FocalTech — Interim / Quarterly Report 2019

Dec 31, 2019

FocalTech Systems Co., Ltd. and Subsidiaries

Consolidated Financial Statements for the Three Months Ended March 31, 2019 and 2018

This is the translation of the financial statements. CPAs do not audit or review on this translation.

FOCALTECH SYSTEMS CO., LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In Thousands of New Taiwan Dollars)

ASSETS CURRENT ASSETS Cash and cash equivalents (Note 6) Financial assets at fair value through other comprehensive income - current (Note 8) Trade receivables, net (Note 10) Inventories (Note 11) Other financial assets (Note 9) Other current assets Total current assets NON-CURRENT ASSETS Financial assets at fair value through profit or loss - non-current (Note 7) Financial assets at fair value through other comprehensive income - non-current (Note 8) Property, plant and equipment (Note 13) Goodwill (Notes 14) Other intangible assets (Note 15) Deferred tax assets Other non-current assets (Note 28) Total non-current assets TOTAL LIABILITIES AND EQUITY CURRENT LIABILITIES Trade payables (Note 16) Other payables (Note 17) Current tax liabilities (Notes 4) Other current liabilities (Notes 20) Total current liabilities NON-CURRENT LIABILITIES Deferred tax liabilities Net defined benefit liabilities - non-current (Note 4) Guarantee deposits received Other non-current liabilities Total non-current liabilities Total liabilities EQUITY ATTRIBUTABLE TO OWNERS OF THE COMPANY (Notes 19 and 24) Share capital Ordinary shares Capital surplus Additional paid-in capital Treasury shares Changes in ownership interests in subsidiaries Employee share options Employee share options - expired Total capital surplus Retained earnings Legal reserve Undistributed earnings Total retained earnings Other equity Exchange differences from translating the financial statements of foreign operations Unrealized loss on financial assets at fair value through other comprehensive income Total other equity Treasury shares Equity attributable to owners of the company NON-CONTROLLING INTERESTS Total equity TOTAL		March 31, 2019 Amount % $ 2,416,264 23 140,911 2 678,286 6 2,413,696 23 1,533,892 14 155,099 1 7,338,148 69 114,216 1 175,945 2 1,495,532 14 1,237,268 12 134,293 1 136,858 1 53,047 - 3,347,159 31 $10,685,307 100 $ 1,323,691 12 701,467 7 394,869 4 139,049 1 2,559,076 24 30,799 1 26,008 - 124,362 1 10,400 - 191,569 2 2,750,645 26 2,987,924 28 6,423,295 60 40,868 - 20,448 - 49,135 1 20,731 - 6,554,477 61 186,154 2 (1,618,106) (15) (1,431,952) (13) 194,812 2 (461) - 194,351 2 (393,203) (4) 7,911,597 74 23,065 - 7,934,662 74 $ 10,685,307 100		December 31, 2018 Amount % $ 2,355,926 21 130,716 1 983,496 9 2,120,600 19 2,283,900 20 158,385 1 8,033,023 71 112,063 1 183,253 2 1,394,372 12 1,237,268 11 148,998 1 134,858 1 56,286 1 3,267,098 29 $11,300,121 100 $ 1,625,756 14 794,104 7 394,493 3 64,875 1 2,879,228 25 30,998 - 26,096 - 275,784 3 10,400 - 343,278 3 3,222,506 29 2,987,432 26 6,422,355 58 40,868 - 20,448 - 47,476 - 20,334 - 6,551,481 58 186,154 2 (1,434,755) (13) (1,248,601) (11) 149,454 1 (2,290) - 147,164 1 (393,203) (3) 8,044,273 71 33,342 - 8,077,615 71 $ 11,300,121 100		March 31, 2018
				Amount $ 2,355,926 130,716 983,496 2,120,600 2,283,900 158,385 8,033,023 112,063 183,253 1,394,372 1,237,268 148,998 134,858 56,286 3,267,098 $11,300,121 $ 1,625,756 794,104 394,493 64,875 2,879,228 30,998 26,096 275,784 10,400 343,278 3,222,506 2,987,432 6,422,355 40,868 20,448 47,476 20,334 6,551,481 186,154 (1,434,755) (1,248,601) 149,454 (2,290) 147,164 (393,203) 8,044,273 33,342 8,077,615 $ 11,300,121		Amount % $ 2,786,399 20 14,640 - 1,617,128 12 1,991,627 15 1,607,478 12 248,443 2 8,265,715 61 46,362 - 238,913 2 1,434,437 10 3,237,268 24 194,509 1 118,858 1 91,674 1 5,362,021 39 $13,627,736 100 $ 1,324,230 10 734,665 5 408,952 3 125,726 1 2,593,573 19 34,562 1 29,552 - 306,908 2 10,400 - 381,422 3 2,974,995 22 2,984,430 22 6,566,622 48 40,868 1 1,269 - 36,768 - 17,356 - 6,662,883 49 186,154 1 1,028,513 8 1,214,667 9 (18,922) - (3,939) - (22,861) - (188,815) (2) 10,650,304 78 2,437 - 10,652,741 78 $ 13,627,736 100

The accompanying notes are an integral part of the consolidated financial statements.

This is the translation of the financial statements. CPAs do not audit or review on this translation.

FOCALTECH SYSTEMS CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (In Thousands of New Taiwan Dollars, Except Earnings (Losses) Per Share)

REVENUE (Note 4 and 20) COSTS OF SALES (Notes 11 and 21) GROSS MARGIN OPERATING EXPENSES (Notes 18, 21, 25 and 27) Selling and marketing expenses General and administrative expenses Research and development expenses Total operating expenses OPERATIONS INCOME ( LOSS) NON-OPERATING INCOME AND EXPENSES Finance costs (Note 21) Interest income Loss on foreign currency exchange Other gains and losses - net Total non-operating income and expenses INCOME (LOSS) BEFORE INCOME TAX INCOME TAX EXPENSE (Notes 4 and 22) NET INCOME (LOSS) OTHER COMPREHENSIVE INCOME Items that will not be reclassified to profit or loss: Income tax relating to those items not to be reclassified to profit or loss(Notes22) Items that may be reclassified subsequently to profit or loss: Exchange differences from translating the financial statements of foreign operations Unrealized gains(loss) from debt instrument investments measured at fair value through other comprehensive loss		**For the Three Months **	**For the Three Months **	**Ended March 31 **
		2019 Amount % $ 1,639,942 100 (1,296,244) (79) 343,698 21 (97,594) (6) (82,504) (5) (388,407) (24) (568,505) (35) (224,807) (14) (1,150) - 27,007 1 9,541 1 (5,737) - 29,661 2 (195,146) (12) 1,312 - (193,834) (12) - - - - - - 45,564 3 1,829 -		2018
				Amount % $ 2,612,661 100 (2,087,644) (80) 525,017 20 (99,749) (4) (80,188) (3) (340,909) (13) (520,846) (20) 4,171 - (564) - 17,326 1 (15,958) (1) 19,703 1 20,507 1 24,678 1 (15,081) (1) 9,597 - (276) - (276) - - - (66,076) (2) (1,148) - (Continued)

This is the translation of the financial statements. CPAs do not audit or review on this translation.

FOCALTECH SYSTEMS CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (In Thousands of New Taiwan Dollars, Except Earnings (Losses) Per Share) (Reviewed, Not Audited)

Items that may be reclassified subsequently to profit or loss Other comprehensive income for the period, net of income tax TOTAL COMPREHENSIVE INCOME FOR THE YEAR NET PROFIT ATTRIBUTABLE TO: Owners of the Company Non-controlling interests TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO: Owners of the Company Non-controlling interests EARNINGS PER SHARE (Note 23) Basic Diluted		For the Three Months	For the Three Months	Ended March 31
		2019 Amount % $ 47,393 3 47,393 3 $ (146,441) (9) $ (183,351) (11) (10,483) (1) $ (193,834) (12) $ (136,164) (8) (10,277) (1) $ (146,441) (9) $ (0.67)		2018
				Amount % $ (67,224) (2) (67,500) (2) $ (57,903) (2) $ 14,444 - (4,847) - $ 9,597 - $ (53,056) (2) (4,847) - $ (57,903) (2) $ 0.05 $ 0.05
		$		$
		$		$
		$		$
		$		$
		$		$

The accompanying notes are an integral part of the consolidated financial statements

(Concluded)

This is the translation of the financial statements. CPAs do not audit or review on this translation.

(Concluded)

FOCALTECH SYSTEMS CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(In Thousands of New Taiwan Dollars)

BALANCE, JANUARY 1, 2018 Effects of retrospective application and restatement Restated balance as of January 1, 2018 Net income for the three months ended March 31, 2018 Other comprehensive loss for the three months ended March 31, 2018, net of income tax Total comprehensive income (loss) for the three months ended March 31, 2018 Treasury stock transferred to employees (Note 19 and 24) Compensation cost of employee share options (Note 19 and 24) Issue of ordinary shares under employee share options (Note 19 and 24) BALANCE AT MARCH 31, 2018 BALANCE, JANUARY 1, 2019 Net income for the three months ended March 31, 2019 Other comprehensive loss for the three months ended March 31, 2019, net of income tax Total comprehensive income (loss) for the three months ended March 31, 2019 Compensation cost of employee share options (Note 19 and 24) Issue of ordinary shares under employee share options (Note 19 and 24) BALANCE AT MARCH 31, 2019			Equity Attributable to Owners of the Company	Equity Attributable to Owners of the Company	Non-controlling Total Interests $ 10,736,080 $ 7,284 (44,640) - 10,691,440 7,284 14,444 (4,847) (67,500) - (53,056) (4,847) 3,183 - 7,781 - 956 - $ 10,650,304 $ 2,437 $ 8,044,273 $ 33,342 (183,351) (10,483) 47,187 206 (136,164) (10,277) 2,856 - 632 - $ 7,911,597 $ 23,065	Total Equity $ 10,743,364 (44,640)
	ShareCapital Ordinary Shares Capital Surplus $ 2,983,700 $ 6,654,876 - - 2,983,700 6,654,876 - - - - - - - - - 7,781 730 226 $ 2,984,430 $ 6,662,883 $ 2,987,432 $ 6,551,481 - - - - - - - 2,856 492 140 $ 2,987,924 $ 6,554,477		Retained Earnings Undistributed Legal Reserve Earnings $ 186,154 $ 1,058,985 - (44,640) 186,154 1,014,345 - 14,444 - (276) - 14,168 - - - - - - $ 186,154 $ 1,028,513 $ 186,154 $ (1,434,755) - (183,351) - - - (183,351) - - - - $ 186,154 $ (1,618,106)	Other Equity Unrealized gains (losses) from Differences from financial asset Translating Equity Directly measured at fair Financial Associated with value through Statement of Non-current other Foreign Assets comprehensive Operations Held for Sale income Treasury Shares $ 47,154 $ (2,791) $ - $ (191,998) - 2,791 (2,791) - 47,154 - (2,791) (191,998) - - - - (66,076) - (1,148) - (66,076) - (1,148) - - - - 3,183 - - - - - - - - $ (18,922) $ - $ (3,939) $ (188,815) $ 149,454 $ - $ (2,290) $ (393,203) - - - - 45,358 - 1,829 - 45,358 - 1,829 - - - - - - - - - $ 194,812 $ - $ (461) $ (393,203)
			Legal Reserve $ 186,154 - 186,154 - - - - - - $ 186,154 $ 186,154 - - - - - $ 186,154
						10,698,724 9,597 (67,500)
						(57,903)
						3,183 7,781 956
						$ 10,652,741
						$ 8,077,615 (193,834) 47,393
						(146,441)
						2,856 632
						$ 7,934,662

The accompanying notes are an integral part of the consolidated financial statements.

This is the translation of the financial statements. CPAs do not audit or review on this translation.

FOCALTECH SYSTEMS CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

CASH FLOWS FROM OPERATING ACTIVITIES Income (loss) before income tax from continuing operation Adjustments for: Depreciation expenses Amortization expenses Gains from reversal of impairment loss on expected credit Loss on financial assets and liabilities at fair value through profit or loss Finance costs Interest income Compensation cost of employee share options Write-down of inventories Unrealized loss (gain) on foreign currency exchange Changes in operating assets and liabilities Increase in financial assets mandatorily classified as at fair value through profit or loss Trade receivables Inventories Other current assets Trade payables Other payables Other current liabilities Net defined benefit liabilities Cash generated from operations Interest paid Income tax paid Net cash generated from operating activities CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from disposal of financial asset at fair value through other comprehensive income Purchase for property, plant and equipment Purchase of intangible assets Decrease (increase) in other financial assets Decrease (increase) in other non-current assets Interest received Net cash generated from investing activities		For the Three Months Ended **March 31 **	For the Three Months Ended **March 31 **
		2019 $ (195,146) 18,848 14,984 - 110 1,150 (27,007) 2,856 - (4,713) (1,955) 306,514 (287,201) 7,028 (309,196) (95,995) 73,212 (88) (496,599) (1,150) (1,689) (499,438) - (89,805) - 761,217 4,070 24,585 700,067	2018 $ 24,678 15,954 16,390 (6,084) - 564 (17,326) 7,781 28,185 (11,029) (17,257) (361,708) 632,145 (29,948) 28,228 2,655 43,328 (68) 356,488 (564) (5,247) 350,677 20,510 (20,044) (2,205) (250,064) (595) 11,967 (240,431) (Continued)

This is the translation of the financial statements. CPAs do not audit or review on this translation.

FOCALTECH SYSTEMS CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

CASH FLOWS FROM FINANCING ACTIVITIES Increase (decrease) in guarantee deposits Issue of ordinary shares under employee share options Treasury stock transferred to employees Net cash used in financing activities EFFECTS OF EXCHANGE RATE CHANGES ON THE BALANCE OF CASH HELD IN FOREIGN CURRENCIES NET INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD		For the Three Months Ended **March 31 **	For the Three Months Ended **March 31 **
		2019 $ (152,088) 632 - (151,456) 11,165 60,338 2,355,926 $ 2,416,264	2018 $ 108,651 956 3,183 112,790 (32,765) 190,271 2,596,128 $ 2,786,399

The accompanying notes are an integral part of the consolidated financial statements.

(Concluded)

This is the translation of the financial statements. CPAs do not audit or review on this translation.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 2019 AND 2018 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

FOCALTECH SYSTEMS CO., LTD. AND SUBSIDIARIES

1. GENERAL INFORMATION

FocalTech Systems Co., Ltd. (the “FocalTech” or the “Company”), formerly named as Orise Technology Co., Ltd., was incorporated in the Republic of China (“ROC”) in January 2006 and moved to Hsinchu Science Park in April on the same year. The Company’s shares have been listed on the Taiwan Stock Exchange (“TSE”) since July 2007. On January 2, 2015, the Company acquired FocalTech Corporation, Ltd. through a share swap and renamed on January 17, 2015. This acquisition was comprehensively considered as a reverse merger, where FocalTech Corporation, Ltd. was treated as the acquirer in the financial statements. The Company is mainly engaged in research, development, design, manufacturing, and sales of solutions regarding to human and machine interface devices, such as Display Driver IC, Touch Control IC and so on.

The consolidated financial statements are presented in the Company’s functional currency, New Taiwan dollars.

2. APPROVAL OF FINANCIAL STATEMENTS

The consolidated financial statements were approved by the Company’s board of directors on May 7, 2019.

3. APPLICATION OF NEW, AMENDED AND REVISED STANDARDS AND INTERPRETATIONS

• a. Initial application of the amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), IFRIC Interpretations (IFRIC), and SIC Interpretations (SIC) recognized and issued into effect by the Financial Supervisory Commission (FSC) (collectively, “IFRSs”).

Except the following items, the initial adoption in 2018 of the IFRSs and related amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers above would not result in material impact on the Company’s accounting policies:

1) IFRS 16 “Leases”

IFRS 16 sets out the accounting standards for leases that will supersede IAS 17“Leases”, IFRIC 4 “ Determining whether an Arrangement contains a Lease”, and a number of related interpretations.The relevant accounting policies could be found in Note 4.

Definition for leases

The Company decides only to include the contracts signed or changed after January 1, 2019 to use IFRS 16 evaluation. The contracts currently considered to be judged as leases based on IAS 17 and IFRIC 4 will not be re-evaluated and will be processed in accordance with the transitional provisions of IFRS 16.

The Company is lessee

When IFRS 16 first time is applied, the Company will recognize right-of-use assets and lease liabilities for all leases on the consolidated balance sheets except for low-value asset lease and short-term leases recognized as expenses on a straight line basis. On the consolidated statements of comprehensive income, the Company will present the depreciation expense charged on the

This is the translation of the financial statements. CPAs do not audit or review on this translation.

right-of-use asset separately from interest expense accrued on the lease liability; interest is computed by using effective interest method. On the consolidated statements of cash flows, cash payments for the principal portion of the lease liability will be classified within financing activities. The interest portion will be classified within operating activities. Before IFRS 16 is applied, payments under operating lease contracts are recognized as expenses on a straight-line basis. Cash flows for operating leases are classified within operating activities on the consolidated statements of cash flows.

For the current agreements judged and processed as operating leases based on IAS 17, the measurement of the lease liability on January 1, 2019 will be discounted by the remaining lease payments at the incremental borrowing rate of the lessee at that date. All right-of-use assets will be measured by the amount of the lease liability on that date, which will be subject to IAS 36 impairment assessment.

The Company is expected to apply the expedient method and account those leases which lease term ends on or before December 31, 2019 as short-term leases.

There is no impact on the assets, liabilities and equity on January 1, 2019 by this application.

• 2) IFRIC 23 “Uncertainty over Income Tax Treatments”

IFRIC 23 clarifies that when there is uncertainty over income tax treatments, the Company should assume that the taxation authority will have full knowledge of all related information when making related examinations. If the Company concludes that it is probable that the taxation authority will accept the Company declaration, the Company’s financial statements should reflect consistently with its income tax filing, using the same assumptions regarding the taxable income, tax bases, unused loss credits, unused tax credits or tax rates. If it is not probable to be accepted by the taxation authority, the Company should make estimates using either the most likely amount or the expected value of the tax treatment, depending on which method could come out the better prediction to the resolution of the uncertainty. The Company has to reassess its judgments and estimates if facts and circumstances change.

• 3) Amendments to IAS 19 " Employee Benefits - Plan Amendment, Curtailment or Settlement"

The amendment provides that when the plan is amended, curtailed or settled, the current service cost and net interest for the remainder of the year shall be determined on the basis of the actuarial assumptions used to re-measure the net defined benefit liabilities (assets). In addition, the amendment clarifies the impact of the plan's amendment, curtailment or settlement on rules applied to the asset cap. The aforementioned amendments will is applied prospectively.

• b. New IFRSs in issue but not yet endorsed by the FSC

New IFRSs in issue but not yet endorsed by the FSC
New, Revised or Amended Standards and Interpretations Amendments to IFRS 3 “Definition of a Business” Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets between an Investor and its Associate or Joint Venture” IFRS 17 “Insurance Contracts” Amendments to IAS 1 and IAS 8 “Definition of Materiality”	Effective Date Announced by IASB (Note 1)
	January 1, 2020 (Note 2) To be determined January 1, 2021 January 1, 2020 (Note 3)

• Note 1: Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on or after their respective effective dates.

• Note 2: The Company shall apply these amendments to the business combination and the asset acquisition for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after January 1, 2020.

This is the translation of the financial statements. CPAs do not audit or review on this translation.

• Note 3: The Company shall apply these amendments prospectively for annual reporting periods beginning on or after January 1, 2020.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

• a. Statement of compliance

The consolidated financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers (“the Regulations”) and IAS 34 “Interim Financial Reporting” as endorsed by the FSC. Disclosure information included in these interim consolidated financial statements is less than the disclosure information required in a complete set of annual financial statements.

• b. Basis of Preparation

The consolidated financial statements are prepared on the historical cost basis, except for the financial instruments measured at fair value and the net defined benefit liabilities recognized in the fair value of the estimated assets, and explained in the accounting policies below.

The evaluation of fair value could be classified into Degree 1 to Degree 3 by the observable intensity and importance of related input value:

• 1) Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities;

• 2) Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

• 3) Level 3 inputs are unobservable inputs for the asset or liability.

• c. Basis of consolidation

The detail information, holding percentages, and main business of the subsidiaries could be found in Note 12.

• d. Other significant accounting policies

Except for accounting policies for leases and the following, the accounting policies applied in the consolidated financial statements are consistent with those applied in the consolidated financial statements for the year ended December 31, 2018.

• 1) Leases

2019

The Company assesses whether the contract is, or contains a lease at the inception when it is set up.

The Company as a lessee

The Company recognizes right-of-use assets and lease liabilities for all leases at the commencement date of a lease, except for short-term leases and low-value asset leases accounted for applying a recognition exemption where lease payments are recognized as expenses on a straight-line basis over the lease terms.

This is the translation of the financial statements. CPAs do not audit or review on this translation.

2018

The Company as a lessee

When the Company is a lessee of an operation lease, the payments under operating lease contracts are recognized as expenses on a straight-line basis over the lease terms.

• 2) Retirement benefit costs

Pension cost for an interim period is calculated on a year-to-date basis by using the actuarially determined pension cost rate at the end of the prior financial year, adjusted for significant market fluctuations since that time and for significant plan amendments, settlements, or other significant one-off events.

• 3) Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax. Interim period income taxes are assessed on an annual basis and calculated by applying to an interim period’s pre-tax income the tax rate that would be applicable to expected total annual earnings. The effect of a change in tax rate resulting from the amendment in the tax law is recognized consistent with the accounting treatment of the corresponding transaction itself, and is recognized in profit or loss or other comprehensive income in full in the occurring period.

5. CRITICAL ACCOUNTING JUDGMENTS, ESTIMATIONS AND ASSUMPTIONS

Except for the following, the uncertainty of critical accounting judgments, estimations and assumptions applied are consistent with those in the consolidated financial statements for the year ended December 31, 2018.

6. CASH AND CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS
			December 31,
	March 31, 2019			2018	March 31, 2018
Cash on hand	$	3,498	$	2,344	$	1,861
Checking accounts and demand deposits		827,044		840,827		1,604,460
Cash equivalent (fixed deposit with original
maturities less than three months)		1,585,722		1,512,755		1,180,078
	$	2,416,264	$	2,355,926	$	2,786,399

The market rate intervals of cash in bank at the end of the reporting period were as follows:

		December 31,
	March 31, 2019	2018	March 31, 2018
Demand deposits	0.001%-0.5%	0.001%-0.48%	0.001%-0.4%
Fixed deposits	1.1%-3%	0.6%-3.37%	0.6%-4.01%

This is the translation of the financial statements. CPAs do not audit or review on this translation.

7. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS-NON-CURRENT

8. 9. 10.

March 31, 2019 December 31, 2018 March 31, 2018 Mandatorily at fair value through profit or loss (FVTPL) Listed preferred shares $ 10,710 $ 10,540 $ 10,200 Private Funds 42,414 41,023 36,162 Structured Investments 61,092 60,500 - $ 114,216 $ 112,063 $ 46,362 FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME March 31, 2019 December 31, 2018 March 31, 2018 Investments in debt instruments Current Foreign investments Fixed income bonds $ 140,911 $ 130,716 $ 14,640 Non–Current Foreign investments Fixed income bonds $ 175,945 $ 183,253 $ 238,913 Yield rates 1.963%-4.117% 1.963%-4.117% 1.963%-3.0168% OTHER FINANCIAL ASSETS March 31, 2019 December 31, 2018 March 31, 2018 Time deposits with original maturities more than three months $ 1,533,892 $ 2,283,900 $ 1,607,478 Market rate intervals 0.8%-4.18% 1.75%-4.18% 1.045%-4.03% TRADE RECEIVABLES, NET March 31, 2019 December 31, 2018 March 31, 2018 Trade receivables $ 678,286 $ 983,496 $ 1,710,264 Less: Allowance for doubtful accounts - - (93,136) Trade receivables, net $ 678,286 $ 983,496 $ 1,617,128

The average credit period on sales of goods was 60-120 days. In order to minimize credit risk, management of the Group has delegated a team responsible for determining credit limits, credit approvals and other monitoring procedures to ensure that follow-up action is taken to recover overdue debts. In addition, the Group reviews the recoverable amount of each individual trade debt at the end of the reporting period to ensure that adequate allowances are made for irrecoverable amounts. In this regard, management believes the Group’s credit risk was significantly reduced.

This is the translation of the financial statements. CPAs do not audit or review on this translation.

The Company applies the simplified approach prescribed by IFRS 9, which permits the use of allowances of expected credit losses over the lifetime for all trade receivables. The expected credit losses on trade receivables are estimated by using an allowance matrix with references to past customer default records, customer’s current financial position, and general economic conditions of the industry. Due to the past experiences, there is no significant difference in the loss patterns of different customer groups. Therefore, the allowance matrix does not further distinguish the customer base, and only sets the expected credit loss rate based on the overdue days of trade receivable.

The following table details the loss allowance of trade receivables based on the Company’s allowance matrix.

March 31, 2019

Expected credit loss rate Gross carrying amount and Amortized cost December 31, 2018 Expected credit loss rate Gross carrying amount and Amortized cost	Non Past Due 0% $665,432 Non Past Due 0% $884,692		Overdue 1-60 Days 0% $ 12,854 Overdue 1-60 Days 0% $ 77,795	Overdue 61-180 Days 0% $ - Overdue 61-180 Days 0% $ 1,937	Overdue Over 181 Days 0% $ - Overdue Over 181 Days 0% $ 19,072		Total
							0% $ 678,286 Total
							0% $ 983,496

December 31, 2018

March 31, 2018

Expected credit loss rate Gross carrying amount Loss allowance (Lifetime ECL) Amortized cost	Non Past Due 0% $ 1,596,575 - $ 1,596,575		Overdue 1-60 Days 0% $ 2,117 - $ 2,117	Overdue 61-180 Days 0% $ 155 - $ 155	Overdue Over 181 Days 84% $ 111,417 (93,136) $ 18,281		Total
							0% $ 1,710,264 (93,136) $ 1,617,128

The movements of the allowance for doubtful trade receivables were as following ：

Beginning balance Less: Impairment loss reversed Difference from foreign exchange translation Ending balance	For the three months ended March 31 2019 $ - - - $ -	For the three months ended March 31,2018 $ 101,184 (6,084) (1,964) $ 93,136

Wintek Corporation announced the following material information on October 13, 2014. Due to loss of continuous operation, the board of directors of Wintek Corporation approved to apply for court’s ratification for reorganization and emergency disposal in accordance with the relevant rules of the Company Act. Until December 31, 2018, the reorganization plan had been approved and executed. The Group wrote off the allowance for doubtful accounts of 97,344 thousand and reversed it for 6,084 thousand NT in 2018, and received of 19,072 thousand NT in January, 2019.

This is the translation of the financial statements. CPAs do not audit or review on this translation.

11. INVENTORIES

			December 31,	December 31,
	March 31, 2019			2018	March 31, 2018
Finished goods	$	391,799	$	537,585	$	569,829
Work in progress		1,276,618		921,944		807,251
Raw materials and supplies		745,279		661,071		614,547
	$	2,413,696	$	2,120,600	$	1,991,627

The cost of goods sold included inventory write-downs for the three months ended March 31, 2019 and 2018 was $1,296,244 thousand and $2,087,644 thousand, included the write-downs of inventories of $0 thousand and $28,185 thousand for the three months ended March 31, 2019 and 2018, respectively.

12. SUBSIDIARIES

Details of the Group’s subsidiaries included in the consolidated financial statements were as follows:

Investor Investee Main Businesses	Proportion ofOwnership
	March 31, 2019 December 31, 2018 March 31, 2018
FocalTech Systems Co., Ltd. FocalTech Corporation, Ltd. Investment activity FocalTech Electronics, Ltd. Research, development, manufacturing and sale of integrated circuits	100% 100% 100% 100% 100% 100%
FocalTech Systems Co., Ltd. And FocalTech Electronics Co., Ltd. (a) FocalTech Smart Sensors, Ltd. Research, development, manufacturing and sale of integrated circuits	61.88% 61.88% 67.11%
FocalTech Smart Sensors,Ltd. (a) FocalTech Smart Sensors Co.,Ltd. Research, development, manufacturing	100% 100% 100%
FocalTech Corporation,Ltd. FocalTech Systems, Inc. Investment activity	100% 100% 100%
FocalTech Systems, Inc. FocalTech Systems, Ltd. Research, development, manufacturing and sale of integrated circuits	100% 100% 100%
FocalTech Systems, Ltd. FocalTech Systems (Shenzhen) Co., Ltd. Design and research of integrated circuits FocalTech Electronics Co.,Ltd. Import and export of integrated circuits	100% 100% 100% 100% 100% 100%
FocalTech Electronics, Ltd. FocalTech Electronics (Shanghai) Co., Ltd. Sales support and post-sales service for affiliates’ IC products FocalTech Electronics (Shenzhen) Co., Ltd. Design and research of integrated circuits Hefei PineTech Electronics Co.,Ltd. Research and sale of integrated circuits	100% 100% 100% 100% 100% 100% 100% 100% 100%

• a. The Company’s direct and indirect holding percentage changed due to the exercise of employee stock option and the capital injection in FocalTech Smart Sensors, Ltd. in 2018.

As of March 31, 2019, the immaterial subsidiaries of the Group included FocalTech Smart Sensors Co., Ltd., FocalTech Electronics Co., Ltd., FocalTech Systems (Shenzhen) Co., Ltd., FocalTech Electronics (Shenzhen) Co., Ltd., FocalTech Electronics (Shanghai) Co., Ltd., Hefei PineTech Electronics Co., Ltd. and FocalTech Smart Sensors, Ltd. As of March 31, 2018, the immaterial subsidiaries of the Group included FocalTech Smart Sensors Co., Ltd., FocalTech Electronics Co., Ltd., FocalTech Electronics (Shenzhen) Co., Ltd., FocalTech Electronics (Shanghai) Co., Ltd., Hefei PineTech Electronics Co., Ltd. and FocalTech Smart Sensors, Ltd. The financial statements of the immaterial subsidiaries had not been reviewed by the auditors.

This is the translation of the financial statements. CPAs do not audit or review on this translation.

As of March 31, 2019 and 2018, the total amounts of assets of the immaterial subsidiaries were $2,195,025 thousand, and $399,177 thousand, 20.54% and 2.93% of total consolidated assets, respectively. The total amounts of liabilities were $548,161 thousand, and $83,658 thousand, 19.93% and 2.81% of total consolidated liabilities, respectively. For the three months ended March 31, 2019 and 2018, the total immaterial subsidiaries comprehensive loss has been recognized $408 thousand, $(9,459) thousand, that held 0.28%, and(16.34%) in the consolidated statements of comprehensive income (loss), respectively.

13. PROPERTY, PLANT AND EQUIPMENT

Cost Balance at January 1, 2018 Additions Effect of foreign currency exchange differences Balance at March 31, 2018 Accumulated depreciation Balance at January 1, 2018 Depreciation Effect of foreign currency exchange differences Balance at March 31, 2018 Carrying amounts at March 31, 2018 Cost Balance at January 1, 2019 Additions Effect of foreign currency exchange differences Balance at March 31, 2019 Accumulated depreciation Balance at January 1, 2019 Depreciation Effect of foreign currency exchange differences Balance at March 31, 2019 Carrying amounts at December 31, 2018 and January 1, 2019 Carrying amounts at March 31, 2019	Buildings Development Equipment $ 1,358,019 $ 165,491 693 18,172 21,486 (471) $ 1,380,198 $ 183,192 $ 16,029 $ 121,011 9,147 4,437 254 (814) $ 25,430 $ 124,634 $ 1,354,768 $ 58,558 $ 1,375,563 $ 192,558 - 89,271 30,435 1,373 $ 1,405,998 $ 283,202 $ 51,610 $ 138,166 9,303 7,760 1,105 848 $ 62,018 $ 146,774 $ 1,323,953 $ 54,392 $ 1,343,980 $ 136,428	Office Equipment $ 14,479 1,045 175 $ 15,699 $ 10,236 455 109 $ 10,800 $ 4,899 $ 15,970 - 272 $ 16,242 $ 11,635 332 175 $ 12,142 $ 4,335 $ 4,100	Information Equipment $ 42,437 134 616 $ 43,187 $ 27,331 1,365 384 $ 29,080 $ 14,107 $ 42,675 534 866 $ 44,075 $ 31,508 927 616 $ 33,051 $ 11,167 $ 11,024	Leasehold Improve- ments $ 39,209 - 237 $ 39,446 $ 36,554 550 237 $ 37,341 $ 2,105 $ 38,956 - 326 $ 39,282 $ 38,431 526 325 $ 39,282 $ 525 $ -	Total $ 1,619,635 20,044 22,043
					$ 1,661,722
					$ 211,161 15,954 170
					$ 227,285
					$ 1,434,437
					$ 1,665,722 89,805 33,272
					$ 1,788,799
					$ 271,350 18,848 3,069
					$ 293,267
					$ 1,394,372
					$ 1,495,532

Property, plant and equipment were depreciated on a straight-line basis over the estimated useful lives as follows:

Buildings 45-50 years Development equipment 3-5 years Office equipment 3-5 years Information equipment 3-5 years Leasehold improvements 1-5 years

Property, plant and equipment were not been pledged as collateral.

This is the translation of the financial statements. CPAs do not audit or review on this translation.

14. GOODWILL

		December 31,
	March 31, 2019	2018	March 31, 2018
Ending balance	$ 1,237,268	$ 1,237,268	$ 3,237,268

Considering the synergy of integration of LCD driver and touch controller under the industry trend, the reverse merger was triggered by FocalTech Corporation, Ltd. on January 2, 2015, resulting the goodwill of 3,237,268 thousand. In 2018, the impacts of market improper competition and the shortage of wafer supply made the company a serious market share decline, which is expected to influence the market shares and gross margins in the future. Therefore, the recoverable amount from IDC (Integrated Driver Controller) less than the carrying value so the Company recognized the impairment loss of NT2,000,000 thousand.

The recoverable amount is calculated by IDC projected net cash flows, discounted at 9.95%, under the assumptions of management team judgments and historical experiences with regard to future growth rates and market shares of smartphone, gross margins and forecasted operating expenses.

15. OTHER INTANGIBLE ASSETS

Cost Balance at January 1, 2018 Additions Effect of foreign currency exchange differences Balance at March 31, 2018 Accumulated amortization Balance at January 1, 2018 Amortization expense Effect of foreign currency exchange differences Balance at March 31, 2018 Carrying amounts at March 31, 2018 Cost Balance at January 1, 2019 Effect of foreign currency exchange differences Balance at March 31, 2019 Accumulated amortization Balance at January 1, 2019 Amortization expense	Licenses and Franchises $ 126,919 - (2,383) $ 124,536 $ 72,394 4,308 (1,371) $ 75,331 $ 49,205 $ 130,393 382 $ 130,775 $ 95,724 4,132	Software $ 149,951 2,205 (3,002) $ 149,154 $ 98,685 8,286 (1,994) $ 104,977 $ 44,177 $ 157,801 608 $ 158,409 $ 133,210 7,056	Patents Trademark $ 76,718 $ 74,000 - - 4 - $ 76,722 $ 74,000 $ 23,595 $ 22,200 1,946 1,850 4 - $ 25,545 $ 24,050 $ 51,177 $ 49,950 $ 76,714 $ 74,000 5 - $ 76,719 $ 74,000 $ 31,376 $ 29,600 1,946 1,850	Total $ 427,588 2,205 (5,381) $ 424,412 $ 216,874 16,390 (3,361) $ 229,903 $ 194,509 $ 438,908 995 $ 439,903 $ 289,910 14,984

This is the translation of the financial statements. CPAs do not audit or review on this translation.

Effect of foreign currency exchange differences Balance at March 31, 2019 Carrying amounts at December 31, 2018and January 1, 2019 Carrying amounts at March 31, 2019	267 $ 100,123 $ 34,669 $ 30,652	444 $ 140,710 $ 24,591 $ 17,699	5 $ 33,327 $ 45,338 $ 43,392	- $ 31,450 $ 44,400 $ 42,550	716
					$ 305,610
					$ 148,998
					$ 134,293

Other intangible assets were amortized on a straight-line basis over the estimated useful lives as follows:

Licenses and franchises					3-5 years
Software					1-5 years
Patents					7-10 years
Trademark					10 years
TRADE PAYABLES
		December 31,
	March 31, 2019		2018	March 31, 2018
Trade payables	$ 1,323,691	$ 1,625,756		$ 1,324,230

16. TRADE PAYABLES

The average credit period on purchases was 30-60 days. The Group has financial risk management policies in place to ensure that all payables are paid within the pre-agreed credit terms.

17. OTHER PAYABLES

			December 31,
		March 31, 2019	2018	March 31, 2018
Payable	for rebates	$ 267,003	$ 337,581	$ 300,963
Payable	for salaries and bonus	308,173	336,145	288,675
Payable	for labor, health and social insurance	15,158	15,475	15,293
Reserve	for litigations	52,280	52,101	60,089
Payable	for professional services and others	58,853	52,802	69,645
		$ 701,467	$ 794,104	$ 734,665

18. RETIREMENT BENEFIT

Employee benefit expenses in respect of the Group’s defined benefit retirement plans were $112 thousand and $140 thousand for the three months ended March 31, 2019 and 2018, respectively, and were calculated using the actuarially determined pension cost discount rate as of December 31, 2018 and 2017.

This is the translation of the financial statements. CPAs do not audit or review on this translation.

19. EQUITY

a. Share capital

Ordinary shares (NT$10 par value per share)

		December 31,
	March 31, 2019	2018	March 31, 2018
Numbers of shares authorized (in thousands)	500,000	500,000	500,000
Shares authorized	$ 5,000,000	$ 5,000,000	$ 5,000,000
Number of shares issued and fully paid (in
thousands)	298,792	298,743	298,443
Shares issued	$ 2,987,924	$ 2,987,432	$ 2,984,430

b. Capital surplus

BALANCE, JANUARY 1, 2018 Compensation cost of employee share options Issue of ordinary shares under employee share options BALANCE AT MARCH 31, 2018 BALANCE, JANUARY 1, 2019 Compensation cost of employee share options Issue of ordinary shares under employee share options Employee share options expired BALANCE AT MARCH 31, 2019	Additional Paid-in Capital (1) $6,565,204 - 1,418 $ 6,566,622 $6,422,355 - 940 - $ 6,423,295	Treasury Shares (1) $ 40,868 - - $ 40,868 $ 40,868 - - - $ 40,868	Changes in ownership interests in subsidiaries (2) $ 1,269 - - $ 1,269 $ 20,448 - - - $ 20,448	Employee Share Options (3) $ 30,179 7,781 (1,192) $ 36,768 $ 47,476 2,856 (800 ) (397) $ 49,135	Employee Share Options -Expired (2) $ 17,356 - - $ 17,356 $ 20,334 - - 397 $ 20,731		Total
							$6,654,876 7,781 226
							$ 6,662,883
							$6,551,481 2,856 140 -
							$ 6,554,477

• 1) This type of capital surplus may be used to offset a deficit; in addition, when the Company has no deficit, such capital surplus may be distributed as cash dividends or converted to share capital (at a certain percentage of the Company’s capital surplus annually).

• 2) This type of capital surplus may be used to offset a deficit.

• 3) This type of capital surplus cannot be used for any purposes.

c. Retained earnings and dividend policy

Under the Company’s Articles of Incorporation, in the allocation of the net profits for each fiscal year, the Company should first offset its deficits in previous years and then set aside a legal reserve at 10% of the remaining profits until the accumulated legal capital reserve equals total capital. After deducting the legal reserve and any special reserve as required by laws or related regulations.

Any balance, the distribution of earnings is proposed by the board of directors for approval at the stockholders’ meeting. For the comparison of the original and amended of the “Articles of Incorporation” about the accrual basis of the employees’ compensation and remuneration to directors, please refer to Note 22(d).

Considering current and future development plans, investment conditions, capital requirements, and market competition situations, and shareholder benefits, The Company would appropriate the dividends to the shareholders not less than 10% of the current year’s earnings. The dividends could be paid in cash or shares. The cash portion should be equal or more than 10% of the total dividends. It is allowed not to distribute any cash dividend if the cash amount per share is less than NT 0.5.

This is the translation of the financial statements. CPAs do not audit or review on this translation.

Legal reserve may be used to offset deficit. If the Company has no deficit and the legal reserve has exceeded 25% of the Company’s paid-in capital, the excess may be transferred to capital or distributed in cash.

The Company’s board proposed to compensate the deficit from Legal Reserve of $186,154 and additional paid-in capital of $1,248,601 thousand for deficit compensation on May 7, 2019.

The Company’s board on May 7, 2019 and the shareholders’ meeting on June 15, 2018 respectively proposed and approved the cash distribution from additional paid-in capital of $150,000 thousand which comes from the premium over the par value when issuing, approximately $0.5 and $0.51 per share.

The proposals for 2018 deficit compensation and cash distribution from additional paid-in capital are subject to the resolution of the shareholders’ meeting to be held in June 2019.

• d. Treasury stock

	Shares
	(In Thousands)
Number of shares at January 1, 2018	5,936
Decrease during the period	(120)
Number of shares on March 31, 2018	5,816
Number of shares on January 1 and March 31, 2019	15,970

The detailed information for other Shares Buy Back Programs could be found in Note 24 (b).

The treasury shares held by the company cannot be pledged and no dividend and voting right is attached in accordance with the Regulations of Securities and Exchange Act.

20. REVENUE

REVENUE
IC for portable devices Contract balances March 31, 2019 Contract liabilities Sales of goods $ 98,766		For the Three Months Ended March 31
		2019 2018 $ 1,639,942 $ 2,612,661 December 31, 2018 March 31, 2018 $ 13,895 $ 69,474

Contract liabilities Sales of goods

21. NET INCOME

• a. Finance costs

Others

For the Three Months Ended **March 31 **	For the Three Months Ended **March 31 **	For the Three Months Ended **March 31 **
	2019 $ 1,150	2018 $ 564

This is the translation of the financial statements. CPAs do not audit or review on this translation.

b. Depreciation and amortization

Property, plant and equipment Intangible assets An analysis of deprecation by function Operating expenses Operating costs		For the Three Months Ended **March 31 **	For the Three Months Ended **March 31 **
		2019 $ 18,848 14,984 $ 33,832 $ 33,450 382 $ 33,832	2018 $ 15,954 16,390 $ 32,344 $ 31,767 577 $ 32,344

c. Employee benefits expense

Post-employment benefits Defined contribution plans Defined benefit plans (Note 18) Share-based payments (Note 24) Other employee benefits Total employee benefits expense An analysis of employee benefits expense by function Operating expenses Operating costs		For the Three Months Ended March 31	For the Three Months Ended March 31
		2019 2018 $ 7,171 $ 7,057 112 140 2,856 7,781 377,916 342,557 $ 388,055 $ 357,535 For the Three Months Ended March 31
		2019 $ 361,007 27,048 $ 388,055	2018 $ 330,333 27,202 $ 357,535

d. The remuneration to employees and directors

The Company stipulates to distribute employees’ compensation and remuneration to directors at the rates no less than 1% and no higher than 1.5%, respectively, of net profit before income tax, employees’ compensation, and remuneration to directors. Due to the net loss before tax from January 1 to March 31, 2019, there was no accrual for any remuneration to employees and directors. The estimated employees’ compensation and remuneration to directors from January 1 to March 31, 2018 are as following:

This is the translation of the financial statements. CPAs do not audit or review on this translation.

Accrual rate

Employees’ compensation Remuneration of directors Amount Employees’ compensation Remuneration of directors		For the Three Months Ended March 31,2018
		19.52% 0.48% For the Three Months Ended March 31,2018
		$ 6,023 $ 147

If there is a change in the proposed amounts after the annual consolidated financial statements were authorized for issue, the differences are recorded as a change in accounting estimate.

Information on the employees’ compensation and remuneration to directors resolved by the Company’s board of directors are available on the Market Observation Post System website of the Taiwan Stock Exchange.

22. INCOME TAXES

• a. Major components of tax expense (income) recognized in profit or loss:

Current tax In respect of the current year Deferred tax In respect of the current year Effect of tax rate changes Income tax expense recognized in profit or loss		For the Three Months Ended March 31	For the Three Months Ended March 31
		2019 $ 556 (1,868) - (1,868) $ (1,312)	2018 $ 10,793 15,725 (11,437) 4,288 $ 15,081

In 2018, the amendment of the Republic of China Income Tax Law let the income tax rate for corporations adjust to 20% from 17%. The effect of the change in tax rate on deferred tax income was recognized in profit in 2018. In addition, the tax rate applicable to the undistributed earnings was reduced from 10% to 5%.

• b. Income tax expense recognized in other comprehensive income

Deferred income tax Effect of tax rate change	For the Three Months Ended **March 31 **	For the Three Months Ended **March 31 **	For the Three Months Ended **March 31 **
		2019 $ -	2018 $ 276

This is the translation of the financial statements. CPAs do not audit or review on this translation.

c. Income tax assessments

The Company and FocalTech Electronics Co., Ltd.’s tax returns up to 2016, and FocalTech Smart Sensors Co., Ltd.’s tax returns up to 2017 have been assessed by the tax authorities.

23. EARNINGS PER SHARE

EARNINGS PER SHARE
Basic earnings per share Diluted earnings per share	Unit: NT$ Per Share For the Three Months Ended March 31
		2019 $ (0.67)	2018 $ 0.05 $ 0.05

The earnings and weighted average number of ordinary shares outstanding in the computation of earnings per share were as follows:

Net Profit for the Year

Earnings used in the computation of basic earnings per share		For the Three Months Ended March 31	For the Three Months Ended March 31
		2019 $(183,351)	2018 $ 14,444

Weighted Average Number of Ordinary Shares Outstanding (In Thousand Shares)

Weighted average number of ordinary shares in computation of basic earnings per share Effect of potentially dilutive ordinary shares: Employee share option (Note) Employees’ compensation or bonus issue to employees (Note) Weighted average number of ordinary shares used in the computation of diluted earnings per share	For the Three Months Ended March 31	For the Three Months Ended March 31	For the Three Months Ended March 31
		2019 274,456 - - -	2018 287,838 1,215 189 289,242

Note ： The Company has a net loss after tax, so there is no dilution effect in the calculation of earnings of shares for the three months ended March 31,2019.

If the Group is able to select the settlement of the compensation paid to employees in cash or shares, the weighted average number of outstanding shares used in the computation of diluted earnings per share should include the diluting effect assuming the entire amount of the compensation settled in shares until the final number of shares distributed to employees is resolved in the following year.

24. SHARE-BASED PAYMENT ARRANGEMENTS

The Company did not have new share option plan issued for employees for the three months ended March 31, 2019 and 2018, except for The 2[nd ] Shares Buy Back Program stated below. The detailed information of the employee share option plans could be found in Note 26 of the consolidated financial statements of the year ended December 31, 2018.

This is the translation of the financial statements. CPAs do not audit or review on this translation.

a. Employee stock option plan

Information about outstanding options for the three months ended March 31, 2019 and 2018 is as following:

March 31, 2019

Employee Stock Option Plan	Beginning	Balance	Options unvested	Options unvested	Options exercised	Options exercised	Options	expired Weighted- average Exercise Price (NT$) $ 28.30 37.90 -	EndingBalance	EndingBalance
	Quantity of Options	Weighted- average Exercise Price (NT$)	Quantity of Options - - (22,250)	Weighted- average Exercise Price (NT$)	Quantity of Options	Weighted- average Exercise Price (NT$)	Quantity of Options		Quantity of Options	Weighted- average Exercise Price (NT$)
2006 2013 2015	1,594,999 627,250 985,750	$ 19.86 37.90 12.20		$ - - 12.20	( 6,200) - (43,000)	$ 17.24 - 12.20	( 14,400) (7,000) -		1,574,399 620,250 920,500	$ 19.79 37.90 12.20

March 31, 2018

Employee Stock Option Plan	Beginning	Balance	Options unvested	Options unvested	Options exercised	Options exercised	Options	expired Weighted- average Exercise Price (NT$) $ - 37.90 -	Ending	Balance
	Quantity of Options	Weighted- average Exercise Price (NT$)	Quantity of Options - - (33,000)	Weighted- average Exercise Price (NT$)	Quantity of Options	Weighted- average Exercise Price (NT$)	Quantity of Options		Quantity of Options	Weighted- average Exercise Price (NT$)
2006 2013 2015	1,637,199 768,750 1,476,500	$ 19.84 37.90 12.20		$ - - 12.20	( 13,000) - (60,000)	$ 17.24 - 12.20	- (38,500) -		1,624,199 730,250 1,383,500	$ 19.86 37.90 12.20

b. Shares Buy Back Program

Based on the 2nd and the 3rd Shares Buy Back Program for transferring to employees approved by The board of directors on April 28, 2016 and May 12, 2017, the Company bought back 5,000 thousand and 6,808 thousand shares respectively. The transferred price to employees would be the average purchase price which is respectively $26.53 and $36.11 per share.

Information about Shares Buy Back Programs for the three months ended March 31, 2019 is as follows:

The 2nd Shares Buy Back Program The 3rd Shares Buy Back Program

Employee subscription base date 2016/10/28 2017/02/24 2018/02/08 2018/04/24 2018/07/26 Total	Shares transferred (In Thousands)	The fair value of the right to subscribe (NT$) $ 11.26 11.26 4.3 - -	Employee subscription base date 2017/07/24 2018/07/26 Total	Shares transferred (In Thousands)	The fair value of the right to subscribe (NT$) $ 12.85 -
	2,624 50 120 255 1,765			3,198 3,515
	4,814			6,713

This is the translation of the financial statements. CPAs do not audit or review on this translation.

Compensation cost recognized for share-based payments above for the three months ended March 31, 2019 and 2018 were as follows:

Employee share option plans Shares buy back and transfer to employee program Capital surplus - employee share options		For the Three Months Ended **March 31 **	For the Three Months Ended **March 31 **
		2019 2018 $ 141 $ 909 2,715 6,872 $ 2,856 $ 7,781 For the Three Months Ended March 31
		2019 $ 2,856	2018 $ 7,781

25. OPERATING LEASE ARRANGEMENTS

The Company is Lessee

The Company and its subsidiaries have lease contracts relate to office, plant and part of office equipment, and they would be expired around March 2020. Those agreements are short-term leases and qualified for the recognition exemption to leases so the Company does not recognize right-of-use assets and lease liabilities for these leases. The committed payments for the short-term leases were $17,466 thousand on March 31, 2019

The lease payments recognized in profit or loss for the current period were as follows:

lease payment		For the Three Months Ended **March 31 **	For the Three Months Ended **March 31 **
		2019 $ 9,333	2018 $ 8,965

The future minimum lease payments of non-cancellable operating lease commitments were as follows:

	March 31, 2019	March 31, 2018
Not later than 1 year	$ 22,573	$ 26,153
Later than 1 year and not later than 5 years	240	7,136
	$ 22,813	$ 33,289

26. FINANCIAL INSTRUMENTS

a. Fair value of financial instruments that are not measured at fair value

The management believes the carrying amounts of financial assets and financial liabilities not measured of fair value approximate their fair values.

This is the translation of the financial statements. CPAs do not audit or review on this translation.

• b. Fair value of financial instruments that are measured at fair value on a recurring basis

• 1) Fair value hierarchy

March 31, 2019 Financial assets at FVTPL Listed preferred shares Private funds Structured Investments Total Financial assets at FVTOCI assets Investments in debt instruments Fixed income bonds December 31, 2018 Financial assets at FVTPL Listed preferred shares Private funds Structured Investments Total Financial assets at FVTOCI assets Investments in debt instruments Fixed income bonds March 31, 2018 Financial assets at FVTPL Listed preferred shares Private funds Total Financial assets at FVTOCI assets Investments in debt instruments Fixed income bonds	Level 1 $ 10,710 - - $ 10,710 $ - Level 1 $ 10,540 - - $ 10,540 $ - Level 1 $ 10,200 - $ 10,200 $ -	Level 2 $ - - 61,092 $ 61,092 $ 316,856 Level 2 $ - - 60,500 $ 60,500 $ 313,969 Level 2 $ - - $ - $ 253,553	Level 3 $ - 42,414 - $ 42,414 $ - Level 3 $ - 41,023 - $ 41,023 $ - Level 3 $ - 36,162 $ 36,162 $ -	Total $ 10,710 42,414 61,092
				$ 114,216
				$ 316,856
				Total $ 10,540 41,023 60,500
				$ 112,063
				$ 313,969
				Total $ 10,200 36,162
				$ 46,362
				$ 253,553

There was no type transfer between Level 1 and Level 2 for the three months ended March 31, 2019 and 2018.

This is the translation of the financial statements. CPAs do not audit or review on this translation.

• 2) Reconciliation of financial instruments measured by Level 3 fair value

For the three months ended March 31, 2019

For the three months ended March 31, 2019
Financial assets at FVTPL Balance, beginning of period Purchases Recognized in profit or loss(other income or loss) Effect of foreign currency exchange differences Balance, end of period		For the Three Months Ended **March 31 **
		2019 $ 41,023 1,955 (665) 101 $ 42,414	2018 $ 29,760 7,057 - (655) $ 36,162

• 3) Valuation techniques and inputs applied for the purpose of measuring Level 2 fair value measurement

The fair values of foreign fixed income bonds are determined by quoted market prices provided by the independent third party. The fair values of structured investments are determined by quoted prices provided by the seller.

• 4) Valuation techniques and inputs applied for the purpose of measuring Level 3 fair value measurement

The unlisted equity investment is measured by the market approach, which decides fair value by referring to the recent financing activities of investees or the market transaction prices and status of the similar companies. The Company had carefully evaluated and selected the suitable evaluation method, but the use of different evaluation models or fair values may result in different evaluation results.

• c. Categories of financial instruments

			December 31,	December 31,
	March 31, 2019			2018	March 31, 2018
Financial assets
Fair value through profit or loss (FVTPL)
Mandatorily at FVTPL	$	114,216	$	112,063	$	46,362
Amortized cost (Note 1)		4,658,683		5,661,319		6,047,819
Financial assets at FVTOCI
Investments in debt instruments		316,856		313,969		253,553
Financial liabilities
Amortized cost (Note 2)		2,149,520		2,695,644		2,365,803

• 1) The amounts included financial assets measured at amortized cost, which comprise cash and cash equivalents, notes and trade receivables, other financial assets and refundable deposits, booked in other non-current assets.

• 2) The balances included financial liabilities measured at amortized cost, which comprise trade and other payables and deposits received.

This is the translation of the financial statements. CPAs do not audit or review on this translation.

d. Financial risk management objectives and policies

The Group’s major financial instruments include cash and cash equivalents, trade receivable, other financial assets, financial assets at FVTPL, financial assets at FVTOCI, trade and other payables. The Group’s Corporate Treasury function provides services to the business, coordinates access to domestic and international financial markets, monitors and manages the financial risks relating to the operations of the Group through internal risk reports which analyze exposures by degree and magnitude of risks. These risks include market risk (including currency risk, interest rate risk and other price risk), credit risk and liquidity risk.

The board of directors is solely responsible for established and monitored the framework of risk management of the Group, the board of directors authorized the chairman develop and monitored the risk management policy of the Company with the operation center of the Group, and regularly reported the situation to the board of directors.

The Group’s financial risk management policies are developed for identifying and analyzing the financial risks to the Group, evaluating the impacts of the financial risks, and executing the financial-risk aversion policies. The financial risk management are periodically reviewed to reflect changes to the market and the operations. Through the internal controls, such as training and setting up managing requirements and procedures, the Group is engaged in developing a disciplined and constructive control environment, in order to have all employees understand own responsibilities.

The Group’s board of directors monitors the management on managing the compliance to the financial risk management policies and procedures and reviews the appropriateness of risk management structure. To assist the board of directors, the internal auditors perform period and exceptional reviews on the controls and procedures of financial risk management and report the result of reviews to the board of directors.

1) Market risk

The major financial risks from the Company’s operation were foreign currency exchange risk referred to a) and interest rate risk referred to b).

a) Foreign currency risk

The carrying amounts of the Group’s foreign currency denominated monetary assets and monetary liabilities which were not in the same functional currency with the Group entity at the end of the reporting period are shown in Note 30.

Sensitivity analysis

The Group was mainly exposed to the U.S. dollar.

The following table details the Group’s sensitivity to a 5% increase and decrease in New Taiwan dollars (the functional currency) against the relevant foreign currencies. 5% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis included only outstanding foreign currency denominated monetary items and adjusts their translation at the end of the reporting period for a 5% change in foreign currency rates. A positive number below indicates an decrease in pre-tax profit and other equity associated with New Taiwan dollars strengthen 5% against the relevant currency. For a 5% weakening of New Taiwan dollars against the relevant currency, there would be an equal and opposite impact on pre-tax profit and other equity and the balances below would be negative.

This is the translation of the financial statements. CPAs do not audit or review on this translation.

Profit or loss/ equity		USD Impact	USD Impact
		For the Three Months Ended March 31
		2019 $ 26,192(i)	2018 $ 31,197(i)

• i. This was mainly attributable to the exposure outstanding on USD time deposits, trade receivables, trade, other payables, other current assets and other current liability.

b) Interest rate risk

The Group was exposed to interest risk arising from fixed rate time deposits, bond investments, and floating rate demand deposits and structured investments. The time deposits were at fixed interest rates, and bonds were at fixed rates or with guaranteed minimal interest rates and carried at amortized costs, and, therefore, the variations to interest rates did not affect future cash flows.

The carrying amount of the Group’s financial assets with exposure to interest rates at the end of the reporting period were as follows.

			December 31,	December 31,
	March 31, 2019			2018	March 31, 2018
Fair value interest rate risk
Financial assets	$	3,436,470	$	4,110,624	$ 3,041,109
Cash flow interest rate risk
Financial assets	$	888,136	$	901,327	$ 1,604,460

Sensitivity analysis

The sensitivity analyses below were determined based on the Group’s exposure to interest rates for both derivatives and non-derivative instruments at the end of the reporting period. For floating rate assets, the analysis was prepared assuming the amount of the assets outstanding at the end of the reporting period was outstanding for the whole year. A 25 basis point increase or decrease was used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the reasonably possible change in interest rates.

If interest rates had been 25 basis points higher/lower and all other variables were held constant, the Group’s post-tax profit for the three months ended March, 2019 and 2018 would decrease/increase by $555 thousand and $1,003 thousand, respectively.

2) Credit risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. As at the end of the reporting period, the Group’s maximum exposure to credit risk which will cause a financial loss to the Group due to failure of counterparties to discharge an obligation from the carrying amounts of the financial assets as recognized in the balance sheets.

The Group’s concentration of credit risk was related to the five largest client of trade receivables. Ongoing credit evaluation is performed on the financial condition of trade receivables.

As of March 31, 2019, the Group’s five largest customer took 84% of total trade receivables, the remaining transactions with a large number of unrelated customers, thus, no significant concentration of credit risk was observed.

This is the translation of the financial statements. CPAs do not audit or review on this translation.

Credit risk management for investments in debt instruments

The Group’s investments in debt instruments are financial assets at fair value through profit or loss and financial assets at fair value through other comprehensive income. The Company policy allows only to invest the targets with credit ratings equal to or higher than the investment grade and with low credit risk after the impairment assessment. Credit rating information is provided by independent rating institute. The Company continuously tracks external rating information to monitor changes in credit risk of the invested debt instruments, and also examines other information such as the bond yield curve and the debtor's material information to assess whether the credit risk of the debt instrument investment has increased significantly after the original recognition.

The Company assesses the 12-month expected credit loss based on the probability of default and loss given from default provided by external credit rating agencies. The current credit risk assessment policies and carrying amount of investments in debt instruments for each credit rating are as follows:

Category Performing Category Performing Category Performing	Description Basis for Recognizing Expected Credit Loss The debtor with low credit risk and fully capable paying off contractual cash flows 12 months expected credit loss Description Basis for Recognizing Expected Credit Loss The debtor with low credit risk and fully capable paying off contractual cash flows 12 months expected credit loss Description Basis for Recognizing Expected Credit Loss The debtor with low credit risk and fully capable paying off contractual cash flows 12 months expected credit loss	Expected Credit Loss Ratio 0% Expected Credit Loss Ratio 0% Expected Credit Loss Ratio 0%	Carrying Amount as of March 31, 2019	Carrying Amount as of March 31, 2019
			$ 377,948 Carrying Amount as of December 31, 2018	$ 377,948
			$ 374,469 Carrying Amount as of March 31, 2018	$ 374,469
				$ 253,553

3) Liquidity risk

The Group manages liquidity risk by monitoring and maintaining a level of cash and cash equivalents deemed adequate to finance the Group’s operations and mitigate the effects of fluctuations in cash flows. In addition, bank loans are a significant resource of liquidity for the Group.

As of March 31, 2019, December 31, 2018, and March 31, 2018, the available unutilized short-term bank loan facilities refer to (b) Financing facilities.

This is the translation of the financial statements. CPAs do not audit or review on this translation.

• a) Liquidity and interest risk rate tables for non-derivative financial liabilities

The Group’s remaining contractual maturity for its financial liabilities was based on the undiscounted cash flows, including interest and principal cash flow, of financial liabilities from the earliest date on which the Group can be required to pay.

March 31, 2019

b)	Non-interest bearing December 31, 2018 Non-interest bearing March 31, 2018 Non-interest bearing Financing facilities Unsecured bank overdraft facility, reviewed annually: Amount used Amount unused	On Demand or Less than 1 Year 1-5 Years $ 2,025,158 $ 124,362 On Demand or Less than 1 Year 1-5 Years $ 2,419,860 $ 275,784 On Demand or Less than 1 Year 1-5 Years $ 2,058,895, $ 306,908 March 31, 2019 December 31, 2018 March 31, 2018 $ - $ - $ - 1,207,870 1,300,000 3,346,300 $ 1,207,870 $ 1,300,000 $ 3,346,300

The amounts above included unsecured bank overdraft facility obtained by the Subsidiaries and only guaranteed by the Company credit.

This is the translation of the financial statements. CPAs do not audit or review on this translation.

27. TRANSACTIONS WITH RELATED PARTIES

• a. Balances and transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation and are not disclosed in this note.

• b. Compensation of key management personnel

Long-term employee benefits Short-term employee benefits Post-employment benefits Share-based payments	For the Three Months Ended **March 31 **	For the Three Months Ended **March 31 **	For the Three Months Ended **March 31 **
		2019 $ 3,845 11,893 45 755 $ 16,538	2018 $ 7,196 9,863 89 1,689 $ 18,837

28. ASSETS PLEDGED AS COLLATERAL OR FOR SECURITY

The following assets were provided as collateral for legal proceedings and import customs duties:

				December 31,	December 31,
		March	31, 2019		2018	March	31, 2018
Pledge	deposits	$	4,000	$	4,000	$	4,000

29. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED CONTRACTUAL COMMITMENTS

FocalTech Electronics, Ltd., a subsidiary of the Company, filed a litigation of patent infringement against Novatek Microelectronics Corp. in September 2018 .As of the report issue date, the result of litigation and the effect on financial statements still could not be inferred.

30. SIGNIFICANT ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

The following information was aggregated by the foreign currencies other than functional currencies of the group entities and the exchange rates between foreign currencies and respective functional currencies were disclosed.

The significant assets and liabilities denominated in foreign currencies were as follows:

March 31, 2019

		Foreign		Carrying
	Currencies		Exchange Rate	Amount
Financial assets
Monetary items
USD	$	40,227	30.82 (USD:NTD)	$ 1,239,795
USD		2,665	6.7335 (USD:RMB)	82,151
Financial liabilities

Monetary items

This is the translation of the financial statements. CPAs do not audit or review on this translation.

USD		15,759	30.82 (USD:NTD)	485,697
USD		10,137	6.7335 (USD:RMB)	312,417
December 31, 2018
		Foreign		Carrying
	Currencies		Exchange Rate	Amount
Financial assets
Monetary items
USD	$	39,074	30.715 (USD:NTD)	$ 1,200,151
USD		6,644	6.8632 (USD:RMB)	204,081
RMB		7,832	0.1457 (RMB:USD)	35,049
Financial liabilities
Monetary items
USD		16,911	30.715 (USD:NTD)	519,425
USD		16,024	6.8632 (USD:RMB)	492,173
March 31, 2018
		Foreign		Carrying
	Currencies		Exchange Rate	Amount
Financial assets
Monetary items
USD	$	66,977	29.105 (USD:NTD)	$ 1,949,363
USD		1,965	6.2881 (USD:RMB)	57,198
Financial liabilities
Monetary items
USD		33,664	29.105 (USD:NTD)	979,802
USD		13,840	6.2881 (USD:RMB)	402,818

31. SEGMENT INFORMATION

Segment information is provided to those who allocate resources and assesse segment performance separately. The Company’s operation focuses on the selling and developing portable device related IC under a single operation unit. Thus, the information of operating segment should not be disclosed individually.

This is the translation of the financial statements. CPAs do not audit or review on this translation.