: The company's annual report exposes the link between directors' performance evaluation and salary compensation. Item 4.1: The company sets up an appropriate governance structure to set and review corporate social responsibility policies and systems or related management policies, and expose these matters to the annual report and company website.

• b. The company plan to enhance the disclosure of Chinese version information as well as English version at annual report and website: Item 4.6: Does the company refer to international human rights conventions and formulate policies to protect human rights and specific management programs, and expose them to the company's website and annual report.

25

Assessment item	Implementation status	Implementation status	Implementation status	Implementation deviations and the reason(s)
	Yes	No	Explanation
website or annual report reveals information about establishing an information security and risk management framework and setting information security policies and specific management plans.

26

Attachment 1: Accountant Independence Statement

Accountant Independence Statement

Letter receiving party : Danen Technology Cooperation

Date: February 5[th] , 2018

Document No.: (2017) Tsu-Hui-Tsung Zi No. 17006788

Our firm is entrusted to audit the 2018 financial statement of the company. We hereby state:

1. The audit staff and CPA of our firm don‟t have any relation, joint investment or benefit sharing with the company or its stakeholders.

2. The audit staff and CPA of our firm don‟t hold any position of chairman, director, supervisor, manager or employee in the company or related enterprises.

3. No other disobedience stated in [Code of professional ethics gazette no. 10] that may have impacts on the independence of our firm.

PwC Taiwan

Lai, Chung-Hsih

Accountant

Zhi, Bing-Jun

27

Attached Table 1: The Implementation of Director Continuing Education of Year 2018:

Title	Name	Date	Host by	Training/Speech Title	Duratio
Director	Fang, Jenn-Ming	05.03.2018~05.03.2018	Taiwan Stock Exchange Corperation	Forum of 100% E-Voting and Enhancement of Corporate Value	6 hours
Director	Jen, Chao-Ming	28.09.2018~28.09.2018	Taiwan Academy of Banking and Finance	UBS Corporate Governance and Corporate Sustainability Management Seminar	3 hours
		12.10.2018~12.10.2018	Taiwan Insurance Institute	Corporate Governance Seminar (Third period of 2018) : Looking at the advantages and disadvantages of the implementation of the company's internal information security system from the perspective of corporate governance	3 hours
Director	Chuang, Bi-Yang	11.04.2018~11.04.2018	Taiwan Academy of Banking and Finance	UBS Corporate Governance and Corporate Sustainability Management Seminar	3 hours
		15.10.2018~15.10.2018	Financial Supervisory Commission, R.O.C	The 12thTaipei Corporate Governance Forum	3 hours
Independent director	Tsai, Wen-Jing	09.03.2018~09.03.2018	Taiwan CPA association, ROC	Following the money laundering prevention Act	3 hours
		27.03.2018~27.03.2018	Taiwan CPA association, ROC	Key points and doubts about company tax declaration	7 hours
Independent director	Lin, Her-Yuan	11.04.2018~11.04.2018	Taiwan Academy of Banking and Finance	UBS Corporate Governance and Corporate Sustainability Management Seminar	3 hours
		17.10.2018~17.10.2018	Taipei Foundation Of Finance	Tax and money laundering risk prevention	3 hours
Independent director	Chao, Yi-long	06.09.2018~06.09.2018	Training Institute, Ministry of Finance, R.O.C	"Money Laundering Prevention" Special Lecture Training in 2018	3 hours

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		07.09.2018~07.09.2018	Training Institute, Ministry of Finance, R.O.C	"Corporate Governance" Special Lecture Training in 2018	3 hours
Independent director	Su, Tsung-Tsan	04.05.2018~04.05.2018	Securities & futures market foundation	Prevention of Insider Trading Promotion Conference in 2018	3 hours
		08.05.2018~08.05.2018	Taiwan Stock Exchange Corperation	The Blueprint of New Corporate Governance Summit	3 hours

3.5 Composition, responsibility and operation of the compensation committee

The company has established compensation committee and stipulated [Statute of compensation committee] after the resolution approved by BOD meeting at October 25[th] , 2011. Then, the 4th compensation committee was set up at August 9[th] , 2017. The committee is responsible for refining compensation systems of directors and managers. The information of committee members and operation activities can be seen as follows:

3.5.1 Professional qualifications and independence analysis of compensation committee members

Title (Note1)	Criteria Name	Meets One of the Following Professional Qualification Requirements, Together with at Least Five Years‟ Work Experience	Meets One of the Following Professional Qualification Requirements, Together with at Least Five Years‟ Work Experience	Meets One of the Following Professional Qualification Requirements, Together with at Least Five Years‟ Work Experience	Independence Criteria (Note2)	Independence Criteria (Note2)	Independence Criteria (Note2)	Independence Criteria (Note2)	Independence Criteria (Note2)	Independence Criteria (Note2)	Independence Criteria (Note2)	Independence Criteria (Note2)	Number of other public companies in which the Individual is concurrent ly serving as an compensat ion committee member	Remarks
		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 specialist who has passed a national examination and been awarded a certificate in a profession necessary for the business of the company	Has work experience in the areas of commerce, law, finance, or accounting, or otherwise necessary for the business of the Company	1	2	3	4	5	6	7	8
Independent director	Lin, Her-Yuan			ˇ	ˇ	ˇ	ˇ	ˇ	ˇ	ˇ	ˇ	ˇ	0	N/A
Independent director	Tsai, Wen-Jing		ˇ		ˇ	ˇ	ˇ	ˇ	ˇ	ˇ	ˇ	ˇ	0	N/A
Independent director	Chao, Yi-long	ˇ			ˇ	ˇ	ˇ	ˇ	ˇ	ˇ	ˇ	ˇ	2	N/A

Note 1: The identity category refers to director, independent director or others.

Note 2: The members who are in line with the following conditions two years before selection and during tenure.

(1) Not an employee of the company or its affiliates

• (2) Not a director or supervisor of affiliated companies. Not applicable in cases where the person is an independent

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director of the parent company, or any subsidiary in which the Company holds, directly or indirectly, more than 50% of the voting shares.

• (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 outstanding shares of the company, or ranking in the top 10 in share holdings.

• (4) Not a spouse, relative within the second degree of kinship, or lineal relative within the third degree of kinship, of any of the persons in the above preceding three sub-paragraphs.

• (5) Not a director, supervisor, or employee of a corporate shareholder who directly holds 5% or more of the total number of outstanding shares of the company, or who holds shares ranking in the top five holdings.

• (6) Not a director, supervisor, officer of a specified company or institution which has a financial or business relationship with the company, or shareholder with holding 5% or more of the company shares.

• (7) Not a professional individual, who is the 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.

• (8) Not a person of any conditions defined in Article 30 of the Company Act.

3.5.2 Operation information of compensation committee

3.5.2.1 There are three members in compensation committee of the company.

• 3.5.2.2 Tenure of current committee members: from August 9[th] , 2017 to May 25[th] , 2020. The company held 2 committee meetings in 2018, the attendance can be seen below:

Title	Name	Attendance in person(B)	By proxy	Attendance rate (%) 【Ｂ/Ａ】	Remarks
Convener	Lin, Her-Yuan	2/2	0	100	N/A
Committee member	Tsai, Wen-Jing	2/2	0	100	N/A
Committee member	Chao, Yi-long	2/2	0	100	N/A
Other mentionable items: (1) If the board meeting declines or modifies the recommendation of the compensation committee, it should specify the date of meeting, session, content of the motion, resolution by the board meeting, and the company‟s response to compensation committee‟s opinion (eg., the compensation approved by the board meeting exceeds the proposal of the compensation committee, the condition and cause of the difference shall be specified): None. (2) If resolutions of the compensation committee are objected by members or subject to a opinion reservation recorded or declared in writing, the date of the meeting, session, content of the motion, all members‟ opinions and the response to members‟ opinion should be specified: None. (3)Compensation committee terms of reference : To improve corporate governance, strengthen board functions, assist the board of directors in implementing and evaluating the company's overall compensation and benefits policy, and the compensation of managers. (4)Compensation committee discussed topics and resolution and company's handlingof member

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	opinions
	Date	Topics
	May 14~~th~~, 2018	Topic_1 : Retention program of important manager Resolution : The company will provide a a health examination subsidy of NT$30,000 everythreeyears.
	November 7~~th~~, 2018	Topic_1 : New year work plan discussion of compensation committee in 2019 Resolution : According to the regulations of compensation committee, a least two workingmeetings are required eachyear.

3.6 Fulfillment of social responsibility

ulfillment of social responsibility
Evaluation Item	Implementation status			Deviations from “the corporate social responsibility best-practice principles for TWSE/TPEx listed companies” and the reasons
	Yes	No	Abstract Explanation
(1) Corporate governance implementation a. Does the company set up its corporate social responsibility policy and review the results of the implementation? b. Does the company provide education and training on corporate social responsibility on a regular basis? c. Does the company establish dedicated (or concurrent) department, and first-line managers authorized by the board to be in charge of the corporate social responsibility and reporting to the board? d. Does the company establish a reasonable compensation policy, and integrate the employee performance appraisal system with its corporate social responsibility policy, as well as set up an effective reward and disciplinary system?	ˇ		~~a. Based on the approval of board~~ meeting, the company has established the rule of practice on corporate social responsibility on November 5, 2014 and revised on March 25, 2015.And was disclosed on the company's internal and external websites and public information observatories. Follow the corporate governance evaluation rule set up by government, the company promote corporate social responsibility activities by the promotion team and management function including HR and IT groups promote and enhance the knowledge of social responsibility, traffic safety, environmental protection, fire prevention, health, corporate governance training, insurance knowledge information technology and corporate operations to all employees. There were 23 items of professional and knowledge-sharing education and training courses were held in theyear of 2018,with a total	None; accord with Corporate Social Responsibility Best Practice Principles for TWSE/GTSM Listed Companies

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Evaluation Item	Implementation status	Implementation status	Implementation status	Deviations from “the corporate social responsibility best-practice principles for TWSE/TPEx listed companies” and the reasons
	Yes	No	Abstract Explanation
			attendance of 60 persons and around 3 courses per participant. The average satisfaction rate of the course survey was 90.3 points and 17 times by self-learning. Besides, the employee health examination arranged by SHE department, and total 4 times done on the training courses of safety, environmental related. Corporate governance, insurance and management knowledge issued by HR department each month. IT and legal information sharing issued by IT and legal departments via monthly basis. The company was awarded with (6% to 20%) good rankings in corporate governance evaluation by government in consecutive 4 years (2015-2018) and will continue to devote resources for the promotion of corporate social responsibility. b. The company provides the education and training on a regular basis, and announced “The promotion post of corporate social responsibility “and try to build in the concept of corporate social responsibility to all employees and share these activities to board directors through meetings. c. Follow the “ Regulations of best practice for corporate social responsibility “ ,the company established a dedicated corporate social responsibility team, the management representatives including president andassistant vice president, other members are heads of all functional departments such as finance, HR,

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Evaluation Item	Implementation status	Implementation status	Implementation status	Deviations from “the corporate social responsibility best-practice principles for TWSE/TPEx listed companies” and the reasons
	Yes	No	Abstract Explanation
			~~QA, manufacturing and~~ environmental protection departments, promote the activities of corporate social responsibilities based on five aspects, i.e. corporate governance, employee care, stakeholder relationship, environmental sustainability and community participation, and the promotion results shall be reported to board meetings on a regular basis. d. The company has established “Regulations on salary payment”and “ Performance evaluation and appraisal regulations “ as the bases of reasonable compensation policies, and make sure a clear and effective rewards and punishment rules can be followed, and confirm the major compensation policy and top managements‟ reward can be reviewed by compensation committee, and all the employee performance appraisal work can be worked through by key performance indicators (KPI) and half year performance evaluation task, and these activities can be tied up together with employee welfare and corporate social responsibility. The company also clearly declare with 5% profit sharing to employees in the corporate articles of association.
(2) Development of sustainable environment a. Does the company endeavor to utilize all resources more efficiently and use renewable materials which have low impact on the environment? b. Does the company establish proper environmental management systems based	ˇ		~~a. The company has set up recycled~~ water processing system, successively recycled the process waste water for second time use. As for the wastes (waste cutting oil) produced during manufacturing, we recycle it 100% for reuse, making the resources recyclable and be effectively used again, not only cost saving but also reduce the negative impacts and loads on the environment. The company also reduce the 29.36M kw/hr	None; accord with corporate social responsibility best practice principles for TWSE/TPEx listed companies

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Evaluation Item	Implementation status	Implementation status	Implementation status	Deviations from “the corporate social responsibility best-practice principles for TWSE/TPEx listed companies” and the reasons
	Yes	No	Abstract Explanation
on the characteristics of their industries? c. Does the company monitor the impact of climate change on its operations and conduct greenhouse gas inspections, as well as establish company strategies for energy conservation and carbon reduction?			~~electricity usage successfully~~ through all power saving acticities. b. The company has completed the establishment of ISO14001 environmental management system at November 2009, we take the spirit of continuous improvement on contamination prevention, work through the PDCA cycle, and consider environmental aspect evaluation and go through internal and external audit, try to implement all possible environmental protection actions. c. The company planned to save 1% electricity power per year, after the integration of all power saving activities, achieved 65% saving in power consumption per unit, and reduced CO2 emission by 15,142 tons. The CO2 emission volume achieved 23,771 and 15,142 tons respectively. The power consumption reduction activities kept moving through system monitoring to prevent abnormal consumption and consider the risk management procedures for climate change issues, expect to see the electricity power consumption can save more than 1% for annual saving.
(3) Preserving public welfare a. Does the company formulate management policies and procedures according to relevant regulations and the international convention of human rights? b. Has the company set up an	˅		~~a. The company has established~~ rules of work and complies with relevant laws and regulations and follow international human rights conventions. For example ,Convention on the elimination of all forms of discrimination against women and rights of persons with disabilities…etc. The company protects employees'gender	None; accord with corporate social responsibility best practice principles for TWSE/TPEx listed companies

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Evaluation Item	Implementation status	Implementation status	Implementation status	Deviations from “the corporate social responsibility best-practice principles for TWSE/TPEx listed companies” and the reasons
	Yes	No	Abstract Explanation
employee hotline or grievance mechanism to handle complaints with appropriate solutions? c. Does the company provide a healthy and safe working environment and organize training on health and safety for its employees on a regular basis? d. Does the company setup a communication channel and mechanism with employees on a regular basis, as well as reasonably inform employees of any significant changes in operations which may have impacts on them? e. Does the company provide its employees with career development and training sessions? f. Does the company establish the consumer protection mechanisms and appealing procedures regarding research development, procurement, manufacturing, operating and service? g. Does the market promotion for service and product label of the company meet with relevant regulations and international standards? h. Does the company review and evaluate the records of suppliers‟ impact on the environment and society before making business partnerships?			~~equality, work rights and~~ prohibits racial and class discrimination. b. The company has set up employee complaint mail box on external and internal websites (http://www.danentech.com/inve stor_cir.aspx) and there are dedicated personnel to handle the complaints according to complaint handling procedures in a timely and effective manner. c. The company has stipulated code of practice on labor safety and health] to protect the health and safety of employees; in order to make sure the safety and health of working environment for employees, we outsource examinations on working environment every six months and undertake safe and healthy educations for employees regularly; in order to ensure the physical and psychological health of employees, we hire professional doctors in the factories to provide health consultancy in addition to the nursing staff. Besides, we also offer free annual physical examination for employees .The company promote actively the safety and health of employees, in addition to the OHSAS18001 certificate, we request for regular checks on the safety tools and environmental monitoring work. d. The company arranged regular labor relationship meetings, set up mail box and held tea party on special events, purpose to let employees have good chances to deliver messages. In addition to announce monthly operating result to disclose market information and major business condition. At the same time, the company announce and deliver information through training and information sharing channel to achieve complete communication purpose to all employees. .

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Evaluation Item	Implementation status	Implementation status	Implementation status	Deviations from “the corporate social responsibility best-practice principles for TWSE/TPEx listed companies” and the reasons
	Yes	No	Abstract Explanation
i. Do the contracts between the company and its major suppliers involve termination clauses which come into force once the suppliers breach the corporate social responsibility policy and cause appreciable impacts on the environment and society?			~~e. The company set up complete~~ training system and education plan, review and renew training plan for new on board employees, including on job training, professional skill, safety and environmental training courses, not only internal courses but also outside training, diversified education and training to ensure the ability of employee in their career development. f. The company has assigned sales and marketing division to be responsible for customer complaints, and set up guideline of product quality management, confirm the quality level at outgoing criteria, starting from the customer PO confirmation, customer complaint management and account receivables and RMA procedures all are in the regulations of the company, purpose to ensure to protect customer‟s interest, product quality confirmation, RMA and customer‟s complaint are all in the management‟s scope, and make sure customer satisfaction meet the target of business operation. Product and service mail box is sited in the corporate web site, a dedicated personnel is assigned to handle customer and product related service. (http://www.denentech.com/inve stor_cir.aspx ) g. The companyfollows all regulations and international standards in product and service promotion material, no cheating, misleading, false information or any damage, behavior could hurt customer‟s interests and trust. h. The purchasing group of the company always evaluates whether the suppliers to build partnership with, have any negative records of impact to environment and society and all documents and records can be

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Evaluation Item	Implementation status	Implementation status	Implementation status	Deviations from “the corporate social responsibility best-practice principles for TWSE/TPEx listed companies” and the reasons
	Yes	No	Abstract Explanation
			~~found at suppliers‟ basic~~ information. QC system of the company will undertake all indicators that affect environment and the society including “whether the supplier has ISO 14001 system certificate, and make sure whether its SHE management system, and operation impacts on the environment and executed audit activities and record all the information in the company. i. The company has evaluated the corporate social responsibilities and environmental impacts of major suppliers and have noted in the purchasing orders and contracts, to emphasis if suppliers involve in the violation of social and environmental responsibilities that lead to negative impacts, the contract shall be terminated at any time.
(4) Enhancing information disclosure a. Does the company disclose relevant and reliable information regarding its corporate social responsibility on its website and the Market Observation Post System?	ˇ		The company has established a special section for corporate social responsibility on the company website and disclose relevant corporate social responsibility information on annual report, website and Market Observation Post System (http://www.danentech.com/csr.asp x)	None; accord with Corporate Social Responsibility Best Practice Principles for TWSE/GTSM Listed Companies
~~(5) If the company stipulates its own corporate social responsibility practice regulation~~ according to “ corporate social responsibility best practice principles for TWSE/TPEx listed companies”, it shall clearly state the differences between the actual execution result and its regulations: None, accord with corporate social responsibilities best practice principles for TWSE/TPEx listed companies.
(6) Other important information to facilitate better understanding of the company‟s corporate social responsibility practices : a. The company invest in new process, expect to reduce the power consumption and production waste significantly. b. The company produce solar wafers,a renewable andgreen technology,we focus and dedicate

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Evaluation Item	Implementation status	Implementation status	Implementation status	Deviations from “the corporate social responsibility best-practice principles for TWSE/TPEx listed companies” and the reasons
	Yes	No	Abstract Explanation
in environmental protection work, promote actively in electricity saving and CO2 reduction for all employees. c. By now, the waste water and gases produced during the manufacturing process are treated by the pollution-prevention equipment before being discharged and the industrial wastes are entrusted to the qualified treatment agencies that are verified by competent authorities to avoid negative impacts on the environment. d. For the promotion of safety and health policies, in addition to relevant regulations of environment, safety and health, we also certificated with OHSAS 18001. e. The company has formulated regulations on safety and health to make sure health and safety of employees are assured.
~~(7) A clear statement shall be made below if the corporate social responsibility reports were verified by~~ external certification institutions: None

3.7 Ethical corporate management and implementation:

Evaluation Items	Implementation Status	Implementation Status	Implementation Status	Deviations from “The ethical corporate management best-practice principles for TWSE/TPEx listed companies” and reasons
	Yes	No	Abstract Illustration
(1) Establishment of ethical corporate management policies and programs a. Does the company declare its ethical corporate management policies and procedures in its guidelines and external documents, as well as the commitment from its board to implement the policies? b. Does the company establish policies toprevent unethical	ˇ		~~a. The company has stipulated~~ “Ethical corporate management best practice principles” and “Ethics operating procedures and business behavior standards” to regulate directors, independent directors, managers and employee‟s behavior and implemented the relevant regulations of Company act, Securities exchange act, relevant decrees and regulations of TWSE/TPEx listed companies based on the basic principle of ethical management. BOD	None; accord with ethical corporate management best practice principles for TWSE/TPEx listed companies

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Evaluation Items	Implementation Status	Implementation Status	Implementation Status	Deviations from “The ethical corporate management best-practice principles for TWSE/TPEx listed companies” and reasons
	Yes	No	Abstract Illustration
conduct with clear statements regarding relevant procedures, guidelines of conduct, punishment for violation, rules of appeal, and the commitment to implement the policies? c. Does the company establish appropriate precautions against high-potential unethical conducts or listed activities stated in article 2, paragraph 7 of the ethical corporate management best-practice principles for TWSE/TPEx listed companies?			~~directors and senior managers~~ also take active part in the training courses in terms of ethic management, recognized the decrees and put ethical management into effect. b. The company undertakes business activities based on the principles of fairnessandgood faith. In order to implement ethical management policies and prevent dishonesty behavior, we have established “Procedures for ethical management and guidelines for conduct” to regulate operation procedures, guidelines for conducts, punishment for violations as well as appeal systems and made into effective. Besides, by proceeding regular education and training for employees, we advocated the spirit of ethical management. The company handles a one-hour publicity course for the deputy level managers. Eight people participated in the discussion of integrity management regulations and company regulations. we also publish ethical management information sharing to all employees every month. All BOD directors attend insider trading and corporate social responsibility forum and related training courses, the company will continue to promote the ethical management and prevent dishonesty behavior in the new fiscal year. c. The company‟s “Procedure for ethical management and Guidelines for Conduct” has clear demonstrated that the personnel within the company shall return or refuse the benefits provided by others directly or indirectly or interests promised to be given in any form or under

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Evaluation Items	Implementation Status	Implementation Status	Implementation Status	Deviations from “The ethical corporate management best-practice principles for TWSE/TPEx listed companies” and reasons
	Yes	No	Abstract Illustration
			~~any names and need report to~~ supervisors immediately and inform the dedicated group to handle, actions to follow “ Procedures for ethical management and guidelines for conduct”. Furthermore, there are impeach mechanism and relevant penalties to effectively prevent the personnel from giving or taking illegitimate benefits or offering illegitimate political contributions along with the relevant internal control systems.
(2) Fulfill business integrity a. Does the company evaluate business partners‟ ethical records and include ethics-related clauses in business contracts? b. Does the company establish an exclusively (or concurrently) dedicated group which in charge of corporate integrity, and supervised by the board? c. Does the company establish policies to prevent conflicts of interest and provide appropriate communication channels, and implement it? d. Has the company established effective systems for both accounting and internal control to facilitate ethical corporate management, these corporate activities audited by either internal auditors or CPAs on a regular basis? e. Does the company regularly hold internal and external	ˇ		a. The company will always evaluate whether the suppliers, customers or other parties with business contacts have records of dishonesty before establishing partnerships with them. And clearly demonstrate in the contract if the suppliers violate the environmental and social responsibilities and cause negative impacts on the environment and society, the contract will be terminated or removed at any time to make sure the fulfillment of ethical management policies. b. The president office is assigned for stipulating corporate ethical management policies, supervising the implementation of regulations as well as reporting to the board of directors meeting regularly. c. The company has approved the “Procedures for ethical management and guidelines for conduct” by the board meeting at 2014,clearly described the conditions of interest contradictions, required relevant personnel to avoid these contradictions and implemented according to the procedures, in case of contradictions between personal interests and corporate rights and interests. The company also set up audit committee mail box, ethical	None; accord with Ethical Corporate Management Best Practice Principles for TWSE/GTSM Listed Companies

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Evaluation Items	Implementation Status	Implementation Status	Implementation Status	Deviations from “The ethical corporate management best-practice principles for TWSE/TPEx listed companies” and reasons
	Yes	No	Abstract Illustration
education and trainings on business operation integrity?			~~management and employee~~ complaint mail boxes, dedicated group was assigned for handing these appeals. d. The company has established accounting systems according to IAS standards and stipulated internal control systems based on “ Criteria for the establishment of internal control system for listed companies], set up internal auditing group to undertake risk evaluation and audit activities according to planned scheme. In addition, we conduct comprehensive self-assessment along with all departments within the company during the period of annual self-assessment of internal control system and reported the assessment results to audit committee and board meetings on a regular basis. e. The company has intensified the promotion of relevant policies of ethical management by internal network and deliver a handbook of work ethical regulations, conduct ethical working practices, and arrange annual training courses for internal education and adopt external training when necessary.
(3) Prosecution system and operation a. Does the company establish a clear prosecution system and reward/punishment system as well as a convenient hotline? Can the accused be reached by an appropriate person for follow-up? b. Does the company establish standard operating procedures for prosecution and related confidential process? c. Does the company provide	ˇ		~~a. The company has stipulated~~ “Procedure for ethical management and guidelines for conduct” and reward for the impeach according to the seriousness of the cases. Moreover, there are president mailbox for internal impeach and audit committee mailbox, ethical management impeach mailbox and employee complaints mailbox for external impeaches, which will be handled by dedicated group according to the complaints mailbox handling procedures. b. The company has stipulated handling procedures for complaints and clearly stated that	None; accord with Ethical Corporate Management Best Practice Principles for TWSE/GTSM Listed Companies

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Evaluation Items	Implementation Status	Implementation Status	Implementation Status	Deviations from “The ethical corporate management best-practice principles for TWSE/TPEx listed companies” and reasons
	Yes	No	Abstract Illustration
proper whistle-blower protection?			~~the dedicated assigned~~ authorities to keep confidential for all the complaints and prosecutions. Standard procedure is announced at the corporate website. c. The personnel handled with impeaches are required to keep the identity of prosecutors with highly confidential in a written statement and the company protects the prosecutors away from being improperly treated because of impeaches.
(4) Intensify information disclosure a. Does the company disclose its ethical corporate management policies and the results of its implementation on the company‟s website and MOPS?	ˇ		The company has disclosed the contents of ethical corporate management best practice principles and stipulated on corporate website (http://www.danentech.com/investo r_cg_more.aspx?ID=5)and Market Observation Post System	None; Accord with ethical corporate management best practice principles for TWSE/TPEx listed companies
~~(5) If the company has established the ethical corporate management policies based on the ethical~~ corporate management best-practice principles for TWSE/TPEx listed companies, please describe any discrepancy between the policies and implementations: No difference; Accord with ethical corporate management best practice principles for TWSE/TPEx listed companies The company has stipulated “ethical corporate management best practice principles” and “Ethics and professional standards” to regulate directors, independent directors, managers and employees and implemented the relevant regulations decrees of company act, securities exchange act, relevant laws and regulations for TWSE/TPEx listed companies based on the basic principle of ethical management. Directors and senior managers also take active part in the training courses in terms of ethic management and regulated by the laws and decrees to put ethical management into effective.
(6) Other important information to facilitate a better understanding of the company‟s ethical corporate management policies (e.g., Review and amendment of its policies). The company BOD meeting approved and established [ethical corporate management best practice principles] and [Procedures for ethical management and guidelines for conduct] at 2014, and made an amendment at the resolution of Board meeting on March 25th, 2015 which was approved atgeneral shareholders meetingofyear 2015.

3.8 Corporate governance guidelines and regulations

Please refer to our corporate website (Investor service/corporate governance) for more details

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regarding corporate governance.

http://www.danentech.com/en/investor_cg.aspx

• 3.9 Other important information regarding corporate governance

None

• 3.10 Internal control systems

• 3.10.1 Statement of internal control system:

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Statement of internal control system

of

Danen Technology Corporation

Date: February 18[th] , 2019

The self-assessment results of 2018 internal control system of the company are hereby stated as follows:

• A. The company has indeed realized that it‟s the responsibility of board of directors, managers to establish, execute as well as maintain the internal control system and the company has established this system, which targets at providing reasonable guarantee for operating results and efficiency (including profits, performance and asset security), and report with reliability, real time, transparency as well as the realization of goals that are in accordance with relevant laws and decrees.

• B. In spite of the flawless designs, the internal control system still has its own limitations and it can only provide reasonable and effective guarantees for the above three goals; furthermore, the effectiveness of the internal control system varies with the changes of environment and conditions. However, the internal control system of the company designed with self-supervision, can take immediate adjustments to make up the recognized deficiency.

• C. The company has based on the “regulations governing for the corporate internal control system established based on “Regulations for establishment of internal control systems in public companies” (hereinafter referred to as Regulations) to judge the effectiveness of the design and execution of internal control system. The judging items adopted are also known as the procedures for management and control, which is divided into five parts i.e. (1) Environmental control, (2) Risk assessment, (3) Control operations, (4). Information and communication and (5) Monitoring operations. Each part is composed by several sub-items. Please refer to “Regulations” for more details of above mentioned items.

• D. The company has adopted the above mentioned judging items for internal control system to assess the effectiveness of designs and fulfillment of internal control system.

• E. The company can safely conclude that understanding operating results, efficiency and the realization of goals, reliability, real time, transparency as well as the design and execution of internal control system in line with relevant laws and decrees are effective based on the aforementioned assessment results of internal control system (including the supervision and management of subsidiaries) carried out on December 31[th] , 2018.

• F. This Statement is the main content of the annual report and prospectus and will be made public. Any fraud, camouflage and other illegitimate affairs in the statement will bear the legal liabilities regulated in article 20, 32, 171 and 174 of securities exchange act.

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• G. We hereby declare: This statement has approved by board meeting on February 18[th] , 2019. Seven directors were presented at the Board, none opposed to this statement and the contents of this statement have reached consensuses.

Danen Technology Corporation

Chairman: Fang, Jenn-Ming

President: Fang, Jenn-Ming

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• 3.10.2 Those who entrust Internal Control System project review to accountants shall disclose the CPA Audit Report: None.

• 3.11 Whether the company and personnel within the company were punished, the personnel has penalized by the company in recent years and as of the date of Annual Report publication; whether there were significant errors and improvements:

None

• 3.12 The important resolutions of shareholders‟ meeting and Board of Directors in recent years and periods as of the date of Annual Report publication:

• 3.12.1 Major Resolutions of Shareholders‟ Meeting and Board Meetings:

• (1) Important Resolutions of 2016 Annual Shareholders' Meeting

Date	Date	Item	Item	Major resolutions	Major resolutions	Major resolutions
2018/05/29		Shareholders' meeting of Yr.2018		1、Approval for 2017 Annual Business Report and Financial Statements. 2、Approval for the Proposal of 2017 Deficit Compensation of loss.
)Important Resolutions of			Board of Directors
Date	Item		Major resolutions		Item listed in the provisions of Article 14-3 of the Securities and Exchange Act	Against opinion from independent directors
2018/5/14	The 6thsession of the 5thboard meeting		1、 Approved the amendment in the "Internal Control System" and "Internal Audit Implementation Rules" of the company 2、 Approved the unaudited financial statements for the first quarter ended March 31, 2018 3、 Approval for executing loan agreements with banks All of resolutions: Any of opinion from independent directors : None Executions of independent directors‟ opinion : None Resolution approved by all of directors.		V V V	None

• (2) Important Resolutions of Board of Directors

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Date	Item	Major resolutions	Item listed in the provisions of Article 14-3 of the Securities and Exchange Act	Against opinion from independent directors
2018/6/19	The 7stsession of the 5thboard meeting	1、 Approved the Lubricating Aluminum Sheet Material Technical case of Heming Technology. 2、 Approved the operation strategy and transformation case of the company. The results of the first motion resolution are as follows: Independent Director's Opinion: This investment case should evaluate the relevant production, operation, capital and other plans for the next three years. The company's handling of the opinions of independent directors: There should have room for the price of this investment case and please negotiate to reduce it. Resolutions : In addition to the avoidance of the interests of the directorsChuang, Bi-Yang, the chairman consulted and got consensus from directors in the meeting. The case was approved by the attached opinion. The results of the second motion resolution are as follows: Any of opinion from independent directors : None Executions of independent directors‟ opinion : None Resolution: After consultation with all the directors and discussions, the resolution was implemented in accordance with the operational strategy as reported, and continued to focus on and evaluate the company's future operationalplans.	V V	None
2018/8/3	The 8ndsession of the 5thboard meeting	~~1~~、 ~~Approval the results of the asset~~ valuation assessment 2、 Approved the unaudited financial statements for the second quarter ended June 30, 2018. All of resolutions: Any of opinion from independent directors : None Executions of independent directors‟ opinion : None Resolution approved byall of directors.	V V	None

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Date	Item	Major resolutions	Item listed in the provisions of Article 14-3 of the Securities and Exchange Act	Against opinion from independent directors
2018/11/7	The 9thsession of the 5thboard meeting	1、 Approval to the change of financial and accounting supervisor . 2、 Approval to the appointment of the new financial and accounting supervisor. 3、 Approved the financial statements for the third quarter ended September 30, 2018. 4、 Approved the proposal of 2019 internal auditing plan. 5、 Approved the amendment for the Company's "Organizational Procedures of Audit Committee". 6、 Approved the amendment for the Company's "Budget Management Measures" case All of resolutions: Any of opinion from independent directors : None Executions of independent directors‟ opinion : None Resolution approved by: all of directors.	V V V V V V	None
2019/2/18	The 10thsession of the 5thboard meeting	~~1~~、 ~~Approved the declaration of “Statement~~ of 2018 internal control system”. 2、 Approved the company's proposal for 2018 annual asset impairment case 3、 Approved the 2018 annual operation report and financial statements. 4、 Approved the proposal for 2018 annual deficit compensation of loss. 5、 Approved the company's proposal for capital reduction to make up the loss case. 6、 Approved the company‟s plan for applying cash replenishment by issuing ordinary shares in the form of private placement or public offering in response to the needs of future working capital or the introduction of strategic investors. 7、 Approved the company's 2019 accountant appointment and annual fee case. 8、 Approved the amendment for revisions of the sections on "Acquisition or Disposal of Assets Processing Procedures." All of resolutions: Any of opinion from independent directors : None Executions of independent directors‟ opinion : None Resolution approved byall of directors.	V V V V V V V V	None

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==> picture [468 x 267] intentionally omitted <==

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

Item listed
in the
provisions Against
of Article opinion from
Date Item Major resolutions
14-3 of the independent
Securities directors
and
Exchange
Act
1、 Approval to the company's suspending V
on non-economical fab operation and
disposal these idle assets. V
2、 Approved the 2019 business plan.
3、 Approved the company‟s plan for BOD V
The 11 [th] session director liability insurance case.
4 、 Approved the company‟s calling of V
of the 5 [th] board
2019/3/13 2019 shareholders' meeting None
meeting All of resolutions:
Any of opinion from independent directors :
None
Executions of independent directors‟
opinion : None
Resolution approved by all of directors.
----- End of picture text -----

3.12.2 The execution of resolutions of shareholders‟ meeting of 2018

• 3.12.2.1 Acknowledged the business report and financial statement of year 2017

Execution result: Approved

• 3.12.2.2 Acknowledged the deficit off-setting of year 2017

Execution result: Approved and handled the relevant accounts according to regulations.

3.12.3 Major resolutions of Audit committee‟s meeting

Date	Item	Major resolutions	Item listed in the provisions of Article 14-5 of the Securities and Exchange Act	The resolution approved by the directors of more than 2/3 without the approval of the audit committee
2018/5/14	The 4thsession of the 2ndaudit committee	1、 Approved the amendment for "Internal Control System" and "Internal Audit Implementation Rules". 2、 Approved the unaudited financial statements for the first quarter ended March 31, 2018. All of resolutions: Approved by audit committee Executions of audit committee‟s opinion : None	V V	None

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Date	Item	Major resolutions	Item listed in the provisions of Article 14-5 of the Securities and Exchange Act	The resolution approved by the directors of more than 2/3 without the approval of the audit committee
2018/8/3	The 5stsession of the 2ndaudit committee	1、 Approved the results of the asset valuation and assessment with additional explanations and amendments to this case. 2、 Approved the unaudited financial statements for the second quarter ended June 30, 2018. Approved by audit committee Executions of audit committee‟s opinion : None	V V	None
2018/11/7	The 6ndsession of the 2nd audit committee	1、 Approved the change of the company's financial and accounting supervisor. 2、 Agreed~~to~~the appointment of the new financial and accounting supervisor. 3、 Approved the proposal of 2019 internal auditing plan. 4、 Approved the financial statements for the third quarter ended September 30, 2018. 5、 Approved the amendment for the Company's "Organizational Procedures for the Audit Committee". All of resolutions: Approved by audit committee Executions of audit committee‟s opinion : None	V V V V V	None
2019/2/18	The 7thsession of the 2ndaudit committee	1、 Approved the declaration of “Statement of 2018 internal control system”. 2、 Approved the proposal for asset impairment case of 2018. 3、 Approved the 2018 annual operation report and financial statements. 4、 Approved the proposal of 2018 annual deficit compensation for loss. 5、 Approvedtheproposal of reducing capital to make up for losses. 6、 Approved the proposal of raising new cash fund by issuing ordinary shares via private placement or public offering. 7、 Approved the appointment and annual fee of accountants in 2019. 8、 Approved the amendment of the sections on "Acquisition or Disposal of Assets Processing Procedures". Results of the above-mentioned resolution 1.2.3.4.5.7.8 of the Audit Committee: Approved by audit committee Executions of audit committee‟s opinion : None Results of the above-mentioned 6 motion audit committee resolution: The amendments were slightlyamendedas	V V V V V V V V	None

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Date	Item	Major resolutions	Item listed in the provisions of Article 14-5 of the Securities and Exchange Act	The resolution approved by the directors of more than 2/3 without the approval of the audit committee
		follows: "The company is considering the need for future working capital, or the introduction of strategic investors, and intends to raise new cash fund by issuing ordinary shares via private placement or public offering." Approved by audit committee Executions of audit committee‟s opinion : None
108/3/13	The 8thsession of the 2ndaudit committee	~~Approval to the company's suspending on~~ non-economical fab operation and disposal these idle assets. Approved by audit committee Executions of audit committee‟s opinion : None	V	None

• 3.13 Major issues of record or written statements made by any director or supervisor dissent to important resolutions approved by the board meeting:

None

• 3.14 Resignation or dismissal of the company‟s key individuals, including the chairman, CEO, and heads of accounting, finance, internal audit and R&D:

None

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4. Information regarding the company‟s accountant fee

4.1 Audit Fee

dit Fee	dit Fee
Accounting Firm		Name	of CPA		Period Covered by CPA‟s Audit			Remarks
PwC Taiwan		Lai, Chung-Hsih	Zhi,	Bing-Jun	2018.1.1~2018.12.31			None
						Unit: NT$ thousands
Notch of amount		Public-fund items		Audit Fee		Non-audit Fee	Total
1	Under NT$ 2,000,000			ˇ		ˇ	ˇ
2	NT$2,000,001 ~ NT$4,000,000
3	NT$4,000,001 ~ NT$6,000,000
4	NT$6,000,001 ~ NT$8,000,000
5	NT$8,000,001 ~ NT$10,000,000
6	Over NT$100,000,000

• 4.2 The company with any conditions below shall disclose the items listed below

• 4.2.1 Those non-audit fees paid for CPA, accounting firm of CPA and for the related enterprises are more than one quarter of audit fees shall be disclosed, including the amount of audit and non-audit fees and non-audit services:

Unit: NT$ thousands

Accounting Firm	Name of CPA	Audit fee		Non-audit Fee	Non-audit Fee			Period covered by CPA‟s audit	Remarks
			System of design	Company registration	Human resource	Others	Subtotal
PwC Taiwan	Lai, Chung-Hsih Zhi, Bing-Jun	1,800	0	0	0	0	0	2018	Internal job adjustment

• 4.2.2 Those enterprises that paid audit fees for change of accounting firm and the amounts of audit fees are less than the ones of prior year should disclose the audit fees before and after changes and the reasons: None

• 4.2.3 Those enterprises whose audit fees decrease more than half of the ones of prior year shall disclose the reduction amounts, percentage and reasons: None

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1. Replacement of CPA: PwC accounting firm performs internal regular rotations to maintain the independence of the accountant. The accountant for the company's financial report audit was changed from Li,Siou-Ling accountant and Zhi, Bing-Jun accountant to Zhi, Bing-Jun accountant and Lai, Chung-Hsih accountant since the first quarter of 2018.

2. Whether the chairman, president, manager responsible for financing or accounting have held posts in the accounting firm of CPA or in its related enterprises within recent year: None

3. Shareholding alienation and changes of directors , supervisors, managers and the shareholders with more than 10% shares in recent year and up to the date of Annual Report publication:

4. 7.1 Changes in equity of directors, supervisors, managers as well as major shareholders

Unit: share

				Unit: share	Unit: share
Title	Name	Year 2018		As of March 31th,2019
		Increments and decrements of shares holding	Increments and decrements of pledged shares	Increments and decrements of shares holding	Increments and decrements of pledged shares
Chairman	Fang, Jenn-Ming	0	0	0	0
Vice Chairman	Jen, Chao-Ming	0	0	0	0
Director	Chuang, Bi-Yang	0	0	50,000	0
Independent Director	Tsai, Wen-Ching	0	0	0	0
Independent Director	Lin, Her-Yuan	0	0	0	0
Independent Director	Chao, Yi-long	0	0	0	0
Independent Director	Su, Tzung-Tsan	0	0	0	0
Assistant Vice President	Wang, Jung-Chun	0	0	0	0
Manager	Fan Chiang, Kun-Yan	0	0	0	0

• 7.2 Shares Trading with Related Parties: None

• 7.3 Shares Pledge with Related Parties: None

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1. The information of relationships among the top 10 shareholders

April 29[th] , 2019 Unit: One Thousand share; %

Name	Current Shareholding	Current Shareholding	Spouse‟s/minor ‟s shareholding	Spouse‟s/minor ‟s shareholding	Shareholding by nominee arrangement	Shareholding by nominee arrangement	Name and relationship between the company‟s top Ten shareholders, or spouses or relatives within two degrees	Name and relationship between the company‟s top Ten shareholders, or spouses or relatives within two degrees	Remarks
	Shares	%	Shares	%	Shares	%	Name	Kinship
Liang,Chi-Chen	5,789	1.66%	－	－	－	－	－	－	－
Luo,Cing-Chuan	5,678	1.62%			－	－	－	－	－
Hung,Wen-Chin	5,183	1.48%	2,147	0.61%	－	－	－	－	－
Fang,Jenn-Ming	5,116	1.46%	1,012	0.29%	－	－	－	－	－
Lin,Mu-Chuan	4,990	1.43%	－	－	－	－	－	－	－
Investment account of security (DFA ) trusteed byCitibank					－	－	－	－	－
	4,108	1.17%	－	－
DFA Sub-fund of Emerging Markets Small Cap Fund trusteed by Citibank			－	－	－	－	－	－	－
	2,771	0.79%
Chen, Yu-Lian	2,444	0.70%	－	－	－	－	－	－	－
Fund trusteed by Standard Chartered Bank			－	－	－	－	－	－	－
	2,070	0.59%
Lin,Chien-Chang	2,049	0.59%	－	－	－	－	－	－	－

1. The shares of the same reinvestment enterprises held by directors, supervisors, managers of the company or the enterprises directly or indirectly controlled by the company, and consolidating the shares and shareholding ratio:

None

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IV. Capital overview

1. Capital and shares

1.1 Source of Capital

1.1.1 Issued Shares

Unit: One Thousand share; NT$ thousands

						Unit: One Thousand share; NT$ thousands	Unit: One Thousand share; NT$ thousands	Unit: One Thousand share; NT$ thousands
Month/ Year	Par Value (NT$)	Authorized Capital		Paid-in Capital		Remark
		Shares	Amount(NT$ thousands)	Shares	Amount(N T$ thousands)	Sources of Capital	Capital Increased by Assets Other than Cash	Other
November 2007 November 2007 December 2007 March 2008 October 2008 August 2009 January 2010 June 2010 July 2010 March 2011 August 2011 February 2013 July 2013 February 2014 January 2015 December 2015	10 10 10 10 30 18 32 10 50 59 10 14.09 0 15.46 0 0	25,000 25,000 120,000 120,000 120,000 180,000 180,000 180,000 180,000 280,000 280,000 280,000 280,000 350,000 350,000 350,000	250,000 250,000 1,200,000 1,200,000 1,200,000 1,800,000 1,800,000 1,800,000 1,800,000 2,800,000 2,800,000 2,800,000 2,800,000 3,500,000 3,500,000 3,500,000	100 25,000 31,500 88,000 91,000 126,000 141,000 147,658.2 164,458.2 201,258.2 203,673.2 263,673.2 264,823.3 349,823.3 349,675.8 349,626.8	1,000 250,000 315,000 880,000 910,000 1,260,000 1,410,000 1,476,582 1,644,582 2,012,582 2,036,732 2,636,732 2,648,233 3,498,233 3,496,758 3,496,268	Capital establishment Capital increase Capital increase Capital increase Capital increase Capital increase Capital increase Execution of Employee Stock Option Certificates Capital increase Capital increase Capital increase from surpluses Capital increase Restricted stocks Capital increase Capital decrease of restricted stocks Capital decrease of restricted stocks	None None None None None None None None None None None None None None None None	Note1 Note2 Note3 Note4 Note5 Note6 Note7 Note8 Note9 Note10 Note11 Note12 Note13 Note14 Note15 Note16

Note 1：Date of approval and registration and document No. are November 9[th] , 2007 and Ri-Fu-Chan-Ye Zi No. 09691818000 respectively. Note 2：Date of approval and registration and document No. are December 18[th] , 2007 and Ri-Fu-Chan-Ye Zi No. 09693594700 respectively. Note 3：Date of approval and registration and document No. are January 14[th] 2008 and Ri-Fu-Chan-Ye Zi No. 09780124600 respectively. Note 4：Date of approval and registration and document No. are April 9[th , ] 2008 and Ri-Jing-Shou-Shan Zi No. 09701082540 respectively Note 5: Date of approval and registration and document No. are October 24[th] , 2008 and Ri-Jing-Shou-Shan Zi No. 09701271840 respectively.

Note 6：Date of approval and registration and document No. are August 27[th] , 2009 and Ri-Jing-Shou-Shan Zi No. 09801192040 respectively. Note 7：Date of approval and registration and document No. are February 3[rd] , 2010 and Ri-Jing-Shou-Shan Zi No. 09901022670 respectively. Note 8：Date of approval and registration and document No. are July 8[th] , 2010 and Ri-Jing-Shou-Shan Zi No. 09901145830 respectively. Note 9：Date of approval and registration and document No. are August 9[th] , 2010 and Ri-Jing-Shou-Shan Zi No. 09901176690 respectively. Note 10: Date of approval and registration and document No. are April 6[th] , 2011 and Ri-Jing-Shou-Shan Zi No. 10001064740 respectively. Note 11: Date of approval and registration and document No. are August 12[th] , 2011 and Ri-Jing-Shou-Shan Zi No. 10001187300 respectively.

Note 12: Date of approval and registration and document No. are February 18[th] , 2014 and Ri-Jing-Shou-Shan Zi No. 10201029210 respectively.

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Note 13: Date of approval and registration and document No. are July 17[th] , 2014 and Ri-Jing-Shou-Shan Zi No. 10201143450 respectively. Note 14: Date of approval and registration and document No. are February 11[th] , 2014 and Ri-Jing-Shou-Shan Zi No. 10301019530 respectively.

• Note 15: Date of approval and registration and document No. are January 17[th] , 2015 and Ri-Jing-Shou-Shan Zi No. 10301260750 respectively.

• Note 16: Date of approval and registration and document No. are December 11[th] , 2015 and Ri-Jing-Shou-Shan Zi No. 10401262780 respectively.

1.1.2 Types of shares Unit: One Thousand share

Types of shares				Unit: One Thousand share
Types of shares	Authorized capital stock			Note
	Outstanding capital stock	Unissued capital stock	In total
Registered common stock	349,626.8	373.2	350,000	Shares of public companies

1.1.3 Related information of shelf registration system: None

1.2 Status of shareholders

April 29[th] , 2019 Unit: person, share; %

Shareholders‟ structure Numbers	Government agencies	Financial institutions	Other juridical persons	Foreign institutions & natural persons	Domestic natural persons	Treasury shares	Total
Number of Shareholders
	0	0	111	49	37,372	0	39,619
Shareholding (shares)
	0	0	739,871	12,187,829	336,699,099	0	349,626,799
Percentage	0.00%	0.00%	0.21%	3.49%	96.30%	0.00%	100.00%

1.3 Shareholding Distribution Status

April 29[th] , 2019 Unit: share; %

Class of shareholding (Unit: Share)	Number of shareholders	Shareholding (Shares)	Percentage
1-999	15,861	235,909	0.07%
1,000-5,000	12,819	30,519,545	8.73%
5,001-10,000	3,851	31,688,047	9.06%
10,001-15,000	1,281	16,308,099	4.66%
15,001-20,000	1,089	20,506,376	5.87%
20,001-30,000	898	23,393,923	6.69%
30,001-40,000	429	15,457,456	4.42%
40,001-50,000	296	13,983,492	4.00%
50,001-100,000	574	42,150,853	12.06%
100,001-200,000	235	32,657,146	9.34%
200,001-400,000	126	34,826,581	9.96%
400,001-600,000	30	14,558,762	4.16%
600,001-800,000	15	9,977,764	2.85%
800,001-1000,000	6	5,438,732	1.56%
1,000,001 or over	22	57,924,114	16.57%
Total	37,532	349,626,799	100.00%

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1.4 List of major shareholders

April 29[th] , 2019 Unit: share; %

	April29th	, 2019 Unit: share; %
Shares Names of major shareholders	Shares held	Shareholding ratio (%)
Liang, Chi-Chen
	5,788,640	1.66%
Luo, Cing-Chuan
	5,678,000	1.62%
Hung, Wen-Chin
	5,182,603	1.48%
Fang, Jenn-Ming
	5,116,409	1.46%
Lin, Mu-Chuan
	4,990,000	1.43%
Investment account of security (DFA ) trusteed by Citibank	4,108,000	1.17%
DFA Sub-fund of Emerging Markets Small Cap Fund trusteed by Citibank
	2,771,000	0.79%
Chen, Yu-Lian	2,443,756	0.70%
Fund trusteed by Standard Chartered Bank	2,070,000	0.59%
Lin, Chien-Chang	2,048,706	0.59%
Total
	40,197,114	11.49%

1.5 Market price, net worth, earnings, and dividends per share

Unit: NT$

					Unit: NT$
Items	Years		2017	2018	01/01/2019-03/31/2019 (Note 8)
Market price per share (Note 1)	Highest market Price		8.48	7.74	3.00
	Lowest market Price		5.70	2.70	1.44
	Average market Price		7.03	5.14	1.86
Net Worth per Share (Note 2)	Before distribution		8.53	3.25	3.14
	After distribution		8.53	Yet to be distributed	Yet to be distributed
Surpluses per share	Weighted average shares		349,627	349,627	349,627
	Surpluses per share(Note 3)		(1.98)	(5.28)	(0.11)
Dividends per share	Cash dividends		-	-	-
	Stock	Dividends from Retained Earnings	-	-	-

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	Dividends	Dividends from capital surplus	-	-	-
	Accumulated undistributed dividends(Note 4)		-	-	-
Investment rewards analysis	Price/earnings ratio (Note 5)		(3.55)	(0.97)	(16.91)
	Price/dividend ratio (Note 6)		-	-	-
	Cash dividend yield rate (Note 7)		-	-	-

• Note 1: Presenting the highest and lowest market values of common stocks of each year and calculating average market values according to transaction values and amount of each year.

• Note 2: Fill the forms based on issued shares in the year end and according to the distribution resolutions of shareholders‟ meeting of coming year.

• Note 3: If the retroactive adjustments are necessary due to stock grants and other reasons, the surpluses per share before and after adjustment shall be presented.

• Note 4: If the issue terms of equity securities require that the undistributed dividends of previous years that are accumulated and not distributed until the year with surpluses shall be disclosed.

• Note 5: Price-earnings ratio=average closing price per share of current year/surplus per share.

Note 6: Capital-interest ratio= average closing price per share of current year/cash dividends per share.

Note 7: Cash dividends yields ratio=cash dividends per share/average closing price per share of current year Note 8: The information audited by accountant.

1.6 Dividend policy and implementation status

1.6.1 The dividend policies stipulated in the Articles of Corporation

• The dividends and bonuses are only available when there are surpluses in the company. The net profits of the company for each annual financial year shall be allocated in the following order:

• 1.6.1.1 Paying taxes.

• 1.6.1.2 Offsetting the losses.

• 1.6.1.3 Set aside ten percent (10%) as legal reserve unless the accumulated amount of such legal reserve equals to the total capital of the company.

• 1.6.1.4 Setting aside or make any reversal of an amount as Special Reserve pursuant to the applicable rules and requirements of the committees

• 1.6.1.5 With respect to the earnings available for distribution, i.e. the net profit after the deduction of the items 1.6.1.1 to 1.6.1.4 above plus the previously cumulative undistributed retained earnings, the board meeting may present a proposal to distribute to the shareholders by way of dividends at the regular meeting for approval.

The allocation of the directors‟ remuneration not exceeding three percentages of the annual

earnings and not less than five percentages of employee remuneration and a company may set off losses if any accumulated losses.

58

Resolutions at a shareholders' meeting for the allocation of the employees‟ remuneration and directors‟ remuneration shall be adopted by a majority vote of the directors present, who represent over two-thirds of the directors and report in the meeting.

The allocation of the employee bonuses in the form of cash or shares, the employees entitled to such share bonuses may include employees of the Subordinate Companies satisfying certain criteria.

The industrial environments are changeable and diverse and the corporate life cycle are in the first stage and continued to develop. In order to perfect the financial planning and pursue sustainable development, it‟s necessary to stipulate the dividend distribution policies. Several factors shall be taken into consideration when it comes to the establishment including future capital expenditure budget and fund demands, the necessity of handling financial problems with surpluses. By doing these can the retained earnings, distributed amounts and the dividends and bonuses distributed to shareholders in cash can be determined. Earnings may be distributed in the form of cash dividends and/or shares, but the cash dividends are prior to any shares, or distribution by the amount of dividends. Share dividends shall comprise a minimum of fifty percent (50%) of the total dividends allocated to Shareholders.

• 1.6.2 The dividend distribution scheme proposed at this shareholders‟ meeting

The dividends and bonuses are not available due to zero surpluses in 2018.

The dividends distribution of the company over the years：

The cash dividends and the stock dividends of 2010 distributed in 2011 are NT$ 201,258 thousand and NT$ 24,151 thousand respectively and the total amount distributed accounts for 47.07% of the profits after tax.

There were zero after-tax profits between 2012 and 2017, therefore, the dividends distributions are not available according to Articles of Corporation, and namely the dividend distribution rate was 0%.

• 1.6.3 Whether the dividend policies are estimated to subject to major changes: None

• 1.7 The effects the stock grants proposed at this shareholders‟ meeting exerting on the corporate performance and surpluses per share

This is not applicable due to the unavailability of dividends and bonuses of 2018.

• 1.8 Remunerations for employees and directors

• 1.8.1 The percentage and range of remunerations for employees and directors recorded in the Articles of Corporation

The allocation of the directors‟ remunerations should not exceed three percentages of the annual

59

earnings and no less than five percentages of employee remuneration and a company may set off losses if there are any accumulated losses.

The allocation of the directors and employees‟ remunerations in the Articles of Corporation mentioned above are the draft mapped out by the board, which needs to be approved at the regular meeting of shareholders.

• 1.8.2 The handling of difference between estimated allocation amounts and estimated bases of remunerations for employees and directors ; shares calculation bases of employees and directors‟ remunerations paid in dividends and actual allocation amounts: none.

• 1.8.3 The remuneration allocation resolutions passed at the Board:

• 1.8.3.1 Remunerations paid in cash or stocks for employees and directors: none

• 1.8.3.2 The ratio between compensations for employees paid in stock allocation and after-tax profits in individual or several financial statements; and the ratio between total amount of employees‟ remunerations and after-tax profits in individual or several financial statements: none.

• 1.8.4 The actual compensation allocation for employees and directors of prior years (including number of shares, amount and share price distributed), the variances, reasons and handling situations shall be clearly stated if there are differences from the recognizing compensations for employees and directors: none.

• 1.9 Whether the company has repurchased the shares of its own: None

• Debt of the company:

None

1. Preferred stock of the company:

None

1. GDR of the company:

None

1. Employee stock option certificates and restricted stocks

2. 5.1 The management of employee stock option certificates yet to expire as of the date of annual report publication and its impacts on the interests and rights of shareholders shall be disclosed: None.

3. 5.2 The names subscription situations of manager with employee stock option certificates and the top ten employees with option-certificate stocks as of the date of annual report publication: None.

4. 5.3 The management status of restricted stocks

The management status of restricted stocks of year 2015:

The proposals for issuing restricted stocks in 2015 have been passed at the shareholders meeting of

60

2015, yet haven‟t actually issued as of the date of annual report publication.

• 5.4 The names subscription situations of manager with employee stock option certificates and the top ten employees with option-certificate stocks: None

• New share issue under merge or transfer

• None

• Financial plan and execution status

• The issued or privately collected negotiable securities of the company previously yet to be finished or finished in recent three years but without expected profits as of one quarter prior to date of Annual Report publication: None.

The use of proceeds for negotiable securities issuance has been finished as of one quarter prior to date of annual report publication.

61

V. Operational Highlights

1. Business Activities

2. 1.1 Scope of business

3. 1.1.1 Main contents of the business

4. 1.1.1.1 Electronic components manufacturing

5. 1.1.1.2 Electronic material wholesale business

6. 1.1.1.3 Electronic material retain business

7. 1.1.1.4 Any businesses without being prohibited or restricted by laws except licensing business.

8. 1.1.2 Proportion of business

Unit: NT$ thousands; %

			Unit: NT$ thousands; %	Unit: NT$ thousands; %
Items	Year 2017		Year 2018
	Amount	Proportion	Amount	Proportion
Multi- crystalline solarwafer	763,768	80.51	29,246	5.60
Others	184,839	19.49	493,288	94.40
In total	948,607	100.00	522,534	100.00

• 1.1.3 Products (services) provided by the company at present

• 1.1.3.1 6.2-inch Multi-crystalline solar wafer (156.75156.75mm200μm).

• 1.1.3.2 6.2-inch Multi-crystalline solar wafer foundry services.

• 1.1.3.3 Multi-crystalline solar ingots and bricks.

• 1.1.4 The new products (services) planned to be developed : No plans to develop new products.

• 1.2 Industrial overview

1.2.1 Industrial status and development

Since 1990‟s the global ecological environment pollution and damage have been increasingly serious, in response to the worse conditions, the relevant conventions have been stipulated successively. Governments of all the nations reached a consensus for energy saving and carbon reduction based on Kyoto Protocol and Copenhagen Accord and established an important position for solar energy in future energy supply. In the past ten years, European countries, United States, Japan and China have encouraged the investment of solar industry by legislation in succession and have subsidized users which made solar industry begin to flourish.

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With the technological advancement of solar cells and costs declination, the application of photovoltaic has shifted from space technology, military use to livelihood purposes and it has been widely applied. In our daily life the large-sized power plants are much more commonplace. By now, in some advanced European countries the costs for photovoltaic power generation has come approximately to power consumption costs in prime time. With the further technological revolutions and cost decrease, more and more countries and regions can enjoy a price the same as the one of commercial power. Furthermore, it‟s easier to connect grids, which is estimated to mobilize the industrial sustainability. The photovoltaic applications so far are much extensive, which can be classified as follows:

Application of solar products and examples

Application of	solarproducts and examples
Items	Application examples
Livelihood	Radio, electrical test meter, watch, computer, solar camera, flashlight, battery charger, camping light, household appliance and PV system for power supply of livelihood consumptiongoods.
Road and traffic	Street lamps, traffic signs, road signs, identification lamp, solar electric vehicle charging stations, freeway emergency telephone, emergency telephone in remote road, parking meter, control gate system in parking lot, PV system for sound-proof wall in expressway and PV systems for highway rest area, solar vehicles, level crossing indicator light, bus shelter and rooftop stations.
Agriculture, forestry, fishery, pastoral and medical areas.	Farmhouse power supply, PV system of power supply for greenhouse culture, agricultural irrigation, fire sprinkler system, agriculture and animal husbandry greenhouses, fisheries aquaculture pumping ventilation and automatic pet feeder.
Communication	PV System for wireless communication, relay base station, emergency telephone relay station, telephone communication power supply and PV system of signal receiver for microwave relaystation and radio.
Buildings	Household power supply system, emergency power supply system, emergency lighting system, curtain wall, sunshade, dome skylight, and roofing-tile type PV system.
Industrial Application	Electrical corrosion prevention of pipeline, power supply PV system pipeline flow meter, market advertising tower, offshore oil platform, power supply PV

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Items	Application examples
	system for all kinds of measuringstations.
Emergency / Disaster Prevention	Duty Command Center, emergency refuge, medical establishments, parks, schools, earthquake observing station, forester observation deck, evacuation indicator, PV system for power supply of water level alarm, river lamp, PV breakwater safetylamp.
Power plant	Roof-type, Ground-type and Floating on water Solar power plants.

Data source: Photovoltaic Information Network, collocated by Danen, March 2019

Solar cells can be divided into two types, namely silicon and non-silicon, according to materials applied and silicon battery can be categorized into three types, i.e. Mono-crystalline silicon, polycrystalline silicon and Mono-crystalline silicon. Among them, Mono-crystalline silicon, polycrystalline silicon belong to crystalline solar cells while Mono-crystalline silicon are applied in thin-film solar cells. The parts made from non-silicon materials can be divided into compound battery, organic and inorganic materials which are applicable to thin-film solar cells.

Classification table of solar cell materials

Types of solar cells	Types of solar cells	semiconductor materials	Market module power conversion efficiency
silicon is the most widely used material in PV system	Crystalline Silicon	Mono-crystalline Silicon	20~23%
		Multi-crystalline Silicon	19~20%
	Amorphous Silicon	Si, SiC, SiGe, SiH, SiO	8~10%
Compounds are applicable to space and HCPV system	Ⅲ-Ⅴcompound	GaAs, InP	30~45%
	Non-Ⅲ-Ⅴ compound	CdS, CdTe, CuInse	14~18%
Nano & Organic are applicable to organic solar cells which are still developed and researched atpresent.	TiO2 、Csx/Pby/Clz		5~10%

Data source: Photovoltaic Information Network, collocated by Danen, March 2019

Silicon solar cells, divided into Mono-crystalline Silicon and Multi-Crystalline Silicon, are widely accepted by the market due to excellent durability, higher conversion efficiency and lower average selling price. It has become the mainstream products which account for 90% of market

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shares. The Mono-crystalline solar cells are made from silicon with high purity grade about 9-11 N which makes its conversion efficiency higher than that of Multi-crystalline solar cells. However, the higher losses, long and sophisticated processing make the costs higher than those of Multicrystalline solar cells. The Multi-crystalline solar cells require lower purity of silicon materials about 7 to 8 N with a conversion efficiency of 19% to 20%, a little bit lower than Mono-crystalline solar cells. However, it can be rapidly produced without wasting too many materials and the lower costs of raw materials and manufacturing also make it the mainstream products in future crystalline silicon cells. Moreover, thanks to the tendency of cost decline of thin-film solar cells, excellent scratch prevention and light transmission; they can be combined with buildings and applied to external glasses of the building and car windows. Nevertheless, the development potential of it is restricted, due to lower conversion efficiency and shortage of resources compared to other crystalline cells and it can‟t be well developed unless the conversion efficiency and the product yield are improved. While, according to the estimations by EnergyTrend and other market research institutions, the silicon solar cells will still dominate the market for a period of time in the future.

The solar industry has experienced changes in the US Section 201, the 61 new policy of China, the defensive tariffs in India and the remove of the EU MIP. From the most upstream supply chain to the most downstream system were all with extremely unstable situation.

Among these events, the 61 new policy of China has significantly affected the cost of global solar panels. The government of China issued a new policy at the end of May 2018, which not only reduced subsidies, but also significantly restricted the construction of solar power plants. Driving a lot of solar energy projects and construction in China come to an abrupt end, so that Chinese manufacturers actively sell solar panels overseas, causing a wave of low-priced dumping across the board. BNEF pointed out that the market situation of oversupply has caused global solar cost to decline and global solar installation cost has dropped by 12% in 2018.

China has also launched a non-subsidized solar program, and if it is approved, it will start construction before the end of 2020. Europe has now also ended the minimum price limit. Driven by the continued decline in solar energy costs and energy-saving and carbon-reduction awareness, market demand is expected to grow substantially in the future.

According to EnergyTrend's latest demand report, the global market size is expected to be stable between 100-120GW from 2018, and the annual demand change will be less than 10%. The GW-class market will grow from 6 in 2016 to 15 in 2019, indicating that the market is moving from oligopolistic to average and decentralized.

EnergyTrend believes that the solar industry faces a strong challenge in 2018, but it also enters a consolidation phase, and it is expected that long-term development will tend to be stable and healthy.

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As supply chain prices continue to fall, solar energy is gradually moving away from subsidies and affordable grid parity online. The popularity of the non-subsidy system and actually LCOE cost of energy will become the price indicator for the future supply chain.

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1.2.2 The relationships among up, middle and down streams

Up, middle and down streams manufacturers	Upstream	Middle stream	Downstream
	Poly Silicon	Silicon Wafer	Solar Cell
Domestic manufactures	-	Sino-American Silicon Products Inc., Danen Technology Corporation, Green Energy Technology, Gigastorage Corp., Utech Solar, Co., Ltd. AUO	Motech Industry Corp., E-Ton Solar Tech, URE Co., Ltd , Tainergy Tech. Co., Ltd, Ever Energy PV Corp.,Bigsun Energy group., TSEC Corp., MingHwei Energy.
Foreign manufacturers	Hemlock Wacker OCI GCL TBEA REC Daqo Hanwha Chemical	GCL DAHAI LDK ReneSola Sornid RIETECH LONGi Zhonghuan	Jinko Solar Tongwei Solar YingLi Green Canadian Solar Inc. Trina Solar JA Solar Hanwha Q-cells
Number of manufacturer	10 to 20	About 20 to 30 (Note)	30 to 50

Data source: collocated by the Company, March 2019 Note: The silicon wafer companies counted only for pure players, integrated enterprises including Jinko, Yingli and Trina are not included in.

1.2.3 Various development trends of products

The power generation costs for current solar power generation system are gradually getting closer to those for traditional energies. Only when the costs of solar power generation system keep dropping down on the conditions that the high conversion efficiency is kept can solar power generation system take place of traditional ones.

The most widely applied solar cells all over the world are crystalline and non-crystalline silicon. Among them, crystalline silicon account for about 90% market shares and the ratio

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between Mono silicon and poly silicon is 4:6 changed from the past 3:7 or so. It is estimated that the market mono-crystal will reverse the market share in the next few years..

According to estimations by ITRPV, the product efficiency of mono crystalline solar silicon will be increased by 19.5% to 24% in 2018 and that of poly crystalline solar silicon is estimated to be grown to 18.5% to 22%. The technologies applied in the wafers and cells have been improved, as a result the costs are continuing to be reduced which prolonged the service life of modules to more than 30 years. The industry so far has been dedicating to developing the technologies with respect to silicon wafer quality improvements, cell efficiency betterment as well as cost reductions. Almost all the plants are adopting high-efficiency wafers to improve conversion efficiency, cut down costs expecting to motivate the growth of solar energy industry.

1.2.4 Competition situation

The solar industry of Taiwan are mainly engaging in silicon wafer and cell manufacturing and cutting a striking figure in industry chain by professional division of labor, which is different from the vertical integration of solar energy plants in industry chain of Europe and Mainland China‟s giant plants. Thanks to the talents developed by semiconductors, the superiority and specialization in professional manufacturing, which brings the achievement of excellent conversion efficiency, competitiveness in terms of costs and other favorable advantages owned by Taiwan‟s manufacturers.However, the global solar market is in a dilemma of oversupply and low profits in 2018. In the market, only the first-tier Chinese manufacturers with strong technical and cost advantages and a wide global layout still maintain strong activities, and the existing expansion plans can continue to carry out, which makes the supply chain continue to be concentrated.

According to EnergyTrend data, the new capacity of China's top five poly-silicon suppliers is expected to be introduced in the second quarter of 2019. By then, the top five suppliers will account for nearly 70% of the world's production capacity, and the cash cost will be more competitive. In the production of silicon wafers, the market will be dominated by LonGi and ZhongHuan, the two companies will dominate in 2019. The mono-crystal wafer supply chain will also dominate the market, and there is a chance to increase the annual market share of mon-crystals to 60%, and reversing the situation that multi-crystals have always larger than mon-crystals in the past few years.

Taiwan's solar energy industry faces China's large-scale pressure and price constraints and long-term burden of poly-silicon supply contract. The wave of trade barriers and mon-crystal market dominate market trend. For the solar energy industry in Taiwan, which was focused on multi-crystalline solar energy supply, will become no market competitive advantage gradually.

1.3 Research and Development

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• 1.3.1 The cost for development and research, successfully developed technologies and products in recent two years and period as of the date of Annual Report publication

1.3.1.1 Costs for development and research

for development and research
Years Items	Year 2017	Year 2018
Costs for development and research	10,925	7,041
Operating revenues	948,607	522,534
Ratio of R&D costs to operating revenues	1.15%	1.35%

1.3.1.2 The technologies and products successfully developed

Year	R&D achievement
2009	Completed the development of solarpolycrystalline silicon wafers (180μm).
	Successfullydeveloped domestic cuttingoils for slicing.
	Highyield rates in terms of UMG (16%) and Virgin Polywafers.
2010	Successfully recycled the cutting oils from waste sizing and reapplied in cutting sizing.
	Succeeded in adjusting the angles and shapes of slicer guide wheels to further improve the slicing yield.
	Successfully applied the diamond wire in ingot cutting processes to further enhance the capacityof machines.
2011	Recycled cutting powder from waste cutting sizing and reapplied in the cutting sizingto reduce the wastes.
	Completed the assessment of next-generation crystalline growth furnace to further improve the capacityof capacity.
	Improved the conversion efficiency of wafers with a growth to more than 16.8%.
2012	Succeeded in developing the crystal growth manufacturing procedures of cast-mono.
	Promoted the wafer conversion efficiency to 17.5%.
2013	Improved the conversion efficiency rate of poly crystalline silicon wafers to 17.8%, which maintained a leading position in the industry.
	Reduced the silicon losses of wafers during slicing processes and enhanced the unit yield of silicon materials by 5%.
2014	Promoted the yield of ingot by 10% in unit time of the machine by transforming the growth crystal machines.
	Reduced the side-effects producing during the manufacturing of growth crystal by introducing new materials and further improved the wafer quality to satisfy the needs of customers with respect to conversion efficiency.
	Optimized the manufacturing processes of high-conversion-efficiency wafers along with the betterment of manufacturing procedures of customers‟ cells to further promote the average conversion efficiencyrate to more than 18.6%.

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2015	Reduced deficiency rate of wafer by the optimization of manufacturing procedures of growth crystals along with the betterment of manufacturing procedures of customers‟ cells to further promote the average conversion efficiency rate to more than 19%.
	Effectively reduced the deficiency rate by reforming the tools and the improvement rate reached more than 20%.
	Cutting down the costs for slicing manufacturing by introducing new slicing materials and the reduction rate wasgreater than 8%.
2016	Through wafer process optimization, we provide new generation product with 19.2% conversion efficiency, from which we can better serve customer‟s satisfaction.
	Collaborate with customer in high end PERC process, work through experiment and electrical parameter‟s adjustment, we have improved the efficiency by more than 0.8%.
	Through the study and evaluation for slicing material with sufficient experiments to demonstrate consistent result. Effectively cut down the manufacture cost and meet the goal of environment protection after the high ratio recycle of slicing material were introduced into slicing process, cost was effectively reduce higher than 5%.
2017	Reduced ~3% power consumption by furnace hardware retrofit in order to energy saving and carbon reduction to meet the goal of environment protection.
	Through casting process optimization and collaborate with customer in cell process improvement to increase multi wafer efficiency more than 19.6% to fulfill customer‟s requirement.
2018	Through the hardware modification of the crystal growth furnace and optimization of the process recipe, the manufacturing process is converted from G5 to G6 ingots, and increasing productivity by approximately 40% viaprocess optimization
	Introducing diamond cutting technology, the throughput of wafers increased by 20%, and the production cost was reduced by about 30%.

1.3.2 Future research and development : None

1.4 Long-term and short-term business development schemes

1.4.1 Short-term development schemes

1.4.1.1 Stop production of Fabs with poor economic performance.

In order to protect the interests of shareholders and the interests of other stakeholders and consider the long-term sustainable operation of the company, the board of directors of the company decided to suspend the production of non-economical fabs..

1.4.1.2 Revitalize assets to enrich working capital for long-term transformation

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In addition to maintaining inventories sell and basic operations, idle assets such as plant buildings, machinery and equipment will be planned for leasing or sale. The company will revitalize its assets to enrich the working capital of long-term transformation and actively expand business opportunities with potential opportunity.

1.4.2 Long-term development schemes

The company will actively seek new technologies and transformation opportunities.

2. Market and Sales Overview

2.1 Market analyses

2.1.1 Sale territories of major commodities (services)

The sales of the company's products cover Europe, the United States, Asia and China years ago. In the past two years, it has mainly focused on Taiwan and mainland China market.

• 2.1.2 Market shares and the situations of future market supply &demands and growth

2.1.2.1 Market shares

As China released a new policy at the end of May 2018, the so-called "61 new policy of Solar " not only reduced subsidies, but also significantly limited solar power plant construction. Made a lot of solar energy projects and construction in China came to an abrupt end, so that Chinese manufacturers actively sell solar panels overseas, causing extreme oversupply across the board, leading to a wave of low-priced dumping. Because the company is located in Taiwan, the raw materials are almost imported, and it is impossible to compete with the Chinese manufacturers' raw materials advantage and the government's unfair subsidies. Therefore, the company's market share is compressed.

• 2.1.2.2 The situations of future market supply & demands and growth

According to the estimation by the research institutions, the power generation costs of PV system in most market regions globally will form competitiveness against traditional electric power in coming years and the motivation for cost reductions will be continued which will drive a long-term flourishing development of PV industry.

As for market demands growth, according to the “Technology Forecasting Survey” by hundreds of experts issued by a research institution in US that from 2015 to 2020, 30% of global energies will be from alternative energy sources. The alternative energy, especially solar energy is expected to be the mainstream of future energy as results of continual deterioration of climate change and the corresponding practical policies, protocols and regulations stipulated by governments of all the nations and transnational organizations; more and more funds and talents investments which contribute greatly to the growth and development of alternative energies.

• 2.1.3 Favorable competitive advantages

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• 2.1.3.1 The major members of R&D team within the company are equipped with the professional management experience of semiconductors‟ manufacturing processes. Besides, the manufacturing procedures of semiconductors are similar to those of solar wafer and cells which are remarkably beneficial for the future product R&D and the master of applied technologies. In the meantime, most of the members in the team are talents in massive production of poly crystalline silicon wafer which will rapidly promote the development of new products and production capacity with less cost.

• 2.1.3.2 There are professional managers with at least twenty-year experience in manufacture and technical industry management in operation & management team within the company who are proficient in corporate operation and organization as well as marketing management.

• 2.1.3.3 We are dedicated to investing in advanced poly crystalline silicon wafer machines and technologies for quality betterment, which are effective in enhancing the quality of solar silicon wafers and making the costs and performance of the products more competitive.

• 2.1.3.4 We are focusing on mastering the supply resources of upstream silicon materials and establishing good trading and cooperative relationships with world-class silicon raw material supply companies, making sure the proper supply of silicon raw materials and effectively controlling the material costs based on changes of supply and demands.

• 2.1.4 The favorable or unfavorable factors for long-term development and corresponding measures

• 2.1.4.1 Favorable factors

• 2.1.4.1.1 Changeable global ecological environment and increasing environmental awareness The temperatures are continuing to rise, global climate changing anomalously and the ice melting caused by greenhouse effects as results of human beings‟ excessive exploration of natural ecological environments, substantial emission of CO2. In response to these problems, UN has stipulated the protocols against man-made greenhouse gases emission. Furthermore, the Kyoto Protocol was signed in 1997 and took into effect in 2005. Later the Climate Treaty of Paris was signed on December 12[th] , 2015 which was the treaty possessing the right to restrict the greenhouse gases reductions after Kyoto Protocol. The increase of CO2 emissions has become the main threats for ecological environment. In order to safeguard the living environment of next generations, the carbon emission reductions should be the consensus reached by all the nations globally; and the application of solar energies is one of the important ways to effectively reduce carbon emission.

• 2.1.4.1.2 Subsidies from all nations cutting down the costs for system installation

• The power generation costs of PV system are still higher than other traditional ones because the conversion efficiency technologies of solar cells are yet to be improved. In the early stage of

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industrial development, the governments have played important roles in installation cost subsidies, Germany, Japan and US are cases in point which has invested in the solar energy industry and encouraged the installation of solar system with relatively high subsidy policies in the early phase and gradually reduced the subsidies or canceled the policies after the solar systems are widely used; in addition, “Renewable Energy Development Act” stipulated by Legislative Yuan through third read in June 2009 and the targeted quantity of renewable energies of 2030 set in 2010 was 10.8 GW which was expanded into 17.2 GW in 2015 including the priority renewable items such as solar energy (8.7GW), wind power (5.2 GW) and biomass energy (0.95 GW as the target) and among them, solar energy ranked first. In 2016, the current government clearly state that the target of nuclear-free homeland will be achieved by 2025. Target the solar energy achieve a cumulative capacity of 20GW in 2025.

2.1.4.1.3 Traditional fossil energies are deficient which has driven the demands of alternative energies

The application of traditional energies tend to increase instead of decrease due to the continual development of major economies in the world, especially in the emerging countries with rapid development rate, the energy demand growth are much higher than developed countries. However the fact is that the global traditional energies i.e. petroleum, natural gases and coals will be used up one day. Take the petroleum as an example, the development of alternative energies has become a significant issue in respect to global economy as the decline of global oil storage amount. While the solar energy is the most important alternative energy that will never be used up, in consequence, it has attracted numerous investments from the countries throughout the world.

In the end of 2017 bids in a 300MW tender in Saudi Arabia breached two US cents per kwh, being record-breaking 1.78567 US cent per kwh. We believes that the day to replace the fossil fuel energy by solar energy will come true soon, as the cost of solar energy will be lower than that of fossil fuel energy, in terms of the power price of 2~3 US cent per kwh.

2.1.4.1.4 Japan's Fukushima nuclear leakage crisis showed the importance of alternative energies

The Fukushima nuclear leakage crisis caused by 3.11 earthquake in 2011 has arisen global concerns about safety if nuclear energy. The doubts about nuclear power safety have promoted all the countries to modify their policies on energies. In a long run, people will be urged to pay more attention to the safe alternative energies which is helpful for the development of solar energy, wind power and renewable energy industries.

2.1.4.2 Unfavorable factors

2.1.4.2.1 Changes in policies of alternative energies in all the countries

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Restricted by the influence of economic environment or subsidy policies of all governments, the early industry development is easy to run into imbalance situation between supply and demands. For example, since the end of 2008, the subsidy policies for solar energy was restricted and shrunken in main markets, namely European areas and US due to the negative impacts of financial storms which has dampened the needs of terminal solar system installation. In addition, the government of Mainland China has provided potent political supports after the 12[th] Five Year Plan, which has resulted in considerable supply, constant falling market prices and further the significant changes in supply and demands.

Corresponding measures:

The company has known for high-quality and competitive products since founded and the constant increase of conversion efficiency, drop of manufacturing costs have made the prices and quality of poly crystalline silicon wafers of the company more competitive in the market. In addition, we are mastering the industrial trends at home and abroad at any time and making best responses such as adjustment of sales strategies, capacity application and high-level flexibility according to market changes. With the continuous decline of solar power generation and the price rise of electricity generated by traditional energies, the solar power generation costs are approaching the traditional ones which will reduce the industrial reliance on political supports gradually.

2.1.4.2.2 Price dumping from Mainland China‟s enterprises

Due to strong supports from Mainland China governments, the manufacturers are sprung up and expanding the productions in succession. With the supported funds, manpower and political subsidies from all level of governments, the enterprises of Mainland China are seizing the markets with low-price tactics. In spite of the notorious quality, it has really put burden on the manufacturers European countries, US and Taiwan.

Corresponding measures:

The Company is dedicated to producing high quality and performance products and focusing on advanced markets that are different from the markets with low-price silicon wafers in Mainland China. Furthermore, we took active participation in R&D in recent years and we have made some progresses in material reduction and recycled technologies. In consequence, the manufacturing cost control could be varied from the changes of market price, all of which made The Company competitive compared with the rivals in Mainland China.

2.1.4.2.3 The emergence of other alternative energies

Crystalline solar wafers are the mainstream products at present with 90% market shares. While, thanks to the large size feature, the tendency of cost decline of thin-film solar cells, excellent

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scratch prevention and light transmission, they can be combined with buildings and play a special role. Nevertheless, the development potential of it is restricted due to lower conversion efficiency compared to other crystalline cells and it can be well developed unless the conversion efficiency and the product yield are improved.

Corresponding measures:

We are looking forward to being first-class solar energy technical resolution provider and exploring other technical development of alternative resources in different directions and the possibility of different energy alternatives as the technical revolutions.

1. 2 The important uses and manufacturing procedures of main products

2.2.1 The application of main products:

e application of main products:
Product	Application
Solarpolysilicon wafer	Solar cells,solar PV modules

2.2.2 Manufacturing process:

==> picture [534 x 205] intentionally omitted <==

2.2.3 Supply Status of Main Materials

Major Raw Materials	Source of Supply	Supply Situation
Silicon	OCI	Good

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2.2.4 Main customer list of purchases and sales

2.2.4.1 Major Suppliers in the Last Two Calendar Years

Unit: NT$ thousands; %

		2017				2018	2018		2019 (As of	2019 (As of	March 31)	March 31)
Items	Company Name	Amount	Percent	Relation with Issuer	Company Name	Amount	Percent	Relation with Issuer	Company Name	Amount	Percent	Relation with Issuer
1	Supplier A	354,057	49.77	None	Supplier A	331,440	63.72	None	Supplier A	331,44 0	63.72	None
-	Others	357,297	50.23	None	Others	188,739	36.28	None	Others	188,73 9	36.28	-
-	Net purchase amount	711,354	100.0 0	-	Net purchase amount	520,179	100.00	-	Net purchase amount	520,17 9	100.0 0	-

Note: Major suppliers refer to those commanding 10%-plus share of annual order volume.

The changes of suppliers of the company in recent two years and up to the most recent financial statements date. Mainly because of the sudden change in solar market conditions in 2018 , the price of the product fell sharply, which has led the company to adopt a strategy of selective order and adjust the production capacity to meet the goal of reducing cash loss and maintaining stable finance condition.

2.2.4.2 Major Clients in the Last Two Years

									Unit: NT$thousands;%	Unit: NT$thousands;%	Unit: NT$thousands;%	Unit: NT$thousands;%
		2017				2018			2019 (As of March 31)
Item s	Company Name	Amount	Percent	Relation with Issuer	Company Name	Amount	Percent	Relation with Issuer	Company Name	Amount	Percent	Relatio n with Issuer
1	Company A	175,896	18.54	None	Company E	260,725	49.90	None	Company E	39,340	65.02	None
2	Company B	172,058	18.14	None	Company F	86,132	16.48	None	Company G	17,270	28.55	-
3	Company C	149,550	15.77	None	-	-	-	None	-	-	-	-
4	Company D	125,995	13.28	None	-	-	-	None	-	-	-	-
5	Company E	108,927	11.48	None	-	-	-	None	-	-	-	-
6	Others	216,181	22.79	None	Others	175,677	33.62	None	Others	3,890	6.43	None
-	Net Sales	948,607	100.00	-	Net Sales	522,534	100.00	-	Net Sales	60,500	100.00	-

The changes of customers of the company in recent two years and up to the most recent financial statements date. Mainly because of the sudden change in solar market conditions in 2018 years, the price of the product fell sharply, which has led the company to adopt a strategy of selective order and adjust the production capacity to meet the goal of reducing cash loss and maintaining stable finance condition.

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2.2.5 Production in the Last Two Years

Unit: thousand pieces; NT$ thousands

Year Output Majorproducts	2017	2017	2017	2018	2018	2018
	Capacity	Quantity	Amount	Capacity	Quantity	Amount
Poly crystalline silicon solar wafers	78,080	37,820	876,106	78,080	496	46,523
Others	-	-	57,469	-	459	372,105
Total	78,080	37,820	933,575	78,080	-	418,628

2.2.6 Shipments and Sales in the Last Two Years

Unit: thousand pieces; NT$ thousand; MT

					Unit: thousandpieces;NT$thousand;MT	Unit: thousandpieces;NT$thousand;MT	Unit: thousandpieces;NT$thousand;MT	Unit: thousandpieces;NT$thousand;MT
Year Shipment & Sales Majorproducts	2017 Local Export Quantity Amount QuantityAmount				2018
			Export		Local		Export
		Amount	Quantity	Amount	Quantity	Amount	Quantity	Amount
Poly crystalline silicon solar wafers	38,753	763,768	0	0	1,546	29,245	0	0
Others	226	120,840	120	63,999	634	310,049	524	183,240
In total	-	884,608	-	63,999	-	339,294	-	183,240

3. Human Resources

Unit: Person

man Resources	man Resources			Unit: Person
Year		2017	2018	March 31th,2019
Number of employees	Managers	25	11	10
	Common employees	51	20	8
	Manufacturing workers	92	5	3
	In total	168	36	21
Average ages(years old)		32 years old	40 years old	43years old
Average service	seniority (years)	4.36 years	8.12 years	8.75 years
Education	Ph.D.	1%	0%	0%
	Master	15%	28%	19%
	University	58%	61%	76%
	Junior college	11%	11%	5%
	High school	15%	0%	0%

Note: The managers here refer to section managers and above in the company.

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1. Environmental Protection Expenditure

2. 4.1 Total Losses and Penalties: None.

3. 4.2 Countermeasures:

4. There was no environment pollution produced since the company started and the periods as of the date of Annual Report publication. So far, the waste water and gases produced during production and manufacture have been well treated by pollution-prevention equipment before being discharged and the industrial wastes are commissioned to the treatment agencies ratified by competent authorities.

5. Labor Relations

6. 5.1 All kinds of employee welfare benefits, further education, training, retirement system and actual executions as well as the execution of employers-employees agreements and maintenance of employees‟ rights and interests

7. 5.1.1 Employee welfare benefits

8. 5.1.1.1 The company provides National Health Insurance, labor insurance, setting aside pension reserve, overdue wages repayment funds as well as providing accident insurance.

9. 5.1.1.2 The employees join Employee Welfare Committee according to Employee Welfare Fund Act. The Committee is responsible for handling with employee welfare affairs and setting aside bonuses according to the percentages of initial capital fund, monthly operating revenues, employees‟ salaries and revenues from selling off leftovers based on the regulations.

10. 5.1.1.3 In addition, the employees within company enjoy the additional group insurances of Life Insurance Agency bought by the company including life insurance, accident insurance and cancer & medical insurance.

11. 5.1.1.4 The new employees enjoy the holidays more than the ones regulated by the calendar of government agencies once they are working in the company.

12. 5.1.1.5 We hold birthday parties, department dinner parties on a regular basis and the employee activities irregularly to unite the employees‟ emotions, liven up the harmony and perk up the morale.

13. 5.1.1.6 The employees will be distributed with bonuses annually according to Articles of Corporation if there are surpluses.

14. 5.1.2 Employees‟ further study and training

    • Once the new employees are in office they will be provided with professional and technical training based on different functions and business requirements to strengthen their functions and effectively improve the corporate performance and competitiveness. Furthermore, we enhance employees‟ professional knowledge by holding professional courses, technical seminars and other activities; besides, the online courses are provided to launch comprehensive and systematic educational plans which are beneficial for improving the individual abilities and work quality.

15. The training plans of Danen Technology Corp. are as follows:

16. 5.1.2.1 Training for new employees: including two phases, i.e. basic information introductions for newcomers, fundamental occupational training which is contributing to their perception and

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grasping of corporate philosophy and cultures; by individual guidance, online learnings and tests can help employee catch the occupational skills rapidly.

• 5.1.2.2 Enhancement of professional skills: As for the professional competency of different functions we have conducted internal training along with the combination with external academic seminars, the professional courses offered by consultant companies and other channels to improve employees‟ knowledge and skills.

• 5.1.2.3 Training for management skills: in order to cultivate the management abilities of mangers, we have planned a series of applicable training courses for managers of all levels, including: management practices, corporate operation and management, leadership and other training and referred to the external managerial trends to lead the team to realize the goals set by organization.

• 5.1.2.4 Training subsidies: in order to meet different functional needs of employees, intensify the professional competency of them, we have provided employees with subsidies for external training courses to improve the competitiveness of the organization.

• 5.1.2.5 Self-development: We have self-developed the educational training system and the E-learning and practical course‟s engagement available for employees, with which them can learn some knowledge irrelevant to the work to improve themselves and achieve in-depth learning outcomes. The execution results of educational courses in 2018 can be seen as below:

Types of courses	Number of class	Gross impression	Total hours	Total expenses(NT$)
Training for new employees	8	8	40	53,660
General training	11	42	11
Professional training	18	88	185
Managerial abilities	2	20	4
Self-development	8	8	16
In total	47	167	256

5.1.3 Retirement system and execution results

According to Labor Standards Law, we allocate 6% of monthly salaries of employees as pension, which is in line with the provisions of relevant regulations.

• 5.1.4 The conditions of employers-employees agreement

• We have been focusing on human-based management and adhering to the philosophy of sharing weal and woe together with employees. In consequence, with respect to communication of employers-employees problems we have always adopted flexible and multi-faceted measures which have maintained a good employers-employees relationship.

5.1.5 Supporting measures for all kinds of employees‟ rights and interests

The Company has stipulated comprehensive regulations and systems which clearly state all the managerial policies, employees‟ rights and obligations as well as welfare items. In addition, we

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conduct regular reviews on the welfare items to protect the rights and interests of the employees.

5.2 The losses incurred from labor disputes in recent years and the periods as of the date of Annual Report publication; the disclosure of estimated amounts involved in the labor disputes at present and in the future as well as the corresponding measures, the reasons should be demonstrated if the amount cannot be reasonably estimated: None.

1. Important Contracts

Contract character	Parties involved	The beginning and ending dates of the contract	Main contents	Restricted terms
Lease Contract	Pan-Asia Technology (shares) Company	2008.02.15~2023.06.30	Factory land lease	None
Lease Contract	Pan-Asia Technology (shares) Company	2010.01.20~2025.06.30	Factory land lease	None
Lease Contract	Pan-Asia Technology (shares) Company	2010.12.27~2026.05.31	Factory land lease	None
Supply contract	OCI Company Ltd.	2011.03.15~2023.12.31	Purchasing contract of poly-silicon	The total purchasing amount up to 2023 will reach 128,8M USD

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VI. Financial overview

1. Five-year financial statement summary

1.1 Condensed Balance sheet-- Based on IFRS

Unit: NT$ thousands

Years Items	Years Items	Financial data of prior five years (Note 1)	Financial data of prior five years (Note 1)	Financial data of prior five years (Note 1)	Financial data of prior five years (Note 1)	Financial data of prior five years (Note 1)	Financial data of current year as of March 31th, 2019 (Note 2)
		2014	2015	2016	2017	2018
Current assets		1,369,168	1,246,962	1,132,731	914,279	475,821	1,103,859
Real estate, factories and equipment		3,602,486	3,241,820	2,711,662	2,171,589	752,680	22,775
Intangible assets		0	0	0	0	0	0
Other assets		555,133	347,760	68,774	176,564	167,431	296,516
Total assets		5,526,787	4,836,542	3,913,167	3,262,432	1,395,932	1,423,150
Current liabilities	Before distribution	390,589	367,507	192,748	275,141	143,551	109,946
	After distribution	390,589	367,507	192,748	275,141	Yet to be distributed	Yet to be distributed
Non-current liabilities		128,070	62,705	47,733	5,355	117,245	216,051
Total liabilities	Before distribution	518,659	430,212	240,481	280,496	260,796	325,997
	After distribution	518,659	430,212	240,481	280,496	Yet to be distributed	Yet to be distributed
Equity attributable to parent companyowners		5,008,128	4,406,330	3,672,686	2,981,936	1,135,136	1,097,153
Capital stock		3,496,758	3,496,268	3,496,268	3,496,268	3,496,268	3,496,268
Capital reserves		2,050,412	1,513,900	910,062	176,418	0	0
Retained earnings	Before distribution	(537,100)	(603,838)	(733,644)	(690,750)	(2,361,132)	(2,399,115)
	After distribution	(537,100)	(603,838)	(733,644)	(690,750)	Yet to be distributed	Yet to be distributed
Other equity		(1,942)	0	0	0	0	0
Treasurystock		0	0	0	0	0	0
Non-controlling interests		0	0	0	0	0	0
Total equity	Before distribution	5,008,128	4,406,330	3,672,686	2,981,936	1,135,136	1,097,153
	After distribution	5,008,128	4,406,330	3,672,686	2,981,936	Yet to be distributed	Yet to be distributed

Note 1: The financial data of prior five year have been audited and verified by accountant.

Note 2: Checked and approved by accountants.

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1.2 Consolidated Condensed Statement of Comprehensive Income – Based on IFRS

Unit: NT$ thousands

Years Items	Financial data of prior five years (Note 1)	Financial data of prior five years (Note 1)	Financial data of prior five years (Note 1)	Financial data of prior five years (Note 1)	Financial data of prior five years (Note 1)	Financial data of current year as of March 31th, 2019 (Note 2)
	2014	2015	2016	2017	2018
Operatingrevenue	1,853,771	1,575,121	1,370,986	948,607	522,534	32,282
Grossprofit	(398,002)	(454,774)	(455,687)	(621,200)	(796,195)	(6,799)
Income from operations	(484,143)	(532,787)	(534,127)	(688,071)	(855,987)	(19,690)
Non-operating Income and expense	4,579	7,936	4,416	(1,376)	(986,315)	5,400
Income before tax	(479,564)	(524,851)	(529,711)	(689,447)	(1,842,302)	(14,290)
Continuing operating net profits for current period	(537,100)	(603,838)	(733,644)	(690,750)	(1,846,800)	(14,290)
Discontinued operating losses	0	0	0	0	0	(23,693)
Net profit (loss) for current period	(537,100)	(603,838)	(733,644)	(690,750)	(1,846,800)	(37,983)
Other consolidated profits or losses for current period (net amount after tax)	0	0	0	0	0	0
Total consolidated profits or losses for currentperiod	(537,100)	(603,838)	(733,644)	(690,750)	(1,846,800)	(37,983)
Net profits are attributable toparent companyowners	0	0	0	0	(1,846,800)	(37,983)
Net profits are attributable to non-controllingequity	0	0	0	0	0	0
Total consolidated profits or losses are attributable to parent companyowners	0	0	0	0	(1,846,800)	(37,983)
Total consolidated profits or losses are attributable to non-controllingequity	0	0	0	0	0	0
Earningsper share	(1.55)	(1.73)	(2.10)	(1.98)	(5.28)	(0.11)

Note 1: The financial data of prior five year have been audited and verified by accountant. Note 2: Checked and approved by accountants.

1.3 Names and auditing opinions of CPA in recent five years

1.3.1 Names and auditing opinions of CPA in recent five years

Years	CPA	Name of accountingfirm	Auditingopinion
2014	La, Cung-Hsih , Lin, Chun-Yao	PwC Taiwan	Clean opinion after amendment
2015	Lee,Hsiu-Ling ,Lin,Chun-Yao	PwC Taiwan	Clean opinion
2016	Lee,Hsiu-Ling ,Lin,Chun-Yao	PwC Taiwan	Clean opinion
2017	Lee,Hsiu-Ling ,Zhi,Bing-Jun	PwC Taiwan	Clean opinion
2018	Lai,Chung-Hsih,Zhi,Bing-Jun	PwC Taiwan	Clean opinion

• 1.3.2 If the accountants have been changed in recent five years, the reasons for changing provided by the company, former accountant and successor should be noted: None.

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2. Five-year financial status analysis

2.1 Consolidated Financial Analysis – Based on IFRS

Item (Note 4)	Year	Financial data of prior five years (Note 1)	Financial data of prior five years (Note 1)	Financial data of prior five years (Note 1)	Financial data of prior five years (Note 1)	Financial data of prior five years (Note 1)	Financial data of current year as of March 31th, 2019 (Note2)
		2014	2015	2016	2017	2018
Financial structure (%)	Debt Ratio	9.38	8.90	6.15	8.60	18.68	22.91
	Ratio of long-term capital to property, plant and equipment	142.57	137.86	137.20	137.56	166.39	5765.96
Solvency (%)	Current ratio	350.54	339.30	587.67	332.29	331.47	1004.01
	Quick ratio	296.80	289.42	492.74	275.97	304.01	988.08
	Interest earned ratio (times)	(Note3)	(Note3)	(Note3)	(Note3)	(Note3)	(Note3)
Operating performance	Accounts receivable turnover(times)	11.39	9.04	12.17	15.54	20.65	0
	Average collectionperiod	32	40	30	23	18	0
	Inventory turnover (times)	14.69	11.21	11.83	12.56	18.49	15.41
	Accounts payable turnover (times)	25	33	31	30	20	24
	Average days in sales	14.65	10.50	13.08	12.64	16.30	11033
	Property, plant and equipment turnover(times)	0.51	0.49	0.51	0.44	0.36	0.53
	Total assets turnover (times)	0.32	0.30	0.31	0.26	0.22	0.15
Profitability	Return on total assets(%)	(9.12)	(11.59)	(16.74)	(19.21)	(79.24)	(2.65)
	Return on stockholders' equity (%)	(11.58)	(12.83)	(18.16)	(20.76)	(89.71)	(3.40)
	Pre-tax income to paid-in capital(%)	(13.71)	(15.01)	(15.15)	(19.72)	(52.69)	(1.09)
	Profit ratio(%)	(28.97)	(38.34)	(53.51)	(72.82)	(353.43)	(74.18)
	Earningsper share(NT$)	(1.55)	(1.73)	(2.10)	(1.98)	(5.28)	(0.11)
Cash flow	Cash flow ratio (%)	4.95	24.78	23.09	4.07	(191.71)	(2.63)
	Cash flow adequacy ratio (%)	15.05	3.35	12.99	25.03	41.20	53
	Cash reinvestment ratio (%)	0.27	1.27	0.64	0.17	0	0
Leverage	Operating leverage	(0.17)	(0.05)	(0.07)	0.18	0.43	(0.16)
	Financial leverage	0.96	0.99	1.00	1.00	1.00	0.96

Note 1: The financial data of prior five year have been audited and verified by accountant.

Note 2: Checked and approved by accountants. Note 3: Non-applicable because the correlation ratio is negative. Note 4: Calculation formula of financial ratio can be seen below:

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2.1.1 Financial structure

• 2.1.1.1 Debt Ratio=total debts/total assets.

• 2.1.1.2 Ratio of long-term capital to property, plant and equipment =(total equity + non-current liabilities)/net value of real estate/factories/equipment.

• 2.1.2 Solvency

• 2.1.2.1 Current ratio =current assets/current liabilities.

• 2.1.2.2 Quick ratio=(current assets-inventory-prepayments)/current liabilities.

• 2.1.2.3 Interest earned ratio =net profits of income tax and interest expenses before tax/interests Expenses for current period.

• 2.1.3 Operating performance

• 2.1.3.1 Accounts receivable (including accounts receivable and notes receivable for business) turnover=net sales revenues/average accounts receivable balances for all periods (including accounts receivable and notes receivable for business).

• 2.1.3.2 Average collection period =365/receivables turnover.

• 2.1.3.3 Inventory turnover=goods sale costs/average inventory amount.

• 2.1.3.4 Accounts payable (including accounts payable and notes payable for business)turnover=sales expenses/average accounts payable balances for all periods (including accounts payable and notes payable for business).

• 2.1.3.5 Average days in sales =365/ inventory turnover.

• 2.1.3.6 Real estate, factories and equipment turnovers=net sales revenues/net average revenues of real estate, factories and equipment.

• 2.1.3.7 Total assets turnover=net sales revenues/total average assets.

• 2.1.4 Profitability

• 2.1.4.1 Return on total assets =[profit or loss after tax+ interest expends ×(1- tax ratio)]/total average assets.

• 2.1.4.2 Return on stockholders' equity =profit or loss after tax/net average equity.

• 2.1.4.3 Profit ratio=profit or loss after tax/net sales revenues.

• 2.1.4.4 Earnings per share =(profit or loss attributable to parent company owners-dividends of common stocks)/weighted average number of shares issued. (Note 4)

• 2.1.5 Cash flow

• 2.1.5.1 Cash flow ratio=net cash flow for business activities/current liabilities.

• 2.1.5.2 Cash flow adequacy ratio = net cash flow for business activities in recent five years/(capital expenses + cash dividends) in recent five years.

• 2.1.5.3 Cash reinvestment ratio =(net cash flow for business activities-cash dividends)/(gross amount of real estate, factories and equipment + long-term investments + other non-current assets + operating capital).

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2.1.6 Leverage

• 2.1.6.1 Operating leverage= (net operating revenues - changes in operating expenses and costs)/operating profits.

2.1.6.2 Financial leverage =operating profits/(operating profits - interest expenses).

2.2 Causes of change in financial ratio

2.2.1 Financial structure:

The main factor is the asset impairment of NT$ 993,585 thousands and the year-by-year depreciation of the assets, resulting in a decrease in the book value of the property, plant and equipment and the total assets. As a result, the debt ratio and long-term capital to real estate, plant and equipment ratio was increased.

2.2.2 Solvency:

The decrease in inventory balance in 2018 led to an increase in the quick ratio.

2.2.3 Operating performance:

The decrease in inventory balance in 2018 led to an increase in the quick ratio. Both the receivables turnover rate and the inventory turnover rate increased.

2.2.4 Profitability:

The profitability of 2018 dropped down compared with the prior year as a result of sluggish growth momentum of solar energy in second half year as well the decline of overall supply chain prices.

2.2.5 Cash flow:

The decreases of cash flow operation activities, cash flow ratio and cash reinvestment ratio in year 2018 compared with year 2017 were majorly caused from the influence of product price decline in the year. The cash flow adequacy ratio in year 2018 has increased due to the reduction in capital expenditure.

2.2.6 Leverage:

The increases in operation leverage in year 2018 compared with year 2017 were majorly due to the influence of product price decline in year 2018. The company take selective order business mode to control loss.

3. Audit committee reports for recent yeasr

Please refer to P98 of this Annual Report.

4. Financial Report of recent years

Please refer to P98-P153 of this Annual Report.

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1. Financial Report verified by accountants for recent years :

None

1. The impact to company financial condition if any financial turnover troubles within the company or

subsidiary up to the date of annual report publication

We did not have related parties and there were no financial flow difficulties in the company, either in 2018 and a period as of the date of Annual Report publication.

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VII. Review of Financial Conditions, Financial Performance, and risk assessment

1. Financial status

Comparison Statement of Financial Status Unit: NT$ thousands

Year Item	2018	2017	Difference	Difference
			Amounts	%
Current assets	475,821	914,279	(438,458)	-48%
Financial Assets Carried at Cost - Non Current	155,000	0	155,000	100%
Financial assets measured by cost-Non Current	0	155,000	(155,000)	-100%
Fixed assets	752,680	2,171,589	(1,418,909)	-65%
Other assets	12,431	21,564	(9,133)	-42%
Total assets	1,395,932	3,262,432	(1,866,500)	-57%
Current liabilities	143,551	275,141	(131,590)	-48%
Long-term liabilities	7,500	0	7,500	100%
Other liabilities	109,745	5,355	104,390	1949%
Total debts	260,796	280,496	(19,700)	-7%
Capital stock	3,496,268	3,496,268	0	0%
Additionalpaid-in capital	0 ~~(~~	176,418	(176,418)	-100%
Retained earnings	(2,361,132)	(690,750)	(1,670,382)	-242%
Other equity	0	0	0	0%
Total equity	1,135,136	2,981,936	(1,846,800)	-62%
Statement of changes in percentage increments and decrements: (1) Financial Assets Carried at Cost - Non Current：NT$155,000thousands. Increasefair value through profit or loss to financial assetsNT$155,000thousands in accordance with IFRS 9 (2) Fixed assets: The book value decreased due to the impairment of assets with $993,585 and the annual depreciation. (3) Other assets: Their decline was mainly due to the decrease in deferred income tax assets and prepayments. (4) Long-term liabilities: The decline of long-term debt was a result of prepayments for part of medium and long-term bank loans. (5) Additional paid-in capital: The additional paid-in capital dropped down as a result of compensation made for off-setting the losses. (6) Retained earnings: The fall of retained earnings was mainlydue to losses of 2018.

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2. Financial performance

2.1 Comparison of financial performance

Comparison Statement of Financial Performance

Unit: NT$ thousands

Years Items	2018	2017	Increments and decrements in amount	Variable ratio (%)
Operatingrevenues	522,534	948,607	(426,073)	-45%
Operatingcosts	1,318,729	1,569,807	(251,078)	-16%
Grossprofits	(796,195)	(621,200)	(174,995)	-28%
Operatingexpenses	59,792	66,871	(7,079)	-11%
Operating profit and loss	(855,987)	(688,071)	(167,916)	-24%
Profit or loss before tax for currentperiod	(1,842,302)	(689,447)	(1,152,855)	-167%
Income tax (expenses) profits	(4,498)	(1,303)	(3,195)	-245%
Profit or loss after tax for currentperiod	(1,846,800)	(690,750)	(1,156,050)	-167%
Statement of changes in percentage increments and decrements: (1) Operating revenues and gross profits: The multi-crystalline product supply chain market shrinkage was caused by the oversupply and the market price was also affected to decrease at second half of 2018. (2) Profit or loss before tax for current period and Profit or loss after tax for current period : a. 2018 annual revenue reduced dramatically. b. Impairment loss of assets : NT$ 993,585 thousands. c. Long term purchase contract loss NT$130,000 thousands. (3) Income tax (expenses) profits: Part of deferred tax assets will be transferred into income tax expenses of 2018 based on the result of estimated deferred tax assets in 2018.

2.2 Estimated sales volume and bases

timated sales volume and bases	timated sales volume and bases
Unit: MT
Product type	Estimated sales volume
Multi c-Si Solar Products (includingwafer)	850

The estimated sales volume of 2019 is based on the market demands and customer operating situations, estimated ordering quantity planned as well as supply chain pricing condition.

2.3 The potential impacts on corporate future finance and corresponding measures

Looking at the development trend of solar energy domestic and abroad, even if the global solar

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market has opportunity to grow and green energy policies of domestic non-nuclear homes, Taiwan's domestic demand market has opportunity to gain further development. However, in the environment where the price of products has fallen sharply and the market share of mono-crystal products has greatly eroded the share, it is difficult for multi-crystalline wafers to regain the capacity utilization rate. With the change of market and industry conditions, multi-crystalline wafers cannot be competitive in the market due to production costs, resulting in the company's business scale be shrunk. Despite the use of lean organization and lower operating expenses, the operation continues to suffer losses. In order to protect the interests of shareholders and take into account the interests of other stakeholders, and consider the long-term sustainable operation of the company, it is proposed to stop the production of wafer fabs which do not have the economic benefits.

After the facorties are discontinued, except for the maintenance of inventories sale and basic operations, the plant building and machinery assets will be planned for leasing or sale. Revitalize assets to enrich the working capital for long-term transformation, and actively seek and explore opportunities in potential business development.

3. Cash flow

3.1 Analysis of changes in cash flow of recent years

Years Items	2018	2017	Percentages of increments and decrements
Cash flow ratio	-191.71%	4.07%	-4,810%
Cash flow adequacy ratio	41.20%	25.03%	65%
Cash re-investment ratio	0%	0.17%	-100%
Cash flow ratio and Cash flow adequacy ratio : The decreases of cash re-investment ratio and cash flow ratio in year 2018 compared with year 2017 were mainly caused by the sluggish growth momentum of multi-crystal products in second half of the year which mainly due to the decline of overall supply chain prices. Cash flow adequacy ratio: The cash flow adequacy ratio in year 2018 has increased due to the reduction in capital expenditure.

3.2 Improvement policies for liquidity shortage: None.

3.3 Analysis of cash liquidity of coming year

Improvement policies for liquidity shortage: None. Analysis of cash liquidity of coming year	Improvement policies for liquidity shortage: None. Analysis of cash liquidity of coming year	Improvement policies for liquidity shortage: None. Analysis of cash liquidity of coming year	Improvement policies for liquidity shortage: None. Analysis of cash liquidity of coming year
				Unit: NT$thousands
Cash and Cash Equivalents, Beginning of Year	Net Cash Flow from Operating Activities	Cash Outflow	Cash Surplus (Deficit)	Leverage of Cash Deficit
				Investment Plans	Financing plans
434,121	(91,703)	(85,000)	257,418	－	－

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Analysis of changes in cash flow:

• (1) Analysis of cash liquidity of coming year

a. Business activities: The cash outflow of business activities of 2019 is estimated to be NT$ 91,703 thousand according to market situation and customer operating status, plus estimated ordering and overall expenses and costs.

b. Financing activities: The financing plan of 2019 are expected to return NT$ 85,000 loan to Banks.

• (2) The remedial measures for estimated cash deficits and analysis of liquidity: None.

• The impacts of major capital spending on business in recent fiscal years

• 4.1 Major capital spending in recent fiscal years: None.

4.2 The impacts on finance and business: None.

1. Reinvestment policies, main reasons for profits and losses, improvement plans and investment plans of coming year

2. 5.1 Re-investment policies, main reasons for profits and losses, improvement plans in recent years: None.

5.2 Investment plans of coming year: None.

1. Analysis of risk factors and assessments

2. 6.1 The impacts of interest rate, changes in exchange rate and inflation on corporate loss and profit and corresponding measures in the future

3. 6.1.1 Changes in interest rates

4. 6.1.1.1 The impacts on corporate loss and profit

The interest expenses and revenues of 2018 were NT$1,506 and NT$3,738 thousand respectively and the ratios of them to net operating revenues were 0.29% and 0.72% respectively. The impacts the interest ratio changes exerting on the corporate loss and profit proved to be limited.

• 6.1.1.2 Corresponding measures in the future

We conduct regular assessment on bank loan interest rate and keep good relations with banks to gain preferential interest rates to reduce interest expenses.

6.1.2 Changes in exchange rates

6.1.2.1 Impacts on corporate loss and profit

The foreign exchange loss of 2018 reached NT$ 1,187 thousand, which accounted for 0.23% of net operating profits and the impacts the interest rate changes exerting on the corporate loss and profit proved to be limited.

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6.1.2.2 Corresponding measures in the future

The foreign currency was mainly applied when we proceed purchases and sales. In order to effectively reduce the effects the interest rate changes playing on operating revenues and profits, we continue to observe the overall economic impacts on interest rate to take necessary hedging measures apart from moderately reserving the foreign currency position of sales revenues to cover the foreign procurement spending and further realize the function of natural hedging. If the interest rates change remarkably, we will adjust the transaction values in a moderate manner to relieve the effects of the exchange rate fluctuation playing on the corporate revenues and profits.

6.1.3 Inflation

• 6.1.3.1 Impacts on corporate loss and profit

We have maintained good partnerships with suppliers and customers and paid attention to price fluctuation of raw materials in the market at any time, thus, the inflation has not yet played significant effects on corporate loss and profit.

• 6.1.3.2 Corresponding measures in the future

By now there are no immediate impacts of inflation on the company and in order to reduce the risks of inflation on corporate operation we have paid numerous attentions to the changes of raw material prices.

• 6.2 Main reasons of policies, profit or loss and corresponding measures for high-risk, high-leveraged investments, loans to others, endorsement and derivatives transactions.

• 6.2.1 The Company is dedicated to our own business without engaging in high-risk or high-leveraged investments.

• 6.2.2 We were not involved in lending to others and proceeding endorsement and derivatives transactions in recent years. And if it‟s necessary for us to conduct above mentioned affairs because of business needs or risk hedging, we will handle with them according to corporate “Operational Procedures for Lending Loans to Others”, “Operational Procedures for Endorsement”, “Management Procedures for Assets Acquisition or Assets Disposal” and announce the relevant information correctly according to regulations.

• 6.3 Future R&D plans and estimated costs for these plans

• 6.3.1 Future R&D plans

Planned projects	Description of contents
None	None

6.3.2 Estimated R&D expenses

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The R&D ability is a key competitive factor for company in the future, the R&D costs in 2017 and 2018 were accounting for 1.15% and 1.35% of operating revenues respectively. And we are consistently focusing on the missions as a technical enterprise and going to invest certain amount of costs for developing new products, cultivating R&D talents, continually improving product competitiveness. The R&D expenses of 2018 are estimated to be NT$ 15,272 thousand dollars.

• 6.4 The impacts of important policies and legal change in domestic and abroad affected on corporate finance and business as well as corresponding measures

The industry we specializing in is green energy industry with low pollution which is encouraged by most countries without being restricted by special laws and decrees and supported by incentive policies which is contributing to the prosperity of this industry.

Except for obeying the relevant domestic laws and regulations we also pay attention to the significant policies and legal changes domestic and abroad. As of the date of Annual Report publication, in addition to the recent trade dispute between the United States and China, there was a limited subsidy policy announced by the Chinese government and implemented immediately on June 1 2018. Immediately, the prices of products in all sections of the supply chain fell sharply in the second half of the year, especially the cumulative price drop of multi-crystalline wafers reached 60%. In order to reflect the operational distress caused by the increase of production losses, the board of directors of the company approved the resolution of the factory's overall shutdown on March 13, 2019. In order to maintain long-term shareholders' equity by reducing the outflow of operating cash and avoiding the further losses and the activation of existing assets to enrich the financial strength needed for future transformation.

• 6.5 The impacts of the technical and industrial changes having on corporate finance and business and corresponding measures

We are paying attention to relevant industrial trends regarding technical development and changes at any time and appointing professional personnel or project teams to research industrial technologies that will have significant impacts on corporate future development, finance and business as well as propose necessary corresponding measures. There were no significant technical changes having considerable effects on corporate finance and business in recent years and up to the date of Annual Report publication.

The Company follows the provisions of Articles 8 and 9 of standards for publicly held companies to internal control systems to establish personal data protection management and computerized information system related control operations, such as operations of personal data protection, inspection operations of information security, and operations of system recovery control...etc, and in accordance with the provisions of Article 13 of the handling guidelines, the safety inspections will be included in the annual audit plan . The latest implementation date of the internal audit of the information safety inspection was 2018/06/21. There was no significant impact and risk on the company.

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On the security control, the company established and implemented an information security management system and set up information security policy and documents to standardize company information security. At the same time, information security risk assessment and internal/ external information security auditing operations are conducted regularly every year to ensure the effectiveness of the management system and comply with the laws and regulations. Therefore, the risk of security is not a major operational risk of the company.

• 6.6 The impacts of the corporate image changes exerting on the corporate crises management and corresponding measures

Since foundation, we have being adhering to the principle of credit management and focusing on corporate images, therefore we never ran into corporate crisis management due to corporate image changes.

• 6.7 Estimated profits, risks of mergers and acquisitions and corresponding measures

We didn‟t have any plans of mergers and acquisitions in recent years and a period as of the date of Annual Report publication. If there are mergers and acquisitions in the future we will take a careful attitude and take comprehensive effectiveness of mergers and acquisitions into consideration when assessing them to ensure the shareholders‟ equity.

6.8 The estimated benefits of factories expansion, potential risks and corresponding measures The corporate production capacity of multi-crystalline silicon wafers is about 330MW, it is a small sized scale compared with giant companies globally. We started the construction of 3rd factory in 2011 in order to reach the economic size and meet the demands of downstream customers, thus the goal of total production capacity been raised to 550MW target and we have realized the strategy of reducing unit production costs and scattering customer sources by expanding this production capacity. We decided to slow down the pace of equipment installation in this new factory, take active part in adjusting operating scheme, strengthening management and improving effectiveness as well as adjusting the schedule of 3rd factory‟s being put into use after considering market status and possible changes. The factory is currently shut down and there are no new risk.

• 6.9 Risks of purchases and sales centralization and the corresponding measures

As for goods purchasing, the purchasing department of the company has purchased silicon from major giant companies since 2009. In addition, the poly-silicon is oversupplied in the market now therefore, we have got rid of the silicon centralization risks and resolve the problem for buying the silicon material. Furthermore, we have signed long-term supply contracts with Korean manufacture OCI in March 2011 making sure the sound supply of main materials to satisfy the manufacturing needs.

Those customers with 5% net operating revenues ranking accounted for 87.5% of total operating revenues of 2018 which was made up with five major customers, among them the largest customer share was approaching 49.9%. The total revenues from top 10 customers made up 97.1% of total revenues in 2018, among them the individual revenues occupied between 1.1% and 49.9% of total

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operating revenues. The current priority is to meet the ordering demands of major customers due to relatively small production size compared with those companies within the same industry and downstream solar cell manufacturers. The customers stay relatively stable , thanks to our active measures taken to develop new customers and the major customers are all well-known solar cell companies domestic and abroad. Thus, we are going to continue to expand business and develop new customers to effectively reduce the risks of sales centralization.

• 6.10 The impacts, risks of large equity transfer and exchange of directors, supervisors or major shareholders with more than 10% shares exerting on the company and corresponding measures There are no such matters in recent years and up to the date of Annual Report publication.

• 6.11 The impacts of management right changes exerting on the company, risks and corresponding measures

The managements are dedicated to the operation of the company and the employees of the company are identifying with the corporate developing directions and willing to hold company‟s shares and grow with the company. Thus, there were no large equity transfer and exchange that would lead to management rights and further exert negative effects on the company and increase the risks.

6.12 In terms of lawsuits or non-lawsuit affairs and administrative litigation sentenced and determined or yet to be judged by corporate directors, supervisors, general manager, actual responsible person, major shareholders with more than 10% shares and affiliated companies shall be clearly stated. And for those lawsuits or non-lawsuit affairs and administrative litigation which may exert significant effects on shareholders‟ equity or securities‟ price, the contentious facts, amount of subjects, starting date of litigation, the main parties involved as of the date of Annual Report publication shall be disclosed:

disclosed:
Case no.	Amount of subjects	Starting date of litigation	The main parties involved	Contentious facts
CHUNG-SHAN NO. 717, 106 Taiwan High Court	NTD 18,284,065	106.10.05~	The company	The MEP project of Fab3 is not finished yet for final acceptance and the obligation of payment does not exist. The MEP contractor company appeal, and the Taiwan high court adjudicated that the company(Danen) win the lawsuit at 2018.05.22
Sue-Chi No.2412, 107 Taichung District Court	NTD 58,464,800	107.09.14~	The company & managers involved	During the period from 2010 to 2012, the company entrusted Yizeng Co., Ltd. (referred to as Yizeng Company) to remove and dispose the D-1799 waste oil mixture of the company's

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business waste. Unexpectedly, the company did not know the circumstances, Yi Zeng Company not only been not approved the recycling process according to the law, but also transferred the derivative waste mud to the Huilong Company who was in Yizeng Company site, assigned to assist it in filtering and recycling the waste. The sludge was taken out of the Yizeng company's factory area and then been investigated by the public and police. Yizeng Company violated the contractual agreement the Company and violate the approval process of the waste recycle, thus the Company purchased the recycle oil products from Yizeng Company and Huilong Company, was suspected of being a joint offender in violation of the Waste Clean-up Law by the police. In the investigation, we are sure that each waste of the company paid the waste disposal fee in accordance with the market conditions according to law, and obtained the certificate of proper handling from Yizeng Company one by one. According to the provisions of the Waste Clean-up Law and the social conception at the time, there is no illegal fact and necessity. Therefore, lawyers have been requested to assist in actively seeking acquittal judgments from the courts.

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• 6.13 Other material risks and corresponding measures:

None.

1. Other important matters

2. 7.1 Depreciation methods and life span for real estate, plants and equipment

3. 7.1.1 Real estate, plants and equipment shall be recorded on the basis of the actual cost of acquisition and the related interests during the period of construction shall be capitalized.

4. 7.1.2 The subsequent costs can only be included in the carrying amount of assets or as a separated asset when the future economic outcomes related to the item are likely to flow into the company and the costs can be measured reliably. The carrying amount reset shall be excluded. And all other maintenance expenses occurred will be recognized as current profits and losses.

5. 7.1.3 The follow-up measurement of real estate, plants and equipment is based on cost model. Except the land without being made depreciation, all the rest are made depreciation based on durability according to straight-line depreciation method. The real estate, plants and equipment shall be made depreciation separately if the compositions of them are major.

6. 7.1.4 The company would inspect the residual values, durable years and depreciation methods of all kinds of assets on the closing date of fiscal year. If the expected values of residual values and durable years are different from what we estimated before or the expected consumption patterns of future economic outcomes of assets have changed considerably, we would handle with these matters according to No. 8 “Accounting Policies, Changes in Accounting Estimates and Errors” of International Accounting Standards since the date changes occurred. The durable years of all kinds of assets can be seen below:

Buildings	11 years～36 years
Machinery equipment	4 years～11 years
Office facilities	4 years～ 6 years
Transportation facilities	4 years～ 6 years
Leasing assets	7 years
Miscellaneous assets	6 years～ 8 years

7.2 Evaluation bases of provision methods of assets and liabilities evaluation subjects

7.2.1 Bad debt

The bad debt provisions of the company are based on the ages of closing notes receivable and

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accounts receivable and the analysis of recover possibilities and according to the Regulations on the Bad Debt Provisions. The provision rates can be seen below:

Ages overdue	Bad debt ratio
Non-overdue	0.5%
1 to30days	0.5%
31 to90 days	20%
91 to 180days	50%
181 to 270days	80%
271 to 365 days	90%
More than366days	100%

7.2.2 Allowance for inventory valuation losses

The inventories are measured based on the lower one between costs and net realized values and its costs are calculated according to weighted average method.

Cost of finished goods and semi-finished products include raw materials, direct labor, other direct and related manufacture cost.

The comparison between cost and net realized values for inventories are applied with

item-by-item method and net realized values refer to the balance between estimated selling price under normal operations and the costs need to be invested into as of the completion date and relevant selling expenses.

Besides, the allowances for inventory valuation losses are based on its stock ages. The allowance losses follow inventory management regulation will be 25%, 50%, 75% and 100% of ending inventory cost if stock ages are between 6 and 12 months, 13 and 18 months, 19 and 24 months and more than 25 months respectively.

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VIII. Special Disclosure

1. Relevant information about related enterprises

2. 1.1 There are no related enterprises in the company.

3. 1.2 Consolidated Financial Statement of related enterprises and reports of related enterprises:

None.

1. Information of private equity in latest year and up to the date of Annual Report publication:

2. None.

3. Shares of the company held or disposed by the subsidiaries:

4. None.

5. Other necessary supplementary disclosure:

None.

1. Significant impacts to shareholder equity and security price which violate Provision 2 Item 2 Article 36 of Securities Exchange Act in latest year up to the date of Annual Report publication:

2. None.

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Audit Committee’s Review Report

To 2019 Regular Meeting of Shareholders:

The 2018 Business Report, Financial Report and Proposal for Deficit Compensation prepared by the Board of Directors, of which Financial Report was audited by accountants, Lai Chung-Shih and Zhi Bing Jun of PricewaterhouseCoopers Taiwan and issue a review report. Also Business Report, Financial Report and Proposal for Deficit Compensation above have been examined by the Audit Committee, who prepared the report in accordance with the Article 14-4 of the Securities and Exchange Act and Article 219 of the Company Act and submit it for reference.

Sincerely,

The convener of the Audit Committee

• Tsai, Wen Jing

Date: February 18, 2019

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DANEN TECHNOLOGY CORPORATION FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT ACCOUNTANTS DECEMBER 31, 2018 AND 2017

-----------------------------------------------------------------------------------------------------------------------------------For the convenience of readers and for information purpose only, the 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. In the event of any discrepancy between the English version and the original Chinese version or any differences in the interpretation of the two versions, the Chinese-language auditors‟ report and financial statements shall prevail.

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REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders of Danen Technology Corporation

Opinion

We have audited the balance sheets of Danen Technology Corporation as of December 31, 2018 and 2017, and the related statements of comprehensive income, of changes in equity and of cash flows for the year 2018 and 2017, and notes to the financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of Danen Technology Corporation as of December 31, 2018 and 2017, and its financial performance and cash flows for the year 2018 and 2017 in accordance with the “Regulations Governing the Preparations of Financial Reports by Securities Issuers” and the interpretations of International Financial Reporting Standards, International Accounting Standards, as endorsed by the Financial Supervisory Commission.

Basis for opinion

We conducted our audits in accordance with the “Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants” and generally accepted auditing standards in the Republic of China (ROC GAAP). Our responsibilities under those standards are further described in the Auditor‟s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of Danen Technology Corporation in accordance with the Code of Professional Ethics for Certified Public Accountants in the Republic of China, and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidences we have obtained are 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 financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole and, in forming our opinion thereon, we do not provide a separate opinion on these matters.

Impairment assessment of Property, plant and equipment

Description and Audit Procedure: Please refer to the Chinese version of the Handbook for details.

Evaluation of Inventory

Description and Audit Procedure: Please refer to the Chinese version of the Handbook for details.

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

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

In preparing the financial statements, management is responsible for assessing the ability of Danen Technology Corporation, whether to continue business, disclosing, as applicable, matters related to the going concern accounting basis unless the managements either intend to liquidate Danen Technology Corporation or to cease operations, or has no realistic alternative but to do so.

Those who charged with governance, including audit committee, are responsible for overseeing financial reporting process of Danen Technology Corporation.

Accountant’s responsibilities for the audit of financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether the issue was due to fraud or error, and to issue an auditor‟s report that includes our opinion. Reasonable assurance is with ~~a~~ high level of confidence, but is not a guarantee that an audit conducted in accordance with ROC GAAP will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered materially when it happens in individual or aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with ROC GAAP, we take professional judgment and maintain professional skepticism throughout the audit. We also: 1. Identify and assess the risks of material misstatement of the 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.

1. Obtain an understanding of internal control system relevant to the audit, in order to design the audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the internal control effectiveness of Danen Technology Corporation.

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

3. Conclude on the appropriateness of the managements‟ use of the going concern basis accounting

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and base on the audit evidence obtained, whether a material uncertainty exists, which related to events or conditions that may cast significant doubt on Danen Technology Corporation‟s ability to continue business as a going concern. If we conclude that a material uncertainty exists, we are required to draw attentions in our auditor‟s report to related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidences obtained up to the date of our auditor‟s report. However, future events or conditions may cause the company to cease the operation, could be as a going concern.

1. Evaluate the overall presentations, structures and contents of the financial statements (including the notes), and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with those who charged with governance, including the planned audit scope, timing of the audit and significant audit findings (including any significant deficiencies in internal control that were identified during the audit.

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

From the matters communicated with those who charged with governance, we determine the matters that were with most significance in the audit of the financial statements for the current period and therefore are the key audit matters. We describe these matters in our auditor‟s report unless law or regulation precludes public disclosure about the matter or 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 interests of such communication.

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DANEN TECHNOLOGY CORPORATION BALANCE SHEETS DECEMBER 31

(Expressed in thousands of New Taiwan dollars)

Assets	Notes 6(1) 6(3) 6(4) 6(2) 6(5)、8、9 6(21) 8 6(6)	2018	% 31 - - - 2 1 - 34 11 - 54 - 1 - 66 100	2017
		AMOUNT $ 434,121 - 1,705 119 30,777 8,632 467 475,821 155,000 - 752,680 - 11,021 1,410 920,111 $ 1,395,932		AMOUNT $ 705,268 50,598 3,347 97 111,847 43,122 - 914,279 - 155,000 2,171,589 4,616 11,021 5,927 2,348,153 $ 3,262,432	%
Current assets 1100 Cash and cash equivalents 1170 Accounts receivable, net 1200 Other receivables 1220 Current tax assets 130X Inventories, net 1410 Prepayments 1479 Other current assets – others 11XX Total current assets Non-current assets 1510 Non-current Financial Assets at Fair Value through Profit or Loss 1543 financial assets at cost - noncurrent 1600 Property, plant and equipment, net 1840 Deferred tax assets 1980 Other financial assets - non-current 1990 Other non-current assets - others 15XX Total non-current assets 1XXX Total assets					22 2 - - 3 1 -
					28
					- 5 67 - - -
					72
					100

(Continued)

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DANEN TECHNOLOGY CORPORATION BALANCE SHEETS DECEMBER 31

(Expressed in thousands of New Taiwan dollars)

Liability and Shareholders'Equity

2018 2017 Notes AMOUNT % AMOUNT % 6(7)(25) $ 55,000 4 $ 25,000 1 58 - 161,724 5 6(8) 38,501 3 64,056 2 6(11) 26,000 2 - - 6(9)(25) 22,500 1 22,917 1 1,492 - 1,444 - 143,551 10 275,142 9 6(9)(25) 7,500 1 - - 6(11) 109,745 8 5,237 - 6(21) - - 118 - 117,245 9 5,355 - 260,796 19 280,496 9 6(12) 3,496,268 250 3,496,268 107 6(13) - - 176,418 5 6(14) ( 2,361,132 ) ( 169 ) ( 690,750) ( 21) ( 1,135,136 81 2,981,936 91 9 $ 1,395,932 100 $ 3,262,432 100

Current liabilities 2100 Short-term liabilities 2170 Accounts payable 2200 Other payables 2250 Provisions - Current 2320 Long-term liabilities, current portion 2399 Other current liabilities – others 21XX Total current liabilities Non-current liabilities 2540 Long-term borrowings 2550 Provisions - Non-current 2570 Deferred tax liabilities 25XX Total non-current liabilities 2XXX Total liabilities Share capital 3110 Common stock Capital surplus 3200 Capital surplus Retained earnings 3350 Accumulated deficit 3XXX Total equity Significant commitments and contingent events 3X2X Total liabilities and shareholders' equity

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

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DANEN TECHNOLOGY CORPORATION STATEMENTS OF INCOME

FOR THE YEARS ENDED DECEMBER 31

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

Items

2018 2017 Notes AMOUNT % AMOUNT % 6(15) $ 522,534 100 $ 948,607 100 6(4)(19)(20) ( 1,318,729)( 252)( 1,569,807) ( 166) ( 796,195)( 152)( 621,200) ( 66) 6(19)(20) ( 5,798 ) ( 1) ( 9,086) ( 1) ( 46,953 ) ( 9) ( 46,860) ( 5) ( 7,041 ) ( 2)( 10,925) ( 1) ( 59,792 ) ( 12)( 66,871) ( 7) ( 855,987 ) ( 164)( 688,071) ( 73) 6(16) 28,819 6 8,135 1 6(5)(17) ( 1,013,628 ) ( 194) ( 7,712) 1 6(18) ( 1,506 ) - ( 1,799) - ( 986,315)( 188) 1,376 - ( 1,842,302 ) ( 352) ( 689,447) ( 73) 6(21) ( 4,498 ) ( 1)( 1,303) ( -) ( 1,846,800 ) ( 353)( 690,750) ( 73) ( 1,846,800)( 353)($ 690,750) ( 73) ($ 1,846,800 ) ( 353)($ 690,750) ( 73) 6(22) ($ 5.28)($ 1.98) 6(22) ($ 5.28) ($ 1.98)

4000 Operating revenue 5000 Operating costs 5900 Gross loss from operations Operating expenses 6100 Selling expenses 6200 General and administrative expenses 6300 Research and development expenses 6000 Total operating expenses 6900 Operating loss Non-operating income and expenses 7010 Other income 7020 Other gains and losses 7050 Finance costs 7000 Total non-operating income and expenses 7900 Loss before income tax 7950 Income tax expense 8000 Loss from continuing operations 8200 Loss for the period 8500 Total comprehensive loss 9750 Basic loss per share 9850 Diluted loss per share

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

105

DANEN TECHNOLOGY CORPORATION STATEMENTS OF CHANGES IN EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017

(Expressed in thousands of New Taiwan dollars)

Commonstock $ 3,496,268 - - - $ 3,496,268 $ 3,496,268 - - - $ 3,496,268	Additionalpaid-incapital $ 910,062 - - ( 733,644 ) $176,418 $ 176,418 - - ( 176,418 ) $-	Accumulated deficit Totalequity ( $ 733,644 ) $ 3,672,686 ( 690,750 ) ( 690,750 ) ( 690,750 ) ( 690,750 ) 733,644 - ( $690,750 ) $2,981,936 ( $ 690,750 ) $ 2,981,936 ( 1,846,800 ) ( 1,846,800 ) ( 1,846,800 ) ( 1,846,800 ) 176,418 - ( $2,361,132 ) $1,135,136

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

106

DANEN TECHNOLOGY CORPORATION

STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31

DANEN TECHNOLOGY CORPORATION STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31	DANEN TECHNOLOGY CORPORATION STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31
(Expressed in thousands of New Taiwan dollars) Notes CASH FLOWS FROM OPERATING ACTIVITIES Loss before tax for the year ($ Adjustments to reconcile loss before tax to net cash provided by operating activities Income and expenses Depreciation expense 6(5)(19) Amortization expense 6(19) Provision for bad debt expense Payables on equipment Other revenues 6(24) ( Loss of purchase contract Gain on disposal of property, plant and equipment 6(17) ( Interest revenue 6(16) ( Non-financial asset impairment loss 6(5)(17) Interest expense 6(18) Changes in assets/liabilities relating to operating activities Net changes in assets relating to operating activities Accounts receivable, net Other receivables Inventories Prepayments Other current assets ( Other non-current assets Net changes in liabilities relating to operating activities Accounts payable ( Other payables ( Other current liabilities Cash generated from operations ( Cash received as interest Interest paid ( Income tax paid (returned) ( Cash provided by (used in) operating activities ( CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of financial assets at cost Acquisition of property, plant and equipment 6(24) ( Disposal of immovable property, plant and equipment Increase in refundable deposits ( Net cash (used in) provided by investing activities ( CASH FLOWS FROM FINANCING ACTIVITIES Increase in short-term loans Decrease in short-term loans Proceeds from long-term debt Repayments of long-term debt ( Increase in guarantee deposits received Net cash (used in) provided by financing activities Decrease (increase) in cash and cash equivalents ( Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year $		2018 1,842,302) ($ 464,141 1,257 -( 18,755) 130,000 3,633) 3,738) ( 993,585 1,506 50,598 1,587( 81,070 34,490 467) 3,151 161,666) 8,874) ( 48( 278,002) 3,793 964) ( 22) 275,195) -( 35,888) ( 3,853 1,000) ( 33,035) ( 30,000 -( 30,000 22,917) ( -( 37,083( 271,147) ( 705,268 434,121$		2017
				689,447) 542,558 1,434 126) - - - 4,620) - 1,799 21,022 2,170) 26,198 1,812 173 44,588 75,079 10,599) 312) 7,389 4,576 1,317) 563 11,211 155,000) 7,194) - 10) 162,204) 295,000 270,000) 30,000 75,000) 30) 20,030) 171,023) 876,291 705,268
	$		$

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

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DANEN TECHNOLOGY CORPORATION NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2018 AND 2017

(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS, EXCEPT AS OTHERWISE INDICATED)

1. HISTORY AND ORGANIZATION

Danen Technology Corporation (the “Company”) started preparing for establishment from October 1, 2007 and was approved to establish on November 9, 2007. The Company is primarily engaged in manufacturing and processing of solar-energy related products. Starting from July 20, 2010, the Company‟s stocks are officially listed on the Taiwan Stock Exchange.

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

PROCEDURES FOR AUTHORIZATION

These financial statements were authorized for issuance by the Board of Directors on February 18, 2019.

3. APPLICATION OF NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS

• (1) Effect of the adoption of new issuances of or amendments to International Financial Reporting Standards (“IFRS”) as endorsed by the Financial Supervisory Commission

The following table sets out the amendment and revision guidelines and explanations for the 2018

new issuance of the appliance on International Financial Reporting Standards approved by the Financial Management Committee:

ancial Management Committee:
New Release / Amendment / Revision Criteria and Explanations Revision of International Financial Reporting Standards No. 2 "Classification and measurement of share base payment transactions" Amendments to International Financial Reporting Standards No. 4 "Methodologies to the application of the International Financial Reporting Standards No. 9" Financial Instruments " for insurance contract under the International Financial Reporting Standards No. 4 International Financial Reporting Standards No. 9, " Financial Instruments " International Financial Reporting Standards No. 15 " The Revenue from Customer Contract " Amendments to the International Financial Reporting Standards No. 15 " Interpretation of the International Financial Reporting Standards No. 15 " The Revenue from Customer Contract "" Amendments of International Accounting Standards No. 7 " Disclosure Initiative " Amendments of International Accounting Standards No. 12, "Recognition of Deferred Income Tax with Unrealized Loss"	The effective date of announcement from the International Accounting Standards Board
	January 1, 2018 January 1, 2018 January 1, 2018 January 1, 2018 January 1, 2018 January 1, 2017 January 1, 2017

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Amendments to International Accounting Standards No. 40 January 1, 2018 "Conversion of Real Estate Investment " Interpretation to No. 22 of International Financial Reporting " Foreign January 1, 2018 Currency Transactions and Prepaid Price Consideration" Annual improvements during 2014-2016 period - International January 1, 2018 Financial Reporting Standards No. 1, " The First Time for International Financial Reporting Standards " Annual improvements during 2014-2016 period - International January 1, 2017 Financial Reporting Standards No. 12 " Disclosure of the rights and interests of other individuals " Annual improvements during 2014-2016 period – International January 1, 2018 Accounting Standards 28 " Investment in affiliate companies and joint ventures"

Except as described below, the Company's assessment for the above criteria and explanations has no material impact on the Company's financial position and results of operations. International Financial Reporting Standard No. 9 "Financial Instruments"

Depending on business model and the contractual cash flows, the financial assets debt instruments are classified as financial asset at fair value through profit or loss, financial asset at fair value through other comprehensive income, or Amortized cost of a financial asset.

The financial assets equity instruments are classified as financial asset at fair value through profit or loss, unless the company choose to recognize the fair value of non-trading purposes equity instruments in other comprehensive income.

The companies applied the 2018 new issuance of the appliance on International Financial Reporting Standards approved by the Financial Management Committee, and adopt Simple retrospective adjustment by following International Financial Reporting Standards No. 9(IFRS9). The assessment of the material impact on January 1, 2018 are as follows ：

The company classified $155,000 thousand NTD Financial Assets Carried at Cost as financial asset at fair value through profit or loss by following IFRS 9 and adjusted the number to $155,000 thousand NTD.

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

the Company

The following table sets out the amendment and revision guidelines and explanations for the 2019 new issuance of the appliance on International Financial Reporting Standards approved by the Financial Management Committee:

New Release / Amendment / Revision Criteria and Explanations

The effective date of announcement from the International Accounting Standards Board

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Amendments to International Financial Reporting Standards No. 9 " January 1, 2019 Prepayment Features with Negative Compensation" International Financial Reporting Standards No. 16 "Lease" January 1, 2019 Amendments to International Accounting Standards No. 19 " Plan January 1, 2019 amendments, curtailments, or settlements" Amendments to International Accounting Standards No. 28 " January 1, 2019 Long-term interests in associates and joint ventures " Interpretation to No. 23 of International Financial Reporting " January 1, 2019 Uncertainty over Income Tax Treatments " Annual improvement during 2015-2017 period January 1, 2019

In addition to the following, the Company's assessment of the above criteria and explanations has no material impact on the Company's financial position and results of operations. The relevant impact amount will be disclosed when the assessment is completed:

International Financial Reporting Standards No. 16 “Lease”

The International Financial Reporting Standards No. 17 “Lease” is superseded by IAS 16 and its related explanations and announcements. This clause stipulates that the lessee shall recognize the assets in use and lease liabilities (except for the lease period less than 12 months or low value of the leasing assets); Lessor accounting treatment will be the same, following by operating lease and finance leasing, two types of processing , only need to increase the relevant disclosure.

The Company will treat the lessee's lease contract in accordance with International Financial Reporting Standard No. 16 but adopt the non-restatement of the previous financial statements (hereinafter referred to as “corrected traceability”)

The Company may increase the right to use assets $134,815 and lease liability $134,815 respectively for January 1, 2019.

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

New standards, interpretations and amendments issued by IASB but not yet included in the 2018 version of IFRSs as endorsed by the FSC:

New Release / Amendment / Revision Criteria and Explanations Amendments to International Financial Reporting Standards No. 1 and International Accounting Standards No. 8 "Disclosure InitiativeDefinition of materiality "

• Amendments to International Accounting Standards No. 3 " Definition of business "

• Amendments to International Financial Reporting Standards No. 10 and International Accounting Standards No. 28 " Sales or contributions of assets between an investor and its associate/joint venture"

The effective date of announcement from the International Accounting Standards Board January 1, 2020

January 1, 2020

To be confirmed by International accounting Standards Board

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International Financial Reporting Standards No. 17 "Insurance January 1, 2021 Contracts"

In addition to the following, the Company's assessment of the above criteria and explanations has no material impact on the Company's financial position and results of operations. The relevant impact amount will be disclosed when the assessment is completed:

International Financial Reporting Standards No. 16 " Lease "

The International Financial Reporting Standards No. 17 " Lease " be superseded by IAS 16 and its related explanations and announcements. This clause stipulates that the lessee shall recognize the assets in use and lease liabilities (except for the lease period less than 12 months or low value of the leasing assets); Lessor accounting treatment will be the same, following by operating lease and finance leasing, two types of processing , only need to increase the relevant disclosure.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

(1) Compliance statement

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

• (2) Basis of preparation

• A. Except “Financial assets measured at fair value through profit or loss” are measured by fair value, the financial statements have been prepared under the historical cost convention.

• B. The preparation of financial statements in conformity with IFRSs requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Company‟s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 5.

• C. The company applied IFRS 9 and IFRS 15 for the first time on January 1, 2018, represent the conversion difference as a retained earnings or other equity. The company did not make restatement of the 2017 financial statements and notes. The 2017 annual financial report is based on International Accounting Standards No. 39 (hereinafter referred to as "IAS 39"), International Accounting Standards No. 11 (hereinafter referred to as "IAS 11"), International Accounting Standards No. 18 (hereinafter referred to as "IAS 18"), and Relevant explanations. For the significant accounting policies and important accounting statements adopted, please refer to Note 12, (4) and (5) for details.

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(3) Foreign currency translation

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

Foreign currency transactions and balances

• (a) Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are remeasured. Foreign exchange gains and losses resulting from the settlement of such transactions are recognised in profit or loss in the period in which they arise.

• (b) Monetary assets and liabilities denominated in foreign currencies at the period end are re-translated at the exchange rates prevailing at the balance sheet date. Exchange differences arising upon re-translation at the balance sheet date are recognised in profit or loss.

• (c) Non-monetary assets and liabilities denominated in foreign currencies held at fair value through profit or loss are re-translated at the exchange rates prevailing at the balance sheet date; their translation differences are recognised in profit or loss. Non-monetary assets and liabilities denominated in foreign currencies held at fair value through other comprehensive income are re-translated at the exchange rates prevailing at the balance sheet date; their translation differences are recognised in other comprehensive income. However, non-monetary assets and liabilities denominated in foreign currencies that are not measured at fair value are translated using the historical exchange rates at the dates of the initial transactions.

• (d) All foreign exchange gains and losses are presented in the statement of comprehensive income within „other gains and losses‟.

• (4) Classification of current and non-current items

• A. Assets that meet one of the following criteria are classified as current assets; otherwise they are classified as non-current assets:

  • (a) Assets arising from operating activities that are expected to be realised, or are intended to be sold or consumed within the normal operating cycle;

  • (b) Assets held mainly for trading purposes;

  • (c) Assets that are expected to be realised within twelve months from the balance sheet date;

  • (d) Cash and cash equivalents, excluding restricted cash and cash equivalents and those that are to be exchanged or used to pay off liabilities more than twelve months after the balance sheet date.

• B. Liabilities that meet one of the following criteria are classified as current liabilities; otherwise they are classified as non-current liabilities:

  • (a)Liabilities that are expected to be paid off within the normal operating cycle;

  • (b)Liabilities arising mainly from trading activities;

  • (c)Liabilities that are to be paid off within twelve months from the balance sheet date;

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• (d)Liabilities for which the repayment date cannot be extended unconditionally to more than twelve months after the balance sheet date. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.

(5) Cash equivalents

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

• (6) Financial Assets at Fair Value through Profit or Loss Applicable in 2018

• A. Financial assets that are not measured at amortised cost or measured at fair value through other comprehensive profit or loss.

• B. The company's financial assets measured at fair value through profit or loss in accordance with customary transactions are accounted on the transaction date.

C. The company's initial recognition is measured at fair value, the related transaction costs are recognized in profit or loss, and subsequently measured at fair value; the benefits or losses are recognized in profit or loss.

D. When the right to receive dividends is determined, the benefits related to dividends are likely to flow in, and when the amount of dividends can be reliably measured, the company recognizes dividend income in profit or loss.

(7) Accounts receivable

• A. Accounts receivable refers to the unconditional collection of the right to receive the amount of the consideration due to the transfer of goods or services in accordance with the contract.

• B. Short-term accounts receivable without bearing interest are subsequently measured at initial invoice amount as the effect of discounting is immaterial.

(8) Impairment of financial assets

The financial assets measured by the amortized cost at each balance sheet date, after considering all reasonable and provable information (including forward-looking), For the credit risk that has not increased significantly since the original recognition, the allowance loss is measured by the 12-month expected credit loss amount. For those who increase the credit risk after the initial recognition, the allowance loss is measured by the expected amount of credit loss during the period of existence. For accounts receivable or contract assets that do not contain significant financial components, the allowance for loss is measured by the amount of expected credit losses over the life of the period.

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(9) Derecognition of Financial asset

Financial assets are derecognised when the rights to receive cash flows from the assets expire

(10) Inventories

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

(11) Property, plant and equipment

• A. Property, plant and equipment are initially recorded at cost. Borrowing costs incurred during the construction period are capitalised.

• B. Subsequent costs are included in the asset‟s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to profit or loss during the financial period in which they are incurred.

• C. Land is not depreciated. Other property, plant and equipment apply cost model and are depreciated using the straight-line method to allocate their cost over their estimated useful lives. Each part of an item of property, plant, and equipment with a cost that is significant in relation to the total cost of the item must be depreciated separately.

• D. The assets‟ residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each financial year-end. If expectations for the assets‟ residual values and useful lives differ from previous estimates or the patterns of consumption of the assets‟ future economic benefits embodied in the assets have changed significantly, any change is accounted for as a change in estimate under IAS 8, „Accounting Policies, Changes in Accounting Estimates and Errors‟, from the date of the change. The estimated useful lives of property, plant and equipment are as follows:

Buildings 11 ~ 36 years Machinery and equipment 4 ~ 11 years Office equipment 4 ~ 6 years Transportation equipment 4 ~ 6 years Leased assets 7 years Other assets 6 ~ 8 years

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(12) Operating leases (lessee)

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

(13) Impairment of non-financial assets

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

(14) Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in profit or loss over the period of the borrowings using the effective interest method.

(15) Accounts and notes payable

• A. Means the debt incurred as a result of the purchase of the original materials, goods or services and the notes payable due to business and non-business

• B. Short-term accounts payable without bearing interest are subsequently measured at initial invoice amount as the effect of discounting is immaterial.

(16) Provisions(Decommissioning liabilities and onerous contract)

Provisions are recognised when the Company has a present legal or constructive obligation as a result of past events, and it is probable that an outflow of economic resources will be required to settle the obligation and the amount of the obligation can be reliably estimated. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation on the balance sheet date, which is discounted using a pre-tax discount rate that reflects the current market assessments of the time value of money and the risks specific to the obligation. When discounting is used, the increase in the provision due to passage of time is recognised as interest expense. Provisions are not recognised for future operating losses.

(17) Employee benefits

• A. Short-term employee benefits

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

• B. Pensions

The Company‟s pension policy is a defined contribution plan which the contributions are

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

• C. Employees‟ compensation and directors‟ and supervisors‟ remuneration

  • Employees‟ compensation and directors‟ and supervisors‟ remuneration are recognised as expenses and liabilities, provided that such recognition is required under legal obligation or constructive obligation and those amounts can be reliably estimated. If there is a difference between Actual distribution amount and estimated amount, the company will handle it according to Change in accounting estimate.

• (18) Income tax

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

• B. The current income tax expense is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the Company operates and generates taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in accordance with applicable tax regulations. It establishes provisions where appropriate based on the amounts expected to be paid to the tax authorities. The unappropriated retained earnings is recorded as income tax expense in the year the stockholders resolve to retain the earnings.

• C. Deferred tax is recognised, using the balance sheet liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the balance sheet. However, the deferred tax is not accounted for if it arises from initial recognition of goodwill or of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred tax is provided on temporary differences arising on investments in associates, except where the timing of the reversal of the temporary difference is controlled by the Company and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.

• D. Deferred tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. At each balance sheet date, unrecognised and recognised deferred tax assets are reassessed.

• E. Current income tax assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. Deferred tax assets and liabilities are offset on the balance sheet when the entity has the legally

116

enforceable right to offset current tax assets against current tax liabilities and they are levied by the same taxation authority on either the same entity or different entities that intend to settle on a net basis or realise the asset and settle the liability simultaneously.

• F. A deferred tax asset shall be recognised for the carry forward of unused tax credits resulting from acquisitions of equipment or technology, research and development expenditures and equity investments to the extent that it is possible that future taxable profit will be available against which the unused tax credits can be utilised.

(19) Share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or stock options are shown in equity as a deduction, net of tax, from the proceeds.

(20) Dividends

Dividends are recorded in the Company‟s financial statements in the period in which they are approved by the Company‟s shareholders. Cash dividends are recorded as liabilities; stock dividends are recorded as stock dividends to be distributed and are reclassified to ordinary shares on the effective date of new shares issuance.

(21) Revenue recognition

• A. Sales of goods

• a. The company manufactures and sells solar wafer related products. Revenue from sales is recognized when the control of the product is transferred to the buyer, that is, when the product is delivered to the buyer. The buyer has discretion to the price of the product sold, and the company has no unfulfilled obligations that may affect the buyer‟s recognition of the revenue when accepting the product. The risk of obsolescence and loss has been transferred to the buyer, and accepting products based on sales contracts. Or when there is objective evidence that all acceptance criteria have been met, the goods are delivered.

• b. The sales revenue of the commodity is deducted from the contract price, net of sales return, quantity discount and discount.

• B. Sales of services

The Company provides manufacturing and processing services for silicon wafer. Revenues are recognised based on the stage of completion of the service when all the following criteria below are met, and the cost shall be recognised as incurred. Losses are immediately recognised if they are anticipated to incur:

• (a) Revenue can be measured reliably;

• (b) It is probable that the economic benefits associated with the transaction will flow to the entity;

• (c) The costs incurred and to be incurred associated with transaction can be measured reliably;

• (d) The degree of completion of the transaction can be measured reliably at the balance sheet date.

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(22) Operating segments

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The Company‟s chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors that makes strategic decisions.

5. CRITICAL ACCOUNTING JUDGEMENTS, ESTIMATES AND KEY SOURCES OF

ASSUMPTION UNCERTAINTY

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

(1) Critical judgements in applying the Company‟s accounting policies

• Revenue recognition on a net/gross basis

The nature of the company's commitment to customers based on the type of transaction and economic substance, it is the performance obligation of the specific goods or services provided by itself (the company's principal), or the other party's performance obligation to provide such goods or services (the company is the agent). Before the company transfers the specific goods or services to the customer and controls the goods or services, the company is the main manager, and the company recognizes the total amount of the consideration for the expected transfer of the specific goods or services. If the company does not control the goods or services before the transfer of the specific goods or services to the customer, the company is an agent who provides the other party with specific goods or services for the arrangement of the customer. Fees or commissions recognized as income.

The company determines the control of the goods or services before the transfer of specific goods or services to the customer based on the following indicators. ：

• A. The company has primary responsibility for fulfilling its commitment to provide specific goods or services.

• B. The company assumes the inventory risk before the transfer of specific goods or services to the customer or after the transfer of control.

• C. The company has a discretionary power to set prices for specific goods or services.

(2) Critical accounting estimates and assumptions

• A. Impairment assessment of tangible assets

The Company assesses impairment based on its subjective judgement and determines the recoverable amount of a specific group of assets, useful lives of assets and the future possible income and expenses arising from the assets depending on how assets are utilised and industrial

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characteristics. Any change of economic circumstances or estimates due to the change of Company strategy might cause material impairment on assets in the future.

As of December 31, 2018, the Company recognised carrying amount of property, plant and equipment amounting to NT$752,680 thousands. .

B. Evaluation of inventories

As inventories are stated at the lower of cost and net realisable value, the Company must determine the net realisable value of inventories on balance sheet date using judgements and estimates. Due to unbalanced market supply and demand, the Company evaluates the amounts of normal inventory consumption, obsolete inventories or inventories without market selling value on balance sheet date, and writes down the cost of inventories to the net realisable value. Such an evaluation of inventories is principally based on the demand for the products within the specified period in the future. Therefore, there might be material changes to the evaluation. As of December 31, 2018, the carrying amount of inventories was NT$30,777 thousands.

6. DETAILS OF SIGNIFICANT ACCOUNTS

(1) Cash and cash equivalents

Cash and cash equivalents
Cash on hand Demand deposits Time deposits		December 31 , 2018 $ 50 65,071 369,000 $ 434,121	December 31 , 2017 $ 80 131,188 574,000 $ 705,268

• A. The Company transacts with a variety of financial institutions all with high credit quality to disperse credit risk, so it expects that the probability of counterparty default is remote.

• B. The Company has no cash and cash equivalents pledged to others.

• (2) Non-current financial assets at fair value through profit or loss

Applicable in 2018

Items Non-current items : Fair value through other comprehensive income financial assets Unlisted, not on the counter, non-stock stock Adjustments for change in value Total	December 31 , 2018 $ 155,000 - $ 155,000

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The details of financial assets at fair value through profit or loss are as follows:

2018

Fair value through other comprehensive income financial assets

• Equity Instruments $

For the information of 2017 and December 31, 2018, please refer to Note 12 and (4) for details.

(3) Accounts receivable

Accounts receivable Less：allowance for bad debts	December 31 , 2018 $ - - $-	December 31 , 2017 $ 50,798 ( 200) $ 50,598

Note: Please refer to Note 12 (2) for relevant credit risk information. (4) Inventories

Inventories
Raw materials $ Supplies Semi-finished goods Finished goods $			December 31,2018
		Cost 20,574 11,010 53,351 22,416 107,351	($ ( ( (	Allowance for valuation loss 8,594) 7,958) 39,449) 20,573) 76,574)	$	Book value 11,980 3,052 13,902 1,843 30,777
	$		($		$

Raw materials $ Supplies Work in process Semi-finished goods Finished goods $			December 31,2017	December 31,2017
		Cost 40,372 12,596 39,429 17,754 24,982 135,133	($ ( ( ( (	Allowance for valuation loss 1,155) 7,557) 5,916) 3,015) 5,643) 23,286)	$	Book value 39,217 5,039 33,513 14,739 19,339 111,847
	$		($		$

For the years ended December 31, 2018 and 2017, details of related profit or loss recognised for inventories that are included in operating costs are as follows:

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Cost of goods sold Loss of purchase contract Revenue from sale of scraps Gain on reversal of decline in market value Loss on decline in market value Unallocated manufacturing expenses		Years end December 31,	Years end December 31,
	$ (	2018 712,901 130,000 432) - 53,288 422,972 1,318,729	$ ( (	2017 1,218,605 - 796) 8,309) - 360,307 1,569,807
	$		$

Note: The gain on reversal of decline in market value was caused by the disposal of inventory previously written down.

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(5) Property, plant and equipment

At January 1,2018 Cost Accumulated depreciation and impairment 2018 Opening net book amount as at January 1 Additions Disposal Reclassification Depreciation charge Impairment loss Closing net book amount as at December 31 At December 31,2018 Cost Accumulated depreciation and impairment At January 1,2017 Cost Accumulated depreciation and impairment 2017 Opening net book amount as at January 1 Additions Depreciation charge Closing net book amount as at December 31 At December 31,2017 Cost Accumulated depreciation and impairment	Buildings $ 1,781,648 ( 649,089) $ 1,132,559 $ 1,132,559 5,733 - 59,157 ( 98,551) ( 377,129) $ 721,769 $ 1,846,538 ( 1,124,769) $ 721,769 Buildings M e $1,781,648 ( 549,889) $1,231,759 $1,231,759 - ( 99,200) $1,132,559 $1,781,648 ( 649,089) $1,132,559	Machinery equipment $ 4,044,755 ( 3,065,718) $ 979,037 $ 979,037 29,856 ( 69) - ( 364,808) ( 613,144) $ 30,872 $ 3,894,042 ( 3,863,170) $ 30,872 achinery quipment $ 4,044,755 ( 2,622,951) $ 1,421,804 $ 1,421,804 - ( 442,767) $ 979,037 $ 4,044,755 ( 3,065,718) $ 979,037	Office equipment $ 12,967 ( 12,908) $ 59 $ 59 190 ( 151) 1,140 ( 148) ( 1,078) $ 12 $ 13,363 ( 13,351) $ 12 Office equipment $ 13,460 ( 13,365) $ 95 $ 95 - ( 36) $ 59 $ 12,967 ( 12,908) $ 59	Others $ 52,197 ( 51,451) $ 746 $ 746 2,149 - - ( 634) ( 2,234) $ 27 $ 53,146 ( 53,119) $ 27 Others $ 52,277 ( 50,976) $ 1,301 $ 1,301 - ( 555) $ 746 $ 52,197 ( 51,451) $ 746	Construction In progress and equipment to be inspected $ 59,188 - $ 59,188 $ 59,188 - - ( 59,188) - - $- $ - - $- Construction In progress and equipment to be inspected $ 56,703 - $ 56,703 $ 56,703 2,485 - $ 59,188 $ 59,188 - $ 59,188	Total $ 5,950,755 ( 3,779,166) $ 2,171,589 $ 2,171,589 37,928 ( 220) 1,109 ( 464,141) ( 993,585)
						$ 752,680 $ 5,807,089 ( 5,054,409)
						$ 752,680 Total $ 5,948,843 ( 3,237,181) $ 2,711,662 $ 2,711,662 2,485 ( 542,558)
						$ 2,171,589 $ 5,950,843 ( 3,779,166) $ 2,171,589

• A. The significant components of buildings include main plants and facility, which are depreciated over 36 and 11 years, respectively.

• B. Some of the houses and buildings of the Company were seized by the court, and the relevant seizure information is detailed in Note 8 and Note 9 (1)

• C. After evaluation, the market value of the factory and machinery equipment for manufacturing solar silicon wafers has been less than the book value. The company recognized the impairment loss of $993,585 in 2018.

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(6) Other non-current assets

		December 31 , 2018	December 31 , 2018		December	31	, 2017
Prepayments for business facilities		$	-		$		4,460
Others			1,410				1,467
		$	1,410		$		5,927
(7)Short-term borrowings
							Assets pledged
Type of borrowings		December 31 ,	2018	Interest rate range			as collateral
Bank borrowings
Unsecured borrowings		$ 55,000			1.20%		None
							Assets pledged
Type of borrowings		December 31 ,	2017	Interest rate range			as collateral
Bank borrowings
Unsecured borrowings		$ 25,000			1.20%		None
(8)Other payables
		December 31 , 2018			December 31 , 2017
Accrued expenses
Wages and salaries payable		$	7,458		$		8,685
Accrued utilities expenses			272				7,694
Bonus payable			4,386				11,230
others			24,345				17,692
			36,461				45,301
Payable on machinery and equipment			2,040				18,755
		$	38,501		$		64,056
(9)Long-term borrowings
					Assets
	Loan period	and repayment Interest rate			pledged as
Type of borrowings	method		range		collateral		December 31 , 2018
	From April 13, 2018 to April
Unsecured borrowings	13, 2020, The principal is amortized on a quarterly basis from the 15th month
	onwards		1.40%		None		$ 30,000
Less：current portion						(	22,500)
							$ 7,500

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Type of borrowings Loan period and repayment method Unsecured borrowings From November 28, 2016 to November 28, 2018, monthly payment on interest Less：current portion	Interest rate range 1.45%	Assets pledged as	December 31 , 2017 $ 22,917 ( 22,917) $-
		collateral None

(10) Pensions

The Company have established a defined contribution pension plan (the “New Plan”) under the Labour Pension Act (the “Act”), covering all regular employees with R.O.C. nationality. The Company contributes monthly an amount of at least 6% of the employees‟ monthly salaries and wages to the employees‟ individual pension accounts at the Bureau of Labour Insurance. The benefits accrued are paid monthly or in lump sum upon termination of employment. The pension costs under defined contribution pension plans of the Company for the years ended December 31, 2018 and 2017 were $3,814 and $5,414, respectively.

(11) Provisions

Decommissioning liabilities Loss of purchase contract At January 1, 2018 $ 5,237 $ - New debt provision for the current period - 130,000 Unwinding of discount 508 - At December 31, 2018 5,745 130,000 At January 1, 2017 New debt provision for the current period Unwinding of discount At December 31, 2017	Total $ 5,237 130,000 508 $ 135,745 Decommissioning liabilities $ 4,773 - 464 $ 5,237

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Analysis of total provisions:

lysis of total provisions:
Current Non-current	$	December 31,2018 26,000 109,745	$	December 31,2017 -
	$		$	5,237

a. Decommissioning liabilities

According to the policy published, applicable agreement or the law/regulation requirement, the Company bears dismantling, removing the asset and restoring the site obligations for the Guanyin plant in the future. A provision is recognised for the present value of costs to be incurred for dismantling, removing the asset and restoring the site.

• b. Loss of purchase contract

The obligation to fulfil the raw material supply contract exceeds the expected economic benefit; the company recognizes the liability provision for the loss of the purchase contract.

(12) Share capital

As of December 31, 2018, the Company‟s authorized capital was $3,500,000, consisting of 350,000 thousand shares of ordinary stock, and the paid-in capital was $3,496,268 with a par value of $10 (in dollars) per share. All proceeds from shares issued have been collected.

(13) Capital surplus

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

	the legal reserve is insufficient.
(14)	Share premium Retained earnings At January 1 Loss for the year Capital surplus used to cover accumulated deficit At December 31	($ (	$	December 31,2018 - 2018 690,750) ($ 1,846,800) ( 176,418 2,361,132) ($			$	December 31,2017 176,418
					-
					2018 690,750) 1,846,800) 176,418 2,361,132)				2017 733,644) 690,750) 733,644 690,750)
		($				($

A. Under the Company‟s Articles of Incorporation, the current year‟s earnings, if any, shall be

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distributed in the following order:

• (a) Payment of all taxes and dues.

• (b) Offset against prior years‟ operating losses, if any.

• (c) Set aside 10% of the remainder as legal reserve until the accumulated amount of the legal reserve reaches the total authorized capital of the Company.

• (d) Set aside or reverse special reserve in accordance with related laws or the Competent Authority.

• (e) The appropriation of the current year‟s distributable earnings less the abovementioned items of (a) to (d), plus prior year‟s accumulated unappropriated earnings, shall be proposed by the Board of Directors and then approved by the shareholders.

The Company operates in a volatile business environment and is in the rapid growth stage, so it sets its dividend policy based on an optimal financial plan to chase for an ongoing development. The Company considers the future capital expenditure budget and capital needs, as well as necessity of earnings to fulfil capital needs, the Company determines the amount of earnings retained or distributed and the amount of dividends or bonus distributed to shareholders in the form of cash. Earnings can be distributed as cash dividends or stock dividends. However, earnings shall be preferably distributed using cash dividends and may also be distributed using stock dividends. The ratio for stock dividends shall not exceed 50% of the total amount of dividends distributed.

• B. Except for covering accumulated deficit or issuing new stocks or cash to shareholders in proportion to their share ownership, the legal reserve shall not be used for any other purpose. The use of legal reserve for the issuance of stocks or cash to shareholders in proportion to their share ownership is permitted, provided that the distribution of the reserve is limited to the portion in excess of 25% of the Company‟s paid-in capital.

• C. On February 23 and May 26, 2017, the Board of Directors and shareholders have approved the deficit compensation in 2016 of the Company, respectively. The Company covered losses using capital surplus – additional paid-in capital of $733,644.

• D. On February 27 and May 29, 2018, the Board of Directors and shareholders have approved the deficit compensation in 2017 of the Company, respectively. The Company covered losses using capital surplus – additional paid-in capital of $176,418.

• E. For the information relating to employees‟ remuneration and directors‟ and supervisors‟ remuneration, please refer to Note 6(20).

(15) Operating revenue

Revenue from Contracts with Customers	$	2018 522,534	$	2017 948,607

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Segmentation of revenue from contracts with customers

The company's revenue is derived from the provision of goods that are transferred at a certain point in time. The revenue can be broken down into the following major product lines and geographic regions:

Taiwan Asia(excluding Taiwan) America Revenue from Contracts with external Customers Income recognized at a certain point in time when income is recognized Taiwan Asia(excluding Taiwan) America Revenue from Contracts with external Customers Income recognized at a certain point in time when income is recognized					2018	2018	Total $ 357,424 44,471 120,639 522,534 $ 522,534 Total $ 844,608 1,376 62,623 948,607 $ 948,607
		Multi-crystalline solar wafer			Commodity and processing income $ 328,178 44,471 120,639 493,288 $ 493,288 2017
		$ 29,246 - - 29,246 $ 29,246
	Multi-crystalline solar wafer $ 763,768 - - 763,768 $ 763,768		Commodity and processing income $ 120,840 1,376 62,623 184,839 $ 184,839

(16) Other income

Interest income： Interest income from bank deposits	Years ended December 31, 2018 2017 3,738 4,620

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Rental revenue Other income	$ 906 24,175 $ 28,819	$ 1,009 2,506 $ 8,135

(17) Other gains and losses

ther gains and losses
Gain on disposal of property, plant and equipment Currency exchange gains or losses Non-financial asset impairment loss Other gains and losses	$ ($ ( (	Years ended December 31, 2018 2017 3,633 $ - 1,187) ($ 7,710) 993,585) - 22,489) ( 2) 1,013,628) ($ 7,712)
	($

(18) Finance costs

inance costs	inance costs
Interest expense： Bank borrowings $ Provision: unwinding of discount		Years ended December 31, 2018 2017 988 $ 1,335 508 464 1,506 1,799

(19) Expenses by nature

xpenses by nature
Employee benefit expense Depreciation charges Amortization charges Supplies charges	$	Years ended December 31, 2018 2017 108,175 $ 168,730 464,141 542,558 1,257 1,434 26,686 178,750 600,259 $ 891,472
	$

(20) Employee benefit expense

mployee benefit expense
Wages and salaries Labour and health insurance fees Pension costs Other personnel expenses	$	Years ended December 31, 2018 2017 93,545 $ 143,532 7,599 12,251 3,814 5,414 3,217 7,533 108,175 $ 168,730
	$

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• A. According to the Articles of Incorporation of the Company, when distributing earnings, the Company shall distribute bonus to the employees and pay remuneration to the directors and supervisors that account for no less than 5% and 3%, respectively, of the total distributed amount. If a company has accumulated deficit, earnings should be channelled to cover losses. A company may, by a resolution adopted by a majority vote at a meeting of Board of Directors attended by two-thirds of the total number of directors, have the profit distributable as employees‟ compensation distributed in the form of shares or in cash; and in addition thereto a report of such distribution shall be submitted to the shareholders' meeting. Qualification requirements of employees, including the employees of subsidiaries of the company meeting certain specific requirements, entitled to receive aforementioned stock or cash may be specified in the Articles of Incorporation.

• B. For the years ended December 31, 2018 and 2017, employees‟ compensation and directors‟ and supervisors‟ remuneration were both accrued at $0. Information about the appropriation of employees‟ bonus and directors‟ and supervisors‟ remuneration by the Company as proposed by the Board of Directors and resolved by the stockholders will be posted in the “Market Observation Post System” at the website of the Taiwan Stock Exchange.

(21) Income tax

• A. Income tax expense

Components of income tax expense:

Taiwan Stock Exchange. ome tax Income tax expense Components of income tax expense:
Current tax: Deferred tax: Origination and reversal of temporary differences Total deferred tax Income tax expense	$ $	Years ended December 31, 2018 2017 - $ - 4,498 1,303 4,498 1,303 4,498 $ 1,303

• B. Reconciliation between income tax expense and accounting loss:

Tax calculated based on loss before tax and statutory tax rate ($ Temporary differences are not recognized as deferred income tax assets	Years ended December 31, 2018 2017 368,460) ($ 117,206) 209,374 -

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Effects from items disallowed by tax regulation - Current tax losses are not recognized as deferred income tax assets 159,086 Change in assessment of realization of deferred tax assets 4,498 Income tax expense $ 4,498	39 118,470 - $ 1,303

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

January 1 Deferred tax assets: Temporary differences: Unrealized inventory valuation loss $ 3,959 Others 657 Subtotal $ 4,616 Deferred tax liabilities: Unrealized exchange gain ( 118) $ 4,498	Recognized in profit or loss	2018 Recognized in other comprehensive income $ - - $- - $-	Recognized In equity $ - - $- - $-	December 31
	($ 3,959) ( 657) ($ 4,616) 118 ($ 4,498)			$ - - $- - $-

January 1 Deferred tax assets: Temporary differences: Unrealized inventory valuation loss $ 5,371 Others 443 Subtotal $ 5,814 Deferred tax liabilities: Unrealized exchange gain ( 12) $ 5,802	January 1 Deferred tax assets: Temporary differences: Unrealized inventory valuation loss $ 5,371 Others 443 Subtotal $ 5,814 Deferred tax liabilities: Unrealized exchange gain ( 12) $ 5,802	Recognized in profit or loss	2017 Recognized in other comprehensive income $ - - $- - $-	Recognized In equity	December 31
		($ 1,412) 214 ($ 1,198) ( 106)		$ - - $- - $-	$ 3,959 657 $ 4,616 ( 118) $ 4,498
	$ 5,802	($ 1,304)

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• D. Expiration dates of unused taxable loss and amounts of unrecognised deferred tax assets are as follows:

follows:
Year incurred 2011 2012 2013 2014 2015 2016 2017 2018	December 31,2018 Amount field/ assessed Unused amount		Unrecognized Deferred tax assets	Usable until 2021 2022 2023 2024 2025 2026 2027 2028
	$ 300,197 917,673 746,449 575,492 527,720 521,686 696,793 795,429 $ 5,081,439	$ 300,197 917,673 746,449 575,492 527,720 521,686 696,793 795,429 $ 5,081,439	$ 300,197 917,673 746,449 575,492 527,720 521,686 696,793 795,429 $ 5,081,439

Year incurred 2011 2012 2013 2014 2015 2016 2017	December 31,2017 Amount field/ assessed Unused amount	December 31,2017 Amount field/ assessed Unused amount	Unrecognized Deferred tax assets	Usable until 2021 2022 2023 2024 2025 2026 2027
	$ 300,197 917,673 746,449 575,492 527,720 521,686 696,793	$ 300,197 917,673 746,449 575,492 527,720 521,686 696,793 $ 4,286,010	$ 300,197 917,673 746,449 575,492 527,720 521,686 696,793 $ 4,286,010
	$ 4,286,010

• E. The Company‟s income tax returns through 2016 have been assessed and approved by the Tax Authority.

• F. The amendments to the Taiwan Income Tax Law came into effect on February 7, 2018, and the tax rate for the profit-making business income tax has been increased from 17% to 20%. This amendment has been applied since the Republic of China in 107. The Company has assessed the related income tax implications for this tax rate change.

• (22) Loss per share

Year ended December 31,2018

Weighted average Number of ordinary Shares outstanding Losses per share Amount after tax (share in thousands) (in dollars)

Basic loss per share

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Loss for the year Diluted loss per share Loss for the year	($ 1,846,800) ($ 1,846,800)	349,627 349,627	($ 5.28)
			($ 5.28)

Basic loss per share Loss for the year Diluted loss per share Loss for the year	Year Amount after tax ($ 690,750) ($ 690,750)	Year	ended December 31,2017 Weighted average Number of ordinary Shares outstanding (share in thousands) Losses per share (in dollars) 349,627 ($ 1.98) 349,627 ($ 1.98)
			Weighted average Number of ordinary Shares outstanding (share in thousands) 349,627 349,627

(23) Operating leases

The Company leases in land under non-cancellable operating lease agreements. The lease terms are between 2008 and 2026. Extra rents are paid based on changes in local price index for certain leases. The Company recognised rental expenses of $23,110 and $22,847 for the years ended December 31, 2018 and 2017, respectively. The future aggregate minimum lease payments under non-cancellable operating leases are as follows:

Not later than one year $ later than one year but Not later than five years later than five years $	Not later than one year $ later than one year but Not later than five years later than five years $	December 31,2018 24,450 93,656 29,206 147,312	$	December 31,2017 24,081 96,323 48,760
	$		$	169,164

(24) Supplemental cash flow information

Investing activities with partial cash payments ：

Purchase of property, plant and equipment Add: opening balance of payable on equipment Less: ending balance of payable on equipment Less: Payables on equipment transfer to other revenues Cash paid during the period	$ (	Years ended December 31, 2018 2017 37,928 $ 2,485 18,755 23,464 2,040) ( 18,755) 18,755) - 35,888 $ 7,194
	(
	$

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(25) Changes in liabilities from financing activities

January 1, 2018 Changes in liabilities from financing activities December 31, 2018	Short-term borrowing Long-term borrowing (Include current portion) $ 25,000 $ 22,917 30,000 7,083 $ 55,000 $ 30,000	Total liabilities from financing activities $ 47,917 $ 37,083 $ 85,000

7. RELATED PARTY TRANSACTIONS

(1) Significant related party transactions

None.

(2) Key management compensation

ey management compensation
Salaries and other short-term employee benefits Post-employment benefits Other long-term benefits Termination benefits Share-based payments Total	$	2018	Years ended	December31,	2017 12,006 216 - - - 12,222
			11,761 184 - - - 11,945	$
	$			$

8. PLEDGED ASSETS

The Company‟s assets pledged as collateral are as follows:

Book value

Pledged asset Time deposits (shown as other financial Assets-non-current) Buildings	December 31,2018 $ 11,021 194,559 $ 205,580	December 31,2017 Purpose $ 11,021 Land tenancy - Litigation seizure (Note) $ 11,021

Note: Please refer to Note 9(1) for relevant geographical information

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9. SIGNIFICANT COMMITMENTS AND CONTINGENT LIABILITIES

(1) Contingencies

The company was involved in the case of violation of the waste disposal law in June, 2018. (Taiwan Taichung District Court Year 2018 v. No. 2412 case), The Seventh Corps of the Security Police of the Ministry of the Interior of the Ministry of the Interior applied for the Taichung District Court to detain the three real estates located in the 27-1, 27-2 and 27-3 construction of the Guantang section of Guanyin District (all belong to the first factory), The prosecutor sued the company for a fine of the violation of Section 46 of the Waste Clean-up Act and pursued unlawful gains.

The company believes that the criminal circumstances identified in the indictment are inconsistent with the facts of the relevant documentary evidence that has been collected by itself. The company obviously has no illegal intentions, but the prosecutor did not recognize the facts. In this regard, the company has appointed a lawyer to declare to the judge that it should be acquitted. At present, the trial of the case is still unable to confirm the outcome of the court decision.

(2) Commitments

• A. Capital expenditure contracted for at the balance sheet date but not yet incurred is as follows:

Facilities and Equipment	$	December 31,2018 17,327	$	December 31,2017 60,806

B. Operating lease commitments

Please refer to Note 6 (23) for the related information.

• C. In order to ensure that the sources of silicon raw materials are sufficient, the Company has entered into a supply contract with a world-renowned supplier in March 2011. The contract period is from January 1, 2012 to December 31, 2018. The supplier has committed to provide a certain quantity of silicon raw material to the Company during the contract period. The total contract price is USD 161 million. As the price of the silicon raw material has fluctuated dramatically, the delivered price and quantity for each purchase were then determined based on mutual agreements for the years ended December 31, 2015 and 2014.

Amendments were made for poly-silicon contract with material supplier at March 2016, the contract period was extended to December 31, 2023, the total amount of contract value was revised to $ 128.8 million, the company agreed to purchase a fixed amount of silicon raw material according to the revised contract during 2016-2018, and the purchasing price and quantity will be negotiated and agreed by the two parties from 2019 and afterwards.

As of December 31, 2018, the estimated loss of the purchase contract may be $130,000. The liability provision has been estimated. Please refer to note (6) and (11) for relevant information.

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10. SIGNIFICANT DISASTER LOSS

None.

11. SIGNIFICANT EVENTS AFTER THE BALANCE SHEET DATE

On February 18, 2019, the company passed the resolution of the capital reduction to make up the loss. In order to improve the financial structure, the company plans to reduce the capital amount by $2,361,132 to make up for the loss. The capital reduction ratio is 67.53%.

12. OTHERS

(1) Capital management

The Company‟s objectives when managing capital are to safeguard the Company‟s ability to continue as a going concern in order to provide returns for shareholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, issue new shares or sell assets to reduce debt. The Company monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings less cash and cash equivalents. Total capital is calculated as „equity‟ as shown in the balance sheet plus net debt. As of December 31, 2018 and 2017, the Company‟s gearing ratio was as follows:

Total borrowings Less: Cash and cash equivalents Net liabilities Total equity Total capital Liabilities Capital ratio	$	December 31,2018 85,000 434,121 349,121 ) 1,135,136 786,015 44.42% )	$	December 31,2017 47,917 705,268
	( (		( (	657,351 ) 2,981,936 2,324,585 28.28% )

(2) Financial instruments

A. Types of financial instruments

Financial asset Financial asset at fair value through profit or loss Fair value through other comprehensive income financial assets $ Financial assets at cost-noncurrent Financial assets measured by amortized cost Cash and cash equivalents	December 31,2018 155,000 $ - 434,121	December 31,2017 - 155,000 705,268

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Accounts receivable Other receivable Other financial asset Financial liabilities Short-term debt Accounts payable Other payables Long-term borrowings (including current portion)	- 50,598 1,705 3,347 11,021 11,021
	$ 601,847 $ 925,234
	$ 55,000 $ 25,000 58 161,724 38,501 64,056 30,000 22,917
	$ 123,559 $ 273,697

• B. Financial risk management policies

• (a) The Company‟s activities expose it to a variety of financial risks: market risk (including foreign exchange risk, interest rate risk and price risk), credit risk and liquidity risk. The Company‟s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Company‟s financial position and financial performance.

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

• C. Significant financial risks and degrees of financial risks

• (a) Market risk

Foreign exchange risk

• i. The Company‟s certain transactions were denominated in foreign currencies and the Company is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the USD. Foreign exchange risk arises from future commercial transactions, recognised assets and liabilities.

• ii. Management has set up a policy to require the Company to manage the foreign exchange risk against the functional currency.

• iii. The Company‟s businesses involve some non-functional currency operations. The information on assets and liabilities denominated in foreign currencies whose values would be materially affected by the exchange rate fluctuations is as follows:

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Foreign currency Amount (In thousands) (Foreign currency: functional currency) Financial assets Monetary assets JPY：NTD $ 4 USD：NTD 1,535 Financial liabilities Monetary items USD：NTD - Foreign currency Amount (In thousands) (Foreign currency: functional currency) Financial assets Monetary assets JPY：NTD $ 1 USD：NTD 3,915 Financial liabilities Monetary items JPY：NTD $ 749 USD：NTD 4,218	December 31,2018 Exchange rate Book value (NTD) 0.278 $ 1 30.715 47,138 30.715 - December 31,2017 Exchange rate Book value (NTD) 0.2642 $ - 29.760 116,523 0.2642 $ 198 29.760 125,523

iv. Total exchange gain (loss), including realized and unrealized arising from significant foreign exchange variation on the monetary items held by the Company for the years ended December 31, 2018 and 2017, amounted to ($1,187) and ($7,710), respectively.

• v. Analysis of foreign currency market risk arising from significant foreign exchange variation:

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Year ended December 31,2018

	Year ended December 31,2018	Year ended December 31,2018
	Sensitivityanalysis
Degree of variation	Effect on profit or loss	Effect on other Comprehensive income

(Foreign currency:
functional currency)
Financial assets
Monetary assets
JPY：NTD	1%	$	- $	-
USD：NTD	1%		471	-
Financial liabilities
Monetary items
JPY：NTD	1%	$	- $	-
USD：NTD	1%		-	-

Year ended December 31,2017

	Year ended December 31,2017	Year ended December 31,2017
	Sensitivityanalysis
Degree of variation	Effect on profit or loss	Effect on other Comprehensive income

(Foreign currency: functional currency) Financial assets

Financial assets
Monetary assets
JPY：NTD	1%	$	- $	-
USD：NTD	1%		1,165	-
EUR：NTD	1%		-	-
Financial liabilities
Monetary items
JPY：NTD	1%	$	2 $	-
USD：NTD	1%		1,255	-

Price risk

• i. The equity instruments exposed to the price risk of the Company are held at the financial assets measured at fair value through profit or loss.

• ii. The Company invests primarily in equity instruments issued by domestic companies, and the price of such equity instruments is affected by the uncertainty of the future value of the investment target. If the price of the equity instruments increases or

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decreases by 10%, and all other factors remain unchanged, the net loss after tax of 2018 will be increased by the benefit or loss of equity instruments measured by fair value through profit or loss or Reduced by $15,500.

Cash flow and fair value interest rate risk

• i. The Company's interest rate risk mainly arises from short-term and long-term borrowings, which exposes the company to cash flow interest rate risk. In the year of 2018 and 2017, the Company's loans issued at fixed interest rates were mainly denominated in New Taiwan dollars.

• ii. When the interest rate of the New Taiwan dollar borrowings rises or falls by 5%, and all other factors remain unchanged, the net loss after tax in the 2018 and 2017 will be reduced or increased by $50 and $67, respectively.

• (b)Credit risk

• i. The Company's credit risk is the risk of financial loss due to client or the inability of the financial instrument counterparty to perform its contractual obligations, mainly from the fact that the counterparty is unable to pay off the accounts receivable on the terms of the payment, and is classified as contractual cash flows measured by amortized cost and measured by fair value through profit or loss.

• ii. The company establishes the management of credit risk from the perspective of the company. In accordance with the internal credit policy, the Company must manage and credit risk analysis before setting terms and conditions for payment and delivery with each new customer. The internal risk control system assesses the credit quality of customers by considering their financial status, past experience and other factors. The individual risk limits are determined by the board of directors based on internal or external evaluations. The company regularly monitors the use of credit lines.

• iii. The Company adopts IFRS 9 to provide the following presumptions as a basis for judging whether there is a significant increase in the credit risk of financial instruments since initial recognition :

  • When the contract payment is overdue for more than 30 days according to the agreed payment terms, the credit risk of financial assets will be deemed to have increased significantly since the initial recognition.

• iv. The Company adopts IFRS 9 to provide the premise that when the contract payment is overdue for more than 366 days according to the agreed payment terms, it is deemed that a default has occurred.

• v. The Company will group the customer's accounts receivable, contract assets and lease receivables according to the characteristics of the customer's rating, and use the simplified method to estimate the expected credit losses based on the matrix method.

• vi. The Company's forward-looking considerations for the loss rate established by the history of the specific period and current information to estimate the allowance for

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receivables, contract assets and lease receivables, The preparation matrix method for December 31, 2018 and December 31, 2017 is as follows :

December 31, 2018 Expected loss rate Total book value Allowance loss December 31, 2017 Expected loss rate Total book value Allowance loss	Not overdue 0.5% $ - $ - 0.5% $ 50,798 ($ 200)	1~30 days 0.5% $ - $ - 0.5% $ - $ -	31~90 days 20% $ - $ - 20% $ - $ -	91~180 days 50% $ - $ - 50% $ - $ -	181~270 days 80% $ - $ - 80% $ - $ -	271~365 days 90% $ - $ - 90% $ - $ -	More than 366 days Total 100% $ - $ - $ - $ - 100% $ - $ 50,798 $ - ($ 200)

vii. Please refer to Note 12 and (4) for the credit risk information of 2017.

• (c) Liquidity risk

• i. Company treasury monitors rolling forecasts of the Company‟s liquidity requirements to ensure it has sufficient cash to meet operational needs while maintaining sufficient headroom on its undrawn committed borrowing facilities at all times. So that the company does not violate the relevant borrowing limits or terms. Such forecasting takes into consideration of the Company‟s debt financing plans, covenant compliance, compliance with targeted internal balance sheet ratios.

• ii. Unused borrowing details of the Company is as follows:

Floating rate Current maturity Due more than one year	$	December 31,2018 90,000 - 90,000	$	December 31,2017 50,000 - 50,000

Note: The amounts of Current maturity borrowing are for the Company‟s annual operational needs.

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

• None-derivative financial liabilities :

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December 31,2018 Short-term borrowings $ Accounts payable Other payables Long-term borrowings (including current portion) None-derivative financial liabilities : December 31,2017 Short-term borrowings $ Accounts payable Other payables Long-term borrowings (including current portion)	Less than 1 year 55,167 58 38,501 22,891 Less than 1 year 25,025 161,724 64,056 23,080	Between 1 and 2 years $ - - - 7,504 Between 1 and 2 years $ - - - -	Between 2 and 5 years $ - - - - Between 2 and 5 years $ - - - -	More than 5 years $ - - - - More than 5 years $ - - - -

• iv. The Company does not expect the timing of occurrence of the cash flows estimated through the maturity date analysis will be significantly earlier, nor expect the actual cash flow amount will be significantly different.

(3) Fair value information

• A. The levels of valuation techniques used to measure the fair value of financial and non-financial instruments are defined as follows：

• Level one：Quotations from the same assets or liabilities that the company can obtain in the active market (Unadjusted).An active market is a market in which assets or liabilities with sufficient frequency and volume are traded to provide pricing information on an ongoing basis.

• Level two：An observable input value of an asset or liability, directly or indirectly, excluding the Level-one bidder.

• Level three：Unobservable input value of an asset or liability. The equity investment of the company's investment in the inactive market is at this level.

• B. Financial and non-financial instruments measured at fair value. The Company is classified on the basis of the nature, characteristics and risks of the assets and liabilities and the fair value hierarchy. The relevant information is as follows：

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December 31, 2018 Level one Level two Assets Repetitive fair value Financial assets measured at fair value through profit or loss Equity securities $- $- December 31, 2017：No such situation.	Level three $ 155,000	Total $ 155,000

• C. No transfer from or to the third level in 2018.

• D. The company's evaluation process for fair value classified as the third level is evaluated 。

• by an external appraiser.

(4) Effect of the initial application of International Financial Reporting Standard No. 9

• A. The major accounting policies adopted in 2017 are as follows ：

• (a) Accounts receivable

Originally generated receivables, Is the amount due from customers in the normal course of business for the sale of goods or services. Original recognition at fair value, subsequent effective interest method is measured by amortized cost less deductible. However, the short-term accounts receivable that have not yet been paid interest rate are not significant due to the redemption, so the subsequent measurement is based on the original invoice amount.

• (b) Financial asset impairment

• i. On each balance sheet date, the company assesses whether there is any objective ，

• evidence of impairment. One or more events of a certain or a group of financial assets after initial recognition （ "loss event" ）， And the loss event has a reliable estimate of the estimated future cash flows of a financial asset or a group of financial assets.

• ii. The policy used by the company to determine whether there is objective evidence of impairment loss is as follows ：

  • (i) Significant financial difficulties of the issuer or debtor ；

  • (ii) Default, such as delay or non-payment of interest or principal payments ；

  • (iii) The company gives concessions to the debtor that could not have been considered due to economic or legal reasons related to the financial difficulties of the debtor ；

  • (iv) The possibility that the debtor is about to enter bankruptcy or other financial restructuring is increasing rapidly ；

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• (v) Financial difficulties make the active market of the financial assets disappear ；

• (vi) Observable information shows that the estimated future cash flows of a group of financial assets are measurably reduced after the initial recognition of the assets. Although the reduction is not yet recognized as belonging to a certain financial asset in the group. Such information includes adverse changes in the debtor's repayment status of the group's financial assets, or national or regional economic conditions associated with asset defaults in the group's financial assets ；

• (vii) Information on significant changes that have adverse effects in the technical, market, economic or legal environment in which the issuer operates, And the evidence shows that the investment cost of the equity investment may not be recovered.

• (viii) The fair value of equity instrument investment fell sharply or persistently to below cost.

• iii. The Company recognizes financial assets that have been assessed to have objective evidence of impairment and have incurred impairment losses in the following categories. ：

• (i) Financial assets measured by amortized cost

The company recognizes the impairment loss in the current profit and loss by the difference between the carrying amount of the asset and the estimated future cash flow at the present value of the financial asset's initial effective interest rate. If the amount of impairment loss decreases during the subsequent period, and the reduction can be objectively linked to the occurrence of the impairment loss, the previously recognized impairment loss should be reversed in the current profit and loss within the limit of the amortized cost on the revolving date in the case of the unrecognized impairment. The amount of recognition and reversal loss is equal to the carrying amount of the asset adjusted by the allowance account.

(ii) Financial assets measured by cost

The company recognizes the impairment loss in the current profit and loss base on the difference between the carrying amount of the asset and the present value of the estimated future cash flows discounted at the current. Such impairment losses shall not be renewed after the continuation. The amount of the impairment loss is equal to the carrying amount of the asset adjusted by the allowance account.

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• B. The book value of financial assets has been converted from IAS 39 on December 31, 2017 to January 1, 2018, adjusted according to IFRS 9 as follows ：

IAS 39 Transfer to financial assets measured at fair value through profit or loss IFRS 9	Financial assets measured at fair value $ - 155,000 $ 155,000	Financial assets measured by cost $ 155,000 ( 155,000) $-	Financial assets measured by cost $ 155,000 ( 155,000) $-		Total $ 155,000 - $ 155,000

NT$155 million for equity instruments classified as “measuring financial assets by cost” by IAS 39,According to IFRS 9, it should be classified as “financial instruments (equity instruments) measured at fair value through profit or loss”.

• C. The description of the major accounting items as of December 31, 2017 is as follows ：

Financial assets measured by cost

Financial assets measured by cost
Item Non-current Item : Stock of Centrillion Technologies Taiwan Accumulated impairment Total	December 31, 2017 $ 155,000 - $ 155,000

• (a) In order to create medium and long-term operational performance and opportunities to increase the company's new operating areas, the company decided to invest in Centrillion Technologies Taiwan on April 11, 2017 by the board of directors. The company invested NT$155 million on April 28, 2017 to acquire a 10.64% stake in the company. Centrillion Technologies Taiwan is principally engaged in the development of biochips and systems.

• (b) The stock investment of Centrillion Technologies Taiwan held by the Company is classified as financial assets measured at fair value through profit or loss. ， However, because the target is not openly traded in the active market, and it is unable to obtain sufficient industry information of similar companies and relevant financial information of the invested company, and the fair value of these targets cannot be reasonably and reliably measured. Therefore, this investment is classified as “financial assets measured by cost”.

• (c) The company did not have a financial asset measured by cost as pledge on December

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31, 2017.

• D. Credit risk information for December 31, 2017 and 2017 is as follows ：

• (a) Credit risk is the risk of financial loss caused by the Company's counterparty to the client or financial instrument unable to perform its contractual obligations. In accordance with the internal credit policy, the Company must manage and credit risk analysis before setting terms and conditions for payment and delivery with each new customer. The internal risk control system assesses the credit quality of customers by considering their financial status, past experience and other factors. The individual risk limits are determined by the board of directors based on internal or external evaluations. The company regularly monitors the use of credit lines. The main credit risk comes from cash, cash equivalents, and deposits with banks and financial institutions.

• (b) In 2017, there is no excess of the credit limit, and the management does not expect any significant losses due to the non-performance of the counterparty.

• (c) The credit quality information of the Company based on the credit standard of the Company that is not overdue and does not detract from the accounts receivable is as follows ：

follows：
Payment terms within 3 months	December 31, 2017 $ 50,798

• (d) As of December 31, 2017, the company has no deductible accounts receivable.

• (e) The company's 2017 accounts receivable allowance for bad debt changes is as follows ：

January 1 Reversal of impairment loss December 31	Individual assessment of impairment losses $ - - $-	2017 Group assessment of impairment losses $ 326 ( 126) $ 200	Total $ 326 ( 126) $ 200

(5) Effect of the initial application of International Financial Reporting Standard No. 9

• A. The major accounting policies for recognition of revenue in 2017 are as follows ：

(a) Sales revenue

The company manufactures and sells solar wafer related products. Revenue is the

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fair value of the consideration received or receivable for sales of goods to customers outside the company during normal business activities, in order to deduct the net return of sales, volume discounts and discounts. Commodity sales are recognized as revenue when the goods are delivered to the customer, the sales amount can be reliably measured and the future economic benefits are likely to flow into the company. When the significant risks and rewards associated with ownership have been transferred to the customer, the company does not continue to participate in the management of the products and does not maintain effective control, and the customers accept the goods according to the sales contract, or when there is objective evidence that all acceptance terms have been met, the goods are delivered.

• (b) Service revenue

The company provides solar wafer processing and manufacturing related services. Recognize revenue based on the extent to which the transaction is completed when ， the following conditions are met And recognize the costs incurred in the current period as costs. If the transaction result is expected to be a loss, the company immediately recognizes the loss ：

• i. Reliable measure of income amount ；

• ii. The economic benefits associated with the transaction are likely to flow to the enterprise ；

• iii. The costs incurred or imminent in relation to the transaction can be reliably measured ；

• iv. The degree of completion of the transaction on the balance sheet date can be reliably measured.

• B. The income recognized by the Company in the above accounting policies in 2017 is as follows:

2017 $ 763,768 Multi-crystalline solar wafer Processing fees revenue 184,839 $ 948,607

• C. If the Company continues to apply the aforementioned accounting policies in 2018, it will not affect the Company's balance sheet and statement of comprehensive income.

13. SUPPLEMENTARY DISCLOSURES

(1) Significant transactions information

• A. Loans to others: None.

• B. Provision of endorsements and guarantees to others: None.

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• C. Holding of marketable securities at the end of the period (not including subsidiaries, associates and joint ventures): please refer to attached Table 1.

• D. Acquisition or sale of the same security with the accumulated cost exceeding $300 million or 20% of the Company‟s paid-in capital: None.

• E. Acquisition of real estate reaching NT$300 million or 20% of paid-in capital or more: None.

• F. Disposal of real estate reaching NT$300 million or 20% of paid-in capital or more: None.

• G. Purchases or sales of goods from or to related parties reaching NT$100 million or 20% of paid-in capital or more: None.

• H. Receivables from related parties reaching NT$100 million or 20% of paid-in capital or more: None.

• I. Trading in derivative instruments undertaken during the reporting periods: None.

• J. Significant inter-company transactions during the reporting periods: None.

(2) Information on investees

None.

(3) Information on investments in Mainland China

None.

14. SEGMENT INFORMATION

(1) General information

The Company operates business only in a single industry relating to silicon wafer. The chief operating decision-maker, Board of Directors who considers the Company as a single performance management entity and assesses performance, makes strategic decisions and allocates resources based on the financial statements of the Company, has identified that the Company has only one reportable operating segment.

(2) Measurement of segment information

The Board of Directors evaluates the performance of the operating segments based on the quarterly financial statements.

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

The Company has only one reportable operating segment. Segment profit or loss, assets and liabilities are in agreement with those shown in the financial statements.

(4) Reconciliation for segment profit or loss, assets and liabilities

The Company has only one reportable operating segment. Segment profit or loss, assets and liabilities are in agreement with those shown in the financial statements, thus there is no reconciliation.

(5) Information on products and services

Revenue from external customers is mainly arising from the sales and processing of solar energy related products, detail of revenue balance is as follows:

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Multi-crystalline solar wafer Processing fees revenue	$	Years ended December 31, 2018 2017 29,246 $ 763,768 493,288 184,839 522,534 $ 948,607
	$

(6) Geographical information

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

Years ended December 31,

Revenue Taiwan $ 357,424 Asia(excluding Taiwan) 44,471 Europe - America 120,639 $ 522,534	Revenue Taiwan $ 357,424 Asia(excluding Taiwan) 44,471 Europe - America 120,639 $ 522,534	2018 Non-current assets $ 920,111 - - - $ 920,111	2018 Non-current assets $ 920,111 - - - $ 920,111	Revenue $ 884,608 1,376 - 62,623	2017 Non-current assets $ 2,343,537 - - - $ 2,343,537	2017 Non-current assets $ 2,343,537 - - - $ 2,343,537
	$ 522,534		$	$ 948,607		$

(7) Major customer information

Information about the Company‟s sales revenue of major customers for the years ended December 31, 2018 and 2017 is as follows:

Company A Company B Company C Company D Company E Company F	Years ended December 31,2018 $ 260,725 86,132 - - - - $ 346,857	Years ended December 31,2017
		$ 108,926 - 175,896 172,058 149,550 125,995 $ 732,425

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DANEN TECHNOLOGY CORPORATION

DETAILS OF CASH AND CASH EQUIVALENTS DECEMBER 31, 2018

(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS)

Item Description Petty cash and cash on hand Cash in banks Demand deposits Foreign currency demand deposits JPY 4,353, exchange rate 0.278 USD 1,534,655.22, exchange rate 30.715 EUR 7.13, exchange rate 35.2 CHF 0.28, exchange rate 31.185 Time deposits (Remainder of page intentionally left blank)	Amount
	$ 50 17,932 47,139 369,000
	$ 434,121

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DANEN TECHNOLOGY CORPORATION STATEMENT OF INVENTORIES YEAR ENDED DECEMBER 31, 2018

(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS)

Item Raw materials Supplies Semi-finished goods Finished goods Less: Allowance for inventory valuation and obsolescence losses	Amount Description Cost Marketprice $ 20,574 $ 11,981 11,010 3,051 53,351 13,902 22,416 1,843 107,351 $ 30,777 ( 76,574 ) $ 30,777	Note
		Use net realizable value as market price

(Remainder of page intentionally left blank)

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DANEN TECHNOLOGY CORPORATION DETAILS OF LONG-TERM BORROWINGS DECEMBER 31, 2018 (EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS)

Type of borrowings Unsecured borrowings	Creditors Bank of Panhsin (BOP)	Description Maturity Within one year Maturity longer than one year $ 22,500 $ 7,500 $	Total 30,000	Contract period 2018.4.13~2020.4.13	Interest Rate 1.4%	Financing -	Collateral Or guarantee
							None

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DANEN TECHNOLOGY CORPORATION DETAILS OF OPERATING REVENUE YEAR ENDED DECEMBER 31, 2018

(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS)

Item Multi-crystalline solar wafer Processing fees revenue	Quantity 1,546k pcs	Amount $ 29,246 493,288 $ 522,534	Note

(Remainder of page intentionally left blank)

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DANEN TECHNOLOGY CORPORATION DETAILS OF OPERATING COSTS YEAR ENDED DECEMBER 31, 2018

(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS)

Item Direct material Opening balance of raw materials Add: Purchases during the year Less: Ending balance of raw materials Sales of raw material Transfer to manufacturing expenses and research and development expenses Materials used during the year Indirect material Opening balance of supplies Add: Purchases during the year Less: Ending balance of supplies Material sales Transfer to manufacturing expenses and research and development expenses Supplies used during the year Direct labour Manufacturing overhead Manufacturing cost Add: Opening balance of work in process and semi-finished goods Less: Ending balance of work in process and semi-finished goods Production loss Cost of finished goods Add: Opening balance of finished goods Less: Ending balance of finished goods Others Cost of goods manufactured Loss of purchase contract	Description	Amount $ 40,372 468,150 ( 20,574) ( 341,285) ( 191) 146,472 12,596 33,960 ( 11,010) ( 2,691) ( 32,855) - 25,224 190,925 362,621 57,183 ( 53,351) (10,071) 356,382 24,982 ( 22,416) ( 3,563) 355,385 130,000	Amount $ 40,372 468,150 ( 20,574) ( 341,285) ( 191) 146,472 12,596 33,960 ( 11,010) ( 2,691) ( 32,855) - 25,224 190,925 362,621 57,183 ( 53,351) (10,071) 356,382 24,982 ( 22,416) ( 3,563) 355,385 130,000	Note
		( ( (
		( ( ( (

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DANEN TECHNOLOGY CORPORATION DETAILS OF OPERATING COSTS YEAR ENDED DECEMBER 31, 2018

(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS)

Unamortised manufacturing expenses Raw material sale cost Supplies sale cost Cost of purchased goods sold Production loss Loss from inventory market value decline Revenue from sale of scraps Other adjustments Operating costs	422,972 341,286 2,605 3,429 10,071 53,288 ( 432) 125 $ 1,318,729

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DANEN TECHNOLOGY CORPORATION DETAILS OF MANUFACTURING OVERHEAD YEAR ENDED DECEMBER 31, 2018

(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS)

Item Depreciation Supplies expenses Utilities expenses Indirect labour Others Less: Unamortised manufacturing expenses	Description Amount $ 462,440 26,664 33,577 32,311 58,905 ( 422,972) $ 190,925	Note
		None of the balances of each remaining accounts is greater than 5% of this account balance.

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DANEN TECHNOLOGY CORPORATION DETAILS OF SELLING EXPENSES YEAR ENDED DECEMBER 31, 2018

(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS)

Item Wages and salaries Utilities expenses Insurance expenses Others expenses	Description	Amount $ 2,550 430 278 2,540	Note
			None of the balances of each remaining accounts is greater than 5% of this account balance
		$ 5,798

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DANEN TECHNOLOGY CORPORATION

DETAILS OF GENERAL AND ADMINISTRATIVE EXPENSES YEAR ENDED DECEMBER 31, 2018

(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS)

Item Wages and salaries Insurance expenses Professional service fees Others expenses	Description	Amount $ 28,456 2,299 3,003 13,195 $46,953	Note
			None of the balances of each remaining accounts is greater than 5% of this account balance.

(Remainder of page intentionally left blank)

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DANEN TECHNOLOGY CORPORATION DETAILS OF RESEARCH AND DEVELOPMENT EXPENSES YEAR ENDED DECEMBER 31, 2018

(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS)

Item Wages and salaries Insurance expenses Others expenses	Description Amount Note $ 6,209 517 315 None of the balances of each remaining accounts is greater than 5% of this account balance. $7,041 (Remainder of page intentionally left blank)	Note

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Employee benefit expense (Note) Wages and salaries Labour and health insurance fees Pension costs Director's remuneration Other personnel expenses Total Depreciation Amortisation		2018	Total $ 90,201 7,599 3,813 3,344 3,217 108,174 464,141 1,257		2017
	Operating costs $ 56,330 4,720 2,330 - 2,561 65,941 462,440 802	Operating expenses		Operating costs $ 101,320 8,778 3,669 - 6,653 120,420 540,949 847	Operating expenses $ 35,081 3,473 1,745 7,131 880 48,310 1,609 587	Total
		$ 33,871 2,879 1,483 3,344 656 42,233 1,701 455				$ 136,401 12,251 5,414 7,131 7,533 168,730 542,558 1,434

Note: As of December 31, 2018 and 2017, the number of employees of the Company was 63 and 220, respectively.

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