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.

			December 31, 2019		December 31, 2018
	Assets	Notes	AMOUNT	%	AMOUNT	%
	Current assets
1100	Cash and cash equivalents	6(1)	\$ 464,395	38	\$ 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	2	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	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	1	7,521	1
1900	Other non-current assets	6(10)	15,291	1	8,338	1
15XX	Non-current assets		698,129	57	603,273	50
1XXX	Total assets		\$ 1,229,378	100	\$ 1,206,834	100

DAVICOM SEMICONDUCTOR, INC. PARENT COMPANY ONLY BALANCE SHEETS (Expressed in thousands of New Taiwan dollars)

(Continued)

				December 31, 2019		December 31, 2018
	Liabilities and Equity	Notes		AMOUNT	%	AMOUNT	%
	Current liabilities
2130	Current contract liabilities		\$	57	- \$	-	-
2150	Notes payable			5,944	1	4,687	-
2170	Accounts payable			4,856	1	5,557	1
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	2
2XXX	Total Liabilities			125,028	10	57,482	5
	Equity
	Share capital	6(15)
3110	Common stock			846,551	69	846,551	70
3200	Capital surplus Capital surplus	6(16)		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) (	1)
	Treasury shares	6(13)
3500	Treasury shares		(	28,115) (	2) (	16,376) (	1)
3XXX	Total equity			1,104,350	90	1,149,352	95
	Significant contingent liabilities and	9
	unrecognised contract commitments
3X2X	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)

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	6(5)
	ventures accounted for under equity method			12,462	5		3,744	2
7000	Total non-operating income and
	expenses			33,072	14		29,352	12
7900	Income from continuing operations
	before income tax			45,192	20		42,436	17
7950	Income tax expense	6(24)	(	3,796) (	2) (		4,801) (	2)
8000	Profit for the year from continuing
	operations			41,396	18		37,635	15
8200	Profit for the year		\$	41,396	18	\$	37,635	15
	Other comprehensive income, net Components of other comprehensive income that will not be reclassified to profit or loss
8311 8349	Other comprehensive income, before tax, actuarial gains on defined benefit plans Income tax related to components of	6(13) 6(24)	\$	458	-	\$	354	-
	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
8361	or loss Financial statement translation differences of foreign operations		(	13,496) (	6)		1,182	1
8360	Components of other comprehensive income that will be reclassified to profit
	or loss		(	13,496) (	6)		1,182	1
8300	Other comprehensive (loss) income for
	the year, net		( \$	13,130) (	6)	\$	1,770	1
8500	Total comprehensive income for the year		\$	28,266	12	\$	39,405	16
9750	Basic earnings per share Net income	6(25)	\$		0.50	\$		0.44
	Diluted earnings per share	6(25)
9850	Net income		\$		0.49	\$		0.44

		Share capital		Capital surplus 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		Unearned compensation for restricted employee share of stock		Treasury shares		Total
Year 2018
Balance at January 1, 2018		\$	846,551	\$	193,688	\$	56,564	\$ 65,446	\$	51,033	(\$	2,945 )	\$	5,122	(\$	15,544 )	\$	-	\$	1,199,915
Efffects of retrospective application			-		-		-	-		-		-	(	5,122 )		-		-	(	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
Profit for the year			-		-		-	-		37,635		-		-		-		-		37,635
Other comprehensive income for the year			-		-		-	-		588		1,182		-		-		-		1,770
Total comprehensive income			-		-		-	-		38,223		1,182		-		-		-		39,405
Differences between equity purchase price and carrying amount arising from actual acquisition of subsidiaries			-		-		-	-	(	610 )		-		-		-		-	(	610 )
Appropriation and distributed of 2017 earnings	6(17)
Legal reserve			-		-		-	5,103	(	5,103 )		-		-		-		-		-
Cash dividends			-		-		-	-	(	45,714 )		-		-		-		-	(	45,714 )
Cash dividends distribution from capital surplus	6(16)(17)		-	(	30,476 )		-	-		-		-		-		-		-	(	30,476 )
Restricted stocks to employees	6(14)(15)		-		3,570	(	3,570 )	-		-		-		-		8,330		-		8,330
Treasure share repurchase	6(15)		-		-		-	-		-		-		-		-	(	16,376 )	(	16,376 )
Balance at December 31, 2018		\$	846,551	\$	166,782	\$	52,994	\$ 70,549	\$	37,829	(\$	1,763 )	\$	-	(\$	7,214 )	(\$	16,376 )	\$	1,149,352
Year 2019
Balance at January 1, 2019		\$	846,551	\$	166,782	\$	52,994	\$ 70,549	\$	37,829	(\$	1,763 )	\$	-	(\$	7,214 )	(\$	16,376 )	\$	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 )	(\$	28,115 )	\$	1,104,350

DAVICOM SEMICONDUCTOR, INC. PARENT COMPANY ONLY STATEMENTS OF CHANGES IN EQUITY (Expressed in thousands of New Taiwan dollars)

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 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)	(	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 Net (profit) loss on financial assets at fair	6(2)(20)	(	12,462 )	(	3,744 )
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	(	2 )
Accounts receivable			8,654	(	5,788 )
Other receivables			311	(	196 )
Inventories, net			7,241		4,947
Prepayments		(	4,360 )	(	93 )
Financial assets at fair value through profit or
loss-noncurrent			20,952		-
Changes in operating liabilities
Current contract liabilities Notes payable			57 1,257	(	- 2,619 )
Accounts payable		(	701 )	(	2,904 )
Other payables		(	399 )		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

DAVICOM SEMICONDUCTOR, INC. NOTES TO THE PARENT COMPANY ONLY FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

(Expressed in thousands of New Taiwan dollars, except as otherwise indicated)

1. HISTORY AND ORGANISATION

Davicom Semiconductor, Inc. (the "Company") was incorporated on August, 1996, as a corporation limited by shares and opened in the same year. The Company is primarily engaged in the research, development, production, manufacturing and sales of communications network ICs. The Company's stock has been listed on the Taiwan Stock Exchange since August 6, 2007.

THE DATE OF AUTHORISATION FOR ISSUANCE OF THE PARENT COMPANY ONLY FINANCIAL STATEMENTS AND PROCEDURES FOR AUTHORISATION

These financial statements were authorised for issuance by the Board of Directors on February 27, 2020. 3. APPLICATION OF NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS

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

New standards, interpretations and amendments endorsed by FSC effective from 2019 are as follows:

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

Except for the following, the above standards and interpretations have no significant impact to the Company's financial condition and financial performance based on the Company's assessment. IFRS 16, 'Leases'

A. IFRS 16, 'Leases', replaces IAS 17, 'Leases' and related interpretations and SICs. The standard requires lessees to recognise a 'right-of-use asset' and a lease liability (except for those leases with terms of 12 months or less and leases of low-value assets). The accounting stays the same for lessors, which is to classify their leases as either finance leases or operating leases and account for those two types of leases differently. IFRS 16 only requires enhanced disclosures to be provided by lessors.

B. The Company has elected to apply IFRS 16 by not restating the comparative information (referred herein as the 'modified retrospective approach') when applying "IFRSs" effective in 2019 as endorsed by the FSC. Accordingly, the Company increased 'right-of-use asset' by \$65,559, increased 'lease liability' by \$65,559 with respect to the lease contracts of lessees on January 1, 2019.
C. The Company has used the following practical expedients permitted by the standard at the date of initial application of IFRS 16:
(a) Reassessment as to whether a contract is, or contains, a lease is not required, instead, the application of IFRS 16 depends on whether or not the contracts were previously identified as leases applying IAS 17 and IFRIC 4.
(b) The use of a single discount rate to a portfolio of leases with reasonably similar characteristics.
(c) The accounting for operating leases whose period will end before December 31, 2019 as shortterm leases and accordingly, rent expense of \$189 was recognised in 2019.
(d) The exclusion of initial direct costs for the measurement of 'right-of-use asset'.
(e) The use of hindsight in determining the lease term where the contract contains options to extend or terminate the lease.

(f) The adjustment of the 'right-of-use asset' by the amount of any provision for onerous leases.

D. The Company calculated the present value of lease liabilities by using the weighted average incremental borrowing interest rate of 0.95%.
E. The Company recognised lease liabilities which had previously been classified as 'operating leases' under the principles of IAS 17, 'Leases'. The reconciliation between operating lease commitments under IAS 17 measured at the present value of the remaining lease payments, discounted using the lessee's incremental borrowing rate and lease liabilities recognised as of January 1, 2019 is as follows:

Operating lease commitments disclosed by applying IAS 17 as at
December 31, 2018	\$ 7,484
Add: Adjustments as a result of a different treatment of extension and
termination options	70,035
Total lease contracts amount recognised as lease liabilities by applying
IFRS 16 on January 1, 2019	\$ 77,519
Incremental borrowing interest rate at the date of initial application	0.95%
Lease liabilities recognised as at January 1, 2019 by applying IFRS 16	\$ 65,559

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

New standards, interpretations and amendments endorsed by the FSC effective from 2020 are as follows:

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

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

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

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

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

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

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

(1) Compliance statement

The parent company only financial statements have been prepared in accordance with the "Regulations Governing the Preparation of Financial Reports by Securities Issuers".

(2) Basis of preparation

A. Except for the following items, the parent company only statements have been prepared under the historical cost convention:
(a) Financial assets at fair value through profit or loss.
(b) Defined benefit liabilities recognised based on the net amount of pension fund assets less present value of defined benefit obligation.
B. The preparation of financial statements in conformity with IFRSs requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Company's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the parent company only financial statements are disclosed in Note 5.
(3) Foreign currency translation
Items included in the financial statements of each of the Company's entities are measured using the currency of the primary economic environment in which the entity operates (the "functional currency"). The parent company only financial statements are presented in New Taiwan Dollars, which is the Company's functional currency.
A. Foreign currency transactions and balances
- (a) Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are remeasured. Foreign exchange gains and losses resulting from the settlement of such transactions are recognised in profit or loss in the period in which they arise.
- (b) Monetary assets and liabilities denominated in foreign currencies at the period end are retranslated at the exchange rates prevailing at the balance sheet date. Exchange differences arising upon re-translation at the balance sheet date are recognised in profit or loss.
- (c) Non-monetary assets and liabilities denominated in foreign currencies held at fair value through profit or loss are re-translated at the exchange rates prevailing at the balance sheet date; their translation differences are recognised in profit or loss. Non-monetary assets and liabilities denominated in foreign currencies held at fair value through other comprehensive income are re-translated at the exchange rates prevailing at the balance sheet date; their translation differences are recognised in other comprehensive income. However, nonmonetary assets and liabilities denominated in foreign currencies that are not measured at fair value are translated using the historical exchange rates at the dates of the initial transactions.
- (d) All other foreign exchange gains and losses based on the nature of those transactions are presented in the statement of comprehensive income within 'other gains and losses'.
B. Translation of foreign operations
(a) The operating results and financial position of all the company entities that have a functional currency different from the presentation currency are translated into the presentation currency as follows:
- i. Assets and liabilities for each balance sheet presented are translated at the closing exchange rate at the date of that balance sheet;
- ii. Income and expenses for each statement of comprehensive income are translated at average exchange rates of that period; and
- iii. All resulting exchange differences are recognised in other comprehensive income.
(b) When the foreign operation partially disposed of or sold is a subsidiary, cumulative exchange differences that were recorded in other comprehensive income are proportionately transferred to the non-controlling interest in this foreign operation. In addition, even when the Company retains partial interest in the former foreign subsidiary after losing control of the former foreign subsidiary, such transactions should be accounted for as disposal of all interest in the foreign operation.
(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 settle 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 settled within the normal operating cycle;
- (b) Liabilities arising mainly from trading activities;
- (c) Liabilities that are to be settled within twelve months from the balance sheet date;
- (d) Liabilities for which the repayment date cannot be extended unconditionally to more than twelve months after the balance sheet date. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.

(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

A. Financial assets at fair value through profit or loss are financial assets that are not measured at amortised cost or fair value through other comprehensive income.
B. On a regular way purchase or sale basis, financial assets at amortised cost are recognised and derecognised using trade date accounting.
C. At initial recognition, the Company measures the financial assets at fair value and recognises the transaction costs in profit or loss. The Company subsequently measures the financial assets at fair value, and recognises the gain or loss in profit or loss.
D. The Company recognises the dividend income when the right to receive payment is established, future economic benefits associated with the dividend will flow to the Company and the amount of the dividend can be measured reliably.
(7) Accounts and notes receivable
A. Accounts and notes receivable entitle the Company a legal right to receive consideration in exchange for transferred goods or rendered services.
B. The Company initially measures accounts and notes receivable at fair value and subsequently recognises the amortised interest income over the period of circulation using the effective interest method and the impairment loss. A gain or loss is recognised in profit or loss.
(8) Impairment of financial assets

The Company assesses at each balance sheet date including accounts receivable that have a significant financing, the Company recognises the impairment provision for 12 months expected credit losses if there has not been a significant increase in credit risk since initial recognition or recognises the impairment provision for the lifetime expected credit losses (ECLs) if such credit risk has increased since initial recognition after taking into consideration all reasonable and verifiable information that includes forecasts. On the other hand, for accounts receivable that do not contain a significant financing component, the Company recognises the impairment provision for lifetime ECLs.

(9) Derecognition of financial assets

The Company derecognises a financial asset when the contractual rights to receive the cash flows from the financial asset 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). 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) Investments accounted for using equity method / Subsidiaries and associates
A. Subsidiaries are all entities (including structured entities) controlled by the Company. The Company controls an entity when the Company is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Consolidation of subsidiaries begins from the date the Company obtains control of the subsidiaries and ceases when the Company loses control of the subsidiaries.
B. Inter-company transactions, balances and unrealised gains or losses on transactions between companies within the Company are eliminated. Accounting policies of subsidiaries have been adjusted where necessary to ensure consistency with the policies adopted by the Company.
C. Profit or loss and each component of other comprehensive income are attributed to the owners of the parent and to the non-controlling interests. Total comprehensive income is attributed to the owners of the parent and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.
D. Changes in a parent's ownership interest in a subsidiary that do not result in the parent losing control of the subsidiary (transactions with non-controlling interests) are accounted for as equity transactions, i.e. transactions with owners in their capacity as owners. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity.
E. When the Company loses control of a subsidiary, the Company remeasures any investment retained in the former subsidiary at its fair value. That fair value is regarded as the fair value on initial recognition of a financial asset or the cost on initial recognition of the associate or joint venture. Any difference between fair value and carrying amount is recognised in profit or loss. All amounts previously recognised in other comprehensive income in relation to the subsidiary are reclassified to profit or loss on the same basis as would be required if the related assets or liabilities were disposed of. That is, when the Company loses control of a subsidiary, all gains or losses previously recognised in other comprehensive income in relation to the subsidiary should be reclassified from equity to profit or loss, if such gains or losses would be reclassified to profit or loss when the related assets or liabilities are disposed of.
F. Accordance with the "Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants", the profit and loss of the parent company only financial report and other comprehensive gains and losses should be the same as the current profit and loss and other comprehensive gains and losses in the financial report prepared on an individual basis, which is the share of the owner of the parent company. The parent company only financial report owner's equity should be included in the financial report prepared on an individual basis. The owners' equity attributable to the parent company is the same.
(12) 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. 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	50 years
Computer communications equipment	2 ~ 4 years
Other equipment	2 ~ 6 years

(13) Leasing arrangements (lessee)-right-of-use assets/ lease liabilities Effective 2019
A. Leases are recognised as a right-of-use asset and a corresponding lease liability at the date at which the leased asset is available for use by the Company. For short-term leases or leases of low-value assets, lease payments are recognised as an expense on a straight-line basis over the lease term.
B. Lease liabilities include the net present value of the remaining lease payments at the commencement date, discounted using the incremental borrowing interest rate. Lease payments are comprised of the fixed payments, less any lease incentives receivable. The Company subsequently measures the lease liability at amortised cost using the interest method and recognises interest expense over the lease term. The lease liability is remeasured and the amount of remeasurement is recognised as an adjustment to the right-of-use asset when there are changes in the lease term or lease payments and such changes do not arise from contract modifications.
C. At the commencement date, the right-of-use asset is stated at cost comprising the amount of the initial measurement of lease liability. The right-of-use asset is measured subsequently using the cost model and is depreciated from the commencement date to the earlier of the end of the asset's useful life or the end of the lease term. When the lease liability is remeasured, the amount of remeasurement is recognised as an adjustment to the right-of-use asset.
(14) Operating leases (lessee/lessor)

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.

(15) Investment property

An investment property is stated initially at its cost and measured subsequently using the cost model. Investment property is depreciated on a straight-line basis over its estimated useful life of 50 years.

(16) Intangible assets

Computer software is stated at cost and amortised on a straight-line basis over its estimated useful life of 1 to 5 years.

(17) 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.

(18) Notes and accounts payable

A. Accounts payable are liabilities for purchases of raw materials, goods or services and notes payable are those resulting from operating and non-operating activities.
B. The short-term notes and accounts payable without bearing interest are subsequently measured at initial invoice amount as the effect of discounting is immaterial and subsequently amortises the interest expense in profit or loss over the period of circulation using the effective interest method.

(19) 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 expense in that period when the employees render service.

B. Pensions

(a) Defined contribution plans

For defined contribution plans, the contributions are recognised as pension expense when they are due on an accrual basis. Prepaid contributions are recognised as an asset to the extent of a cash refund or a reduction in the future payments.

(b) Defined benefit plans
i. Net obligation under a defined benefit plan is defined as the present value of an amount of pension benefits that employees will receive on retirement for their services with the Company in current period or prior periods. The liability recognised in the balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the balance sheet date less the fair value of plan assets. The defined benefit net obligation is calculated annually by independent actuaries using the projected unit credit method. The rate used to discount is determined by using interest rates of government bonds (at the balance sheet date) of a currency and term consistent with the currency and term of the employment benefit obligations.
ii. Remeasurement arising on defined benefit plans are recognised in other comprehensive income in the period in which they arise and are recorded as retained earnings.
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 or constructive obligation and those amounts can be reliably estimated. Any difference between the resolved amounts and the subsequently actual distributed amounts is accounted for as changes in estimates. If employees' compensation is paid by shares, the Company calculates the number of shares based on the closing price at the previous day of the board meeting resolution.

(20) Employee share-based payment

A. For the equity-settled share-based payment arrangements, the employee services received are measured at the fair value of the equity instruments granted at the grant date, and are recognised as compensation cost over the vesting period, with a corresponding adjustment to equity. The fair value of the equity instruments granted shall reflect the impact of market vesting conditions and non-market vesting conditions. Compensation cost is subject to adjustment based on the service conditions that are expected to be satisfied and the estimates of the number of equity instruments that are expected to vest under the non-market vesting conditions at each balance sheet date. And ultimately, the amount of compensation cost recognised is based on the number of equity instruments that eventually vest.
B. Restricted stocks:
(a) Restricted stocks issued to employees are measured at the fair value of the equity instruments granted at the grant date, and are recognised as compensation cost over the vesting period.
(b) For restricted stocks where those stocks do not restrict distribution of dividends to employees and employees are not required to return the dividends received if they resign during the vesting period, the Company recognises the fair value of the dividends received by the employees who are expected to resign during the vesting period as compensation cost at the date of dividends declared.
(c) For restricted stocks where employees have to pay to acquire those stocks, if employees resign during the vesting period, they must return the stocks to the Company and the Company must refund their payments on the stocks. The Company recognises the payments from the employees who are expected to resign during the vesting period as liabilities at the grant date, and recognises the payments from the employees who are expected to be eventually vested with the stocks in 'capital surplus – others'.

(21) Income tax

A. The tax expense for the period comprises current and deferred tax. Tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or items recognised directly in equity, in which cases the tax is recognised in other comprehensive income or equity.
B. The current income tax expense is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the Company and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in accordance with applicable tax regulations. It establishes provisions where appropriate based on the amounts expected to be paid to the tax authorities. An additional tax is levied on the unappropriated retained earnings and is recorded as income tax expense in the year the stockholders resolve to retain the earnings.
C. Deferred tax is recognised, using the balance sheet liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated balance sheet. However, the deferred tax is not accounted for if it arises from initial recognition of goodwill or of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred tax is provided on temporary differences arising on investments in subsidiaries, 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 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.

(22) Share capital

A. Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or stock options are shown in equity as a deduction, net of tax, from the proceeds.
B. Where the Company repurchases the Company's equity share capital that has been issued, the consideration paid, including any directly attributable incremental costs (net of income taxes) is deducted from equity attributable to the Company's equity holders. Where such shares are subsequently reissued, the difference between their book value and any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, is included in equity attributable to the Company's equity holders.

(23) Dividends

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

(24) Revenue recognition

A. The Company manufactures and sells communications network ICs. Sales are recognised when control of the products has transferred, being when the products are delivered to the customer, when the customer has accepted the goods based on the sales contract or there is objective evidence showing that all acceptance provisions have been satisfied.
B. Revenue from these sales is recognised based on the price specified in the contract, net of the estimated sales discounts and allowances. No element of financing is deemed present as the sales are made with a credit term of 30 to 75 days, which is consistent with market practice.
C. A receivable is recognised when the goods are delivered as this is the point in time that the consideration is unconditional because only the passage of time is required before the payment is due.

5. CRITICAL ACCOUNTING JUDGEMENTS, ESTIMATES AND KEY SOURCES OF ASSUMPTION UNCERTAINTY

The preparation of these parent company only 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:.

Critical accounting estimates and assumptions

(1) Evaluation of accounts receivable

When there is objective evidence showing signs of impairment, the Company considers future cash flow estimates. The amount of the impairment loss is measured by the difference between the carrying amount of the asset and the estimated future cash flow at the original effective interest rate of the financial asset. If the actual cash flow is less than expected, there may be significant impairment losses.

(2) 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 the rapid technology innovation, 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.

6. DETAILS OF SIGNIFICANT ACCOUNTS

(1) Cash and cash equivalents

	December 31, 2019	December 31, 2018
Cash on hand	\$ 60	\$ 60
Checking accounts and demand deposits	205,282	109,868
Time deposits	259,053	414,570
	\$ 464,395	\$ 524,498

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) Financial assets at fair value through profit or loss

Items		December 31, 2019	December 31, 2018
Non-current items:
Financial assets mandatorily measured
at fair value through profit or loss
Unlisted stocks	\$	34,761	\$ 34,761
Emerging stocks		-	12,239
Subtotal		34,761	47,000
Valuation adjustment	(	4,209) (	5,042)
	\$	30,552	\$ 41,958

A. Amounts recognised in profit or loss in relation to financial assets at fair value through profit or loss are listed below:

	Years ended December 31,
	2019	2018
Financial assets mandatorily measured at fair
value through profit or loss
Equity instruments	\$ 9,546	(\$	3,443)

B. As of December 31, 2019 and 2018, the Company has no financial assets at fair value through profit or loss pledged to others.

C. Information relating to credit risk of financial assets at fair value through profit or loss is provided in Note 12(2).

(3) Notes and accounts receivable

		December 31, 2019		December 31, 2018
Notes receivable	\$	-	\$	64
Accounts receivable	\$	32,541	\$	41,195
Less: Allowance for uncollectible accounts	(	1,101)	(	1,201)
	\$	31,440	\$	39,994

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

	December 31, 2019		December 31, 2018
	Accounts		Accounts
	receivable	Notes receivable	receivable	Notes receivable
Not past due	\$ 31,144	\$ -	\$ 34,497	\$ 64
Up to 30 days	1,396	-	6,698	-
31 to 90 days	1	-	-	-
	\$ 32,541	\$ -	\$ 41,195	\$ 64

The above ageing analysis was based on past due date.

B. As of December 31, 2019 and 2018, accounts receivable and notes receivable were all from contracts with customers. And as of January 1, 2018, the balance of receivables from contracts with customers amounted to \$35,469.
C. Information relating to credit risk of accounts receivable and notes receivable is provided in Note 12(2).

(4) Inventories

			December 31, 2019
			Allowance for
	Cost		valuation loss	Book value
Work in progress	\$ 14,829	(\$	6,809)	\$ 8,020
Finished goods	23,983	(	7,162)	16,821
	\$ 38,812	(\$	13,971)	\$ 24,841
			December 31, 2018
			Allowance for
	Cost		valuation loss	Book value
Work in progress	\$ 22,039	(\$	8,901)	\$ 13,138
Finished goods	24,014	(	5,070)	18,944
	\$ 46,053	(\$	13,971)	\$ 32,082

The cost of the inventories recognised as expense for the period:

	Years ended December 31,
		2019		2018
Cost of goods sold	\$	74,576	\$	87,719
Gain on reversal of decline in market value		-	(	600)
Inventory retirement losses		-	(	7,451)
Others		-	(	2)
	\$	74,576	\$	79,666

(5) Investments accounted for using equity method

	December 31, 2019	December 31, 2018
Davicom Investment Inc.	\$ 212,029	\$ 211,105
TSCC Inc.	95,835	98,061
Medicom Corp.	330	348
Aidialink Corp.	8,583	8,297
	\$ 316,777	\$ 317,811

A. The investment gains recognised by the Company for the years ended December 31, 2019 and 2018 using the equity method are \$12,462 and \$3,744, respectively, which were recognised based on the investees' financial statements audited by independent accountants in the same periods.

B. For information relating to the subsidiaries of the Company, please refer to Note 4(3) of the 2019 consolidated financial statements of the Company.

2019

(6) Property, plant and equipment

			Computer
			communications	Construction
		Buildings	equipment	in progress		Others	Total
At January 1
Cost	\$	170,034	\$ 708	\$ -	\$	735	\$ 171,477
Accumulated depreciation	(	49,249) (	275)	-	(	320) (	49,844)
	\$	120,785	\$ 433	\$ -	\$	415	\$ 121,633
Opening net book amount as at January 1	\$	120,785	\$ 433	\$ -	\$	415	\$ 121,633
Additions		-	239	41,939		24	42,202
Depreciation charge	(	3,344) (	173)	-	(	176) (	3,693)
Closing net book amount as at
December 31	\$	117,441	\$ 499	\$ 41,939	\$	263	\$ 160,142
At December 31
Cost	\$	169,884	\$ 857	\$ 41,939	\$	679	\$ 213,359
Accumulated depreciation	(	52,443) (	358)	-	(	416) (	53,217)
	\$	117,441	\$ 499	\$ 41,939	\$	263	\$ 160,142

				2018
		Buildings	Computer communications equipment		Construction in progress		Others	Total
At January 1
Cost	\$	170,034	\$ 931	\$	-		\$ 811	\$ 171,776
Accumulated depreciation	(	45,842) (	412)		-	(	417) (	46,671)
	\$	124,192	\$ 519	\$	-		\$ 394	\$ 125,105
Opening net book amount as at January 1	\$	124,192	\$ 519	\$	-		\$ 394	\$ 125,105
Additions		-	127		-		206	333
Depreciation charge	(	3,407) (	213)		-	(	185) (	3,805)
Closing net book amount as at
December 31	\$	120,785	\$ 433	\$	-		\$ 415	\$ 121,633
At Deember 31
Cost	\$	170,034	\$ 708	\$	-		\$ 735	\$ 171,477
Accumulated depreciation	(	49,249) (	275)		-	(	320) (	49,844)
	\$	120,785	\$ 433	\$	-		\$ 415	\$ 121,633

(7) Leasing arrangements-lessee

Effective 2019

A. The Company leases various assets including land. Rental contracts are typically made for periods for 20 years. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose covenants, but leased assets may not be used as security for borrowing purposes.
B. The carrying amount of right-of-use assets and the depreciation charge are as follows:

		Year ended
	December 31, 2019	December 31, 2019
	Carrying amount	Depreciation charge
Land	\$ 63,750	\$ 1,809

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

	Year ended
		December 31, 2019
Items affecting profit or loss
Interest expense on lease liabilities	\$	616
Expense on short-term lease contracts	\$	189
Expense on leases of low-value assets	\$	100

D. For the year ended December 31, 2019, the Company's total cash outflow for leases was \$2,427.

(8) Leasing arrangements – lessor

Effective 2019

A. The Company leases various assets including buildings. Rental contracts are typically made for periods of 1 and 3 years. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions.
B. For the year ended December 31, 2019, the Company recognised rent income in the amounts of \$18,065, based on the operating lease agreement, which does not include variable lease payments.
C. Gain arising from operating lease agreements for the year ended December 31, 2019 is as follows:

	Year ended December 31, 2019
Rent income	\$ 18,065

D. The maturity analysis of the lease payments under the operating leases is as follows:

	December 31, 2019
2020	\$ 23,630
2021	17,545
2022	1,443
	\$ 42,618

(9) Investment property

Building

	Years ended December 31,
		2019	2018
At January 1
Cost	\$	\$ 148,907	148,907
Accumulated depreciation	(	43,047) (	40,127)
	\$	\$ 105,860	108,780
Opening net book amount as at January 1	\$	\$ 105,860	108,780
Depreciation charge	(	2,920) (	2,920)
Closing net book amount as at December 31	\$	\$ 102,940	105,860
At December 31
Cost	\$	\$ 148,907	148,907
Accumulated depreciation	(	45,967) (	43,047)
	\$	\$ 102,940	105,860

A. Rental income from investment property and direct operating expenses arising from investment property are shown below:

Years ended December 31,

		2019	2018
Rental income from investment property	\$	18,065	\$ 21,983
Direct operating expenses arising from the investment
property that generated rental income during the period	(\$	4,583) (\$	4,823)

B. The fair value of the investment property held by the Company as at December 31, 2019 and 2018 were \$150,720 and \$151,401, respectively, which was valued by independent valuers. Valuations were made using the cost approach and income approach in a weight ratio of 50% for each approach which is categorised within Level 3 in the fair value hierarchy. Key assumptions are as follows:

		Overall capital	Ratio of
		interest rate	salvage value
Cost approach		1.835%	5.00%
			Capitalisation
			rate
Income approach			8.30%
(10) Other non-current assets
	December 31, 2019		December 31, 2018
Deferred charges	\$ 12,365	\$	8,258
Overdue receivables	-		4,308
Guarantee deposits paid	174		80
Restricted assets	2,752		-
Less: Allowance for loss	-	(	4,308)
	\$ 15,291	\$	8,338
(11) Others payables
	December 31, 2019		December 31, 2018
Wages and bonus payable	\$ 20,290	\$	19,148
Processing fees payable	2,966		2,663
Others	5,304		7,148
	\$ 28,560	\$	28,959
(12) Other non-current liabilities
	December 31, 2019		December 31, 2018
Net defined benefit liability	\$ 14,107	\$	14,387
Guarantee deposits received	3,303		2,930
	\$ 17,410	\$	17,317

(13) Pensions

A. (a) The Company has a defined benefit pension plan in accordance with the Labor Standards Act, covering all regular employees' service years prior to the enforcement of the Labor Pension Act on July 1, 2005 and service years thereafter of employees who chose to continue to be subject to the pension mechanism under the Act. Under the defined benefit pension plan, two units are accrued for each year of service for the first 15 years and one unit for each additional year thereafter, subject to a maximum of 45 units. Pension benefits are based on the number of units accrued and the average monthly salaries and wages of the last 6 months prior to retirement. The Company contributes monthly an amount equal to 2% of the employees' monthly salaries and wages to the retirement fund deposited with Bank of Taiwan, the trustee, under the name of the independent retirement fund committee. Also, the Company would assess the balance in the aforementioned labor pension reserve account by the end of December 31, every year. If the account balance is insufficient to pay the pension calculated by the aforementioned method to the employees expected to qualified for retirement next year, the Company will make contributions to cover the deficit by next March.
(b) The amounts recognised in the balance sheet are as follows:

		December 31, 2019	December 31, 2018
Present value of defined benefit obligations (\$		39,619) (\$	38,769)
Fair value of plan assets		25,512	24,382
Net defined benefit liability	(\$	14,107) (\$	14,387)

		Present value of	Fair value of
		defined benefit	plan		Net defined
		obligations	assets		benefit liability
Year ended December 31, 2019
Balance at January 1	(\$	38,769)	\$ 24,382	(\$	14,387)
Current service cost	(	101)	-	(	101)
Interest (expense) income	(	271)	170	(	101)
	(	39,141)	24,552	(	14,589)
Remeasurements:
Return on plan assets (excluding amounts included in interest income or expense)		-	936		936
Experience adjustments	(	478)	-	(	478)
	(	478)	936		458
Pension fund contribution		-	24		24
Balance at December 31	(\$	39,619)	\$ 25,512	(\$	14,107)

	Present value of		Fair value of
	defined benefit		plan	Net defined
		obligations	assets		benefit liability
Year ended December 31, 2018
Balance at January 1	(\$	37,994)	\$ 23,416	(\$	14,578)
Current service cost	(	100)	-	(	100)
Interest (expense) income	(	228)	140	(	88)
	(	38,322)	23,556	(	14,766)
Remeasurements:
Return on plan assets
(excluding amounts included in		-	801		801
interest income or expense)
Change in financial assumptions		183	-		183
Experience adjustments	(	630)	-	(	630)
	(	447)	801		354
Pension fund contribution		-	25		25
Balance at December 31	(\$	38,769)	\$ 24,382	(\$	14,387)

(d) The Bank of Taiwan was commissioned to manage the Fund of the Company's and domestic subsidiaries' defined benefit pension plan in accordance with the Fund's annual investment and utilisation plan and the "Regulations for Revenues, Expenditures, Safeguard and Utilisation of the Labor Retirement Fund" (Article 6: The scope of utilisation for the Fund includes deposit in domestic or foreign financial institutions, investment in domestic or foreign listed, over-the-counter, or private placement equity securities, investment in domestic or foreign real estate securitization products, etc.). With regard to the utilisation of the Fund, its minimum earnings in the annual distributions on the final financial statements shall be no less than the earnings attainable from the amounts accrued from two-year time deposits with the interest rates offered by local banks. If the earnings is less than aforementioned rates, government shall make payment for the deficit after being authorized by the Regulator. The composition of fair value of plan assets as of December 31, 2019 and 2018 is given in the Annual Labor Retirement Fund Utilisation Report announced by the government.
(e) The principal actuarial assumptions used were as follows:

Years ended December 31,
	2018
0.70%	0.70%
2.00%	2.00%

Assumptions regarding future mortality experience are set based on actuarial advice in accordance with published statistics and experience in each territory.

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

		Discount rate	Future salary increases
	Increase 0.5%	Decrease 0.5%	Increase 0.5%	Decrease 0.5%
December 31, 2019
Effect on present value of
defined benefit obligation	(\$ 832)	\$ 865	\$ 751	(\$ 730)
December 31, 2018
Effect on present value of
defined benefit obligation	(\$ 891)	\$ 929	\$ 816	(\$ 791)

The sensitivity analysis above is based on one assumption which changed while the other conditions remain unchanged. In practice, more than one assumption may change all at once. The method of analysing sensitivity and the method of calculating net pension liability in the balance sheet are the same.

The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the previous period.

(f) Expected contributions to the defined benefit pension plans of the Company for the year ending December 31, 2020 amount to \$200.
(g) As of December 31, 2019, the weighted average duration of the retirement plan is 2.5 years. The analysis of timing of the future pension payment was as follows:

Within 1 year	(\$	25,031)
1-5 year(s)	(	13,273)
Over 5 years	(	1,315)
	(\$	39,619)

B. (a) Effective July 1, 2005, the Company and its domestic subsidiaries have established a defined contribution pension plan (the "New Plan") under the Labor Pension Act (the "Act"), covering all regular employees with R.O.C. nationality. Under the New Plan, the Company contributes monthly an amount based on 6% of the employees' monthly salaries and wages to the employees' individual pension accounts at the Bureau of Labor Insurance. The benefits accrued are paid monthly or in lump sum upon termination of employment.
(b) The pension costs under defined contribution pension plans of the company for the years ended December 31, 2019 and 2018, were \$4,374 and \$4,640, respectively.

(14) Share-based payment

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

			Contract	Vesting
Type of arrangement	Grant date	Quantity granted	period	conditions
Restricted stocks to	2017.09.29	1,400	3 years	1~3 years' service
employees		(share in thousands)

B. The Board of Directors at their meeting on May 26, 2017 adopted a resolution to issue employee restricted ordinary shares for 2,000 thousand shares and granted 1,400 thousand shares on September 29, 2017. The record date for the capital increase through issuance of employee restricted ordinary shares was set on October 2, 2017 and the subscription price is \$10 (in dollars) per share. From the day of grant, percentage of vesting are 20%, 30%, and 50%, respectively, in sequence from 1 to 3 years.
C. For the years ended December 31, 2019 and 2018, the compensation fees arising from restricted stocks to employees is \$4,983 and \$8,330, respectively.
(15) Share capital
A. As of December 31, 2019, the Company's authorized capital was \$1,200,000, consisting of 120,000 thousand shares of ordinary stock (including 18,000 thousand shares reserved for employee stock options and 400 thousand shares reserved for convertible bonds issued by the Company), and the paid-in capital was \$846,551 with a par value of \$10 (in dollars) per share. All proceeds from shares issued have been collected.
B. The Board of Directors at their meeting on May 26, 2017 adopted a resolution to issue employee restricted ordinary shares for 2,000 thousand shares with the effective date set on August 8, 2017, granted 1,400 thousand shares on September 29, 2017 and the subscription price is \$10 (in dollars) per share. The record date for capital increase of employee restricted ordinary shares was set on October 2, 2017. As at December 31, 2019, the receipts for share capital was \$14,000 and the capital surplus and others were \$8,925 and \$2,231, respectively.
C. Treasury shares
- (a) Reason for share reacquisition and movements in the number of the Company's treasury shares are as follows:

		December 31, 2019
Name of company holding		Number of shares
the shares	Reason for reacquisition	(share in thousand)	Carrying amount
The Company	To be reissued to employees	1,515	\$ 28,115

		December 31, 2018
Name of company holding		Number of shares
the shares	Reason for reacquisition	(share in thousand)	Carrying amount
The Company	To be reissued to employees	900	\$ 16,376

(b) Pursuant to the R.O.C. Securities and Exchange Act, the number of shares bought back as treasury share should not exceed 10% of the number of the Company's issued and outstanding shares and the amount bought back should not exceed the sum of retained earnings, paid-in capital in excess of par value and realised capital surplus.
(c) Pursuant to the R.O.C. Securities and Exchange Act, treasury shares should not be pledged as collateral and is not entitled to dividends before it is reissued.
(d) Pursuant to the R.O.C. Securities and Exchange Act, treasury shares should be reissued to the employees within three years from the reacquisition date and shares not reissued within the three-year period are to be retired. Treasury shares to enhance the Company's credit rating and the stockholders' equity should be retired within six months of acquisition.

(16) Capital surplus

Pursuant to the R.O.C. Company Act, capital surplus arising from paid-in capital in excess of par value on issuance of common stocks and donations can be used to cover accumulated deficit or to issue new stocks or cash to shareholders in proportion to their share ownership, provided that the Company has no accumulated deficit. Further, the R.O.C. Securities and Exchange Act requires that the amount of capital surplus to be capitalised mentioned above should not exceed 10% of the paidin capital each year. Capital surplus should not be used to cover accumulated deficit unless the legal reserve is insufficient. On June 12, 2019 and May 28, 2018, the distribution of cash dividends from capital surplus was approved by the shareholders and amounted to \$33,256 and \$30,476, respectively. On February 27, 2020, the Board of Directors proposed the distribution of cash of \$29,099 from capital surplus.

(17) Retained earnings
A. Under the Company's Articles of Incorporation, the current year's earnings shall first be used to pay all taxes and offset prior years' operating losses and 10% of the remaining amount shall be set aside as legal reserve, then set aside or reverse special reserve in accordance with related regulations. The appropriation of the remainder along with the earnings in prior years shall be proposed by the Board of Directors and resolved at the stockholders' meeting. The Company shall appropriate all the current distributable earnings, taking into consideration the Company's financials, business and operations. Dividends to shareholders can be distributed in the form of cash or shares and cash dividends to shareholders shall account for at least 30% of the total dividends to shareholders.
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. In accordance with the regulations, the Company shall set aside special reserve from the debit balance on other equity items at the balance sheet date before distributing earnings. When debit balance on other equity items is reversed subsequently, the reversed amount could be included in the distributable earnings.
D. The appropriation of 2018 and 2017 earnings was resolved by the shareholders on June 12, 2019 and May 28, 2018, respectively. Details are as follows:

		Year ended December 31, 2018		Year ended December 31, 2017
		Dividends		Dividends
		per share		per share
	Amount	(in dollars)	Amount	(in dollars)
Legal reserve	\$ 3,844		\$ 5,103
Cash dividends	33,256	\$ 0.40	45,714	\$ 0.54

On June 12, 2019 and May 28, 2018, the distribution of cash dividends from capital surplus was approved by the shareholders and amounted to \$33,256 and \$30,476, respectively. The abovementioned appropriation of earnings of 2018 and 2017 was in agreement with those amounts proposed by the Board of Directors on March 11, 2019 and February 22, 2018, respectively.

E. The details of the appropriation of 2019 earnings was proposed by the Board of Directors on February 27, 2020. Details are follows:

	Year ended December 31, 2019
		Dividends
		per share
	Amount	(in dollars)
Legal reserve	\$ 4,176
Cash dividends	38,244	\$	0.46

On February 27, 2020, the Board of Directors proposed the distribution of cash of \$29,099 from capital surplus. Abovementioned appropriation of earnings and distribution of cash from capital surplus has not been resolved by the shareholders.

F. For the information relating to employees' compensation (bonuses) and directors' and supervisors' remuneration, please refer to Note 6(23).

(18) Operating revenue

	Years ended December 31,
		2019		2018
Revenue from contracts with customers	\$	232,706	\$	250,432

Disaggregation of revenue from contracts with customers

The Company derives revenue at a point in time in the following geographical regions:

	Years ended December 31,
	2019	2018
China	\$ 160,470	\$ 156,849
Taiwan	30,374	43,759
USA	4,760	4,982
Others	37,102	44,842
	\$ 232,706	\$ 250,432

(19) Other income

	Years ended December 31,
		2019		2018
Interest income:
Interest income from bank deposits	\$	2,398	\$	1,374
Other interest income		28		342
Rent income		18,065		21,983
Dividend income		-		3,834
Other income, others		1,472		427
	\$	21,963	\$	27,960

(20) Other gains and losses

	Years ended December 31,
		2019	2018
Net currency exchange (loss) gains Net profit (loss) on financial asssets at fair	(\$	\$ 5,671)	5,944
value		9,546 (	3,443)
Other losses	(	4,583) (	4,822)
	(\$	708) (\$	2,321)
(21) Finance costs

	Years ended December 31,
	2019	2018
Interest expense	\$ 645	\$	31

(22) Expenses by nature

	Years ended December 31,
		2019		2018
Change in finished goods, work-in-process and raw materials inventory	\$	34,122	\$	35,819
Employee benefit expense		113,185		122,073
Product testing fees		22,488		25,024
Amortisation charges		3,644		3,034
Depreciation charges on property, plant and equipment
(including right-of-use assets)		5,502		3,805
Other costs and expenses		41,645		47,593
Operating costs and expenses	\$	220,586	\$	237,348
(23) Employee benefit expense
		Years ended December 31,
		2019		2018
Wages and salaries	\$	96,250	\$	104,880
Labour and health insurance fees		7,520		7,874

Pension costs	4,576	4,828
Directors' remuneration	1,807	1,385
Other personnel expenses	3,032	3,106
	\$ 113,185	\$ 122,073

As of December 31, 2019 and 2018, the number of employees of the Company were 77 and 81, respectively, and the number of directors who were not concurrently employees were 1 and 0, respectively.

For the years ended December 31, 2019 and 2018, average employee benefits were \$1,466 and \$1,490, respectively; average employee salary were \$1,266 and \$1,295, respectively. The average employee salary decreased by 2.24% year over year.

A. According to the Articles of Incorporation of the Company, a ratio of gain on current pre-tax profit before deduction of employees' compensation and directors' remuneration, after covering accumulated losses, shall be distributed as employees' compensation and directors' remuneration. The ratio shall not be lower than 8.5% for employees' compensation and shall not be higher than 2% for directors' remuneration. A company may, by a resolution adopted by a majority vote at a meeting of Board of Directors attended by two-thirds of the total number of directors, have the profit 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. Directors' remuneration shall be distributed in cash. Qualification requirements of employees, including the employees of subsidiaries of the company meeting certain specific requirements, entitled to receive employees' compensation in the form of stock or cash are set by the Board of

Directors.

B. For the years ended December 31, 2019 and 2018, employees' compensation was accrued at \$4,308 and \$4,583, respectively; directors' and supervisors' remuneration was accrued at \$1,010 and \$959, respectively. The aforementioned amounts were recognised in salary expenses.

The employees' compensation and directors' and supervisors' remuneration were estimated and accrued based on 8.5% and 2% of distributable profit of current year as of the end of reporting period. The employees' compensation and directors' and supervisors' remuneration resolved by the Board of Directors were \$4,308 and \$1,010, respectively, and the employees' compensation will be distributed in the form of cash.

Employees' compensation and directors' and supervisors' remuneration of 2018 as resolved by the meeting of the Board of Directors were in agreement with those amounts recognised in the 2018 financial statements.

Information about employees' bonus and directors' and supervisors' remuneration of the Company as approved by the meeting of Board of Directors and resolved by the shareholders will be posted in the "Market Observation Post System" at the website of the Taiwan Stock Exchange.

(24) Income tax

A. Income tax expense

(a) Components of income tax expense:

		Years ended December 31,
		2019	2018
Current tax:
Current tax on profits for the year	\$	\$ 4,450	2,330
Additional income tax imposed on
unappropriated earnings		36	216
Prior year income tax (over)
underestimation		534 (	19)
Total current tax		5,020	2,527
Deferred tax:
Origination and reversal of temporary
differences	(	1,224)	3,582
Impact of change in tax rate		( -	1,308)
Income tax expense	\$	\$ 3,796	4,801

(b) The income tax (charge)/credit relating to components of other comprehensive income is as follows:

	Years ended December 31,
		2019		2018
Remeasurement of defined benefit obligations	(\$	92)	\$	135
Impact of change in tax rate		-		99
	(\$	92)	\$	234

	Years ended December 31,
		2019		2018
Tax calculated based on profit before tax and statutory tax rate	\$	9,087	\$	8,506
Effect from items disallowed by tax regulation	(	874) (		922)
Effect from temporary difference	(	3,200) (		815)
Effect from tax credits of investment	(	1,787) (		956)
Additional tax on undistributed earnings		36		216
Prior year income tax (over) underestimation		534	(	19)
Effect from changes in tax regulation		-		99
Other		-	(	1,308)
Income tax expense	\$	3,796	\$	4,801

B. Reconciliation between income tax expense and accounting profit

C. Amounts of deferred tax assets or liabilities as a result of temporary differences are as follows:

			Year ended December 31, 2019
	Recognised in other
				Recognised		comprehensive
		January 1		in profit or loss		income	December 31
Deferred tax assets:
–Temporary differences:
Inventory retirement losses	\$	814	\$	-	\$	-	\$	814
Loss for market value decline
and obsolete and		2,794		-		-		2,794
slow-moving inventories
Unrealised exchange loss		-		1,030		-		1,030
Unused compensated absences		1,252		123		-		1,375
Other		2,661		11	(	92)		2,580
Subtotal	\$	7,521	\$	1,164	(\$	92)	\$	8,593
Deferred tax liabilities:
–Temporary differences:
Currency temporary differences	(\$	603)	\$	91	\$	-	(\$	512)
Unrealised exchange gain		31	(	31)		-		-
Subtotal	(\$	572)	\$	60	\$	-	(\$	512)
Total	\$	6,949	\$	1,224	(\$	92)	\$	8,081

						Year ended December 31, 2018
	Recognised in other
				Recognised in		comprehensive
	January 1			profit or loss		income		December 31
Deferred tax assets:
–Temporary differences:
Inventory retirement losses	\$	692	\$	122	\$	-	\$	814
Loss for market value decline
and obsolete and		3,829	(	1,035)		-		2,794
slow-moving inventories
Unrealised exchange loss		1,681	(	1,681)		-		-
Unused compensated absences		1,028		224		-		1,252
Other		2,222		205		234		2,661
Subtotal	\$	9,452	(\$	2,165)	\$	234	\$	7,521
Deferred tax liabilities:
–Temporary differences:
Currency temporary differences	(\$	512) (\$		91)	\$	-	(\$	603)
Unrealised exchange loss		-		31		-		31
Subtotal	(\$	512) (\$		60)	\$	-	(\$	572)
Total	\$	8,940	(\$	2,225)	\$	234	\$	6,949

D. The Company's income tax returns through 2017 have been assessed and approved by the Tax Authority.

E. Under the amendments to the Income Tax Act which was promulgated by the President of the Republic of China in February 7, 2018, the Company's applicable income tax rate was raised from 17% to 20% effective from January 1, 2018. The Company has assessed the impact of the change in income tax rate.

(25) Earnings per share

		Year ended December 31, 2019
		Weighted average
		number of ordinary	Earnings per
		shares outstanding	share
	Amount after tax	(share in thousands)	(in dollars)
Basic earnings per share Profit attributable to ordinary
shareholders of the parent	\$ 41,396	83,190	\$ 0.50
Diluted earnings per share Profit attributable to ordinary shareholders of the parent Assumed conversion of all dilutive	\$ 41,396	83,190
potential ordinary shares Employees' bonus Profit attributable to ordinary	-	488
shareholders of the parent plus assumed conversion of all dilutive potential ordinary shares	\$ 41,396	83,678	\$ 0.49
		Year ended December 31, 2018
		Weighted average
		number of ordinary	Earnings per
		shares outstanding	share
	Amount after tax	(share in thousands)	(in dollars)
Basic earnings per share Profit attributable to ordinary
shareholders of the parent	\$ 37,635	84,580	\$ 0.44
Diluted earnings per share Profit attributable to ordinary
shareholders of the parent Assumed conversion of all dilutive	\$ 37,635	84,580
potential ordinary shares Employees' bonus	-	434
Profit attributable to ordinary
shareholders of the parent plus assumed conversion of all dilutive	\$ 37,635	85,014	\$ 0.44
potential ordinary shares

(26) Operating leases

Prior to 2018

A. The Company leases building to others under non-cancellable operating lease agreements. These leases have terms expiring between 2016 and 2022, and all these lease agreements are not renewable at the end of the lease period. Contingent rents of \$21,983 was recognised for these leases in profit or loss for the year ended December 31, 2018. The future aggregate minimum lease payments receivable under non-cancellable operating leases are as follows

	December 31, 2018
Not later than one year	\$ 10,539
Later than one year but not later than five years	4,710
	\$ 15,249

B. The Company entered into a 20-year non-cancellable operating lease agreement with the Science Park Administration for land and office. The lease agreement is renewable at the end of the lease period at market price. The future aggregate minimum lease payments under non-cancellable operating leases are as follows:

	December 31, 2018
Not later than one year	\$ 2,138
Later than one year but not later than five years	5,346
	\$ 7,484

(27) Changes in liabilities from financing activities

			Year ended December 31, 2019
					Liabilities from
	Lease liability		Guarantee deposits		financing activities
			received	gross
At January 1	\$	65,559	\$ 2,930	\$	68,489
Changes in cash flow from
financing activities	(	1,522)	373	(	1,149)
Changes in other non-cash items		-	-		-
At December 31	\$	64,037	\$ 3,303	\$	67,340

			Year ended December 31, 2018
				Liabilities from
	Guarantee deposits			financing activities
		received		gross
At January 1	\$	2,930	\$	2,930
Changes in cash flow from
financing activities		-		-
Changes in other non-cash items		-		-
At December 31	\$	2,930	\$	2,930

7. RELATED PARTY TRANSACTIONS

Key management compensation

	Years ended December 31,
		2019		2018
Salaries and other short-term employee benefits	\$	10,108	\$	13,687

8. PLEDGED ASSETS

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

		Book value
Pledged asset	December 31, 2019		December 31, 2018	Purpose
Time deposits (shown as other non-current assets)	\$	2,752	\$ -	Performance guarantee
9. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNISED CONTRACT
COMMITMENTS

(1) Contingencies

None.

(2) Commitments

The Company entered into lease contracts for land and office, please refer to Note 6(26) for details of annual lease payments.

SIGNIFICANT DISASTER LOSS

None.

11. SIGNIFICANT EVENTS AFTER THE BALANCE SHEET DATE

None.

12. OTHER

(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, return capital to shareholders, issue new shares or sell assets to reduce debt.

(2) Financial instruments

A. Financial instruments by category

	December 31, 2019	December 31, 2018
Financial assets
Financial assets at fair value through profit or loss
Financial assets mandatorily measured at fair value
through profit or loss	\$ 30,552	\$ 41,958
Financial assets at amortised cost
Cash and cash equivalents	\$ 464,395	\$ 524,498
Notes receivable	-	64
Accounts receivable	31,440	39,994
Other receivables	4,773	5,483
Guarantee deposits paid	174	80
Other financial assets	2,752	-
	\$ 503,534	\$ 570,119
Financial liabilities
Financial liabilities at amortised cost
Notes payable	\$ 5,944	\$ 4,687
Accounts payable	4,856	5,557
Other accounts payable	28,560	28,959
Guarantee deposits received	3,303	2,930
	\$ 42,663	\$ 42,133
Lease liability	\$ 64,037	\$ -

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.
(b) Risk management is carried out by a central 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 management 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 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:

			December 31, 2019
					Sensitivity analysis
	Foreign currency amount	Exchange	Book value	Degree of variation	Effect on profit or loss	Effect on other comperehersive income
	(In thousands)	rate	(NTD)
(Foreign currency: functional currency)
Financial assets
Monetary items
USD:NTD	\$ 7,560	29.98	\$ 226,649	1%	\$ 2,266	\$ -
RMB:NTD Investments accounted for using equity method	2,073	4.31	\$ 8,935	1%	89	-
USD:NTD	\$ 3,197	29.98	\$ 95,835	1%	\$ -	\$ 958
Financial liabilities
Monetary items
USD:NTD	\$ 152	29.98	\$ 4,557	1%	\$ 46	\$ -
			December 31, 2018
					Sensitivity analysis
	Foreign currency		Book	Degree	Effect on	Effect on other
	amount	Exchange	value	of	profit or	comperehersive
	(In thousands)	rate	(NTD)	variation	loss	income
(Foreign currency: functional currency)
Financial assets
Monetary items
USD:NTD	\$ 2,421	30.72	\$ 74,361	1%	\$ 744	\$ -
RMB:NTD	1,770	4.47	7,912	1%	79	-
Investments accounted for using equity method
USD:NTD	\$ 3,193	30.72	\$ 98,061	1%	\$ -	\$ 981
Financial liabilities
Monetary items USD:NTD	\$ 158	30.72	\$ 4,853	1%	\$ 49	\$ -

ii. The total exchange (loss) gain, including realised and unrealised arising from significant foreign exchange variation on the monetary items held by the Company for the years ended December 31, 2019 and 2018, amounted to (\$5,671) and \$5,944, respectively.

Price risk

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

ii. The Company's investments in equity securities comprise shares issued by the domestic companies. The prices of equity securities would change due to the change of the future value of investee companies. If the prices of these equity securities had increased/decreased by 1% with all other variables held constant, for the years ended December 31, 2019 and 2018, other components of equity would have increased/decreased by \$306 and \$420, respectively.
(b) Credit risk
i. Credit risk refers to the risk of financial loss to the Company arising from default by the clients or counterparties of financial instruments on the contract obligations. The main factor is that counterparties could not repay in full the accounts receivable based on the agreed terms.
ii. The Company manages their credit risk taking into consideration the entire company's concern. For banks and financial institutions, only independent rated parties with a minimum rating are accepted. According to the Company's credit policy, each local entity in the Company is responsible for managing and analysing the credit risk for each of their new clients before standard payment and delivery terms and conditions are offered. Internal risk control assesses the credit quality of the customers, taking into account their financial position, past experience and other factors. Individual risk limits are set based on internal or external rating in accordance with limits set by the Board of Directors. The utilisation of credit limits is regularly monitored.
iii. The Company adopts the assumptions under IFRS 9, the default occurs when the contract payments are past due over 90 days.
iv. The Company classifies customers' accounts receivable in accordance with credit rating of customer. The Company applies the simplified approach to estimate expected credit loss under the provision matrix basis.
v. The Company used the forecast ability of Taiwan Institute of Economic Research report to adjust historical and timely information to assess the default possibility of accounts receivable. On December 31, 2019 and 2018, the provision matrix, loss rate methodology is as follows:

	Group A			Group B	Total
December 31, 2019
Expected loss rate		0.03%		3.63%~100%
Total book value	\$	22,200	\$	10,341	\$ 32,541
Loss allowance	\$	7	\$	1,094	\$ 1,101
		Group A		Group B	Total
December 31, 2018
Expected loss rate		0.03%		4.86%~100%
Total book value	\$	21,064	\$	20,131	\$ 41,195
Loss allowance	\$	6	\$	1,195	\$ 1,201

vi. Movement in relation to the Company applying the simplified approach to provide loss allowance for accounts receivable is as follows:

		Years ended December 31,
		2019	2018
At January 1	\$	1,201	\$ -
Provision for impairment		-	1,201
Reversal of impairment loss	(	100)	-
At December 31	\$	1,101	\$ 1,201

According to the above method, the allowance loss on the accounts receivable as of December 31, 2019 and 2018, should be \$601 and \$1,201, respectively, which is not significantly different from the amount of allowance loss on the current account. For the years ended December 31, 2019 and 2018, there was no impairment loss arising from customers' contracts.

(c) Liquidity risk
i. Cash flow forecasting is performed by Company treasury. Company treasury monitors rolling forecasts of the Company's liquidity requirements to ensure it has sufficient cash to meet operational needs. Such forecasting compliance with internal balance sheet ratio targets and, if applicable external regulatory or legal requirements, for example, currency restrictions.
ii. Surplus cash held by the operating entities over and above balance required for working capital management will be invested in interest bearing current accounts and time deposits, choosing instruments with appropriate maturities or sufficient liquidity to provide sufficient head-room as determined by the above-mentioned forecasts.
iii. The table below analyses the Company's non-derivative financial liabilities based on the remaining period at the balance sheet date to the contractual maturity date for nonderivative financial liabilities. The amounts disclosed in the table are the contractual undiscounted cash flows.

Non-derivative	Less		Between	Between	Over
financial liabilities:		than 1 year	1 and 2 years	2 and 5 years		5 years
December 31, 2019
Lease liability	\$	2,138	\$ 2,138	\$ 6,415	\$	64,689
Other financial liabilities		838	48	2,417		-
(shown as other non-current
liabilities)

Non-derivative	Less		Between		Between		Over
financial liabilities:	than 1 year		1 and 2 years		2 and 5 years		5 years
December 31, 2018 Other financial liabilities (shown as other non-current liabilities)	\$	2,110	\$	820	\$	-		-

(3) Fair value information

A. The different levels that the inputs to valuation techniques are used to measure fair value of financial and non-financial instruments have been defined as follows:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. A market is regarded as active where a market in which transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. The fair value of the Company's investment in listed stocks and emerging stocks is included in Level 1.
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3: Unobservable inputs for the asset or liability. The fair value of the Company's investment in equity investment without active market is included in Level 3.
B. Fair value information of investment property at cost is provided in Note 6(9).
C. The related information of financial and non-financial instruments measured at fair value by level on the basis of the nature, characteristics and risks of the assets and liabilities are as follows:
(a) The related information of nature of the assets and liabilities is as follows:

December 31, 2019	Level 1	Level 2	Level 3	Total
Assets
Recurring fair value measurements
Financial assets at fair value through profit or loss
Equity securities	\$ -	\$ -	\$ 30,552	\$ 30,552
December 31, 2018	Level 1	Level 2	Level 3	Total
Assets
Recurring fair value measurements
Financial assets at fair value through profit or loss
Equity securities	\$ 14,870	\$ -	\$ 27,088	\$ 41,958

(b)The methods and assumptions the Company used to measure fair value are as follows:
i. The instruments the Company used market quoted prices as their fair values (that is, Level 1) are listed below by characteristics:

	Listed shares	Emerging stocks
Market quoted price	Closing price	Last transaction price

ii. Except for financial instruments with active markets, the fair value of other financial instruments is measured by using valuation techniques or by reference to counterparty quotes. The fair value of financial instruments with similar terms and characteristics in substance, discounted cash flow method or other valuation methods, including calculated by applying model using market information available at the balance sheet date (i.e. yield curves on the Taipei Exchange, average commercial paper interest rates quoted from Reuters).
iii. The output of valuation model is an estimated value and the valuation technique may not be able to capture all relevant factors of the Company's financial and non-financial instruments. Therefore, the estimated value derived using valuation model is adjusted accordingly with additional inputs, for example, model risk or liquidity risk and etc. In accordance with the Company's management policies and relevant control procedures relating to the valuation models used for fair value measurement, management believes adjustment to valuation is necessary in order to reasonably represent the fair value of financial and non-financial instruments at the consolidated balance sheet. The inputs and pricing information used during valuation are carefully assessed and adjusted based on current market conditions.
iv.The Company takes into account adjustments for credit risks to measure the fair value of financial and non-financial instruments to reflect credit risk of the counterparty and the Company's credit quality.
D. For the years ended December 31, 2019 and 2018, there was no transfer between Level 1 and Level 2.
E. The following chart is the movement of Level 3 for the years ended December 31, 2019 and 2018:

	Years ended December 31,
		2019		2018
		Non-derivative		Non-derivative
		equity instrument		equity instrument
At January 1	\$	27,088	\$	34,905
Gains and losses recognised in profit or loss
Recorded as non-operating income and expenses		3,464	(	7,817)
At December 31	\$	30,552	\$	27,088

F. For the years ended December 31, 2019 and 2018, there was no transfer into or out from Level 3.
G. Finance department is in charge of valuation procedures for fair value measurements being categorised within Level 3, which is to verify independent fair value of financial instruments. Such assessment is to ensure the valuation results are reasonable by applying independent information to make results close to current market conditions, confirming the resource of information is independent, reliable and in line with other resources and represented as the exercisable price, and frequently updating inputs and making any other necessary adjustments to the fair value.
H. The following is the qualitative information of significant unobservable inputs and sensitivity analysis of changes in significant unobservable inputs to valuation model used in Level 3 fair value measurement:

	Fair value at December 31, 2019	Valuation technique	Significant unobservable input	Range (weighted average)	Relationship of inputs to fair value
Non-derivative equity instrument:
Unlisted shares	\$ 30,552	Net asset value	Not applicable	-	Not applicable
	Fair value at			Range	Relationship of
	December 31,	Valuation	Significant	(weighted	inputs to
	2018	technique	unobservable input	average)	fair value
Non-derivative equity instrument:
Unlisted shares	\$ 27,088	Net asset value	Not applicable	-	Not applicable

13. SUPPLEMENTARY DISCLOSURES

(1) Significant transactions information
A. Loans to others: None.
B. Provision of endorsements and guarantees to others: None.
C. Holding of marketable securities at the end of the period (not including subsidiaries, associates and joint ventures): Please refer to table 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 \$300 million or 20% of paid-in capital or more: None.
F. Disposal of real estate reaching \$300 million or 20% of paid-in capital or more: None.
G. Purchases or sales of goods from or to related parties reaching \$100 million or 20% of paid-in capital or more: None.
H. Receivables from related parties reaching \$100 million or 20% of paid-in capital or more: None.
I. Trading in derivative instruments undertaken during the reporting periods: None.

DAVICOM Semiconductor, Inc.

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

December 31, 2019

Table 1

Expressed in thousands of NTD

(Except as otherwise indicated)

					As of December 31, 2019
	Marketable securities	Relationship with the	General		Book value			Footnote
Securities held by	(Note 1)	securities issuer (Note 2)	ledger account	Number of shares	(Note 3)	Ownership (%)	Fair value	(Note 4)
The Company	Unitech Capital Inc.	-	Financial assets at fair value through profit or loss - non current	1,000,000	\$ 30,552	2.00%	\$ 30,552
Davicom Investment Inc.	Global Mobile Corp.	-	Financial assets at fair value through profit or loss - non current	892,458	-	0.32%	-
Davicom Investment Inc.	MTECH Corporation	-	Financial assets at fair value through profit or loss - non current	200,000	-	0.93%	-
Davicom Investment Inc.	Schroder fund	-	Financial assets at fair value through profit or loss - non current	2,900,000	28,942		28,942

Note 1: Marketable securities in the table refer to stocks, bonds, beneficiary certificates and other related derivative securities.

Note 2: Leave the column blank if the issuer of marketable securities is non-related party.

Note 3: Fill in the amount after adjusted at fair value and deducted by accumulated impairment for the marketable securities measured at fair value; fill in the acquisition cost or amortised cost deducted by accumulated impairment for the marketable securities not measured at fair value.

Note 4: The number of shares of securities and their amounts pledged as security or pledged for loans and their restrictions on use under some agreements should be stated in the footnote if the securities presented herein have such conditions.

DAVICOM Semiconductor, Inc.

Information on investees

December 31, 2019

Table 2

Expressed in thousands of NTD

(Except as otherwise indicated)

Investment income(loss)

				Initial investment amount			Shares held as at December 31, 2019		Net profit (loss) of the	recognised by the Company
			Main business	Balance	Balance				investee for the year ended	for the year ended
Investor	Investee	Location	activities	as at December 31, 2019	as at December 31, 2018	Number of shares	Ownership (%)	Book value	December 31, 2019	December 31, 2019	Footnote
The Company	TSCC Inc.	Samoa	General investment	\$ 143,224	\$ 143,224	4,400,000	100	\$ 95,835	\$ 11,270	\$ 11,270	-
The Company	Davicom Investment Inc.	Taiwan	General investment	222,000	222,000	21,200,000	100	212,029	924	924	-
The Company	Medicom Corp.	Taiwan	Designing and manufacturing of IC	17,004	17,004	496,811	99.36	330	( 18)	( 18)	-
The Company	Aidialink Corp.	Taiwan	Wireless communication machinery and equipment manufacturing industry	8,970	8,970	885,000	88.50	8,583	323	286	-
TSCC Inc.	Jubilink Ltd.	British Virgin Islands	General investment	82,725	82,725	22,775,207	100		- -	-	-

DAVICOM Semiconductor, Inc.

Information on investments in Mainland China

December 31, 2019

Table 3

Expressed in thousands of NTD

(Except as otherwise indicated)

				Accumulated amount of		Amount remitted from Taiwan to Mainland China/	Accumulated amount of		Ownership	Investment income		Accumulated amount
				remittance from		Amount remitted back	remittance from		held by	(loss) recognised		of investment
				Taiwan to		to Taiwan for the year	Taiwan to Mainland		the	by the Company	Book value of	income
				Investment Mainland China	ended December 31, 2019		China as of	Net income of	Company	for the year ended	investments in	remitted back to
Investee in	Main business		method	as of January 1,	Remitted to	Remitted back	December 31, 2019	investee as of	(direct or	December 31, 2019	Mainland China	Taiwan as of
Mainland China	activities		Paid-in capital (Note 1)	2019	Mainland China	to Taiwan	(Note 3)	December 31, 2019	indirect)	(Note 2)	as of December 31, 2019	December 31, 2019 Footnote
DAVICOM IC (SuZHou) Co.LTD		\$ 74,950	(2)	\$ 74,950		-	- \$ 74,950 (\$	1,185)	100	(\$ 1,185) \$		-	- -

Note 1: Investment methods are classified into the following three categories; fill in the number of category each case belongs to:

(1)Directly invest in a company in Mainland China.

(2)Through investing in TSCC Inc., an existing company in the third area, which then invested in the investee in Mainland China.

(3)Others.

Note 2: Investment income (loss) was recognised based on the financial statements that are audited and attested by R.O.C. parent company's CPA.

Note 3: DAVICOM IC (SuZHou) Co.LTD has completed deregistration on October 11, 2019, and the mainland investment cancellation case has been approved by the INVESTMENT COMMISSION review on January 6, 2020.

	Accumulated amount of	Investment amount approved by
	remittance from Taiwan to	the Investment Commission of the	Ceiling on investments in Mainland
	Mainland China as of	Ministry of Economic Affairs	China imposed by the Investment
Company name	December 31, 2019	(MOEA)	Commission of MOEA
The Company	\$ -	\$ -	\$ 663,281

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

(2) Information on investees

Names, locations and other information of investee companies (not including investees in Mainland China):Please refer to table 2.

(3) Information on investments in Mainland China
A. Basic information: Please refer to table 3.
B. Significant transactions, either directly or indirectly through a third area, with investee companies in the Mainland Area: None.

14. SEGMENT INFORMATION

Not application.

(Following blank)

DAVICOM SEMICONDUCTOR , INC. CASH DECEMBER 31, 2019

Expressed in thousands of NTD

Items	Summary Amount			Footnote
Petty cash		\$	60
Cash in banks
Checking accounts			1,789
Demend deposits			21,316
Foreign currency deposits	USD \$ 6,066		181,863	Exchange rate 29.98
	CHY \$ 73		314	Exchange rate 4.305
Time deposits			259,053
		\$	464,395

DAVICOM SEMICONDUCTOR , INC. ACCOUNTS RECEIVABLE, NET DECEMBER 31, 2019

Expressed in thousands of NTD

Client Name		Amount	Footnote
B	\$	9,224
A		6,736
C		5,996
D		3,108
E		2,383	The balance of each client
Others		5,094	is less than 5% of this account.
		32,541
Less: Allowance for
uncollectible accounts	(	1,101)
	\$	31,440

DAVICOM SEMICONDUCTOR , INC. INVENTORIES DECEMBER 31, 2019

Expressed in thousands of NTD

				Amount
Items	Summary	Cost		Net Realizable		Footnote
Work in process		\$	14,829	\$	12,662	The net realizable value of work in process and finished
Finished goods			23,983		18,827	is the market price.
			38,812	\$	31,489
Less: Allowance for valuation loss and
obsolescence		(	13,971)
		\$	24,841

DAVICOM SEMICONDUCTOR , INC. SALES REVENUE YEAR ENDED DECEMBER 31, 2019

Expressed in thousands of NTD

Detail List 4
Items	Quantity	Amount	Footnote
Sales revenue
Network control chipset	6,234,266 PCS	\$ 207,927
Electronic paper	1,151,589 PCS	7,760
Video Decoder	337,551 PCS	15,959
Data processor chipset	4,450 PCS	466
ESL electronic label	537 PCS	570
Others	60 PCS	24
		\$ 232,706

DAVICOM SEMICONDUCTOR , INC. OPERATING COSTS YEAR ENDED DECEMBER 31, 2019

Expressed in thousands of NTD

Items		Amount
Purchase in this period	\$	28,064
Less: Engineering experiment pick up	(	982)
Others		-
Raw materials used in this period		27,082
Manufacturing expense		40,454
Manufacturing cost		67,536
Add: Beginning work in process		22,039
Engineering experiment pick up return		23
Less: Ending work in progress	(	14,829)
Transfer to expenses	(	367)
Cost of finished goods		74,402
Add: Beginning finished goods		24,014
Purchase in this period		174
Less: Ending finished goods	(	23,983)
Engineering experiment pick up	(	31)
Operating cost	\$	74,576

DAVICOM SEMICONDUCTOR , INC. OPERATING EXPENSES FOR THE YEAR ENDED DECEMBER 31, 2019

Item	Amount
Selling expenses
Salary expenditure	\$ 19,715
Insurance expenses	1,716
Other expenses	8,331
Subtotal	29,762
General & administrative expenses
Salary expenditure	20,509
Miscellaneous expenses	1,993
Labor expenses	2,705
Travel expenses	2,354
Other expenses	13,998
Subtotal	41,559
Research and development expenses
Salary expenditure	51,348
Research experiment fees	5,685
Insurance expenses	4,023
Other expenses	13,733
Subtotal	74,789
Impairment on expected credit profit	( 100)
	\$ 146,010

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DAVICOM — Annual Report 2019

52295_rns_2019-11-19_4741a7ec-e186-41bc-a5b9-f4654684e26a.pdf

DAVICOM SEMICONDUCTOR, INC. PARENT COMPANY ONLY BALANCE SHEETS (Expressed in thousands of New Taiwan dollars)

DAVICOM SEMICONDUCTOR, INC. PARENT COMPANY ONLY BALANCE SHEETS (Expressed in thousands of New Taiwan dollars)

DAVICOM SEMICONDUCTOR, INC. PARENT COMPANY ONLY STATEMENTS OF COMPREHESIVE INCOME (Expressed in thousands of New Taiwan dollars, except earnings per share)

DAVICOM SEMICONDUCTOR, INC. PARENT COMPANY ONLY STATEMENTS OF CHANGES IN EQUITY (Expressed in thousands of New Taiwan dollars)

DAVICOM SEMICONDUCTOR, INC. PARENT COMPANY ONLY STATEMENTS OF CASH FLOWS (Expressed in thousands of New Taiwan dollars)

DAVICOM SEMICONDUCTOR, INC. PARENT COMPANY ONLY STATEMENTS OF CASH FLOWS (Expressed in thousands of New Taiwan dollars)

DAVICOM SEMICONDUCTOR, INC. NOTES TO THE PARENT COMPANY ONLY FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

1. HISTORY AND ORGANISATION

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(1) Compliance statement

(2) Basis of preparation

(5) Cash equivalents

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

(10) Inventories

(18) Notes and accounts payable

(19) Employee benefits

B. Pensions

(20) Employee share-based payment

(21) Income tax

(22) Share capital

(23) Dividends

(24) Revenue recognition

5. CRITICAL ACCOUNTING JUDGEMENTS, ESTIMATES AND KEY SOURCES OF ASSUMPTION UNCERTAINTY

Critical accounting estimates and assumptions

(2) Evaluation of inventories

6. DETAILS OF SIGNIFICANT ACCOUNTS

(1) Cash and cash equivalents

(4) Inventories

(5) Investments accounted for using equity method

(6) Property, plant and equipment

(7) Leasing arrangements-lessee

Effective 2019

(8) Leasing arrangements – lessor

Effective 2019

(9) Investment property

Building

(13) Pensions

(14) Share-based payment

(18) Operating revenue

(19) Other income

(22) Expenses by nature

(24) Income tax

A. Income tax expense

(25) Earnings per share

(26) Operating leases

Prior to 2018

(27) Changes in liabilities from financing activities

7. RELATED PARTY TRANSACTIONS

Key management compensation

8. PLEDGED ASSETS

(1) Contingencies

11. SIGNIFICANT EVENTS AFTER THE BALANCE SHEET DATE

12. OTHER

B. Financial risk management policies

Foreign exchange risk

(3) Fair value information

13. SUPPLEMENTARY DISCLOSURES

DAVICOM Semiconductor, Inc.

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

December 31, 2019

DAVICOM Semiconductor, Inc.

Information on investees

December 31, 2019

Expressed in thousands of NTD

Investment income(loss)

DAVICOM Semiconductor, Inc.

Information on investments in Mainland China

14. SEGMENT INFORMATION

(Following blank)

DAVICOM SEMICONDUCTOR , INC. CASH DECEMBER 31, 2019

DAVICOM SEMICONDUCTOR , INC. ACCOUNTS RECEIVABLE, NET DECEMBER 31, 2019

DAVICOM SEMICONDUCTOR , INC. INVENTORIES DECEMBER 31, 2019

DAVICOM SEMICONDUCTOR , INC. SALES REVENUE YEAR ENDED DECEMBER 31, 2019

DAVICOM SEMICONDUCTOR , INC. OPERATING COSTS YEAR ENDED DECEMBER 31, 2019

DAVICOM SEMICONDUCTOR , INC. OPERATING EXPENSES FOR THE YEAR ENDED DECEMBER 31, 2019

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DAVICOM Annual Report 2019