ECLAT — Annual Report 2019

Nov 11, 2019

Stock Code:1476

$\mathbf{1}$

ECLAT TEXTILE CO., LTD.

FINANCIAL STATEMENTS

With Independent Auditors' Report For the Years Ended December 31, 2019 and 2018

Address: 10F.-3, No.80, Sec. 2, Chang'an E. Rd., Taipei City Telephone: $(02)2299 - 6000$

The independent auditors' report and the accompanying financial statements are the English translation of the Chinese version prepared and used in the Republic of China. If there is any conflict between, or any difference language independent auditors' report and financial statements, the Chinese version shall prevail.

Table of Contents

Contents	Page
1. Cover Page	$\mathbf{1}$
2. Table of Contents	2
3. Independent Auditors' Report	3
4. Balance Sheets	$\overline{4}$
5. Statements of Comprehensive Income	5
6. Statements of Changes in Equity	6
7. Statements of Cash Flows	$\tau$
8. Notes to the Financial Statements
Company history (1)	8
(2) Approval date and procedures of the financial statements	8
New standards, amendments and interpretations adopted (3)	$8\sim10$
(4) Summary of significant accounting policies	$11 - 24$
(5) Significant accounting assumptions and judgments, and major sources of estimation uncertainty	24
Explanation of significant accounts (6)	$24 - 44$
(7) Related-party transactions	$44 - 47$
Pledged assets (8)	47
(9) Commitments and contingencies	47
(10) Losses due to major disasters	48
(11) Subsequent events	48
$(12)$ Other	48
(13) Other disclosures
(a) Information on significant transactions	$49 - 50$
(b) Information on investees	51
(c) Information on investment in mainland China	$51 - 52$
(14) Segment information	52
9. List of major account titles	$53 - 60$

要侯建業群合會計師事務府 KPMG

台北市11049信義路5段7號68樓(台北101大樓) 68F., TAIPEI 101 TOWER, No. 7, Sec. 5, Xinyi Road, Taipei City 11049, Taiwan (R.O.C.)

Telephone 電話 + 886 (2) 8101 6666 Fax 傳真 + 886 (2) 8101 6667 Internet 網址 kpmg.com/tw

Independent Auditors' Report

To the Board of Directors of Eclat Textile Co., Ltd.:

Opinion

We have audited the accompanying financial statements of Eclat Textile Co., Ltd. (the "Company"), which comprise the balance sheets as of December 31, 2019 and 2018, and the statements of comprehensive income, statements of changes in equity and statements of cash flows for the years then ended, and notes to the financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and its financial performance and its cash flows for the years ended December 31, 2019 and 2018 in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the International Financial Reporting Standards ("IFRSs"), International Accounting Standards ("IASs"), interpretation as well as related guidance endorsed by the Financial Supervisory Commission of the Republic of China.

Basis for Opinion

We conducted our audits in accordance with the "Regulations Governing Auditing and Certification of Financial Statements by Certified Public Accountants" and the auditing standards generally accepted in the Republic of China. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the Certified Public Accountants Code of Professional Ethics in Republic of China ("the Code"), and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis of our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements for the year ended December 31, 2019. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Key audit matter for the Company is stated as follow:

Revenue recognition and cut-off

Please refer to Note $4(n)$ for details of the accounting policies of the recognition of revenue and Note $6(m)$ operating revenues.

How the matter was addressed in our audit

Revenue recognition of the Company is the main concern of the financial report users. Therefore, the assessment of revenue recognition is the key audit items in our audit.

Our principal audit procedures included:

Testing the design and implementation of internal control over revenue recognition, inspecting the accuracy of revenue recognition, and reconciling between sales systems and general ledger; analyzing the company's main sources of revenues to evaluate whether there are major anomalies; conditions for revenue recognition and to further inspect related transaction documents to ensure the revenue is recorded in the appropriate period.

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

Management is responsible for the preparation and fair presentation of the financial statements in accordance with Regulations Governing the Preparation of Financial Reports by Securities Issuers and IFRSs, IASs, interpretation as well as related guidance endorsed by the Financial Supervisory Commission of the Republic of China, and for such internal control as management determines is necessary to enable the preparation of financial statements free from material misstatement due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance (including members of the Audit Committee) are responsible for overseeing the Company's financial reporting process.

Auditor's Responsibilities for the Audit of the Financial Statements

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

As part of an audit in accordance with auditing standards generally accepted in Republic of China, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• 1. Identify and assess the risks of material misstatement of the financial statements due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• 1. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control.
• 1. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

• 1. Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors' report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors' report. However, future events or conditions may cause the Company to cease to continue as a going concern.
• 1. Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
• 1. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the Company audit.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

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

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements for the year ended December 31, 2019 and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partners on the audit resulting in this independent auditors' report are Hui-Chih Kou and Hsin-Yi Kuo.

KPMG

Taipei, Taiwan (Republic of China) March 5, 2020

Notes to Readers

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

The independent auditors' audit report and the accompanying financial statements are the English translation of the Chinese version prepared and used in the Republic of China. If there is any conflict between, or any difference in the interpretation of the English and Chinese language independent auditors' audit report and financial statements, the Chinese version shall prevail.

	December 31, 2019	December 31, 2018			December 31, 2019	December 31, 2018
Assets	వ్ Amount	$\mathcal{N}_0$ Amount		Liabilities and Equity	è, Amount	Amount	$\sim$
Current assets:				Current liabilities:
Cash and cash equivalents (note 6 (a))	$\tilde{=}$ 3,289,321 69	$\overline{c}$ 2,397,986	2150	Notes payable	263,601 Ğ,	262,688
Notes receivable, net (including related parties) (notes 6 (b) and 7)	13,245	2,065	2170	Accounts payable	1,168,715	1,092,205	¢
Accounts receivable, net (note 6 (b))	$\overline{1}$ 3,016,695	$\tilde{=}$ 3,811,947	2180	Accounts payable to related parties (note 7)	359,240	276,118
Other receivables, net	9,196	69,429	2200	Other payables (note 6 (i))	815,999	871,006
Inventories, net (note 6 (c))	$\tilde{=}$ 3,490,168	3,498,815	2230	Current tax liabilities	591,039	728,433
Other current assets (notes $6(g)$ and $8$ )	207,213	195,836	2280	Current lease liabilities (note 6 (h))	17,229
Total current assets	$\overline{d}$ 10,025,838	49 9,976,078	2399	Other current liabilities, others	46,011	35,479
Non-current assets:				Total current liabilities	$\overline{15}$ 3,261,834	3,265,929	$\overline{5}$
Investments accounted for using equity method (note 6 (d))	21 4,516,119	$\overline{1}$ 3,860,948		Non-current liabilities:
Property, plant and equipment (notes 6 (e) and 8)	32 6,716,581	ᆕ 6,149,445	2570	Deferred tax liabilities (note 6 (j))	12,225	5,946
Right-of-use assets (note 6 (f))	44,993		2580	Non-current lease liabilities (note 6 (h))	19,726
Intangible assets	5,111	9,104	2640	Net defined benefit liability, non-current (note 6 (i))	5,132	2,016	ł
Deferred tax assets (note 6 (j))	54,080	20,381	2645	Guarantee deposits received	2,539	1,488
Other non-current assets (note $6(g)$ )	62,486	190,453		Total non-current liabilities	39,622	9,450
Total non-current assets	53 11,399,370	$\overline{5}$ 10,230,331		Total liabilities	$\frac{5}{5}$ 3,301,456	3,275,379	ᅴ
				Equity (Note 6 (k)):
			3110	Ordinary share	$\overline{13}$ 2,743,671	2,743,671	$\overline{14}$
			3200	Capital surplus	$\overline{17}$ 3,769,547	3,769,547	$\overline{5}$
				Retained earnings:
			3310	Legal reserve	$\overline{13}$ 2,756,589	2,318,613
			3320	Special reserve	6,862	104,100
			3350	Unappropriated retained earnings	$\overline{a}$ 8,936,125	8,001,961	$\frac{40}{5}$
				Total retained earnings	55 11,699,576	10,424,674	$\overline{5}$
			3490	Other equity, others	(89,042)	(6, 862)	Ч
				Total equity	$\frac{85}{2}$ 18,123,752	16,931,030	끼
Total assets	뤠 21,425,208	휇 20,206,409 $\parallel$		Total liabilities and equity	희 21,425,208	20,206,409	흷

$\begin{array}{c} 1550 \ 1600 \ 1755 \ 1780 \ 1840 \ 1840 \ \end{array}$

$\begin{array}{c} 1100 \ 1150 \ 1170 \ 1200 \ 1310 \ 1310 \ 1470 \end{array}$

(English Translation of Financial Statements Originally Issued in Chinese)
$\text{ECLAT TEXTILE CO., LTD.}$

Balance Sheets

(Expressed in Thousands of New Taiwan Dollars) December 31, 2019 and 2018

(English Translation of Financial Statements Originally Issued in Chinese) ECLAT TEXTILE CO., LTD.

Statements of Comprehensive Income

For the years ended December 31, 2019 and 2018

(Expressed in Thousands of New Taiwan Dollars, Except for Earnings Per Share)

	2019		2018
	Amount	$\%$	Amount	$\%$
4000 Operating revenue (notes $6 \text{ (m)}$ and $7$ )	\$28,074,641	100	27,558,271	100
5000 Operating costs (notes $6(e)(f)(i)(n)$ , 7 and 12)	20,555,239	73	20,250,495	73
Gross profit from operations	7,519,402	27	7,307,776	$\overline{27}$
Operating expenses (notes $6(e)(f)(i)(n)$ , 7 and 12):
6100 Selling expenses	1,300,087	5	1,302,110	5
6200 Administrative expenses	746,033	3	676,472	$\overline{c}$
6300 Research and development expenses	139,608		141,071	1
Total operating expenses	2,185,728	$\bf 8$	2,119,653	$\frac{8}{5}$
Net operating income	5,333,674	19	5,188,123	19
Non-operating income and expenses (note 6 (o)):
Other income 7010	28,575		19,539
7020 Other gains and losses, net	(15,910)		202,696
7050 Finance costs	(14,263)		(6,770)
7060 Share of profit of associates accounted for using equity method, net	68,020		50,861
Total non-operating income and expenses	66,422	$\sim$	266,326
7900 Income before income tax	5,400,096	19	5,454,449	20
7950 Less: Tax expenses (note $(i)$ )	1,100,847	$\overline{A}$	1,074,695	4
8200 Profit	4,299,249	15	4,379,754	16
8300 Other comprehensive income (loss):
8310 Components of other comprehensive income that will not be reclassified to profit or loss
8311 Losses on remeasurements of defined benefit plans (note (i))	(4,260)		(11, 831)
8349 Income tax related to components of other comprehensive income that will not be reclassified to profit or loss
Components of other comprehensive income that will not be reclassified to profit or loss	(4,260)		(11, 831)
8360 Components of other comprehensive income (loss) that will be reclassified to profit or loss
8361 Exchange differences on translation of foreign financial statements	(102, 724)		121,546
8399 Income tax related to components of other comprehensive income that will be reclassified to profit or loss (note $(i)$ )	(20, 544)		24,308
Components of other comprehensive income that will be reclassified to profit or loss	(82,180)		97,238
8300 Other comprehensive income, net of income tax	(86, 440)		85,407
8500 Total comprehensive income	4,212,809	- 15	4,465,161	16
Earnings per share (note 6(l))
Basic earnings per share (in dollars) 9750	S	15.67		15.96
9850 Diluted earnings per share (in dollars)		15.67		15.96

							Exchange
							differences on translation of
					Unappropriated		foreign
	Ordinary	Capital	Legal		retained	Total retained	financial
	share	surplus	reserve	Special reserve	earnings	earnings	ξ statements
Balance at January 1, 2018	2,743,67	3,769,437	2,013,408		6,649,830	8,663,238	104,100
Profit					4,379,754	4,379,754
Other comprehensive income					(11, 831)	(11, 831)	97,238
Total comprehensive income					4,367,923	4,367,923	97,238
Appropriation and distribution of retained earnings:
Legal reserve appropriated			305,205		(305, 205)
Special reserve appropriated				104,100	(104, 100)
Cash dividends of ordinary share					(2,606,487)	(2,606,487)
Other changes in capital surplus
Balance at December 31, 2018	2,743,67	3,769,547	2,318,613	104,100	8,001,961	10,424,674	(6, 862)
Effects of retrospective application					(2,049)	(2.049)
Balance at January 1, 2019 after adjustments	2,743,67	3,769,547	2,318,613	104,100	7,999,912	10,422,625	(6,862)
Profit					4,299,249	4,299,249
Other comprehensive income					(4,260)	(4,260)	(82, 180)
Total comprehensive income					4,294,989	4,294,989	82,180
Appropriation and distribution of retained earnings:
Legal reserve appropriated			437,976		(437,976)
Reversal of special reserve				(97,238)	97,238

$(2,049)$

$(86,440)$

$4,212,809$

4,299,249

16,928,981

$(3,018,038)$

$(3,018,038)$ 11,699,576

$(3,018,038)$

$\overline{1}$

18,123,752

$\frac{1}{2}$

$(89,042)$

$\blacksquare$

∥

8,936,125

$\parallel$

$\frac{6,862}{2}$

2,756,589

$3,769,547$

$S = 2,743,671$

Cash dividends of ordinary share Balance at December 31, 2019

$110$ $(2,606,487)$

16,931,030

85,407

$4,465,161$

$\frac{1}{2}$

15,072,246

al equity

Other equity

Retained earnings

4,379,754

(English Translation of Financial Statements Originally Issued in Chinese)
ECLAT TEXTILE CO., LTD.

Statements of Changes in Equity

For the years ended December 31, 2019 and 2018

(Expressed in Thousands of New Taiwan Dollars)

$\ddot{\circ}$

(English Translation of Financial Statements Originally Issued in Chinese) ECLAT TEXTILE CO., LTD.

Statements of Cash Flows

For the years ended December 31, 2019 and 2018

(Expressed in Thousands of New Taiwan Dollars)

		2019	2018
Cash flows from (used in) operating activities:
Profit before tax	\$.	5,400,096	5,454,449
Adjustments:
Adjustments to reconcile profit:
Depreciation expense		275,190	261,115
Amortization expense		6,006 61,378	10,404
Expected credit loss		14,263	6,770
Interest expense Interest income		(18, 867)	(9, 831)
Share of profit of associates accounted for using equity method		(68,020)	(50, 861)
Loss on disposal of property, plant and equipment		6,530	8,419
Gain on disposal of investments		(217)	$\blacksquare$
Total adjustments to reconcile profit		276,263	226,016
Changes in operating assets and liabilities:
Decrease (increase) in notes and accounts receivable		784,072	(403, 118)
Decrease in inventories		8,647	219,936
Increase in other current assets		(11, 975)	(53, 977)
Increase (decrease) in notes and accounts payable		160,545	(269, 553)
(Decrease) increase in other payables		(48, 932)	120,906
Increase (decrease) in other current liabilities		10,532	(20, 137)
Decrease in net defined benefit liability		(1, 144)	(137, 122)
Total changes in operating assets and liabilities		901,745	(543,065)
Total adjustments		1,178,008	(317,049)
Cash inflow generated from operations		6,578,104	5,137,400
Interest received		19,414	6,478
Interest paid		(13, 563)	(6,770)
Income taxes paid		(1, 258, 786)	(725,300)
Net cash flows from operating activities		5,325,169	4,411,808
Cash flows from (used in) investing activities:
Acquisition of investments accounted for using equity method		(761, 190)
Proceeds from disposal of associate		12,459
Proceeds from capital reduction of investments accounted for using equity method		57,322
Acquisition of property, plant and equipment		(653, 695)	(227, 838)
Proceeds from disposal of property, plant and equipment		557	729
(Increase) decrease in refundable deposits		(1)	1,707
Acquisition of intangible assets		(2,013)	(3,795)
Increase in prepayments for business facilities		(38, 757)	(199, 234) 2,038
Dividends received		(1,385,318)	(426,393)
Net cash flows used in investing activities Cash flows from (used in) financing activities:
Payment of lease liabilities		(30, 478)
Cash dividends paid		(3,018,038)	(2,606,487)
Net cash flows used in financing activities		(3,048,516)	(2,606,487)
Net increase in cash and cash equivalents		891,335	1,378,928
Cash and cash equivalents at beginning of period		2,397,986	1,019,058
Cash and cash equivalents at end of period		3,289,321	2,397,986

(English Translation of Financial Statements Originally Issued in Chinese) ECLAT TEXTILE CO., LTD.

Notes to the Financial Statements

For the years ended December 31, 2019 and 2018

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

(1) Company history

Eclat Textile Co., Ltd. (the "Company") was incorporated in November 1977. The Company has established the Tashan Plant, Miao-li Plant and Hsichou Plant in Miao-li, and Dayuan Plant in Taoyuan. It has mainly been involved in the manufacturing and marketing of knitwear.

(2) Approval date and procedures of the financial statements

On March 05, 2020, the board of directors approved and noted the financial statements as of and for the year ended December 31, 2019.

(3) New standards, amendments and interpretations adopted:

The impact of the International Financial Reporting Standards ("IFRSs") endorsed by the Financial $(a)$ Supervisory Commission, R.O.C. ("FSC") which have already been adopted.

The following new standards, interpretations and amendments have been endorsed by the FSC and are effective for annual periods beginning on or after January 1, 2019.

New, Revised or Amended Standards and Interpretations	LITECUVE GATE per IASB
IFRS 16 "Leases"	January 1, 2019
IFRIC 23 "Uncertainty over Income Tax Treatments"	January 1, 2019
Amendments to IFRS 9 "Prepayment features with negative compensation"	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
Annual Improvements to IFRS Standards 2015-2017 Cycle	January 1, 2019

Except for the following items, the Company believes that the adoption of the above IFRSs would not have any material impact on its financial statements. The extent and impact of signification changes are as follows:

IFRS 16"Leases" $(i)$

IFRS 16 replaces the existing leases guidance, including IAS 17 Leases, IFRIC 4 Determining whether an Arrangement contains a Lease, SIC-15 Operating Leases - Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease.

The Company applied IFRS 16 using the modified retrospective approach, under which the cumulative effect of initial application is recognized in retained earnings on January 1, 2019. The details of the changes in accounting policies are disclosed below:

Definition of a lease $1)$

Previously, the Company determined at contract inception whether an arrangement is or contains a lease under IFRIC 4. Under IFRS 16, the Company assesses whether a contract is or contains a lease based on the definition of a lease, as explained in Note $4(k)$ .

On transition to IFRS 16, the Company elected to apply the practical expedient to grandfather the assessment of which transactions are leases. The Company applied IFRS 16 only to contracts that were previously identified as leases. Contracts that were not identified as leases under IAS 17 and IFRIC 4 were not reassessed for whether there is a lease. Therefore, the definition of a lease under IFRS 16 was applied only to contracts entered into or changed on or after January 1, 2019.

$2)$ As a lessee

As a lessee, the Company previously classified leases as operating or finance leases based on its assessment of whether the lease transferred significantly all of the risks and rewards incidental to ownership of the underlying asset to the Company. Under IFRS 16, the Company recognizes right-of-use assets and lease liabilities for most leases $-$ i.e. these leases are on-balance sheet.

Leases classified as operating leases under IAS 17

At transition, lease liabilities were measured at the present value of the remaining lease payments, discounted at the Company's incremental borrowing rate as at January 1, 2019. Right-of-use assets are measured at either:

• their carrying amount as if IFRS 16 had been applied since the commencement date, discounted using the lessee's incremental borrowing rate at the date of initial application – the Company applied this approach to its largest property leases; or
• an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments $-$ the Company applied this approach to all other lease.

In addition, the Company used the following practical expedients when applying IFRS 16 to leases.

Applied a single discount rate to a portfolio of leases with similar characteristics.

• Excluded initial direct costs from measuring the right-of-use asset at the date of initial application.
• Used hindsight when determining the lease term if the contract contains options to extend or terminate the lease.
• Impacts on financial statements $3)$

On transition to IFRS 16, the Company recognized additional \$57,936 thousands of rightof-use assets, \$58,405 thousands of lease liabilities and \$1,580 of investments accounted for using equity method, recognizing the difference in retained earnings. When measuring lease liabilities, the Company discounted lease payments using its incremental borrowing rate at January 1, 2019. The weighted-average rate applied is 1.095%.

The impact of IFRS endorsed by FSC but not yet effective $(b)$

The following new standards, interpretations and amendments have been endorsed by the FSC and are effective for annual periods beginning on or after January 1, 2020 in accordance with Ruling No. 1080323028 issued by the FSC on July 29, 2019:

New, Revised or Amended Standards and Interpretations	Effective date per IASB
Amendments to IFRS 3 "Definition of a Business"	January 1, 2020
Amendments to IFRS 9, IAS39 and IFRS7 "Interest Rate Benchmark Reform"	January 1, 2020
Amendments to IAS 1 and IAS 8 "Definition of Material"	January 1, 2020

The Company assesses that the adoption of the abovementioned standards would not have any material impact on its financial statements.

$(c)$ The impact of IFRS issued by IASB but not yet endorsed by the FSC

As of the date, the following IFRSs that have been issued by the International Accounting Standards Board (IASB), but have yet to be endorsed by the FSC:

	Effective date
New, Revised or Amended Standards and Interpretations	per IASB
Amendments to IFRS 10 and IAS 28 "Sale or Contribution of Assets Between an Investor and Its Associate or Joint Venture"	Effective date to be determined by IASB
IFRS 17 "Insurance Contracts"	January 1, 2021
Amendments to IAS 1 "Classification of Liabilities as Current or Non-current"	January 1, 2022

The Company is evaluating the impact of its initial adoption of the abovementioned standards or interpretations on its financial position and financial performance. The results thereof will be disclosed when the Company completes its evaluation.

$(4)$ Summary of significant accounting policies:

The significant accounting policies presented in the financial statements are summarized as follows. Except for Note $3$ and $4(k)$ , the following accounting policies were applied consistently through all reporting periods presented in the financial statements.

Statement of compliance $(a)$

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

• Basis of preparation $(b)$
• $(i)$ Basis of measurement

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

Functional and presentation currency $(ii)$

The functional currency of the Company is determined based on the primary economic environment in which the entities operate. The financial statements are presented in New Taiwan Dollar, which is the Company's functional currency. All financial information presented in New Taiwan Dollar has been rounded to the nearest thousand.

• Foreign currency $(c)$
• Foreign currency transaction $(i)$

Transactions in foreign currencies are translated into the respective functional currencies of the Company at the exchange rates at the dates of the transactions. At the end of each subsequent reporting period, monetary items denominated in foreign currencies are translated into the functional currencies using the exchange rate at that date. Non-monetary items denominated in foreign currencies that are measured at fair value are translated into the functional currencies using the exchange rate at the date the fair value was determined. Non-monetary items denominated in foreign currencies that are measured based on historical cost are translated using the exchange rate at the date of transaction.

Foreign operations $(ii)$

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated into the Company's functional currency at the exchange rates at the reporting date. The income and expenses of foreign operation are translated into the Company's functional currency at the average rate. Foreign currency differences are recognized in other comprehensive income, and presented in the translation reserve in equity.

When a foreign operation is disposed of such that control, significant influence or joint control is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal. When the Company disposes any part of its interest in a subsidiary that includes a foreign operation while retaining control, the relevant proportion of the cumulative amount is reattributed to non-controlling interest. When the Company disposes only part of investment in an associate of joint venture that includes a foreign operation while retaining significant or joint control, the relevant proportion of the cumulative amount is reclassified to profit or loss.

When the settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor likely in the foreseeable future, the foreign currency exchange gains and losses arising from such items are considered to form part of a net investment in the foreign operation and are recognized in other comprehensive income, and presented in the translation reserve in equity.

$(d)$ Classification of current and non-current assets and liabilities

An asset is classified as current under one of the following criteria, and all other assets are classified as non-current.

• $(i)$ It is expected to be realized, or intends to sell or consume it, in its normal operating cycle;
• $(ii)$ The Company holds the asset primarily for the purpose of trading:
• (iii) It is expected to be realized within twelve months after the reporting date; or
• (iv) The asset is cash or cash equivalent unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.

A liability is classified as current under one of the following criteria, and all other liabilities are classified as non-current.

• $(i)$ It is expected to be settled in its normal operating cycle;
• $(ii)$ The Company holds the liability primarily for the purpose of trading;
• (iii) The liability is due to be settled within twelve months after the reporting period; or
• The Company does not have an unconditional right to defer settlement of the liability for at $(iv)$ least twelve months after the reporting period. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification
• Cash and cash equivalents $(e)$

Cash comprises cash on hand and demand deposits. Cash equivalents are 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. Term deposits that meet the above requirements and are held for the purpose of meeting short-term cash commitments rather than for investment or other purposes should be recognized as cash equivalents.

$(f)$ Financial instruments

All other financial assets and financial liabilities are initially recognized when the Company becomes a party to the contractual provisions of the instrument. A trade receivable without a significant financing component is initially measured at the transaction price.

$(i)$ Financial assets

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

On initial recognition, a financial asset is classified as measured at amortized cost. Financial assets are not reclassified subsequent to their initial recognition unless the Company changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model.

$\overline{1}$ Financial assets measured at amortized cost

A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated as at FVTPL:

• it is held within a business model whose objective is to hold assets to collect contractual cash flows; and
• its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

These assets are subsequently measured at amortized cost, which is the amount at which the financial asset is measured at initial recognition, plus/minus, the cumulative amortization using the effective interest method, adjusted for any loss allowance. Interest income, foreign exchange gains and losses, as well as impairment, are recognized in profit or loss. Any gain or loss on derecognition is recognized in profit or loss.

$2)$ Impairment of financial assets

The Company recognizes loss allowances for expected credit losses (ECL) on financial assets measured at amortized cost (including cash and cash equivalents, notes and accounts receivable, other receivables, refundable deposits and other financial assets).

The Company measures loss allowances at an amount equal to lifetime expected credit loss (ECL), except for the following which are measured as 12-month ECL:

bank balances for which credit risk (i.e. the risk of default occurring over the expected life of the financial instrument) has not increased significantly since initial recognition.

Loss allowance for accounts receivable is always measured at an amount equal to lifetime ECL.

Lifetime ECLs are the ECLs that result from all possible default events over the expected life of a financial instrument.

12-month ECLs are the portion of ECLs that result from default events that are possible within the 12 month after the reporting date (or a shorter period if the expected life of the instrument is less than 12 months).

The maximum period considered when estimating ECLs is the maximum contractual period over which the Company is exposed to credit risk.

When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECL, the Company considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis based on the Company's historical experience and informed credit assessment as well as forwardlooking information.

The Company assumes that the credit risk on a financial asset has increased significantly if it is more than 60 days past due.

The Company considers a financial asset to be in default when the financial asset is more than 180 days past due.

ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e the difference between the cash flows due to the Company in accordance with the contract and the cash flows that the Company expects to receive). ECLs are discounted at the effective interest rate of the financial asset.

At each reporting date, the Company assesses whether financial assets carried at amortized cost and debt securities at FVOCI are credit-impaired. A financial asset is ' credit-impaired' when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. Evidence that a financial assets is credit-impaired includes the following observable data:

• · significant financial difficulty of the borrower or issuer;
• a breach of contract such as a default past due; or
• $\cdot$ it is probable that the borrower will enter bankruptcy or other financial reorganization;

Loss allowances for financial assets measured at amortized cost are deducted from the gross carrying amount of the assets.

The gross carrying amount of a financial asset is written off when the Company has no reasonable expectations of recovering a financial asset in its entirety or a portion thereof. For corporate customers, the Company individually makes an assessment with respect to the timing and amount of write-off based on whether there is a reasonable expectation of recovery. The Company expects no significant recovery from the amount written off. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Company's procedures for recovery of amounts due.

$3)$ Derecognition of financial assets

The Company derecognizes a financial asset when the contractual rights to the cash flows from the financial asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred or in which the Company neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset.

The Company enters into transactions whereby it transfers assets recognized in its statement of balance sheet, but retains either all or substantially all of the risks and rewards of the transferred assets. In these cases, the transferred assets are not derecognized.

• Financial liabilities $(ii)$
• Financial liabilities $1)$

Financial liabilities are classified as measured at amortized cost.

Subsequently measured at amortized cost using the effective interest method. Interest expense and foreign exchange gains and losses are recognized in profit or loss. Any gain or loss on derecognition is also recognized in profit or loss.

Derecognition of financial liabilities $2)$

The Company derecognizes a financial liability when its contractual obligations are discharged or cancelled, or expire.

On derecognition of a financial liability, the difference between the carrying amount of a financial liability extinguished and the consideration paid (including any non-cash assets transferred or liabilities assumed) is recognized in profit or loss.

Offsetting of financial assets and liabilities $3)$

Financial assets and financial liabilities are offset and the net amount presented in the statement of balance sheet, and only when, the Company currently has a legally enforceable right to set off the amounts and it intends either to settle them on a net basis or to realize the asset and settle the liability simultaneously.

Inventories $\left( \varrho \right)$

Inventories are necessary expenditures and charges for bringing the inventory to a salable and useable condition and location. In the case of manufactured overhead, cost includes an appropriate share of production overheads based on normal operating capacity of labor hours or machine hours and is allocated to finish goods and work-in-progress. Inventories are measured at the lower of cost and net realizable value subsequently and the cost of inventories is calculated using the monthly weighted-average method. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

Investment in associates $(h)$

Associates are those entities in which the Company has significant influence, but not control, over the financial and operating policies.

Investments in associates are accounted for using the equity method and are recognized initially at cost. The cost of the investment includes transaction costs. The carrying amount of the investment in associates includes goodwill arising from the acquisition less any accumulated impairment losses.

The Company's financial statements include the Company's share of the profit or loss and other comprehensive income of equity accounted investees, after adjustments to align the accounting policies with those of the Company, from the date that significant influence commences until the date that significant influence ceases.

Gains and losses resulting from transactions between the Company and an associate are recognized only to the extent of unrelated Company's interests in the associate.

When the Company's share of losses of an associate equals or exceeds its interests in an associate, it discontinues recognizing its share of further losses. After the recognized interest is reduced to zero, additional losses are provided for, and a liability is recognized, only to the extent that the Company has incurred legal or constructive obligations or made payments on behalf of the associate.

$(i)$ Investment in subsidiaries

In preparing the financial statements, the Company appraises its investees by using equity method. Under equity method, current income and other comprehensive income from financial statement is the same as the consolidated income and other comprehensive income attributable to parent. Shareholders' equity is the same as the consolidated shareholders' equity.

The Company treated the changes of subsidiaries' equity as transactions among owners.

• $(i)$ Property, plant and equipment
• $(i)$ Recognition and measurement

Items of property, plant and equipment are measured at cost, which includes capitalized borrowing cost, less accumulated depreciation and any accumulated impairment losses.

If significant parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

Any gain or loss on disposal of an item of property, plant and equipment is recognized in profit or loss.

(ii) Subsequent cost

Subsequent expenditure is capitalized only if it is probable that the future economic benefits associated with the expenditure will flow to the Company.

(iii) Depreciation

Depreciation is calculated on the cost of an asset less its residual value and is recognized in profit or loss on a straight-line basis over the estimated useful lives of each component of an item of property, plant and equipment.

Land is not depreciated.

The estimated useful lives of property, plant and equipment for current and comparative periods are as follows:

• Buildings: 5 to 60 years. $\left( \right)$
• Machinery and equipment: 2 to 25 years. $2)$
• Transportation equipment: 3 to 8 years. $3)$
• Office equipment: 5 to 9 years. 4)
• Miscellaneous equipment: 3 to 15 years. 5)

Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.

$(k)$ Leases

Applicable from January 1, 2019

$(i)$ Identifying a lease

At inception of a contract, the Company assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Company assesses whether:

the contract involves the use of an identified asset – this may be specified explicitly or $1)$ implicitly, and should be physically distinct or represent substantially all of the capacity of a physically distinct asset. If the supplier has a substantive substitution right, then the asset is not identified; and

• $(2)$ the Company has the right to obtain substantially all of the economic benefits from use of the asset throughout the period of use; and
• $3)$ the Company has the right to direct the use of the asset throughout the period of use only if either:
• the Company has the right to direct how and for what purpose the asset is used throughout the period of use; or
• the relevant decisions about how and for what purpose the asset is used are predetermined and:
• the Company has the right to operate the asset throughout the period of use, without the supplier having the right to change those operating instructions; or
• the Company designed the asset in a way that predetermines how and for what purpose it will be used throughout the period of use.
• (ii) As a leasee

The Company recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be reliably determined, the Company's incremental borrowing rate. Generally, the Company uses its incremental borrowing rate as the discount rate.

Lease payments included in the measurement of the lease liability comprise the following:

• fixed payments, including in-substance fixed payments;
• variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;
• amounts expected to be payable under a residual value guarantee; and
• payments for purchase or termination options that are reasonably certain to be exercised.

The lease liability is measured at amortized cost using the effective interest method. It is remeasured when:

• there is a change in future lease payments arising from the change in an index or rate; or
• there is a change in the Company's estimate of the amount expected to be payable under a residual value guarantee; or
• there is a change in the lease term resulting from a change of its assessment on whether it will exercise an option to purchase the underlying asset, or
• there is a change of its assessment on whether it will exercise an extension or termination option; or
• there is any lease modifications
• $(iii)$ As a lessor

When the Company acts as a lessor, it determines at lease commencement whether each lease is a finance lease or an operating lease. To classify each lease, the Company makes an overall assessment of whether the lease transfers to the lessee substantially all of the risks and rewards of ownership incidental to ownership of the underlying asset. If this is the case, then the lease is a finance lease; if not, then the lease is an operating lease. As part of this assessment, the Company considers certain indicators such as whether the lease is for the major part of the economic life of the asset.

The lessor recognizes a finance lease receivable at an amount equal to its net investment in the lease. Initial direct costs, such as lessors to negotiate and arrange a lease, are included in the measurement of the net investment. The interest income is recognized over the lease term based on a pattern reflecting a constant periodic rate of return on the net investment in the lease. The Company recognizes lease payments received under operating leases as income on a straight-line basis over the lease term as part of 'other income'.

Applicable before January 1, 2019

$(i)$ Lessor

A finance lease asset is recognized on a net basis as lease receivable. Initial direct costs incurred in negotiating and arranging an operating lease are added to the net investment in the leased asset. The finance income is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the receivable.

Lease income from an operating lease is recognized in income on a straight-line basis over the lease term. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset, and recognized as an expense over the lease term on the same basis as the lease income. Incentives granted to the lessee to enter into the operating lease are spread over the lease term on a straight-line basis so that the lease income received is reduced accordingly.

Contingent rents are recognized as income in the period when the lease adjustments are confirmed.

(ii) Lessee

Leases in which the Company assumes substantially all of the risks and rewards of ownership are classified as finance leases. On initial recognition, the lease asset is measured at an amount equal to the lower of its fair value or the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to the asset.

Minimum lease payments made under finance leases are apportioned between the finance cost and the reduction of the outstanding liability. The finance cost is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.

Other leases are operating leases and are not recognized in the Company's balance sheets.

Payments made under operating leases (excluding insurance and maintenance expenses) are recognized in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognized as an integral part of the total lease expense, over the term of the lease.

Contingent rent is recognized as expense in the period in which it is incurred. Recognition of income arising from a sale and leaseback transaction depends upon the type of lease involved. If a sale and leaseback transaction results in a finance lease, any excess of sales proceeds over the carrying amount is deferred and amortized over the lease term. If a sale and leaseback transaction results in an operating lease, and it is clear that the transaction is established at fair value, any profit or loss is recognized immediately. If the sales price is below fair value, any profit or loss shall be recognized immediately except that if the loss is compensated for by future lease payments at below-market price, it is deferred and amortized in proportion to the lease payments over the period for which the asset is expected to be used. If the sales price is above fair value, the excess over fair value is deferred and amortized over the period for which the asset is expected to be used.

For operating leases, if the fair value at the time of a sale and leaseback transaction is less than the carrying amount of the asset, a loss equal to the amount of the difference between the carrying amount and the fair value shall be recognized immediately.

Intangible assets $(1)$

$(i)$ Recognition and measurement

Other intangible assets are acquired by the Company and have finite useful lives are measured at cost less accumulated amortization.

Subsequent expenditure $(ii)$

Subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditures are recognized in profit or loss as incurred.

(iii) Amortization

Amortization is calculated over the cost of the asset, less its residual value, and is recognized in profit or loss on a straight-line basis over the estimated useful lives of intangible assets from the date that they are available for use.

The estimated useful lives for current and comparative periods are as follows:

Software $: 2$ to 3 years.

Amortization methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.

(m) Impairment of non-financial assets

At each reporting date, the Company reviews the carrying amounts of its non-financial assets (other than inventories and deferred tax assets) to determine whether there is any indication of impairment. If any such indication exists, then the asset's recoverable amount is estimated.

For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGU_s.

The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. Value in use is based on the estimated future cash flows, discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU.

An impairment loss is recognized if the carrying amount of an asset or CGU exceeds its recoverable amount.

Impairment losses are recognized in profit or loss. They are allocated first to reduce the carrying amount of any goodwill allocated to the CGU, and then to reduce the carrying amounts of the other assets in the CGU on a pro rata basis.

• Revenue recognition $(n)$
• Revenue from contracts with customers $(i)$

Revenue is measured based on the consideration to which the Company expects to be entitled in exchange for transferring goods or services to a customer. The Company recognizes revenue when it satisfies a performance obligation by transferring control of a good or a service to a customer.

The Company manufactures and sells elastic fabrics and clothing. The Company recognizes revenue when control of the products has transferred, being when the products are delivered to the customer, the customer has full discretion over the channel and price to sell the products, and there is no unfulfilled obligation that could affect the customer's acceptance of the products. Delivery occurs when the products have been shipped to the specific location, the risks of obsolescence and loss have been transferred to the customer, and either the customer has accepted the products in accordance with the sales contract, the acceptance provisions have lapsed, or the Company has objective evidence that all criteria for acceptance have been satisfied.

A receivable is recognized when the goods are delivered as this is the point in time that the Company has a right to an amount of consideration that is unconditional.

• Employee benefits $(0)$
• $(i)$ Defined contribution plans

Obligations for contributions to defined contribution plan are expensed as the related service is provided.

Defined benefit plans $(ii)$

The Company's net obligation in respect of defined benefit plans is calculated separately for each the plan by estimating the amount of future benefit that employees have earned in the current and prior periods, discounting that amount and deducting the fair value of any plan assets.

The calculation of defined benefit obligations is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a potential asset for the Company, the recognized asset is limited to the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. To calculate the present value of economic benefits, consideration is given to any applicable minimum funding requirements.

Remeasurements of the net defined benefit liability, which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognized immediately in other comprehensive income, and accumulated in retained earnings within equity. The Company determines the net interest expense (income) on the net defined benefit liability (asset) for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the then-net defined benefit liability (asset). Net interest expense and other expenses related to defined benefit plans are recognized in profit or loss.

When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service or the gain or loss on curtailment is recognized immediately in profit or loss. The Company recognizes gains and losses on the settlement of a defined benefit plan when the settlement occurs.

(iii) Short-term employee benefits

Short-term employee benefits are expensed as the related service is provided.

A liability is recognized for the amount expected to be paid if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

Income taxes $(p)$

Income taxes comprise current taxes and deferred taxes. Except for expenses related to business combination or recognized directly in equity or other comprehensive income, all current and deferred taxes are recognized in profit or loss.

Current taxes comprise the expected tax payables or receivables on the taxable profits for the year and any adjustment to the tax payable or receivable in respect of previous years. The amount of current tax payables or receivables are the best estimate of the tax amount expected to be paid or received that measured using tax rates enacted or substantively enacted at the reporting date.

Deferred taxes arise due to temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and their respective tax bases. Deferred taxes are recognized except for the following:

• $(i)$ temporary differences on the initial recognition of assets and liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profits (losses) at the time of the transaction:
• temporary differences related to investments in subsidiaries and associates that the Company is $(ii)$ able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future; and
• (iii) taxable temporary differences arising on the initial recognition of goodwill.

Deferred taxes are measured at tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted at the reporting date.

Deferred tax assets and liabilities are offset if the following criteria are met:

• the Company has a legally enforceable right to set off current tax assets against current tax $(i)$ liabilities: and
• the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same $(ii)$ taxation authority on either:
• $1)$ the same taxable entity; or
• $2)$ different taxable entities which intend to settle current tax assets and liabilities on a net basis, or to realize the assets and liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered.

Deferred tax assets are recognized for the carry forward of unused tax losses, unused tax credits, and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefits will be realized; such reductions are reversed when the probability of future taxable profits improves.

Earnings per share $(q)$

The Company reports the basic earnings per share and the diluted earnings per share. The basic earnings per share are calculated based on the profit attributable to the ordinary shareholder of the Company divided by weighted average number of ordinary shares outstanding. The diluted earnings per share is calculated based on the profit attributable to ordinary shareholders of the Company, divided by weighted average number of ordinary shares outstanding after adjustment for the effects of all dilutive potential ordinary shares.

$(r)$ Operating segments

The Company has already disclosed the segment information in the consolidated financial statement; therefore, the Company need not disclose the segment information again in the financial statement.

$(5)$ Significant accounting assumptions and judgments, and major sources of estimation uncertainty:

The preparation of the financial statements in conformity with the Regulations and the IFRSs endorsed by the FSC requires management to make judgments, estimates, and assumptions that affect the application of the accounting policies and the reported amount of assets, liabilities, income, and expenses. Actual results may differ from these estimates.

The management continues to monitor the accounting estimates and assumptions. The management recognizes any changes in accounting estimates during the period and the impact of those changes in accounting estimates in the next period.

(6) Explanation of significant accounts:

(a) Cash and cash equivalents

	December 31, 2019	December 31, 2018
Cash	2,732	2,413
Bank deposits	1,994,689	1,595,520
Term deposits	1,291,900	800,053
Cash and cash equivalents	3,289,321	2,397,986

Please refer to note 6 (p) for the exchange risk, interest rate risk, and sensitivity analysis of the financial assets and liabilities of the Company.

(b) Notes receivable and accounts receivable

	December 31, 2019	December 31, 2018
Notes receivable—operating activities	13,245	2,065
Accounts receivable	3,040,781	3,836,033
Less: allowance for doubtful accounts	(24,086)	(24, 086)
Total	3,029,940	3,814,012

The Company applies the simplified approach to provide for its expected credit losses, i.e. the use of lifetime expected loss provision for all receivables. To measure the expected credit losses, notes and accounts receivable have been grouped based on shared credit risk characteristics and the days past due, as well as incorporated forward looking information, including the macroeconomic and related industrial information.

The loss allowance provisions were determined as follows:

		December 31, 2019
	Gross carrying amount	Weighted- average loss rate	Loss allowance provision
Current	\$ 2,985,433	0.42%	12,335
Within 30 days past due	60,736	16.14%	9,804
$31 - 120$ days past due	7,233	18.30%	1,323
Over 121 days past due	624	100.00%	624
	3,054,026		24,086

		December 31, 2018
	Gross carrying amount	Weighted- average loss rate	Loss allowance provision
Current	\$ 3,716,187	0.49%	18,067
Within 30 days past due	117,174	3.22%	3,771
$31$ ~120 days past due	4,223	41.05%	1,734
Over 121 days past due	514	100.00%	514
	3,838,098		24,086

The movement in the allowance for notes and accounts receivable was as follows:

	For the years ended December 31
	2019	2018
Beginning balance (Ending balance)	24,086	24,086

None of notes receivable and accounts receivable held by the Company were pledged, collateralized or discounted as of December 31, 2019 and 2018.

Accounts receivable of the Company have been insured accounts receivable credit risk. The insured amounts are \$154,100 thousand and \$514,914 thousand as of December 31, 2019 and 2018. Guaranteed fraction is 90% of reviewed credit of policyholder; the recoverable amount of the insurance is considered when deciding impairment amount of accounts receivable.

The Company has signed accounts receivable factoring contracts without recourse with financial institutions. As stated in the contract, the Company doesn't have to bear the risks of uncollectable accounts receivables but the loss incurred due to commercial arguments, and hence meets the criteria of derecognition of financial assets. Factored accounts receivable which are not due as of the report date are as follows:

		December 31, 2019
Counterparty	Factored amount	Acceptable advances	Amount collected in advance	Interest rate	Pledged items
E.sun Bank	774,381	574,719	774,381	$2.42\%~2.57\%$	None
SHANGHAI Bank	182,833 S	653,609	182,833	$2.27\%~2.38\%$	None
		December 31, 2018
Counterparty	Factored amount	Acceptable advances	Amount collected in advance	Interest rate	Pledged items

2.87%~3.44%

240,600

None

1.265.971

(c) Inventories

E.sun Bank

240,600

\$

	December 31, 2019	December 31, 2018
Raw materials	\$ 2,093,187	2,116,561
Supplies	549,175	512,323
Work in progress	656,412	733,524
Finished goods	191,394	136,407
	3,490,168	3,498,815

There was no recognized loss of inventory price due to write-downs from inventories to net realizable value for 2019 and 2018.

None of inventories held by the Company were pledged as of December 31, 2019 and 2018.

(d) Investment under equity method

A summary of the Company's financial information for equity-accounted investees at the reporting date is as follows:

	December 31, 2019	December 31, 2018
Subsidiaries	4,516,119	3,846,176
Associates	$\,$	14.772
	4,516,119	3,860,948

• $(i)$ Subsidiaries: Please refer to consolidated financial statements.
• (ii) None of investment under equity method held by the Company was pledged as of December 31, 2019 and 2018.

Property, plant and equipment $(e)$

The cost and depreciation of the property, plant and equipment of the Company are as follows:

Cost:		Land	Buildings	Machinery and equipment	Transportation equipment	Office equipment	Miscellaneous equipment	Construction in progress	Total
Balance at January 1, 2019	S.	4,790,091	1,192,721	1,841,173	43,697	113,802	208,846	202,206	8,392,536
Additions			81,807	86,260	2,734	3,283	11,097	468,514	653,695
Disposals				(75, 146)		(1,623)	(11,901)		(88, 670)
Reclassification			187,448	157,713			(17, 243)	(182, 121)	145,797
Balance as of December 31, 2019	S	4,790,091	1,461,976	2,010,000	46,431	115,462	190,799	488,599	9,103,358
Balance at January 1, 2018	S	4,790,091	1,190,268	1,837,583	42,554	111,219	204,144		8,175,859
Additions			2,453	15,001	$\overline{4}$	2,583	5,591	202,206	227,838
Disposals				(42,073)	(1, 011)		(1, 335)		(44, 419)
Reclassification				30,662	2,150		446		33,258
Balance as of December 31, 2018		4,790,091	1,192,721	1,841,173	43,697	113,802	208,846	202,206	8,392,536
Depreciation:
Balance at January 1, 2019	s		541,082	1,418,637	31,407	98.142	153,823		2,243,091
Depreciation			50,130	162,150	3,616	5,777	24,524		246,197
Reclassification				(3,637)			(17, 291)		(20, 928)
Disposals				(68, 290)		(1,623)	(11, 670)		(81, 583)
Balance as of December 31, 2019			591,212	1,508,860	35,023	102,296	149,386		2,386,777
Balance at January 1, 2018			494,770	1,278,569	27,553	91,277	125,078		2,017,247
Depreciation			46,312	172,992	4,865	6,865	30,081		261,115
Disposals				(32, 924)	(1, 011)		(1, 336)		(35, 271)
Balance as of December 31, 2018	Æ.		541,082	1,418,637	31,407	98,142	153,823		2,243,091
Carrying amounts:
Balance as of December 31, 2019	s.	4,790,091	870,764	501,140	11,408	13,166	41,413	488,599	6,716,581
Balance as of December 31, 2018	s	4,790,091	651,639	422,536	12,290	15,660	55,023	202,206	6,149,445

The property, plant and equipment are pledged or mortgaged as collateral for loans as of December 31, 2019 and 2018, please refer to note 8.

$(f)$ Right-of-use assets

The Company leases assets including buildings, transportation equipment, office equipment and miscellaneous equipment. Information about leases for which the Company as a lessee was presented below:

	Buildings	Transportation equipment	office equipment	Miscellaneous equipment	Total
Cost:
Balance at January 1, 2019	\$
Effects of retrospective application	46,230	40,380	628	2,272	89,510
Restated balance at January 1, 2019	46,230	40,380	628	2,272	89,510
Additions	3,889	10,248	2,102		16,239
Disposal		(283)			(283)
Balance at December 31, 2019	50,119	50,345	2,730	2,272	105,466
Accumulated depreciation:
Balance at January 1, 2019
Effects of retrospective application	12,394	18,129	28	1,023	31,574
Restated Balance at January 1, 2019	12,394	18,129	28	1,023	31,574
Depreciation	14,191	13,645	930	227	28,993
Disposal		(94)			(94)
Balance at December 31, 2019	26,585	31,680	958	1,250	60,473
Carrying amount:
Balance as of December 31, 2019	23,534	18,665	1.772	1,022	44,993

$(g)$ Other current or non-current assets

Current:

	December 31, 2019	December 31, 2018
Tax refund receivables	\$ 42,285	77,921
Payment in advance	42,356	65,065
Prepaid expense	8,501	23,477
Other prepaid	7,904	6,798
Temporary payments	46,065	8,072
Office supplies	1,713	1,961
Other financial assets	2,000	2,000
Prepaid sales tax	56,389	10,542
	207,213	195,836

Non-current:

	December 31, 2019	December 31, 2018
Prepayments for equipment	59,610	187,578
Refundable deposits	2.876	2,875
	62.486	190,453

(h) Lease liabilities

Company's lease liabilities were as follow:

	December 31, 2019
Current	17,229
Non-current	19.726

For the maturity analysis, please refer to note $6(p)$ .

The amounts recognized in profit or loss were as follows:

	For the years ended December 31, 2019
Interest on lease liabilities		700
Expenses relating to short-term leases		3.611
Expenses relating to leases of low-value assets, excluding short-term leases of
low-value assets

The amounts recognized in the statement of cash flows for Company was as follows:

	For the years
	ended
	December 31,
	2019
Total cash outflow for leases	35,236

Real estate leases $(i)$

As of December 31, 2019, the Company leases buildings for its office space and dormitory, leases period are 2 to 5 years.

$(ii)$ Other leases

The Company leases transportation, office and miscellaneous equipment that leases period are 2 to 10 years.

The Company also leases miscellaneous equipment with contract terms of 1 to 3 years. These leases are short-term or leases of low-value items. The Company has elected not to recognize right-of-use assets and lease liabilities for these leases.

Employee benefits $(i)$

$(i)$ Defined benefit plan

Reconciliation for present value of defined benefit obligation and fair value of plan assets are as follows:

	December 31, 2019	December 31, 2018
Present value of defined benefit obligation	242.514	244,210
Fair value of plan assets	(237, 382)	(242, 194)
Net defined benefit liabilities	5,132	2,016

Employee's benefits liabilities of the Company are as follows:

	2019	December 31, December 31, 2018
Long-term compensated absences liability	45,263	41,633

Under the Company's employee benefit retirement plan, contributions are made to an independent fund that is deposited with Bank of Taiwan. Employees are eligible for retirement and payments of retirement benefits are based on years of service and the average salary for the last six months before the employee's retirement according to the Labor Standards Law.

Composition of the plan asset $1)$

The retirement funds deposited by the Company according to the Labor Standards Law are managed by the Bureau of Labor Funds, Ministry of Labor (the "BLF"). According to Regulations for Revenues, Expenditures, Safeguard and Utilization of the Labor Retirement Fund, the usage of funds and their minimum amount of return distributed by the final accounts shall not be less than the income calculated by the two-year deposit interest rate of local bank.

As of December 31, 2019, the Company's pension fund with Bank of Taiwan amounted to \$237,382 thousand. Please refer to the related information published on the website of the Labor Pension Supervisory Committee concerning the utilization of the labor pension fund, related yield rate and its allocation.

$2)$ Changes in present value of the defined benefit obligations were as follows:

	For the years ended December 31
		2019	2018
Defined benefit obligations at January 1	\$	244,210	226,084
Current service cost and interest		4,301	4,797
Remeasurement of defined benefit liability
- Actuarial gains and losses of experience adjustments		7,728	8,181
- Actuarial losses of financial assumptions change		3,474	7,239
Benefits paid		(17, 199)	(2,091)
Defined benefit obligations at December 31		242,514	244,210

Changes in the fair value of the plan assets were as follows: 3)

	For the years ended December 31
		2019	2018
Fair value of plan assets at January 1	S	242,194	98,777
Remeasurement of net defined benefit liability
- Return on plan assets (excluding current interest)		9,663	4,937
Appropriated amount to the plan		2,724	140,571
Benefits paid		(17, 199)	(2,091)
Fair value of plan assets at December 31		237,382	242.1

$4)$ Expense recognized as profit or loss

Expense recognized as profit or loss for 2019 and 2018 were as follows:

	For the years ended December 31
	2019	2018
Current service cost	1,572	1,705
Interest of net defined benefit liability
	1.580	149

	For the years ended December 31
	2019	2018
Operating cost	376	852
Selling expense	543	1,193
Administrative expense	661	1,404
	1,580	3,449

(Continued)

$5)$ Remeasurement of net defined benefit liabilities recognized in other comprehensive income

The Company's remeasurement of net defined benefit liabilities recognized in other comprehensive income for 2019 and 2018, were as follows:

	For the years ended December 31
		2019	2018
Accumulated amount at January 1		34,811	22,980
Recognized in current period		4.260	11,831
Accumulated amount at December 31		39,071	34.811

$6)$ Actuarial assumptions

Major assumptions used to determine the present value of the defined benefit obligations were as follows:

	December 31, December 31, 2019	2018
Discount rate	$1.000\%$	$1.125\%$
Future salary increases rate	3.000 %	3.000 $%$

Expected appropriated amount paid to defined benefit plan by the Company during 1 year after the reporting date of 2019 is \$2,741 thousand.

The weighted average duration of the defined benefit plan is 13.13 years.

$7)$ Sensitivity analysis

As of December 31, 2019 and 2018, the effects of the present value of the defined benefit obligation arising from changes in principal actuarial assumptions were as follows:

	Effect of defined benefit obligations
	Increase 0.25%		Decrease 0.25%
December 31, 2019
Discount rate (change $0.25\%$ )	S	(6,913)	7,182
Future salary increases rate (change $0.25\%$ )		6,901	(6,686)
December 31, 2018
Discount rate (change $0.25\%$ )		(7,239)	7,527
Future salary increases rate (change $0.25\%$ )		7,254	(7,006)

The sensitivity analysis presented above may not be representative of the actual change in the present value of the defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated. The sensitivity analysis adopts the same methods for determining the defined benefit assets at the balance sheet date.

(ii) Defined contribution plan

The Company contributes an amount equal to 6% of the employee's monthly wages to the Labor Pension personal account of the Bureau of the Labor Insurance in accordance with the provisions of the Labor Pension Act, under which, the Company is not required to bear the regulated or putative obligation subsequent to the payment of fixed-rate contribution.

The Company's pension costs under the defined contribution pension plan amounted to \$49,112 thousand and \$46,382 thousand for 2019 and 2018, respectively. Those pension costs have been contributed to Bureau of the Labor Insurance or local relevant authorities.

$(i)$ Income tax

$(i)$ Income tax expense

The details of income tax expense were as follows:

	For the years ended December 31
	2019	2018
Current tax expense	\$ 1,107,723	1,053,070
Deferred tax expense
Temporary differences	(6, 876)	32,278
Change of income tax rate		(10, 653)
Total income tax expense	1,100,847	1,074,695

The details of income tax expense under other comprehensive income were as follows:

	For the years ended December 31
		2019	2018
Components of other comprehensive income that will be reclassified to profit or loss
Exchange differences on transaction of foreign financial
statements.		(20.544)	24,308

The reconciliation between income tax expense and profit before tax are as follow:

	For the years ended December 31
		2019	2018
Income before tax	\$	5,400,096	5,454,449
Income tax using the individual Company's domestic tax rate		1,080,019	1,090,890
Change of income tax rate		$\overline{\phantom{a}}$	(10, 653)
Estimated in prior periods		(6,381)	100
Undistributed earnings additional tax		50,457	4,311
Others		(23, 248)	(9,953)
		1,100,847	1,074,695

(ii) Deferred tax assets and liabilities

$1)$ Recognized deferred tax assets and liabilities

Changes in deferred tax assets and liabilities for 2019 and 2018 were as follows:

Deferred tax assets:
----------------------	--	--

January 1, 2019	\$ 20,381
Recognized in expense	13,155
Exchange differences on translation of foreign financial statements	20,544
December 31, 2019	54,080
January 1, 2018	\$ 60,735
Recognized in income	(16,046)
Exchange differences on translation of foreign financial statements	(24,308)
December 31, 2018	20,381
Deferred tax liability:
$T_{\text{max}} = 1.0010$

January 1, 2019		5,946
Recognized in expense		6,279
December 31, 2019		12,225
January 1, 2018	S	367
Recognized in income		5,579
December 31, 2018		5,946

(iii) Income tax approved

The Company's income tax returns through 2017 had been examined by the R.O.C. tax authority.

Stockholders' equity $(k)$

Common stock $(i)$

As of December 31, 2019 and 2018, the Company's authorized share capital both amounted to \$3,000,000 thousand dollars, divided into 300,000 thousand shares of stock with \$10 par value per share. The total number of issued shares were 274,367 thousand shares.

(ii) Capital surplus

The balances of capital surplus were as follows:

		December 31, 2019	December 31, 2018
Paid-in capital in excess of par value		3,550,000	3,550,000
Treasury stock transactions		396	396
Unpaid compensation to directors and supervisors		1,377	1,377
Net assets from merger with Everbright Garment		15,866	15,866
Unpaid dividend payables		113	113
Employee stock options		201,795	201,795
		3,769,547	3,769,547

According to Company Law, realized capital surplus can be transferred to common stock or distributed as cash dividends after deducting the accumulated deficit, if any. Realized capital surplus includes the additional paid-in capital from issuance of common stock in excess of the common stock's par value and donation from others. Paid-in capital in excess of par value is transferrable to common stock annually but shall not exceed 10% of total issued and outstanding common stock according to Regulations Governing the Offering and Issuance of Securities by Securities Issuers.

(iii) Retained earnings

According to the Company's articles of incorporation, 10% of annual net earnings (net of income taxes), after deducting accumulated deficits, must be set aside as legal reserve. The remaining portion is to be distributed upon a proposal by the board of directors and approval in an annual shareholders' meeting.

The Company is now in the growth stage and has a plan to expand the product line. Due to the need for capital to fulfill the plan, the policy for dividend distribution should reflect factors such as investment planning, financial structure, future fund requirements, and status of earnings. In a normal consideration, the percentage of earnings distribution shall not be less than 50% of the net earnings of the current year after compensating for accumulated deficits, if any. The board of directors shall make the distribution proposal, and it is then approved at the shareholders' meeting. The ratio for distributing cash dividends shall not be lower than 20% of the total distribution.

$1)$ Legal reserve

If the Company experienced profit for the year, the distribution of the statutory earnings reserve, either by new shares or by cash, shall be decided at the shareholders meeting, and the distribution amount is limited to the portion of legal reserve which exceeds 25% of the paid-in capital.

$2)$ Special reserve

A regulation issued by the Securities and Futures Bureau requires a special reserve be made from the unappropriated earnings, equivalent to current income or loss and prior period-undistributed earnings from the reduction of other equity; the special reserve appropriated from prior period-undistributed earnings cannot be distributed. If the reductions of other equity reverse, the reverse parts can be distributed. The Company is applicable to the regulations in Interpretation No.1010012865 by FSC for recognizing special reserve.

$3)$ Earnings appropriation and distribution

Earnings distributions for 2018 and 2017 were decided via the annual general meeting of the shareholders held on June 18, 2019 and June 14, 2018, respectively. The relevant dividend distributions to shareholders were as follows:

	For the years ended December 31
		2018		2017
		per share (dollars)	amount	per share (dollars)	amount
Dividends distributed to ordinary shareholders:
Cash dividends		11.00	3,018,038	9.50	2,606,487

As mentioned above, please browse through the relative information approved during the board of directors' and shareholder's meeting on Market Observation Post System website of the Taiwan Stock Exchange.

The appropriation of the Company's 2019 earnings was subject to a resolution approved by the board of directors and the annual shareholders' meetings. Following the approval of those resolutions, related information can be obtained from the Market Observation Post System website of the Taiwan Stock Exchange.

(iv) Other equity (net of income tax)

	Financial statements translation differences from foreign operations
Balance at January 1, 2019	\$	(6, 862)
Exchange differences on translation of foreign financial statements		(82,180)
Balance at December 31, 2019	S	(89,042)

(Continued)

	Financial statements translation differences from foreign operations
Balance at January 1, 2018	\$	(104, 100)
Exchange differences on translation of foreign financial statements		97,238
Balance at December 31, 2018	S	(6, 862)

Earnings per share $(1)$

The earnings per share were calculated as follows:

Basic earnings per share		For the years ended December 31
		2019	2018
Profit attributable to ordinary stockholders		4,299,249	4,379,754
Weighted average number of ordinary shares outstanding (in thousands)		274,367	274,367
Basic earnings per share (in dollars)		15.67	15.96

	For the years ended December 31
Diluted earnings per share		2019	2018
Profit attributable to ordinary stockholders		4,299,249	4,379,754
Weighted average number of ordinary shares outstanding (basic) (in thousands)		274,367	274,367
Effect on employee's profit sharing bonus (in thousands)		18	21
Weighted average number of ordinary shares outstanding (diluted) (in thousands)		274,385	274,388
Diluted earnings per share (in dollars)		15.67	15.96

(m) Revenue from contracts with customers

	For the years ended December 31
		2019		2018
		Clothing	Knitted	Clothing	Knitted
Main market:
Americas	\$	15,724,764	519,655	15,883,257	330,902
Asia		1,388,726	6,643,934	1,587,926	6,513,706
Europe		2,075,759	4,384	1,667,564	2,039
the Middle East		74,160	696,678	49,121	736,275
Africa		23,286	448,916	19,919	455,604
Others		264,208	210,171	221,016	90,942
	S	19,550,903	8,523,738	19,428,803	8,129,468
		2019		2018
Main product:
Knitted fabrics	\$	8,519,836		8,113,109
Yarn		3,902		16,359
Clothing		19,550,903		19,428,803
	\$	28,074,641		27,558,271

Employees' profit sharing bonus $(n)$

The Company's articles of incorporation require that earnings shall first be offset against any deficit, then, a minimum of 0.1% will be distributed as employee profit sharing bonus which is to be decided upon a proposal by the board of directors, and then approved at the shareholders' meeting. Qualified employees are entitled to stock and cash distribution of the Company.

For the years ended December 31, 2019 and 2018, the estimated amounts of employee's profit sharing bonus amounted to \$6,000 thousand, which was calculated based on the Company's profit excluding tax as well as employee profit sharing bonus and earnings allocation a minimum of 0.1% as stated under the Company's articles of incorporation. These employee's bonuses were reported under cost of goods sold and operating expenses for the year ended December 31, 2019 and 2018. If there is the change after released financial reporting date in the following year, the difference is treated as a change in accounting estimate, and is charged to profit or loss for 2020 and 2019.

There was no difference between the estimated and distributed employee's profit sharing bonus approved by the BOD for the year ended December 31, 2018, related information can be obtained from the Market Observation Post System website of the Taiwan Stock Exchange.

(o) Results from non-operating activities

$(i)$ Other income

The Company's other income were as follows:

	For the years ended December 31
	2019	2018
Interest income-bank deposit	18,867	9,831
Rental income	9.708	9,708
	28,575	19,539

Other gains and losses, net $(ii)$

The company's other gains and losses were as follows:

	For the years ended December 31
	2019	2018
Foreign exchange (loss) gain	\$ (16,989)	200,938
Loss on transaction for property	(6, 530)	(8, 419)
Others	7,609	10,177
	(15,910)	202,696

Financial instruments $(p)$

$(i)$ Credit risk

$1)$ Exposure to credit risk

The carrying amount of financial assets represents the maximum exposed amount to credit risk.

Concentration of credit risk $2)$

As the Company has numerous clients, does not make concentrated transactions with any single client and scatters the sales region, there is no concentration of credit risk for accounts receivable.

$3)$ Credit risk of accounts receivables

For details on credit risk of notes and accounts receivable, please refer to note 6(b).

(ii) Liquidity risk

The following are the contractual maturities of financial liabilities, including the estimated interest payments but excluding the impact of netting agreements.

	Carrying amount	Contractual cash flow	Within 12 months	1-2years	2-5years
December 31, 2019
Non-derivative financial liabilities
Accounts and notes payable (related parties included)	\$ 1.791,556	1,791,556	1.791.556
Lease liabilities	36.955	38,456	18.545	16.665	3,246
	1,828,511	1,830,012	1,810,101	16,665	3,246
December 31, 2018
Non-derivative financial liabilities
Accounts and notes payable (related parties included)	1,631,011	1,631,011	1,631,011

The Company is not expecting the cash flows included in the maturity analysis would occur significantly earlier or at significantly different amounts.

(iii) Exchange rate risk

$1)$ Exposure to currency risk

The Company's significant exposure to foreign currency risk was as follows:

		December 31, 2019				December 31, 2018
		Foreign currency	Exchange rate	NTD	Foreign currency	Exchange rate	NTD
Financial assets
Monetary items
USD	S	136,732	29.98	4.099.225	153,287	30.715	4,708,210
Financial liabilities
Monetary items
USD		36,895	29.98	1.106.112	30,325	30.715	931,432

$2)$ Sensitivity analysis

The Company's exposure to foreign currency risk arises from the translation of the foreign currency exchange gains and losses on cash and cash equivalents, accounts receivable, bank borrowings and accounts payable. A 1% depreciation or appreciation of the TWD against the USD as of December 31, 2019 and 2018 would have increased or decreased the net income after tax by \$23,945 thousand and \$30,214 thousand respectively. The analysis assumes that all other variables remain constant and ignores any impact of forecasted sales and purchases. The analysis is based on the same basis.

Foreign currency gain or loss on monetary items $3)$

The amounts of conversion gains and losses (including realized and unrealized) of monetary items of the Company, which was converted into functional currency (that is the Company's expression currency), and the exchange rate information converted to the Company' functional currency, NTD, are as follows:

	2019		2018
	Realized and unrealized exchange loss	Average rate	Realized and unrealized exchange gain	Average rate
JSD	(16,989)	30.912	200,938	30.149

$(iv)$ Interest rate analysis

The Company's exposure to interest rate risk arising from financial assets and liabilities is described in the liquidity risk part of this note.

The following sensitivity analysis is determined through the exposure to interest rate risk of derivative and non-derivative instruments on the reporting date. For floating rate liabilities, the analysis assumes that the balances of outstanding liabilities on the reporting date have been outstanding for the whole period, and their rational change intervals are being estimated. If the interest rate increases/decreases by 1%, representing the reasonable interest rates changes made by management.

Fair value $(v)$

The Company's management considers its financial assets and financial liabilities measured at amortized cost to be the approximation of the fair value.

Financial risk management $(q)$

Nature and extent $(i)$

The Company has exposure to the following risks from its financial instruments:

• Credit risk $1)$
• $2)$ Liquidity risk
• $3)$ Market risk

This note expresses the information of risk exposure and goals, policies and procedures for the Company to measure and manage risks. Please refer to notes in financial statements for further quantitative disclosures.

Risk management framework $(ii)$

The board of directors is responsible for the supervision of the Company's risk management framework.

The risk management policies are established to identify and analyze the Company's exposure to risks, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Company's activities. The Company, through its training and management standards and procedures, aim to develop a disciplines and constructive control environment, in which all employees understand their roles and obligations.

The audit committee of the Company oversees how the management complies in monitoring the Company's risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the Company. The internal audit sector of the Company reviews the risk management controls and procedure on scheduled and non-scheduled basis, and reports the results to the audit committee.

(iii) Credit Risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company's receivables from customers.

$1)$ Accounts receivable

Every single client affects the credit risk exposure of the Company, but still, the management should consider the status of its clients, including the industry the client belongs to and the default risk of the country where the client is located. Because the transaction of the Company is not concentrated in one single client for 2019 and 2018, therefore, there is no concentration on credit risk for accounts receivable.

To minimize the risk of accounts receivable, the Company established a risk management procedure relating to the financial condition of the client, credit risk rating, historical transactions inside the Company, and the current economic situation that may affect the clients' ability to pay up the bills. The Company also uses some credit-improved tools such as prepayments and credit insurance in order to reduce specific client's credit risk.

$2)$ Financial investments

The credit risk exposure in the bank deposits, fix income investments and other financial instruments are measured and monitored by the Company's finance department. As the Company deals with the banks and other external parties with good credit standing and financial institutions, corporate organization and government agencies which are graded above investment level, the management believes that the Company does not have any compliance issues, and therefore, there is no significant credit risk.

$3)$ Guarantee

The Company only provide guarantee to wholly owned subsidiaries. The Company did not provide guarantee to any third party as of December 31, 2019 and 2018.

(iv) Liquidity risk

Liquidity risk is the risk that the Company is unable to meet the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company' s approach to managing liquidity is to ensure, as much as possible, that it always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company's reputation.

The Company estimates the cost of products and services based on accounting policy in order to assist in monitoring its cash flow requirements and optimizing its cash return on investments. Generally, the Company ensures that there is sufficient cash to cover expected operating expenditure demand, but excluding potential influence under unexpected extremely condition (i.e. nature disaster). In addition, the total amount of unused credit term as of December 31, 2019 and 2018 amounted to \$3,458,745 thousand and 4,094,379 thousand respectively.

Market risk $(v)$

Market risk is the risk that comes from changes in market prices such as changes of foreign exchange rates, interest rates and equity prices, impacting the Company's income or the value of financial instruments held by the Company. The objective of market risk management is to manage and control market risk exposures within acceptable range and optimize the return on investments.

The Company buys and sells derivatives, and also incurs financial liabilities, in order to manage market risks. All such transactions are carried out within the guidelines set by the board of directors.

Exchange rate risk $1)$

The Company's exposure to currency risk is on sales, purchases and borrowings that are denominated in a currency other than the respective functional currencies of the Company, primarily the New Taiwan Dollars (NTD). The currencies used in these transactions are denominated in NTD, USD, VND and CNY.

At any point of time, the Company's principle is to regularly hedge using the net value after offsetting assets and liabilities. The choice of hedging exchange rate risk instruments is based on the cost and the period of hedging. The Company mainly hedges its currency risk using the foreign exchange contracts.

Interest rate risk $(2)$

All of the Company's assets and liabilities bear floating interest rates, and thus suffer from cash flow interest rate risk exposure. The detail of floating interest rates of the Company's assets and liabilities are described in note of liquidity risk management.

Capital management $(r)$

The Board's policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence, and to sustain the future development of the business. The capital includes common stock, capital surplus, retained earnings and other equities. Therefore, the capital management of the Company focuses on ensuring necessary financial resources and increase stockholders' value, examining the capital return periodically. The Company's return on capital as of December 31, 2019 and 2018 were as follows:

		For the years ended December 31
	2019	2018
Net income	4,299,249	4,379,754
Total capital	18, 123, 752	16,931,030
Return on capital	23.72 %	25.87%

The Company does not have any plan of purchasing treasury stock.

(7) Related-party transactions:

Names and relationship with related parties $(a)$

The followings are entities that have had transactions with related party during the periods covered in the financial statements.

Name of related party	Relationship with the Company
Grand Elite Holdings Inc. (Grand Elite)	Subsidiaries
Eclat Cayman Islands Holdings (Eclat Cayman)	Subsidiaries
PT Eclat Textile International (Eclat Textile (ID))	Subsidiaries
Eclat Textile (Cambodia) Co., Ltd (Eclat Textile (Cambodia))	Subsidiaries
Unison (Wuxi) Textile and Garment Inc. (Unison)	Subsidiaries
Eclat Textile Co., Ltd (Vietnam) (Eclat Textile (VN))	Subsidiaries
Eclat Fabrics (Vietnam) Co., Ltd. (Fabrics)	Subsidiaries
E-TOP (Vietnam) Co., Ltd. (E-TOP(VN))	Subsidiaries
Colltex Garment MFY Co., Ltd. (VN) (Colltex)	Subsidiaries
Eclat Enterprise Ltd. (Eclat Enterprise)	Subsidiaries
Tai-Yuan Garments Co., Ltd. (TAI-YUAN(VN))	Subsidiaries
E&I Printing Company Limited (E&I Printing)	Associates indirectly held by the Company
Best Information Co., Ltd. (Best) (Note)	Associates

Name of related party	Relationship with the Company
Yi Yuan Co., Limited	The entity's chairman is the second immediate family of the Company's chairman
Eclat Education Foundation	Founded by donation of the Company

Note: The Company sold the entire shareholding of Best on April 15, 2019. Henceforth Best is not the Company's associate any more.

• Material transactions among related parties $(b)$
• Operating revenue $(i)$

			For the years ended
		December 31,
	2019		2018
Subsidiaries			13 003

Sales term to subsidiaries is the same as general sales. The term for receivables is O/A 30 to 60 days.

(ii) Purchasing and processing

	For the years ended December 31
	2019	2018
Subsidiaries – Eclat Textile $(VN)$	\$ 1,486,567	1,666,482
Subsidiaries-Fabrics	1,745,851	1,648,401
$Subsidiaries - Colltex$	487,183	599,206
Subsidiaries $-E$ -Top (VN)	929,637	669,419
Subsidiaries – Others	544,599	490,810
Associates		86
	S 5,193,837	5,074,404

Purchasing price to subsidiaries is the same as to general purchases. The term for payables is O/A 30 to 60 days.

(iii) Receivables from related parties

	Types of	December 31,	December 31,
Account	related parties	2019	2018
Notes receivable	Associates

(iv) Payables to related parties

Account	Types of related parties		December 31, 2019	December 31, 2018
Accounts payable-related parties	Subsidiaries-Eclat Textile (VN)	\$	190,347	73,547
Accounts payable-related parties	Subsidiaries-others		168,893	202,473
Accounts payable-related parties	Associates			98
		S	359,240	276,118

(v) Guarantees and endorsements

The Company guarantees and endorsements for related parties are as follows:

Types of related parties	December 31. December 31. 2019	2018
Subsidiaries-Eclat Cayman		1,489,678

(vi) Leases

	For the years ended December 31
Types of related parties	2019	2018
Associates	150	600
Other related parties	300	300
	450	900

The Company charged their rentals based on the local market prices, which are paid monthly.

(vii) Others

		Software Maintenance For the years ended December 31		Donations For the years ended December 31
		2019	2018	2019	2018
Associates		122	428
Other related parties				2,000	2,000
	Ъ	122	428	2,000	2,000

(c) Key management personnel transactions

Key management personnel compensation comprised:

	December 31,	For the years ended
Short-term employee benefits	2019 111,771	2018 107,132
Cars provided to key management personnel:
	December 31,	December 31,
Cost	2019 28,638	2018 28,638
Numbers
Book value	5,806	7,843

(8) Pledged assets:

The Company's pledged assets are as follows:

Pledged assets	Pledged to secure	December 31, 2019	December 31, 2018
Other financial assets-current	Natural gas security deposit	2.000	2.000
Land	Medium to long term financing	3,381,772	3,381,772
		3,383,772	3,383,772

(9) Commitments and contingencies:

$(a)$ The balance of unused letters of credit of the Company was as follows:

	December 31, December 31,
2019	2018
61.255	78.824

$(b)$ Contingent liabilities:

The Company served as the guarantor of Eclat Cayman, and the balances of short-term borrowings with the banks were as follows:.

December 31,	December 31,
2019	2018
USS.	16,500

(10) Losses due to major disasters: None.

(11) Subsequent events: None.

$(12)$ Other:

The Company's employee benefits, depreciation and amortization expenses, categorized by function, were as follows:

		For the years ended December 31, 2019			For the years ended December 31, 2018
	Operating costs	Operating expenses	Total	Operating costs	Operating expenses	Total
Employee benefits
Salary	428,591	1,118,643	1,547,234	401,639	1,028,309	1,429,948
Labor and health insurance	36,894	84,870	121,764	33,127	76,261	109,388
Pension	12,469	38,223	50,692	12,323	37,508	49,831
Director's remuneration		5,082	5,082		4,040	4,040
Others	20,086	47,530	67,616	19,425	43,325	62,750
Depreciation	204,967	70,223	275,190	200,485	60,630	261,115
Amortization		6,006	6,006	505	9,899	10,404

The numbers of employees and employee benefits are as follows:

	For the years ended December 31,
	2019	2018
The numbers of employees	1,914	1.893
Non-employee directors
Average employee benefits	937	876
Average employee salary	811	758
Adjustment of average employee salary	6.99%

(13) Other disclosures:

(a) Information on significant transactions:

The following is the information on significant transactions required by the "Regulations Governing the Preparation of Financial Reports by Securities Issuers" of the Company as of December 31, 2019:

$(i)$ Loans to other parties:

															(In thousands of NTD / USD)
	Number Name of lender	Name of borrower	Account name	Related party	Highest balance of financing to other parties during the period	Ending balance (note 1)	Actual usage amount during the period	Range of during the period	Purposes of fund interest rates financing for the borrower (note 2)	Transaction amount for business between two parties	Reasons for short-term financing	Allowance for bad debt	Collateral Item	Value	Individual funding loan limit of fund limits	Maximum financing
01	Eclat Cayman	Fabrics	Other receivables	Yes	379,200 (USD12,000)				$\overline{2}$	٠	Operating capital	٠			3,104,843 (Note)	3,492,948 (Note)
01	Eclat Cayman	Eclat Textile (VN)	Other receivables	Yes	31,600 (USD1,000)				$\overline{2}$	$\blacksquare$	Operating capital		$\overline{\phantom{a}}$		3,104,843 (Note)	3,492,948 (Note)
01	Eclat Cayman	Colltex	Other receivables	Yes	221,200 (USD7,000)				$\overline{2}$	٠	Operating capital				3,104,843 (Note)	3,492,948 (Note)
01	Eclat Cayman	$E-TOP (VN)$	Other receivables	Yes	268,600 (USD8,500)				$\overline{2}$	۰	Operating capital				3,104,843 (Note)	3,492,948 (Note)
01	Eclat Cayman	Eclat Textile (Cambodia)	Other receivables	Yes	216,460 (USD6, 850)				$\overline{c}$		Operating capital				3,104,843 (Note)	3,492,948 (Note)
01	Eclat Cayman	Eclat Enterprise	Other receivables	Yes	31,600 (USD1,000)				$\overline{2}$		Operating capital				3,104,843 (Note)	3,492,948 (Note)
01	Eclat Cayman TAI-YUAN	kvn)	Other receivables	Yes	205,400 (USD6,500)				$\overline{2}$		Operating capital				3,104,843 (Note)	3,492,948 (Note)

Note: The total financing amount of Eclat Cayman should not exceed 90% of the net equity of its latest financial statements; individual financing should not exceed 80% of its net equity on its latest financial staten

Note 1: Approved by BOD.

Note 2: Way of nature of lending: 1 for counterparties and 2 for short-term financing.

(ii) Guarantees and endorsements for other parties:

(In thousands of NTD / USD)

									Ratio of
			Counter-party of	Limit on					accumulated		Parent	Subsidiary	Endorsements
			guarantee and	amount of	Highest	Balance of		Property	amounts of		company	endorsements/ guarantees to
			endorsement	guarantees and	balance for	guarantees		pledged for	guarantees and	Maximum	endorsements/	guarantees	third parties
			Relationship		endorsements leuarantees and	and	Actual usagel	guarantees	endorsements to	amount for	guarantees to to third parties		on behalf of
No.	Name of	Name	with the	for each	endorsements	l endorsements	amount	and	net worth of the guarantees and third parties on on behalf of				companies in
	guarantor		Company	enterprise	during	las of reporting	during the	lendorsementsl	latest financial	endorsements	behalf of	parent	Mainland
			(note 3)	(note 1)	the period	date	period	(Amount)	statements	(note 2)	subsidiary	company	China
$00 -$	The	Eclat		5.437,126	1,532,600				$\frac{6}{2}$	9.061.876		N	N
	Company	Cavman			(USD48,500)

Note 1: Guarantees amount provided to single entity must not exceed 30% of the Company's net value disclosed in the recent financial statements

Note 2: Total guarantees amount provided must not exceed 50% of the Company's net value disclosed in the recent financial statements.

Note 3: Relationship with the Company:

1. Ordinary business relationship.

2. Subsidiary which own more than 50% by the guarantor.

3. An investee owned more than 50% in total by both the guarantor and its subsidiary.

4. An investee owned more than 90% by the guarantor or its subsidiary.

5.Fulfillment of contractual obligations by providing mutual endorsements and guarantees for peer or joint builders in order to undertake a construction project.

6.An entity that is guaranteed and andorsed by all capital contributing shareholders in proportion to their shareholding percentages.

1. The companies in the same industry provide among themselves joint and several security for a performance guarantee of a sales contract for pre- construction homes pursuant to the Consumer Protection Act for each other.

(iii) Securities held as of December 31, 2019 (excluding investment in subsidiaries, associates and joint ventures): None.

(iv) Individual securities acquired or disposed of with accumulated amount exceeding the lower of NT\$100 million or 20% of the capital stock:

(In thousands of New Taiwan Dollars)

	Category and		Name of	Relationship		Beginning Balance	Purchases				Sales		Ending Balance
Name of	name of	Account	counter-party	with the	Shares		Shares		Shares			Gain (loss)	Shares
company	security	name		company	l (thousands)	Amount	(thousands)	Amount	(thousands)	Price	$\circ$ ost	on disposal	(thousands)	Amount	Note
The Company ECLAT		Investments Accounted for ECLAT		Subsidiary			2.500	761.190					2.500	747.076	Note
		Textile (ID) Using Equity Method	Textile (ID)

Note: Ending amount included Investment gains or losses recognized under equity method and translation adjustments.

• $(v)$ Acquisition of individual real estate with amount exceeding the lower of NT\$300 million or 20% of the capital stock: None.
• (vi) Disposal of individual real estate with amount exceeding the lower of NT\$300 million or 20% of the capital stock: None.
• (vii) Related-party transactions for purchases and sales with amounts exceeding the lower of NT\$100 million or 20% of the capital stock:

(In thousands of New Taiwan Dollars)

							Transactions with terms
				Transaction details			different from others			Notes/Accounts receivable (payable)
Name of company		Nature of	Purchase/		Percentage of total purchases	Payment		Payment		Percentage of total notes/accounts receivable
	Related party	relationship	(Sale)	Amount	/(sales)	terms	Unit price	tenns	Ending balance	(pavable)
The Company		Eclat Textile (VN) Indirectly held subsidiaries	processing	1,486,567	19.89% (Note)	30 days	(Note 1)	(Note 1)	Accounts payable (190.347)	(10.62)%
Eclat Textile (VN)	The Company	Parent company	(sales)	(1,486,567)	$(99.94)\%$	30 days	(Note 1)	(Note 1)	Accounts receivable 190.347	100.00%
The Company	Fabrics	Indirectly held subsidiaries	purchasing	1,745,536	14.77%	30 days	(Note 1)	(Note 1)	Accounts payable (89, 547)	$(5.00)\%$
Fabrics	The Company	Parent company	(sales)	(1,745,536)	$(96.87)\%$	30 days	(Note 1)	(Note 1)	Accounts receivable 89,547	97.34%
The Company	E-TOP (VN)	Indirectly held subsidiaries	processing	929,637	12.44% (Note)	30 days	(Note 1)	(Note 1)	Accounts payable (38, 145)	$(2.13)\%$
E-TOP (VN)	The Company	Parent company	(sales)	(929, 637)	$(98.71)$ %	30 days	(Note 1)	(Note 1)	Accounts receivable 38,145	97.01%
The Company	Colltex	Indirectly held subsidiaries	processing	487.183	6.52% (Note)	30 days	(Note 1)	(Note 1)	Accounts payable (20, 940)	(1.17)%
Colitex	The Company	Parent company	(sales)	(487, 183)	$(98.38)\%$	30 days	(Note 1)	(Note 1)	Accounts receivable 20,940	98.10%
The Company	Eclat Textile (Cambodia)	Indirectly held subsidiaries	processing	369,433	4.94% (Note)	30 days	(Note 1)	(Note 1)	Accounts payable (14, 788)	(0.83)%
Eclat Textile (Cambodia)	The Company	Parent company	(sales)	(369, 433)	(100.00)%	30 days	(Note 1)	(Note 1)	Accounts receivable 14,788	100.00%
The Company		TAI-YUAN (VN) Indirectly held subsidiaries	processing	175,166	2.34% (Note)	30 days	(Note 1)	(Note 1)	Accounts payable (5, 473)	(0.31)%
TAI-YUAN (VN)	The Company	Parent company	(sales)	(175, 166)	(91.42)%	30 days	(Note 1)	(Note 1)	Accounts receivable 5.473	29.14%

Note: Percentage on processing expense

Note 1: The same as general processing/purchasing/sales.

(viii) Receivables from related parties with amounts exceeding the lower of NT\$100 million or 20% of the capital stock:

(In thousands of NTD / USD)

Name of		Nature of	Ending	umover		Overdue	______ Amounts received in	Allowance
company	Counter-party	relationship	balance	rate	Amount	Action taken	subsequent period	for bad debts
Eclat Textile (VN)	The Company	Parent company	190.347 (USD6.349)	11.27

Note 1: The exchange rate as of December 31, 2019 is USD 1 to NTD 29.98.

(ix) Trading in derivative instruments: None.

(b) Information on investees:

The following is the information on investees for the years ended December 31, 2019 (excluding information on investees in Mainland China):

									(In thousands of NTD / USD)
			Main	Original investment amount			Balance as of December 31, 2019		Net income	Share of
Name of investor	Name of investee	Location	businesses and products	December 31.	December 31,	Shares		Percentage of Carrying value	(losses)	profits/losses
				2019	2018	(thousands)	ownership	(note)	of investee	of investee	Note
The Company	Best	Taiwan	Computer equipment installation, software retailing and international commerce	×.	8,739				(1, 219)	(2,400)	Note 2
The Company	Grand Elite	British Virgin Islands	Investments in securities, real estate, and manufacturing industry	255,430 (USD8, 520)	421,789 (USD14,069)	21	100 00 %	(91, 511)	4,718	4,718	Note 4
The Company	Eclat Cayman	Cayman Islands	Investments in securities, real estate,	3,839,988	3,839,988	123,759	100.00%	3,860,554	68,202	68,202
			and manufacturing industry	(USD128,085)	(USD128,085)
The Company	Eclat Textile (ID)	Indonesia	Design, manufacture, processing, sale	749,500		2,500	100 00 %	747,076	(2, 500)	(2,500)	Note 3
			of clothing, knit fabric mills, printing, dyeing and finishing mill	(USD25,000)
Grand Elite	Eclat Textile (Cambodia) Cambodia		Design, manufacture, processing and	239,840	239,840	8,000	100 00 %	(108, 634)	4,509	4,509
			sale of clothing	(USD8,000)	(USD8,000)
Eclat Cayman	Colltex	Vietnam	Design, manufacture, processing and	478,331	478,331	16,800	100 00 %	475,370	(36,068)	(37, 537)
			sale of ciothing	(USD15, 955)	(USD15, 955)
Eclat Cayman	E-TOP (VN)	Vietnam	Design, manufacture, processing and	1,079,280	1,079,280	36,000	100,00 %	1,171,336	84,690	85,342
			sale of clothing	(USD36,000)	(USD36,000)
Eclat Cayman	Eclat Enterprise	Cambodia	Investments in securities, real estate,	30	30		100.00 %	(1, 548)	(323)	(323)
			and manufacturing industry	(USDI)	(USDI)
Eclat Cayman	Eclat Textile (VN)	Vietnam	Design, manufacture, processing and	634,707	634,707	22,000	100 00 %	801,524	26,001	26,001
			sale of clothing	(USD21, 171)	(USD21, 171)
Eclat Cayman	Fabrics	Vietnam		1,199,200	1,199,200
			Knit fabric mills, printing, dyeing and finishing mill	(USD40,000)	(USD40,000)	40,000	100 00 %	1,447,246	(44,009)	(36,045)
Eclat Cayman	ITAI-YUAN (VN)	Vietnam		207,312	207,312
			Design, manufacture, processing and sale of clothing	(USD6, 915)	(USD6,915)	6,800	100 00 %	(129, 570)	(19, 279)	(19, 566)
Eclat Cayman	E&I Printing	Vietnam	Design, printing, dyeing and finishing llim	29,980 (USD1,000)	29,980 (USD1,000)	1,000	40.00 %	8,943	(5, 391)	(2, 156)
Eclat Cayman	Eclat Textile (ID)	Indonesia	Design, manufacture, processing, sale of clothing, knit fabric mills, printing, dyeing and finishing mill	(USD01)		0 1	%	3	(2, 500)		Note 3

Note: Accumulated translation is included.

Note 1: The exchange rate as of December 31, 2019 is USD 1 to NTD 29.98; the average exchange rate for 2019 is USD 1 to NTD 30.912.

Note 2: The Company sold the entire equity of Best on April 15, 2019

Note 3: The Company was approved by the board of directors on September 17, 2019 and established by the Company and Eclat Cayman. It has been established in December 20, 2019, and shareholding ratio are 99.9996% and 0.0004

Note 4: The Grand Elite's capital reduction was approved by the board of directors on January 18, 2018, and returned the investment capital on November 11, 2019.

(c) Information on investment in mainland China:

$(i)$ The names of investees in Mainland China, the main businesses and products, and other information:

(In thousands of NTD / USD)

				Accumulated			Accumulated	Net
	Main	Total		outflow of		Investment flows	outflow of	income				Accumulated
	businesses	amount	Method of	investment from			investment from	$(\text{losses})$	Percentage	Investment		remittance of
Name of	and	of paid-in	investment	Taiwan as of			Taiwan as of	of the	of	income (losses)	Book	earnings in
investee	products	capital	(note)	January 1, 2019	Outflow	Inflow	December 31, 2019	investee	ownership		value	current period
Unison	Design, manufacture,	168,638		128.194		۰	128.194	52.206	100.00%	52,206	8.653
(Note2)	processing and sale of	(USD5.625)		(USD4.276)			(USD4.276)
	clothing

Note: There are four kinds of investments

1. Invest in mainland china by remitting through third region.

2. Reinvest in mainland china by establishing investing companies in third region.

3. Reinvest in mainland china by reinvesting in companies in third region.

4. Invest directly in Mainland China's companies.

Note1: The exchange rate as of December 31, 2019 is USD 1 to NTD 29.98; the average exchange rate for 2019 is USD 1 to NTD 30.912.

Note2: Unison can no longer maintain its business in mainland China due to the rising cost of labor, material and supply. Therefore, the BOD of the company approved the dissolution and liquidation of Unison on December 7,

(ii) Limitation on investment in Mainland China:

Accumulated investment in Mainland China as I of December $31, 2019$	Investment amounts authorized by investment commission, MOEA	Upper limit on investment
128.194	128.194	10.874,251
(USD 4.276 thousand)	(USD 4.276 thousand)

Note: The exchange rate as of December 31, 2019 is USD 1 to NTD 29.98.

(iii) Significant transactions: None

(14) Segment information:

Please refer to the consolidated financial statements.

Statements of cash and cash equivalents

December 31, 2019

(Expressed in thousands of New Taiwan Dollars)

$\hat{\mathcal{A}}$

Items		Description	Exchange Rate	Amount
Cash				\$ 2,732
Bank deposits				865,512
Checking deposits				272,494
Term deposits	USD	5,000 thousand	29.98	149,900
Stock deposits				50
Foreign currency deposits	USD	28,573 thousand	29.98	856,624
	HKD	thousand $\blacksquare$	3.849	2
	EUR	thousand $\overline{\phantom{a}}$	33.59	7
Term deposits				1,142,000
Subtotal				3,286,589
Total				3,289,321

$\bar{z}$

$\alpha$ .

Statements of notes receivable

December 31, 2019

(Expressed in thousands of New Taiwan Dollars)

Client name	Description	Amount
Non-related parties:
A Customer	Operating	7,200 \$
B Customer	$^{\prime\prime}$	4,079
Others (Note)	$^{\prime\prime}$	1,966
Total		13,245

Note: Consisting of individual accounts with less than 5% of the total amount.

Statements of accounts receivable

Client name	Description	Amount
Non-related parties:
C Customer	Operating	\$ 320,108
D Customer	$^{\prime\prime}$	319,974
E Customer	$^{\prime\prime}$	244,006
F Customer	$^{\prime\prime}$	241,411
G Customer	$^{\prime\prime}$	204,455
H Customer	$^{\prime\prime}$	177,865
Others (Note)	$^{\prime\prime}$	1,532,962
		3,040,781
Less: allowance for doubtful accounts		(24,086)
Total		3,016,695

Note: Consisting of individual accounts with less than 5% of the total amount.

Statements of inventories

December 31, 2019

(Expressed in thousands of New Taiwan Dollars)

	Amount
Items	Carrying value (Note)	Net realizable value
Finished goods	\$ 191,394	256,953
Work in process	656,412	981,409
Raw materials	2,093,187	3,036,205
Supplies	549,175	549,175
Total	3,490,168	4,823,742

Note: Inventory value has been deducted to net realizable amount.

$\mathop{\rm ECLAT}\nolimits$ TEXTILE CO., LTD.

Statements of changes in investments accounted for using the equity method

For the year ended December 31, 2019

(Expressed in thousands of New Taiwan Dollars)

	Balance as of January 1, 2019		Increase		Decrease		Others (Note)		Investment			Balance as December 31, 2019
									$\frac{1}{100}$ recognized	Change in
									inder equity	translation		Holding		Net value of	Pledge or
Name of company	Shares	Amount	Shares	Amount	Shares	mount	Shares	Amount	nethod, net	adjustment	Shares	percentage	Amount	equity	collateralization
inder equity method:
Best		881 \$ 14,772			881	12,242			(2.400)						None
clat Cayman		(23,759 3,889,306						(1,580)	68.202	(95.374)	23,759	00.00%	3,860,554	3,881,054	None
Grand Elite		(43, 130)				57,49			4,718	4,394		$00.00\%$	(91, 511)	(91, 511)	None
Eclat Textile (ID)		$\cdot$	2,500	761,190				$\cdot$	(2,500)	$\underline{\underline{\textbf{(1.614)}}}$	2.500	$100.00\%$	747,076	747,076	None
		3,860,948		$\frac{761,190}{2}$		69,73 I		$-0.580$	$68.02^{p}$	$\frac{102.72}{5}$			4.516.119	4.536.61

Note: Effects of retrospective application.

Statements of notes payable

December 31, 2019

(Expressed in thousands of New Taiwan Dollars)

Objects	Description	Amount
Non-related parties:
A Supplier	Operating	\$	33,859
B Supplier	11		15,290
Others (Note)	$^{\prime\prime}$		214,452
Total			263,601

Note: Consisting of individual accounts with less than 5% of the total amount.

Statements of accounts payable

Objects	Description	Amount
Non-related parties:
C Supplier	Operating	59,871 \$
Others (Note)	11	1,108,844
Total		1,168,715

Note: Consisting of individual accounts with less than 5% of the total amount.

Statements of operating revenue

For the year ended December 31, 2019

(Expressed in thousands of New Taiwan Dollars)

Items	Description	Amount
Knitted fabrics	15,553,330 kg	8,519,836
Yarn	$254,010 \text{ kg}$	3,902
Clothing	92,118,632 pieces	19,550,903
		28,074,641

$\mathbb{R}^2$

$\mathcal{L}_{\text{max}}$

$\sim 10^{11}$

Statements of operating costs

For the year ended December 31, 2019

(Expressed in thousands of New Taiwan Dollars)

Items			Amount
Inventory balance, beginning of year		\$
Add: Purchases(net)			1,665,097
Sales of material and work-in-process			243,904
Less: Inventory balance (goods), end of year
Merchandising cost of goods sold			1,909,001
Raw materials & supplies
Raw materials, beginning of year	\$ 2,129,981
Supplies, beginning of year	512,323
Add: Purchases	10,000,994
Less: Raw materials, end of year	(2,106,995)
Supplies, end of year	(549, 175)
Sales of raw materials	(36, 147)
Others(Transferred to R&D expenses)	(34, 549)
Materials consumed			9,916,432
Direct labor			310,801
Manufacturing overhead			8,475,676
Manufacturing costs			18,702,909
Work-in-process, beginning of year			738,692
Add: Purchase of work-in-process			151,605
Less: Work-in-process, end of year			(658, 761)
Sales of work-in-process			(207, 757)
Others			(24, 563)
Cost of finished goods			18,702,125
Add: Finished goods, beginning of year			136,407
Less: Finished goods, end of year			(193, 825)
Cost of goods sold			18,644,707
Others			1,531
Total operating costs		S	20,555,239

Statements of operating expenses

For the year ended December 31, 2019

(Expressed in thousands of New Taiwan Dollars)

		Selling	Administrative	R&D
Items	expenses		expenses	expenses
Salaries expense		659,041	430,180	34,504
Expected credit loss		2,169	59,209
Depreciation		27,461	38,784	3,978
Exporting expense		213,218
Testing expense		65,953	3
Raw materials				39,815
Processing expense				50,799
Labor and health insurance expenses		40,010	44,149	711
Others(Note)		292,235	173,708	9,801
Total		1,300,087	746,033	139,608

Note: Consisting of individual accounts of less than 5% of the total amount.

$\sim 10^7$