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DAVICOM AGM Information 2020
52295_rns_2020-06-16_071f8fdf-d21a-44ca-91c2-9f181535fc90.pdf
AGM Information
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TWSE: 3094
DAVICOM Semiconductor, Inc.
2020 Annual General Shareholders' Meeting Handbook
Meeting Time: 9:00 a.m. on Wednesday, 10th Jun, 2020 Venue: 3F., No.6, Li-Hsin Rd.6, Science Park, Hsinchu, Taiwan (Auditorium)
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Table of Contents
| I. Meeting Procedure----------------------------------- |
|---|
| II.Report Agenda------------------------------------ |
| 1. Call Meeting to Order |
| 2. Chairman Address |
| 3. Report Item |
| 4. Proposal Resolutions |
| 5. Motions |
| III.Attachments ------------------------------------ P.9 |
| 1. Company's 2019 Business Report |
| 2. Audit Committee's Review Report |
| 3. CPA Audit Report and 2019 Individual Financial Statements |
| 4. CPA Audit Report and 2019 Consolidated Financial Statements |
| 5. 2019 Annual Profit Distribution Table |
| IV. Appendix------------------------------------ |
| 1. Shareholdings of All Directors |
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DAVICOM Semiconductor, Inc.
2020 Annual General Shareholders' Meeting Procedure
-
- Call Meeting to Order
-
- Chairman's Address
-
- Report Items
-
- Proposal Resolution
-
- Motions
-
- Adjournment
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DAVICOM Semiconductor, Inc.
2020 Annual General Shareholders' Meeting Agenda
Time: 9:00 a.m., Jun 10, 2020 (Wednesday)
Place: 3F., No.6, Li-Hsin Rd.6, Science Park, Hsinchu, Taiwan (Auditorium)
Agenda:
-
- Call Meeting to Order
-
- Chairman's Address
-
- Report Items
- (1) To report the business of 2019 and operating plan of 2020
- (2) Audit Committee's review report of 2019
- (3) To report 2019 employees' bonus and directors' compensation
- (4) To report the proposal for issuance of 2017 Restricted Stock Awards $("RSA")$
- (5) To report Implementation Status of the Company's Share Buyback in 2018 and 2020.
-
- Approval and Discussion Items
- (1) To accept 2019 Business Report and Financial Statements
- (2) To approve the proposal for distribution of 2019 Profits
-
(3) To approve the proposal for cash distribution of 2019 additional paid in capital
-
Motions 6.Adjournment
Report Items
1. To report the business of 2019 and operating plan of 2020
Explanatory Notes: Please refer to the Attachment 1.
2. Audit Committee's review report of 2019
Explanatory Notes: Please refer to the Attachment 2.
3. To report 2019 employees' bonus and directors' compensation
Explanatory Notes:
- (1) The pre-tax profits of 2019 is NT\$50,510,834 and according to the Company's Articles of Incorporation, the Board has adopted a proposal for distribution of 2019 profit as follows: directors' compensation is NT\$1,010,217 and the profit to employees is NT\$4,308,448; both shall be paid in cash.
- (2) The implementation of the distribution will be conducted after being approved by the shareholders' meeting.
-
- To report the proposal for issuance of 2017 Restricted Stock Awards ("RSA")
Explanatory Notes:
Based on the resolution of shareholders meeting on 2017/05/26, the Company will issue total 2,000,000 shares of restricted employee shares. The Company has reported to Financial Supervisory Commission R.O.C. (Financial-Supervisory-Securities Document No.1060029187) and this proposal has been approved since 2017/08/08. As the date of publication, 1,400,000 restricted employee shares were issued. The other 600,000 are not issued by Board's resolutions.
- To report Implementation Status of the Company's Share Buyback in 2018 and 2020
Explanatory Notes:
- (1) The Company's Share Buyback in 2018: The Company purchased 1,515,000 shares common stock from Dec. 12, 2018 to Feb. 11, 2019. Total monetary amount of shares buyback was NT\$28,127,052. The ratio is 1.79% of cumulative number of own shares held during the buyback period to the total number of the Company's issued shares.
- (2) The Company's Share Buyback in 2020: The Company purchased 1,400,000 shares common stock from Mar. 2, 2020 to May. 1, 2020. Total monetary amount of shares buyback was NT\$22,758,483. The ratio is 1.65% of cumulative number of own shares held during the buyback period to the total number of the Company's issued shares
Approval and Discussion Item
Proposal 1
Proposed by the Board of Directors
Subject: To accept 2019 Business Report and Financial Statements
Explanatory Notes:
- (1) DAVICOM's 2019 Business Report, Financial Statements, including Balance Sheets, Statement of Comprehensive Income, Statements of Changes in Equity, and Statements of Cash Flows, were audited by independent auditors, Mr. Lin Se-Kai, and Mrs. Hsiao Chun-Yuan, of PricewaterhouseCoopers, Taiwan.
- (2) 2019 Business Report, Independent Auditors' Report, and the aforementioned Financial Statements are attached hereto as Attachments. Please refer to the Attachment 1 to Attachment 4.
Proposal 2
Proposed by the Board of Directors
Subject: To approve the proposal for distribution of 2019 earnings
Explanatory Notes:
- $(1)$ 2019 net profit after tax is NT\$ 41,395,667. To make up the actuarial loss of the pension and to allocate 10% of the statutory surplus reserve, the proposed dividend to shareholders is NT\$38,244,441. Each shareholder will be entitled to receive a cash dividend of NT\$0.46 per share.
-
(2) In the event of any change in the number of outstanding shares resulting from executing employee stock options or converting treasury stock to its employees, the dividend ratio must be adjusted. It is proposed to fully authorize the Chairman of Board of Directors of DAVICOM to adjust the dividend ratio and to proceed on the relevant matters.
-
(3) Upon the approval of the Annual Meeting of Shareholders, it is proposed that the Chairman of Board of Directors of DAVICOM be authorized to resolve the ex-dividend date and other relevant issues.
- (4) Please refer to the 2019 Annual Profit Distribution Table. Please refer to attachment 5
Proposal 3
Proposed by the Board of Directors
To approve the proposal for additional cash distribution of Subject: 2019 from its reserved surplus earnings.
Explanatory Notes:
- (1) Based on the profit allocation proposal, the Company intends to declare cash dividends in the amount of NT\$29,099,031 at NT\$0.35 per share from its distributable reserved surplus earnings for the year 2019.
- (2) In the event of any change in the number of outstanding shares resulting from executing employee stock options or converting treasury stock to its employees, the dividend ratio must be adjusted. It is proposed to fully authorize the Chairman of Board of Directors of DAVICOM to adjust the dividend ratio and to proceed on the relevant matters.
- (3) Upon the approval of the Annual Meeting of Shareholders, it is proposed that the Chairman of Board of Directors of DAVICOM be authorized to resolve the ex-dividend date and other relevant issues.
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Motions
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Adjournment
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Attachment 1
Company's 2019 Business Report
Dear Shareholders,
I would like to thank you for your continuing support throughout the year. DAVICOM has responded to the changing business climate by adopting an aggressive stance in strengthening our competitiveness. As of the end of December – 2019, our company generated net income of NT \$45.27 million on consolidated revenue of NT \$242 million. Our company has been continuously posting profits for 56 quarters.
The Company has three major product lines: ethernet chip, electronic paper driver chip and video decoder chip. Last year revenue didn't grow up as expected due to new products which been applied to vehicles, financial payment systems, and industrial control still wait for customers' final approval. We expect the new products will be in mass production this year. In addition, bids of some end users were postponed which cause the revenue lower than expected. With the gradual development of the Internet of Thing (IoT) industry, where Ethernet network plays a key role in IoT architecture, our company's network chip products have been widely used in various areas including smart grid, smart home, healthcare, security, industrial control, etc.
Looking forward to the year 2020, with the continued growth of IoT and the diversified application of AIoT, we look forward to future opportunities in the communications industry. Additionally, with the development of the 5G industry, Ethernet chips play an important role in increasing communication facilities. We expect that the growing demand for AIoT & 5G market will improve the company's business opportunities of the year.
In contrast, the continued Sino-US trade war and the outbreak of COVID-19 had lead to the global economic impact. Fortunately, the epidemic in China has been ebbing in March. Also, the China government has developed various infrastructures including electricity, telecommunications, and transportation to stimulate the economy, which has activated the China market. On the other hand, the European and American markets have been hit hard by the COVID-19, which has a certain degree of direct or indirect impact on this year's sales performance. Because of this, in addition to strengthening the Chinese market planning and the promotion of new products this year, the company will actively develop new products to against the revenue loss that may stem from the European and American markets.
Although the impact of the COVID-19 epidemic and the rise of nationalism on global trade is still difficult to quantify, in terms of the overall environment, the trend has gradually taken shape and cannot be underestimated. In addition, the potential threat of IC design industry in China and the rapid changes of product applications, the market is full of opportunities and risks, the company will remain flexible in the strategy operation to seek the best business opportunities in the market. We will continue the spirit of pragmatic approach to governance. Our management team and all the employees are making strides in achieving our company's goal - to create the most value for all shareholders – by implementing business plan, improving cost management and enhancing operating efficiency. Develop high-performance, power-saving, industrial-grade, and diverse interfaces from key core technologies of Ethernet to meet the market requirements of IoT and
Industry 4.0 for smart grid, home, medical, security monitoring, automotive, industrial control, etc. The market needs to expand the series of e-paper driver chips for financial smart cards and electronic shelf labels, and actively develop and integrate relevant platforms to provide customers with high-quality and competitive products to stabilize customer relationships and to provide customers with customer-oriented to reach a win-win goal. Davicom gains a deep understanding of market application trends for market opportunities, and work closely with supply chain partners to obtain full support for expecting higher return on investment for shareholders to thank all shareholders for their long-term support.
Last but not the least, we would like to thank you - our shareholders - for your continuous support and belief in our efforts.
We wish you all health and happiness Sincerest regards.
Chairman Ting Hao President Ting Hao Accounting Supervisor Kuei-Feng Chiu
Attachment 2 Audit Committee's Review Report
The Company's 2019 Financial Statements have been agreed by Audit Committee members of the Company and approved by the Board of Directors. The CPA firm of PricewaterhouseCoopers Taiwan was retained to audit the Company's Financial Statements and has issued an audit report relating to the Financial Statements.
The Board of Directors has prepared the Company's 2019 Business Report and proposal for allocation of profits. The 2019 Business Report and profit allocation proposal have been reviewed and determined to be correct and accurate by the Audit Committee members of the Company. According to relevant requirements of the Securities and Exchange Act and the Company Law, we hereby submit this report.
DAVICOM Semiconductor Inc. Independent Director: Ueng, Chang-Yue Independent Director : Hwang, Jen-Jyh Independent Director: Wei, Niang-Shou
February 27, 2020
Attachment 3
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DAVICOM SEMICONDUCTOR, INC. PARENT COMPANY ONLY FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT ACCOUNTANTS FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018
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.
REPORT OF INDEPENDENT ACCOUNTANTS TRANSLATED FROM CHINESE
To the Board of Directors and Stockholders of DAVICOM Semiconductor, Inc.
Opinion
We have audited the accompanying parent company only balance sheets of DAVICOM Semiconductor, Inc. (the "Company") as at December 31, 2019 and 2018, and the related parent company only statements of comprehensive income, of changes in equity and of cash flows for the years then ended. and notes to the parent company only financial statements, including a summary of significant accounting policies.
In our opinion, based on our audits and the reports of other auditors (please refer to Other matter section of our report), the accompanying parent company only financial statements present fairly, in all material respects, the parent company only financial position of the Company as at December 31, 2019 and 2018, and its parent company only financial performance and its parent company only cash flows for the years then ended in accordance with the "Regulations Governing the Preparation of Financial Reports by Securities Issuers".
Basis for opinion
We conducted our audits in accordance with the "Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants" and generally accepted auditing standards in the Republic of China (ROC GAAS). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Parent Company Only Financial Statements section of our report. We are independent of the Company in accordance with the Code of Professional Ethics for Certified Public Accountants in the Republic of China (the "Code"), and we have fulfilled our other ethical responsibilities in accordance with the Code. Based on our audits and the reports of other auditors. we believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the parent company only financial statements of the current period. These matters were addressed in the context of our audit of the parent company only financial statements as a whole and, in forming our opinion thereon, we do not provide a separate opinion on these matters.
The Company's key audit matters are as follows:
Evaluation of accounts receivable
Description
Please refer to Note 4(7) for accounting policies on accounts receivable recognition and accounts receivable valuation, Note 5 for uncertainty of accounting estimates and assumptions in relation to impairment of accounts receivable valuation, Note 6(3) for details of accounts receivable. The balance of accounts receivable amounted to NT\$31,440 thousand as at December 31, 2019.
The Company's accounts receivable arises from selling goods, and collecting in accordance with credit period which is determined by the Credit Quality Control Policy of individual customers' credit quality. Allowance for uncollectible accounts are based on expected credit losses during its existing period. For the purpose of measurement, underlying receivable should be grouped appropriately and the assumptions should be judged and analyzed. The aging of intervals, expected loss ratio and forward-looking information usually include subjective judgement, therefore, we determined the valuation of accounts receivable as one of the key areas of focus for this year's audit.
How our audit addressed the matter
We performed the following audit procedures on the above key audit matter:
-
- Checked and tested the assumptions of expected credit losses and assessed the reasonableness of the aging of intervals, including objective evidences used to determine the accuracy of periods and credit terms. Verified whether there are long overdue unrecoverable accounts receivable on the list to assess the adequacy of allowance for uncollectible accounts.
-
- Checked and tested accounts receivable aging schedule which is classified based on customer types, based on subsequent collections, and discussed with management for its assessment of recoverability of past due receivables.
Evaluation of inventories
Description
Please refer to Note 4(10) for accounting policy on inventory valuation, Note 5 for uncertainty of accounting estimates and assumptions in relation to inventory valuation, Note 6(4) for details of inventory. The balance of inventory and allowance for inventory valuation losses amounted to NT\$24,841 thousand and NT\$13,971 thousand as at December 31, 2019, respectively.
The Company is engaged in research, development, production, manufacturing and sales of local area network chipset. Due to rapid changes in technology, the life cycle of products is short and easily affected by market prices, there is a higher risk of incurring inventory valuation losses or having obsolete inventory. The Company measures inventory for normal sales at the lower of cost or net realisable value method. For inventory aging over certain period, individual inventory valuation losses and obsolete inventory, provision for loss is made through individual identification and measured at net realizable value. As a result of the significant amount, numerous items, and since identifying obsolete and damaged inventory usually involves management judgement, it also belongs to one of the audit scopes involving professional judgement. Therefore, we determined the estimate of inventory valuation losses as one of the key areas of focus for this year's audit.
How our audit addressed the matter
We performed the following audit procedures on the above key audit matter:
-
- Obtained an understanding of the business, industry, products and inventory aging to assess the provision policy of allowance for inventory valuation losses, verifying whether the related accounting policies are consistent with the last period, and evaluating whether the provision policy is reasonable.
-
- Obtained inventory aging report from management, analyse and compare the different reasons for loss due to market value decline and obsolete and slow-moving inventories to assess the appropriateness of loss for market value decline and obsolete and slow-moving inventory policy.
-
- For summary statement that management uses to valuate loss for market value decline and obsolete and slow-moving inventories, confirming whether it agrees with the statement details generated from system, and verifying that obsolete and slow-moving inventories which were provided valuation losses, has been completely listed in the statement.
-
- Tested book value of ending inventory, through selecting samples and obtaining invoices of last period to verify whether they were measured at the lower of cost or net realizable value method, and recalculating and valuating the reasonableness of changes in allowance for inventory valuation losses.
-
- Participating and observing the year-end physical inventory count to verify the existence and completeness of inventory, and checking the condition of inventory to assess the appropriateness of allowance for inventory valuation losses of obsolete and slow-moving inventories.
Other matters
The report of other independent accountants
The share of profit or loss of related companies recognised under the equity method, which is recognised in the audit report of other independent accountants for the years ended December 31, 2019 and 2018, is NT\$1,210 thousand and NT\$3,873 thousand, respectively. Additionally, the recognised comprehensive income comprising share of other comprehensive income in subsidiaries, were both NT\$0 thousand for the abovementioned periods. As of December 31, 2019 and 2018, the balance of the investments using the equity method was NT\$220,612 thousand and NT\$219,402 thousand, respectively.
Responsibilities of management and those charged with governance for the Parent Company Only financial statements
Management is responsible for the preparation and fair presentation of the parent company only financial statements in accordance with the "Regulations Governing the Preparation of Financial Reports by Securities Issuers", and for such internal controls as management determines is necessary to enable the preparation of parent company only financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the parent company only financial statements, management is responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance, including the audit committee, are responsible for overseeing the Company's financial reporting process.
Independent accountant's responsibilities for the audit of the Parent Company Only financial statements
Our objectives are to obtain reasonable assurance about whether the individual financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ROC GAAS will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these parent company only financial statements.
As part of an audit in accordance with ROC GAAS, we exercise professional judgement and maintain professional skepticism throughout the audit. We also:
- Identify and assess the risks of material misstatement of the parent company only financial $\mathbf{L}$ 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 controls.
- $2.$ Obtain an understanding of internal controls relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal controls.
- Evaluate the appropriateness of accounting policies used and the reasonableness of accounting $3.$ estimates and related disclosures made by management.
- Conclude on the appropriateness of management's use of the going concern basis of accounting $41$ and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our report to the related disclosures in the parent company only financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our report. However, future events or conditions may cause the Company to cease to continue as a going concern.
- Evaluate the overall presentation, structure and content of the parent company only financial 5. statements, including the footnote disclosures, and whether the parent company only financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
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- Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the parent company only financial statements. We are responsible for the direction, supervision and performance of the Company's audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding the planned scope and timing of the audit, among other matters, the planned scope and timing of the audit and significant audit findings. including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the parent company only financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
Se-Kai Lin Chun-Yuan Hsiao For and on behalf of PricewaterhouseCoopers, Taiwan February 27, 2020
The accompanying parent company only financial statements are not intended to present the financial position and results of operations and cash flows in accordance with accounting principles generally accepted in countries and jurisdictions other than the Republic of China. The standards, procedures and practices in the Republic of China governing the audit of such financial statements may differ from those generally accepted in countries and jurisdictions other than the Republic of China. Accordingly, the accompanying parent company only financial statements and report of independent accountants are not intended for use by those who are not informed about the accounting principles or auditing standards generally accepted in the Republic of China, and their applications in practice.
As the financial statements are the responsibility of the management, PricewaterhouseCoopers cannot accept any liability for the use of, or reliance on, the English translation or for any errors or misunderstandings that may derive from the translation.
| December 31, 2019 | December 31, 2018 | |||||
|---|---|---|---|---|---|---|
| Assets | Notes | AMOUNT | $\%$ | AMOUNT | % | |
| Current assets | ||||||
| 1100 | Cash and cash equivalents | 6(1) | \$ 464,395 |
38 | $\sqrt{2}$ 524,498 |
44 |
| 1150 | Notes receivable, net | 6(3) | 64 | |||
| 1170 | Accounts receivable, net | 6(3) | 31,440 | 3 | 39,994 | 3 |
| 1200 | Other receivables | 4,773 | 5,483 | |||
| 130X | Inventories, net | 6(4) | 24,841 | $\overline{\mathbf{c}}$ | 32,082 | 3 |
| 1410 | Prepayments | 5,800 | 1,440 | |||
| 11XX | Current Assets | 531,249 | 43 | 603,561 | 50 | |
| Non-current assets | ||||||
| 1510 | Financial assets at fair value through 6(2) | |||||
| profit or loss - noncurrent | 30,552 | $\overline{\mathbf{3}}$ | 41,958 | 3 | ||
| 1550 | Investments accounted for under | 6(5) | ||||
| equity method | 316,777 | 26 | 317,811 | 26 | ||
| 1600 | Property, plant and equipment | 6(6) | 160,142 | 13 | 121,633 | $10\,$ |
| 1755 | Right-of-use assets | 6(7) | 63,750 | 5 | ||
| 1760 | Investment property - net | 6(9) | 102,940 | 8 | 105,860 | 9 |
| 1780 | Intangible assets | 84 | 152 | |||
| 1840 | Deferred income tax assets | 6(24) | 8,593 | $\mathbf{1}$ | 7,521 | $\mathbf{1}$ |
| 1900 | Other non-current assets | 6(10) | 15,291 | 1 | 8,338 | $\mathbf{1}$ |
| 15XX | Non-current assets | 698,129 | 57 | 603,273 | 50 |
DAVICOM SEMICONDUCTOR, INC.
PARENT COMPANY ONLY BALANCE SHEETS
(Expressed in thousands of New Taiwan dollars)
(Continued)
$\pmb{\mathbb{S}}$
$1XXX$
Total assets
$100\,$
1,229,378
$\frac{\mathsf{s}}{\mathsf{s}}$
50
100
1,206,834
$\mathcal{-}8\mathcal{-}$
| Liabilities and Equity | Notes | December 31, 2019 AMOUNT |
% | December 31, 2018 AMOUNT |
|||
|---|---|---|---|---|---|---|---|
| Current liabilities | $\%$ | ||||||
| 2130 | Current contract liabilities | \$ | 57 | \$ | |||
| 2150 | Notes payable | 5,944 | 1 | 4,687 | |||
| 2170 | Accounts payable | 4,856 | 1 | 5,557 | |||
| 2200 | Other payables | 6(11) | 28,560 | 2 | 28,959 | 2 | |
| 2230 | Current income tax liabilities | 6(24) | 2,234 | ||||
| 2280 | Current lease liabilities | 6(27) | 1,537 | ||||
| 2310 | Advance receipts | 1,418 | 390 | ||||
| 21XX | Current Liabilities | 44,606 | 4 | 39,593 | 3 | ||
| Non-current liabilities | |||||||
| 2570 | Deferred income tax liabilities | 6(24) | 512 | 572 | |||
| 2580 | Non-current lease liabilities | 6(27) | 62,500 | 5 | |||
| 2600 | Other non-current liabilities | 6(12) | 17,410 | 1 | 17,317 | 2 | |
| 25XX | Non-current liabilities | 80,422 | 6 | 17,889 | $\overline{c}$ | ||
| 2XXX | Total Liabilities | 125,028 | $10\,$ | 57,482 | 5 | ||
| Equity | |||||||
| Share capital | 6(15) | ||||||
| 3110 | Common stock | 846,551 | 69 | 846,551 | 70 | ||
| Capital surplus | 6(16) | ||||||
| 3200 | Capital surplus | 186,520 | 15 | 219,776 | 18 | ||
| Retained earnings | 6(17) | ||||||
| 3310 | Legal reserve | 74,393 | 6 | 70,549 | 6 | ||
| 3350 | Undistributed earnings | 6(24) | 42,491 | 3 | 37,829 | 3 | |
| Other equity interest | |||||||
| 3400 | Other equity interest | € | $17,490$ ) ( | $1)$ ( | $8,977$ ) ( | $\mathbf{1}$ | |
| Treasury shares | 6(13) | ||||||
| 3500 | Treasury shares | $28,115$ ) ( | $2)$ ( $16,376$ ( |
$\mathbf{1}$ | |||
| 3XXX | Total equity | 1,104,350 | 90 | 1,149,352 | 95 | ||
| Significant contingent liabilities and | 9 | ||||||
| unrecognised contract commitments | |||||||
| $3\mathrm{X}2\mathrm{X}$ | Total liabilities and equity | \$. | 1,229,378 | 100 | 1,206,834 \$ |
100 |
DAVICOM SEMICONDUCTOR, INC.
PARENT COMPANY ONLY BALANCE SHEETS
(Expressed in thousands of New Taiwan dollars)
$\cdot$
The accompanying notes are an integral part of these parent company only financial statements.
DAVICOM SEMICONDUCTOR, INC.
PARENT COMPANY ONLY STATEMENTS OF COMPREHESIVE INCOME
(Expressed in thousands of New Taiwan dollars, except earnings per share)
| Years ended December 31 | |||||||
|---|---|---|---|---|---|---|---|
| 2019 | 2018 | ||||||
| Items | Notes | AMOUNT | $\%$ | AMOUNT | $\%$ | ||
| 4000 | Sales revenue | 6(18) | \$ 232,706 |
100 | \$ | 250,432 | 100 |
| 5000 | Operating costs | 6(4)(22)(23) | 74,576) | 32) | 79,666) | 32) | |
| 5900 | Net operating margin | 158,130 | 68 | 170,766 | 68 | ||
| Operating expenses | 6(22)(23) | ||||||
| 6100 | Selling expenses | $29,762)$ ( | $12)$ ( | $30,611)$ ( | 12) | ||
| 6200 | General and administrative expenses | 41,559) ( | $18)$ ( | 45,317) ( | 18) | ||
| 6300 | Research and development expenses | 74,789) ( | $32)$ ( | 80,553) ( | 32) | ||
| 6450 | Impairment on expected credit gains (losses) |
$6(3)$ and $12(2)$ | 100 | 1,201) | 1) | ||
| 6000 | Total operating expenses | 146,010 | 62) | 157,682) | 63) | ||
| 6900 | Operating income | 12,120 | 6 | 13,084 | 5 | ||
| Non-operating income and expenses | |||||||
| 7010 | Other income | 6(19) | 21,963 | 9 | 27,960 | 11 | |
| 7020 | Other gains and losses | 6(20) | 708) | $2,321)$ ( | $_{1}$ | ||
| 7050 | Finance costs | 6(21) | 645) | 31) | |||
| 7070 | Share of profit of associates and joint ventures accounted for under equity |
6(5) | |||||
| method | 12,462 | 5 | 3,744 | $\overline{2}$ | |||
| 7000 | Total non-operating income and expenses |
33,072 | 14 | 29,352 | |||
| 7900 | Income from continuing operations | 12 | |||||
| before income tax | 45,192 | $20\,$ | 42,436 | 17 | |||
| 7950 | Income tax expense | 6(24) | 3,796) | 2) | 4,801) | $\overline{2}$ | |
| 8000 | Profit for the year from continuing | ||||||
| operations | 41,396 | 18 | 37,635 | $\overline{15}$ | |||
| 8200 | Profit for the year | \$ 41,396 |
18 | $\pmb{\mathfrak{p}}$ | 37,635 | 15 | |
| Other comprehensive income, net Components of other comprehensive income that will not be reclassified to profit or loss |
|||||||
| 8311 | Other comprehensive income, before tax, 6(13) actuarial gains on defined benefit plans |
\$ 458 |
\$ | 354 | |||
| 8349 | Income tax related to components of other comprehensive income that will not be reclassified to profit or loss |
6(24) | 92) | 234 | |||
| 8310 | Components of other comprehensive | ||||||
| income that will not be reclassified to | |||||||
| profit or loss | 366 | 588 | |||||
| Components of other comprehensive income that will be reclassified to profit or loss |
|||||||
| 8361 | Financial statement translation | ||||||
| differences of foreign operations | $13,496$ ( | 6) | 1,182 | $\mathbf{I}$ | |||
| 3360 | Components of other comprehensive | ||||||
| income that will be reclassified to profit or loss |
|||||||
| 8300 | Other comprehensive (loss) income for | $13,496)$ ( | 6) | 1,182 | 1 | ||
| the year, net | \$ 13,130) |
6) | 1,770 | ||||
| 8500 | Total comprehensive income for the year | 28.266 | 12 | 39,405 | 16 | ||
| Basic earnings per share | 6(25) | ||||||
| 9750 | Net income | \$ | 0.50 | \$ | 0.44 | ||
| 9850 | Diluted earnings per share Net income |
6(25) | \$ | 0.49 | $\frac{3}{2}$ | 0.44 |
The accompanying notes are an integral part of these parent company only financial statements.
DAVICOM SEMICONDUCTOR, INC.
PARENT COMPANY ONLY STATEMENTS OF CHANGES IN EQUITY (Expressed in thousands of New Taiwan dollars)
| Share capital | Capital sumlus | Retained earnings | Other equity interest | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Notes | Common stock | Additional paid- in capital |
Others | Legal reserve | Undistributed earnings |
Exchange differences from translation of foreign operations |
Unrealized gain or loss on available-for- sale financial assets |
Uneamed compensation for restricted employee share of steck |
Treasury shares | Total | |
| Year 2018 | |||||||||||
| Balance at January 1, 2018 | 846,551 s |
193,688 | S6.564 | 65,446 s |
51,033 | 2.945) ſS. |
5,122 | ||||
| Efffects of retrospective application | 5,122 | $15,544$ ) \$ 1\$ |
\$1,199,915 | ||||||||
| Balance at January 1 after adjustments | 846,551 | 193,688 | 56.564 | 65,446 | 51,033 | 2,945 | 5.122 | ||||
| Profit for the year | 37,635 | 15,544) | 1,194,793 | ||||||||
| Other comprehensive income for the year | 588 | ,182 | 37.635 | ||||||||
| Total comprehensive income | 38,223 | 1.182 | 1.770 | ||||||||
| Differences between equity purchase price and carrying amount mising from actual acquisition of subsidiaries |
$610$ ) | 39,405 | |||||||||
| Appropriation and distributed of 2017 earnings | 6(17) | 610) | |||||||||
| Legal reserve | 5,103 | $5,103$ ) | |||||||||
| Cash dividends | 45,714) | ||||||||||
| Cash dividends distribution from capital surplus | 6(16)(17) | 30,476) | 45,714) | ||||||||
| Restricted stocks to employees | 6(14)(15) | 3,570 | 3.570) | 30,476) | |||||||
| Treasure share repurchase | 6(15) | 8,330 | $16,376$ ) | 8,330 | |||||||
| Balance at December 31, 2018 | 846,551 | 166,782 Ś. |
52.994 | 70,549 | 37,829 | 1,763 (Š |
$7,214$ ) í\$ |
ſ\$ | 16.376) | ||
| Year 2019 | 16,376 | \$1,149.352 | |||||||||
| Balance at January 1, 2019 | 846,551 | 166,782 | 52,994 | 70,549 ŝ |
37,829 | $1,763$ ) (S |
$7,214$ ) (\$ |
16,376 1\$ |
\$1,149,352 | ||
| Profit for the year | 41,396 | 41,396 | |||||||||
| Other comprehensive income (loss) | 366 | 13,496) | 13,130) | ||||||||
| Total comprehensive income | 41,762 | 13,496 | 28,266 | ||||||||
| Appropriation and distributed of 2018 earnings | 6(17) | ||||||||||
| Legal reserve | 3,844 | 3,844) | |||||||||
| Cash dividends | 33,256) | 33.256) | |||||||||
| Cash dividends distribution from capital surplus | 6(16)(17) | 33.256) | 33,256) | ||||||||
| Restricted stocks to employees | 6(14)(15) | 5,355 | 5.355) | 4,983 | 4,983 | ||||||
| Treasure share repurchase | 6(15) | 11,739 | 11,739) | ||||||||
| Balance at December 31, 2019 | 846,551 | 138,881 | 47,639 | 74,393 | 42,491 | 15,259 | 2,231 ſŜ. |
28,115 ſ\$. |
\$1,104,350 |
The accompanying notes are an integral part of these parent company only financial statements.
$\hat{\boldsymbol{\beta}}$
$-11-$
DAVICOM SEMICONDUCTOR, INC.
PARENT COMPANY ONLY STATEMENTS OF CASH FLOWS (Expressed in thousands of New Taiwan dollars)
$\sim$
$\sim$
$\label{eq:3} \begin{split} \mathcal{L}{\text{max}}(\mathcal{L}{\text{max}},\mathcal{L}{\text{max}}) = \mathcal{L}{\text{max}}(\mathcal{L}_{\text{max}}), \end{split}$
| Years ended December 31 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Notes | 2019 | 2018 | ||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Profit before tax | \$ | 45,192 | \$ | 42,436 | ||||
| Adjustments | ||||||||
| Adjustments to reconcile profit (loss) | ||||||||
| Depreciation(including investment property | 6(6)(7)(9) | |||||||
| and right-of-use assets) | 8,422 | 6,725 | ||||||
| Amortisation | 6(22) | 3,644 | 3,034 | |||||
| Impairment on expected credit (gains) losses | $6(3)$ and $12(2)$ | $\overline{C}$ | 100) | 1,201 | ||||
| Cost of restricted stocks to employees | 6(14)(15) | 4,983 | 8,330 | |||||
| Deferred charges transferred to research and | ||||||||
| experimental expenses | 4,912 | |||||||
| Interest income | 6(19) | € | $2,426$ ) ( | 1,716) | ||||
| Interest expense | 6(21) | 645 | 31 | |||||
| Share of profit of associates accounted for | 6(5) | |||||||
| under equity method | C | $12,462$ ) ( | 3,744) | |||||
| Net (profit) loss on financial assets at fair | 6(2)(20) | |||||||
| value through profit or loss | € | 9,546) | 3,443 | |||||
| Changes in operating assets and liabilities | ||||||||
| Changes in operating assets | ||||||||
| Financial assets at fair value through profit or | ||||||||
| loss-current | 1,600 | |||||||
| Notes receivable | 64 | C | 2) | |||||
| Accounts receivable | 8,654 | € | 5,788) | |||||
| Other receivables | 311 | € | 196) | |||||
| Inventories, net | 7,241 | 4,947 | ||||||
| Prepayments | ( | 4,360) | ſ | 93) | ||||
| Financial assets at fair value through profit or loss-noncurrent |
||||||||
| Changes in operating liabilities | 20,952 | |||||||
| Current contract habilities | ||||||||
| Notes payable | 57 1,257 |
|||||||
| Accounts payable | $\left($ | 2,619) | ||||||
| Other payables | ( | $701$ ) 399) |
$\left($ | 2,904) 567 |
||||
| Advance receipts | 1,028 | ( | $602$ ) | |||||
| Net defined benefit liabilities | 86 | 164 | ||||||
| Cash inflow generated from operations | 72,542 | 59,726 | ||||||
| Interest received | 2,388 | 1,599 | ||||||
| Income tax paid | $2,257$ ) ( | 8,182) | ||||||
| Interest paid | 645) | |||||||
| Net cash flows from operating activities | 72,028 | 53,143 | ||||||
(Continued)
DAVICOM SEMICONDUCTOR, INC.
PARENT COMPANY ONLY STATEMENTS OF CASH FLOWS (Expressed in thousands of New Taiwan dollars)
| Years ended December 31 | ||||||
|---|---|---|---|---|---|---|
| Notes | 2019 | 2018 | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||
| Acquisition of investments accounted for under | 6(5) | |||||
| equity method | \$ | ( | 7,650) | |||
| Acquisition of property, plant and equipment | 6(6) | $42,202$ ) ( | 333) | |||
| Increase in refundable deposits | 94) | |||||
| Increase in intangible assets | $120)$ ( | 212) | ||||
| Increase in other assets | $10,315$ ) | 9,211) | ||||
| Net cash flows used in investing activities | 52,731) | 17,406) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||
| Increase in guarantee deposits received | 6(12)(27) | 373 | ||||
| Payments of cash dividends | 6(17) | $66,512$ ) ( | 76, 190) | |||
| Repayments of principal for lease liabilities | 6(7)(27) | 1,522) | ||||
| Treasure stock repurchase | 6(15) | 11,739) | 16,376) | |||
| Net cash flows used in financing activities | 79,400) | 92,566) | ||||
| Net decrease in cash and cash equivalents | $60,103$ ) ( | $56,829$ ) | ||||
| Cash and cash equivalents at beginning of year | 524,498 | 581,327 | ||||
| Cash and cash equivalents at end of year | \$ | 464,395 | \$ | 524,498 |
The accompanying notes are an integral part of these parent company only financial statements.
$\bar{\beta}$
$\label{eq:reduced} \begin{split} \text{minimize} & \left{ \left( \begin{array}{cc} \text{min} & \text{min} \left( \mathbf{r} \right) & \text{min} \left( \mathbf{r} \right) & \text{min} \left( \mathbf{r} \right) \ \text{min} \left( \mathbf{r} \right) & \text{min} \left( \mathbf{r} \right) & \text{min} \left( \mathbf{r} \right) & \text{min} \left( \mathbf{r} \right) \end{array} \right) \end{split}$
where $\alpha_{\rm{max}}$ is a complementary of $\alpha_{\rm{max}}$ , and
$\sim$ 13 $\sim$
$\label{eq:2} \mathcal{L}(\mathcal{L}) = \mathcal{L}(\mathcal{L}(\mathcal{L})) = \mathcal{L}(\mathcal{L}(\mathcal{L})) = \mathcal{L}(\mathcal{L}(\mathcal{L})) = \mathcal{L}(\mathcal{L}(\mathcal{L})) = \mathcal{L}(\mathcal{L}(\mathcal{L})) = \mathcal{L}(\mathcal{L}(\mathcal{L})) = \mathcal{L}(\mathcal{L}(\mathcal{L})) = \mathcal{L}(\mathcal{L}(\mathcal{L})) = \mathcal{L}(\mathcal{L}(\mathcal{L})) = \mathcal{L}(\mathcal{L}(\mathcal{L})) = \mathcal{L}(\mathcal{$
Attachment 4
DAVICOM SEMICONDUCTOR, INC. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT ACCOUNTANTS FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018
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.
DAVICOM Semiconductor, Inc.
Declaration of Consolidated Financial Statements of Affiliated Enterprises
For the year ended December 31, 2019, pursuant to "Criteria Governing Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises," the company that is required to be included in the consolidated financial statements of affiliates, is the same as the company required to be included in the consolidated financial statements of parent and subsidiary companies under International Financial Reporting Standard 10. Also, if relevant information that should be disclosed in the consolidated financial statements of affiliates has all been disclosed in the consolidated financial statements of parent and subsidiary companies, it shall not be required to prepare separate consolidated financial statements of affiliates.
$\ddot{\phantom{a}}$
Hereby declare,
Company name: DAVICOM SEMICONDUCTOR, INC. Representative: HAO, TING February 27, 2020
REPORT OF INDEPENDENT ACCOUNTANTS TRANSLATED FROM CHINESE
To the Board of Directors and Stockholders of DAVICOM Semiconductor, Inc.
Opinion
We have audited the accompanying consolidated balance sheets of DAVICOM Semiconductor, Inc. and its subsidiaries (the "Group") as at December 31, 2019 and 2018, and the related consolidated statements of comprehensive income, of changes in equity and of cash flows for the years then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.
In our opinion, based on our audits and the reports of other auditors (please refer to Other matter section of our report), the accompanying consolidated financial statements present fairly, in all material respects. the consolidated financial position of the Group as at December 31, 2019 and 2018, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with the "Regulations Governing the Preparation of Financial Reports by Securities Issuers" and the International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the Financial Supervisory Commission.
Basis for opinion
We conducted our audits in accordance with the "Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants" and generally accepted auditing standards in the Republic of China (ROC GAAS). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the Code of Professional Ethics for Certified Public Accountants in the Republic of China (the "Code"), and we have fulfilled our other ethical responsibilities in accordance with the Code. Based on our audits and the reports of other auditors, we believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole and, in forming our opinion thereon, we do not provide a separate opinion on these matters.
The Group's key audit matters are as follows:
Evaluation of accounts receivable
Description
Please refer to Note 4(8) for accounting policies on accounts receivable recognition and accounts receivable valuation, Note 5 for uncertainty of accounting estimates and assumptions in relation to impairment of accounts receivable valuation. Note 6(3) for details of accounts receivable. The balance of accounts receivable amounted to NT\$32,321 thousand as at December 31, 2019.
The Group's accounts receivable arises from selling goods, and collecting in accordance with credit period which is determined by the Credit Quality Control Policy of individual customers' credit quality. Allowance for uncollectible accounts are based on expected credit losses during its existing period. For the purpose of measurement, underlying receivable should be grouped appropriately and the assumptions should be judged and analyzed. The aging of intervals, expected loss ratio and forward-looking information usually include subjective judgement, therefore, we determined the valuation of accounts receivable as one of the key areas of focus for this year's audit.
How our audit addressed the matter
We performed the following audit procedures on the above key audit matter:
-
- Checked and tested the assumptions of expected credit losses and assessed the reasonableness of the aging of intervals, including objective evidences used to determine the accuracy of periods and credit terms. Verified whether there are long overdue unrecoverable accounts receivable on the list to assess the adequacy of allowance for uncollectible accounts.
-
- Checked and tested accounts receivable aging schedule which is classified based on customer types, based on subsequent collections, and discussed with management for its assessment of recoverability of past due receivables.
Evaluation of inventories
Description
Please refer to Note 4(11) for accounting policy on inventory valuation, Note 5 for uncertainty of accounting estimates and assumptions in relation to inventory valuation, Note 6(4) for details of inventory. The balance of inventory and allowance for inventory valuation losses amounted to NT\$27,524 thousand and NT\$13,971 thousand as at December 31, 2019, respectively.
The Group is engaged in research, development, production, manufacturing and sales of local area network chipset. Due to rapid changes in technology, the life cycle of products is short and easily affected by market prices, there is a higher risk of incurring inventory valuation losses or having obsolete
inventory. The Group measures inventory for normal sales at the lower of cost or net realisable value method. For inventory aging over certain period, individual inventory valuation losses and obsolete inventory, provision for loss is made through individual identification and measured at net realizable value. As a result of the significant amount, numerous items, and since identifying obsolete and damaged inventory usually involves management judgement, it also belongs to one of the audit scopes involving professional judgement. Therefore, we determined the estimate of inventory valuation losses as one of the key areas of focus for this year's audit.
How our audit addressed the matter
We performed the following audit procedures on the above key audit matter:
-
- Obtained an understanding of the business, industry, products and inventory aging to assess the provision policy of allowance for inventory valuation losses, verifying whether the related accounting policies are consistent with the last period, and evaluating whether the provision policy is reasonable.
-
- Obtained inventory aging report from management, analyse and compare the different reasons for loss due to market value decline and obsolete and slow-moving inventories to assess the appropriateness of loss for market value decline and obsolete and slow-moving inventory policy.
-
- For summary statement that management uses to valuate loss for market value decline and obsolete and slow-moving inventories, confirming whether it agrees with the statement details generated from system, and verifying that obsolete and slow-moving inventories which were provided valuation losses, has been completely listed in the statement.
-
- Tested book value of ending inventory, through selecting samples and obtaining invoices of last period to verify whether they were measured at the lower of cost or net realizable value method, and recalculating and valuating the reasonableness of changes in allowance for inventory valuation losses.
-
- Participating and observing the year-end physical inventory count to verify the existence and completeness of inventory, and checking the condition of inventory to assess the appropriateness of allowance for inventory valuation losses of obsolete and slow-moving inventories.
Other matters
Reference to report of the other independent accountants
We did not audit the financial statements of a wholly-owned consolidated subsidiary that are included in the financial statements. Total assets of the subsidiary amounted to NTS226,120 thousand and NT\$221.908 thousand as at December 31, 2019 and 2018, constituting 18.31% and 18.35% of consolidated total assets, respectively. Operating income of the subsidiary amounted to NT\$9.810 thousand and NT\$10,641 thousand, for the years ended December 31, 2019 and 2018, constituting 4.04% and 4.08% of consolidated total operating income, respectively. Those financial statements were audited by other independent accountants whose reports thereon have been furnished to us, and our opinion expressed herein is based solely on the audit reports of the other independent accountants.
Parent company only financial reports
We have audited and expressed an unqualified opinion including an Other Matter paragraph on the parent company only financial statements of DAVICOM Semiconductor, Inc. as at and for the years ended December 31, 2019 and 2018.
Responsibilities of management and those charged with governance for the financial statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the "Regulations Governing the Preparation of Financial Reports by Securities Issuers", and the International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the Financial Supervisory Commission, and for such internal controls as management determines is necessary to enable the preparation of parent company only financial statements that are free from material misstatement. whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.
Those charged with governance, including the audit committee, are responsible for overseeing the Group's financial reporting process.
Independent accountant's responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ROC GAAS will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with ROC GAAS, we exercise professional judgement and maintain professional skepticism throughout the audit. We also:
- Identify and assess the risks of material misstatement of the consolidated financial statements, $\mathbf{1}$ . 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 controls.
- Obtain an understanding of internal controls relevant to the audit in order to design audit procedures $21$ that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group's internal controls.
- Evaluate the appropriateness of accounting policies used and the reasonableness of accounting $3.$ estimates and related disclosures made by management.
- $4.$ Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our report to the related disclosures in the parent company only financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our report. However, future events or conditions may cause the Group to cease to continue as a going concern.
- Evaluate the overall presentation, structure and content of the consolidated financial statements, $5.$ including the footnote disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
- Obtain sufficient appropriate audit evidence regarding the financial information of the entities or 6. business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the Group's audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding the planned scope and timing of the audit, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
Se-Kai Lin Chun-Yuan Hsiao For and on behalf of PricewaterhouseCoopers, Taiwan February 27, 2020
The accompanying consolidated financial statements are not intended to present the financial position and results of operations and cash flows in accordance with accounting principles generally accepted in countries and jurisdictions other than the Republic of China. The standards, procedures and practices in the Republic of China governing the audit of such financial statements may differ from those generally accepted in countries and jurisdictions other than the Republic of China. Accordingly, the accompanying consolidated financial statements and report of independent accountants are not intended for use by those who are not informed about the accounting principles or auditing standards generally accepted in the Republic of China, and their applications in practice.
As the financial statements are the responsibility of the management, PricewaterhouseCoopers cannot accept any liability for the use of, or reliance on, the English translation or for any errors or misunderstandings that may derive from the translation.
| December 31, 2019 | December 31, 2018 | |||||||
|---|---|---|---|---|---|---|---|---|
| Assets | Notes | AMOUNT | $\%$ | AMOUNT | ℅ | |||
| Current assets | ||||||||
| 1100 | Cash and cash equivalents | 6(1) | \$ 752,567 |
61 | $\mathsf{\$}$ | 835,857 | 69 | |
| 1150 | Notes receivable, net | 6(3) | 64 | |||||
| 1170 | Accounts receivable, net | 6(3) | 32,321 | 3 | 40,243 | 3 | ||
| 1200 | Other receivables | 5,490 | 5,504 | $\mathbf{1}$ | ||||
| 130X | Inventories, net | 6(4) | 27,524 | 2 | 34,159 | 3 | ||
| 1410 | Prepayments | 5,851 | $\mathbf{1}$ | 1,443 | ||||
| 1470 | Other current assets | 46 | ||||||
| 11XX | Total Current Assets | 823,753 | 67 | 917,316 | 76 | |||
| Non-current assets | ||||||||
| 1510 | Financial assets at fair value through $6(2)$ | |||||||
| profit or loss - noncurrent | 59,494 | 5 | 47,247 | $\overline{4}$ | ||||
| 1600 | Property, plant and equipment, net | 6(5) | 160,982 | 13 | 122,860 | 10 | ||
| 1755 | Right-of-use assets | 6(6) | 63,750 | 5 | ||||
| 1760 | Investment property, net | 6(8) | 102,940 | 8 | 105,860 | 9 | ||
| 1780 | Intangible assets | 84 | 153 | |||||
| 1840 | Deferred income tax assets | 6(23) | 8,594 | 1 | 7,573 | |||
| 1900 | Other non-current assets | 6(9) | 15,292 | 1 | 8,338 | 1 | ||
| 15XX | Total Non-current assets | 411,136 | 33 | 292,031 | 24 | |||
| IXXX | Total assets | \$ 1,234,889 |
100 | \$ | 1,209,347 | 100 |
DAVICOM SEMICONDUCTOR, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Expressed in thousands of New Taiwan dollars)
$\label{eq:2} \begin{split} \mathcal{L}{\mathcal{F}}(\mathcal{F}) = \mathcal{L}{\mathcal{F}}(\mathcal{F}) = \mathcal{L}{\mathcal{F}}(\mathcal{F}) = \mathcal{L}{\mathcal{F}}(\mathcal{F}) = \mathcal{L}{\mathcal{F}}(\mathcal{F}) = \mathcal{L}{\mathcal{F}}(\mathcal{F}) = \mathcal{L}{\mathcal{F}}(\mathcal{F}) = \mathcal{L}{\mathcal{F}}(\mathcal{F}) = \mathcal{L}{\mathcal{F}}(\mathcal{F}) = \mathcal{L}{\mathcal{F}}(\mathcal{F}) = \mathcal{L}_{\mathcal{F}}(\mathcal{F})$
(Continued)
| Liabilities and Equity AMOUNT AMOUNT Notes ℅ Current liabilities 2130 Current contract liabilities \$ 57 \$ 2150 Notes payable 5,944 4,687 1 2170 Accounts payable 7,421 6,515 $\bf{l}$ 2200 Other payables 6(10) 28,962 2 29,306 Current income tax liabilities 2230 6(23) 2,266 75 2280 Current lease liabilities 12(2) 1,537 2300 Other current liabilities 2,811 389 21XX Current Liabilities 48,998 40,972 4 Non-current liabilities Deferred income tax liabilities 2570 513 6(23) 625 Non-current lease liabilities 2580 12(2) 62,500 5 Other non-current liabilities 2600 6(11) 17,410 1 17,317 Non-current liabilities 25XX 6 80,423 17,942 2XXX Total Liabilities 10 129,421 58,914 Equity attributable to owners of |
|
|---|---|
| % | |
| 1 2 |
|
| 3 | |
| 2 | |
| $\boldsymbol{2}$ | |
| $\mathfrak s$ | |
| parent | |
| Share capital 6(14) |
|
| Common stock 3110 846,551 69 846,551 |
70 |
| Capital surplus 6(15) |
|
| 3200 Capital surplus 186,520 15 219,776 |
18 |
| Retained earnings 6(16) |
|
| 3310 Legal reserve 74,393 6 70,549 |
6 |
| Undistributed earnings 3350 6(23) 42,491 3 37,829 |
3 |
| Other equity interest | |
| 3400 Other equity interest 17,490) ( $8,977$ ) ( $1)$ ( |
$_{1}$ |
| Treasury shares 6(14) |
|
| 3500 Treasury shares $28,115$ ) ( $2)$ ( $16,376$ ) ( |
$\left( \frac{1}{2} \right)$ |
| Equity attributable to owners of 31XX |
|
| the parent 1,104,350 90 1,149,352 |
95 |
| Non-controlling interest 36XX 1,081 1,118 Total equity 3XXX |
|
| 90 1,105,468 1,150,433 |
95 |
| Significant contingent liabilities and 9 |
|
| unrecognised contract commitments Total liabilities and equity 3X2X \$ 1,234,889 $100 - $$ 1,209,347 |
100 |
DAVICOM SEMICONDUCTOR, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Expressed in thousands of New Taiwan dollars)
The accompanying notes are an integral part of these consolidated financial statements.
DAVICOM SEMICONDUCTOR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Expressed in thousands of New Taiwan dollars, except earnings per share)
| Years ended December 31 | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2019 | 2018 | ||||||||||||
| Items | Notes | AMOUNT | $\%$ | AMOUNT | ℅ | ||||||||
| 4000 | Sales revenue | 6(17) | \$ | 242,531 | 100 \$ |
261,095 | 100 | ||||||
| 5000 | Operating costs | 6(4)(21)(22) | 81,482)( | 34( | $87,299$ ) ( | 33) | |||||||
| 5900 | Net operating margin | 161,049 | 66 | 173,796 | 67 | ||||||||
| Operating expenses | 6(21)(22) | ||||||||||||
| 6100 | Selling expenses | ( | $31,637$ ) ( | 13( | $32,280$ ) ( | 12) | |||||||
| 6200 | General and administrative | ||||||||||||
| expenses | € | $42,350$ ) ( | 17( | $46,524$ ) ( | 18) | ||||||||
| 6300 | Research and development | ||||||||||||
| expenses | ( | $76,976$ ) ( | $32)$ ( | $83,811$ )( | 32) | ||||||||
| 6450 | Impairment on expected credit | $6(3)$ and $12(2)$ | |||||||||||
| losses | 100 | $1,201$ )( | $\left\vert 1\right\rangle$ | ||||||||||
| 6000 | Total operating expenses | $150,863$ )( | 62( | $163,816$ ) ( | 63) | ||||||||
| 6900 | Operating income | 10,186 | 4 | 9,980 | $\overline{4}$ | ||||||||
| Non-operating income and | |||||||||||||
| expenses | |||||||||||||
| 7010 | Other income | 6(18) | 23,814 | 10 | 29,485 | 11 | |||||||
| 7020 | Other gains and losses | 6(19) | 11,920 | 5 | 3,417 | $\mathbf{1}$ | |||||||
| 7050 | Finance costs | 6(20) | 645) | 31) | |||||||||
| 7000 | Total non-operating income | ||||||||||||
| and expenses | 35,089 | 15 | 32,871 | 12 | |||||||||
| 7900 | Income from continuing | ||||||||||||
| operations before income tax | 45,275 | 19 | 42,851 | 16 | |||||||||
| 7950 | Income tax expense | 6(23) | $3,842$ ) ( | $2)$ ( | $4,928$ )( | 2) | |||||||
| 8000 | Profit for the period from | ||||||||||||
| continuing operations | 41,433 | 17 | 37,923 | 14 | |||||||||
| 8200 | Profit for the year | \$ | 41,433 | 17 \$ |
37,923 | 14 | |||||||
(Continued)
DAVICOM SEMICONDUCTOR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Expressed in thousands of New Taiwan dollars, except earnings per share)
| Years ended December 31 | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| 2019 | 2018 | ||||||||
| Items | Notes | AMOUNT | $\%$ | AMOUNT | $\%$ | ||||
| Other comprehensive income | |||||||||
| Components of other | |||||||||
| comprehensive income that will | |||||||||
| not be reclassified to profit or | |||||||||
| loss | |||||||||
| 8311 | Other comprehensive income, | ||||||||
| before tax, actuarial gains on | |||||||||
| defined benefit plans | \$ | 458 | \$ | 354 | |||||
| 8349 | Income tax related to | 6(23) | |||||||
| components of other | |||||||||
| comprehensive income that will | |||||||||
| not be reclassified to profit or | |||||||||
| loss | 92) | 234 | |||||||
| 8310 | Components of other | ||||||||
| comprehensive income that | |||||||||
| will not be reclassified to | |||||||||
| profit or loss | 366 | 588 | |||||||
| Components of other | |||||||||
| comprehensive income that will | |||||||||
| be reclassified to profit or loss | |||||||||
| 8361 | Financial statement translation | ||||||||
| 8360 | differences of foreign operations Components of other |
$13,496$ ) ( | 5) | 1,182 | |||||
| comprehensive income that will | |||||||||
| be reclassified to profit or loss | $13,496$ )( | $\overline{5}$ ) | 1,182 | ||||||
| 8300 | Total other comprehensive (loss) | ||||||||
| income for the year | (\$ | $13,130$ ) ( | 5) | \$ | 1,770 | 1 | |||
| 8500 | Total comprehensive income for | ||||||||
| the year | \$ | 28,303 | 12 | \$ | 39,693 | 15 | |||
| Profit, attributable to: | |||||||||
| 8610 | Owners of parent | \$ | 41,396 | 17 | \$ | 37,635 | 14 | ||
| 8620 | Non-controlling interest | 37 | 288 | ||||||
| \$ | 41,433 | 17 | \$ | 37,923 | 14 | ||||
| Comprehensive income, | |||||||||
| attributable to: | |||||||||
| 8710 | Owners of parent | \$ | 28,266 | 12 | S. | 39,405 | 15 | ||
| 8720 | Non-controlling interest | 37 | 288 | ||||||
| \$ | 28,303 | 12 | \$ | 39,693 | 15 | ||||
| Basic earnings per share | 6(24) | ||||||||
| 9750 | Net income | \$ | 0.50 | 0.44 | |||||
| Diluted earnings per share | 6(24) | ||||||||
| 9850 | Net income | 0.49 | 0.44 |
The accompanying notes are an integral part of these consolidated financial statements.
DAVICOM SEMICONDUCTOR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Expressed in thousands of New Taiwan dollars)
Equity atributable to owners of the paren
$\sim$
| equally authorization of the partial entry | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Share capital | Capital surplus | Retained earnings | Other equity interest | ||||||||||||||
| Notes | Common stock | Additional paid-in capital |
Others | Legal reserve | Undistributed eamines |
Exchange differences from translation of foreign operations |
Unrealized cain compensation for or loss on available for sale financial assets |
Unearned restricted employee share of stock |
Treasury shares | Total | Non- controlling interest |
Total couity | |||||
| Year 2018 | |||||||||||||||||
| Balance at January 1, 2018 | 846.551 | 193.688 | \$56.564 | \$65.446 | 51.033 | $2,945$ ) 18 |
5,122 | $15,544$ ) \$ | \$1,199,915 | 183 | |||||||
| Effects of retrospective application | 5,122 | $\sim$ | 5,122 | \$1,200,098 | 5,122 | ||||||||||||
| Balance at January 1 after adjustments | 846,551 | 193,688 | 56,564 | 65,446 | 51.033 | 2,945 | 15,544 | 1,194,793 | 183 | 1.194.976 | |||||||
| Profit for the year | 37 635 | 37,635 | 288 | 37.923 | |||||||||||||
| Other comprehensive income for the year | 588 | 1,182 | 1,770 | 1.770 | |||||||||||||
| Total comprehensive income | 38,223 | 1.182 | 39,405 | 288 | 39.693 | ||||||||||||
| Differences between equity purchase price and carrying amount arising from actual acquisition of subsidiaries |
$610$ : | $\cdot$ | $610$ : | 610) | |||||||||||||
| Change of noncontrolling interests | $\blacksquare$ | 610 | 610 | ||||||||||||||
| Appropriation and distribution of 2017 earnings 6(16) | |||||||||||||||||
| Legal reserve | 5.103 | 5.103 | |||||||||||||||
| Cash dividends | 45 714 : | 45,714 | 45.714) | ||||||||||||||
| Cash dividends distributed from capital surplus 6(15)(16) | 30.476 | 30,476 | 30.476) | ||||||||||||||
| Restricted stocks to employees | 6(13)(14) | 3,570 | 3,570 | 8,330 | 8,330 | 8.330 | |||||||||||
| Treasure share repurchase 6(14) |
16,376 | 16,376 | 16,376 | ||||||||||||||
| Balance at December 31, 2018 | 846,551 | 166,782 | \$52,994 | 70,549 | 37 829 | (1.763) | 78 | 7,214 | 16,376 | \$1,149,352 | \$1,081 | \$1,150,433 | |||||
| Years ended December 31, 2019 | |||||||||||||||||
| Balance at January 1, 2019 | 846.551 | 166,782 | \$52,994 | 70.549 s |
37.829 | (1.763) | 1\$ | 7,214 | t\$ | 16.376 | \$1,149,352 | 1,081 | \$1,150,433 | ||||
| Profit for the year | 41 396 | 41,396 | 37 | 41.435 | |||||||||||||
| Other comprehensive income (loss) for the year | 366 | 13,496 | 13,130 | 13, 130 | |||||||||||||
| Total comprehensive income | 41 762 | 13,496 | 28,266 | 37 | 28,303 | ||||||||||||
| Appropriation and distribution of 2018 carnings 6(16) | |||||||||||||||||
| Legal reserve | 3,844 | 3.844 3 | |||||||||||||||
| Cash dividends | $\sim$ | 33, 256 3 | 33,256 | 33 256 ) | |||||||||||||
| Cash dividends distributed from capital surplus 6(15)(16) | 33,256 ) | 33,256 | 33.256) | ||||||||||||||
| Restricted stocks to employees | 6(13)(14) | 5,355 | 5.355 | 4,983 | 4,933 | 4.983 | |||||||||||
| Treasure share repurchase 6(14) |
11,739 | 11,739 | 11,739 | ||||||||||||||
| Balance at December 31, 2019 | 846,551 | 138,881 | \$47,639 | 74, 393 | 42 491 | (15, 259) | 2,231 | 28,115 | \$1,104,350 | 1,118 | \$1,105,468 |
The accompanying notes are an integral part of these consolidated financial statements.
$\bar{\mathbf{r}}$
$\bar{z}$
$-13-$
$\ddot{\phantom{a}}$
DAVICOM SEMICONDUCTOR, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Expressed in thousands of New Taiwan dollars)
| Years ended December 31 | |||||
|---|---|---|---|---|---|
| Notes | 2019 | 2018 | |||
| CASH FLOWS FROM OPERATING ACTIVITIES | |||||
| Profit before tax | \$ | 45,275 | \$ | 42,851 | |
| Adjustments | |||||
| Adjustments to reconcile profit (loss) | |||||
| Depreciation (including investment property and right-of-use | 6(5)(6)(8) | ||||
| assets) | 8,809 | 7,113 | |||
| Amortisation | 6(21) | 3,644 | 3.034 | ||
| Impairment on expected credit (profits) losses | $6(3)$ and $12(2)$ | t | 100) | 1,201 | |
| Deferred charges transferred to research and experimental | |||||
| expenses | 4,911 | ||||
| Cost of restricted stocks to employees | 6(13)(14) | 4,983 | 8,330 | ||
| Interest income | 6(18) | ( | 4,781) ( | $2,950$ ) | |
| Interest expense | 6(20) | 645 | 31 | ||
| Net (profit) loss on financial assets at fair value through profit $6(2)(19)$ | |||||
| or loss | € | $11,315$ ) | 103 | ||
| Changes in operating assets and liabilities | |||||
| Changes in operating assets Financial assets at fair value through profit or loss-current |
1,600 | ||||
| Notes receivable | 64 | 2) | |||
| Accounts receivable | 8,022 | € ť |
6,037) | ||
| Financial assets at fair value through profit or loss- | |||||
| noncurrent | ( | 932) | 2,247 | ||
| Other receivables | 332 | ( | 197) | ||
| Inventories | 6,635 | 2,901 | |||
| Prepayments | t | 4,408) | 1,520 | ||
| Other current assets | 46 | 42. | |||
| Changes in operating liabilities | |||||
| Current contract liabilities | 57 | ||||
| Notes payable | 1,257 | € | $2,619$ ) | ||
| Accounts payable | 906 | € | 1,946) | ||
| Other payables | ( | 345) | 716 | ||
| Net defined benefit liabilities | 280) | 164 | |||
| Other current liabilities | 2,422 | $2,050$ ) | |||
| Cash inflow generated from operations | 60,936 | 60,968 | |||
| Interest received | 4,106 | 2,833 | |||
| Interest paid | 645) | ||||
| Income tax paid | $2,345$ ) | $8,233$ ) | |||
| Net cash flows from operating activities | 62,052 | 55.568 | |||
| CASH FLOWS FROM INVESTING ACTIVITIES | |||||
| Acquisition of property, plant and equipment | 6(5) | 42,202) $120$ ) |
333) | ||
| Increase in intangible assets Increase in refundable deposits |
94) | 212) | |||
| Increase in other assets | $10,315$ ) | 9,212) | |||
| Net cash flows used in investing activities | 52, 731) | 9,757) | |||
| CASH FLOWS FROM FINANCING ACTIVITIES | |||||
| Increase in guarantee deposits received | 373 | ||||
| Payments of cash dividends | 6(16) | 66,512) | $\mathcal{A}$ | 76,190) | |
| Lease principal repayment | o(6) | $1,522$ ) | |||
| Treasury stock repurchased | 6(14) | $11,739$ ) | 16,376) | ||
| Net cash flows used in financing activities | $79,400$ ) | 92,566) | |||
| Effect of foreign exchange rate changes on cash and cash | |||||
| equivalents | 13,211) | 1,206 | |||
| Net decrease in eash and eash equivalents | 83,290) | 45,549) | |||
| Cash and cash equivalents at beginning of year | 835,857 | 881,406 | |||
| Cash and cash equivalents at end of year | \$ | 752,567 | \$ | 835,857 |
$\epsilon$
The accompanying notes are an integral part of these consolidated financial statements.
Attachment 5
Ξ,
DAVICOM ANNUAL PROFIT DISTRIBUTION TABLE Year 2019
| Items | Total (NTD) | ||||
|---|---|---|---|---|---|
| Beginning unappropriated retained earnings | S | 730,350 | |||
| Add: retained earnings---Actuarial present value of promised retirement benefits |
366,106 | ||||
| Add: net profit after tax of 2019 | 41,395,667 | ||||
| Distributable net profit | 42,492,123 | ||||
| $Less$ : 10% legal reserve Distributable items: |
(4,176,177) | ||||
| Dividend to shareholders--- NT\$0.46 per share | (38, 244, 441) | ||||
| Unappropriated retained earnings | ¢ | 71,505 |
Chairman: Hao Ting
President: Hao Ting
Accounting Supervisor: Chiu Kuei Feng
Appendix 1
Current shareholding of Directors and Independent Directors
| Record Date: April 12, 2020 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Title | Name | Current | Shareholding | |||||||
| shareholding | ratio | |||||||||
| Chairman | Ting Hao | 1,719,500 | 2.03% | |||||||
| Director | Goodyears Investments Ltd. | 3,982,475 | 4.70% | |||||||
| Director | Tzay Hua Ltd. | 1,480,652 | 1.75% | |||||||
| Director | Yun-Ping Lin | 900,000 | 1.06% | |||||||
| Independent | ||||||||||
| Director | Chang-Yue Ueng | 150,000 | 0.18% | |||||||
| Independent | Jen-Jyh Hwang | $\Omega$ | $0.00\%$ | |||||||
| Director | ||||||||||
| Independent | Niang-Shou Wei | 2,000 | $0.00\%$ | |||||||
| Director | ||||||||||
| Total Shares of Directors Hold | 8,234,627 | 9.73% |
-
DAVICOM Total Issued Shares: 84,655,089shares
-
Total Shares of Directors Required: 6,772,407 shares (Shareholding ratio: 8.00%.).
$\ddot{\phantom{a}}$
- Total Shares of Directors Hold:8,082,627 shares (Not including Independent Director).