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HIWIN Annual Report 2018

Jul 16, 2019

51962_rns_2019-07-16_23169961-1bc8-4e69-b956-40a32ff79cd6.pdf

Annual Report

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http://mops.twse.com.tw

2018

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2019 . 6 . 11

Table of Contents

I. Letter to Shareholders

i. 2018 Business Report ................................................................................................................... 3
ii. 2019 Business Plan Outline .......................................................................................................... 4
II. Company Profile...................................................................................................................................... 7
III.Corporate Governance Report
i. Organization Chart ..................................................................................................................... 16
ii. Information of Directors and Major Managers .......................................................................... 18
iii. Implementation of Corporate Governance ............................................................................... 35
iv. Information on Accountant’s Fees............................................................................................ 78
v. Information on Change of Accountant ..................................................................................... 79
vi. If the Company’s Chairman, General Manager and Managers Responsible for Financial
and Accounting Affairs Have Held Office in the CPA Firm or Any of Its Affiliated
Companies Within a Year, Their Names, Job Titles and the Periods During Which They		 80
Have Held Such Office Should Be Disclosed…………………...…………………………...
vii. Transfer and Pledge of Shares by the Chairman, Supervisors, Managers and Shareholders
Holding more than 10% of the Company’s Shares within the Latest Year and up till the 80
Publication Date of This Annual Report…………………………………………………….
viii. Information of the 10 Largest Shareholders Who Are Related as Stated in Statement of
Financial Accounting Standards No. 6, or Couples or Relatives Within the Second Degree 82
of Kinship ……………………………………………………………………………………
ix. The Shareholdings and Joint Shareholding Held by the Company, its Directors, its
Supervisors, its Managers and Affiliates Controlled Directly or Indirectly by the Company 84
in the Same Invested Businesses ……………………………………………...……………..
IV. Capital Overview
i. Capital and Shares ........................................................................................................................ 85
ii. Issuance of Corporate Bonds ........................................................................................................ 91
iii. Issuance of Preferred Stocks ...................................................................................................... 91
iv. Issuance of Global Depositary Receipts (GDR) ........................................................................ 91
v. Exercise of Employee Stock Option Plan (ESOP) ....................................................................... 91
vi. Acquisition of New Restricted Stock ......................................................................................... 91
vii. Mergers and Acquisitions of New Shares Issued by Other Companies .................................... 91
viii. Execution of Capital Utilization Plan ...................................................................................... 91
V. Business Overview
i. Business Content ......................................................................................................................... 92
ii. Market, Production and Sales Status ........................................................................................... 103
iii. Employee Data of the Recent Two Years and Up to the Publication Date ................................. 107
iv. Information Regarding Expenditure on Environmental Protection ............................................. 107
v. Labor Relations ............................................................................................................................ 110
vi. Important Contracts ..................................................................................................................... 113
VI. Financial Overview
i. Condensed Balance Sheets and Statements of Income for the Past Five Years ............................ 114
ii. Financial Analyses for the Last Five Years .................................................................................. 118
iii. The Audit Committee’s Audit Report of the Financial Report for the Past Year ....................... 122
iv. The Financial Report and the Accountant’s Audit Report for the Past Year............................... 123
v. Consolidated Financial Statements Audited by CPA for the Past Year ....................................... 123
vi. The Impacts of Any Financial Difficulties Encountered by the Company or Its Affiliates in
the Past Year and up to the Annual Report Publication Date on the Company’s Financial 123
Status…………………………………………………………………………………………
VII. Review and Analysis of Financial Status, Financial Performance, and Risk Management
i. Financial Status.............................................................................................................................. 124
ii. Financial Performance .................................................................................................................. 125
iii. Cash Flow .................................................................................................................................... 126
iv. Effects of Major Capital Expenditure on Financial Business of the Past Year ........................... 126
v. Investment Policy of the Past Year, Main Causes for Profits or Losses, Improvement Plan
and Investment Plan for the Coming Year…….……………………………………………… 127
vi. Risk Analysis ............................................................................................................................... 127
vii. Other Important Matters ............................................................................................................. 132
VIII. Special Disclosures
i. Information on Affiliates ............................................................................................................... 133
ii. Private Placement of Securities during the Past Year and up to the Annual Report Publication
Date ...............................................................................................................................................		 138
iii. Holding or Disposal of Stocks of the Company by Subsidiaries in the Past Year and up to
the Annual Report Publication Date ...........................................................................................		 138
iv. Other Necessary Supplemental Information ................................................................................ 138
v. Events Having Significant Impacts on Shareholders’ Equity or Security Price According to
Article 36.2.2 of Securities Exchange Act in the Past Year and up to the Issuance of Annual 138
Report…………………………………………………………………………………………
Appendix
Independent Auditor’s Report .......................................................................................................... 139

I. Letter to Shareholders

To HIWIN’s shareholders:

The consolidated revenue of HIWIN Technologies Corporation was 29.33 billion NTD in 2018, with an annual growth of 38.6%, which is once again the record high in history. This number is far better than the 6.5% of the domestic overall manufacturing industry. The economy has been steadily growing in first half of 2018. Industries, such as automation, semiconductors, panel displays, smartphones, automobiles, and new energies are vigorously expanding, and global demand of key components is getting short of demand. HIWIN ’ s strategy is continuously increasing productivity domestically and overseas, and optimizing manufacturing process efficiency. By this way, HIWIN has made itself an important partner with well-known automotive brand, semiconductor equipment manufacturers and various essential industries during the critial moment of severe global market shortage, which showing the results of the continuous cultivation.

Multiple important achievements have been made in various markets in 2018. It is the 25th anniversary of HIWIN Germany, and its annual revenue reached a billion euros for the first time ever. HIWIN Germany also expands its business cooperation with the world ’ s most famous pneumatic component manufacturer. HIWIN has also surpassed various well-known competitors in the conservative Japan market, and even successfully came to the aid of multiple well-known Japanese semiconductor equipment manufacturers during the period of material shortage. This leads HIWIN to become the second largest linear motion and system technology supplier in Japan. After the completion of HIWIN China ’ s Phase 1 factory, the production capacity has largely increased, and can rapidly supply product in China market. HIWIN China also built up system integration team, and this is getting prepared for the demands of China's transformation to smart manufacturing. Because of the manufacturing industry return back to the United States, HIWIN USA will have better performance in 2019.

In order to meet the rapidly growing demands of smart manufacturing and automation, HIWIN is aggressively expanding its global manufacturing and R&D foundation. HIWIN has increased the production capacity because Yunlin Science Park Plant and new Dapumei Plant have completed recently. HIWIN Japan and Luren Precision Ltd. Co. have purchased lands in Kobe and in Fongshan Industrial Area in Hsinchu County. Production capacity and service capability can be increased. HIWIN Italy and HIWIN Korea are continuously evaluating the new factory expansion in order to lay a solid foundation for HIWIN to become the global leading brand.

HIWIN has continuously received domestic and international recognition in R&D innovation and corporate operation performance. The Datoker robot reducer AKA the heart of robot, HIWIN is the third company in the world who can meet international standards for this product. The i4.0BS ballscrew demonstrates the functions of smart monitoring and life expectancy, and was awarded the 2018 Enterprise Asia International Innovation Award. HIWIN has received the Gold and Silver Medal of the Ministry of Economic Affairs ’ Taiwan Excellence Awards consecutively for the past 19 years, gained the recognition of top 5% ranking in TWSE ’ s evaluation of listed companies consecutively for the past 3 years; awarded 5 honors including the “ Taiwan Corporate Sustainability Awards- Top 50 Performance ” by the Taiwan Institute for Sustainable Energy and the “ Outstanding Sustainability Award ” by the British Standards Institution; selected for the “ Common Wealth Excellence in Corporate Social Responsibilities Award ” consecutively for the past 12 years from 2007 to 2018. These accolades are of many achievements from the long term efforts on R&D and operations made by the HIWIN team.

HIWIN ’ s contribution to CSR continues to be education criteria. HIWIN has held the “ HIWIN Thesis Award ” and the “ HIWIN Doctoral Award ” , inciting vigorous participation from students and

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professors who have mechanical major background from Taiwan and China. This will cultivate future excellent mechanical talents. HIWIN is leading and promoting the “ Automation Engineers Certificate ” and “ Robotics Engineers Certificate ” . These two certificates will increase professional level of smart automation field in Taiwan. The “ JIMTOF ” show learning trip for university students has inspired young innovative minds for precision machinery. The “ HIWIN robot competition ” provided the best platform for young students with a passion for robotics to express their creativity. The “ Greater Taichung lychee value-added preservation technique ” has collectively promoted by HIWIN, NCHU, and the farmers ’ association. This has successfully promoted to the Japan market, and has made an effort to Taiwanese agriculture industry.

Looking on 2019, due to the trade war between China and the U.S., recession of the European economy, the growing power of China has slowed down, the IMF predicts the global economic growth to be only 3.5%. This is the lowest number in the past three years. Although we are facing challenges from harsh environments, the demand of smart manufacturing and automation continues to be strong, and this is a crucial moment for the global manufacturing industry ’ s transformation. This year will be full of challenges and opportunities for HIWIN. HIWIN expects to become the pioneer in smart manufacturing, providing total solution for system integration, satisfying smart manufacturing demands of global clients, accompanying clients to a future of industrial upgrade. We are expecting all the shareholders, government institutions, bank groups to continue to offer support and advice in a year full of uncertainty. All staff of HIWIN will do our best in order to reach the next milestone for HIWIN ’ S 30-year-anniversary and sales turnover exceeding a billion US dollar.

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2018 Business Plan Implementation Results are as follow:

i. 2018 Business Report

(i) Business Plan Implementation Results

2018 consolidated financial statement revenue was 29,333,129 thousand dollars, a 39% increase compared to 21,164,764 thousand dollars in 2017. Operating income was 6,419,195 thousand dollars, a 92% increase compared to 3,345,101 thousand dollars in 2017. Income before Tax was 6,095,960 thousand dollars, a 217% increase compared to 2,812,135 thousand dollars in 2017. Consolidated net income attributed to stockholders of the Company was 5,392,257 thousand dollars, a 197% increase compared to 2,738,019 thousand dollars in 2017. Earnings per share was 18.44 dollars, a 94% increase compared to 9.49 dollars in 2017.

(ii) Financial Revenues and Expenditures and Profitability Analysis

1. Financial Revenues and Expenditures

Unit: thousand NTD

. Financial Revenues and Expenditures Unit: thousand NTD Unit: thousand NTD
Year
Item		 2018 Certification of Finance
Amount Percentage
Net Operating Revenue 29,333,129 100
Cost of Goods Sold or Manufacturing 17,703,549 60
Gross Profit 11,629,580 40
Operating Expenses 5,210,385 18
Operating Income 6,419,195 22
Net Non-operating Expenses (323,235) (1)
Income before Tax 4,890,423 17
Consolidated Net Income Attributed to Stockholders of the Company 5,392,257 19

Note: This is a consolidated financial statement. The Company did not disclose a budget plan in 2017, therefore no disclosure of the budget.

2. Profitability Analysis

. Profitability Analysis
Item 2018
Return on Asset (%) 11.59
Return on equity (%) 23.83
Operating Income to Capital Stock (%) 213.57
Profit Before Tax to Capital Stock (%) 202.82
Profit Margin (%) 16.67
Earnings Per Share (dollar) 18.44

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(iii) Research and Development

  1. 2018 R&D fund was 5% of the revenue. There were 237 patent applications and 205 patent certifications acquired. Until the end of 2018, we have acquired 1724 valid patent certifications

  2. 2018 domestic juristic-person rank in top 100 Intellectual Property Office by Ministry of Economic Affairs.

  3. (1) No.65 in patent application.

  4. (2) No.72 in invention patent announce certification.

  5. (3) No.47 in patent announce certification.

R&D result in metal steel and precision machinery fields is the best in the country and continues to stay on top.

  1. Endoscope supporting robotic arm MTG-H100 series and the micro ballscrew Super Z series were respectively rewarded the Gold and Silver Medal of the Department of Economic Affairs’ Taiwan Excellence Award. The i4.0BS smart ballscrew was rewarded the product category of the 2018 International Innovation Award.

  2. R&D Results:

  3. (1) Completion of developing the second generation smart ballscrew prototype

  4. (2) Completion of full format mass-production new circulation ballscrew (Super Z) Type 1

  5. (3) Completion of develop new cooling C3 ballscrew

  6. (4) Completion of prototype development of the super-micro linear guideway.

  7. (5) Completion of development and mass-production of the covered roller linear slide

  8. (6) Completion of developing the entire series of Torque-resistant linear slide

  9. (7) Completion of development and mass-production of the DATORKER harmonic reducer

  10. (8) The parallel robotic arms RD403-110-GB, RD403-1100-PR-GB obtained the CE certification and a food grade certification.

  11. (9) Mass production of the joint robotic arms RT610 Series

  12. (10) The joint robotic arm RA605-710-GB obtained the CE certification

  13. (11) The equipment front end module passed the SEMI S2 certification

  14. (12) Completion of prototype development on the single-armed cassette arm

  15. (13) Completion of prototype development on the panel arms

  16. (14) Completion of development and mass-production of the RAS series single supporting Torque motor rotating worktable

  17. (15) Continuation of development and mass-production of endoscope supporting robotic arms.

ii. 2019 Business Plan Outline

(i) Business principle

  1. Develop smart manufactured key products, provide clients with smart manufacturing transformation

  2. Accelerate manufacturing smart automation, increase competitiveness.

  3. Integrate marketing, provide total solution services for the system’s electromechanical integration of components, and subsystems

  4. Expand globalization and production capacity, provide services swiftly

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(ii) Estimated sales numbers and basis

1. 2019 Estimated Sales Numbers:

Unit: thousand unit

Product Sales Amount
Ballscrews 2400
Linear Guideway 27,000
Industrial Robotics 3,000
Total 32,400

2. Basis:

In accordance with global economy trend, operating environment in various industries, market demand and supply and competitive situation, analysis business developments of current clientele and development progress of potential clients, and consider various factors including production and sales balance as basis, to estimate the sales numbers of 2019.

(iii) Important production and sales policy

  1. Accelerate smart automation manufacture, flexibly apply to the manufacture line, achieve effectiveness increase, cost decrease, high quality and stability

  2. Continue to cultivate globally, distribute production capacity in essential markets, provide supply and services nearby

  3. Integrate electro mechanics with marketing, establish a close alliance of a Partner Ecosystem

  4. Build firm partnerships in the supply chain of important industries

(iv) Future developing strategy

  1. Electromechanical integration, provide total solutions, initiate smart manufacturing for the industry and clients

  2. Enhance the software/hardware competitiveness of industrial robotics

  3. Continue to develop high add-on value products, expand to new application fields

  4. Extend core techniques to develop diversified new products, expand distribution of industries such as semiconductors, new energy, medical, 5G, automobiles

(v) Effects on external competition environment, regulation environment, and overall

operation environment

Looking on 2019, the impact of the trade war between China and the U.S., slow growth of the European economy, and a possible no-deal Brexit, the IMF predicts the 2010 global economy growth to be 3.5%, 0.4% lower than 2018’s, the lowest statistic in the past 3 years. Primarily affected by the trade war between China and the U.S., and the domestic demand market being not as expected, the estimated 2019 economic growth is at 6.3%, lower than 2018’s. Europe, on the other hand, due to weak consumption and investment in major countries such as Germany, France, and Italy, they’re unable to play the part of hoisting regional growth, 2019 economic growth is at approximately 1.4~1.6%, lower than 2018. Japan has invested in numerous infrastructures due to the upcoming Olympics, however, in light of the trade war and automobiles tariffs, the growth thrust brought on by the TPP can be undermined, estimated 2019 economic growth is at 1.3%. Although the U.S. economy is expanding and pushing for the reflux of the manufacture industry, many institutions expect the 2019 U.S. economic growth to be lower than 2018, estimated at about 2.3~2.5%. India’s industrial economy looks to be good still, with a strong growth trend, but the impact can only be truly revealed until after the presidential election. As for Vietnam and other ASEAN

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countries, although their economy is expected to perform a slight growth, it would still be affected by general election results of various countries and unstable factors of the world trade situation.

On the competitive environment, due to the high demand of the component market, competitors are building factories or increasing production capacities, drawing new companies to invest in the manufacture of linear drive products, a slow economy would heat up the competition, causing unfavorable outcomes such as over supply and low price competitions. The impact of the trade war between the U.S. and China would also accelerate China’s industrial upgrade, Chinese companies have been merging and acquiring well-known foreign corporations, obtaining techniques and patents swiftly by doing so, when its manufactures have successfully upgraded and elevated quality, they would make a forceful competitor to HIWIN, and bring about major repercussions to the global industry.

Although 2019 is filled with challenges, it could be crucial moment to gain maximum results. HIWIN has always refined in-factory automation and smart manufacturing, researching and developing innovative products with high add-on value, we have the most intact key components, subsystem parts, and system parts required by electromechanical integrated products and smart automation, the products, services, and total solutions we provide have become the best collaborator for clients to execute industrial upgrade, move towards smart automated Industry 4.0, in this case hide facing the rapidly and fiercely transforming markets and environments, we are confident to face more severe challenges, stably root the HIWIN brand globally, march toward the objective of number one worldwide

HIWIN Technologies CORP. Chuo,Yung-Tsai, Chairman

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II. Company Profile

1. Establishment Date

1989 ● Established in October.

2. Company History

1992 ● Set up a subsidiary in USA.

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  • Acquired ISO 9001 certification through SGS, UK.

1993 ● Acquired HOLZER and set up a subsidiary in Germany.

  • Acquired Aircraft Quality Systems Approval by McDonnell Douglas Corp., USA.

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  • Precision Ballscrew Awarded the 1st “Taiwan Excellence Silver Award”.

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  • 1996 ● Merged with Finest Ballscrew Company, Taiwan

  • 1997 ● Acquired ISO 14001 certification from TÜV Germany

  • 1999 ● Linear Bearing Awarded the 7th “Taiwan Excellence Gold Award”.

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  • Strategic alliance formed with Parker Hannifin, USA.

  • ●Set up a subsidiary in Japan.

2000 ● HIWIN Germany reinvested HIWIN Switzerland

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  • Awarded the “Excellence Award” of the 8th “Industrial Technology Advancement

Award” from MOEA.

  • ●Awarded the 1st “Industrial Excellence Award” by MOEA.

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  • ●HIWIN Linear Guideway was Awarded the 8th “Taiwan Excellence Award”.

  • Ranked 79 in Top Patents 100 of National Institutional Corps in Taiwan.

2001 ● HIWIN Germany reinvested HIWIN Czech Republic.

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  • High Speed Ballscrew Awarded 9th “Taiwan Excellence Silver Award”.

  • Ranked 816th in Top 1,000 Manufacturers 2001 by Common Wealth Magazine.

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  • 2002 ● Self-lubricated Linear Guideway Awarded the 10th “Taiwan Excellence Silver Award”.

  • ●Awarded the Gold Medal of the 11th “National Invention Award” by MOEA.

  • ●Awarded “Outstanding Promoter” of “National Award of Excellence-Taiwan”.

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  • Ranked 65 in Top 100 Patents of National Institutional Corps in Taiwan.

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  • Ranked 855 in Top 1,000 Manufacturers 2002 by Common Wealth Magazine.

  • ●Acquired OHASA 18001 Occupational Safety and Health Certificate by TÜV Germany.

  • 2003 ● Precision Linear Module was awarded the 11th “National Product Image Gold Award”.

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  • Purchased a land with an area of 15,332 tsubo in Yun-Lin Science Industrial Park and t

  • built plant in the first phase.

  • Ranked 734 in Top 1,000 Manufacturers 2003 by Common Wealth Magazine.

  • 2004 ● Awarded “Most Outstanding” of the 12th “Industrial Technology Advancement Award” by MOEA.

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●Continued the expansion of the new factory in Yun-Lin Science Industrial Park and started production.

  • ●R&D Center in Tokyo, Japan was founded.

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  • ●Hosted the first HIWIN THESIS AWARDS.

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n ●Ranked 603 in Top 1,000 Manufacturers 2004 by Common Wealth Magazine.

  • 2005 ● Awarded the 2 Taiwan Superior Brands Award by Bureau of Foreign Trade, MOEA.

  • ●All-Electric Injection Molding Machine Ballscrew was awarded the 11th “National Product Image Gold Award”.

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  • ●Selected “Enterprise Citizen” by Common Wealth Magazine.

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  • ●Ranked 79 in Top 100 Patents of National Institutional Corps in Taiwan.

  • Ranked 552 in Top 1,000 Manufacturers 2005 by Common Wealth Magazine.

  • 2006 ● Won First Place in the competition of acquiring new land in Taichung Precision Machinery & Innovation Park planned by Taichung City Government among over 500 companies and got a land of 12,665 tsubo.

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  • Awarded the 3 Taiwan Superior Brands Award by Bureau of Foreign Trade, MOEA.

  • ●Super S Ballscrew Awarded the 14th “Taiwan Excellence Silver Award”.

  • New factory started in Chicago, US.

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  • ●Ranked 40 in Top 100 Patents of National Institutional Corps in Taiwan.

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  • ● Ranked 513 in Top 1,000 Manufacturers 2006 by Common Wealth Magazine.

  • 2007 ● Ranked 4 of “Excellence in Corporate Social Responsibility” honor in mid-size company category from Common Wealth Magazine.

  • ●Selected as the benchmarking company in “Flagship Enterprise Development Project” by MOEA.

  • ●Groundbreaking for the new headquarter in Taichung Precision Machinery & Innovation Park.

  • ●Acquired new land and started new plant in Tanzi.

  • ●Acquired ISAT certification from Applied Material (USA) and became a qualified supplier.

  • ●Ranked 32 in Top 100 Patents of National Institutional Corps in Taiwan.

  • HIWIN Germany acquired new factory and land with an area of about over 2000 square

meters to merge with the old plant and expand production capacity. 

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  • ●RG Linear Guideway Awarded the 10th “Taiwan Excellence Silver Award”.

  • Ranked 440 in Top 1,000 Manufacturers 2007 by Common Wealth Magazine.

  • 2008 ● Ranked 3 of “Excellence in Corporate Social Responsibility” honor in mid-size company category from Common Wealth Magazine.

  • ●105,214 m² land in Dapumei Intelligent Industrial Park Registered.

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  • ●E2 Series Awarded the 16th “Taiwan Excellence Gold Award”.

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  • ●Awarded the Industry Contribution Award of “National Invention

Award” 2008 from Intellectual Property Office, MOEA.

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  • ●Hosted the first HIWIN Intelligence Robotic Competition.

  • ●Ranked 36 in Top 100 Patents of National Institutional Corps 2008 in Taiwan.

  • Obtained the certification of Taiwan Occupational Safety & Health Management System t

  • (TOSHMS).

  • ●Ranked 380 in Top 1,000 Manufacturers 2008 by Common Wealth

Magazine.

2009 ● Ranked 3 of “Excellence in Corporate Social Responsibility” honor in mid- size company category from Common Wealth Magazine.

  • ●Energy Conservation Driving Module R1 Series was Awarded the 17th “Taiwan

Excellence Gold Award”.

  • Stocks are listed for public trading

  • ●Awarded Taiwan Superior Brands Award 2009 by Bureau of Foreign Trade, MOEA.

  • ●CEO was honored the Gold Merit winner of National Innovation Award (Individual Category) by Intellectual Property Office, MOEA.

  • ●Honored with the Excellent Corp. Award for Reserve Military Officer by Ministry of National Defense.

  • ●20th anniversary of HIWIN.

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  • ●Reinvested MegaFabs Motion Systems LTD in Israel. s

  • ●Ranked 33 in Top 100 Patents of National Institutional Corps 2009 in Taiwan.

  • ●Ranked 471 in Top 1,000 Manufacturers 2009 by Common Wealth Magazine.

  • 2010 ● Additional 29,514 m² land in Dapumei intelligent Industrial Park Registered, total land area reaching 45,286 m².

  • ●Energy Conservation Driving Module SK Series Awarded the 18th “Taiwan Excellence t

  • Gold Award”.

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  • ●Ranked 59 in Top 100 Patents of National Institutional Corps 2010 in Taiwan.

  • Received the 2 Contribution Award for Job Creation 2010 from Executive Yuan.

  • Honored with the Contribution Award for Providing Job Opportunities to Veterans by

  • Executive Yuan.

  • ●Received the Contribution Award for Job Creation from Taichung City Government.

  • ●Awarded the National Champion Award by MOEA for committing public facilities green landscaping, and employing specialists for long term maintenance.

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  • ●Ranked 313 in Top 1,000 Manufacturers 2010 by Common Wealth Magazine.

  • Ranked 2 of “Excellence in Corporate Social Responsibility” honor in s

  • mid-size company category from Common Wealth Magazine.

  • 2011 ● Received the 1 Contribution Award for Job Creation from Executive Yuan.

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  • Energy-Saving & Thermal-Controlling Ballscrew C1 Series Awarded the 19th “Taiwan

  • Excellence Gold Award”.

  • ●Awarded Taiwan Top 100 Brands by Bureau of Foreign Trade, MOEA.

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  • Awarded the first “ Monte Jade Innovation Award ” by Monte Jade Science and

  • Technology Association.

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  • ●Awarded the first “Taiwan Green Classic Award” by MOEA.

  • ●Awarded Taiwan Top 10 Innovative Enterprises 2011 by MOEA.

  • ●Awarded National Enterprises Innovation Award.

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  • ●Received the “Taiwan Train Quality System-Enterprise TTQS” Silver Award.

  • Hosted 1st Annual HIWIN Doctoral Dissertation Award.

  • ●CEO was honored with the Management of Technology Award from Chinese Society for Management of Technology.

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  • ●CEO was honored with SUPER MVP Manager of the year from Manager Today Magazine.

  • ●CEO was awarded the Honorary Doctor of Engineering from National Kaohsiung First University of Science & Technology.

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  • ●CEO received the Honorary Professor glory from Dalian University of Technology.

  • Ranked 33 in Top 100 Patents of National Institutional Corps 2011 in Taiwan.

  • Ranked 223rdin Top 1,000 Manufacturers 2011 from Common Wealth Magazine.

  • 2012 ● Honored with the Contribution Award for providing job opportunities to alternative military service from Ministry of the Interior.

  • ●Acquired Greenhouse Gases Emissions ISO14064-1 Certificate.

  • ●Acquired Product Carbon Footprint PAS 2050 Certificate.

  • ●Ranked No.1 of the Best Business Performance from 2009~2011 by Common Wealth

Magazine.

  • ●Awarded for the safety working environment record of continuously occupational accidents or injuries free by Council of Labor Affairs.

  • ●Ranked the No.21 of the Taiwan “2012 Excellence in Corporate Social Responsibility”

under the category of large-scale enterprise by Common Wealth Magazine.

  • ●Recirculation Divide Ballscrew RD Series Awarded with the 20th “Taiwan Excellence Gold Award”.

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  • ●The new HIWIN Global Headquarter and R&D Center were officially opened.

  • Forbes 2012 Honor “200 Best Under a Billion”.

  • ●Awarded “Taiwan Top 20 Innovative Enterprises” in 2012 by Ministry of Economic

Affairs.

  • ●TTQS Certificate of Taiwan Train Quality System Enterprise Version Gold.

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  • CEO was awarded the Honorary Doctor of Business Administration from National t

  • Chung Cheng University.

  • Ranked 257 in Top 1,000 Manufacturers 2012 from Common Wealth Magazine.

  • CEO was awarded the 6th National Excellence Manager Outstanding Achievement

Award by Chinese Professional Management Association

  • Associate Vice President Dr. Jerry Chiu was awarded the 30th National Excellence R&D Manager Award.

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  • ●Operational Headquarters Received the honor of “Taichung Outstanding Healthy

Workplace” by Bureau of Health Promotion, Department of Health, ROC.

  • 2013 ● Awarded the first Taiwan Mittelstand Award.

  • ●Crossed Roller Bearing Series Awarded with the 21st “Taiwan Excellence Gold Award” .

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  • ●Received the “Taiwan Train Quality System-Enterprise TTQS” Gold Award.

  • Acquired ISO13485 certification.

  • ●Honored with the SGS Merit Award by SGS Yarsley Ltd., UK.

  • ●Awarded “Taiwan Top 20 Innovative Enterprises” by Ministry of Economic Affairs.

  • ●CEO was awarded the Honorary Alumnus with Golden Eagle Award by Tamkang University.

  • ●Started Management Associate Program to develop international marketing talents.

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  • HIWIN signed the Industry-Academy Collaboration contract with Taichung Industrial

High School and National Taiwan University of Science and Technology, to foster the future leaders.

  • ●“Chuo Yung-Tong Memorial Library” donation contract signing ceremony was held in Dec. 2013.

  • ●HIWIN released the first “Corporate Social Responsibility Report”. th

  • ●Subsidiaries in Singapore, South Korea, and Italy, were founded.

  • ●Ranked 259 in Top 1,000 Manufacturers 2013 from Common Wealth Magazine.

  • 2014 ● Tangential External Recirculation Ballscrew Super T Series Awarded with the 22nd

  • “Taiwan Excellence Gold Award”.

==> picture [17 x 35] intentionally omitted <==

  • ●Introduced the Toyota Production System (TPS) for improvement.

  • ●Ranked No.50 of “The World’s Most Innovative Growth Companies 2014” by Forbes.

  • ●HIWIN was selected as No.1 weighted component in the investment benchmark Index

  • “The ROBO-STOX Global Robotics & Automation Index “among 81 promising worldwide companies.

==> picture [19 x 41] intentionally omitted <==

  • HIWIN established collaborative research centers with National Tsing Hua University.

  • ●HIWIN-MPEI (Moscow Power Engineering Institute) Precision Electrical Engineering Research Center established.

  • ●HIWIN teamed up with industrial computer supplier Advantech Co.

11

  • Stone ceremony for the second factory of HIWIN GmbH was held.

  • Awarded Taiwan Top 20 Innovative Enterprises by MOEA.

==> picture [26 x 36] intentionally omitted <==

  • ●HIWIN Robotic Gait Training System acquired the CE Medical Devices Certificate.

  • Subsidiary in Suzhou, China, was founded.

  • ●Held the groundbreaking ceremony of “Chuo Yung-Tong Memorial Library”.

  • Awarded the “Taiwan Corporate Sustainability Awards (TCSA)” and honored with

  • “Social Inclusion Award”.

==> picture [26 x 32] intentionally omitted <==

  • ●Selected as one of the favorite enterprises for R&D alternative service. th

  • ●Acquired the Certification of Taiwan Intellectual Property Management System (TIPS).

  • ●Ranked 227 in Top 1,000 Manufacturers 2014 from Common Wealth Magazine.

  • 2015 ● Acquired 48% stake in Luren Precision Co., Ltd.

  • ●Acquired the certification of ISO 50001 Energy Management System.

  • ●Ranked No.37 of “The World’s Most Innovative Growth Companies 2015” by Forbes.

  • ●Robotic Gait Training System MRG-P100 Awarded with the 23rd “Taiwan Excellence Gold Award”.

==> picture [30 x 30] intentionally omitted <==

==> picture [23 x 44] intentionally omitted <==

  • ●General Manager Enid Tsai was honored “50 Power Businesswomen in Asia” by Forbes, the only one from Taiwan.

  • ●Released “Corporate Social Responsibility Report” 2013~2014 and acquired AA1000 certification.

  • ●Awarded Taiwan Corporate Sustainability Awards (TCSA) and

Growth through Innovation Awards.

==> picture [22 x 42] intentionally omitted <==

  • ●Ranked the No.31 of the Taiwan “Excellence in Corporate Social Responsibility” under the category of large-scale enterprise by Common Wealth Magazine.

  • Cooperated with China Medical University to set up a R&D Center.

  • ●Entered Top 20 Innovative Companies selected by MOEA.

  • ●Started a new project of “Jingke Plant II”.

==> picture [22 x 43] intentionally omitted <==

  • ●Held the groundbreaking ceremony of dormitories of Taichung City Precision Machinery Innovation Technology Park.

  • ●CEO was awarded an honorary doctorate of philosophy from National Tsing Hua

  • University and an honorary doctorate of engineering from Taiwan University of th

  • Technology.

  • ●Ranked 220 in Top 1,000 Manufacturers 2015 from Common Wealth Magazine.

  • 2016 ● Rated as No.5 in Top100 Global Growth Enterprises by Nikkei Business Publications. nd

==> picture [58 x 36] intentionally omitted <==

  • Held cornerstone-laying ceremony for a new plant of HIWIN China.

  • Ranked in the top 5 percent of listed companies in the 2 Corporate Governance

Evaluation.

12

  • The single axis robot module (HM series) won iF and Red Dot awards. th

  • ● Delta Robot, a parallel one, won Taiwan Excellence Silver Award.

==> picture [21 x 39] intentionally omitted <==

  • CEO Ranked 25 in Top 50 Taiwanese CEOs 2015 selected by Harvard Business

Review.

  • Signed a memorandum with IRCAD/AITS on “Robotic Endoscope Holder” surgery

  • training courses and promotion.

  • Chairman Eric Y. T. Chuo received an honorary doctorate of science from China Medical University.

  • CNC rotating table achieved EU CE certification.

  • HIWIN and Etron signed a memorandum.

  • t

  • HIWIN, HIWIN MIKROSYSTEM and Global MEMS signed a memorandum.

  • Awarded “The 17 National Standardization Award” by the Bureau

==> picture [58 x 41] intentionally omitted <==

of Standards, Metrology & Inspection, MOEA.

  • New factory started in the 2 factory area in HIWIN Germany.

  • Awarded “Taiwan Corporate Social Award”, “Taiwan Corporate Social Award-People Development Awards”, and the “Gold Award of Top 50 Taiwan Corporate Sustainability Reports” by Taiwan Institute for Sustainable Energy.

==> picture [39 x 39] intentionally omitted <==

  • HIWIN and Siemens signed a memorandum.

  • Held the groundbreaking ceremony of a new factory in Chiayi Dapumei Precision Machinery Park.

  • Robotic Gait Training System achieved SNQ certification and won the bronze medal of

  • “National Biotechnology & Medical Care Quality Awards”.

  • General Manager Enid Tsai won Kwol-Ting Li’s Management Award.

  • Assistant General Manager Wu Yueqin was selected as Excellent Accountant.

  • Executive Assistant Manager Liao Kehuang won National Manager Excellence Award.

  • Executive Assistant Manager Chen Congren National Production Manager Excellence Award.

  • Ranked the No.14 of the Taiwan “Excellence in Corporate Social Responsibility” under the category of large-scale enterprise by Common Wealth Magazine.

  • 2017 ● Signed a contract “ Exported Litchi Cultivation Pattern and Value-Added Key Preservation Technology ” with National Chung Hsing University and Taiping District t

  • Farmers’ Association.

  • ●Wafer Robot won the 25 Taiwan Excellence Silver Award.

  • Ranked in the top 5 percent of listed companies in the 3 Corporate Governance s

  • Evaluation.

  • Ranked 201 in Top 1,000 Manufacturers 2016 from Common Wealth Magazine.

  • Obtained market license from TFDA for the “ Bath Assistive Equipment ”

13

  • Ranked as No.1 in ASIA 300 Index for 179% market value increased rate in one year by

  • Nikkei Business Publications.

  • ●Awarded 2017 “Good Design Award” in Japan for the electric gripper.

  • Awarded “Sustainable Practice Award” by BSI Standard.

  • ●Held the ceremony of new plant started in HIWIN China.

  • ●Held the opening ceremony for “Chuo Yung-Tong Memorial Library”.

  • ●CG series won the 26 Taiwan Excellence Silver Award.

==> picture [20 x 40] intentionally omitted <==

  • ●Acquired the Certification of Taiwan Intellectual Property Management System (TIPS) for 4 years in a row.

  • ●Awarded Gold in Taiwan Corporate Sustainability Awards (TCSA) in Electronic t

  • Information Manufacturing Group.

  • t

  • ●CEO was awarded Outstanding Award in the 4 National Intelligence Award.

  • ●General Manager Enid Tsai was recognized in the 35 National General Manager t

Award.

  • 2018 ● Ranked in the top 5 percent of listed companies in the 4 Corporate Governance

Evaluation.

  • t

  • ● Ranked 163rdin Top 1,000 Manufacturers 2017 from Common Wealth Magazine.

==> picture [22 x 50] intentionally omitted <==

==> picture [25 x 43] intentionally omitted <==

  • Ranked 534 in Top 1,000 market value in Cross-Strait 2018 from Business Today.

  • The endoscope supporting robotic arm MTG-H100 series was awarded the Gold Medal of the 27th Taiwan Excellence Award

  • The micro ballscrew Super Z series, was awarded the Silver Medal of the 27th Taiwan Excellence Award

==> picture [35 x 35] intentionally omitted <==

  • Received the Certificate of the Taiwan Intellectual Property Management System

  • The Equipment Front End Module received the SEMI S2 international safety provisions certification

==> picture [33 x 33] intentionally omitted <==

  • The smart ballscrew i4.0BS was awarded the 2018 International Innovation Award

  • Received the TCSA’s “Top 50 Comprehensive Performances Award”, “Individual Performance-

Innovative Growth Award”, “Individual Performance- Gender Equality Award”, “Individual

Performance- Talent Development Award”, and the Gold Medal for the “Reporting Category - Electronic Information Manufacturing Group”

  • Received the “Outstanding Sustainability Award” from the British Standards Institution

  • Received an A grade certificate of the Japanese Sumitomo Group’s hard labor evaluation

==> picture [34 x 34] intentionally omitted <==

==> picture [41 x 31] intentionally omitted <==

  • The subsidiary in Germany received the “Best Supplier Award” from HELLER

  • HIWIN signed a memorandum of cooperation with Gyeonggi-do, South Korea

  • Received the Ministry of the Interior Alternative Service Excellence Award

==> picture [41 x 30] intentionally omitted <==

  • HIWIN Group ’ s President Chuo,Yung-Tsai was recognized by the Harvard Business

  • Review as the 8th most powerful Taiwanese CEO of 2018

14

  • HIWIN Group ’ s President Chuo,Yung-Tsai was named an honorary professor by National

  • Chin-Yi University of Technology

  • Senior Manager Chiang, He-Shen was selected as Excellent Accountant

  • Collaborated with Mr. Wang-Tse in the Taiwan Design Exhibition, with the HIWIN robotic arms

  • demonstrating their “two arms three kettles” brewing techniques

  • Funded the key module for the Earth’s largest mechanical flower “Listen to the Blossoms” at the

  • Taichung World Flora Exposition

  • HIWIN Robotics collaborated with the National Taiwan Orchestra and dance groups, in a stage

  • performance of “What Happened?”

  • HIWIN Robotics integrated inter-departmentally with National Taiwan University of Arts, in the

  • stage performances of “DaDa’s Dream Music Note” and “Island Times”

  • HIWIN Robotics collaboratively promoted the “ Greater Taichung Lychee Value-Adding

  • Preservation Key Technique ” project with National Chung Hsing University and the Taiping District Farmers’ Association, and held the “Taichung Promotional Event of Beautiful Lychee” in Tokyo, Japan, making an effort for Taiwanese Agriculture

  • 2019 ● The third-generation cooling ballscrew received the Outstanding Award of the Statistics Monitoring Machine Tool Key Components Category at the 2019 14th Annual Machine Tools

  • “R&D Innovative Products” Competition

  • Passed the Occupational Health and Safety Management System’s ISO 45001 International

  • Standards Certification

==> picture [31 x 43] intentionally omitted <==

  • Received a ranking of the 9th Place of the CommonWealth Magazine’s “2000 Biggest

  • Enterprises”, Top 50 Best Operation Performances in Manufacture

15

III. Corporate Governance Report

i. Organization System

(i) Organization Chart

==> picture [424 x 324] intentionally omitted <==

(ii) Operating Functions of Each Main Department

  • Audit Office

Corporate management risk assessment and normal audit

  • Chairman Room

The company’s business objective setting, promotion of major plans, business performance appraisal and analysis, activity planning, brand management, overseas procurement, legal management and intellectual property management

  • Human Resource Department Planning, management, selection, training and retention of human resource, and educational training

  • Labor Security and Environmental Protection Department

  • Having specific responsibility for environmental protection and health, labor safety and health, and plant safety management

  • Management Department

Building and maintaining the general affairs management system

16

  • Financial Section

  • Budgeting and capital planning, financial affairs, accounting and taxation planning, and evaluation management of overseas subsidiaries reinvestment companies

  • Purchasing Department

Domestic procurement of production equipment and raw materials

  • Storage and Transportation Department

  • Warehouse management of raw materials, semi-finished products and finished products, and product shipping

  • Information Section

  • Information system planning, software development, safety and operation of maintenance information network system

  • Global Marketing Business Group

  • Marketing management, market survey, new product planning, market expanding and customer service

  • Overseas Subsidiary

  • Marketing management, market survey, new product planning, market expanding, customer service and product processing and manufacturing

  • Production Business Group

  • Manufacturing of products, including ball screws, linear guideway, linear bearing, special bearing and robots

  • System Development Business Group

  • Equipment development, design, assembling and maintenance, system product development and manufacturing, and plant electric system maintenance

  • Product Development Business Group

  • Research and development of new products and subsystem products, drawing design, and customers’ technology consulting

  • Project Development Department

  • Research and development of major new products and equipment, and project planning and implementation

  • Quality Assurance Department

Product quality system building, implementation and auditing, and quality control.

17

ii. Information of Directors and Major Managers

(i) Information of Directors

April 30th, 2019
Unit:Shares:%		 April 30th, 2019
Unit:Shares:%		 April 30th, 2019
Unit:Shares:%		 April 30th, 2019
Unit:Shares:%		 April 30th, 2019
Unit:Shares:%		 April 30th, 2019
Unit:Shares:%		 April 30th, 2019
Unit:Shares:%		 April 30th, 2019
Unit:Shares:%		 April 30th, 2019
Unit:Shares:%
Title Nationality
or Place of
Registratio
n		 Name Gen
der		 Date of
Assumptio
n of Duty
(Selection)		 Term Date of
First
Selection		 Shares Held at the
Date of Selection		 Current Shares Held
Current Shares
Held by by Spouse
and Minor Children		 Shares Held under
the Names of
Others		 Major Experiences
(Education
Background)		 Current Position in
This Company and
Other Companies		 With Spouse or a Relative
Within the Second Degree
of Kinship Who Are a
Director or Supervisor
Number of
Shares		 Shareh
olding
Ratio		 Number of
Shares		 Shareh
olding
Ratio		 Number of
Shares		 Shareh Shareh
Number Relationsh
olding olding Title Name
of Shares ip
Ratio Ratio
Chairmaan Taiwan Chuo,Yun-
Tsai		 M 20160628 3
Years		 13,535,572 5.03% 13,453,495 4.48% 1,120,992 0.37% -Master of
Management at
University of San
Francisco -
Honorary Doctor of
Management at
National Chung
Cheng University
-Honorary Doctor
of Engineering at
National
Kaohsiung First
University of
Science and
Technology
-Honorary Doctor
of Engineering at
Taiwan University
of Technology
-Honorary Doctor
of Philosophy at
National Tsing Hua
University
-Honorary Doctor
of Science at China
Medical University		 Chairman of this
company, HIWIN
America (Legal
Representative) ,
HIWIN Germany
(Legal
Representative) ,
HIWIN Japan (Legal
Representative) ,
HIWIN Singapore
(Legal
Representative) ,
HIWIN South Korea
(Legal
Representative) ,
HIWIN China (Legal
Representative) ,
HIWIN Investment
Corporation, HIWIN
Mikrosystem Corp.,
Luren Precision Co.,
Ltd.( (Legal
Representative) ,
Eterbright Solar
Corporation (Legal
Representative) and
HIWIN Education
Foundation, and
supervisor of
Chengda Venture
Group		 Direct
or		 Chuo
Wenh
en g		 Father
and Son
19890926

18

Title Nationality
or Place of
Registratio
n		 Name Gen
der		 Term Date of
First
 Shares Held at the
Date of Selection		 Shares Held at the
Date of Selection		 Current Shares Held Current Shares Held Current Shares
Held by by Spouse
and Minor Children		 Current Shares
Held by by Spouse
and Minor Children		 Shares Held under
the Names of
Others		 Shares Held under
the Names of
Others		 Major Experiences
(Education
Background)		 Current Position in
This Company and
Other Companies		 With Spouse or a Relative
Within the Second Degree
of Kinship Who Are a
Director or Supervisor		 With Spouse or a Relative
Within the Second Degree
of Kinship Who Are a
Director or Supervisor		 With Spouse or a Relative
Within the Second Degree
of Kinship Who Are a
Director or Supervisor
Date of
Assumptio
n of Duty
(Selection) Selection Shareh Shareh Number of
Shares		 Shareh
olding
Ratio		 Number
of Shares		 Shareh
olding
Ratio		 Title Name Relationsh
ip
Number of
Shares		 olding
Ratio		 Number of
Shares		 olding
Ratio
Co-
Chairman		 Taiwan Chen,Chin-
Tsai		 M 3
Years		 19891203 3,902,436 1.45% 4,180,956 1.39% 2,909,355 0.97% -Master of Public
Administratio n at
University of San
Francisco
-Master of
Accounting at
Tamkang
University		 Deputy chairman of
this company, WIN
Semiconductors
Corp., Inventec Solar
Energy Corporation
and Kinmac Solar
Corporation, director
of ITEQ Corporation,
independent director
of Tong Hsing
Electronic Industries
Limited and Kinsus
Interconnect
Technology Corp.,
director of Namchow
Chemical Industrial
Ltd. and Namchow
Chemical Industrial
Co., Ltd., and
supervisor of Taipei
Financial Center
Corporation.
20160628
Director Taiwan Tsai,HueyC
hin		 F 3
Years		 19890926 4,350,649 Doctor of
Organizational
Psychology at
Philips Academy		 General Manager of
this company,
director of HIWIN
America, HIWIN
China, HIWIN
Investment
Corporation and
HIWIN Education
Foundation, legal
representative of
Luren Precision Co.,
and chairman of
HIWIN Healthcare
Corp.
20160628 1.62% 4,372,885
Director Taiwan Lee,ShunC
hin		 M 3
Years		 19891203 12,380,116 2.46% 0.10% Certification of
completion in high
level management
at UC Berkeley
Certification of
completion in
EMBA at Feng
Chia University		 Chairman of Zhengjie
Enterprise Limited,
Zhenqiang Limited
and Naqiang
Limited., and director
of Eterbright Solar
Corporation
20160628 4.60% 7,394,267

19

Title Nationality
or Place of
Registratio
n		 Name Gen
de
r		 Term Date of
First
Selection		 Shares Held at the
Date of Selection		 Shares Held at the
Date of Selection		 Current Shares
Held by by Spouse
and Minor Children		 Current Shares
Held by by Spouse
and Minor Children		 Shares Held under
the Names of
Others		 Shares Held under
the Names of
Others		 Major Experiences
(Education
Background)		 Current Position in
This Company and
Other Companies		 With Spouse or a Relative
Within the Second Degree
of Kinship Who Are a
Director or Supervisor		 With Spouse or a Relative
Within the Second Degree
of Kinship Who Are a
Director or Supervisor		 With Spouse or a Relative
Within the Second Degree
of Kinship Who Are a
Director or Supervisor
Date of
Current Shares Held
Assumpt
ion of
Duty
(Selectio
n)		 Number of
Shares		 Shareh
olding
Ratio		 Number of Shareh
olding
Ratio		 Number of
Shares		 Shareh
olding
Ratio		 Number
of Shares		 Shareh
olding
Ratio		 Title Name Relationsh
ip
Shares
Director Taiwan Chuo,Wen-
Hen		 M 3
Years		 19930816 5,931,765 2.20% 2.03% Master of Business
Administration at
Dominican
University		 Executive Vice
President of this
company, director of
HIWIN America,
HIWIN Japan,
HIWIN Singapore,
HIWIN South Korea,
HIWIN Investment
Corporation , Luren
Precision Co. and
HIWIN Education
Foundation, and
Chairman of HIWIN
Italy (Legal
Representative) and
HIWIN Corporate
Management
Company, and
director and deputy
chairman of
Eterbright Solar
Corporation		 Chair
man		 Eric
Y. T.
Chuo		 Father and
Son
20160628 6,112,237
Director Taiwan Sanko
Investm
ents
Limited		 3
Years		 20040630 3,075,561 1.14% 1.33% Director of East Steel
Co., Ltd.
Director of Taiwan
Steel Tower Co., Ltd.
20160628 4,011,651
Representat
ive of San
Hsin
Investment
Co.Ltd. :
Huang,
You-San		 M -
-		 1,116,415 0.37% Chairman of
Shengli Iron And
Steel Company
20070625 -
Independe
nt Director		 Taiwan Chiang,Che
ng -Ho		 M 3
Years		 20080624 209,049 0.07% Master of
Administration at
National Chengchi
University		 Coordinator of the
company’s Audit,
Remuneration
Committee
20160628
Independe
nt Director		 Taiwan Chen ,Chin
g-Hui		 F 20160628 Graduated from
College of
Management,
National Taiwan
University		 Member of the
company’s Audit,
Remuneration
Committee
20160628

20

Title Nationality
or Place of
Registratio
n		 Name Gen
de
r		 Date of
Assumpt
ion of
Duty
(Selectio
n)		 Term Date of
First
Selection		 Shares Held at the
Date of Selection		 Shares Held at the
Date of Selection		 Current Shares Held Current Shares Held Current Shares
Held by by Spouse
and Minor Children		 Current Shares
Held by by Spouse
and Minor Children		 Shares Held under
the Names of
Others		 Shares Held under
the Names of
Others		 Major Experiences
(Education
Background)		 Current Position in
This Company and
Other Companies		 With Spouse or a Relative
Within the Second Degree
of Kinship Who Are a
Director or Supervisor		 With Spouse or a Relative
Within the Second Degree
of Kinship Who Are a
Director or Supervisor		 With Spouse or a Relative
Within the Second Degree
of Kinship Who Are a
Director or Supervisor
Number of
Shares		 Shareh
olding
Ratio		 Number of
Shares		 Shareh
olding
Ratio		 Number of
Shares		 Shareh
olding
Ratio		 Number
of Shares		 Shareh
olding
Ratio		 Title Name Relationsh
ip
Independe
nt Director		 Taiwan Tu,Li-Ming F 20170628 2
Years		 20170628 Graduated from
Bank Insurance
Department of
Tamkang
University		 Member of the
company’s Audit,
Remuneration
Committee

21

April 30th, 2019

1. Primary Shareholders of Institutional Shareholders
Name of Institutional Shareholders Top 10 Shareholders of Sanko Investments Limited
Name Shareholding Ratio
Sanko Investments Limited Huang Jinyi 25%
Huang Yicang 25%
Huang Mingcang 25%
Huang Xiaoyu 25%

2. Information of Directors
Requirements
Name		 Whether work experience of over
professional qualifications below		 5 years and
are equipped		 Conformity to Independence The number of
other public
compani es
where posts of
independ ent
directors are
held by these
people
Judge, procurator,
lawyer, accountant
or professional
technical personnel
(having national
certificates) related
to company
business		 Work
experien ce
in commerc
e, law,
finance, or
accounti ng
or required
by
company
business		 1 2 3 4 7 8 9 10
The title
ranks above
lecturer in
department
of
commerce,
law,
accounting
or related to
company
business
public and
private
universities
and
colleges.		 5 6
Chairman: Chuo,Yung-
Tsai		 ✓ ✓ ✓ ✓ 0
Deputy Chairman:
Chen,Chin-Tsai		 ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ 2
✓ ✓
Director: Tsai,Huey-Chin ✓ ✓ ✓ ✓ ✓ ✓ 0
Director: Lee,Shun-Chin ✓ ✓ ✓ 0
✓ ✓ ✓ ✓ ✓ ✓
Director: Chuo,Wen-Hen ✓ ✓ ✓ ✓ 0
Director: Representative
of San Hsin Investment
Co.Ltd.: Huang, You-San		 ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ 0
Independent Director:
Chiang,Cheng -Ho		 ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ 0
Independent Director:
Ching-Hui Chen		 ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ 0
Independent Director:
Tu,Li-Ming		 ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ 0

(1) Not an employee of the Company or other affiliates;

22

  • (2) Not a director or supervisor of the Company (the same does not apply if the person is an independent director of the parent company or subsidiaries where the company have over 50% voting shares directly or indirectly);

  • (3) Not an individual shareholder in Top 10 Shareholders or the company where he/she, his/her spouse and minor children have over 1% of the total issued shares or have such shares in the name of others;

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

  • (5) Not a director, supervisor, or employee of institutional shareholders having over 5% of the total issued shares or in Top 5 Shareholders;

  • (6) Not a director, supervisor, manager or shareholder having 5% of the shares of the specified company or agency that have financial transaction or business contact with the company;

  • (7) Not a professional, proprietor, partner, company or the owner, partner, director, supervisor, manager or spouse of the professional consulting entities providing services or consultation in business, law, finance and accounting for the Company or its affiliates. Excluding members of compensation committee who exercise power in accordance with Article 7 of the Regulations Governing the Appointment and Exercise of Powers by the Compensation committee of a Company Whose Stock is Listed on the Stock Exchange or Traded Over the Counter.

  • (8) Not the spouse or a relative within the second degree of kinship of any other director of the Company.

  • (9) Not being involved in any of the situations set forth in Article 30 of the Company Act.

  • (10) Not a government agency, juristic person, or its representative set forth in Article 27 of the Company Act.

23

(ii)Information of General Managers, Vice General Managers, Assistant Managers, and Directors of Departments and Branches

April 30th, 2019

April 30th, 2019 April 30th, 2019 April 30th, 2019
Title Nationality
or
Registration
Place		 Name Gender Date of
Assumption
of Duty
(Note 1)		 Shares Held Shares Held Now by
Spouse and Minor
Children		 Shares Held under the
Names of Others		 Main Experiences
(Education
Background)		 Posts Held in
Other Companies
Now		 With Spouse or a Relative Within
the Second Degree of Kinship
Who Are a Manager
Number of
Shares		 Shareholding
Ratio		 Number of
Shares		 Number
of
Shares		 Shareholding
Ratio		 Title Name Relation
ship
Sharehold
ing Ratio
With Spouse
or a Relative
Within the
Second
Degree of
Kinship Who
Are a
Manager		 Taiwan Chuo,Yung-
Tsai		 M 20111228 4.48% - Master of
Management at
University of San
Francisco
Honorary Doctor
of Management at
National Chung
Cheng University
Honorary Doctor
of Engineering at
National
Kaohsiung First
University of
Science and
Technology
Honorary Doctor
of Engineering at
Taiwan University
of Technology
Honorary Doctor
of Philosophy at
National Tsing Hua
University
Honorary Doctor
of Science at China
Medical University		 Chairman of this
Company, HIWIN
America, HIWIN
Germany, HIWIN
Japan, HIWIN
Singapore, HIWIN
South Korea,
HIWIN China,
HIWIN Investment
Corporation,
HIWIN
Mikrosystem
Corp. and Luren
Precision Co.,
Ltd., Eterbright
Solar Corporation
and HIWIN
Education
Foundation, and
supervisor of
Chengda Venture
Group		 Executive
Vice
General
Manager		 Chuo
Wenheng		 Father
and Son
13,453,495 1,120,992 0.37% -
General
Manager		 Taiwan Tsai,Huey-
Chin		 F 20080701 - Doctor of
Organizational
Psychology at
Philips
Academy		 - -
4,372,885 1.45% - - - General Manager
of this Company,
director of HIWIN
America, HIWIN
China, HIWIN
Investment
Corporation and
HIWIN Education		 -

24

Foundation, legal
representative of
and Luren
Precision Co.,
Ltd., and
Chairman of
HIWIN Healthcare
Corp.
Executive
Vice General
Manager of
Chairman
Room		 Taiwan Chuo,Wen-
Hen		 M 20150201 2.03% - Executive Vice
General Manager
of this Company,
director of HIWIN
America, HIWIN
Japan, HIWIN
Singapore, HIWIN
South Korea,
HIWIN Investment
Corporation, Luren
Precision Co., Ltd.
and HIWIN
Education
Foundation,
Chairman of
HIWIN Italy and
HIWIN Corporate
Management
Company, and
deputy chairman
of Eterbright Solar
Corporation		 Eric Y. T.
Chuo		 Father
and Son
6,112,237 - - - Master of Business
Administration at
Dominican
University		 Chairman
Vice General
Manager of
Finance
Section		 Taiwan Lin Yifeng F 20170801 0.14% - - Master of Business
Administration at
Dominican
University		 Supervisor of
HIWIN Japan,
HIWIN South
Korea and HIWIN
China.		 - - -
424,809 - -
Vice General
Manager of
Chairman
Room		 Taiwan Song
Xiande		 M 20130513 12,000 0.00% Graduate of
National Taipei
University of
Technology		 Legal
Representative and
General Manager
of Luren Precision
Co., Ltd.
Legal
Representative of
MATRIX, UK		 - - -
- - - -

25

Vice General
Manager of
Marketing
Business
Group		 Taiwan Peng Yanqi F 20150201 - Master of
Information
Engineering at
University of
Southern
California		 - - -
19,709 0.01% - - - General Manager
of HIWIN China.
Vice General
Manager of
Finance
Section		 Taiwan Wu Yueqin F 20170801 - - - - Master of Business
Administration at
Feng Chia
University		 Legal
Representative and
Supervisor of
HIWIN
Mikrosystem
Corp., director of
HIWIN Education
Foundation.		 - -
260,487 0.09% -
Assistant
General
Manager of
Finance
Section		 M 20170801 31,548 0.01% - - - Master at
Accounting
Institute of
National Chung
Hsing University		 Supervisor of
Eterbright Solar
Corporation
Legal
Representative of
HIWIN
Mikrosystem
Corp.		 - - -
Taiwan Liao
Kehuang		 -
Assistant
General
Manager of
Chairman
Room		 Taiwan Qu Yueling M 20150201 43,946 0.01% 7,233 - - Doctor at Institute
of Aerospace of
National Cheng
Kung University		 - - - -
0.00%
Assistant
General
Manager of
Chairman
Room		 Taiwan M 23,340 0.01% - Master of
Engineering at
National Tsing
Hua University		 - - - -
Wu
Junliang		 20180201 - - -
Assistant
Manager of
System
Development
Section		 Wang
Fuqing		 M 20190301 - - Doctor of
Mechanics at
National Chung
Cheng University		 - - - -
Taiwan 60,437 0.02% - -

26

Assistant
Manager of
Chairman
Room		 Taiwan Yang
Chuangbao		 M 20190101 0.00% 21 Master at
Mechanics
Institute of
National Chung
Hsing University		 General Manager
of HIWIN Italy		 - - -
6,191 0.00% - -
Senior
Assistant
Manager of
Chairman
Room		 Huang, Li-
Hong		 M 20190326 19,343 6,670 0.00% - - MBA at New York
Institute of
Technology		 General Manager
and Director of
HIWIN Japan		 - - -
Taiwan 0.01%
Assistant
Manager of
Chairman
Room		 Taiwan Qiu Shirong M 20110701 Master of Business
Administration at
University of
Massachusetts		 General Manager
and Director of
HIWIN America		 -
24,361 0.01% 5,048,077 1.68% - - - -
Assistant
Manager of
Chairman
Room		 Taiwan M 20180601 - Graduated from the
Department of
Accounting of
National Taiwan
University		 Assistant General
Manager of
HIWIN China		 - - -
Chen,
Hong-Ming		 3,106 0.00% - - -
Assistant
Manager of
Production
Business
Group		 Taiwan Li Wenbin M 20180701 12,385 0.00% - - - - -
- - - Master of
Mechanics at Feng
Chia University
Assistant
Manager of
Production
Business
Group		 Taiwan Wu, Wen-
Chia		 M 20170701 4,774 - - Master of
Mechanics at
National Taiwan
University		 - - -
0.00% - - -
Assistant
Manager of
Production
Business
Group		 Taiwan Lin
Chishiao		 20170701 7,064 5,735 0.00% - Master of
Mechanics at
National Chung
Hsing University		 - - - -
M 0.00% -
Assistant
Manager of
the System
Development
Division		 Chiang,
Ming-Chun		 M 20190216 Master of Business
Administration at
Yun-Lin University
of Technology		 - - - -
Taiwan 52,040 0.02% 5,184 0.00% - -

27

Assistant
Manager of
Business
Department		 Taiwan Zhang
Kunyao		 M 7,269 0.00% - - Master of
Mechanics at
University of
Southern California		 - - - -
20070401 - -
Assistant
Manager of
Business
Department		 Yu, Ming-
De		 20180510 - - - Master of
Mechanics at
Washington State
University		 - - -
Taiwan M - - - -
Assistant
Manager of
Information
Section		 Taiwan M - Master at
Information
Engineering
Institute of
Tunghai
University		 - - - -
Zhang
Yongming		 20160326 - - - - -
Assistant
Manager of
Project
Development
Department
Taiwan		 Dong
Chengwei		 20170701 0.00% - Master of
Information
Management at
National Chung
Shan University		 - - - -
M 3,053 - - -
Assistant
Manager of
Quality
Assurance
Department		 Taiwan Chou
Yishow		 M 20180322 Master of
Industrial
Management at
Tunghai
University		 - - - -
- - - - - -

Note 1: Date of Assumption of Current Position

Note 2: Incumbent at Date of the Report’s Publication

28

(iii) Remunerations of Directors and Primary Managers in the Past Year

1. Remunerations of Directors (Including Independent Directors)

Unit: NTD Thousand

Title Name Directors’ Remuneration Directors’ Remuneration Directors’ Remuneration Directors’ Remuneration Directors’ Remuneration Directors’ Remuneration Ratio of the Total
Remuneration
(A+B+C+D) to
Net Profit After
Tax (%)		 Ratio of the Total
Remuneration
(A+B+C+D) to
Net Profit After
Tax (%)
Relevant Remuneration Received by Directors Who Are Also
Employees
Relevant Remuneration Received by Directors Who Are Also
Employees
Relevant Remuneration Received by Directors Who Are Also
Employees
Relevant Remuneration Received by Directors Who Are Also
Employees
Relevant Remuneration Received by Directors Who Are Also
Employees
Relevant Remuneration Received by Directors Who Are Also
Employees
Relevant Remuneration Received by Directors Who Are Also
Employees
Relevant Remuneration Received by Directors Who Are Also
Employees		 Ratio of Total
Compensation
(A+B+C+D+E+F+
G) to Net Profit
After Tax (%)		 Ratio of Total
Compensation
(A+B+C+D+E+F+
G) to Net Profit
After Tax (%)		 Compensation Paid
to Directors from
Reinvestment
Business Other
than the
Company’s
Subsidiary (Note 4)
Remuneration
(A)		 Pension (B) Directors’
Remuneration
(C)		 Business Affairs
Expense (D)
(Note 1)		 Salary, Bonus
and Special
Disbursement (E)
(Note 2)		 Pension (F) Employee Remuneration (G)
(Note 3)
This Compan y All Compani es in the Financial
Report		 This Compan y All Compani es in the Financial
Report		 This Compan y All Compani es in the Financial
Report		 This Compan y All Compani es in the Financial
Report		 This Compan y All Compani es in the Financial
Report		 This Compan y All Compani es in the Financial
Report		 This Compan y All Compani es in the Financial
Report		 This Compan y
Cash Bonu s		 All Compani es in
the Financial
Report
Stoc k Bonu
s		 This Compan y All Compani es in
the Financial
Report		 This Compan y All Compani es in the Financial
Report
Stoc k Bonu
s
Cash Bonu s
Chairman Chuo,Yung-Tsai - - - - 61,545 61,545 14,002 15,956 1.40% 1.44% 24,902 24,902 - - 13,638 - 13,638 - 2.11% 2.15% 16,290
Co-Chairman Chen,Chin-Tsai - - - - 41,030 41,030 240 240 0.77% 0.77% - - - - - - - - 0.77% 0.77% -
Director Tsai,Huey-Chin - - - - 20,515 20,515 143 143 0.38% 0.38% 22,198 22,198 110 110 7,435 - 7,435 - 0.93% 0.93% -
Director Lee,Shun-Chin - - - - 20,515 20,515 120 120 0.38% 0.38% - - - - - - - - 0.38% 0.38% 10
Director Chuo,Wen-Hen - - - - 20,515 20,515 120 145 0.38% 0.38% 13,841 13,841 72 72 7,435 - 7,435 - 0.78% 0.78% -
Director Representative of
San Hsin
Investment
Co.Ltd.: Huang,
You-San		 - - - - 20,515 20,515 - - - 0.38% 0.38% -
120 120 0.38% 0.38% - - - - -
Independent
Director		 Chiang,Cheng -
Ho		 - - - - 20,515 20,515 120 120 0.38% 0.38% - - - - - - - 0.38% -
- 0.38%
Independent
Director		 Chen,Ching-Hui - - - - 20,515 20,515 120 120 0.38% 0.38% - - - - - - - 0.38% 0.38% -
-
Independent
Director		 Tu,Li-Ming - 20,515 20,515 120 120 0.38% 0.38% - - - - - - - - 0.38% 0.38% -

Note 1: It includes the company car costs NT$ 13. 619 thousand and excludes annual salaries of drivers NT$ 1.394 thousand.

Note 2: It includes the company car costs NT$ 10.830 thousand and excludes annual salaries of drivers NT$ 1.367 thousand

Note 3: The employee remuneration list hadn’t been decided as of the publication date of the annual report, so the remuneration planned to be distributed this year shall be based on practices in previous years Note 4: Remuneration of Chairman Chuo,Yung-Tsai as Chairman of HIWIN Mikrosystem Corp.

29

2. Remuneration of CEO, General Managers, and Vice General Managers

Unit: NTD Thousand Unit: NTD Thousand Unit: NTD Thousand
Title Name Remuneration (A) Pension (B) Bonus and Special
Disbursement (C)
(Note: 1)		 Employee remuneration (D) (Note: 2) Ratio of the Total
Remuneration
(A+B+C+D) to Net
Profit After Tax (%)		 Compensation
Paid to Directors
from
Reinvestment
Business Other
than the
Company’s
Subsidiary (Note:
3)
This
Company		 All
Companies
in the
Financial
Report		 This
Company		 All
Companies
in the
Financial
Report		 This
Company		 All
Companies
in the
Financial
Report		 This
Company		 All
Companies
in the
Financial
Report		 This
Company		 All
Companies
in the
Financial
Report		 This
Company		 All
Companies
in the
Financial
Report
Cash
Bonus		 Stock
Bonus		 Cash
Bonus		 Stock
Bonus
Chairman and
CEO		 Chuo,Yung-
Tsai		 34,216 36,513 814 814 77,015 78,238 51,747 - 51,747 - 3.03% 3.09% 16,787
General
Manager		 Tsai,Huey-
Chin
Executive Vice
General
Manager of
Chairman
Room		 Chuo,Wen-
Hen
Senior Vice
General
Manager of
Finance
Section
Lin Yifeng
Vice General
Manager of
Chairman
Room		 Song
Xiande
Vice General
Manager of
Marketing
Business
Group		 Peng Yanqi

30

Vice General
Manager of
Finance
Section		 Wu Yueqin
Assistant
General
Manager of
Chairman
Room		 Qu Yueling
Assistant
Manager of
Finance		 Liao
Kehuang
Assistant
General
Manager of
Chairman
Room (Note 4)		 Wu, Chun-
Liang

Note 1: It includes the company car costs NT$ 16.036 thousand and excludes annual salaries of drivers NT$ 1.367 thousand.

Note 2: Employee remunerations were NT$ 492,363 thousand in 2017, but the employee remuneration distribution list hadn’t been decided as of the publication date of the annual report, so the remuneration planned to be distributed this year shall be based on practices in previous years.

Note 3: Remuneration of Chairman Chuo,Yung-Tsai as Chairman of HIWIN Mikrosystem Corp.

Note 4: Wu, Chun-Liang assumed his post on February 1st, 2018

31

Remuneration Notch Table
Notch of Remunerations of General Managers and
Vice General Managers		 Name of General Managers and Vice General Managers
This Company All Reinvestment Businesses of This
Below NT$ 2,000,000
2,000,000 (Including) ~5,000,000 (Excluding)
5,000,000 (Including) ~10,000,000 (Excluding) Qu Yueling, Liao Kehuang, Wu, Chun- Qu Yueling, Liao Kehuang, Wu, Chun-
10,000,000 (Including) ~15,000,000 (Excluding) Lin Yifeng, Song Xiande, Wu Yueqin, Lin Yifeng, Song Xiande, Wu Yueqin,
15,000,000 (Including) ~30,000,000 (Excluding) Tsai,Huey-Chin, Chuo,Wen-Hen, Peng Tsai,Huey-Chin, Chuo,Wen-Hen, Peng
30,000,000 (Including) ~50,000,000 (Excluding) Chuo,Yung-Tsai
50,000,000 (Including) ~100,000,000 (Excluding) Chuo,Yung-Tsai
Above NT$ 100,000,000
Total 10 People 10 People

32

3. Name of Managers Distributing Employee remunerations and Distribution Status

April 30, 2019

Unit: NTD Thousand

April 30, 2019
Unit: NTD Thousand
General Title Name Stock
Bonus		 Cash
Bonus		 Total Ratio of the Total to to
Net Profit After Tax (%)
(％)
Chairman and CEO - 72,180 72,180 1.34%
Chuo,Yung-Tsai
General Manager Tsai,Huey-Chin
Executive Assistant Manager of
Chairman’s Room		 Chuo,Wen-Hen
Senior Assistant Manager of
Finance		 Lin Yifeng
Vice General Manager of Chairman
Room		 Song Xiande
Vice General Manager of
Marketing Business Group
Peng Yanqi
Vice General Manager of Finance
Section
Wu Yueqin
Assistant General Manager of
Finance Section
Liao Kehuang
Assistant General Manager of
Chairman Room		 Qu Yueling
Assistant General Manager of
Chairman Room		 Wu, Chun-Liang
Assistant Manager of the System
Development Division
Wang, Fu-Ching
Senior Assistant Manager of
Chairman’s Room
Yang, Chuang-Baao
Huang, Li-Hong
Senior Assistant Manager of
Chairman’s RoomRoom
Assistant Manager of Chairman’s
Room		 Chiu, Hsih-Rong
Assistant Manager of
Chairman’s Room
Chen, Hong-Mingg
Senior Assistant Manager of
Manufacture Group		 Li, Wen-Bin
Senior Assistant Manager of
Manufacture Group		 Wu, Wen-Chia
Senior Assistant Manager of
Manufacture Group		 Lin, Chi-Shiao
Assistant Manager of System Chiang,Ming-Chun

33

Development Assistant Manager of Business Chang,Cun-Yao Department Assistant Manager of Business Yu,Ming-De Department Assistant Manager of Zhang,Yong-Ming Information Department Assistant Manager of Project Dong, Chen-Wei Development Department Assistant Manager of Quality Dong, Yi-Hsiu Assurance Department

Note 1: Employee remunerations were NT$ 492,363 thousand in 2018, but the employee remuneration distribution list hadn’t been decided as of the publication date of the annual report, so the remuneration planned to be distributed this year shall be based on practices in previous years.

Note 2: Incumbent at Date of the Report’s Publication

  • (iv) Analysis of the Ratio of the Total Remuneration Given to Directors, General Managers, and Vice General Managers by This Company and All Companies in the Consolidated Financial Statements over the Past Two Years to the Net Profit After Tax in the Individual Financial Report, and Description of the Relationship between the Remuneration Policy, Standards and Packages, Procedures for Determining Remuneration, Business Performance, and Future Risk:

  • Analysis of the Ratio of the Total Remuneration Given to Directors, General Managers and Vice General Managers by This Company and All Companies in the Consolidated Financial Statements over the Past Two Years to the Net Profit After Tax in the Individual Financial Report

Report
Item
Title		 Ratio of the Total Remuneration to the Net Profit After Tax
2018 2017
This Company All Companies in the
Financial Report		 This Company All Companies in the
Financial Report
Director 6.51% 6.54% 7.10% 7.15%
CEO, General Manager and Vice
General Manager		 3.04% 3.10% 4.37% 4.47%

Note 1. The net profit after tax belonging to the parent company in 2018 was NT$ 5,392,257 thousand dollars.

Note 2. The net profit after tax belonging to the parent company in 2017 was NT$ 2,738,019 thousand dollars.

34

  • (1) This company’s board of directors passed the distribution resolution of remunerations of employees, directors and supervisors for 2018 on March 26, 2019. NT$492,363 thousand for employees and NT$ 246,182 thousand for directors and supervisors, accounting for 9.13% and 4.56% respectively of the net income after tax in 2017. The employee remuneration distribution list hadn’t been decided as of the publication date of the annual report, so this was a tentative estimation.

  • (2) The total remunerations of directors include those remunerations for the part-time employees, so some of the total remunerations of CEO, general managers and vice general managers are calculated repetitively.

  • Description of the Relationship between the Remuneration Policy, Standards and Packages, Procedures for Determining Remuneration, and Business Performance and Future Risk:

According to rules of this Company, from the profit earned by the Company as shown through the annual account closing, the sum to pay all taxes and to cover previous losses, if any, shall be first withheld, then withhold 10% for legal reserve, and then for special reserve as required by law, and less than 6% (including) for dividends. For the final surplus, if any, the board of directors shall make a dividend distribution proposal based on the company’s earnings performance, expansion plan, profitability and the capital adequacy ratio, and submit it to the board of shareholders; remunerations and salaries of CEO, general managers, vice general managers and employees are paid in accordance with manager’s remuneration distribution method passed by the board of directors.

iii. Implementation of Corporate Governance

(i) The Operation of Board of Directors

  1. The Board of Directors held 8 meetings(A) in 2018. The actual attendance rate of all directors of the board are: 63/72=87.5%, individual director attendances are as follows:
Title Name Number of
Meetings
Attended
Personally (B)		 Number of
Meetings
Attended by
Proxy		 Personal Attendance Rate (%)
(B/A)		 Remarks
Chairman Chuo,Yung-Tsai 8 0 100.0%
Deputy
Chairman		 Chen,Chin-Tsai 5 3 62.5%
Director Tsai,Huey-Chin 6 2 75.0%
Director Lee,Shun-Chin 7 1 87.5%
Director Chuo,Wen-Hen 7 1 87.5%
Director Representative of San
Hsin Investment
Co.Ltd.: Huang, You-
San		 7 1 87.5%
Independent
Director		 Chiang,Cheng -Ho 7 1 87.5%

35

Independent
Director		 Chen,Ching-Hui 8 0 100.0%
Independent
Director		 Tu,Li-Ming 8 0 100.0%
Other Essential Information:
1. For all items listed in Item 3, Clause 14 of the Securities Exchange Act: The company has established an audit committee, it is not
regulated by provisions of Item 3, Clause 14 of the Securities and Exchange Act. Descriptions regarding Item 5, Clause 14 of the
Securities Exchange Act, please refer to the operation of the Audit Committee of this annual report
2. In addition to the pre-opening matters, other directors' resolutions that have been objected to or retained by independent directors and
have a record or written statement: None
3. The implementation of the motion regarding the directors’ avoidance of interest:
Board meeting of June 27th, 2018:
Content of Motion: Lifting the manager's non-competition prohibition
Directors avoiding interest: Chuo,Yung-Tsai, Tsai,Huey-Chin, Chuo,Wen-Hen
Reason of interest avoidance and participation in voting: According to regulations in Article 206 of the company law, except for
directors Chuo,Yung-Tsai、Tsai,Huey-Chin、Chuo,Wen-Hen, who are required to avoid participating in the vote of lifting the
manager's non-competition prohibition, the remaining directors in attendance passed unanimously.
Board meeting of July 16th, 2018:
Content of Motion: Cash increase manager's stock subscription
Directors avoiding interest: Chuo,Yung-Tsai, Tsai,Huey-Chin, Chuo,Wen-Hen
Reason of interest avoidance and participation in voting: According to regulations in Article 206 of the company law, except for
directors Chuo,Yung-Tsai、Tsai,Huey-Chin、Chuo,Wen-Hen who are required to avoid participating in the vote of cash increase
manager's stock subscription, the remaining directors in attendance passed unanimously.
Board meeting of May 6th, 2019:
Content of Motion: Lifting the directors’ and their proxies’ non-competition prohibition
Directors avoiding interest: Chuo,Yung-Tsai, Chen,Chin-Tsai, Lee,Shun-Chin, Tsai,Huey-Chin, Chuo,Wen-Hen, Representative of
San Hsin Investment Co.Ltd.: Huang, You-San
Reason of interest avoidance and participation in voting: According to regulations in Article 206 of the company law, except for
directors Chuo,Yung-Tsai, Chen,Chin-Tsai, Lee,Shun-Chin, Tsai,Huey-Chin, Chuo,Wen-Hen, Representative of San Hsin
Investment Co.Ltd.: Huang, You-San who are required to avoid participating in the vote of lifting the directors’ and their proxies’
non-competition prohibition, the remaining directors in attendance passed unanimously.
4. Evaluation of implementation of goals for increasing the functions of the board of directors (establishing the Audit Committee and
increasing information transparency, etc.) in the current and last fiscal years
1. Goals to increase the diversity of the Board
The Company emphasizes on the diversity of the Board. Besides the gender equality, capability of operation management, risk
management, and professionalism on finance and accounting...etc., are the considering factors when nominating a director. Each
gender has reached 1/3 in the board members.
2. Execution evaluation
The company supports information transparency and publishes important resolutions of the board of directors on its website for
investors to see; it convenes 3 investor conferences irregularly every year for investors to obtain related information of the
company to increase their recognition of the company. Due to the impact of the silent period of cash increase in 2018, the legal
briefing was only held twice

(ii) The Operation of the Audit Committee:

The Audit Committee is formed by three independent directors. They are in charge of reviewing the content of the Company’s financial statement, employing or deploying of the CPAs and its independence and performance, effectively implementing the Company’s internal control,

36

complying related laws and regulations, and controlling the potential or existing risk of the Company. Their main duties are as follow:

  • (1) In accordance with Item 1, Clause 14 of the Securities and Exchange Act, establish or amend the Internal Control System Statement.

  • (2) Evaluate the effectiveness of the Internal Control System Statement.

  • (3) In accordance with Item 1, Clause 36 of the Securities and Exchange Act, establish or amend the procedure of significant financial business behaviors such as obtain or dispose assets, trade on derivative goods, capital loan to others, and endorse or guarantee for others.

  • (4) Issues involving personal interests of the directors.

  • (5) Major assets or derivative goods trade.

  • (6) Major capital loans, endorsement, and guarantees.

  • (7) The offering, issuance, or private placement of any equity-type securities.

  • (8) Employment, deployment, and compensation of the CPAs.

  • (9) Appointment on Finance, Accounting, and internal audit managers.

  • (10) Annual and semi-annual financial reports

  • (11) Other major issues under the regulations of the company or competent authority.

2018 Audit Committee Items of Discussion are included below:

  • (1) Financial Report Auditing, Accounting Policies and Process

  • (2) Major derivative commodity transaction

  • (3) Major fund loans and endorsements or guarantees

  • (4) Raise or issue securities

  • (5) Regulation compliance

  • (6) Anti-fraud scheme and fraud investigation

  • (7) Company risk management

  • (8) CPA qualification, independence and competence

  • (9) CPA appointment and remuneration

The audit committee held 5 meetings (A) in 2018 and the attendance of independent directors is listed as follows:


ows:
Title Name Number of Meetings
Attended Personally (B)		 Number of Meetings
Attended by Proxy		 Personal Attendance
Rate (%) (B/A)		 Remarks
Independent
Director		 Jiang Zhenghe
4		 1 80%
Independent
Director		 Chen Qinghui
5		 0 100%
Independent
Director		 Tu Limin 5 0 100%
Other Essential Information:
1.
Items listed in Article 14-5 of the Securities Exchange Act (please refer to this report’s third chapter, the company’s
governance situation: the shareholders meeting’s and board meeting’s important resolutions)
2.
In addition to the pre-opening matters, other resolutions that have not been approved by the audit committee and two-
thirds of the entire board of directors: None
3.
For the implementation of the directors’ avoidance from motions involving personal interests, directors’ names, the
content of the motion, reasons for avoidance and the voting participation should be stated clearly: None
4.
Communication between independent directors and internal audit supervisors and accountants (it should include
communication about corporate finance and business status, and way and results of such communication):
(1) The internal audit department submits audit reports irregularly to independent directors, and the audit supervisor
also reports great discoveries to board members in the board meeting. Independent directors and internal audit
managers convene at least two meetings each year, submitting reports concerning the company’s internal auditing
and control situation; meetings will be held whenever major events occur
(2) CPAs communicate quarterly with the audit committee in written form or face to face about checking or reviewing
management and information collection of the company’s consolidated statements (including individual financial
statements) in the planning stage and the completion stage, according to “Communication of Audit Matters with
Those Charged with Governance” of No. 39 Statement of Auditing Standards and TCZL Rule No. 0930105373
published by Securities and Futures Bureau on March 11, 2004.
(3) Independent directors, internal audit managers, and CPAs have direct communicating channels, audit managers’

37

report auditing items and major discoveries the audit committee and to independent directors and directors at board meetings, the communicating situation as of the date of the report’s publication in 2018 are as follows and are listed on the following website: http://www.HIWIN.com.tw/stock/Independent_directors_communicate.aspx

Independent Director and Internal

Audit Supervisor
Date Motion Content and Handling
2019.3.26 1. Reporting audit priorities and results to independent directors
The thirteenth session of the
first session
2. Issue the company's 2018 annual internal control system statement
1. Reporting the audit focus and results to the independent director
2018.12.11
The tenth time of the first
session 2. Report the results of the subsidiary inspection to the independent directors
2018.8.9
The ninth time of the first
session
1. Reporting the audit focus and results to the independent directors
1. Reporting the audit focus and results to the independent directors
2018.3.22
~~T~~he eighth time of the first

session
2. Issue the company's 2017 internal control institution statement
Independent Director and CPAs
Date Motion Content and Handling
2019.3.26 1. Accountants explained the results of the 2018 consolidated financial report and discussed
The thirteenth session of the first

the findings
~~s~~ession
2. The accountant reports to the independent director on the results of the internal control

check
3. The IFRSs Bulletin Amendments and New Acts Report to Independent Directors
4. Accountants discuss and communicate with the questions raised by independent directors
1. Report on key check matters
2018.12.11
The tenth time of the first session

2. Accountants discuss and communicate with the questions raised by independent directors
2018.8.9
The ninth time of the first session
1. Accountants explained the results of the review of the consolidated financial statements

for the first half of 2018 and discussed the findings
2. Accountants report to independent directors on new laws and accounting principles
3. Accountants discuss and communicate with the questions raised by independent directors
1. Accountants explained the results of the 2017 consolidated financial report and discussed
2018.3.22

the findings
The eighth time of the first
session 2. The accountant reports to the independent director on the results of the internal control

check
3. IFRSs bulletin revised report to independent director
4. Accountants discuss and communicate with the questions raised by independent directors

(4) The Company regularly convene an audit committee, and invites accountants and auditors to attend the meeting and invite relevant supervisors to attend as needed

38

(iii) Implementation of Corporate Governance and its Differences from Corporate Governance

Best Practice Principles for TWSE/GTSM Listed Companies and the Causes:
Evaluation Items Implementation Differences from
Corporate
Governance Best
Practice
Principles for
TWSE/GTS M
Listed
Companies and
the Causes
Yes No
Summary
1. Does the company set and disclose
corporate governance best practice
principles according to “Corporate
Governance Best Practice Principles for
TWSE/GTSM Listed Companies”?		 V This company sets its own “Corporate
Governance Best Practice Principles”
according to “Corporate Governance Best
Practice Principles for TWSE/GTSM Listed
Companies”; there are no major differences
between its implementation and the
principles it has set; it’ll continue to promote
the implementation of corporate governance
according to relevant provisions.		 None
2. The Company’s shareholding structure
and stockholders’ equity
(1) Does the company establish an internal
operating procedure to deal with
shareholders’ suggestions, doubts, disputes
and litigations, and treat them based on the
procedure?
(2) Does the company possess the list of its
major shareholders as well as the ultimate
owners of those shareholders?
(3) Does the company establish and execute
the risk management and firewall
mechanisms between it and affiliated
companies?
(4) Does the company establish internal
rules against insiders trading with
undisclosed information?		 V
V
V
V		 (1) The company has established an internal
operation procedure and designated
related departments to handle
shareholders’ suggestions or disputes; it
has also established a spokesperson
system, so there’s a person responsible
for responding to shareholders’
questions, including suggestions,
doubts, disputes and litigation.
(2) The company knows the shareholding of
its directors, managers and major
shareholders holding over 10% of its
shares at all times.
(3) The company has established related
internal control systems and firewall
mechanisms, such as rules governing the
management of its subsidiaries and
procedures for loan, endorsement and
guarantee according to law and
regulations.
(4) The company has established
“Procedure for Precaution against
Insider Trading and Internal Significant
Information Processing” to expressly
prohibit insiders from trading
marketable securities using undisclosed
information; besides, Article 37 of
“Corporate Governance Best Practice
Principles” also stipulates that board
members shall do their duties loyally,
bear their duties of care and exercise
their powers in a highly disciplined and
prudent way; the audit department
evaluate whether the procedure
execution above meet the rules
irregularly by random checks, and the
company has also emphasized
precaution against insider trading to
directors and supervisors.		 None

39

3. Composition and Responsibilities of the
Board of Directors
(1) Does the Board develop and implement
a diversified policy for its members?
(2) Does the company voluntarily establish
other functional committees in addition to
the Remuneration Committee and the Audit
Committee?
(3) Does the company establish a standard
to measure the performance of the Board,
and implement it annually?
(4) Does the company regularly evaluate
the independence of CPAs?		 V
V		 V
V		 (1)
The company has set “Corporate
Governance Best Practice
Principles” which writes that board
members should pay attention to
gender equality and be equipped
with knowledge, skills and qualities
necessary for performing their
duties; it has indeed executed such
principles. The current 9 board
members include 3 female directors.
Besides the gender equality,
capability of operation management,
risk management, and
professionalism on finance and
accounting...etc., are the considering
factors when choosing board
members, so it’d correspond the
policy of diversity of the board
members.
(2)
This company has set a
compensation committee according
to law and no other functional
committees at present.
(3)
Though this company hasn’t set
performance evaluation methods of
the board of directors, it discusses
the board’s operation performance
annually and suggests
improvements; it’ll work out
performance evaluation methods in
the future and then evaluate the
board performance annually.
(4)
The company has CPAs respond to
“Independence Evaluation
Questionnaire” annually according to
Governance Best Practice Principles
for TWSE/GTSM Listed Companies
and the board evaluates the
independence of CPAs regularly
(Note); CPAs of the Company don’t
hold director or independent director
positions, or have direct or indirect
financial interest, and they’re not
shareholders of the company. Their
evaluation of independence is
complete and passed. The company
has completed CPA performance
evaluation of 2018 and is approved
by the Audit Committee and the
Board’s meeting on December 11th,
2018 that meet the function of
corporation governance and the
Board. The evaluation result can be
found on the company website. The
audit fees for accountants in 2018
and 2019 have been approved by the
board of directors of the company
meetings on March 22nd, 2018 and
November 11th, 2018.		 None
4. Do TWSE/GTSM Listed Companies set
a special unit or person for corporate
governance to be in charge of related
matters of corporate governance (including
but not limited to providing data needed by
directors and supervisors to perform		 V In order to promote corporate governance
and effectively play the role of the board of
directors, the company has set up a full-time
corporate governance unit under the Finance
Department on the board of directors of
March 26th, 2019 in accordance with
Articles 20 and 22 of the “Listing of Board		 None

40

business, handling matters related to the
board meeting and shareholders’ meeting
according to law, registering the company
and changing the registration, and taking
minutes in the board meeting and
shareholders’ meeting)?		 of Directors and the Key Points to Be
Examined by the Board of Directors”. The
company's corporate management personnel
are also served by the senior deputy general
manager of the Finance Department Lin
Yifeng. They have the experience of
managing the financial, shareholder or
deliberation of the public offering company
for more than three years, and the
qualifications are in compliance with the
regulations
(1) Providing data needed by directors and
supervisors to perform business, handling
matters related to the board meeting and
shareholders’ meeting according to law,
registering the company and changing the
registration, and taking minutes in the
board meeting and shareholders’ meeting.
(2) Asking the opinion of directors before the
board meeting to plan and lay out the
agenda, informing all directors to be
present at least 7 days before the meeting,
and providing data related to the meeting
to make them know the content of related
issues beforehand.
(3) Registering the date of the shareholders’
meetings every year before the time limit
prescribed by law, making and declaring
the meeting notice, agenda and minute
book according to law, and changing
registration after regulations are revised
and directors are changed.
(4) To make sure the board members receive
the important message of the company
immediately; the company will send
notice to the Board members right after
releasing important message, and arrange
professional
knowledge
courses
of
Finance and Sales...etc for the directors.
(5) Irregularly
call
for
communication
meetings with Accountants, Independent
Directors, and Audit Managers, to follow
through internal audit and internal control
system. Meeting minutes can be found on
the company website.
(6) Regularly update the board members on
the updated regulations of company
operation
field
and
corporation
governance.
(7) Review,
design,
and
plan
on
the
company’s internal control system to keep
efficiency
and
flexibility
of
the
corporation governance management and
coordinate
related
issues
in
cross
departments.
(8) Matters
related
to
the
board
and
shareholders
have
been
successfully
completed
in
2018,
and
business
developments have been listed in the
board meeting proposal on March 26th,
2019, primary implementations are as
follows:
1.Assist directors and independent
director execute their duties,
provide relevant information and
arrange for their refresher course

41

2.Assist in the board of directors
and
shareholders'
meeting
procedures and resolutions, such
as
reporting
on
corporate
governance and major issues
related
to
important
board
resolutions
3.The agenda of the board of
directors shall be notified to the
directors seven days in advance,
the meeting shall be convened
and the meeting materials shall
be convened. If the issues need to
be avoided, prior notice will be
given, and the minutes of the
board meeting will be completed
within 20 days after the meeting
4.Conduct date registration of the
stock meeting in accordance with
the law, making a notice of the
meeting within the statutory time
limit, the proceedings manual
and the proceedings
Those
listed
above
have
been
completed in 2018
(9)Corporate
governance
personnel
participated in the accounting managers’
refresher course of the issuer's securities
firm's
stock
exchange,
which
was
established by the Stock Exchange in 2018,
for a total of 16 hours
5.
Does
the
company
establish
a
communication
channel
and
build
a
designated section on its website for
interested parties, and handle all the issues
they care for in terms of corporate social
responsibilities?		 V (1)
The
company
instructs
related
departments to communicate with
interested parties as required and
there is an “Area for Interested
Parties” on the corporate website for
customers,
suppliers,
media
and
employees to contact the company. In
addition, it has also established a
spokesperson system, so there’s a
person responsible for dealing with
related issues of legal persons and
investors.
(2) The “Interested Parties Section” on
the corporate website provides a
questionnaire
for
interested
parties to give suggestions or put
questions and the important social
responsibility issue they’re deeply
concerned about must be responded
to appropriately. The company also
has speaker corner and website for
shareholder
column
email
and
investor related email, also set up
corresponding windows for sales
management and operation items. In
the interested parties section, if there
is any question, suggestion, or
complain, the interested parties may
contact the CEO, General Manager,
Independent Directors, Audit Room,
or special contact window for the
interested parties by the emails
provided in this section for smooth
and
effective
communication
channels.		 None

42

6. Does the company appoint a professional
shareholder service agency to deal with
shareholder affairs?		 V This company usually entrusts related affairs
of the board of shareholders to professional
stock affairs agencies and it authorizes
Yuanta Securities to do the job this year.		 None
7. Information Disclosure
(1) Does the company have a corporate
website to disclose both financial standings
and the status of corporate governance?
(2) Does the company have other
information disclosure channels (e.g.
building an English website, appointing
designated people to handle information
collection and disclosure, creating a
spokesman system, webcasting investor
conferences)?		 V
V		 (1)
The company has established a
Chinese/English website, and has a
dedicated department for collecting
related information to post them on
the website; it also has a
spokesperson system, designated
personnel is responsible for dealing
with issues related to legal persons
and investors, the website has ways
of communication including
telephone and e-mail
(2)
The company convenes investor
conferences on May, August, and
November every year, and
announces the information and
videos of the conferences on the
company website and Market
Observation Post System in
accordance with the regulations.
Conferences were held in May,
Aug, and Nov 2018. (The
conference originally scheduled in
August wasn’t held due to the silent
period for cash replenishment)		 None

43

  1. Does the Company have other important information that is helpful for understanding the status of corporate governance? Yes, description as follow:

(1) Operational Performance:

To implement corporate governance, in addition to setting an effective internal control system and conducting selfinspection, the Company has independent directors to increase the practical experience of the team using their professional experience so as to strengthen the board functions, safeguard stockholders’ equity and improve information transparency; on the other hand, it has established the public information reporting procedure so that shareholders and interested parties can know its financial and business standing and status of corporate governance well. Moreover, to strengthen corporate governance, besides strengthening the Chinese and English websites so that investors can know the company information in real time, the Company has established a platform for interested parties for them to give feedbacks in real time so that it can handle them quickly for improvement; it entered top 5% of the listed companies in the second and third Corporate Governance Ratings. Besides, it also ranked the No.32 of the Taiwan “Excellence in Corporate Social Responsibility” under the category of large-scale enterprise by Common Wealth Magazine.

  • (2) About information of expenditure on environmental protection, and labor relations (employee equity and care): Please read Sections iv and v in Chapter V.

  • (3) Investor Relations:

Treating all shareholders with the principle of being fair and open, the Company convenes shareholders’ meetings every years according to the corporate law and relevant regulations, notifies shareholders to be present in such meetings according to relevant provisions, gives them chances of asking questions or making proposals to achieve balance, makes meeting rules of procedure for such meetings according to law, keeps meeting minutes appropriately and discloses related data on the public information observation station; besides, to ensure that its shareholders have the right to know, participate in and decide the big issues, apart from disclosing major information in real time and publishing important information in both Chinese and English, it has established posts of the spokesperson and deputy spokesperson to handle shareholders’ suggestions and doubts and respond to questions of legal persons and investors to make them know its business results and state of operation better.

(4) Respect equities of interested parties:

The Company discloses the company information honestly according to law to safeguard basic rights and interests of investors, keeps channels of communication open with the correspondent bank, employees, consumers and suppliers and sets an “Area for Interested Parties” on the corporate website for interested parties to contact it in real time. It respects and safeguards their legitimate interests. It has an argon mailbox (communication channel with the chairman), a hope mailbox (communication platform with general managers) and a help mailbox (feedback platform for human resources) to encourage colleagues to express their opinions and report violations, which facilitates its organic growth and development. Statistics of items handled in 2018:

Degree
Year Management Institution Employee Benefits Gender Equality Number of Completed Items of
completi
on
2018 13 0 0 13 100%

(5) Strengthen corporate governance and safeguard investors’ rights and interests:

To reduce risks and spread risks of major damages to the Company and its shareholders caused by directors, supervisors and managers due to mistakes or negligence, the Company has stipulated in Article 25 of Articles of the Company that it shall buy insurance for directors’ and supervisors’ liability for damage in their service execution scope during their term in office; it bought Directors and Supervisors Liability Insurance as of March 26, 2019:

Investee Insurance
Company		 Amount Insured Insured Duration
500 million U.S.
All directors
and managers
Chubb Limited		 dollars (approximately
NTD 152,500
March 27th, 2018~March 26th, 2019
thousand)
(6)Courses about corporategovernance and regulation attended bythe company’s directors in 2018 are listed below:
Title Name Dates Course Hours
September 4th,2018 CorporateGovernance andSecurities Regulations
Chairman Chuo Yung-Tsai May 22nd, 2018 Trend Analysis of Alterations in the Company Law supervisors
are required to comprehend
3
March 5th,2018 ElectronicVoting100%and companyvaluepromotion forum 6
Co-Chairman
Chen Ching-Tsai		 January 8th, 2018 Digital Transformation— Starting by strengthening the board’s
position
3

44

Examining hidden information embedded within financial Examining hidden information embedded within financial Examining hidden information embedded within financial Examining hidden information embedded within financial 3
June 1st, 2018
reports
Director Li Hsun-Chi
Corporate innovation, information technology, and competitive
3
May 15th, 2018
advantages supervisingdirectors are required to comprehend
November 21st,2018 Chinese FamilyEnterprise Forum 3
Director ~~C~~huo Wen-Heng
March 27th,2018 Items the board and shareholders’ meetingshould be aware of 3
July3rd,2018 Annual Meetingof Institute of Directors 3
Director Tsai Huey-Ching Corporate Governance and CSR Development Trends and 3
March 29th, 2018
Model Practice
Advanced Discussions on Directors and supervisors (including 3
Representative of
December, 2018
independent) Practices— Money laundering and Provision
San-Hsin
compliance
Director Investments Co.,
Advanced Discussions on Directors and supervisors (including 3
Ltd.: Huang You-
December 20th, 2018
independent) Practices— Supervisors’ legal responsibilities on
San
dishonest financial reports
Director decisions on how to avoid betraying trust and non- 3
Independent May 22nd, 2018
regular transactions
Director Chiang Cheng-He
May18th,2018 How directors fulfill the duties theyshould be aware of 3
Director decisions on how to avoid betraying trust and non- 3
Independent May 29nd, 2018
regular transactions
Director Chen Ching-Hui
May18th,2018 How directors fulfill the duties theyshould be aware of 3
Director decisions on how to avoid betraying trust and non- 3
Independent May 29nd, 2018
regular transactions
Director Tu Li-Ming
May18th,2018 How directors fulfill the duties theyshould be aware of 3
(7) Courses about corporate governance and regulations attended by financial and auditing managers in 2018 are listed below:
Title Name Dates Course Hours
Assistant General
Manager of the
Financial Department
(Financial Manager)		 Lin Yi-Feng August
16th~17th, 2018		 Continuing Refresher Course of
Issuers Securities Exchange
Accounting Manager		 12
Manager (Auditing
Manager)		 Chen Shih-
Rong		 October 29th,
2018		 Corporate Cost Saving and
Auditing Restrictions of
competitive strategies		 6
December 3rd,
2018		 How internal auditors’ precaution
against corporate fraud and big data
analysis application		 6
(8) Certificates of financial and accountancy personnel and auditors of the Company:
9 persons with CPA, 3 persons with US CPA, one person with IT CPA, one person with UK CPA and 3 persons with CIA
(audit manager with CIA).
(9) Diversity of Directors
The board of directors of the company has rich experience and expertise in the fields of finance, business and
management. In addition, the company also pays attention to the gender equality of the members of the board of directors.
The current board of directors includes three female directors, and the female directors account for 33% of the directors.
When selecting directors, they also assess the management and management capabilities of the board members.
Processing capacity, financial accounting professional, etc., to implement the policy of diversification of the board of
directors of the company, the implementation situation is as follows:
Also serves
Age Corporate experience Professional skills
Director’s
 as an
~~N~~ationalit~~y~~ ~~G~~ender
Name
 employee of Asset Risk
Below 50 61~70 Above 71 Banking
Accounting		 Law
the company Management Management
Chuo Yung-
R.O.C. Male V V V V V V
Tsai
Chen Ching-
R.O.C. Male V V V V

Tsai
Tsai Huey-
R.O.C. Female V V V V V

Ching
Li Hsun-Chi
 R.O.C. Male V V V
Chuo Wen-
R.O.C. Male V V V V
Heng

45

Representative

of San-Hsin
Investments
R.O.C. Male V V V
Co., Ltd.:
Huang You-

San
Chiang
R.O.C. Male V V V V
Cheng-He
Chen Ching-
R.O.C. Female V V V V
Hui
Tu Li-Ming
 R.O.C. Female V V V V
International
Director’s Operation Accounting
 Operational Problem Industry Leadership Decision-
Market
Name
Judgement
and Finance
Management		 Solving
Knowledge
Skills		 making Skills
Perspective
Chuo Yung-
V V V V V V V V

Tsai
Chen Ching-
V V V V V V V V

Tsai
Tsai Huey-
V V V V V V V

Ching
Li Hsun-Chi V V V V V V
Chuo Wen-
V V V V V V V
Heng
Representative
of San-Hsin
Investments
V V V V V V
Co., Ltd.:
Huang You-
San
Chiang Cheng-
V V V

He
Chen Ching-
V V V V

Hui
Tu Li-Ming V V V V

(10) The company attaches great importance to the disclosure and disclosure of information. It regularly or irregularly exposes relevant information of the company on the public information observatory or company website. In the year of 2018, it also publishes 43 major messages in both Chinese and English, so that investors can know the status of the company's operations and important information in realtime.

(11) The company has established an information security risk management structure as follows:

(10) The company attaches great importance to the disclosure and disclosure of information. It regularly or irregularly exposes relevant
information of the company on the public information observatory or company website. In the year of 2018, it also publishes 43 major
messages in both Chinese and English, so that investors can know the status of the company's operations and important information in real-
time.
(11) The company has established an information security risk management structure as follows:		 (10) The company attaches great importance to the disclosure and disclosure of information. It regularly or irregularly exposes relevant
information of the company on the public information observatory or company website. In the year of 2018, it also publishes 43 major
messages in both Chinese and English, so that investors can know the status of the company's operations and important information in real-
time.
(11) The company has established an information security risk management structure as follows:		 (10) The company attaches great importance to the disclosure and disclosure of information. It regularly or irregularly exposes relevant
information of the company on the public information observatory or company website. In the year of 2018, it also publishes 43 major
messages in both Chinese and English, so that investors can know the status of the company's operations and important information in real-
time.
(11) The company has established an information security risk management structure as follows:		 (10) The company attaches great importance to the disclosure and disclosure of information. It regularly or irregularly exposes relevant
information of the company on the public information observatory or company website. In the year of 2018, it also publishes 43 major
messages in both Chinese and English, so that investors can know the status of the company's operations and important information in real-
time.
(11) The company has established an information security risk management structure as follows:		 (10) The company attaches great importance to the disclosure and disclosure of information. It regularly or irregularly exposes relevant
information of the company on the public information observatory or company website. In the year of 2018, it also publishes 43 major
messages in both Chinese and English, so that investors can know the status of the company's operations and important information in real-
time.
(11) The company has established an information security risk management structure as follows:		 (10) The company attaches great importance to the disclosure and disclosure of information. It regularly or irregularly exposes relevant
information of the company on the public information observatory or company website. In the year of 2018, it also publishes 43 major
messages in both Chinese and English, so that investors can know the status of the company's operations and important information in real-
time.
(11) The company has established an information security risk management structure as follows:		 (10) The company attaches great importance to the disclosure and disclosure of information. It regularly or irregularly exposes relevant
information of the company on the public information observatory or company website. In the year of 2018, it also publishes 43 major
messages in both Chinese and English, so that investors can know the status of the company's operations and important information in real-
time.
(11) The company has established an information security risk management structure as follows:		 (10) The company attaches great importance to the disclosure and disclosure of information. It regularly or irregularly exposes relevant
information of the company on the public information observatory or company website. In the year of 2018, it also publishes 43 major
messages in both Chinese and English, so that investors can know the status of the company's operations and important information in real-
time.
(11) The company has established an information security risk management structure as follows:
HIWIN Technologies— Information SecurityRisk Management Network
Internal External
Corporate Corporate Information Professional Info External
Stakeholder

Management Level

Governance		 SecurityPolicy SecurityFirm Inspection
Information Security Internal Control Info Security Risk New Info Security
Inspections

Operating		 Management
and Safety
Threat Educational

Office

Regulations
Provisions
Evaluation		 Training
Information Office
Information hard/software		 Info Security Controlling
New Information
asset management
Management System
Technology
Program Source Code
Safety Settings		 White-list program Regular Info
Regular info Educational Training

Management

Alteration
list
Security

i
Daily securty
Inspection

Information		 iti
Department of Info
Operations		 Client Supplier nspecon Info Security System

Operation and

System Users
Irregularity
Management
Proposals

Mnagement
Report
Information SecurityEducational Training Info Security
Information SecurityOrganization Culture and Awareness
Weakness Assessment

Information security policies and specific management plans have been formulated as well:

46

The Company fully understands the information security of the company's current and future competitive advantages. In order to enhance the
overall information security awareness and establish various safety management action standards, the company establishes information
security policies in accordance with the company's operational and management objectives and laws or regulations. To ensure that the
company's information security management system can be implemented, operated and continued to maintain the confidentiality, integrity
and availability of various information assets within the company and through the joint efforts of all employees, the following objectives are
achieved:
(1) Formulate information security operation specifications, specify safety management objectives and operational points, and implement the
promotion.
(2) Establish security measures such as identity authentication and access control, and strengthen the internal and external information
release process control and review to prevent leakage, error or tampering of confidential information.
(3) Establish an inter-departmental information security organization to develop, promote, implement and evaluate improved information
security management issues to ensure that the company has an information-based environment in which the business can continue to
operate.
(4) Handle information security education and training to strengthen employees' awareness and compliance with information security.
(5) Establish and implement an information security risk assessment mechanism to ensure the effectiveness and immediacy of information
security management.
(6) Implement an internal audit system for information security to ensure the implementation of information security management.
(7) Regularly review and continuously improve the company's information security management system.
Properly controlling the company's data, systems, equipment and network security is the best protection for the company, shareholders,
employees, customers and suppliers. To this end, the company continues to strengthen its ability to protect information security and enhance
employees' The correct concept and alertness of information security protection, and reduce the risks associated with information operations,
also require outsourcing service providers and visitors to comply with the implementation of relevant safety management regulations, any
behavior that jeopardizes information security, regardless of anyone, the company will According to the seriousness of the case, pursue civil,
criminal and administrative responsibilities or conduct consultations according to the relevant regulations of the company, demonstrating the
company's determination to defend information security. The company also sets the following normative points and management plans for
information security objectives:
(1) Information security organization.
(2) Personnel safety management and information security education and training.
(3) Computer system security management.
(4) Network security management.
(5) System access control.
(6) Application system development and maintenance security management.
(7) Asset security hierarchical management.
(8) Physical and environmental security management.
(9) Planning and management of business sustainability plans.
In case of violation of the company's information security regulations, the company will always resort to appropriate disposal procedures or
legal actions, and all employees of the company should know that all information obtained during the work period is the company's assets, if
not allowed, any other unauthorized use is prohibited.
9. Please comment on the results of the recent corporate governance evaluation issued by the Corporate Governance Center of the Taiwan
Stock Exchange Co., Ltd., and propose priorities and measures for those who have not yet improved.
The Corporate Governance Center of the Stock Exchange announced the fifth corporate governance evaluation. The company ranked 6%-
20% of the listed companies. It can be seen that the efforts in implementing corporate governance have been affirmed.
(1)Hold the shareholders' meeting before the end of May: The company is actively evaluating whether to hold the shareholders' meeting in
advance in May.
(2)Announce the annual financial report within two months after the end of the fiscal year: In the accountant's research, this is the goal of the
company's medium-term efforts.
(3)Voluntary Announcement Financial Forecast Information: The Company has no plans to voluntarily announce annual financial forecast
data.
(4)Annual Report Voluntary disclosure of individual directors' remuneration: Based on the protection of personal data, it will not be
disclosed for the time being, and will be re-evaluated in the future.
(5)The company signs a group agreement with the employees: The company has not established a professional association, and it is not
necessary to sign a group agreement according to the group agreement law. If the association is established, it will be implemented
according to the regulations.
(6)Directors' performance appraisal method: The company intends to set the board performance appraisal method in 2019, and has begun to
collect relevant information
Note: CPA Independency and Competency Evaluation Criteria		 The Company fully understands the information security of the company's current and future competitive advantages. In order to enhance the
overall information security awareness and establish various safety management action standards, the company establishes information
security policies in accordance with the company's operational and management objectives and laws or regulations. To ensure that the
company's information security management system can be implemented, operated and continued to maintain the confidentiality, integrity
and availability of various information assets within the company and through the joint efforts of all employees, the following objectives are
achieved:
(1) Formulate information security operation specifications, specify safety management objectives and operational points, and implement the
promotion.
(2) Establish security measures such as identity authentication and access control, and strengthen the internal and external information
release process control and review to prevent leakage, error or tampering of confidential information.
(3) Establish an inter-departmental information security organization to develop, promote, implement and evaluate improved information
security management issues to ensure that the company has an information-based environment in which the business can continue to
operate.
(4) Handle information security education and training to strengthen employees' awareness and compliance with information security.
(5) Establish and implement an information security risk assessment mechanism to ensure the effectiveness and immediacy of information
security management.
(6) Implement an internal audit system for information security to ensure the implementation of information security management.
(7) Regularly review and continuously improve the company's information security management system.
Properly controlling the company's data, systems, equipment and network security is the best protection for the company, shareholders,
employees, customers and suppliers. To this end, the company continues to strengthen its ability to protect information security and enhance
employees' The correct concept and alertness of information security protection, and reduce the risks associated with information operations,
also require outsourcing service providers and visitors to comply with the implementation of relevant safety management regulations, any
behavior that jeopardizes information security, regardless of anyone, the company will According to the seriousness of the case, pursue civil,
criminal and administrative responsibilities or conduct consultations according to the relevant regulations of the company, demonstrating the
company's determination to defend information security. The company also sets the following normative points and management plans for
information security objectives:
(1) Information security organization.
(2) Personnel safety management and information security education and training.
(3) Computer system security management.
(4) Network security management.
(5) System access control.
(6) Application system development and maintenance security management.
(7) Asset security hierarchical management.
(8) Physical and environmental security management.
(9) Planning and management of business sustainability plans.
In case of violation of the company's information security regulations, the company will always resort to appropriate disposal procedures or
legal actions, and all employees of the company should know that all information obtained during the work period is the company's assets, if
not allowed, any other unauthorized use is prohibited.
9. Please comment on the results of the recent corporate governance evaluation issued by the Corporate Governance Center of the Taiwan
Stock Exchange Co., Ltd., and propose priorities and measures for those who have not yet improved.
The Corporate Governance Center of the Stock Exchange announced the fifth corporate governance evaluation. The company ranked 6%-
20% of the listed companies. It can be seen that the efforts in implementing corporate governance have been affirmed.
(1)Hold the shareholders' meeting before the end of May: The company is actively evaluating whether to hold the shareholders' meeting in
advance in May.
(2)Announce the annual financial report within two months after the end of the fiscal year: In the accountant's research, this is the goal of the
company's medium-term efforts.
(3)Voluntary Announcement Financial Forecast Information: The Company has no plans to voluntarily announce annual financial forecast
data.
(4)Annual Report Voluntary disclosure of individual directors' remuneration: Based on the protection of personal data, it will not be
disclosed for the time being, and will be re-evaluated in the future.
(5)The company signs a group agreement with the employees: The company has not established a professional association, and it is not
necessary to sign a group agreement according to the group agreement law. If the association is established, it will be implemented
according to the regulations.
(6)Directors' performance appraisal method: The company intends to set the board performance appraisal method in 2019, and has begun to
collect relevant information
Note: CPA Independency and Competency Evaluation Criteria		 The Company fully understands the information security of the company's current and future competitive advantages. In order to enhance the
overall information security awareness and establish various safety management action standards, the company establishes information
security policies in accordance with the company's operational and management objectives and laws or regulations. To ensure that the
company's information security management system can be implemented, operated and continued to maintain the confidentiality, integrity
and availability of various information assets within the company and through the joint efforts of all employees, the following objectives are
achieved:
(1) Formulate information security operation specifications, specify safety management objectives and operational points, and implement the
promotion.
(2) Establish security measures such as identity authentication and access control, and strengthen the internal and external information
release process control and review to prevent leakage, error or tampering of confidential information.
(3) Establish an inter-departmental information security organization to develop, promote, implement and evaluate improved information
security management issues to ensure that the company has an information-based environment in which the business can continue to
operate.
(4) Handle information security education and training to strengthen employees' awareness and compliance with information security.
(5) Establish and implement an information security risk assessment mechanism to ensure the effectiveness and immediacy of information
security management.
(6) Implement an internal audit system for information security to ensure the implementation of information security management.
(7) Regularly review and continuously improve the company's information security management system.
Properly controlling the company's data, systems, equipment and network security is the best protection for the company, shareholders,
employees, customers and suppliers. To this end, the company continues to strengthen its ability to protect information security and enhance
employees' The correct concept and alertness of information security protection, and reduce the risks associated with information operations,
also require outsourcing service providers and visitors to comply with the implementation of relevant safety management regulations, any
behavior that jeopardizes information security, regardless of anyone, the company will According to the seriousness of the case, pursue civil,
criminal and administrative responsibilities or conduct consultations according to the relevant regulations of the company, demonstrating the
company's determination to defend information security. The company also sets the following normative points and management plans for
information security objectives:
(1) Information security organization.
(2) Personnel safety management and information security education and training.
(3) Computer system security management.
(4) Network security management.
(5) System access control.
(6) Application system development and maintenance security management.
(7) Asset security hierarchical management.
(8) Physical and environmental security management.
(9) Planning and management of business sustainability plans.
In case of violation of the company's information security regulations, the company will always resort to appropriate disposal procedures or
legal actions, and all employees of the company should know that all information obtained during the work period is the company's assets, if
not allowed, any other unauthorized use is prohibited.
9. Please comment on the results of the recent corporate governance evaluation issued by the Corporate Governance Center of the Taiwan
Stock Exchange Co., Ltd., and propose priorities and measures for those who have not yet improved.
The Corporate Governance Center of the Stock Exchange announced the fifth corporate governance evaluation. The company ranked 6%-
20% of the listed companies. It can be seen that the efforts in implementing corporate governance have been affirmed.
(1)Hold the shareholders' meeting before the end of May: The company is actively evaluating whether to hold the shareholders' meeting in
advance in May.
(2)Announce the annual financial report within two months after the end of the fiscal year: In the accountant's research, this is the goal of the
company's medium-term efforts.
(3)Voluntary Announcement Financial Forecast Information: The Company has no plans to voluntarily announce annual financial forecast
data.
(4)Annual Report Voluntary disclosure of individual directors' remuneration: Based on the protection of personal data, it will not be
disclosed for the time being, and will be re-evaluated in the future.
(5)The company signs a group agreement with the employees: The company has not established a professional association, and it is not
necessary to sign a group agreement according to the group agreement law. If the association is established, it will be implemented
according to the regulations.
(6)Directors' performance appraisal method: The company intends to set the board performance appraisal method in 2019, and has begun to
collect relevant information
Note: CPA Independency and Competency Evaluation Criteria		 The Company fully understands the information security of the company's current and future competitive advantages. In order to enhance the
overall information security awareness and establish various safety management action standards, the company establishes information
security policies in accordance with the company's operational and management objectives and laws or regulations. To ensure that the
company's information security management system can be implemented, operated and continued to maintain the confidentiality, integrity
and availability of various information assets within the company and through the joint efforts of all employees, the following objectives are
achieved:
(1) Formulate information security operation specifications, specify safety management objectives and operational points, and implement the
promotion.
(2) Establish security measures such as identity authentication and access control, and strengthen the internal and external information
release process control and review to prevent leakage, error or tampering of confidential information.
(3) Establish an inter-departmental information security organization to develop, promote, implement and evaluate improved information
security management issues to ensure that the company has an information-based environment in which the business can continue to
operate.
(4) Handle information security education and training to strengthen employees' awareness and compliance with information security.
(5) Establish and implement an information security risk assessment mechanism to ensure the effectiveness and immediacy of information
security management.
(6) Implement an internal audit system for information security to ensure the implementation of information security management.
(7) Regularly review and continuously improve the company's information security management system.
Properly controlling the company's data, systems, equipment and network security is the best protection for the company, shareholders,
employees, customers and suppliers. To this end, the company continues to strengthen its ability to protect information security and enhance
employees' The correct concept and alertness of information security protection, and reduce the risks associated with information operations,
also require outsourcing service providers and visitors to comply with the implementation of relevant safety management regulations, any
behavior that jeopardizes information security, regardless of anyone, the company will According to the seriousness of the case, pursue civil,
criminal and administrative responsibilities or conduct consultations according to the relevant regulations of the company, demonstrating the
company's determination to defend information security. The company also sets the following normative points and management plans for
information security objectives:
(1) Information security organization.
(2) Personnel safety management and information security education and training.
(3) Computer system security management.
(4) Network security management.
(5) System access control.
(6) Application system development and maintenance security management.
(7) Asset security hierarchical management.
(8) Physical and environmental security management.
(9) Planning and management of business sustainability plans.
In case of violation of the company's information security regulations, the company will always resort to appropriate disposal procedures or
legal actions, and all employees of the company should know that all information obtained during the work period is the company's assets, if
not allowed, any other unauthorized use is prohibited.
9. Please comment on the results of the recent corporate governance evaluation issued by the Corporate Governance Center of the Taiwan
Stock Exchange Co., Ltd., and propose priorities and measures for those who have not yet improved.
The Corporate Governance Center of the Stock Exchange announced the fifth corporate governance evaluation. The company ranked 6%-
20% of the listed companies. It can be seen that the efforts in implementing corporate governance have been affirmed.
(1)Hold the shareholders' meeting before the end of May: The company is actively evaluating whether to hold the shareholders' meeting in
advance in May.
(2)Announce the annual financial report within two months after the end of the fiscal year: In the accountant's research, this is the goal of the
company's medium-term efforts.
(3)Voluntary Announcement Financial Forecast Information: The Company has no plans to voluntarily announce annual financial forecast
data.
(4)Annual Report Voluntary disclosure of individual directors' remuneration: Based on the protection of personal data, it will not be
disclosed for the time being, and will be re-evaluated in the future.
(5)The company signs a group agreement with the employees: The company has not established a professional association, and it is not
necessary to sign a group agreement according to the group agreement law. If the association is established, it will be implemented
according to the regulations.
(6)Directors' performance appraisal method: The company intends to set the board performance appraisal method in 2019, and has begun to
collect relevant information
Note: CPA Independency and Competency Evaluation Criteria
Note: CPA Independency and Competency Evaluation Criteria
No. Evaluation Item Is the evaluation
outcome independent
1 Does the accountant have a direct or important indirect financial interest in the Company? No Yes
2 Does the accountant finance or guarantee something for the Company or other directors and supervisors? No Yes

47

3 Does the accountant have a close business relationship with the Company? No Yes
4 Is there a potential employment relationship between the accountant and the Company? No Yes
5 Are there contingent fees related to the audit case? No Yes
6 Has the accountant held the post of director, supervisor or manager, or a post having significant impacts on the
audit case recently or in the last 2 years?		 No Yes
7 Does the accountant advertise or broker shares or other securities issued by the Company? No Yes
8 Can the non-audit services the accountant provides affect important items in the audit case directly? No Yes
9 Does the accountant act as the counsel of the Company or mediate conflicts with a third party on behalf of the
Company?		 No Yes
10 Is there a kinship between the accountant and the Company’s directors, supervisors, managers or persons
having significant impacts on the audit case?		 No Yes
11 Does the CPA who retires within one year hold the post of director, supervisor or manager, or a post having
significant impacts on the audit case?		 No Yes
12 Has the accountant accepted valuable presents or gifts from the Company or other directors or managers? No Yes
13 Does the accountant provide services of directors, supervisors or other equivalent posts to the Company’s
colleagues?		 No Yes
14 Does the accountant provide non-audit services below (excluding what’s said in Norm of Professional Ethics
for Certified Public Accountant of the Republic of China No.2)?
(1)Bookkeeping service
(2)Evaluation service
(3)Tax service
(4)Internal audit service
(5)Short-term staffing service
(6)Recruiting senior managers
(7)Corporate finance service		 No Yes
15 Does the accountant regularly participate in the shareholders' meetings and attend meetings of the audit
committee and the board of directors if necessary?		 Yes Non-
applicable
16 Does the accountant provide relevant training for the company? Yes Non-
applicable
17 The company’s financial statements have not been corrected by the competent authority Yes Non-
applicable

Conclusion of Evaluation: Certified Public Accountants Yan, Hsiao-Fang and Tseng, Dong-Rong from

Deloitte Touche Tohmatsu Limited are in line with the Company's independence and compliance evaluation standards, they are sufficient to serve as a visa accountant for the company.

48

(IV) Composition, Responsibilities and Operation of the Remuneration Committee:

1. Information of Remuneration Committee Members

Title Requireme
nts
Name		 Having over 5 years of work experience
and
the
following
professional
qualifications		 Having over 5 years of work experience
and
the
following
professional
qualifications		 Having over 5 years of work experience
and
the
following
professional
qualifications		 Conformity to Independence (Note 1) Conformity to Independence (Note 1) Conformity to Independence (Note 1) Conformity to Independence (Note 1) Conformity to Independence (Note 1) Conformity to Independence (Note 1) Conformity to Independence (Note 1) Conformity to Independence (Note 1) The number
of
other
public
companies
where posts
of
independen
t director s
are held by
these
people		 Remarks
(Note 2)
Having the
title ranking
above
lecturer
in
department
s
of
commerce,
law,
or
accounting
or related to
company
business in
public and
private
universities
and
colleges		 Judge,
procurator,
lawyer,
accountant
or
professiona
l technical
personnel
(having
national
certificates)
related
to
company
business		 Work
experience
in
commerce
,
law,
finance, or
accounting
or
required
by
company
business		 1 2 3 4 5 6 7 8
Independent
Director		 Jiang,
Zheng-He		 ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ 0 ✓
Independent
Director		 Chen,
Qing-Hui		 ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ 0 ✓
Independent
Director		 Tu,
Li-
Ming		 ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ 0 ✓

Note 1: If the member meets any of the following criteria in the two years before being elected or during the term of office, please check the corresponding boxes:

  • (1) Not an employee of the Company or other affiliates;

  • (2) Not a director or supervisor of the Company (the same does not apply if the person is an

  • independent director of the parent company or subsidiaries where the company have over 50% voting shares directly or indirectly);

  • (3) Not an individual shareholder in Top 10 Shareholders or the company where he/she, his/her spouse and minor children have over 1% of the total issued shares or have such shares in the name of others;

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

  • (5) Not a director, supervisor, or employee of institutional shareholders having over 5% of the total issued shares or in Top 5 Shareholders;

(6) Not a director, supervisor, manager or shareholder having 5% of the shares of the specified company or agency that have financial transaction or business contact with the company;

  • (7) Not a professional, proprietor, partner, company or the owner, partner, director, supervisor,

manager or spouse of the professional consulting entities providing services or consultation in business, law, finance and accounting for the Company or its affiliates.

  • (8) Not being involved in any of the situations set forth in Article 30 of the Company Act.

49

Note 2: If the member is a director, please state whether this conforms to Article 6.5 of “Regulations Governing the Appointment and Exercise of Powers by the Remuneration Committee of a Company Whose Stock is Listed on the Stock Exchange or Traded over the Counter”.

2.Responsibilities of Remuneration Committee

To assist the board of directors in executing, evaluating and reviewing the policy, system, standard and structure of salaries and remunerations of the Company’s directors and managers regularly, the

  • remuneration committee shall exercise the care of a good administrator in faithfully performing the official powers listed below, and shall submit suggestions for discussion to the board of directors.

(1)The committee shall make and periodically review the performance evaluation,

remuneration policy, system, standards and structure of directors and managers.

(2)The committee shall periodically evaluate and set the remuneration of directors and managers.

(3)Regularly review the organizational rules of the Compensation Committee and assess whether to propose amendments.

3.Operation of the Remuneration Committee

(1)The committee has 3 members.

(2)The Remuneration Committee held 3 (A) meetings in 2018 and the qualifications of the committee members as well as their attendance records are shown below:

Title Name Number of Meetings
Attended Personally
(B)		 Number of
Meetings Attended
by Proxy		 Personal Attendance Rate
(%) (B/A)		 Remarks
Convener Jiang,
Zheng-He		 3 0 100.0%
Member 3 0 100.0%
Chen,
Qing-Hui
Member Tu,
Li-
Ming		 3 0 100.0%
Other necessary information:
1.If the Board does not adopt or revise proposals of the remuneration committee, the Board meeting date, session, session, content
of the motion, the Board decision, and the Company’s response to the remuneration committee’s opinions shall be properly
recorded (for example, if the remuneration package approved by the Board is superior to that suggested by the remuneration
committee, the difference and reasons must be noted): none
2.Should a committee member oppose or reserve their opinion regarding any decision made by the remuneration committee and
their opinion has been recorded or submitted in a written statement, the committee meeting date, session, content of the motion,
opinions of all members, and the response to the opinions shall be recorded: none.

(3)The Remuneration Committee’s date of meetings, content of proposals, and the company’s handling of the committee’s opinions in the recent year

The Remuneration
Committee		 Proposal Content and Subsequent
Handling		 Proposal Outcome The company’s handling of the
committee’s opinions
4th Session, Third
Committee
March 22nd, 2018		 Employee and Director Remuneration of
2018		 Approved by all members Approved by all attending
directors
5th Session, Third
Committee
May 10th, 2018		 Annual salary of the assistant general
manager of the China subsidiary		 Approved by all members Approved by all attending
directors

50

6th Session, Third
Committee
July 16, 2018		 Cash increase manager's stock
subscription of 2018		 Approved by all members Approved by all directors not
required to avoid interests
7th Session, Third
Committee
March 26, 2019		 Employee and Director Remuneration of
2018		 Approved by all members Approved by all attending
directors

(V) Fulfillment of Social Responsibility:
Evaluation Items Operation Status Differences
from
Corporate
Social
Responsibilit
y Best
Practice
Principles for
TWSE/GTS
M Listed
Companies
and the
Causes
Yes No Summary
1. Implementation of Corporate
Governance
(1)
Has the company
established a corporate social
responsibility policy or system
and reviewed the
implementation results?
(2)
Does the company periodically
hold educational training on
social responsibilities?
(3)
Has the company established a
dedicated (or non-dedicated)
department (in the charge of
senior managers authorized by
the Board and reporting to the
Board) to promote corporate
social responsibilities?
(4)
Has the company established
reasonable salary and
compensation policies,
combined employee
performance evaluation policies
with corporate social
responsibility policies and
established a clear and effective
reward and punishment system?		 V
V
V
V		 (1) The ideas of the company’s fulfillment of
corporate social responsibility mainly focus on
“education”; the Company has established
“Corporate Social Responsibility Practice
Principles” based on “Corporate Social
Responsibility Best Practice Principles for
TWSE/GTSM Listed Companies” and put it on
the company website; apart from updating
related information of corporate social
responsibility, the relevant units convene
meetings irregularly to review the current
measures and present improvement plans, so the
principles are implemented well.
(2) The company carries out health promotion
activities for colleagues, volunteer training
activities and social responsibility and
environment protection trainings for new
employees regularly. It has been holding
JIMTOF since 2010, hoping students from
National Tsing Hua University can learn from
the strong points of the precision mechanical
industry in other countries during their visits,
enhance their international visibility and absorb
international precision machinery development
techniques so that they can be engaged in
industries related to the machinery positively in
the future to make precision machinery
technologies in Taiwan compete with those in
Japan and Germany and become an important
motive force that drives mechanical industry
upgrading in Taiwan and makes Taiwan’s
machinery go international; besides, to refine
the disclosure in CER report, it invites external
specialists to give lessons in the company to
make heads of relevant units learn more of
social responsibility and disclose related
information more completely when writing the
report. Besides, it runs business in good faith,
covering food safety, legal safety and assets
safety, etc. A total of 362 related courses were
held in 2018, which 9,248 people attended and		 None

51

totaled 7,095 hours. (3)The Company set up a CSR Committee under the management of the CEO to promote corporate social responsibility. Members of the Committee include Chairman Room, Management Department, Labor Security and Environmental Protection Department, Human Resource Department, Financial Office and Planning Section; the general manager is responsible for setting the Company’s vision of corporate social responsibility; relevant units convene meetings irregularly and report the year’s implementation plan and results to the Board, which, after discussion, would be listed as a Board report, and should be reported once every year, the 201 execution results and 2019 plans have been listed in the board meeting report of May 6th, 2019. CSR committee pays attention to issues related to education, economy, environment and socially vulnerable group. The Committee’s responsibilities are as follows: 1.Responsible for formulating corporate social responsibility-related systems, policies, and promotional programs 2.Co-ordination and validation of the production of corporate social responsibility reports. 3.Review corporate social responsibility policies and systems regularly, and hold meetings to track progress of various projects. 4.Approval of other matters related to corporate social responsibility or for future references. 5.Maintain communication and interaction between various functional organizations and stakeholders, and management of all major issues regarding to corporate social responsibility. Please refer to the 2018 CSR Report for details (4) The Company and its subsidiaries have established salary and compensation policies according to the relative contribution of duties, to provide employees with reasonable salaries. All salary adjustments and promotions are handled with systematized procedures transparently and openly; it holds meetings regularly for salary adjustment and bonus allocation to make all colleagues learn about the salary and remuneration policy; to encourage employees to strive for better results, the Company allocates a certain percentage of profit surplus as a basis for employee dividends, thereby sharing surplus results with colleagues, and review various salary and welfare systems. By doing so, the Company hopes to achieve “external competitiveness” for salaries that attract and retain outstanding talents. And the "Remuneration Committee" regularly reviews the rationality of the Company’s remuneration system. For employees to grow along with the company , HIWIN vigorously plans professional training require by work tailored for employees, letting employees maintain new knowledge and use their learning at work; all official employees have to undergo a regular evaluation, and new personnel have a newcomer evaluation within the first month and first three months, incumbent employees have a quarterly work performance review, there are four quarter

52

evaluation and an year-end assessment annually,
reviewing the work process constantly and
maintain improvement, boosting performance
and receive promotions, 954 employees have
been promoted in 2018.According to the
company’s articles of association, if the
company’s annual final accounts are profitable,
it should raise 1. The employee’s compensation
should be no less than 1%. 2. The directors’
remuneration should not be higher than 4%. The
compensation of employees is decided by the
board of directors and distributed in stocks or
cash. The payment of directors' compensation is
paid in cash. Also, supervisors are expected to
regard the employee's input and cooperation
with CSR-related activities as a positive input,
and provide positive award for his/her effort in
the performance appraisal; the Company also
has incentives and penalties management
measures, proposal improvement mechanisms,
and workplace harassment and abuse prevention
measures, appeals and disciplinary measures.
The Company would provide award merits
timely, and implement vigilance measures
against the law, and comply with the set code of
conduct and reward and punishment standards.
In addition, the Company holds educational
trainings related to corporate social
responsibility irregularly and makes the results
one of the evaluation items of individual
performance and promotion; to improve the
training effects, it has established a reward and
punishment system.
2. Sustainable Environment
Development
(1) Does the company endeavor
to utilize all resources more
efficiently and use renewable
materials which have low impacts
on the environment?
(2) Has the company established
a proper environmental
management system based on the
characteristics of the industry?
(3) Does the company notice the
impacts of climate change on its
operations, check greenhouse
gases and develop company
strategies for energy conservation
and reduction of CO2 emission
and greenhouse gas emission?		 V
V
V		 (1) The company is dedicated to developing and
using green products’ materials and packing
materials and strengthening garbage
classification and resources recovery to reduce
the waste of resources. It also advocates energy
conservation in the company by managing
energy use effectively through system promotion
and energy review; it made a reduction plan in
2018 and 2017 to save 910kWh and 1220kWh
respectively, i.e. reducing 482 and 855 tons of
carbon emission. Besides the strategies 646, it
also promotes paperless receipts to reduce paper
waste and installed solar modules on the roof of
the operating headquarters to respond to the
government’s green energy policies, thereby
reduces the impacts of company operation on
natural environment. Please refer to the
Company’s 2018 CSR report for more details.
(2) The company appoints Labor Security and
Environmental Protection Department and
environmental protection personnel to deal with
air pollution, waste water and garbage, and
authorizes a professional handling agency to
dispose waste produced in the productive
process and plan and arrange training courses
related to labor security and environmental
management for employees to ensure the
implementation of the company policy; it
achieved ISO14000 Environment Management
System certification in 1997, and conducted
“Greenhouse Gas Inventory 2010” and “Ball
Screw Carbon Footprint Verification” according
to ISO14064-1(Greenhouse Gas Inventory at
Organization Level) and PAS 2050 (Product
Carbon Footprint) standards; it got ISO14064-1
and PAS 2050 certificates from British
Standards Institution (BSI). The Company has		 None

53

been promoting carbon management related operations for some time, and have thoroughly understood the company’s actual production of “carbon” and “greenhouse gas” for the implementation of improvement measures to achieve the goal of reducing CO2 emissions, in order to demonstrate the company’s dedication in environmental protection. (3)1. The company’s coping strategies for climatic change: A. Prevention and control of air and water pollution B. Waste reduction and recovery

C. Reduction of greenhouse gases

D. Save water and chemicals

E. Increase the use of energy saving products F. Build carbon footprint G. Avoid using harmful and toxic substance The aforementioned strategies have been included in the company's risk management protocols 2. The company’s greenhouse gas inventory: a direct emission of 7,261 tons of CO2-e and an indirect emission of 124,163 tons of CO2e in 2018, totaling 131424 tons of CO2-e; a direct emission of 5,895 tons of CO2-e and an indirect emission of 110,222 tons of CO2e in 2017, totaling 116,117 tons of CO2-e. All of the above data have been verified by a third-party verification company, TUV Rheinland, to the factory for verification of the ISO 50001 energy management system and verification of data. 3. The company expects to continue to promote several energy management action plans in 2019 with NT$ 9.36 million, which can save 3.3 million kilowatt-hours and NT$ 9.24 million in annual electricity costs, and reduce direct carbon emissions of 1,832 tons of CO2-e. 4. The company is devoted to reducing traditional pollutants to respond to the government’s CO2 emission reduction and energy saving policy; through the energy budget of the Bureau of Energy, MOEA, it’s selected as the demonstration enterprise group (the only listed company in the precision mechanical industry) of ISO 50001 energy management system by the Industrial Development Bureau, MOEA; Taiwan Green Productivity Foundation assists the Operational Headquarters of HIWIN in importing the energy management system according to the international standard; after the operational status of the Operational Headquarters of HIWIN was inspected by TUV Rheinland, it passed ISO 50001 energy management system verification successfully; it implements control according to the management system (PDCA) every year. The ISO 50001 Verification Date was January 15th, 2018, the certificate is valid until January 14th, 2021 5. Based on the objectives of corporate social responsibility and sustainable management, all employees must jointly promote the international standard ISO 50001:2011 Energy Management System. Our commitment to energy policy are as follows: A.Comply with energy-related regulations and

54

prioritize energy-saving products.
B.Improve energy efficiency and continue to
improve energy performance.
C.Review energy targets and ensure the
availability of information and resources.
D.Implement energy management system, and
participate fully in energy conservation and
carbon reduction.
E.Create corporate energy value and build
sustainable corporate culture.
6. In 2018, HIWIN Technologies Corp. passed
revised certification of ISO14001:2015. In
accordance with the Company’s policy on
environmental safety and health, the
company will endeavor to integrate
environmental protection concepts in the
decision-making processes of research and
development, product manufacturing and
service, use and disposal of raw materials,
and continue to strive for improvements to
fulfill the Company’s corporate
responsibilities in environmental protection,
reduce of disposals, saving energy and
maintaining a safe and clean environment for
workers. In order to do so, the Company has
committed to all employees, customers,
partners and the public for achieving the
following goals:
A. Provide employees with education to raise
awareness of environmental and safety
protection, promote participation in activities,
and continue to communicate and consult
with employees, manufacturers, and
customers on environmental and safety
issues.
B. Comply with government environmental
sanitation regulations and other requirements.
C. Promote pollution prevention and take the
initiative to continue to strive for
improvements.
D. Safe and legal waste disposal, and continuous
industrial waste reduction.
E. Voluntarily maintain and control, or reduce
emission of greenhouse gases; protect natural
resources; saving energy.
The ISO 14001 Verification Date was
February 20th, 2019, the certificate is valid
until January 28th, 2021
3.Safeguarding public
welfare
(1) Has the Company established
its management policies and
procedures in accordance with
relevant laws, regulations, as well
as International Covenants on
Human Rights?
(2) Has the company set up a
complaint channel and mechanism
and handle complaints properly?
(3) Does the company provide a
healthy and safe work
environment and organize training
on health and safety for its
employees on a regular basis?
(4) Has the Company established		 V
V
V
V		 (1) In order to protect the rights and interests of
employees, the Company refers to the
International Covenants on Human Rights to
formulates policies for the protection of human
rights as follows:
1.
Gender equality and maternal health
protection:
No differential salary, benefits
protection and promotion opportunities
will be given due to gender, while
respecting gender equality, setting key
points for prevention and treatment of
sexual harassment; the Company also
abides to labor standards and gender
laws to regulate female labor equality,
maternity leave, paternity leave,
parental leave, etc.; employee may also
adjust working hours and locations
during pregnancy.
2.
Ban on child labor: The Company do
not employ child workers under the
age of 16, and follows the Labor		 None

55

mechanisms for regular
communications with employees
and keeping employees informed
in a reasonable manner changes in
Company operations that might
have significant impacts on
employees?
(5) Has the Company established
an effective career capability
development training program for
employees?
(6) Has the Company established
consumer protection policies as
well as complaint procedures with
regards to R&D, procurement,
production, operations and service
flows?
(7) In terms of the marketing and
labeling of products and services,
has the Company followed
relevant laws, regulations, and
international norms?
(8) Before doing business with
suppliers, does the Company
assess whether or not the suppliers
have had previous records of
negatively affecting the
environment or society?
(9) Do the contracts between the
company and its major suppliers
include termination clauses which
come into force once the suppliers
breach the corporate social
responsibility policy and cause
appreciable impact on the
environment and society?		 mechanisms for regular
communications with employees
and keeping employees informed
in a reasonable manner changes in
Company operations that might
have significant impacts on
employees?
(5) Has the Company established
an effective career capability
development training program for
employees?
(6) Has the Company established
consumer protection policies as
well as complaint procedures with
regards to R&D, procurement,
production, operations and service
flows?
(7) In terms of the marketing and
labeling of products and services,
has the Company followed
relevant laws, regulations, and
international norms?
(8) Before doing business with
suppliers, does the Company
assess whether or not the suppliers
have had previous records of
negatively affecting the
environment or society?
(9) Do the contracts between the
company and its major suppliers
include termination clauses which
come into force once the suppliers
breach the corporate social
responsibility policy and cause
appreciable impact on the
environment and society?
mechanisms for regular
communications with employees
and keeping employees informed
in a reasonable manner changes in
Company operations that might
have significant impacts on
employees?
(5) Has the Company established
an effective career capability
development training program for
employees?
(6) Has the Company established
consumer protection policies as
well as complaint procedures with
regards to R&D, procurement,
production, operations and service
flows?
(7) In terms of the marketing and
labeling of products and services,
has the Company followed
relevant laws, regulations, and
international norms?
(8) Before doing business with
suppliers, does the Company
assess whether or not the suppliers
have had previous records of
negatively affecting the
environment or society?
(9) Do the contracts between the
company and its major suppliers
include termination clauses which
come into force once the suppliers
breach the corporate social
responsibility policy and cause
appreciable impact on the
environment and society?		 V
V
V
V
V		 Ordinance to treat workers under the
age of 18; “Work Regulations” are also
set.
3.
Equality in disability: Same paths of
career development and salary benefits
as that of general staff members.
4.
International shift protection: Legal
salary and leave management.
5.
Reasonable working hours: Follows
the relevant regulations of the Labor
Law to establish Company's working
hours policy and legal wage payment.
6.
Set regulations such as “Work
Regulations”, “Harassment Preventive
Measures”, “Attendance and Leave
Management Measures”, “Babysitting
Subsidies for Staff Members”,
“Employee Group Insurance
Regulations”, “Special Vacation
Management Measures”.
(2) The Company has set an employee
complaint box; meanwhile, it uses a two-way
communication and coordination mode for
employees and the employer and convenes labor-
management conferences regularly to coordinate
labor relationship and discuss how to promote
employee-employer cooperation and improve
working conditions, and plan for labor welfare,
so the relationship between employees and the
employer has been harmonious since the factory
was opened and there has been no labor trouble
so far.
(3) The Company has passed ISO45001/OHSAS
18001/TOSHMS Occupational Safety and
Health verification, and it invites professional
institutes to conduct external audits every year to
keep the management system operating.
Furthermore, it carries out employee safety and
health training, fire-fighting drilling and working
environmental harm control evaluation, and
provides sufficient protection to safeguard
employee health and safety.
The ISO 45001 verification date is 2019.3.7 and
the certificate is valid until 2022.3.6.
To implement environmental safety and health
policy, the Company has established systematic
management (ISO45001, OHSAS18001 and
TOSHMS); through the management spirit of
PDCA Cycle, it adds the environmental safety
and health concepts to R&D, product
manufacturing and service, raw materials using
and waste gas; in addition, it promotes
continuous improvement in goal management
schemes through organizing meetings,
educational training and employee involvement
to fulfill environmental safety and health
protection. The mode of operation is shown
below
1. Every factory has appointed occupational
safety
and health management units and personnel to
draw up occupational safety and health
management plans, promote work environment
and operation hazard risk identification, evaluate
and control health and safety management items,
carry out automatic inspection before operation
of mechanical equipment and working
environment monitoring and continuously
improve safety and health facilities so as to
create a safe, healthy, comfortable and friendly
work environment.

56

  1. Before being designed or purchased, the equipment must conform to necessary safety and health standards and be reviewed and evaluated by safety and health personnel through the management system of change, and must meet safety and health standards before being used in the factory 3. All factories hold occupational health and safety committee meetings regularly every year to review and improve related safety and health issues, and take precautionary measures depending on operating risks, such as mechanical equipment management, contractor management, chemicals safety management, personal protective equipment requirements and safety audit management. Besides, they also do emergency response drills regularly so as to minimize employees’ and the Company’s capital losses and impacts of disasters on the society and environment 4. It appoints special physicians and employs special nurses to provide health service near factories, plans and implements labor health education, health promotion and guidance, prevention and cure of work-related injuries, health consultation, first aid and emergency treatment, and holds regular health promotion activities, such as healthy eating, relaxation, preserving health using traditional Chinese medicine and walking to fitness to satisfy employees’ health needs. Moreover, it also conducts health examination according their ages and special work health examination to effectively evaluate and track employees’ health condition. 5. It conducts working environment monitoring semiannually, including physical and chemical factors defined in laws and regulations, such as illumination, concentrations of carbon dioxide, noise, and concentration of special chemical substances specified by laws and regulations. When there is an unusual phenomenon found from monitoring, the labor security personnel in the factory will conduct evaluation and improvement to ensure an acceptable level of hazard factor exposure risk so as to protect the health of operating personnel. 6. Apart from improvement in work environment and workplace health, there’s also improvement in human factors engineering, including simple fork lift truck, vacuum extractor, hydraulic cart and trolley; moreover, it also conducts allotment of labor, and educational trainings and advocacy on correct handling posture. 7. The implementation status in 2018 is as follows: A. There were 17 cases of disability injuries at all sites of HIWIN Technologies Corp., with no major occupational catastrophes. In addition to strengthening personnel education and audit training, synchronized production of lifting slings and highrisk machines should also be inventoried. Lifting sling sets are still under modification; high-risk machines have completed 49 improvements. *Between 2016 and 2018, there has been no occupational disaster incident at the contractor. B. General Manager Tsai Huey-Ching led

57

the senior management to promote the
safety and culture work area security
joint activities. The heads of various
departments led the colleagues to
participate in the regional joint defense.
In 2018, a total of 1,363 risks were
discovered and improved. In 2019, the
improvement activities will continue to
be promoted.
C. The Company hired occupational health
nurses and special occupational
therapists to provide regular health care
services, such as medical treatment,
health consultation, case management,
emergency injury and medical care, and
abnormal medical examinations. In
2018, a total of 2,626 people
participated in such services.
D. The Company provides employees with
a comfortable, secretive and safe space
for breast-feeding, as well as timely
care and support, and related education
information, in order to enhance the
willingness to continue breast-feeding.
E. The Company provide timely health
inspections to identify potential
virulence factors for employees; and
promotes relevant chronic disease
prevention and cancer screening
activities. Analysis and follow-up
management was also conducted based
on the results of health checks of our
employees. In 2018, an analysis was
carried out to inspect the reduction of
hypertensive workers. Through pre- and
post-test questionnaire surveys, data
tracking and monitoring, the Company
learned about individual health
problems and provided employees with
individual health guidance. After the
majority of employees were instructed,
74.1% of the hypertensive employees
showed improvements in their
hypertension conditions
(4) Besides convening regular labor-
management conference s to
communicate with employees, it holds a
monthly meeting at the beginning of
every month where senior managers
report the company’s business and
operation status to all the employees;
meanwhile, it also sets feedback boxes
for employees to communicate with the
chairman, general managers and the
human resource department to create a
good communication environment.
(5) It has a perfect career development
training system, the theme of which
covers core competencies building,
specialized knowledge and skills at
different levels in different fields, and
leadership management and humanistic
quality to cultivate all occupational skills
in employees.
(6) The drive control and system protects
produced and sold by the Company are
industrial products; by providing
customers with a complete package of
technology support and after-sale
services, it hopes to grow together with
its customers; there is a special area for

58

interested parties on the company website
for consumers to give feedbacks or
complain in real time and the Company
will respond to their questions to protect
their rights and interests.
(7） The Company’s products are sold around
the globe, so they must conform to
environmental protection regulations of
all countries; it and its suppliers jointly
ensure they conform to the regulations
above, and improve the suppliers’
quality, environmental awareness and
ability, and share the corporate social
responsibility.
(8) At present, the Company usually asks the
suppliers to fill in “New Supplier
Evaluation and Survey Form” before
doing business, which lists social
responsibility and their environmental
impacts and shall be answered in details
by manufacturers; it evaluates whether to
trade with suppliers based on this form.
(9) 1. In addition to providing high-tech, high-
quality, and cost-effective products, the
company also adheres to the philosophy
of "manufacturing is not an end, it is to
meet the needs of human beings" and is
committed to providing diversified
services. Shanghai Bank not only
regulates all the company's colleagues,
but also encourages suppliers on the
system to provide good quality and
delivery time, as well as to fulfill the
responsibility of protecting the
environment, including the current state
of labor compliance with national laws
and regulations, the original materials
and the conflict-prohibited areas.
Minerals, banned hazardous substances
(such as EU RoSH), and signed a
conflict-free minerals declaration, and
added a supply partner labor human
rights management project in the
procurement contract to avoid and reduce
potential hazards and risks to the overall
operation of the Bank of China
Technology, to ensure the benefits The
interests of the people involved, as well
as the provision of a good employment
environment, etc., thereby enhancing the
competitiveness of both parties. In 2018,
there were three suppliers who violated
the Labor Law and subsequently
strengthened the Supplier Code of
Conduct to require suppliers to fully
comply with the law.
2. When the company orders the main
equipment, it is stipulated that if the
manufacturer has a significant impact on
environmental protection, it will reassess
whether it will continue to trade with it.
In the case of a transaction with a
supplier, the parties must enter into a
contract for sale and purchase. The
contract states the terms of corporate
social responsibility: Party A and Party B
shall abide by the corporate social
responsibility policy and shall comply
with the standards of ethical, legal and
public requirements for the operation of

59

the company. Considering the impact on society and the natural environment, any party may terminate or terminate the contract at any time if it involves a policy that violates corporate social responsibility. 3. The Company has a specific supplier management policy, which is based on the long-term cooperation of the suppliers and the company's sustainable operation and mutual growth through the close cooperation model. The selection of new suppliers is based on their price and quality. The delivery period is listed as an assessment project, and the environmental safety management, labor human rights and financial assessment projects are evaluated. The survey results show that 100% of the new supply partners have passed the assessment. In 2018, a total of 291 new suppliers joined the Shanghai Bank. Technology supply chain system. 4. The company always attaches great importance to the safety and hygiene of employees and a comfortable working environment. It also hopes that upstream and downstream manufacturers will work together to establish industry standards in safety, health and environmental protection. In order to protect the safety, health and facilities maintenance of contractors and colleagues, the company has set up a management system for contracting safety, health and environmental protection agreements. The number of households has reached 182. Currently, the company will continue to promote and provide assistance when necessary. Expect to work together to reduce the risk of hazard. 5. Through the supplier evaluation and corporate social responsibility questionnaire analysis, the survey items are product quality, product supply price, after-sales service, delivery punctuality rate, supplier location, flexible cooperation degree, compliance with company confidential contract, supplier inventory Policy, environmental safety management, labor human rights and financial assessment are evaluated. Only through evaluation can we become qualified suppliers of the company. In response to the supply chain environmental security management, there are 3 suppliers that do not comply with relevant occupational safety regulations, and are listed as key counseling targets. The environmental impact assessment is added in 2018. The average score is 8 points (out of 10 points), and 25 are significant. Environmental considerations/hazard identification and risk assessment have no legal management measures, and follow-up will continue to counsel suppliers

60

4. Strengthening information disclosure
(1) Has the Company disclosed
relevant and reliable corporate
social responsibility
information on its website as
well as on the Market
Observation Post System
(M.O.P.S.)?		 4. Strengthening information disclosure
(1) Has the Company disclosed
relevant and reliable corporate
social responsibility
information on its website as
well as on the Market
Observation Post System
(M.O.P.S.)?
4. Strengthening information disclosure
(1) Has the Company disclosed
relevant and reliable corporate
social responsibility
information on its website as
well as on the Market
Observation Post System
(M.O.P.S.)?		 V (1) 1. The company has a special area for
corporate social responsibility on the
company website, publishes related
information of its corporate social
responsibility on the Market
Observation Post System according
to relevant law or decree, and
discloses relevant and reliable
related information of its corporate
social responsibility in the annual
report.
2. The Company regularly issues CSR
report to disclose and promote
corporate social responsibility on
csr.HIWIN.tw
3. HIWIN Technologies combines
core corporate strengths with social
benefits, actively investing in
training of the precision machinery
talent field, establishing a learning
society; the HIWIN Technologies
volunteer group focuses on education
and social services, providing
educational and social beneficial
services through corporate resources
and employees’ active participation,
making an effort for corporate social
responsibilities. The company’s
specific CSR promotion plans and
execution results of 2018 are listed in
brief below (Please refer to the
company’s CSR report for details)
Social Benefits
A.
In 2018, a total of four social welfare
groups (Yunlin Shenghui, Maria,
Eden, Xixier) were engaged in the
production of Mid-Autumn moon
cakes, a total of 5,291 boxes to
provide employment opportunities
for vocational groups and vocational
training
B.
"Listening to the sound of flowers"
The large-scale installation art is the
largest mechanical flower on the
surface of the world. It is a "co-
creation" model for physical
integration of HIWIN Technologies,
Da Yin Micro System, Taiwan Yan
Nuofei, Da Zhen Feng Yang
Umbrella, Asian University Artificial
Intelligence College. ...and 12 local
units combined with art, humanities
and technology, composed of 697
fire red mechanical flowers; this
work can simulate the dynamics of
plants through mechanical devices,
multi-point control, environmental
control system, performance
thinking, and nine-channel sound. .
"Mechanical Flower" opens up the
possibility of creating art, technology
and industry together. It also
represents a successful case of cross-
industry and cross-generation. Many
companies have jointly created a
masterpiece of exquisite
craftsmanship. HIWIN Technologies
produces precision machinery
strength
C.
HIWIN Technologies sponsors NTD
2 million each year for the		 None

61

Foundation of the Public Welfare Platform Cultural Foundation. The general manager Tsai Huey-Chin serves as a director of the Public Welfare Platform Foundation, giving timely assistance and advice. D. HIWIN Technologies sponsors NTD1 million per year to support the Huiming Blind School Education Support Program, to support each child's life with love, to help Huiming implement the balanced learning and development of students, and to prevent campus and professional growth. Teachers, community schools, the concept of running a school, enrich the learning energy, provide a sustainable business environment of humanities, nature, aesthetics, creativity - Industry University Cooperation HIWIN Technology spares no effort in the development of "talent education". In addition to its own "HIWIN Science and Technology Machinery Master's Thesis Award", "Shanghui Smart Robotic Hands Competition", "HIWIN Science and Technology Education Foundation JIMTOF Trainee" and leading In addition to educational activities such as "Automation Engineer and Robot Engineer Certification", the company actively participates in government-sponsored multiindustry cooperation programs, such as industry-university cooperation projects, industrial college programs, industrial technicians, and production and education programs. . In order to encourage more young students to participate in the field of precision machinery as early as possible, in 2017, in response to the government's "five specialized industry core skills development plan", it is expected that the vocational education can be rooted. Since 2012, HIWIN Technology has cooperated with the school in 20 industry-university programs, with an average of 150 interns per year. There are currently 360 internship students in the factory. The proportion of internship contracts continuing to remain in service every year is 60~ 70%, students who continue to study in the university also get the opportunity to work for the Bank after they have obtained the degree. It is mainly for the students to appreciate the salary and welfare system. What is more important is that students feel the intention and sincerity of HIWIN Technology during their internship. Community Care In June 2012, the HIWIN Science and Technology Education Foundation established the HIWIN Science and Technology Volunteer Group, which

62

mainly focused on education and
social services. The aim is to provide
caring and supportive services to the
company's employees through
company support and employee
participation, and to participate in
education and social welfare
services, and to fulfill corporate
social responsibility. In 2018, there
were 1,008 participants and the
number of service hours was 3,024
hours.
Kind Donations
A. The HIWIN Science and Technology
Education Foundation supports the
work opportunities of the
disadvantaged groups and actually
increases the income of the social
welfare group. The total income of
the 10th Energy Center is NTD 77
thousand
B. Hualien Earthquake Assistance: On
February 6th, 2018, Hualien
Earthquake occurred in the middle of
the night, Hualien City earthquake
level 7 and caused serious disasters,
the company donated NTD 5 million
yuan for the first time, expressing the
care and support of HIWIN
Technology, and appealing to the
business community and society The
public will lend a helping hand
together to help the disaster relief
and enable the victims to rebuild
their homes as soon as possible.

  1. If the Company has established the corporate social responsibility principles based on “the Corporate Social Responsibility BestPractice Principles for TWSE/TPEX Listed Companies”, please describe any difference between the Principles and their implementation:

  2. The Company has established corporate social responsibility principles based on “the Corporate Social Responsibility BestPractice Principles for TWSE/ TPEX Listed Companies”, and there is no major difference between actual operation and the principles. Besides, with the efforts of all the colleagues, corporate governance, energy conservation and environment protection and efforts devoted to public welfare, and protection of other rights of interested parties are well received.

  3. Other important information that helps comprehending the status of CSR operations:

  4. The company has spent tens of thousands sponsoring the "HIWIN Machinery Master's Thesis Award" every year since 2004, it has been held for fifteen years until the date of the annual report’s publication, mainly to encourage young students to invest in R&D and innovation in the field of mechanical engineering, to cultivate more outstanding talents for the country and enterprises, and to promote and enhance the research interests and standards of domestic young students in the machinery industry, and to absorb more talents into the machinery industry

  5. The "HIWIN Smart Robotics" competition has been held since 2008, it has been held for 11 years until the date of the annual report’s publication, laying the foundation for the future talents and technologies of the robot industry

  6. HIWIN has been responsible for the talents of Taiwan's machinery industry. Since 2009, it has assisted the Taiwan Automation Intelligence and Robotics Association (TAIROA) to promote the "Automation Engineer" license exam, mobilizing 500 teachers from national mechanical-related universities and corporate elites to participate in propositions and questions. 20 exams have been completed until the date of the annual report’s publication. In response to the development trend of major countries in the world, robots have developed the necessary foundation for smart manufacturing. Since 2016, we have assisted TAIROA to promote the "Robotics Engineer" license exam. The 6th exam has completed development

  7. In 2009, the "HIWIN Technologies Education Foundation" was established with promoting the promotion of our country’s industrial standards as principal through various education and award-winning activities

  8. Since 2010, the “College Student JIMTOF Study Group" has been organized by the HIWIN Technologies Education Foundation to encourage mechanical students to focus on the study of precision machinery and expand their international vision, thereby enhancing the innovation of Taiwan's machinery industry technology. This activity is engaging in the primary selection and reelection of domestic mechanical, with the target being college students in domestic mechanical-related departments, up to 32 students from grades 2~3 in the mechanical engineering, automation and electrical related departments of domestic universities and colleges are selected to attend the biennial Japan International Machine Tool Fair (JIMTOF), and arrange to visit Japan's index factory

  9. Since 2011, the Chinese Mechanical Engineering Society has been entrusted to hold the "HIWIN Award for Excellence in Mechanical Doctoral Thesis". The purpose is to raise the standard of Chinese precision machinery and manufacturing technology across the Taiwan Straits, strengthen the cultivation work of high-level creative talents, and improve cross-strait mechanical engineering and the quality of doctoral education in the field of intelligent automation, stimulating and encouraging young students to invest in R&D and creative applications in this field. It has been held for 8 years until the date of the annual

63

report’s publication, and will continue to be held in the future report’s publication, and will continue to be held in the future report’s publication, and will continue to be held in the future report’s publication, and will continue to be held in the future report’s publication, and will continue to be held in the future report’s publication, and will continue to be held in the future

7. The company has been committed to industry-university cooperation and school education for many years, to fulfill corporate

social responsibility, the company and Chairman Chuo donated a new library to Hsinchu Liu-Jia Elementary School, it is
expected to have online library functions, a reading room, and a grand lecture hall, etc., so that teachers and students can easily

use the library, cultivating children's reading habits, international perspective and basic ability to cope with globalization. The

Chuo Yong-Tong Memorial Library opened in November, 2017. It covers an area of 1,865 square meters (about 564 pings) and

is a five-story building. The 1-2 floor is mainly composed of children's books and has a story theater area, a large tree reading
area and a multimedia interactive learning area; the third floor is an adult reading room with foreign newspapers and magazines

for citizens to connect with the world; the 4th floor stepped grand lecture hall can accommodate 200 people at the same time, the

5th floor is the meeting room and research room, the roof is a learning field planned as an environmental energy zone including

wind power and solar energy, the total floor area is 2,735 square meters (about 827 ping), the construction lasted for 5 years and
the total cost is about NTD 160 million. The construction of the Chuo Yong-Tong Memorial Library is mainly to enable alma

mater students to have better reading habits, international outlook and basic ability to cope with globalization. At the same time,

it will be open to communal use, so that community residents can have a better communicating learning space

8.HIWIN Technologies has sponsored a four-year plan with a funding of NTD 1 million per year since 2015. It supports National

Tsing-Hua University’s “Sunrise Project” (economically disadvantaged enrollment), providing scholarships for NTD 400
thousand for four years, so that these students can work hard without any worries, using education to reverse the fate of

generations. The Sunrise enrollment plan considers the applicant's growth process and learning motivation, and prioritizes

economically disadvantaged students who are positive in adversity. After enrolling, the students are diverted to the departments

who provide the quotas. The number of students in the Sunrise Project is 40 every year. the Sunrise Project (not the Sunrise
group) will be expanded starting in the 2018 school year, and more than 30 economically disadvantaged freshmen will be

enrolled. The proportion of economically disadvantaged freshmen is about 3.5%

9. The massive earthquake in Hualien in February, 2018, the company donated NTD 5 million to Hualien County Social Assistance

Fund, to express its concern and support to the disaster area
10.The implementation results in 2018 are as follows: The amount of CSR investment is NTD 109,879 thousand, including four

major items: NTD 37,990 thousand for talent cultivation, NTD 20,908 thousand for industry-university cooperation, NTD

26,008 thousand for community care and NTD 824,903 thousand for public welfare sponsorship; the number of health lecture

participants was 2,483; the number of health care attendees was 4,780; the number of training development hours was 140,000
hours; the new supplier passed the human rights and labor survey by 100%; the cooperation between industry and education

continues, a total of 470 students interned at HIWIN Technologies from 2015 to 2017; the number of HIWIN graduates that

went to higher vocational colleges or universities of technology to share industry trends and product technology applications

was 97; HIWIN volunteer service totaled 3,024 hours
11. The TCSA held by TAISE, HIWIN received the TCSA’s “Top 50 Comprehensive Performances Award”, “Individual

Performance- Innovative Growth Award”, “Individual Performance- Gender Equality Award”, “Individual Performance- Talent

Development Award”, and the Gold Medal for the “Reporting Category - Electronic Information Manufacturing Group”

12. Promote green energy construction: Solar energy is the most abundant energy source for renewable use, and the greenhouse gas
effect will not be intensified from producing greenhouse gases. In 2016, HIWIN Technologies set up 50KW solar power

generation at the operation headquarters and put it into power generation in parallel with the power company line, the investment

for the construction was NTD 3.95 million. Therefore, a solar power generation system was planned for construction in 2017,

and the completion of 486KW power generation was started construction in phases in 2018, and a solar power generation system
is planned for 2019, and installation was started in phases, a goal of a total of 2,844 KW of generating capacity is expected for

installation in 2021. The target is expected to set a total of 1,600 KW of generating capacity by 2021. Target management

performance and outlookplanningare as follows:
Environmental
Management
Management Outlook and Plan Completion

Performance
Target
Short-Term Goal: At the end of 2018, the 486KW solar power generation contract was

signed, and construction was carried out. It is estimated that in June 2019, the power		 Continuing

company will be connected to the power company line in parallel with green power
Process
Renewable

generation. The investment for the construction is NTD 32.55 million.
Energy, Solar
Green Energy Midterm Goal: It is estimated that in the second quarter and the third quarter of 2019,

Power		 Continuing

Construction
solar power generation with an estimated value of 811 KW will be completed, and
Generator
Process
contract signingwill be completed in the third and fourthquarters respectively
Installation
Long-Term Goal: Continue planning and installing solar power generation, preliminary

survey assessment states up to 1,497KW can be installed, combined with 50KW set up,		 Planning
totaling2,844KW of solar energyfor solarpowergeneration
13. The CSR Committee will report the major issues discussed in the economic, social and environmental aspects, the issues discussed
with the people concerned, and the implementation content and frequency of the company to the Board of Directors at least once a year.

The communication and corresponding measure
s of the various categories and stakeholders in 2018 are as follows:
Stakeholder Major Themes Communicating
Platform/ Method		 Solutions

64

01 Employee Labor
relationship
Occupational
safety
Smart
machinery		 •Labor representatives
attend the meeting
•Stakeholder area
•Complaint Mailbox
(Chairman, General
Manager, Human
Resources Department
Special Mailbox)
•Corporate Social
Responsibility Report		 •Sound salary and benefits, retirement system, labor
insurance, health insurance and extra group insurance, etc.
•Diversified employee communication channels to take care
of the various mechanisms of employee physical and mental
health
•Regularly handle various education and training, reading
sessions, lectures and degree training. In 2018, a total of
165,893 hours
•20 labor and management meeting held in 2018
02 Shareholder Occupational
safety
Social economic
regulations
Smart
machinery
Talent
cultivation		 •Annual shareholder
meeting
•Participate in public
policy and other related
meetings
•Official correspondence
•Juristic person briefing
•Stakeholder area, media
news		 •Hold a board meeting at least once a quarter, 8 times in 2018
to review business performance and discuss important
strategic issues
•To develop an operational plan by reviewing the possible
major risks of the Board of Directors, and to maintain
continuous improvement through internal operational
processes.
•The relevant important resolutions of the company were
immediately announced to the public information
observatory of the Taiwan Stock Exchange.
•In 2018, a total of 43 major messages in both Chinese and
English were published.
•Privacy and business secret internal control
•2 juristic person briefings and 1 shareholder meeting in 2018
03 Client Environmental
regulations
Customer health
and safety
Marketing mark
Customer
privacy
Smart
machinery		 •Annual customer
satisfaction survey
•Web page update / 3D
website creation
•Customer relationship
management software
•Product promotion /
exhibition
•Stakeholder area
•Mobile Apps		 •Provide quality pre-sales and after-sales service through
customer surveys and frequent visits and exchanges
•Through web page updates, linking affiliate websites and 3D
website creation, allowing customers to quickly understand
product and service information
•Maintain customer visit information and after-sales service
information through software management; potential
business opportunities from exhibitions and official website
business messages can also be managed and tracked by
software
•Participated in more than 200 exhibitions from around the
world in 2018 (covering more than 40 countries), promoting
new products during the exhibition, and providing guided
tours
•Arrange for subsidiary/dealer education training
04 Contractor Environmental
regulations
Labour
Relations
Occupational
safety
Marketing mark
Customer
privacy
Social economic
regulations		 •Regularly organize
contractor agreement
organization meetings
•Establish management
measures for contractors'
safety, health and
environmental protection
agreements
•Field audit		 •Conduct safety and health management and implement
control for contractors, in the hope of managing at the source
to prevent occupational disasters
•Regular annual meeting organization meeting
•Conducting the annual rating of the contractor
•Conducting internal employee supervision training, totaling
833.5 hours in 2018

65

05 Academic
Field		 Economic
performance
Environmental
regulations
Emission
Labour
Relations
Occupational
safety
Customer health
and safety
Customer
privacy
Social economic
regulations
Smart
machinery
Talent
cultivation		 •Stakeholder area
•Financial annual report,
occasional release of
operational news
•HIWIN Technologies
Education Foundation
holds volunteer activities
•Corporate Social
Responsibility Report
•Arrange visiting activities
•HIWIN-CMU Joint
Research and
Development Center
•HIWIN- NTHU Joint
Research and
Development Center		 •Annually hold HIWIN master’s, doctor’s thesis in mechanics
award, and HIWIN smart robotic hand-craft competition
•Automated Engineer's License Examination and Robotic
Engineer's License Examination, 4,745 in 2018
•HIWIN Forum - Distinguished President Lecture
•Building a National Library, Children's Books and English
Courses
•Comply with government environmental safety and health
regulations and other requirements
•HIWIN mentors gave lectures at schools for 142.5 hours in
2018
•Corporate Social Responsibility Report issuance
•AA total 1,181 people from schools at all levels visited
HIWIN in 2018
06 Media Customer
privacy
Smart
machinery
Talent
cultivation		 •Respond immediately
through a press release
•Stakeholder area
•Social Participation
Activities organized by
the HIWIN Technologies
Education Foundation
•Corporate Social
Responsibility Report
•Press conference		 •Company website is updated irregularly
•Announce the company's business information, the news was
reported for a total of 1,299 in 2018
•Corporate Social Responsibility Report issuance
07 Government
Agency		 Environmental
regulations
Emission
Water
Energy
Occupational
safety
Waste water and
waste		 •Policy promotion and
investment
•Participate in related
seminars
•Promote the verification
of the environmental
safety system
•Corporate Social
Responsibility Report		 •Work together with government agencies
•Apply for and invest in government programs
•Comply with government environmental safety and health
regulations and other requirements
•Strengthen pollution prevention work and proactively
improve
08 Local
Community		 Environmental
regulations
Waste water and
waste
Emission
Training and
education		 •Stakeholder area
•Financial annual report,
occasional release of
operational news
•HIWIN Technologies
Education Foundation
•Corporate Social
Responsibility Report		 •Company website regularly and irregularly announces
information
•1,008 people participated in the volunteer Group in 2018, and
the number of service hours was 3,024 hours.
•Building a National Children's Book and English Course
•Corporate Social Responsibility Report issuance
09 Supplier Supplier
Environmental
Assessment
Supplier social
assessment
Purchasing
practice		 •Supplier Survey /
Evaluation
•Supplier Business Review
Meeting
•Procurement safety
management
•Top 100 supplier
inspections
•Stakeholder area		 •In the procurement of materials, mainly local suppliers in
Taiwan, in addition to the flexibility of supply and quick
response, and provide local work and employment
opportunities.
•Supplier risk assessment
•Safety and hygiene procurement specifications
•In 2018, the supplier signed a total of 291 integrity
commitments
10 Public
Association		 Economic
performance
Industry-
university
cooperation
Sustainable
innovation		 •The competent authorities
hold symposiums and
seminars
•Participate in related
activities
•Corporate Social
Responsibility Report
•Stakeholder area		 •Compliance with government regulations and related
requirements
•Regular and occasional participation in seminars, seminars
•Corporate Social Responsibility Report issuance
•Company website regularly and irregularly announces
information

66

  1. The impact of global climate change and warming has led to an increase in the frequency and intensity of extreme weather at home and abroad, which has had a great impact on life, property and business operations. HIWIN Technologies can assess the impact of climate change on operations and plan relevant countermeasures to ensure the resilience of climate change. In 2015, HIWIN Technologies joined the “Earth Hour an Hour” campaign to make this spirit a habit in HIWIN's life and continue. In June 2018, General Manager Tsai Huey-Ching served as the convener of the adjustment management. Assistant General Manager Wu Jun-Liang served as the risk management representative and set up the adjustment management team to investigate the external environment of the plant and the past disaster situation, and then conduct risk assessment to identify the impact on the organization. Potential risk and opportunity projects (assets, processes, personnel, supply chain and finance), assuming risk types (including high temperature, storm flooding, drought, strong winds, lightning strikes) and impact analysis, sorting, and then developing action plans Painting; the 2018 Opportunity Project is a major issue for water recycling and renewable energy use.
14. The impact of global climate change and warming has led to an increase in the frequency and intensity of extreme weather at home
and abroad, which has had a great impact on life, property and business operations. HIWIN Technologies can assess the impact of
climate change on operations and plan relevant countermeasures to ensure the resilience of climate change. In 2015, HIWIN
Technologies joined the “Earth Hour an Hour” campaign to make this spirit a habit in HIWIN's life and continue. In June 2018, General
Manager Tsai Huey-Ching served as the convener of the adjustment management. Assistant General Manager Wu Jun-Liang served as
the risk management representative and set up the adjustment management team to investigate the external environment of the plant and
the past disaster situation, and then conduct risk assessment to identify the impact on the organization. Potential risk and opportunity
projects (assets, processes, personnel, supply chain and finance), assuming risk types (including high temperature, storm flooding,
drought, strong winds, lightning strikes) and impact analysis, sorting, and then developing action plans Painting; the 2018 Opportunity
Project is a major issue for water recycling and renewable energy use.		 14. The impact of global climate change and warming has led to an increase in the frequency and intensity of extreme weather at home
and abroad, which has had a great impact on life, property and business operations. HIWIN Technologies can assess the impact of
climate change on operations and plan relevant countermeasures to ensure the resilience of climate change. In 2015, HIWIN
Technologies joined the “Earth Hour an Hour” campaign to make this spirit a habit in HIWIN's life and continue. In June 2018, General
Manager Tsai Huey-Ching served as the convener of the adjustment management. Assistant General Manager Wu Jun-Liang served as
the risk management representative and set up the adjustment management team to investigate the external environment of the plant and
the past disaster situation, and then conduct risk assessment to identify the impact on the organization. Potential risk and opportunity
projects (assets, processes, personnel, supply chain and finance), assuming risk types (including high temperature, storm flooding,
drought, strong winds, lightning strikes) and impact analysis, sorting, and then developing action plans Painting; the 2018 Opportunity
Project is a major issue for water recycling and renewable energy use.		 14. The impact of global climate change and warming has led to an increase in the frequency and intensity of extreme weather at home
and abroad, which has had a great impact on life, property and business operations. HIWIN Technologies can assess the impact of
climate change on operations and plan relevant countermeasures to ensure the resilience of climate change. In 2015, HIWIN
Technologies joined the “Earth Hour an Hour” campaign to make this spirit a habit in HIWIN's life and continue. In June 2018, General
Manager Tsai Huey-Ching served as the convener of the adjustment management. Assistant General Manager Wu Jun-Liang served as
the risk management representative and set up the adjustment management team to investigate the external environment of the plant and
the past disaster situation, and then conduct risk assessment to identify the impact on the organization. Potential risk and opportunity
projects (assets, processes, personnel, supply chain and finance), assuming risk types (including high temperature, storm flooding,
drought, strong winds, lightning strikes) and impact analysis, sorting, and then developing action plans Painting; the 2018 Opportunity
Project is a major issue for water recycling and renewable energy use.		 14. The impact of global climate change and warming has led to an increase in the frequency and intensity of extreme weather at home
and abroad, which has had a great impact on life, property and business operations. HIWIN Technologies can assess the impact of
climate change on operations and plan relevant countermeasures to ensure the resilience of climate change. In 2015, HIWIN
Technologies joined the “Earth Hour an Hour” campaign to make this spirit a habit in HIWIN's life and continue. In June 2018, General
Manager Tsai Huey-Ching served as the convener of the adjustment management. Assistant General Manager Wu Jun-Liang served as
the risk management representative and set up the adjustment management team to investigate the external environment of the plant and
the past disaster situation, and then conduct risk assessment to identify the impact on the organization. Potential risk and opportunity
projects (assets, processes, personnel, supply chain and finance), assuming risk types (including high temperature, storm flooding,
drought, strong winds, lightning strikes) and impact analysis, sorting, and then developing action plans Painting; the 2018 Opportunity
Project is a major issue for water recycling and renewable energy use.		 14. The impact of global climate change and warming has led to an increase in the frequency and intensity of extreme weather at home
and abroad, which has had a great impact on life, property and business operations. HIWIN Technologies can assess the impact of
climate change on operations and plan relevant countermeasures to ensure the resilience of climate change. In 2015, HIWIN
Technologies joined the “Earth Hour an Hour” campaign to make this spirit a habit in HIWIN's life and continue. In June 2018, General
Manager Tsai Huey-Ching served as the convener of the adjustment management. Assistant General Manager Wu Jun-Liang served as
the risk management representative and set up the adjustment management team to investigate the external environment of the plant and
the past disaster situation, and then conduct risk assessment to identify the impact on the organization. Potential risk and opportunity
projects (assets, processes, personnel, supply chain and finance), assuming risk types (including high temperature, storm flooding,
drought, strong winds, lightning strikes) and impact analysis, sorting, and then developing action plans Painting; the 2018 Opportunity
Project is a major issue for water recycling and renewable energy use.
Risk Level Number of Impacted Items
Impacted Aspect		 Climate Factor Solution
1. Additional air conditioning equipment in the
Very High 1 Process High Temperature
electrical room
2. Rentedgenerator
1. Build a waterproof gate
Flood after Rain
2. Emergency response waterproof measures
3. Important equipment is set on high floors
6 Process 1. Tap water storage equipment
Dh
rougt 2. Signinga contract with the waterwheel industry
High Temperature Add air conditioning and large exhaust fan
High
1. Set the waterproof gate
Flood after Rain

2. Pumpingmachine spare measures
5 Asset High Temperature Add air conditioning and large exhaust fan
Lightning Strike Regular lightning rod maintenance
According to the results of the climate risk matrix, it is known that there are 12 climate risk risks facing the HIWIN in the future,
which are high and extremely high risk, including important equipment such as electrical equipment, air pressure and tap water,
and the probability of future occurrence with natural disasters, climate shock risk. The degree has also increased. In order to
implement the action plan and strengthen the emergency response, HIWIN Technologies can reduce the degree of financial
impact, maintain normal operation and reduce losses when climate risks occur, and build relevant equipment based on priority
assessment results, such as electrical Air conditioning equipment and pumping equipment will be installed in the room to reduce
future climate shocks.
7. A clear statement shall be made below if the company’s corporate social responsibility reports were verified by relevant certification
bodies:
(1) The company is scheduled to publish the Corporate Social Responsibility Report in June each year. The 2018 Corporate Social
Responsibility Report has been verified and completed in April, 2019. The method of cross-check is used to confirm the contents of
the report. It was verified in May, 2019 by the British Standards Institute Taiwan Branch (BSI), and it meets the GRI Standards and
AA1000 AS (2008) Standard TYPE I medium assurance level verification standards.
(2) The Company regularly publishes the specific promotion plans and implementation results of social corporate responsibility on
the Company's website in June eachyear,and is included in the annual report.

67

(VI) Implementation of Ethical Corporate Management:
Evaluation Items Operation Status Differences
from
Corporate
Social
Responsibility
Best Practice
Principles for
TWSE/GTSM
Listed
Companies
and the
Causes
Yes No Summary
1. Establishment of ethical corporate
management policy and scheme
(1) Has the company expressly stated
its ethical corporate management
policy and practices in its regulations
and external documents? Have its
board and management implemented
the commitment of ethical corporate
management positively?
(2) Has the company made rules
against dishonesty with clear
statements regarding operational
procedures, behavior guidelines and
appeal system, and implemented
them?
(3) Has the company made
appropriate precautionary measures
against high potential dishonesty or
operating activities stated in Article
2, Paragraph 7 of the Ethical
Corporate Management Best-
Practice Principles for TWSE/TPEX
Listed Companies?		 V
V
V		 (1)Ethical Corporate Management Best-Practice
Principles”,
expecting
its
Board
and
management positively implement its ethical
corporate management policy and reinforce
employees’ perception of its ethical corporate
management ideas through daily recitation and
advocacy
of
the
management
ideas
“Professional Level, Enthusiasm for Work and
Professional Ethics”.
(2)The company has established “Employee Code
of Conduct” and “Business Operation
Procedures and Behavior Honesty Guidelines”,
which expressly states operational procedures
and that it will begin disciplinary procedures
according to the circumstances for any violation
of Code of Ethics or corruption; for any
violation of government decrees or corruption,
anyone can report to independent directors,
managers, internal auditors or other competent
personnel by e-mail or in written report, and
personnel of relevant units must report this to
the Chairman after receiving the report; the
internal auditors check whether the preceding
system are followed irregularly and include
dishonesty into the key points of such check to
implement the rules. The behavior guideline
states clearly the procedures and methods for
reporting procedures, and establishes an
independent report box for internal and external
use, and a specific unit responsible for handling
the reporting procedures, as well as how the
records should be kept, and whether or not
discretionary bonuses are reported. The
information has been disclosed on the
company's website.
(3)The company has established “Employee Code
of Conduct” according to “Ethical Corporate
Management Best-Practice Principles”, and
made
appropriate
precautionary
measures
against high potential dishonesty or operating
activities stated in Article 2, Paragraph 7 of
“Ethical Corporate Management Best-Practice
Principles for TWSE/TPEX Listed Companies”;
the internal audit department also plays an
important role in ensuring the obedience of
professional ethics. To ensure that the financial,
management and operation information is
correct, reliable and timely and employee
behaviors conform to relevant policies, rules,
procedures and regulations, the internal audit
department audits according to the annual audit
plan authorized by the Board, and submits the
results and improvement plans to the Board and
management so that to implement the audit
effects.		 None

68

2. Implementation of ethical corporate
management
(1)Does the company evaluate business
partners’ ethical records and include
ethics-related clauses in business
contracts?
(2)Does the company establish a
dedicated (or non- dedicated) unit
under the Board to promote ethical
corporate management and report to
the Board regularly?
(3)Has the company established
policies to prevent conflicts of interest
and provided appropriate
communication channels, and
implemented them?
(4)Has the company established an
effective accounting system and
internal control system to implement
ethical corporate management? Does
the internal control unit audit on a
regular basis or authorize the
accountant to audit?
(5)Does the company regularly hold
internal and external educational
trainings on ethical corporate
management?		 2. Implementation of ethical corporate
management
(1)Does the company evaluate business
partners’ ethical records and include
ethics-related clauses in business
contracts?
(2)Does the company establish a
dedicated (or non- dedicated) unit
under the Board to promote ethical
corporate management and report to
the Board regularly?
(3)Has the company established
policies to prevent conflicts of interest
and provided appropriate
communication channels, and
implemented them?
(4)Has the company established an
effective accounting system and
internal control system to implement
ethical corporate management? Does
the internal control unit audit on a
regular basis or authorize the
accountant to audit?
(5)Does the company regularly hold
internal and external educational
trainings on ethical corporate
management?
2. Implementation of ethical corporate
management
(1)Does the company evaluate business
partners’ ethical records and include
ethics-related clauses in business
contracts?
(2)Does the company establish a
dedicated (or non- dedicated) unit
under the Board to promote ethical
corporate management and report to
the Board regularly?
(3)Has the company established
policies to prevent conflicts of interest
and provided appropriate
communication channels, and
implemented them?
(4)Has the company established an
effective accounting system and
internal control system to implement
ethical corporate management? Does
the internal control unit audit on a
regular basis or authorize the
accountant to audit?
(5)Does the company regularly hold
internal and external educational
trainings on ethical corporate
management?		 V
V
V
V
V		 (1)The company has established an effective
assessment mechanism for its suppliers and
outsourcers and the contracts with them state
both parties’ rights and obligations in details,
and sign the confidentiality agreement and
Integrity Deal Commitment.
(2)The company promotes the integrity and
management of corporate integrity management
by the Human Resources Department, and the
general manager acts as the convener, ensuring
the integrity management based on the work
and scope of each unit, and fully promoting the
integrity of the company. All colleagues,
managers and directors should abide by the
“Code of Integrity Management”. Relevant
members also have the obligation to report to
the Board of Directors. They report to the
Board of Directors at least once a year and
report to the Board of Directors on the
implementation
of
the
2018
Integrity
Management Performance Report at 2019.3.26.
If a colleague discovers that there is any
dishonest fact, it can also be reported through
the
company's
public
channel.
If
the
circumstances are serious, it will be reported to
the board of directors from time to time. The
board of directors supervises whether it is
implemented according to the code. The
implementation in 2018 is as follows:
1.Education and training: Open training courses
such
as
regulations,
check-ups,
risk
management, and prevention of fraud. In
addition, we will arrange external training
courses for corporate integrity forums and
corporate fraud risks for supervisors and
colleagues.
2.Compliance Declaration: In 2018, it mainly
advocated
the
implementation
of
the
company's
business
philosophy
of
"professional standards, enthusiasm for work,
and ethics of practice."
3.Communication channels: Employees can
report violations of integrity management to
the Human Resources Department, various
academic levels, and independent directors
through various corridors, and the Human
Resources Department is responsible for
coordinating them.
4.Regular inspection: Each year, the self-
assessment of the risk of corruption is
implemented
to
achieve
effective
management and implementation, and the
audit unit independently audits. There is no
major corruption in 2018.
5.Reporting system: The company's website has
stated that internal or external personnel can
report dishonest behavior. In addition to
protecting the identity of the sender, the audit
unit will also conduct a special investigation.
In 2018, 13 cases were accepted, all of which
have
been
processed
and
successfully
resolved.
(3)The company’s internal staff can report
conflicts of interest to their department
managers and the audit department, or the
chairman or the general manager will handle		 None

69

==> picture [188 x 342] intentionally omitted <==

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

this personally through the feedback box.
(4)The company’s management ideas
“Professional Level, Enthusiasm for Work and
Professional Ethics” have shown its emphasis
on ethical corporate management; to build and a
corporate culture of ethical corporate
management and develop well, it has
established “Ethical Corporate Management
Best-Practice Principles” and the internal audit
unit has established internal audit plans to
execute audit and check whether employees are
honest or cheat irregularly.
(5)The company advocates ethical corporate
management ideas through morning meetings
every month, providing new employees and
supervisors with basic and promotion trainings.
Besides, it arranges external training courses,
such as enterprise credit forums and business
fraud discussion, for supervisors and colleague.
The related courses for honest corporate
management in 2018 are summarized as
follows:
Number
of Total People
TYPE
Classes Hours Times
Held
Related
Courses for
Honest 340 2,256.5 6,734
Corporate
Management
----- End of picture text -----

70

3. Operation of the Company’s offense
reporting system
(1)Has the company established a
specific offense reporting and reward
systems, set up convenient offense
reporting channels, and appointed an
appropriate person for the one who has
been reported?
(2)Has the company established
standard operating procedures as well
as a relative protection mechanism for
whistleblowers?
(3)Does the company take measures to
protect whistleblowers from being
inappropriately treated?		 V
V
V		 (1)The “Employee Code of Conduct” of the
Company has stated the offense reporting
system, and a reward and punishment system
for employees has also been established; to
make it convenient for whistleblowers to report
the breach of good faith, the Company has a
feedback box on the company website for them
to send mails to the chairman, the general
manager and Human Resources Department
directly. If Directors or the CEO receives such
letters, they would instruct the Audit Office or
Human Resources Department to handle the
case. Separate mailboxes are also set up for
internal and external personnel to send letters
directly to independent directors. In addition,
the Company has set up an independent report
box or special line for internal and external use.
It also specifies the information that the
prosecutor needs to provide, the acceptance
level of the different prosecutors, and the
processing flow of the special duty unit in the
integrity management operating procedures and
behavior guidelines. Report bonuses and expose
relevant information on the company's website.
(2)The company has stated the investigation
methods for offense reporting in “Employee
Code of Conduct”; after receiving the report,
personnel in relevant units should submit it to
the chairman who will instructs relevant units to
investigate and handle it in private, and the
reported matter and the whistleblower should be
kept secret.
(3)The company takes perfect protective measures
for whistleblowers and doesn’t disclose their
names and other relevant information to
guarantee the investigation quality and protect
them from being retaliated or inappropriately
treated.		 None
4. Strengthening information disclosure
(1) Has the company disclosed its ethical
corporate management policies and the
implementation results on the company
website and Market Observation Post
System?		 V (1) 1. The company discloses its ethical corporate
management ideas, corporate mission and
brand meaning on both the company website
and Market Observation Post System;
besides, it puts “Ethical Corporate
Management Best-Practice Principles” on the
company website and Market Observation
Post System.
2. Apart from disclosing its ethical corporate
management principles on the company
website, it also has a dedicated department
for collecting and publishing the company
information, and has disclosed relevant and
reliable ethical corporate management
information in the annual report and CSR
report.		 None
5.If the company has established the ethical corporate management policies based on the Ethical Corporate Management Best-
Practice Principles for TWSE/TPEX Listed Companies, please describe the differences between the policies and their
implementation:
The Company has established the Company's “Code of Integrity Practice” and “Guidelines for the Operational Procedures and
Conduct of Honest Business Operation” based on the “Code of Conduct for Listed Owned Firms”. It is based on the examples
issued by the Stock Exchange and it also requires the Company to operate. Relevant entities should implement the
implementation and internalize the requirements of the above codes and behavior guidelines into daily operations management.
Therefore, there is no significant difference between the actual operation and the codes and guidelines.
6. Other important information to facilitate a better understanding of the company’s ethical corporate management:
The Company conducts educational trainings regularly to advocate the principle of good faith; besides, it has made Commitment
to Trade with Good Faith and required suppliers to sign to promise they do trade with it with good faith.

71

(VII)Corporate Governance Rules and Regulations:

  1. Corporate Governance Regulations:

  2. (1) It establishes Operating Procedures of Acquisition or Disposal of Assets, Procedures for Endorsements and Guarantees, Procedures for Lending Funds to Other Parties, Rules and Procedures of Board Meetings and Organization Rules of the Remuneration Committee according to relevant norms set by Financial Supervisory Commission, Executive Yuan.

  3. (2) It establishes Ethical Corporate Management Code, Code of Conduct, Corporate Governance Practice Principles, Corporate Social Responsibility Practice Principles, Rules and Procedures of Shareholder Meetings and Rules Governing Election of Directors according to relevant norms and reference examples set by Taiwan Stock Exchange.

  4. The information above can be downloaded in “Relevant Regulations and Rules Governing Corporate Governance” under “Corporate Governance” on Market Observation Post System or in “Relevant Rules Governing Corporate Governance” under “Investor” at http://www.HIWIN.com.tw/stock/corporate_governance.aspx.

(VIII) Other Important information helpful for enhancing understanding of the corporate governance of the Company: none.

72

(IX) Implementation of the internal control system:

1. Statement on Internal Control Institution:

HIWIN TECHNOLOGIES CORP. Statement on Internal Control Institution

HIWIN TECHNOLOGIES CORP. Statement on Internal Control Institution

Date: March 26th, 2019

The company hereby makes the following statement about its internal control system for the year 2018 based on its self- examination:

  • 1.The Company is aware that it is the Board and managers’ responsibility to establish, implement, and maintain an internal control system and the Company has set up such a system. The purpose of the system is to ensure the effectiveness and efficiency (including profitability, performance, and protection of assets) of the Company’s operations, the reliability of its financial statements and compliance with relevant laws and regulations.

  • 2.Internal control systems have their inherent limitations. No matter how well they are designed, an effective internal control system can only reasonably ensure achievement of the above three objectives. In addition, an internal control system’s effectiveness may change as circumstances change. Nevertheless, self-supervision mechanisms have been built into the Company’s internal control system. Once a deficiency is identified, the Company will immediately take corrective action.

  • 3.The Company determines whether the design and implementation of its internal control system is effective by referring to the criteria stated in the “Regulations Governing Establishment of Internal Control Systems by Public Companies” (hereinafter, the “Regulations”). The Regulations provides measures for judging the effectiveness of the internal control system. There are five components of an internal control system as specified in the Regulations which are broken down based on the management control process, namely: (1) Control Environment, (2) Risk Evaluation, (3) Control Operation, (4) Information and Communication, and (5) Monitoring. Each component consists of several items. Please refer to the Regulations for the above items.

  • 4.The Company uses the criteria above to determine whether the design and implementation of its internal control system is effective.

  • 5.After a test of the Company’s internal control system based on the above criteria, the Company is of the opinion that, as of December 31st, 2018, its internal control system (including supervision and management of subsidiaries) is effective and therefore can reasonably ensure achievement of the above objectives, which include awareness of the degree to which operating results and goals are achieved, reliability of financial reporting and compliance with the law.

  • 6.This statement shall become a principal part of the Company’s annual report and prospectus and be made available to the public. If the content of the above is untruthful or certain important information is withheld, the Company shall be held liable pursuant to Articles 20, 32, 171, and 174 of the Securities and Exchange Act.

  • 7.This statement has been approved on March 26th, 2019 by the Board, with none of the 9 directors present opposing it.

HIWIN Technologies Corp Chairman: Chuo, Yung-Tsai Signature General Manager: Tsai, Huey-Chin Signature

73

  1. If the company has commissioned external auditors to review the company's internal control system, the external auditor's report should be disclosed: none.

  2. (X) In the last year and as of the publication date of the Annual Report, any disciplinary measures taken against the company or its internal staff according to law or taken by the company against its staff due to violations of the internal control system, the main deficiency and improvement:

In 2018, the company completely complied with the company law, the securities trading law and other regulations. However, because the competent authority determined that the company's colleagues worked overtime, the attendance situation was inconsistent with the labor benchmark law, a fine of NT$25,760 was imposed. The company has adopted an extension of the working hours to apply for approval system and evaluate the manpower allocation

(XI) Major resolutions of Shareholder and Board Meetings in the last year and as of the publication date of the Annual Report:
Name Date Major Resolutions
Shareholders’
Meeting		 June 27th, 2018 Approved Business Report and Financial Statement 2017
Approved Earnings Distribution Statement 2017
Approved the issuance of new shares for capital increase out of earnings
Board Meeting March 22nd, 2018 Passed Earnings Distribution Statement 2017 for employees and directors
Passed “Internal Control System Statement” 2017
Passed Business Report 2017
Approved Annual Financial Statement 2017
Passed Earnings Distribution Statement 2017
Approved the issuance of new shares for capital increase out of earnings
Approved convening the regular shareholder meeting of 2018
Passed assessment of the independence and adequacy of CPAs and appointment
remuneration
Passed constructions of YunTech Factory at Shiliuban Area
Passed endorsement for HIWIN Korea
Passed loans for overdue account transfer funds to subsidiaries
Board Meeting May 9th, 2018 Approved First-Quarter Financial Statement 2018
Approved the issuance of new shares for capital increase out of earnings in Taiwan

74

Passed endorsement for Eterbright Solar Corporation
Passed loans for overdue account transfer funds to subsidiaries
Board Meeting June 27th, 2018 Approved the lifting of the company’s managers’ non-competitive restriction
Passed loans for overdue account transfer funds to subsidiaries
Board Meeting July 4th, 2018 Passed loans for overdue account transfer funds to subsidiaries
Board Meeting July 16th, 2018 Approved the case of setting the price of cash increase
Approved the establishment of the company's 2018 annual cash increase manager's stock
subscription
Board Meeting August 9th, 2018 Approved the consolidated financial statements for the first half of 2018 (Note)
Approved the endorsement of the Korean subsidiary (Note)
Approved endorsement guarantee for Singapore subsidiary (Note)
Approved the guarantee of the subsidiary's Eterbright Solar endorsement (Note)
Approved subsidiary overdue account transfer loan case (Note)
Board Meeting October 20th, 2018 Approved the consolidated financial statements for the third quarter of 2018
Approved subsidiary Eterbright Solar Cash Capital Increase and Endorsement Guarantee
Case (Note)
Approved the purchase of land by a Japanese subsidiary (Note)
Approved subsidiary overdue account transfer loan case (Note)
Board Meeting December 11th, 2018 Approved the assessment of the independence and eligibility of the visa accountant and the
accreditation case (Note)
Approved the subsidiary company Luren Precision Endorsement Guarantee Case (Note)
Approved the endorsement of the Japanese subsidiary (Note)
Approved subsidiary overdue account transfer loan case (Note)
Board Meeting March 26th, 2019 Approved 2018 employee compensation and directors' compensation
Approved the 2018 "Internal Control System Statement" (Note)
Approval of the 2018 Business Report (Note)
Approved 2018 financial statements (Note)

75

Approved 2018 Annual Distribution (Note)
Approved the process of transferring surplus to capital increase and issuing new shares
(Note)
Approved amendment of the "Articles of Association" case
Approved the amendment to the "Acquisition or Disposition of Asset Processing
Procedures" (Note)
Approved the revision of the "Funding Loan and Others Operating Procedures" case (Note)
Approved amendment of the "endorsement guarantee operation procedure" case (Note)
Approved amendment of the "Rules of Procedures for Shareholders Meeting"
Approved director election
Nomination and Qualification Examination for Approved Directors and Independent
Directors
Approved the 2019 regular shareholders' meeting
Approved the assessment and appointment of the independence and eligibility of the CPA
(Note)
Restriction of the company's manager's non-competition prohibition (Note)
Approval of the Italian subsidiary's purchase of the factory (Note)
Approved the subsidiary company Luren Precision Endorsement Guarantee Case (Note)
Approved the endorsement of the Korean subsidiary (Note)
Approved subsidiary overdue account transfer loan case (Note)
Board Meeting May 6th, 2019 Approved the preparation of the first quarter of 2019 financial statements
Approval of the restriction on the prohibition of non-competition of directors and their
representatives (Note)
Passed endorsement for Eterbright Solar Corporation
Approved subsidiary overdue account transfer loan case (Note)
Approved amendment of the "Articles of Association" case
Approved the amendment to the "Evaluation of Long-Term Foreign Exchange Trading and
Operational Practices" (Note)

Note: Items listed in Article 14-5 of the Securities Exchange Law

76

Implementation Result of Resolutions of Shareholder Meeting 2018

  • 1.Approved annual accounts 2017

  • Implementation result: passed at Shareholder Meeting 2018

  • 2.Approved Earnings Distribution Statement 2017

  • Implementation result: passed at Shareholder Meeting 2018, with NT$ 0.6 per share as stock dividend and NT$ 3.2 dividend per share for stockholders, totaling NT$ 3.8; NT$ 3.5 cash dividends and NT$ 0.3 stock dividends had been distributed before Aug 9th, 2018, and capital increase out of earnings had also been handled before Sept 18th, 2018.

  • 3.Discussed the issuance of new shares for capital increase out of earnings: Implementation result: passed at Shareholder Meeting 2018; capital increase out of earnings had been handled before Sept 18th, 2018.

(XII) Different opinions in records or written statements from directors or supervisors regarding major resolutions passed by the Board in the last year and as of the publication date of the Annual Report: none.

(XIII) Resignation or dismissal of Chairman, General Manager, Accounting Supervisor, Finance Supervisor, Internal Audit Supervisor or R&D Supervisor in the last year and as of the publication date of the Annual Report: none.

77

IV. Information on Accountant’s Fees

(i) Information on Accountant’s Fees:
Name of the Accounting Firm Name of Accountants Audit Period Remarks
Deloitte & Touche Yan Xiaofang Zeng Dongyun January 1st~
December 31st,
2018
Notch Items Audit Fees Non-Audit Fees Total
1 Below NTD 2,000 thousand V
2 NTD 2,000(including)~4,000 thousand
3 NTD 4,000(including)~6,000 thousand V
4 NTD 6,000(including)~8,000 thousand V
5 NTD 8,000()including~10,000 thousand
6 Above NTD 10,000 thousand
  • 1.Paying at least one-fourth of non-audit fees to CPAs, their accounting firm, and its affiliates

Unit: NTD Thousand

Unit: NTD Thousand
Name of
the
Accounti
ng Firm		 Name of
Accounta
nt		 Audit
Fees		 Non-Audit Fees Audit
Period		 Remarks
System
Design		 Business
Registrat
ion		 Human
Resource		 Other Subtot
al
Deloitte
&
Touche		 Yan
Xiaofang		 5,290 - - - 1,400 1,400 January
1st~
December
31st, 2018		 The rest mainly
includes capital
increase out of
earnings and
reimbursed expenses
Zeng
Dongyun

  1. Change of CPA firm and the audit fees paid in the year of the change are less than those paid in the previous year: no such cases.

  2. Audit fees paid in the current year are at least 15% less than those paid in the previous year: no such cases

(ii) CPA Independence

The Company evaluates CPA Independence regularly based on the items below and reports

the results to the Board:

  1. CPA Independence Evaluation Questionnaire

  2. The same accountant hasn’t executed certification work continuously for over 5 years

  3. The Company will confirm whether the audit results are affected before the non-audit

services are provided

78

v. Information on Change of Accountant: None

(i) About the former accountant
Change Date
Reasons and Descriptions
Was the termination of audit
services initiated by the Company
or the CPA?		 Involved Parties
Situations		 Accountant Appointer
The Company terminated the
appointment.
The CPA
appointed.		 rejected being
Opinions and reasons of the audit
report
other
than
unqualified opinions issued within
the recent 2 years
Having different opinions from the
issuer		 Yes Accounting Principles or Practice
Disclosure of Financial Reports
Audit Range and Steps
Others
No
Description
Other Disclosures
(according to Sub-item 4 of Item 1,
Paragraph 5, Article 10 of
Guidelines Governing the
Preparation of Financial Reports by
Securities)

(ii) About the succeeding accountant

Name of the Accounting Firm Name of Accountants Date of Appointment Inquiries and replies relating to the accounting methods or principles of certain transactions, and opinions issued for the financial reports prior to appointment Different opinions in written form made by the succeeding accountant from the former accountant

(iii) Former accountants’ response to Item 1 and Sub-item 3 of Item 2, Paragraph 5, Article

10 of these principles: Not Applicable.

79

vi. If the Company’s Chairman, General Manager and Managers Responsible for Financial and Accounting Affairs Have Held Office in the CPA Firm or Any of Its Affiliated Companies Within the Last Year, Their Names, Job Titles and the Periods During Which They Have Held Such Office Should Be Disclosed: none.

  • vii. Transfer and Pledge of Shares by the Chairman, Supervisors, Managers and Shareholders Holding more than 10% of the Company’s Shares within the Latest Year and up till the Publication Date of This Annual Report

(i) Changes of shares held by directors, managers and major shareholders

Unit: share

Unit: share Unit: share
Title Name 2018
2019 as of April 30th
Increase
(Decrease) in
Shares Pledged
Increase
(Decrease) in
Shares Held		 Increase
(Decrease) in
Shares Held		 Increase
(Decrease) in
Shares Pledged
Chairman & CEO Chuo Yung-Tsai 1,335,000 -
640,151 -
Deputy Chairman Chen Chin-Tsai 2,430,000 -
192,467 (1,150,000)
Director & General Manager Tsai Huey-Chin 194,985 - -
-
Director & Vice General
Manager of Chairman Room		 Chuo Wen-Heng
464,320 - (16,000) -
Director Li Xunqin 808,816
3,550,000 (6,000,000) (700,000)
Director San-Hsin
Investments
Limited		 796,838 3,000,000
15,000 (1,463,000)
Representative:
Huang Yousan		 -
- - -
Independent Director Chiang Zhenghe
- - - -
Independent Director Chen Qinghui - -
- -
Independent Director Tu Liming - -
- -
Senior Vice General Manager of
Finance Department		 Lin Yifeng 25,651 -
- -
Vice General Manager of
Chairman Room		 Song Xiande -
12,000 - -
Vice General Manager of
Marketing Business Group		 Peng Yanqi -
15,163 - -
Vice General Manager of Finance
Department		 Wu Yueqin 18,608 - (6,000)
-
Vice General Manager of Finance
Department		 Liao Kehuang
964 - - -

80

Assistant General Manager of
Chairman Room		 Qu Yueling 10,170 - -
-
Assistant General Manager of
Chairman Room		 Wu Junliang ( 11,773) -
- -
Assistant General Manager of
System Research Department		 Wang Fuqing ( 2,834) -
- -
Senior Assistant Manager of
Chairman Room		 Yang Chuangbao - -
4,131 -
Senior Assistant Manager of
Chairman Room(Note 1)		 Huang Lihong -
- - -
Assistant Manager of Chairman
Room		 Qiu Shirong 4,289 -
- -
Assistant Manager of Chairman
Room(Note 2)		 Chen Hongming 2,066 -
- -
Assistant Manager of Production
Business Group		 Li Wenbin 5,569
- - -
Assistant Manager of Production
Business Group
(Note 3)		 Chen Zongren
- - - -
Assistant Manager of Production
Business Group		 Wu Wenjia
1,227 - - -
Assistant Manager of Production
Business Group		 Lin Zhixiao -
6,064 - -
Assistant Manager of System
Research Department		 Chiang Mingjun
( 5,221) - - -
Assistant Manager of Information
Department		 Zhang Kunyao
4,197 - - -
Assistant Manager of Information
Department (Note 4)		 Yu Mingde -
- - -
Assistant Manager of Information
Department		 Zhang Yongming
- - - -
Assistant Manager of Project
Development Department		 Dong Chengwei 3,002 -
- -
Assistant Manager of Project
Development Department
(Note 5)		 Zeng Jinyuan - -
- -
Assistant Manager of Quality
Assurance Department (Note 6)		 Zhou Yixiu -
- - -

Note 1 ： Huang Lihong assumed office on March 26th, 2019, the shares he holds were declared from this day forward Note 2 ： Chen Hongming assumed office on June 1st, 2018, the shares he holds were declared from this day forward

81

Note 3 ： Chen Zongren was relieved from office on January 22nd, 2019, the shares he held were declared until this day Note 4 ： Yu Mingde assumed office on May 1st, 2018, the shares he holds were declared from this day forward Note 5 ： Zeng Jinyuan was relieved from office on March 31st, 2018, the shares he held were declared until this day Note 6 ： Zhou Yixiu assumed office on March 22nd, 2018, the shares he holds were declared from this day forward

(ii) Stock transferred to related parties: none.

(iii) Stock rights pledged to related parties: none.

viii. Information of the 10 Largest Shareholders Who Are Related, or Couples or Relatives within the Second Degree of Kinship

April 30th, 2019 Unit: Shares; %

NAME OF MAJOR
SHAREHOLDERS		 SHARES HELD
PERSONALLY		 SHARES HELD BY
SPOUSE
OR MINOR CHILDREN		 COMBINED
SHARES HELD
IN THE NAME
OF OTHERS		 NAMES AND
RELATIONSHIP OF
THE TOP TEN
SHAREHOLDERS
WHO ARE RELATED,
COUPLES OR
RELATIVES WITHIN
THE SECOND
DEGREE OF KINSHIP		 RE
MA
RKS
Number of
Shares		 Shareholdin
g Ratio		 Number of
Shares		 Shareholdin
g Ratio		 Numbe
r of
Shares		 Sharehol
ding
Ratio		 Title/Nam
e		 Relationshi
p
- Chuo
Yung-
Tsai
HIWIN Investment Corporation
Representative:
Chuo Yung-Tsai		 21,562,741 7.17% - - - Chairman
0.37% - Chuo
Xiumin
Chuo
Wenheng
Chuo
Xiuyu		 Within the
First
Degree of
Kinship
13,453,495 4.48% 1,120,992 -
1,120,992 - Within the
First
Degree of
Kinship
Chuo Yung-Tsai 13,453,495 4.48% 0.37% - Chuo
Xiumin
Chuo
Wenheng
Chuo
Xiuyu
0.10% -
Li Xunqin 7,394,267 2.46% 303,263 - - -
6,112,237 - Within the
First
Degree of
Kinship
Within the
Second
Degree of
Kinship
Within the
Second
Degree of
Kinship
Chuo Wen-Heng 2.03% - - - Chuo
Yung-
Tsai
Chuo
Xiumin
Chuo
Xiuyu

82

6,000,000 - -
First Bank Trust-fund Account
Appointed by Li Xunqin		 2.00% - - - -
Chuo Xiuyu 4,852,924 1.61% 8,000 0.00% - - Chuo
Yung-
Tsai
Chuo
Xiumin
Chuo
Wenheng		 Within the
First
Degree of
Kinship
Within the
Second
Degree of
Kinship
Within the
Second
Degree of
Kinship
4,849,582 - Within the
First
Degree of
Kinship
Within the
Second
Degree of
Kinship
Within the
Second
Degree of
Kinship
Chuo Xiumin 1.61% 222,856 0.07% - Chuo
Yung-
Tsai
Chuo
Wenheng
Chuo
Xiuyu
-
Nan Shan Life Insurance Co.
Ltd.: Du Ying-Zong		 4,467,000 1.49% - - - - -
- - - - - - - -
4,372,885 1.45% -
Tsai Huey-Ching - - - - -
4,180,956 - -
Chen Jing-Tsai 1.39% 2,909,355 0.97% - -

83

ix. The Shareholdings and Joint Shareholding Held by the Company, its Directors, its Supervisors, its Managers and Affiliates Controlled Directly or Indirectly by the Company in the Same Invested Businesses

December 31st, 2018 Unit: Shares; %

Invested Businesses December 31st, 2018
Unit: Shares; %		 December 31st, 2018
Unit: Shares; %
Reinvestment Business Investment of the Company Investment of Business Directly
or Indirectly Controlled by
Directors, Supervisors and
Managers		 Comprehensive Investment
Shareholding
Ratio		 Number of
Shares		 Shareholding
Ratio		 Number of
Shares		 Shareholdi
ng Ratio
Number of
Shares
HIWIN GmbH Note - - Note 100%
100%
HIWIN Corporation, U.S.A. 2,148,000 100% - - 2,148,000 100%
HIWIN Corporation, Japan 54,200 100% - - 100%
54,200
Eterbright Solar Corporation 171,449,42
7		 74% 14,321,772 6% 80%
185,771,199
HIWIN Singapore Pte.Ltd. 5,000,000 100% - - 5,000,000 100%
HIWIN Corporation 1,440,000 100% - - 1,440,000 100%
HIWIN S.R.L. Note 100% - - Note 100%
HIWIN China Note 100% - Note 100%
-
HIWIN Healthcare Corp. 100,000 100% - - 100,000 100%
Luren Precision 17,647,761 58% 1,087,460 4% 18,735,221 62%
Matrix Machine Tool (Coventry) Ltd. 2,400,000 52% - - 2,400,000 52%
Luren Precision Chicago Co.,Ltd. - - 460,000 58% 460,000 58%
Luren Precision Shanghai - 58% Note 58%
- Note

Note: No shares issued

84

IV. Capital Overview

i. Capital and Shares

(i) Source of Capital

Unit: NT$Thousand;Thousand shares Unit: NT$Thousand;Thousand shares
Date Issue
Price		 Authorized Stock Paid-Up Capital Remarks
Number
of
shares		 Sum Number
of
shares		 Sum Source
of
Capita		 Subscript
ions Paid
with
Property
other
than
Cash		 Other
1999.10.08 12 130,500 1,305,000 123,500 1,235,000 Cash
Capital
Increase		 None 1999.08.05
(88)TCZL(1)No.72181
2001.10.22 10 151,900 1,519,000 135,850 1,358,500 Capital
Increase
out of
Earnings
or Capital
Reserves		 None 2001.08.14
(90)TCZL(1)No.151591
2002.10.15 10 151,900 1,519,000 139,925 1,399,255 Capital
Increase
out of
Earnings		 None 2002.08.14
(91)TCZL(1)No.145107
2003.10.09 10 151,900 1,519,000 145,544 1,455,442 Capital
Increase
out of
Earnings		 None 2003.08.15
(92)TCZL(1)No.137138
2004.10.05 10 191,038 1,910,380 156,918 1,569,178 Capital
Increase
out of
Earnings		 None 2004.08.06
FSC Certificate No.0930135195
2005.10.05 10 191,038 1,910,380 177,706 1,777,059 Capital
Increase
out of
Earnings		 None 2005.08.09
FSC Certificate No.0940132392
2006.08.02 10 300,000 3,000,000 201,345 2,013,448 Capital
Increase
out of
Earnings		 None 2006.08.02
FSC Certificate No.0950133960
2009.06.25 24 300,000 3,000,000 223,390 2,233,898 Cash
Capital
Increase		 None 2009.01.08
FSC Certificate No.0970071383
2010.08.16 10 300,000 3,000,000 227,858 2,278,576 Capital
Increase
out of
Earnings		 None 2010.06.25
FSC Certificate No.0990032889

85

2011.08.29 10 300,000 3,000,000 234,693 2,346,933 Capital
Increase
out of
Earnings		 None 2011.07.11
FSC Certificate No.1000031785
2012.09.17 10 300,000 3,000,000 246,428 2,464,280 Capital
Increase
out of
Earnings		 None 2012.07.13
FSC Certificate No.1010031169
2013.09.18 10 300,000 3,000,000 253,821 2,538,208 Capital
Increase
out of
Earnings		 None 2013.07.18
FSC Certificate No.1020027958
2014.09.15 10 300,000 3,000,000 261,435 2,614,354 Capital
Increase
out of
Earnings		 None 2014.07.14
FSC Certificate No.1030026626
2015.09.02 10 300,000 3,000,000 269,278 2,692,785 Capital
Increase
out of
Earnings		 None 2015.09.02
FSC Certificate No.1040027343
2016.09.21 10 300,000 3,000,000 274,664 2,746,640 Capital
Increase
out of
Earnings		 None 2016.09.21
Department of Economy-
Authorization No.10501226510
2017.09.01 10 300,000 3,000,000 280,157 2,801,573 Capital
Increase
out of
Earnings		 None 2017.09.01
Department of Economy-
Authorization No.10601126420
2018.08.22 10 300,000 3,000,000 288,562 2,885,620 Capital
Increase
out of
Earnings		 None 2018.08.22
Department of Economy-
Authorization No.10701102130
2018.10.05 250 500,000 5,000,000 300,562 3,005,620 Cash
Capital
Increase		 None 2018.10.05
Department of Economy-
Authorization No.10701122430

Information for Shelf Registration System: none.

86

(ii) Shareholding Structure

April 30th,2019
Shareholding
Structure
Quantity		 Governmental
Agencies		 Financial
Institutions		 Other Legal
Persons		 Individual Foreign
Institutions
and Outsiders		 Total
Number of
People		 5 17 446 615 46,380
45,297
Number of
Shares held		 3,597,134 9,268,549 49,017,834 141,335,02
7		 300,562,026
97,343,482
Shareholding
Ratio		 1.20% 3.08% 16.31% 47.02% 32.39% 100.00%

(iii) EquityDispersion

April 30th, 2019

ii) EquityDispersion April 30th,201
Class of Shareholding Number of Shareholders Number of Shares Shareholding Ratio
1~999 23,739 1,729,603 0.58%
1,000~5,000 19,207 32,824,221 10.92%
5,001~10,000 1,718 12,192,428 4.06%
10,001~15,000 559 2.26%
6,781,026
15,001~20,000 227 1.34%
4,017,338
20,001~30,000 260 6,346,329 2.11%
30,001~50,000 227 8,762,867 2.91%
50,001~100,000 164 11,591,939 3.86%
100,001~200,000 118 16,944,263 5.64%
200,001~400,000 64 18,394,935 6.12%
400,001~600,000 35 16,604,124 5.52%
600,001~800,000 11 7,473,589 2.49%
800,001~1,000,000 5 4,387,305 1.46%
1,000,001 and above 46 152,512,059 50.73%
Total 46,380 300,562,026 100.00%

87

(iv) List of Major Shareholders

) List of Major Shareholders
April 30th,2019
Share
Name of Major Shareholders		 Number of Shares held Shareholding Ratio
HIWIN Investment Corporation 21,562,741 7.17%
Chuo Yung-Tsai 13,453,495 4.48%
Li Xun-Qin 7,394,267 2.46%
Chuo Wen-Heng 6,112,237 2.03%
First Bank Trust-fund Account Appointed by Li Xunqin
6,000,000 2.00%
Chuo Xiu-Yu 4,852,924 1.61%
Chuo Xiu-Ming 1.61%
4,849,582
Nan Shan Life Insurance Co. Ltd. 1.49%
4,467,000
Tsai Huey-Chin 4,372,885 1.45%
Chen Jing-Tsai 4,180,956 1.39%

(v) Market price, net value, earnings, dividends and other relevant information for the last two years

last two years last two years last two years
Item Year 2017 2018 2019 until March 31st
Market Price
per share		 Highest 344.00 530.00 289.00
Lowest 146.50 181.00 201.00
Average 235.40 326.00 251.26
Net Value per
share		 Pre-Distribution 58.16 80.45 83.74(Note 2)
Post-Distribution (Note 1) (Note 1)
50.95
Earnings per
Share		 Weighted Average Number of
Shares (1000 Shares)		 292,441 300,562(Note 2)
288,562
Earnings per Share (after tax) 9.77 18.44 2.06(Note 2)
Earnings per Share (after tax) after
retroactive adjustment		 9.49 (Note 1) (Note 1)
Dividend per
Share		 Cash Dividends 3.5 7.0(Note 1) -
Stock
Dividends		 Dividends from
Earnings		 0.3 0.3(Note 1) -
Dividends from
Capital Reserve		 - - -
Accumulated Unpaid Dividends - - -
Analysis of
Return on
Investment		 Price/Earnings Ratio 24.09 17.68 -
Price/Dividend Ratio 67.26 46.57 -
1.49 2.15 -

88

Note 1: The earnings distribution for 2018 has not yet been approved by the Shareholders’ Meeting Note 2: The financial statement of the first quarter of 2019 audited by the accountant.

(vi) Dividend Policy and Implementation

  1. Dividend Policy

The dividend policy of the Company has been adjusted on earning distribution policy according to the amended Company Act and through annual shareholder’s meeting on June 28, 2016; in addition, the distribution policy for the remuneration of employees and directors has been promulgated in the Articles of Incorporation. The distribution policy of amended the Articles of Incorporation regulate that if there is any earning in the annual account, the earning shall be distributed according to the following orders:

  • (1) payment of tax;

  • (2) offset of its losses in previous years;

  • (3) 10% for legal reserve;

  • (4) special reserve as required by law;

  • (5) Below 6%(included) for dividends;

(6) The Board shall, based on the profit situation of the company, and in according with the expansion plan and profitability, taking into account the capital adequacy ratio, propose the dividends distribution for shareholders (in whole or in part distributed according to the proportion of shares held by them) and submit it to the shareholders’ meeting for resolution.

The dividends policy is based on the regulations of the company Act and Articles of Incorporation. The company may take factors of financial, business and operation aspect into account, and after having deducted the statutory amounts in (1) ~ (5), distribute part or all of the remaining accumulated unpaid dividends in previous years and current distributable earnings. The earnings may be distributed in the form of cash dividends or stock dividends, but the proportion of stock dividends distributed shall not be higher than 2/3 of the total dividends and bonuses of shareholders in the current year.

Articles of Incorporation of the company not yet clearly specified the distribution ratio of shareholders’ dividends, because the profit for the current year will be subject to adjustment based on future capital expenditure and capital situation, and shall be handled per resolution of the shareholders’ meeting.

As the company continues to expand the factory, expand the scale of investment, and develop new products, it is necessary to retain a certain level of funds. It is estimated that the dividend distribution ratio in the near future should not differ significantly from approximately 37% to 40% in the past five years.

  1. The dividend distribution proposed at the shareholders’ meeting

As for the annual earnings distribution plan of 2018, the Board decided on March 26th, 2019, to allocate a total NT$2,194,102,782 (NT$ 7.3 per share), for share holders’ dividends, including stock dividends of NT$ 90,168,600(NT$ 0.3 per share) and cash

89

dividends of NT$ 2,103,934,182 (NT$ 7.0 per share); ; the plan will be implemented after the Shareholders’ Meeting approves it and authorizes the Board to set the ex-right and ex- dividend base date.

  1. Explanations of expected major changes in dividend policy: none

(vii) The influences of the bonus shares proposed at the shareholders’ meeting on the Company’s business performance and earnings per share:

not applicable because the Company didn’t disclose financial forecasts for 2019.

(viii) Employee Bonuses and Remunerations of Directors

  • 1.Percentage or scope of employee bonuses and remunerations of directors and provided for in the Articles of Incorporation:

  • According to Articles of Incorporation, if the company has earnings at the end of a fiscal year, it should make an allocation in this way: (1) a minimum of 1% for employee remunerations, (2) a maximum of 4% for directors’ remunerations. The distribution proposal of employees’ bonuses and directors’ remuneration shall be reported to the shareholders’ meeting. However, in case that the Company still has accumulated losses, the amount for offset shall be reserved, then the employees’ and directors’ remuneration may be distributed according to the above proportions.

  • 2.Basis for estimating the amount of employee bonuses and remunerations of directors, basis for calculating the number of shares to be distributed as stock bonuses, and the accounting treatment of the discrepancy, if any, between the actual distributed amount and the estimated figure, for the current period:

At the end of the fiscal year, material differences between these estimates and the amounts proposed by the Board of Directors in the following year are adjusted for in the year of the proposal. If the actual amounts still differ from the proposed amounts after the publication of the annual financial statement, the differences are charged to the earnings of the following year as a result of change in accounting estimate.

  1. Information on proposals passed by the board of directors to distribute employee bonuses:

(1) Remunerations to employees, directors and supervisors in the form of cash bonuses: NT$ 492,363,358 for employees and NT$246,181,679 for directors. The estimated ratios were 7.0% and 3.5%, respectively, in compliance with Articles of Incorporation of the Company.

(2) The proportion of the number of shares for employees as remunerations to net profits after tax and the total of employee bonuses of the individual or individual financial reports in the current period: Not applicable.

90

  1. The actual distribution of employee bonuses and remunerations of directors and in the previous year

  2. (1) The employee remunerations distributed in cash were NT$ 231,071,599 in 2017.

  3. (2) The actual remunerations of directors were NT$ 115,535,800 in 2017.

  4. (3) There is no difference between the actual distribution and the distribution passed at the Board Meeting.

(ix) Stock buyback: none.

ii. none. Issuance of Corporate Bonds:

  • iii. Issuance of Preferred Stocks: none .

  • iv. none . Issuance of Global Depositary Receipts (GDR):

  • v. none. Exercise of Employee Stock Option Plan (ESOP):

  • vi. none. Acquisition of New Restricted Stock:

  • vii. Mergers and Acquisitions of New Shares Issued by Other none.

  • Companies:

  • viii. Execution of Capital Utilization Plan: The company hasn’t issued marketable securities or completed the private placement of marketable securities, has completed the plan in the recent 3 years, with no plan effects shown.

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V. Business Overview

i. Business Content

(i) Business Scope

1. The Main Content of the Company’s Business:

The Company is mainly engaged in R&D, design, manufacturing, sale, maintenance and pre-sales and after-sales services of linear guideway (GW), ball screws (BS), industrial robots, wafer robots, precision bearings, various robot arms, rotary tables, medical equipment semiconductor devices.

2. Business Proportion:

The turnover of 2018: GW for 59%, BS for 24%, industrial robots for 8%, others 9%.

3. The Current Product (Service) Items:

Our company provides key components, industrial robots, special machines and aftersales services for machine tools, industrial machinery, bioscience, medical equipment, equipment of electronics industry, photoelectricity, semiconductor devices and automation, etc. The current main products of the Company are listed below:

Product Category Series
1 GW Self-lubricating, quiet, roller, overload, microminiature,
intelligent, dustproof, high rigidity, light weight, high torque
resistance, cross configuration, extremely-low
2 BS Precision grinding, precision rolling, high speed, heavy
load, air cleaning, nut rotary, tangent circulating, quiet,
cooling,
intelligent,
economical,
precision rotary cut
3 Industrial
Robot		 Single axis robot, articulated robot arm series, parallel robot
arm series, scale robotic arm series, wafer robotic arm
series, electric gripper, end effector
4 Rotary
Tables		 Biaxial two-arm rotary table, Biaxial one-arm rotary table,
single-axis vertical rotary table, single-axis horizontal rotary
table
5 Reducer Harmonic Reducer
6 Precision
Bearing		 Crossed roller bearing, ball screw bearing, bearing block
7 Medical
Equipment		 Rehabilitation equipment, nursing equipment, equipment of
minimally invasive surgery

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  1. New products (service) slated for development:

(1)MHS/MLT bath assist, MSR/MRG rehabilitation machine, MTG/MAS surgery series product development.

(2)Skara robot arm LU, AE series development.

(3)Development of protective electric jaws.

(4)Measuring type electric jaw development.

(5)Development of gas-electric rotary joints.

(6)3D visual aids data system development.

(7)The panel type arm is mass-produced.

(8)The one-arm type boat arm was mass-produced.

(9)Panel transmission module development.

(10)Development of the boat box transmission module.

(11)New cycle ball screw Super Z miniaturized TYPE2 series development and trial production.

(12)Ball screw solid assisted lubrication ball screw EL miniaturization specification development.

(13)The next generation of intelligent ball screw was introduced into the factory and trial production.

(14)The ball screw shares the dust-proof module for mass production.

(15)Mass production of new cooled C3 ball screws

(ii) Industry Overview

  1. Development and Current Situation of the Industry:

The International Monetary Fund (IMF) estimated that the global economic growth rate in the year 2018 would be 3.9%, which is the fastest growth in the past seven years. Among them, mainland China, the United States, and Germany have the most competitiveness. Mainland China was constantly transitioning its industries to technology- intensive ones and promoting “Made in China 2025” and “Internet +” policy to positively plan for advanced manufacturing capacity; after 19th National Congress, it paid more attention to environmental protection and ecological environment, industrial transformation and upgraded automation and intelligent manufacturing, and rapidly increased the demand for key components and components. In order to boost U.S economy, the Trump government also proposed the policy of “recovery of the manufacturing industry” and promote the return of manufacturing industries and trade protection policies. Germany has diversified industrial foundation and full support from the country, and it continues to lead the development of Industry 4.0. Driven by Industry 4.0 and technologies such as the Internet of Things and Big Data, its hardware innovation, software upgrades, and hard-soft integration continue to evolve. Smart manufacturing has become an unstoppable trend.

Under the rapid development of science and technology, artificial intelligence has gradually entered people's daily lives. A large number of automation and mechanical modularization also drive manufacturing to the era of smart manufacturing, reshaping the innovation value chain of the industry. The fourth industrial revolution brings industry competition to a new stage; the rise of Internet of Things, big data, cloud computing and artificial intelligence also brings new demands of industrial development; for example,

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the past series mode of upstream and downstream supply chains of precision machinery can no longer cope with changing circumstances, and it needs trans-trade alliance, for instance, to cooperate with industrial IC, sensor and network operators to form a new “intelligent precision machinery” industry cluster. According to the estimation of Topology Research Institute, the global market for intelligent manufacturing and smart factories in 2019 will reach 250 billion U.S. dollars. Surrounding the main axis of intelligent manufacturing, the future industry will bid farewell to the economies of scale in large-scale production, tend to small-volume, customized, flexible services, and derive value-added services such as data analysis, business management, and so on. New emerging technologies such as Internet of Things, artificial intelligence, cloud computing, big data, and virtual integration will all lead intelligent manufacturing to industrial innovation.

Taiwan’s machinery industry has always been behind the scenes of industrial upgrading. From high-tech manufacturing and construction projects to the agriculture and mining, they all cannot survive without machinery industry. Therefore, there is a reputation of “Machine is the mother of industry.” IEK pointed out that the “industrialization of smart machines” and “smart machines for industry” are two axes of major vision proposed by the current policies. Industrial robots are an important element in the construction of automated and intelligent production systems, and they are also the keys to the future growth of the industry. Due to the difficulty in recruiting in the manufacturing industry, and in response to diversified production needs, coupled with the encouragement of multiple factors such as rising wages, lack of labor, and desire to improve product quality, the demand for smart automation and industrial robots in the manufacturing industry is more and more urgent. These will all incubate the beginning of the next wave of heavy use of robots. According to the International Federation of Robotics (IFR) data, the installation capacity of industrial robots has grown significantly at an annual rate of 200,000 units. IEK also predicts that Taiwan’s smart machinery industry will accelerate the introduction of automation application programs mainly based on the robots and relevant peripherals with awareness and the application of robots will gradually present more and more specific cases innovative business models. It is expected that the market scale of global robotic products, including relevant artificial intelligence technologies, will jump to over US$ 80 billion by 2020 with the speed of geometric progression. It is expected that the industrial robots’ industries will present the situation of “The bigger will still be the bigger, and the stronger remain the stronger.” The IFR states that the global sales amount of industrial robotics reached 380 thousand in 2018, increasing 29% from 2017, a record high. To meet demand of the vast global market, the four dynasties of industrial robotics and several major components manufacturers have expanded or added production lines in 2018. On technique development, the trend is toward light and affordable, user-friendly interface, modular architecture, and enhanced human-machine collaboration capabilities to meet the needs of multi-application industries and to shape the future of rapid development.

The development of global machine tools is moving towards multi-axis and high efficiency. Therefore, high-end five-axis and multi-tasking machines have high thresholds for component design, processing and assembly technology. They have always been regarded as the development of Taiwan's machine tool industry. Upgrade the value of the indicator. According to research conducted by Market and Markets, the demand for global machine tools is expected to grow at a rate of 6% per year, reaching US$187 billion in 2019. This growth is mainly for the development of industrial development in the mainland and India. Among them, multi-axis machine tools account for 15% of the overall market, and are expected to grow at a compound annual growth rate of 6.7% per year, with a total turnover of US$26.8 billion. After the demand for lowend and general-purpose machine tools in the mainland market has plummeted, the

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mainland is pushing China's manufacturing 2025. Enterprises need to be upgraded and upgraded. In addition, US remanufacturing also requires high-end machine tools. Tool machine products will be the mainstream demand for the transformation and upgrading of global manufacturing in the future. In addition, in the global trend of developing Industry 4.0, machine tool manufacturers have also developed smart machines and production lines in combination with technologies such as complete machines, robots, Internet of Things, big data and AI. In addition, the current Torque motor rotary table only accounts for 5% of the overall market, and is expected to grow to 40% by 2020. There are still huge market opportunities for manufacturers interested in developing high-end multi-axis machine tools.

Sales of 2018 semiconductor equipment grew by 9.7%, with sales reaching US$62.1 billion, a record high. Taiwan's semiconductor foundry and packaging in the lead in technology and market share, in the global competitive semiconductor industry still has superior competitiveness, but the mainland's policy support, strong subsidies and capitalintensive advantages, the output value has been catching up, SEMI International Semiconductor Industry Association announces the latest China IC Ecosystem Report, which analyzes China's integrated circuit manufacturing supply chain, and points out that China's former wafer fab capacity will grow to global semiconductor wafer capacity in 2019. 16%, and predict that the ratio will increase to 20% by the end of 2020. Therefore, it is estimated that by 2020, there will be a large demand for semiconductor equipment and related automation peripherals such as wafer handling automation and wafer boat handling. Automation is the best way to connect various process equipment and monitor production capacity.

Although the automobile industry has experienced a decline in sales due to the simultaneous decline of the two major auto markets, the global smart transportation market can develop with new technologies such as autonomous driving, electric vehicles and 5G networks. In terms of automobile parts, as the core technology of future automobiles centers on E-Power, lightweight structure and intelligized, the demand for fuel-efficient cars, such as new energy cars, will rise greatly; meanwhile, the development of Advanced Driver Assistance Systems (ADAS), Internet of Vehicles and related industries will also increase the demand for R-EPS and automobile ball screws. The ratio of R-EPS to steering gear box was 26% in 2018 and it’s estimated to become the mainstream type of steering gear box in 2031. In addition, as mainland China meets global environmental issues, its regulations for setting fuel consumption and pollution emissions are becoming increasingly stringent, so using electronic assistant ball screws in the mainland China market is going to be an irresistible trend, which is a great business opportunity.

As pointed out by Forbes Magazine, the global aging population, the rapid rise of chronically ill patients and disabled people, rising health expenditures, and rising costs of economic and social burden are pressing matter that are the pushing the development of intelligent digital health care. In addition to continuing to develop intelligently, the trend of the medical care industry needs to be directed at rapidly increasing medical cost control, and proposes measures such as creating income sources. The path of medical application automation and digital technology is the inevitable direction to help reduce the cost of care, improve efficiency and quality, and improve the quality of life of patients, thus leading to remote monitoring, telemedicine, personal alert reporting systems, and actions. The needs of applications such as health, clinical care, and smart care services. According to Radiant Insights research, it points out that the global smart health market will reach US$225.5 billion in 2022. Major nations have entered the old age society. In response to that the increase of the elderly population, the combination of medical care and health care, care service at home, and healthy lifespan are important

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trends in current welfare development, it is expected that there will be magnificent increase of needs on home-based welfare products, rehabilitation products and care robots. Products and services designed specifically for elderly people will also become emerging areas for all parties to engage in. The surgical industry is gradually emerging from the clinical benefits of robot-assisted surgery, such as for precise brain guidance surgery, for joint replacement surgery, and for minimally invasive surgery to reduce patient bleeding and improve the success rate, according to TrendForce The research report pointed out that the market size of surgical robots in 2021 can reach 9.3 billion US dollars, and its compound growth rate is as high as 19.3%.

2. The relevance of the upper stream, midstream and lower stream of the industry:
Raw Materials
(Upper Stream)		 Main Products Main Application (Lower Stream)
Steel, Steel Ball BS, GW Semiconductor, opto-electronics manufacturing and test
equipment, automation equipment, medical equipment of
bioscience, electronic industry, machine tool, industrial
machinery

3. Development trend of products:

Smart manufacturing is a global trend, and HIWIN has deployed smart automation and robotics for a long time, and its products are moving towards high value-added products, high-end manufacturing and digital applications. In addition to developing its own intelligent ball screw, HIWIN has formed an alliance with Taiwan and the International Semiconductor Industry Association, Taiwan Smart Automation and Robotics Association, and Taiwan's Tool Machines and Components Industry Association to expand the layout of smart components, smart machinery, and wisdom. The system is designed to supply the world's advanced manufacturing needs and assist customers in the transformation and upgrading.

From the trend of major industrial exhibitions and markets in recent years, many devices have begun to introduce intelligent functions, and the demand for the IOT industry has also begun to increase. The products in the market are only records or warnings, but still Lack of predictive function, in order to maintain uninterrupted production capacity and maintain product accuracy, especially the ball screw is the key component of the equipment. At present, the smart ball screw of Shanghai Silver has been the industry's leading indicator, except for the built-in dedicated sensing IC. For self-developed, it also collects large data on the actual line, which can instantly monitor screw temperature, thermal deformation, vibration quantity, lubrication status, predict the life of the product through algorithms, achieve preventive maintenance, improve production efficiency, and visualize Abnormal reminder, instant feedback on the maintenance schedule of the machine, allowing customers to arrange maintenance, replacement and repair of components in advance, avoiding losses caused by downtime, and achieving the Industry 4.0 goal.

The development of multi-axis robotic arms, the development of key components is the key, the key components required are mainly four, precision reducer, servo motor, roller bearing and drive control unit, the cost of these components account for the whole The cost of the shaft robot is more than 50%. At present, the key technologies of these four parts are mostly in the hands of European, American and Japanese manufacturers. Each multi-axis robotic arm factory itself has at least one key component technical strength, and it is matched with it. The technology owned by domestic manufacturers is combined into a complete and solid key component supply chain, and through the design of special

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specifications, consumers can avoid buying parts directly from component suppliers and increase profits through the maintenance market of multi-axis robots.

In addition to the original consumer electronics applications, the optoelectronic semiconductor industry expands the market for semiconductor process equipment and inspection equipment by expanding the sensors and optical components required for invehicle systems and expanding the market applications of optoelectronic semiconductor components. The transmission systems required for these devices often require smaller size, higher precision and reliability. The Super Z series of ball screws from Shanghai Silver meet the needs of equipment manufacturers through optimized design and manufacturing techniques.

Wafer robots began to apply visual sensing, machine networking, and expand their application areas. In response to this trend, the silver wafer arm has also developed more models for different industry use scenarios, itineraries and different processes, making the application of line automation more flexible and faster. In addition, the core structure of the wafer arm not only enhances the modularization, but also emphasizes its commonality. Through the parallel development and vertical integration of product specifications, it creates a more powerful cost advantage and control mode. The new product of the Bank of China, "Crystal Transmission Module", adopts the industry standard "SECS/GEM" communication format, which can be quickly connected to the production line regardless of whether the end user is a foundry, package or production line. Fully reach the structure of the shared module and develop it in parallel to the wafer boat carrying arm, wafer arm, and panel arm. At the same time, for the special needs of each group, special instructions and dedicated end modules can be established to make the same main structure. The scalability is fully linked and more effective. The wafer transfer module EFEM used in the semiconductor industry passed the SEMI S2 international safety certification this year. HIWIN-EFEM can be customized according to customer needs, and HIWIN wafer robots can be matched with the corresponding specifications to make the equipment and process more efficient and competitive.

The newly developed Super Z ball screw from Shanghai Silver Technology introduces optimized design and manufacturing technology, which can reduce the volume by 30% compared with the traditional screw and the performance of the ball screw. The new generation of cooled ball screw optimizes the flow path of the coolant. Design and configuration not only reduce the waste of machining stroke, but also improve the assembly efficiency of the tool machine. Industrial and commercial products are becoming lighter and lighter. In response to this demand, HIWIN is actively developing micro-small and lightweight linear slides to provide more precise displacement and lighter installation.

In recent years, the automobile industry has flourished, including the expansion of new models, the development of all-electric and oil-electric power technologies, and the application of smart-vehicle systems to drive the continuous supply chain. Automotive molds rely on high-precision machine tools for high precision, and HIWIN's new generation of cooled ball screws provide a stable thermostatic positioning system, a key component that keeps the machine tool at high precision. In response to the development trend of electric vehicles and unmanned self-driving vehicles, the vehicle's electric power steering system (R-EPS) developed by Shanghai Bank has active control functions to achieve active safety control of vehicles, such as body dynamic stability system, lane offset assist system, obstacles. Dodge, active parking assistance, etc., are functions that traditional hydraulic auxiliary steering systems cannot achieve. The legal entity estimates that 80% of new cars in the world will be listed as R-EPS in 2020.

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HIWIN Medical Equipment is mainly designed to assist senior self-reliance and care needs, develop lighter and smarter equipment for use in community and personal wear, and combine biomedical sensors to provide evaluation and feedback systems. The user is more convenient and intuitive in operation. In recent years, due to advances in feedback sensing technology, high-output thin motor, human-machine interaction, and dynamic physiological signal analysis technology, the growth of related rehabilitation machine evaluation systems has been promoted. It is estimated that rehabilitation robots will gradually be extended from rehabilitation training to the wisdom of the patient's physiological state and efficacy evaluation is automated, and the effectiveness of rehabilitation equipment and the number of service patients per unit time are further enhanced by big data analysis. Welfare products are also oriented towards home, wisdom, remote care, and reduction of human resources. Their products have health promotion, ability recovery, care prevention, and strengthening the physical function of the elderly. The development direction of surgical robots follows the development of new clinical procedures, allowing doctors to operate robots by remote control. However, in the new methods of operation such as single hole surgery, natural hole surgery, etc., there is no fully effective product to assist in the market. This is also the future direction of various robot manufacturers, such as da Vinci SP system.

Today's rotary table market is still dominated by worm and worm gear transmission systems. However, with the advancement of processing technology and the pursuit of high-quality products in the market, machine tool manufacturers are constantly developing into higher technology fields and are being manufactured by modern metal molds. Due to factors such as the development of technology and rising raw material costs, the market trend is moving towards “high-speed light cutting”. At present, the workpieces produced by the mold technology are very close to the target size, and only need to be lightly cut to accurately reach the final size. It is much more efficient than traditional processing methods.

Commonly used drive sources for articulated robotic arms include electric motors, hydraulic and pneumatic drive units. Among them, servo motor drive is the most common drive method because of its high precision and reliability, due to the joints of the articulated robotic arm. A low-speed, high-torque drive source is required. Therefore, the servo motor must be used with a reducer. The reducer for the articulated robot must have the following requirements: high repeatability, stable swing speed, low friction, high efficiency, and small size. Light weight, large transmission torque, etc. The company's self-developed Torque motor rotary table, with its fast response and high torque, is equipped with an absolute encoder. The position feedback is quite accurate and can effectively meet the rotary axis module technology required by various tool operators. In the future, all rotary shaft products will be developed in a full range, including high-end product lines such as rotary spindle heads and two-axis spindle heads.

Industry 4.0's requirements for robotic arms are becoming more and more sophisticated and increasingly light. In response to this demand, HIWIN is actively developing microsmall and lightweight linear slides to provide more precise displacement and lighter installation. Industrial robots have also begun to use a large number of visual sensing, machine networking, and expand their application areas. The robotic arm of HIWIN Technology has also developed more models of different sensing, stroke and load in response to this trend, making automation applications more flexible. In addition, in the core structure of the robot arm, not only enhance the modularization, but also emphasize the commonality, through the parallel development and vertical integration of product specifications, create a more powerful cost advantage. The new intelligent technology "Smart Electric Clamping Claw" is the only gripper product in the world that adopts the "mini-double rotary linear module". It can be controlled regardless of the strength,

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direction, stroke and speed of the clamping. For objects that are easily deformed, easily broken, and easily damaged, it is more effective to use with a robotic arm.

4. Competition of products:

HIWIN's products have the characteristics of integrating group resources, technological innovation, and key components. We have long been engaged in the development of electromechanical integration, robot manufacturing, and the manufacture of smart mechanical components. Therefore, the silver and general linear transmission products are from Germany and Japan. The differentiation of competitors such as the mainland and the competitive advantages they have become clear. Because of this multidimensional high-end product development strategy, HIWIN Technology has been able to flexibly adapt to the changing international economic situation, leading the industry and reducing the impact on the market. In the face of the competition of so many linear transmission component manufacturers around the world, we listen to the needs of customers and customers, and continue to innovate products, not only differentiated and more diverse with competitor products, but also consolidate the global linear transmission component market indicators. Sexual status.

In terms of competition for key components, as the Japanese peers have hardly expanded their production capacity in recent years, the supply chain of German linear slide manufacturers in the mainland is affected by environmental protection issues. During the period when the market is in short supply, the Bank can demonstrate its competitiveness and value and meet it in time. Customer demand. In the strategy of product competition, HIWIN Technology continues to invest in materials science research, actively search for alternative materials that can replace or even better quality, and simultaneously develop spare parts technology that can be quickly produced and quickly assembled to quickly seize potential customers. With the development of smart components and smart robots, HIWIN is equipped with electronic control software and system services to provide customers with complete solutions and a great competitive advantage in the market. For example, the industry-leading smart ball screw with four diagnostic functions of temperature, preload, vibration and lubrication is more intelligent than European and Japanese competitors.

The cost of the reducer in the key components accounts for 1/3 of the cost of the domestic production machine, which is much higher than the 1/10~1/6 of the international manufacturers. It must rely on imports, and the bargaining space is small plus tariffs. Naturally, the cost of the whole machine is increased, and in the face of a highly competitive market, it can be imagined that the price competitiveness of domestic robots is low. Therefore, in addition to strengthening the self-developed development of key components of the robot, the company has built a system service team and provided complete line planning and services. Through continuous optimization of the design and performance of the robot arm, the selected industries are selected, and the robot production line suitable for the customer is planned and designed. Develop the overall solution for vertical industrial robots. After the introduction of the harmonic reducer introduced by HIWIN in 2018, the key components required for the production of the robot include: servo motor, drive, ball spline, cross ball bearing and harmonic reducer, all of which can be 100% homemade, helping the development of all kinds of robots in Shanghai.

Harmonic reducers occupy a key position in the industrial robot arm, and only Harmonics Drive System has been able to supply industrial grade applications. Therefore, mainland manufacturers are actively engaged in development, and local governments are actively supporting them. Since 2018, I have seen many manufacturers

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who display samples, but these products cannot reach the industrial level in terms of accuracy and longevity, and can only be used for specific low-order applications. The harmonic reducer developed by the independent technology for many years can reach 7,000 hours. The service life has reached the requirements of industrial grade applications.

For the whole machine manufacturer who intends to invest in development, except for a few capable first-line manufacturers, it will consider to develop the four/five axes internally to master the wider channel, but not necessarily can make the key components, and Taiwan Compared with the European and Japanese manufacturers, there is still room for improvement. Most of the operators who are accustomed to the concentration of the precision machinery industry in the central region are still inclined to the outsourcing operation mode of professional four- and five-axis manufacturers. According to the required speed, torque and precision, the components of the four-five axes are determined, and the quality and inertia of the structure are matched. Component size and matching controller parameters, but the key component technology is in the hands of others, it will face supply instability and high cost.

In the industrial robot industry, the core technologies are in the four major families (ABB in Switzerland, FANUC in Japan, KUKA in KUKA, YASKAWA in Yaskawa, Japan) and Nabtesco and Hamerna in the gearbox market. Harmonic Drive, which accounts for more than 70% of the market share of the mainland robot industry, has almost monopolized high-end fields such as robot manufacturing and welding. The gradual emergence of the mainland domestic wafer arm, although its accuracy and quality stability has not been compared with Japan and the United States, but its cost is relatively low, can correspond to some industries that do not need high precision, such as LED Industry only. The biggest bottleneck in the development of the domestic robot industry is that the technology of the three key components cannot be broken, and the key component outsourcing will lose its competitiveness. In the face of such a highly competitive market, in addition to strengthening the self-developed development of key components of the robot, And to build a system service team and provide complete line planning and service, through continuous optimization of the design and performance of the robot arm to improve cost performance, and has been tailor-made for customers, planning and designing the ability to adapt to the customer's robotic production line.

At present, the rotary table produced by Asian manufacturers has long-term wear problems. The manufacturer must also design the worm through the double/variable lead mechanism, and then adjust the gap error with screws, springs, gaskets, etc., which is less internationally competitive; The European market has been introduced to the Torque motor rotary table in 2000. The current competitors are Germany KESSLER and Italy LCM. If the Asian countries need to introduce the European Torque motor rotary table, it is easy to produce high overall cost and difficult maintenance. And so on. HIWIN already has the self-made production capacity of Torque motor rotary table and its key components. The complete core technology including Torque motor, shaft radial bearing and brake device can be developed by ourselves. Compared with competitors, it will be more developed. Advantages of quality and cost.

In the vehicle electric power steering system (R-EPS) market, the current international manufacturers have achieved stable supply performance, while mainland manufacturers are still in the initial stage of development. There are no manufacturers in China that have successfully mass-produced R-EPS; Experience and verification, R-EPS key components, including the self-developed capabilities of the complete core technology of ball screw, motor and control unit, have a good foundation for entering the automotive market in the future.

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The lower limb rehabilitation robot and the endoscope support robot arm developed by the core technology and key components of the silver core gradually show superiority with the peer products after entering the clinical trial; in the mainland market, the lower limb rehabilitation machine of the silver Its fast on-board, patented standing support system and cost-effective European brand hanging robots that replace millions of RMB take-off are rapidly expanding in the rehabilitation market. The endoscope supporting robot arm is also positioned centrally with its patented mechanism to ensure the safety characteristics of small wounds and quick recovery of minimally invasive surgery. It is more stable and reliable than traditional support brackets and other software positioning competitors, and has obtained Japan, Southeast Asia, Highly interested with European customers. In terms of well-being products (bathing robots), Japanese and Swedish manufacturers are the main competitors of the industry. In the past, with the support of the insurance, Japan’s large-scale bathing equipment flourished, but sales have gradually saturated in the past two years, and the price is still relatively High-end, weak in the international market. Surgical products (endoscope support robot), several European and Japanese manufacturers are well-known in the market, their main technologies are not the same, and in the development of technology, the United States still holds the main technology and market leadership. Due to the expiration of patents and the increase in patient acceptance, more competitors are willing to enter this market and develop related products.

In terms of product competition, HIWIN Technology adheres to the business philosophy of professionalism and globalization, continuously improving product quality to provide cost-effective products, and providing customers with one-stop service before, during and after sales to create products of the greatest value for customers.

(iii) Technology and R&D Overview

HIWIN filed a total of 237 applications at home and abroad and obtained 205 patents in 2018, and owned 1,724 valid patents at the end of 2018. It ranked 65th in “Invention Patent Certificates”, 47th in “Patent Public Certificates”, 72nd in Invention Patent Public Certificates, and was also No.1 in Taiwan’s precision machinery field in 2018.

1. R&D Expenses in the Last Year and as of the Publication Date of the Annual Report

Unit: NTD Thousand


Unit: NTD Thousand
Item 2018 2019 until March 31st
R&D Expenses 1,385,997 285,314

2. Technologies and Products Developed Successfully in the Last Five Years
Year Product
2014 1. Continuous development and volume production of high-speed ball screws (Super T)
2. Specification expansion and volume production of Crossed Roller Bearing (CRB)
series
3. Development of long-stroke single axis robot modules
4. Development of short-stroke small screws
5. Development of four-row ball DB linear guideway (UG)
6. Development of six-row ball linear guideway (SG)
7. Specification expansion and volume production of light weight and small wide linear
guideway (PMW)
8. Specification expansion and volume production of quiet roller linear guideway (QR)
9. Volume production of articulated robot arms and parallel robot arms
10. Development and volume production of Robotic Gait Training System MRG-P100,
which has achieved CE93/42/EEC certification.

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2015 1. Development and volume production of the electric gripper, which has achieved
CE2006/42/EC certification and RoHS2011/65/EU certification.
2. The articulated robot arm RA605 has achieved RoHS2011/65/EU certification and
IEC60529 Edition 2.2:2013 IP65 certification.
3. Continuous development of and volume production of the whole series of parallel
robot arms
4. Continuous development and volume production of Robotic Gait Training System
5. Robotic Endoscope Holder MTG-H100 and robot for bath MHS-B100 achieved
ISO13485 certification.
6. Development and volume production of online system- roll-up machine and step
platform
7. Specification expansion and volume production of external reflux miniature linear
guideway (MG-O)
8. Specification expansion of six-row ball linear guideway (SG)
9. Specification expansion and volume production of low assembly roller linear
guideway (RGL)
10. Specification expansion and volume production of single axis robot modules
2016 1. Development of next generation intelligent ball screws
2. Continuous development and pilot volume production of ball screws (Super Z)
3. Continuous development and volume production of self-lubricating module (EL) f
ball screws
4. Development of long-stroke single axis robot module
5. Specification expansion and volume production of high-speed ball screws (Super T)
6. Development and volume production of linear guideway (CG) of high-resistant
torque DB
7. Continuous development and volume production of self-lubricating oil box (E2)
8. Continuous development and volume production of SCARA robot arm RS406, which
achieved 2006/42/EC, 2014/35/EU and 2014/30/EU certification
9. Development of highly dust-proof cover of roller guideway (RG) and linear
guideway (CG) of high-resistant torque DB
10. Development of spine surgery robot system
2017 1. Continuous development of type 2 of New cycle ball screw (Super Z) and pilot
volume production of type 1
2. Development of next generation intelligent ball screws
3. Development and mass production of new dust-proof ball screw (FW)
4. Continuous development and mass production of AG cross-profile linear guideway.
5. Continuous development and mass production of RGS/RGF ultra-low roller liner
guideway.
6. Robotic Endoscope Holder MTG-H100 and robot for bath MHS-B100 were certified
by Taiwan TFDA.
7. Complete development of Teaching upper limb Training System MST-R100
prototype
8. Complete development of the ear and nose endoscope surgery robotic arm MTG-
E100 prototype
9. The articulated arm and the SCARA robot arm are verified by the "TARS".
10. Volume production of the S series integrated electric gripper
11. Volume production of the RJ series circuit rotary joints
12. Development of Automotive Screw (VBS)
2018 1.The new recirculating ball screw (Super Z) type1 is fully mass-produced.
2.The next generation of intelligent ball screw prototypes was developed.
3.The development of the new cooled C3 ball screw was completed.
4.The ultra-small line rail completes the prototype development.
5.The development of the covered roller linear slides was completed and mass
production.
6.The full range of torque-resistant linear slides was developed.
7.The endoscope-supporting robot arm for continuous development and mass
production.
8.Mass production of the articulated robotic arm RT610 series.
9.The parallel robotic arms RD403-110-GB and RD403-1100-PR-GB have obtained CE
certification and food grade certification.
10.The articulated robot arm RA605-710-GB has obtained CE certification.
11.The EFEM wafer transfer module is SEMI S2 certified.
12.The panel arm completes the prototype development.
13.The one-arm wafer arm completes the prototype development.
14.The RAS series single-support Torque Motor rotary table has been developed and
mass produced.
15.DATORKER harmonic reducer has been developed and mass produced.

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(iv) Long, Short Term Business Development Strategy

  1. Short Term Business Development Strategy

  2. (1)Accelerate mass-production of new products

  3. (2)Continue to strengthen global access and accelerate the deployment of system integrators.

  4. (3)Provide electromechanical integration products and services.

  5. (4)Strengthen the proportion of product modularization and system integration sales.

  6. (5)Provide robot system services, improve software functions and overall solutions.

  7. Long Term Business Development Strategy

  8. (1) Establish a highly intelligent automated production line to meet the needs of diverse markets.

  9. (2) Continuously improve the functionality of robot software, develop industry-specific robots, and enhance competitiveness.

  10. (3) Develop smart machinery to connect intelligent service networks to create value for customers.

ii. Market, Production and Sales Status

(i)Market Analysis

  1. Sales Regions of Major Commodities:

HIWIN product sales operations are mainly operating in four regions, Taiwan, Germany, Japan and the United States, and are classified according to operating locations as follows:


cations as follows:

Unit: NTD Thousands
Operation Sites of
Business Units		 2017 2018
Taiwan 13,368,957 17,316,281
Germany 2,542,286 3,533,755
China 1,592,060 2,968,077
Japan 1,162,034 2,216,685
U.S.A. 1,060,802 1,207,781
Others 1,438,625 2,090,550
Total 21,164,764 29,333,129

2. Future Market Supply, Demand and Growth:

The International Monetary Fund (IMF) lowers its estimates of the global economic growth rate in 2019 to 3.5%, due to the escalation of trade tensions, global economic growth faces downside risks. In the short-term unresolved US-China trade dispute, the economic performance of the world and regions in the first half of 2019 will be conservative, conservatively destocking, and economic growth slowing down. However, this trade protection policy also accelerates the development competition between the United States and China. The mainland continues to promote supply-side reforms, actively develop smart manufacturing, and the overall industrial structure upgrade will bring new business opportunities for high-end equipment. The US government calls for manufacturing to return to US investment. The demand for capital goods and machine tools in the United States will increase, and the market demand will be strong. In addition, the global supply chain transfer caused by the trade war will trigger new demand in the Southeast Asian machine tool market. The

103

significant growth expectations of manufacturing in India, Vietnam, Indonesia and other countries can be gradually demonstrated in the second half of 2019.

On the supply side, due to the recent surge in demand in the component market, many of the industry are competing to expand the plant, and even other industrial manufacturers have entered the production of investment transmission components, which is expected to result in ball screws and linear slides of general specifications. If the supply exceeds demand, manufacturers without high-end products may face insufficient orders or even stop production after the market cools down. However, in special specifications and high-precision products, the demand for smart automation continues to be hot, the price is still stable, and even the need to increase production capacity to meet the needs of new business opportunities. We will respond to this price war with a variety of products, electromechanical integration, package shipments, and overall solution marketing, plus the precision ball screw, C-axis/AC shaft rotation required for high-end compound five-axis machine tools. The demand for various industrial robots required by the workbench and the global smart manufacturing industry will also be the kinetic energy for the continued growth of HIWIN's revenue.

3.Competitive Niche:

(1) Continue developing high precision products, corresponding to the mid- to highend market, which is relatively less affected by the economy

(2) High self-manufacturing of key components of industrial robotic arms, elevating competitiveness

(3) The group's technical resources are complete, and high-precision

electromechanical integration will become the core competitiveness of the new generation

(4) Multi-intelligent products, which are conducive to future smart manufacturing opportunities

(5) Intensive global cultivation, product service is faster, and closer to market demand

  1. Advantages and Disadvantages of Development Prospects and the Solutions:

  2. (1)Advantages ：

(1-1) R&D capacity is deep and vast

(1-2) Product development is diversified and complete

(1-3) Globally local supply is firmly rooted

(1-4) Brand awareness and reputation has been established

(1-5) Industrial structure transformation, driving smart manufacturing needs

(2)Disadvantages ：

(2-1) Quantity and quality of human resources

(2-2) Existing technology can be replicated

(2-3) Competitors expand production capacity and cut prices to steal away the business.

(2-4) Reversal of business climate, excess capacity

(3)Solutions ：

(3-1) Accelerate the reengineering of intelligent automation, continue to cooperate with industry-university cooperation between senior high schools and colleges

(3-2) Continue R&D of next-generation intelligent product technology

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  • (3-3)Self-made robots join the production front to improve quality and reduce costs.

  • (3-4) Develop new application markets and strengthen channel marketing

(ii) Important Use and Manufacturing Process of Main Products

1. Primary use of products:

The drive control products manufactured by HIWIN Technologies are mainly applied to the semiconductor, photoelectric and testing equipment, automation equipment, biochemical and medical equipment, electronic industry, machine tool, solar energy, LED and industrial machinery, etc. The drive control products of the Company corresponds to the rising environmental awareness and the pursuit of high-quality life in the modern society; therefore, the more advanced the industry, the larger the demand.

  • 2.Main Manufacturing Process:

  • (1) Ball Screw

Tapping →thermal treatment →thread-cutting →shoulder machining → external

diameter processing →precision shaping → test →assemble →inspect

  • (2) Linear Guideway

Thermal treatment→ drill hole→ precision forming→ inspect→ assemble → final inspection

(iii) Supply of Main Raw Materials
Raw Material Country Supply Status
Steel Taiwan Good
Steel Japan Good
Steel Germany Good
Steel South Korea Good

(iv) Customers with over 10% of gross purchase or gross sales in any year of the last 2 years:

1. List of manufacturers with over 10% of gross purchase

Unit: NTD Thousand


Unit: NTD Thousand
Unit: NTD Thousand
Unit: NTD Thousand
Unit: NTD Thousand
2017 2018 First Quarter of 2019
Name Sum To Net
Purcha
ses%		 Relatio
nship
with the
Issuer		 Name Sum To Net
Purchase
s%		 Relations
hip with
the Issuer		 Name Sum To Net
Purchas
es%		 Relation
ship
with the
Issuer
No manufacturers that take up more than
10% of total purchase amount		 No manufacturers that take up more
of total purchase amount		 than 10% No manufacturers that take up more than
10% of total purchase amount
Net
Purchase
s		 10,255,906 100.00 Net
Purchase
s		 15,472,981 100.00 Net
Purchase
s		 2,350,255 100.00
Cause of increase or decrease: not applicable.

105

2. List of customers with over 10% of gross sales

Unit: NTD Thousand Unit: NTD Thousand Unit: NTD Thousand
2017 2018 First Quarter of 2019
Name Sum To Net
Sales%		 Relation
ship
with the
Issuer		 Name Sum To
Net
Sales
%		 Relations
hip with
the Issuer		 Name Sum To
Net
Sales
%		 Relations
hip with
the Issuer
No customers that take up more than 10% of
total sales amount		 No customers that take up more than 10% of
total sales amount		 No customers that take up more than 10% of
total sales amount
Net Sales 21,164,764 100.00 Net Sales 29,333,129 100.0
0		 Net Sales 5,047,996 100.0
0

Cause of increase or decrease: no major change.

(v) Production Quantity and Value of the Last 2 Years

Unit: NTD Thousand; Thousand Unit: NTD Thousand; Thousand
Year
Quantity
Commoditie		 2017 2018
Capacity Production
Quantity		 Production
Value		 Capacity Production
Quantity		 Production
Value
Ball Screw 1,826 1,647 5,122,043 2,620 2,306 7,588,088
Linear Guideway 21,175 19,626 11,953,140 30,351 28,395 18,694,025

(vi) Sales Quantity and Value of the Last 2 Years

Unit: NTD Thousand;Thousand Unit: NTD Thousand;Thousand Unit: NTD Thousand;Thousand Unit: NTD Thousand;Thousand
Year
Quantity
Commodities		 2017 2018
Domestic Sales Export Sales Domestic Sales Export Sales
Quantity Value Quantity Value Quantity Value Quantity Value
Ball Screw 290 1,256,943 1,360 3,871,114 321 1,480,235 1,846 5,649,746
Linear Guideway 859 963,730 18,542 10,851,753 1,078 1,299,972 25,256 16,037,393
Others — 814,308 — 3,406,916 — 673,787 — 4,191,996
Total — 3,034,981 — 18,129,783 — 3,453,994 — 25,879,135

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iii. Employee Data of the Recent Two Years and Up to the Publication Date


Date
Date
Year 2017 2018 Current Year until March
31st, 2019
Number of
Employees (Note)		 Indirect Employees 2,263 2,429 2,416
Direct Employees 4,030 4,547 4,348
Total(people) 6,293 6,976 6,764
Mean Age (Note) 33.22 33.38 33.69
Average Length of Service (Note) 4.52 4.64 4.97
Education
Background (%)		 Doctor 0.43 0.40 0.43
11.51 11.32 11.61
Master
Junior College 55.22 55.84 55.63
High School 29.84 29.53 29.74
Without A High School
Diploma		 3.00 2.91 2.59

Note: Information of number of employees, mean age, average length of service and education background include that of the subsidiaries

iv. Information Regarding Expenditure on Environmental Protection

Information of the Company’s environmental safety and health:

(i) Environmental safety and health management performance:

  1. Passed ISO 14001environmental management system verification in 1997.

  2. Plant I passed OHSAS 18001 Occupational Safety and Health Management System verification in 2002.

  3. Plant I passed Taiwan Occupational Safety and Health Management System (CNS15506) verification in 2008.

  4. Plant I was awarded Outstanding Unit with No Disasters in Working Hours (no disabling injuries for 7,593,510 hours) by Council of Labor Affairs, Executive Yuan in 2011.

  5. Passed BSI ISO14064-1 (Greenhouse Gas) external audit in 2012 and continue to conduct external audit every year.

  6. Ball Screw passed PAS 2050 (Product Carbon Footprint) external audit in 2012.

  7. The Operational Headquarters, Plant II, Tanzi Plant, Yunke Plant and Yunke Plant II passed TUV OHSAS 18001 and Occupational Safety and Health Management System (CNS15506) verification, and gained Performance Recognition of the Occupational Safety and Health Management System, Ministry of Labor, in 2013.

  8. The Operational Headquarters acquired Cleaner Production Evaluation System Certificate from Industrial Development Bureau, MOEA, in 2013.

  9. The Operational Headquarters passed TUV ISO 50001 energy management system verification in 2014.

  10. Yunke Plant II and Yunke Plant passed TUV ISO 50001 energy management system verification in 2015.

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  1. The Operational Headquarters, Plant II, Tanzi Plant, Yunke Plant and Yunke Plant II passed annual certificate changing of TUV OHSAS 18001 and Occupational Safety and Health Management System (CNS15506).

  2. Plant I and Tanzi Plant passed TUV ISO 50001 in 2016.

  3. The operating headquarters and the Plant I passed ISO 14001: 2015 edition verification in 2017

  4. Yunke Plant II passed the TUV ISO 50001 energy management system evaluation in 2018

  5. Plant was awarded the Gold Medal of the Republic of China Industrial Safety and Health Association for the award of the Excellent Unit for Disaster-free Working Hours (accumulated 12,058,371 hours without disability injury) in 2018

  6. Received the Occupational Safety and Health Management System ISO 45001 International Standard Certification in 2019

(ii) Air pollution control

  1. According to the stationary pollution source under environmental regulations, the Company has pollution prevention equipment and maintains them regularly to improve their stability and guarantee the exhaust meets regulatory requirements.

  2. The pollutant concentration is detected regularly and below the limits.

(iii) Water resource and waste water management:

  1. There is waste water treatment equipment in every plant, so waste water is treated and discharged into the sewage system after it meets the effluent standard.

  2. Every plant applies for water pollution control measure permission according to law and commissions a testing agency recognized by Environmental Protection Administration to detect sewage discharge so as to monitor the discharged water quality effectively; other than Plants II and VII that exceeded the discharge standard, other plants met the provisions in 2018.

  3. It carries out a drill according to the wastewater treatment procedure regularly every year to reduce the impact of improper wastewater treatment on the environment. 4.To implement water resource management, Department of Industrial Safety and Environmental Protection calculate tap water consumption monthly to confirm whether the water consumption is normal.

  4. As for sanitary sewage, HIWIN sets gray water recovery system in Operational Headquarters and the sanitary sewage recovered is usually used to flush toilets and water green plants; the waste water from the manufacturing process of Yunke Plant II is used in the scrubbing tower after treatment; 28,982 tons of waste water were recovered in 2018, 50% more than 2017’s 14,392 tons.

  5. Eterbright Solar Corporation’s wastewater system added COD treatment system in 2018, the cost of wastewater single-chip treatment decreased by 64%, and the cost savings was NT$13.98 million. The energy-saving ESCO project approved by the Ministry of Economic Affairs updated the air compressor equipment and added motor frequency control at the cost of a total of NT$2.9 million, saving annual electricity bills NT$2.2 million.

(iv) Waste Management

  1. Waste of the Company is usually industrial waste and not harmful. The industrial waste is stored in temporary storage area and then cleared by cleaning agency recognized by Environmental Protection Administration; the Company arranges for someone to follow

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the cleaning vehicle to the treatment plant occasionally to confirm whether there is leakage on the way or in the plant, or violation of environmental regulations; no violation was found in 2018.

  1. The company continues to promote waste reduction and conducts educational trainings on waste disposal and resource recovery and classification for new employees and on-the-job trainings for old employees regularly, and performs an audit of waste classification in each unit. Meanwhile, the classification of each department is reported in the meetings to implement waste classification and reduction effectively. The recyclable resources and waste were a total of 12,485 tons in 2018.

(v) Energy management and reduction

  1. Total losses (including compensation) and punishment, and future countermeasures (including improvement measures), and possible expenditures (including the estimated amount of losses, punishment and compensation due to failure to take countermeasures; those not able to be estimated reasonably should be stated clearly) in the last year and as of the publication date of the annual report: not applicable.

  2. The Operational Headquarters of HIWIN, Plant I, Plant II, TanZi Plant, Yunke Plant carried out and built ISO 50001 energy management system in 2014; by means of system implementation and energy audit, it managed energy use effectively, made energy management policies, advocated the energy saving policy and set reduction goals; after actual implementation and improvement in 2018, 91,000 kWh were saved and 482 tons of CO2e emissions were reduced.

Plant Reduction plan Annual energy
(degrees)		 Annual savings (ten
thousand)		 Reduction of carbon
(metric tons of CO2e)
Operation
Headquarters		 Telecentric Separator Energy Saving
Plan		 45,325 13 24
Operation
Headquarters		 Air compressor system energy saving
plan		 400,132 118 212
Operation
Headquarters		 Air compressor system energy saving
plan		 98,550 29 52
Plant I Air compressor system energy saving
plan		 120,000 35 63
Plant II Machine wind pressure energy saving
plan		 73,705 22 39
Tanzi Plant Replacement of air compressor 174,327 51 92
total 912,039 268 482

  1. HIWIN Technologies has installed 486kW of solar energy system in its own plant. It saved 85,000 kWh of electricity in 2018 and reduced carbon dioxide by 53.9 metric tons.

  2. Energy-saving improvement target: HIWIN estimates that it will invest NT$ 9.36 million in 2019, saving 3.3 million kWh of electricity, 924 million dollars of electricity bills annually, and directly reducing carbon dioxide by 1,749 metric tons; Eterbright Solar Corporation expects to integrate the newly established 485-kilowatt solar energy system into Taipower's power supply system in 2019, which is expected to save 680,000 kWh of electricity and 432 metric tons of carbon dioxide.

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v. Labor Relations

(i) Employee welfare measures, further education, trainings, retirement system and implementation, labor agreement and employee equity protection measures:

HIWIN pays great attention to employees; to pursue sustainable operation, create safe, clean and high quality working environment and make employees enjoy work, it joins hands with Taiwan’s industry and commerce to promote “Happy Enterprise”, paying attention to the balance between employees’ work and life, reference has been made to international human rights conventions to formulate and expose safeguarding human rights policies. It provides employees with a development platform, cultivates talents positively and offers a good salary and welfare; to make employees have a sound mind and body, it holds activities irregularly, such as mountain climbing and hiking, and holds sports meetings regularly and provides professional health consultation by inviting doctors to plants. It provides employees with diverse communication channels, such as labor meetings, departmental meetings, monthly meetings, opinion boxes and special lines, to listen to their opinions so as to promote harmony between employees and the employer.

Since it’s founded, it has listed the employees as the biggest asset, which can show its emphasis on talents; it employs employees fairly and openly, implements gender equality and treats employees equally, regardless of their gender, religion, race, nationality or political party; it respects every talent, and employs the disabled actively to care for them and fulfill corporate social responsibility. To net talents, it provides Research and Development Substitute Services, cooperates with universities and colleges, has internship programs, performs industry-university collaboration and provides opportunities to visit the enterprise.

1. Employee welfare measures:

(1) Taiwan Parent Company

Through the welfare policy: insurance/health care, comprehensive care for the insurance plan of the colleagues, meal subsidies, new home benefits, wedding and funeral subsidies, babysitting subsidies, staff quarters and employee compensation, etc., each employee of HIWIN Technologies can be fully cared for, and the employees and family members have a better quality of life, and become an important pillar and backing for supporting BOC employees. HIWIN Technologies provides a comprehensive welfare system as follows:

Welfare System Items
Insurance/Medical Care Group insurance, regular health examination
Insurance plan employees’
that ensures comprehensive
care		 In accordance with the law, every employee is insured with labor insurance and
universal health insurance, so that colleagues can be fully protected. In addition,
in order to ensure the living security of employees and their families, it also
increases group insurance for employees, employees, and other medical care,
accidents, and major illnesses.
Meal subsidy In order to develop and motivate employees and team skills, the company gives
the department a “meal subsidy” every quarter, so that colleagues can arrange
group dinners or entertainment, and relax and get closer to each other.

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New home gift The home environment helps the colleagues to settle down their work.
Therefore, for the purchase of homeowners, the new homes will be given a new
residence fee of NT$1,200-6,000.
Wedding and funeral
allowance		 In order to improve the well-being of employees, colleagues will be entitled to a
wedding payment ranging from NT$5,200-60,000 to seniority. If the person or
the family is unfortunately killed, there will be a concession of NT$7,000-
130,000.
Babysitting allowance A baby allowance of NT$5,000/month (for a period of 3 years) per child is
given to encourage the birth of the same person. Originally for 2 years, it will
be extended to 3 years from October 1, 2017.
Employee dormitory Considering the accommodation expenses and safety issues of foreign
employees, HIWIN Technology provides low-cost and well-established safety
management system for staff quarters, and implements care and care, so that
colleagues can live with peace of mind, enhance interpersonal interaction and
save money.
Employee compensation If the company makes a profit in the year, it will pay the employee bonus of
10% or less, but not less than 1%, and distribute the employees' compensation
to enable the employers and employees to share the operating results.
Others Staff restaurants, staff parking, free overtime meals and snacks, wedding and
funeral allowances, travel grants, three coupons, birthday vouchers, special
store discounts, sports prizes, massage services, etc.

In order to improve Taiwan's fertility rate and economic development considerations, HIWIN began promoting the "nursing-in-child subsidy" policy in 2012, employees will be able to receive NT$5,000 per month for three consecutive years, regardless of gender. NT$180,000), under the promotion of this welfare, 817 HIWIN babies were born between 2015 and 2018. In addition to the value of work, employees can also build a happy family and fulfill their responsibilities. (2) Subsidiaries

It carries out employee welfare measures according to local laws and the labor market condition, and hands out performance bonuses based on the business conditions of its subsidiaries.

  1. Further education and trainings:

  2. (1) Parent Company

Excellent talents are the cornerstone of the sustainable operation of an enterprise; to improve employees’ ability and quality and maintain the long-term competitive edge, the Company’s chairman, general managers and senior managers act as the internal lecturers, spending tens of thousands of funding on employee educational training annually, maintaining the average training expense at over NTD 2,000 per person, assuring every employee of the opportunity to receive training.

The Company has a complete training system, including new employee training, core competency training, professional competency training, management competency training and external training, etc. Employees can be trained properly through classroom training, on-the-job training, external training, reading party, lecture, further education, job rotation and project appointment; the training content and methods are diverse and rich. For colleagues who want to continue education to take their degrees, it provides tuition subsidy schemes. It has cooperated with schools to open two-year junior college/technical college for colleagues to further their education.

111

(2) Subsidiaries

  • Each subsidiary provides new employee training, core competency training and professional competency training, and gives colleagues opportunities to further their education depending on the situation.

3.Retirement system:

HIWIN has a sound financial system, and establishes pension plans and retirement programs and allocates stable pension and payments according to Labor Standard Laws and Labor Pension Act. It commissions an actuary to provide pension reports regularly so as to ensure the pension balance and guarantee colleagues will be pensionable in the future.

  • (1) Parent Company

  • According to Labor Standard Laws and Labor Pension Act, it has established defined- benefit and defined-contribution pension plans and retirement programs. As for the former, it allocates 2% of the employee’s gross salary every month as the pension fund, which is saved in the special account in Bank of Taiwan in the name of Supervisory Committee of Workers’ Retirement Fund; as to the latter, it allocates 6% of the employee’s gross salary every month as the pension fund, which is saved in the individual account in Bureau of Labor Insurance.

  • ➢ Retirement system and implementation:

Pension System Old New
Applicable law Labor Standards Law Labor Pension Statutes
Distribution
Method		 2% of the employee's monthly
salary, deposited in the name of the
company into a Bank of Taiwan
account		 6% of the employee insurance level
is paid to the individual account of
the Labor Insurance Bureau
Amount Labor Retirement Reserves
amounted to NT$82,810 thousand
as of the end of December, 2018		 New pensions of NT$153,721
thousand in 2018

(2) Subsidiaries

Each subsidiary implements pension rules according to local laws.

  1. Labor agreement and employee equity protection measures

  2. The Company and its subsidiaries always attaches importance to employee benefits; labor problems are solved through two-way communications; they convene labor meetings regularly to coordinate labor relations, promote employee-employer cooperation and working conditions and plan labor welfare, so the labor relation has been harmonious since the factories were opened and no major labor dispute has occurred.

  3. In addition to insured group insurance, the company occasionally organizes environmental and safety lectures and occupational safety and health courses, and regularly publishes environmental, health and safety electronic newspapers to protect the personal safety of colleagues and handle them in an emergency.

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  • (ii) Losses Caused by Labor Disputes in the Last Year and as of the Publication Date of the Annual Report:

  • HIWIN Technologies (including the parent company and its subsidiaries) has a harmonious relationship between employers and employees, and there are no major losses arising from labor disputes and labor disputes.

(iii) Any establishment on employee behavior or code of ethics?

HIWIN Technologies has working rules to regulate the working hours, rewards and punishments, promotion and welfare measures of colleagues

vi. Important Contracts

April 30th,2019
Nature of Contract Party Duration Content Restrictions
Contract of Factory
Lease		 William Tools Co., Ltd. 2014.11.16-2024.11.15 Factory Lease None
UDIFA CO., Ltd. 2017.01.01-2019.12.31 Factory Lease None
Long-Term Loan
Contract		 Bank of Taiwan 2011.06.16-2026.06.16 Secured Loan None
Bank of Taiwan 2011.12.28-2026.12.28 Secured Loan None
Bank of Taiwan 2012.08.22-2027.08.22 Secured Loan None
Bank of Taiwan 2012.08.22-2019.08.22 Secured Loan None
Bank of Taiwan 2013.10.30-2028.10.30 Secured Loan None
Bank of Taiwan 2014.06.20-2029.06.20 Secured Loan None
Bank of Taiwan 2014.07.21-2029.07.21 Secured Loan None
Bank of Taiwan 2014.07.30-2029.07.30 Secured Loan None
Bank of Taiwan 2015.03.09-2020.03.09 Secured Loan None
Bank of Taiwan 2015.05.04-2022.05.04 Secured Loan None
Bank of Taiwan 2015.05.04-2030.05.04 Secured Loan None
Bank of Taiwan 2015.11.24-2020.11.24 Secured Loan None
Bank of Taiwan 2016.11.21-2031.11.21 Secured Loan None
Bank of Taiwan 2016.11.21-2023.11.21 Secured Loan None
Bank of Taiwan 2016.02.04-2031.02.04 Secured Loan None
Bank of Taiwan 2019.02.21-2026.02.21 Secured Loan None
Bank of Taiwan 2019.02.21-2034.02.21 Secured Loan None
Land Bank of Taiwan 2007.06.04-2020.06.04 Secured Loan None
The Export-lmport Bank of ROC 2016.02.01-2022.02.01 Secured Loan None
The Export-lmport Bank of ROC 2017.12.18-2023.12.18 Secured Loan None
KGI Bank 2019.02.01-2021.02.01 Unsecured Loan None

113

VI. Financial Overview

i. Condensed Balance Sheets and Statements of Income for the Past Five Years

(i) Condensed Balance Sheet-International Financial Reporting Standards (Consolidated)

Unit: NTD Thousand

Year
Item		 2014 2015 2016 2017 2018 2019 until March
31st
Liquid Assets 12,964,755 13,572,645 11,668,110 13,111,622 18,454,284 17,555,344
Immovable Property,
Plant and Equipment		 15,258,375 15,930,786 17,796,029 21,303,831 25,226,895 25,848,038
Intangible Assets 14,473 192,388 192,388 177,915 256,163 256,163
Other Assets 2,090,160 3,070,400 3,309,998 2,980,190 4,955,500 6,130,382
Total Assets 30,327,763 32,766,219 32,966,525 37,573,558 48,892,842 49,620,216
Liquid
Liabili
ties		 Before
Distribution		 9,974,387 11,526,855 10,656,204 13,318,739 17,638,899 16,556,938
After
Distribution		 10,810,980 12,092,340 11,095,666 14,299,290 Note 2 Non-Applicable
Non-Current Liabilities 6,681,091 6,738,634 7,510,403 7,654,970 6,815,543 7,697,780
Total
Liabili
ties		 Before
Distribution		 16,655,478 18,265,489 18,166,607 20,973,709 24,454,442 24,254,718
After
Distribution		 17,492,071 18,830,974 18,606,069 21,954,260 Note 2 Non-Applicable
Equity Attributable to
Owners of the Parent
Company		 12,928,141 13,646,037 14,101,611 16,293,096 24,180,459 25,169,660
Capital Stock 2,614,354 2,692,785 2,746,640 2,801,573 3,005,620 3,005,620
Capital Reserve 308,630 311,955 308,630 308,630 3,236,274 3,236,274
Retain
ed
Earnin
gs		 Before
Distribution		 10,019,718 10,732,921 11,311,874 13,433,833 17,563,425 18,150,255
After
Distribution		 9,104,694 10,167,436 10,872,412 12,453,282 Note 2 Non-Applicable
Other Equities (14,561) (91,624) (265,533) (250,940) 375,140 777,511
Non-Controlling
Equities		 744,144 854,693 698,307 306,753 257,941 195,838
Total
Equity		 Before
Distribution		 13,672,285 14,500,730 14,799,918 16,599,849 24,438,400 25,365,498
After
Distribution		 12,835,692 13,935,245 14,360,456 15,619,298 Note 2 Non-Applicable

Note 1: The consolidated balance sheet is based on International Financial Reporting Standards and audited and certified by accountants.

Note 2: The 2018 dividend distribution case was approved by the board of directors on March 26th, 2019, but it has not yet been approved by the shareholders meeting.

114

(ii) Condensed Balance Sheet-International Financial Reporting Standards (Individual)

Year
Item		 2014 2015 2016 2017 2018
Liquid Assets 10,928,330 10,616,368 9,063,997 10,043,806 14,812,932
Immovable Property, Plant
and Equipment		 13,137,766 13,147,415 14,289,991 16,833,733 20,804,336
Intangible Assets - - - - -
Other Assets 4,196,536 5,990,436 6,332,876 6,249,042 8,610,485
Total Assets 28,262,632 29,754,219 29,686,864 33,126,581 44,227,753
Liquid
Liabilities		 Before
Distribution		 9,123,638 9,888,427 10,466,752 14,381,950
8,783,530
After
Distribution		 9,960,231 10,453,912 11,447,303 Note 2
9,222,992
Non-Current Liabilities 6,210,853 6,219,755 6,801,723 6,366,733 5,665,344
Total
Liabilities		 Before
Distribution		 15,334,491 16,108,182 15,585,253 16,833,485 20,047,294
After
Distribution		 16,171,084 16,673,667 16,024,715 17,814,036 Note 2
Equity Attributable to
Owners of the Parent
Company		 NA NA NA NA NA
Capital Stock 2,614,354 2,692,785 2,746,640 2,801,573 3,005,620
Capital Reserve 308,630 311,955 308,630 308,630 3,236,274
Retained
Earnings		 Before
Distribution		 10,019,718 10,732,921 11,311,874 17,563,425
13,433,833
After Distribution 9,104,694 10,167,436 10,872,412 12,453,282 Note 2
Other Equities (14,561) (91,624) (265,533) (250,940) 375,140
Non-Controlling Equities NA NA NA NA NA
Total
Equity		 Before
Distribution		 12,928,141 13,646,037 14,101,611 16,293,096 24,180,459
After Distribution 12,091,548 13,080,552 13,662,149 15,312,545 Note 2

Unit: NTD Thousand

Note 1: The individual balance sheet is based on International Financial Reporting Standards and audited and certified by accountants.

Note 2: The 2018 dividend distribution case was approved by the board of directors on March 26th, 2019, but it has not yet been approved by the shareholders meeting.

115

(iii) Condensed Consolidated Income Statement -International Financial Reporting Standards (Consolidated)
Year
Item		 2014 2015 2016 2017 2018 2019
until
March 31st
Operating Revenue 15,087,336 14,881,048 16,118,298 21,164,764 29,333,129 5,047,996
Operating Margin 5,790,752 5,333,619 5,302,045 7,582,638 11,629,580 1,857,568
Operating Profit and Loss 2,847,835 1,902,617 1,450,907 3,345,101 6,419,195 759,646
Non-Operating Income and Expenses 63,107 (68,431) (261,210) (532,966) (323,235) 40,318
Net Profit Before Tax 2,910,942 1,834,186 1,189,697 2,812,135 6,095,960 799,964
Net Profit of the Term 2,267,350 1,394,559 960,777 2,251,520 4,890,423 563,730
Other Consolidated Profit and Loss of
the Term (Net of Tax)		 (22,356) (91,926) (173,357) (30,303) 483,704 407,305
Total Consolidated Profit and Loss of
the Term		 2,244,994 1,302,633 787,420 2,221,217 5,374,127 971,035
Net Profits Attributable to Owners of
the Parent Company		 2,404,906 1,642,238 1,326,815 2,738,019 5,392,257 619,640
Net
Profit
Attributable
to
Non-
Controlling Equities		 (137,556) (247,679) (366,038) (486,499) (501,834) (55,910)
Total Consolidated Profit and Loss
Attributable to Owners of the Parent
Company		 2,382,550 1,551,550 1,152,567 2,709,808 5,878,542 1,022,011
Total Consolidated Profit and Loss
Attributable
to
Non-Controlling
Equities		 (137,556) (248,917) (365,147) (488,591) (504,415) (50,976)
Earnings per Share 8.33 5.69 4.60 9.49 18.44 2.06

Unit: NTD Thousand Note: The consolidated income statement is based on International Financial Reporting Standards and audited and certified by accountants.

116

(iv) Condensed Consolidated Income Statement -International Financial Reporting Standards (Individual)
Year
Item		 2014 2015 2016 2017 2018
Operating Revenue 12,924,054 12,489,325 12,541,259 17,053,792 24,600,218
Operating Margin 4,517,573 4,242,859 3,975,130 6,121,731 9,427,810
Operating Profit and Loss 2,987,335 2,500,500 2,412,824 3,852,729 6,077,872
Non-Operating Income and Expenses (55,165) (479,752) (917,680) (671,682) 212,726
Net Profit Before Tax 2,932,170 2,020,748 1,495,144 3,181,047 6,290,598
Net Profit of the Term 2,404,906 1,642,238 1,326,815 2,738,019 5,392,257
Other Consolidated Profit and Loss of the
Term (Net of Tax)		 (22,356) (90,688) (174,248) (28,211) 486,285
Total Consolidated Profit and Loss of the
Term		 2,382,550 1,551,550 1,152,567 2,709,808 5,878,542
Net Profits Attributable to Owners of the
Parent Company		 Non-
Applicable		 Non-
Applicable		 Non-
Applicable		 Non-
Applicable
Non-
Applicable
Net Profit Attributable to Non-Controlling
Equities		 Non-
Applicable		 Non-
Applicable		 Non-
Applicable
Non-
Applicable		 Non-
Applicable
Total Consolidated Profit and Loss
Attributable to Owners of the Parent
Company		 Non-
Applicable		 Non-
Applicable		 Non-
Applicable		 Non-
Applicable		 Non-
Applicable
Total Consolidated Profit and Loss
Attributable to Non-Controlling Equities		 Non-
Applicable		 Non-
Applicable		 Non-
Applicable
Non-
Applicable		 Non-
Applicable
Earnings per Share 5.69 4.60 9.49
8.33 18.44

Unit: NTD Thousand

Note: The consolidated income statement is based on International Financial Reporting Standards and audited and certified by accountants.

(v) CPA Name and Audit Opinions of the Last 5 Years
Year CPA Name Audit Opinion
2014 Deloitte & Touche Yan Xiaofang, Cheng Derui Unqualified Opinion
2015 Deloitte & Touche Yan Xiaofang, Zeng Dongyun Unqualified Opinion
2016 Deloitte & Touche Yan Xiaofang, Zeng Dongyun Unqualified Opinion
2017 Deloitte & Touche Yan Xiaofang, Zeng Dongyun Unqualified Opinion
2018 Deloitte & Touche Yan Xiaofang, Zeng Dongyun Unqualified Opinion

117

ii. Financial Analyses for the Last Five Years (i) International Financial Reporting Standards (Consolidated)
Item Year 2014 2015 2016 2017 2018 2019
until
March 31st
Financial
Structure
(%)		 Liability-Asset Ratio 54.97 55.74 55.11 55.82 50.02 48.88
Ratio
of
Long-Term
Capital
to
Immovable
Property,
Plant
and
Equipment		 133.39 133.32 125.37 113.85 123.89 127.91
Debt-Paying
Ability		 Liquidity Ratio (%) 129.98 117.75 109.50 98.44 104.62 105.01
Quick Ratio (%) 88.42 68.81 66.19 56.99 53.26 49.94
Interest
Protection
Multiples		 17.91 11.74 8.43 22.41 42.47 21.81
Operating
Ability		 Receivables
Turnover
Ratio		 2.83 2.61 3.13 4.63 5.57 3.56
Average Collection Period 129 140 117 79 66 103
Inventory Turnover Ratio 2.20 1.88 1.98 2.48 2.29 1.33
Payables Turnover Ratio 4.38 4.18 4.75 4.14 3.57 2.84
Inventory
Conversion
Period		 166 194 184 147 159 274
Immovable
Property,
Plant
and
Equipment
Turnover Ratio		 1.03 0.95 0.96 1.08 1.26 0.79
Total
Assets
Turnover
Ratio		 0.52 0.47 0.49 0.60 0.68 0.41
Profitability Return on Assets (%) 8.31 4.87 3.33 6.69 11.59 4.83
Return on Equity (%) 17.81 9.90 6.56 14.34 23.83 9.06
Net Profit Before Tax to
Paid-up Capital Ratio (%)		 111.34 68.11 43.31 100.38 202.82 106.46
Net Profit Ratio (%) 15.03 9.37 5.96 10.64 16.67 11.17
Earnings per Share (NT$) 8.33 5.69 4.60 9.49 18.44 2.06
Cash Flow
(%)		 Cash Flow Ratio 32.15 9.07 41.56 49.30 29.20 (20.93)
Cash
Flow
Adequacy
Ratio (Note 1)		 63.54 43.02 51.73 80.06 66.96 55.22
Cash Reinvestment Ratio 12.45 0.99 17.32 25.26 13.34 (2.62)
Degree of
Leverage		 Degree
of
Operating
Leverage		 2.03 2.84 3.61 2.29 1.81 2.61
Degree
of
Financial
Leverage		 1.06 1.10 1.12 1.04 1.02 1.05

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Reasons why each financial ratio has changed by 20% in the last two years:

  • 1.The financial ratios of Interest Protection Multiples and Profitability increased because the profits this year were more than that of last year.

  • 2.Receivables Turnover Ratio increased mainly because of business growth, clear inventory and because receivables were collected well.

  • 3.Cash flow rate ratio and cash reinvestment ratio increased mainly because the operating net cash flow of this year increased.

4.Degree of Operating Leverage reduced because the operating profit of this year increased.

Note: The consolidated financial statement is based on International Financial Reporting Standards and audited and certified by accountants.

(ii) International Financial Reporting Standards (Individual)
Item Year 2014 2015 2016 2017 2018
Financial
Structure
(%)		 Liability-Asset Ratio 54.26 54.14 52.50 50.82 45.33
Ratio
of
Long-Term
Capital
to
Immovable
Property,
Plant
and
Equipment		 145.68 151.10 146.28 134.61 143.46
Debt-Paying
Ability		 Liquidity Ratio (%) 119.78 107.36 103.19 95.96 103.00
Quick Ratio (%) 85.45 69.12 70.16 62.67 61.10
Interest
Protection
Multiples		 20.54 14.72 11.99 32.27 79.54
Operating
Ability		 Receivables
Turnover
Ratio		 2.29 2.15 2.46 3.44 4.01
Average Collection Period 159 170 148 106 91
Inventory Turnover Ratio 2.63 2.35 2.51 3.32 3.12
Payables Turnover Ratio 4.22 4.01 4.39 3.83 3.37
Inventory
Conversion
Period		 139 155 146 110 117
Immovable Property, Plant
and Equipment Turnover
Ratio		 0.97 0.95 0.91 1.10 1.31
Total
Assets
Turnover
Ratio		 0.48 0.43 0.42 0.54 0.64
Profitability Return on Assets (%) 9.30 6.08 4.84 8.99 14.11
Return on Equity (%) 19.91 12.36 9.56 18.02 26.65
Net Profit Before Tax to
Paid-up Capital Ratio (%)		 112.16 75.04 54.44 113.55 209.29
Net Profit Ratio (%) 18.61 13.15 10.58 16.06 21.92
Earnings per Share (NT$) 8.33 5.69 4.60 9.49 18.44

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Cash Flow
(%)		 Cash Flow Ratio 36.07 24.60 47.02 64.10 40.06
Cash Flow Adequacy Ratio
(Note 1)		 58.13 52.28 60.94 89.06 78.49
Cash Reinvestment Ratio 13.61 8.04 17.05 27.67 16.02
Degree of
Leverage		 Degree
of
Operating
Leverage		 1.73 1.98 1.97 1.79 1.69
Degree
of
Financial
Leverage		 1.05 1.06 1.06 1.03 1.01
Reasons why each financial ratio has changed by 20% in the last two years:
1.The increase in the interest protection ratio and the profitability of various financial ratios was mainly
attributable to the increase in profit this year compared to last year.
2.The cash flow ratio and cash reinvestment ratio decreased, due to higher liquid liability

Note: The individual financial statement is based on International Financial Reporting Standards and audited and certified by accountants.

  1. Financial Structure

  2. (1) Debt Asset Ratio=Total Liabilities/Total Assets

  3. (2) Ratio of Long-Term Capital to Immovable Property, Plant and Equipment= (Total

  4. Equity+Non-Current Liabilities)/ Net Amount of Immovable Property, Plant and Equipment

  5. Debt-Paying Ability

  6. (1) Liquid Ratio =Liquid Assets/Liquid Liabilities

  7. (2) Quick Ratio = (Liquid Assets-Inventory-Upfront Fees)/Liquid Liabilities

  8. (3) Interest Protection Multiples= Profit before Income Tax and Interest Expense / Interest Expense of This Period

  9. Operating Ability

  10. (1) Receivables (Including Receivables and Notes Receivable from Operating Activities) Turnover Ratio=Net Sales/Balance of Average Receivables of Each Period (Including Receivables and Notes Receivable from Operating Activities)

  11. (2) Average Collection Period =365/Receivables Turnover Ratio

  12. (3) Inventory Turnover Ratio= Cost of Sales/Average Inventory

  13. (4) Payables (Including Payables and Notes Payable from Operating Activities) Turnover Ratio= Cost of Sales /Balance of Average Payables of Each Period (Including Payables and Notes Payable from Operating Activities)

  14. (5) Inventory Conversion Period=365/Inventory Turnover Ratio

  15. (6) Ratio of Long-Term Capital to Immovable Property, Plant and Equipment= (Total Equity+Non-Current Liabilities)/Net amount of Immovable Property, Plant and Equipment

  16. (7) Total Assets Turnover Ratio=Net Sales/Total Assets

  17. Profitability

  18. (1) Return on Assets= [Profit and Loss After Tax+ Interest Expense*(1-Tax Rate)]/Average Total Assets

  19. (2) Return on Equity=Profit and Loss After Tax/Average Net Shareholders’ Equity

  20. (3) Net Profit Ratio =Profit and Loss After Tax/Net Sales

  21. (4) Earnings per Share= (Profit And Loss Attributable to the owners of the parent company -Dividend on Preferred Stock)/Weighted Average Outstanding Shares

  22. Cash Flow

  23. (1) Cash Flow Ratio= Cash Flow from Operating Activities /Liquid Liabilities

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(2) Cash Flow Adequacy Ratio= Cash Flow from Operating Activities of the last 5 years/ (Capital Expenditure+ Inventory Increase +Cash Dividend) of the last 5 years

(3) Cash Reinvestment Ratio= (Cash Flow from Operating Activities -Cash Dividend)/ (Gross Amount of Immovable Property, Plant and Equipment + Permanent Investment +Other Non-liquid Assets+ Working Capital)

  1. Degree of Leverage

  2. (1) Degree of Operating Leverage= (Net Operating Revenue- Variable Operating Costs and Expenses)/Operating Profit

  3. (2) Degree of Financial Leverage=Operating Profit/ (Operating Profit-Interest Expense)

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iii. The Audit Committee’s Audit Report of the Financial Report for the Past Year

HIWIN Technologies Corp. The Audit Committee’s Audit Report

We have checked the Financial Statements 2018, Business Report and Earning Distribution Plan prepared by the Board of Directors. In our opinion, all statements and reports referred to above are prepared according to law. This report is submitted in accordance with Article 14.4 of Securities Exchange Act and Article 219 of the Company Law. For your review and approval.

HIWIN Technologies Corporation Audit Committee Convener: Jiang Zhenghe

March 26th, 2019

122

iv. The Financial Report and the Accountant’s Audit Report for the Past Year

Please refer to Appendix.

v. Consolidated Financial Statements Audited by CPA for the Past Year Please refer to Appendix.

vi. The Impacts of Any Financial Difficulties Encountered by the Company or Its Affiliates in the Past Year and up to the Annual none . Report Publication Date on the Company’ s Financial Status:

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VII. Review and Analysis of Financial Status, Financial Performance, and Risk Management

i. Financial Status

(i) Financial Position Analysis

l Status
ncial Position Analysis
Unit: NTD Thousand
Year
Item		 2017 2018 Difference
Sum ％
Liquid Assets 13,111,622 18,454,284 5,342,662 40.75
Fund and Investment 485,293 1,116,495 631,202 130.07
Immovable Property, Plant and
Equipment		 21,303,831 25,226,895 3,923,064 18.41
Other Assets 2,672,812 4,095,168 53.22
1,422,356
Total Assets 37,573,558 48,892,842 11,319,284 30.13
Liquid Liabilities 13,318,739 17,638,899 32.44
4,320,160
Long-Term Liabilities 7,087,273 6,011,746 (1,075,527) (15.18)
Other Liabilities 567,697 803,797 236,100 41.59
Total Liabilities 20,973,709 24,454,442 3,480,733 16.60
Equity Attributable to Owners of
the Parent Company		 16,293,096 24,180,459 7,887,363 48.41
Equity 2,801,573 3,005,620 204,047 7.28
Capital Reserve 2,927,644 948.59
308,630 3,236,274
Retained Earnings 17,563,425 4,129,592 30.74
13,433,833
Other Equities (250,940) 375,140 626,080 (249.49)
Non-Controlling Equities 306,753 257,941 (48,812) (15.91)
Total Equity 16,599,849 24,438,400 7,838,551 47.22

Note: The consolidated financial statement is based on International Financial Reporting Standards and audited and certified by accountants.

(II) Analysis of changes in the increase or decrease ratio exceeding 20%:

1.The increase in current assets, the main sales were good, the increase in accounts receivable and the increase in stocks due to stocking.

2.The increase in funds and investments was mainly based on the IFRS communiqué to convert investment to fair value.

3.Other assets increased, and the main expansion of production capacity led to an increase in prepaid equipment.

4.The increase in total assets was mainly due to the increase in the above-mentioned current assets, funds and investments and other assets.

5.As the current liabilities increased, the main business sentiment increased, and the increase in stocks led to an increase in accounts payable.

6.Other liabilities increased, mainly due to the increase in deferred income tax liabilities.

7.The equity, retained earnings and total equity attributable to owners of the parent company increased mainly in the current period and the surplus increased.

8.The capital reserve will increase, and the main premium will be used for cash replenishment.

9.The increase in other interests was mainly based on the IFRS communiqué to change the investment to fair value.

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ii. Financial Performance

(i) Operating Results Analysis

Unit: NTD Thousand

Year
Item		 2017 2018 Increased
(Decreased)
Amount		 Rate of
Change (%)
Net Operating Revenue 21,164,764 29,333,129 8,168,365 38.59
Operating Costs 13,582,126 17,703,549 4,121,423 30.34
Operating Margin 7,582,638 11,629,580 4,046,942 53.37
Operating Expenses 4,237,537 5,210,385 972,848 22.96
Operating Profit 3,345,101 6,419,195 3,074,094 91.90
Non-Operating Income and Expenses (532,966) (323,235) 209,731 (39.35)
Profit Before Tax 2,812,135 6,095,960 3,283,825 116.77
Income Tax Expense 560,615 1,205,537 644,922 115.04
Net Profit of This Year 2,251,520 4,890,423 2,638,903 117.21
Other Consolidated Profit and Loss of
the Term (Net of Tax)		 (30,303) 483,704 514,007 (1,696.22)
Total Consolidated Profit and Loss of
the Term		 2,221,217 5,374,127 3,152,910 141.95
Net Profits Attributable to Owners of
the Parent Company		 2,738,019 5,392,257 2,654,238 96.94
Net
Profit
Attributable
to
Non-
Controlling Equities		 (486,499) (501,834) (15,335) 3.15
Total Consolidated Profit and Loss
Attributable to Owners of the Parent
Company		 2,709,808 5,878,542 3,168,734 116.94
Total Consolidated Profit and Loss
Attributable
to
Non-Controlling
Equities		 (488,591) (504,415) (15,824) 3.24

Note: The consolidated financial statement is based on International Financial Reporting Standards and audited and certified by accountants.

(ii) Analysis for the Change over 20%:

  1. Operating income, Operating costs, Operating margin, Operating Profit, Income Tax Expense, Profit Before Tax, Net Profit of This Year, Total Consolidated Profit and Loss of the Term, Net Profits Attributable to Owners of the Parent Company, Total Consolidated Profit and Loss Attributable to the owners of the parent company: The main reason is having a good economy in the current period, with a substantial increase in production capacity and an increase in sales volume.

  2. Non-Operating Income and Expenses: The main cause is due to subsidiary listed assets impairment for the current period.

  3. Income Tax Expense: The main cause is due to the increase in net profit before tax for the current period, and the estimated increase in income tax expenses payable.

  4. Other comprehensive income of this period: The main cause is due to the increase in the value of the Taiwan dollar in the previous period resulted in a

125

decrease in the exchange loss in the financial statements of foreign operating institutions.

  1. Net Profit Attributable to Non-Controlling Equities and Total Consolidated Profit and Loss Attributable to Non-Controlling Equities: the losses on investments of Non-Controlling Equities increased this year.

(iii) Possible Effects of Expected Sales Quantity and Its Basis on the

Company’s Future Financial Business and the Company’s Countermove:

Please refer to “Letter to Shareholders”.

iii. Cash Flow

(i) Liquidity Analysis of the Last 2 Years:

==> picture [466 x 191] intentionally omitted <==

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

Year Increase (Decrease)
Item Percentage (%)
2017
2018
Cash Flow Ratio (%) 49.30 29.20 (40.77)
Cash Flow Adequacy Ratio (%) 80.06 66.96 (16.36)
Cash Reinvestment Ratio (%) 25.26 13.34 (47.19)
Analysis for the Change over 20%:
Cash Flow Adequacy Ratio and Cash Reinvestment Ratio increased mainly because the operating net cash flow of this year
increased.
----- End of picture text -----

Note: The consolidated financial statement is based on International Financial Reporting Standards.

(ii) Improvement Plan for Liquidity Shortage: Not Applicable

(iii)Cash Flow Analysis for the Coming Year:

The company expects that cash inflows from operating accounts and cash inflows from operating activities in the coming year should be available for investment activities and fund-raising activities, and cash liquidity will not be considered in the coming year

iv. Effects of Major Capital Expenditure on Financial Business of the Past Year

(i)Major Capital Expenditure and Capital Source

Unit: NTD Thousand

Unit: NTD Thousand Unit: NTD Thousand
Projects Actual or Expected Capital
Source		 Actual or
Expected
Completion
Date		 Total Capital
Required in
2018 and
2019		 Actual Capital Expenditure in
2018 and Planned Capital
Expenditure in 2019
2018 2019
Building factories Own funds, financing 2019.12 4,618,890 3,382,160 1,236,730
Purchasing land to
build factories		 Own funds, financing 2019.12 1,710,000 - 1,710,000
Increasing production
equipment		 Own funds, financing 2019.12 5,886,344 3,826,344 2,060,000

126

  • (ii) Estimated Benefits

  • The capital expenditure is mainly for capacity expansion for future business growth and vertical integration of the manufacturing process so as to strengthen the quality, the elasticity of the delivery time and the optimum cost competitiveness continuously.

V. Investment Policy of the Past Year, Main Causes for Profits or Losses, Improvement Plan and Investment Plan for the Coming Year

The Group's investment strategy is to strengthen the Group's all-round development in products, processes, key technologies, marketing and service customers. It is expected to replicate the company's successful production and management experience through investment conversion to reduce production costs and serve customers nearby. Goal and accelerate the globalization of the layout. In June 2018, the company acquired the British gear and tool machine manufacturer Matrix, and obtained control and mastered its operational activities. It hopes to realize the integration benefits of the Group's resources through its brand image and technology exchange, and through joint exhibitions. Enhance market visibility and achieve the goal of improving the Group's operational efficiency.

In 2018, the Bank of Germany, the United States, Japan, China, the Italian subsidiary and the Mega Fabs were all profitable. The main factors were global economic enthusiasm, the supply of key components was in short supply, and the development of the local market was successful, so the operation continued to grow. In recent years, the Singapore and South Korean subsidiaries have been working hard to develop the market. However, they have not yet reached the economic scale and still have a loss in the year. However, the operations and losses in 2017 have improved significantly compared to 2017. It is hoped that the market will continue to be deeply cultivated and talents will be introduced. With the more complete and multiple benefits of the product line, the future operating conditions are expected to gradually improve.

Eterbright Solar Corporation is currently focusing on R&D and new product promotion. However, due to the downturn in the solar energy industry and the collapse of the market price of solar energy products, it has not yet made a profit in 2018. After the conversion rate is improved and the development of niche products is expanded, the operating conditions are expected to gradually Improvements; Luren is committed to the development and upgrading of new production models, and will continue to optimize the machine to open up the market with higher added value, with the cost advantage of the Bank of China to integrate components directly, and the Bank of China Group With a dense sales channel and intelligent hardware and software equipment with the concept of Industry 4.0, the expected loss situation is expected to gradually improve.

In other overseas markets where no subsidiaries have been established, the Company will also assess whether it is necessary to establish a direct unit at a suitable location in the local area, and immediately support agents in each region or directly supply customers

vi. Risk Analysis

  • (i) Risk Factors: analyze and evaluate the following items in the last year and as of the publication date of the annual report.

  • Impact of interest rate, change in exchange rate and inflation on company profit and loss, the Company’s countermeasures

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  • (1) Interest Rate:

As of the date of publication of the annual report, HIWIN’s long-term and short-term borrowings can be used cyclically within the contract period as stipulated in the contract, under the precondition of improving the financial structure and reducing the risk of interest rate changes. The Company evaluates the bank lending rate regularly and compares it with the market rate; it keeps close contact with the bank to get a favorable rate, so the interest rate change has no major effects on it. Therefore, the change in interest rates did not have a significant impact on HIWIN.

  • (2) Exchange Rate:

Its revenue in 2018 mainly came from RMB, followed by Euros and US Dollars; its main raw materials and machinery equipment were paid for in dollars, euro and yen; it has been implementing foreign exchange risk management policies of “Assets and Liabilities Management” over the years and also used the forward foreign exchange contract to reduce the exchange rate risk produced by assets and liabilities. To cope with exchange rate change risk, it collects information regarding to exchange rate changes at any time to know and analyze the exchange movements, interact with the bank well and take proper countermeasures against exchange rate movement to avoid exchange rate risk.

  • (3) Inflation and Deflation:

The annual growth rate of Taiwan's CPI announced in 2018 and estimated for 2019 is respectively 1.98% and 0.56%. The assessment of inflation risk is still within an acceptable range. It reduces costs through raw materials inventory management, procurement strategy, product design and research innovation of the manufacturing process so that it can cope with environmental changes so as to reduce effects of the external environment.

  1. Policies of Engagement in High-Risk and High Leveraged Investment, Lending Funds to Other Parties, Endorsements and Guarantees and Derivatives Transaction, Main Causes for Profits or Losses and Future Countermeasures

  2. (1) HIWIN has never been engaged in high-risk and high leveraged investment deals.

  3. (2) As of the publication date of the annual report, HIWIN Technologies has never lent funds to other parties but HIWIN Italy according to Procedures for Lending Funds to Other Parties and with approval of the Board, the balance and the actual expenditure was NT$55,582 thousand at the end of 2018.

  4. (3) It made endorsements and guarantees according to Procedures for Endorsements and Guarantees, which was also approved by the Board; the balance at the end of 2018 was NT$2,830,440 thousand, The actual amount of expenditure is NT$1,201,015 thousand; this endorsement and guarantee can effectively reduce subsidiaries’ capital increase demand for the parent company and is also beneficial to tax planning.

  5. (4) HIWIN performs the financial derivatives transaction steadily and conservatively to avoid risks (using actual foreign exchange receipts and

128 

  - payments to avoid actual exchange rate fluctuation risk produced by purchases and sales), and hasn’t been engaged in speculative transaction.

  1. Future R&D Plan and Estimated R & D Costs

  2. R&D costs of HIWIN (parent company and its subsidiaries) in 2018 were NT$1,385,997 thousand, accounting for 5% of the revenue, 194,688 thousand or 16% more than 2017’s 1,191,309 thousand . It’ll be engaged in R & D positively in the future to lay a solid foundation for a long-term development potential, developing new products such as reducers, medical robots and various multi-axis robots, and its key items of R&D are listed below:

Plan Title Current progress Important factors that decide the
success of future R&D
Rotary table high response brake
system		 In development It should be able to be developed
smoothly
Harmonic Reducer It is expected to expand 15
specifications		 It should be able to be developed
smoothly
Modulated Harmonic Reducer In development It should be able to be developed
smoothly
Limited Process Guideway In development It should be able to be developed
smoothly
Smart line development In development It should be able to be developed
smoothly
Rotating spindle head R&D Customer test phase It should be able to be developed
smoothly
Rotary table RAB-800 In development It should be able to be developed
smoothly
Rotary table RAS-650 In development It should be able to be developed
smoothly
R-EPS car screw development 1. Sample customer real vehicle
verification
2. Continue to develop new
specifications based on market
demand after the sale.		 It should be able to be developed
smoothly
R-EPS In development It should be able to be developed
smoothly
Upper/lower limb rehabilitation
robot development		 In development It should be able to be developed
smoothly
Endoscope-supporting robotic arm In development It should be able to be developed
smoothly
Bathing-assisting robot In development It should be able to be developed
smoothly
Skara robotic arm LU, AE series
development		 In development It should be able to be developed
smoothly
Development of protective electric
jaws		 In development It should be able to be developed
smoothly

129

Measuring type electric jaw
development		 In development It should be able to be developed
smoothly
Development of gas-electric rotary
joints		 In development It should be able to be developed
smoothly
3D visual aids data system
development		 In development It should be able to be developed
smoothly
Panel type arm trial production In development It should be able to be developed
smoothly
One-arm wafer arm mass production In development It should be able to be developed
smoothly
Panel transmission module
development		 In development It should be able to be developed
smoothly
Wafer transmission module
development		 In development It should be able to be developed
smoothly

It’s estimated the Company’s R&D costs in 2019 will be about NT$ 1,500,000,000~ NT$ 1,600,000, 000, up 10%~15% from 2018; with the goal of R&D costs accounting for 10% of the revenue, its R&D marches towards Industry 4.0 and the future environmental, green and intelligent automation industry; besides meeting customer requirements, it will continue to integrate the manufacturing processes, reengineer the internal process and reduce costs to expand its competitive advantage in the marketplace.

  1. Effects of Changes in Major Policies and Laws at Home and Abroad on HIWIN’s Business and Finance and Its Countermeasures The company is a professional maker of drive control and system products, which are key parts and also necessities in the economic development; Changes in major policies and laws at home and abroad have little effects on its business and finance and no such changes have affected its business and finance in the last year and as of the publication date of the annual report. The Company’s management team always pays attention to changes in major policies and laws at home and abroad, know the development status and cope with market conditions change to reduce possible adverse effects in the future.

  2. Effects of Technology and Industry Changes on the Company’s Business and Finance and Its Countermeasures With the development of Industry 4.0, the demand for intelligent manufacturing and robot fields will rise rapidly and the demand for various robots in the future will explode. Different research institutions define robot equipment differently; for example, some institutions include automation equipment to calculate the output value. Therefore, Japan Robot Association (JARA), International Federation of Robotics (IFR) and research institutions estimate the future output value of the global robots differently. However, all the institutes estimate that the output value of the global robots will reach about 80 billion dollars in 2020. Now the industrial robots are widely used in different industrial production fields, such as charge-in, spraying, welding and assembling and mainly used in manufacturing industries, such as automobile,

130

electronics, machinery, chemical engineering and food. To meet the demand of population aging and low birth rate for home automation.

To meet the demand of population aging and low birth rate, human needs for welfare equipment, medical equipment and rehabilitation equipment are increasing. HIWIN will continue to research and develop new products besides robots for lower limb muscle training, bathing spa systems, and endoscope-supporting robot arms. In addition, due to the awareness rise on Co2 emission reduction and energy saving, HIWIN also accelerate the development and deployment of green energy products also expands the industry category client base.

The technology and industry evolution aim at promoting human well-being, which coincides with HIWIN’s management ideas. Therefore, HIWIN produces the most complete robot types in the world, and the global layout has been gradually put into place, it will continue to improve the R&D ability, increase the variety and the added value of the products, grasp the long-term development trends of technology and industry and adjust its short-term, midterm and long-term development strategies in due time to realize the sustainable operation.

  1. Effects of Corporate Image Change on Corporate Crisis Management and Its Countermeasures

HIWIN has a long term commitment to corporate social responsibility, public benefits and educational activities (please refer to iii (v) for details); it has won many awards over the years; it won the Gold and Silver Medal at the 27th “Taiwan Excellence Silver Award” in 2018, and was awarded Gold Award of Electronic Information Manufacturing section under Taiwan Corporate Sustainability Reports by TCSA; all these show HIWIN has a good corporate image; in case of situations that will change the corporate image, the crisis response team will take necessary countermeasures.

  1. Anticipated Benefits, Possible Risks and Countermeasures of Mergers In June 2018, HIWIN Technologies acquired the shares of the British thread forming machine manufacturer Matrix Machine Tool (Coventry) Ltd.; as of the printing date of the annual report, there were no other M&A activities

  2. Anticipated Benefits, Possible Risks and Countermeasures of Plant Expansion, please refer to VII. iv of the annual report. HIWIN has been laying a solid foundation over the years, rich experience and good results in investing R&D and process improvement. In addition to continuing to extend the process forward to capture the source of raw materials and reduce the cost of material purchases, the continuous improvement of the process has been put into production in the most profitable way. Therefore, the efficiency of the expansion of the plant is expected to be significantly higher than that of the existing plant.

  3. Although the expansion of the plant requires capital investment, the developed product can also reduce the production cost in addition to meeting the scale, and it can also complete the product line of the company, to provide one-stop shopping for products such as customer components and sub-systems. The financial analysis also shows that in addition to increasing production capacity, the expansion of the plant can also reduce product costs and increase gross profit margin due to economies of scale. In summary, even if the

131

economy temporarily declines, the company can flexibly control the production line and the configuration of each product's production capacity due to the advantages of key technologies. The risk of expanding the plant should be limited.

  1. Risks and Countermeasures of Centralized Purchases or Sales HIWIN didn’t purchase over 10% of its materials from any manufacturer in 2018 or 2017, so centralized purchases didn’t exist; the net sales of its largest customer accounted for 9% of the annual net sales respectively in 2018 and 2017, which show little change, so centralized sales didn’t exist, either.

  2. Effects of Huge Transfer or Change of Stock Rights of Directors, Supervisors or Shareholders Holding over 10% of the Shares on HIWIN, the Risks and Countermeasures They haven’t transferred or changed their stock rights in large quantities in the last year and as of the publication date of the annual report.

  3. Effects of the Change of Management Right on the Company, Risks and Countermeasures HIWIN’s management right hasn’t changed in the last year and as of the publication date of the annual report.

  4. Litigation & Non-Litigation

  5. There have been no litigation & non-litigation cases as of the publication date of the annual report.

  6. Other Important Risks and Countermeasures There have been no such risks in the last year and as of the publication date of the annual report.

vii. Other Important Matters: None.

132

VIII. Special Disclosures

i. Information on Affiliates

==> picture [494 x 121] intentionally omitted <==

(i) Organizational Structure of Affiliates

Note: the organizational structure of affiliates as of April 30, 2019

(ii) Basic Information of Affiliates
Company Name Establishme
nt Date		 Address Paid-in Capital
(Note)		 Major Business or
Production Items
HIWIN GmbH 19930401 Brücklesbünd 2
D-77654 Offenburg,Germany		 EUR5,635,000 Manufacturing and sale of
Precision drive parts, ball
screws, linear guideways
and industrial robots
HIWIN Corporation,
U.S.A		 19920915 USD10,740,000 Manufacturing and sale of
Precision drive parts, ball
screws, linear guideways
and industrial robots
12455 Jim Dhamer Drive,
Huntley, IL 60142, U.S.A.
HIWIN Corporation,
Japan		 19991101 JPY440,000,000 Manufacturing and sale of
Precision drive parts, ball
screws, linear guideways
and industrial robots
3F, Sannomiya-Chuo Bldg.,4-2-20
Goko-dori, Chuo-ku,Kobe-
shi,Hyogo, 651-0087,Japan
Eterbright Solar
Corporation		 20101201 No. 442-1, Zhonghua Rd., Toufen
City, Miaoli County 351, Taiwan		 NTD2,311,514,690 Research,
development,
design, manufacture and
sale of solar cells,
electronic components,
generation transmission,
and power distribution
products, etc.
HIWIN Singapore Pte.
Ltd.		 20130807 Block 203 Woodlands Avenue 9
#06-51 Woodlands Spectrum II
Singapore 738956		 SGD5,000,000 Manufacturing and sale of
Precision drive parts, ball
screws, linear guideways
and industrial robots
HIWIN
Corporation,
South Korea		 20131008 125-25 Saneop-ro, 156beon-gil,
Gwonseon-gu, Suwon-si,
Gyeonggi-do 441-811, Korea		 KRW7,200,000,000 Manufacturing and sale of
Precision drive parts, ball
screws, linear guideways
and industrial robots

133

HIWIN S.R.L 20130329 Via Pitagora 4, 20861 Brugherio
(MB)		 EUR8,500,000 Manufacturing and sale of
Precision drive parts, ball
screws, linear guideways
and industrial robots
HIWIN
Corporation,
China		 20140408 No. 2, Xiazhuang Road, Suzhou
Industrial Park		 CNY300,000,000 Manufacturing and sale of
Precision drive parts, ball
screws, linear guideways
and industrial robots
Luren Precision 19940502 No. 1-1, Li Hsin 1st Rd., Hsinchu
Science Park, Hsinchu City		 NTD305,249,950 Development,
design,
manufacturing and sale of
high precision gear cutter
and gear lapping machine
tool
HIWIN Healthcare Corp. 20150421 Portcullis TrustNet Chambers,
P.O. Box 1225, Apia, Samoa		 USD100,000 Sale of medical robots
Luren Precision Chicago
Co.,Ltd		 20100422 707 REMINGTON ROAD,
UNIT1 SCHAUMBURG IL
60173		 USD460,000 Sale of high precision gear
cutter and gear lapping
machine tool
Luren Precision Shanghai 20090109 B, Floor 6, Building 2, No.401,
Caobao Road, Xuhui District,
Shanghai		 CNY3,010,000 Sale of high precision gear
cutter and gear lapping
machine tool
Matrix Machine Tool
(Coventry) Ltd.		 20031021 Unit 4, Spitfire Close
Coventry Business Park
CV5 6UR
United Kingdom		 GBP4,649,500 Design, manufacture and
sale of thread forming
machines

Note: the base date of paid-in capital is April 30, 2019

(iii) Information of the Same Shareholders of Affiliates Deemed to Be Controlling Corporates and Subsidiary Corporates: None.

(vi) The Industries Covered by Business of Affiliates; If Business of Affiliates Is Connected, State the Division of Work:

The industries covered by business of HIWIN’s affiliates are mainly “Drive Control and System Technology Products Manufacturing Service”, "Gear tools machine industry" and "Solar photovoltaic industry"; as a whole, the affiliates create the maximum comprehensive benefits through mutual support in technology, capacity, marketing and service, and provide customers with “Global Innovative Value-Added Service” to ensure HIWIN’s leading position in the global market.

(v) Information of Directors, Supervisors and General Managers of Affiliates

Unit: Shares;% Unit: Shares;%
Company Name Title Name or Representative Number of
Shares Held		 Shareholdin
g Ratio
HIWIN Corporation,
U.S.A		 Chairman Representative of HIWIN Technologies Corp.:
Chuo Yung-Tsai		 2,148,000 100%

134

HIWIN Corporation,
U.S.A		 Director Tsai Huichin, Chuo Wenheng, Qiu Shirong - -
General
Manager		 Qiu Shirong - -
HIWIN Germany
GmbH		 Chairman Representative of HIWIN Technologies Corp.:
Chuo Yung-Tsai		 Note 1 100%
General
Manager		 Werner Mäurer - -
HIWIN Corporation,
Japan		 Chairman Representative of HIWIN Technologies Corp.:
Chuo Yung-Tsai		 54,200 100%
Director Chuo Wenheng, Nakada, Huang Lihong - -
Supervisor Lin Yifeng - -
Assistant
General
Manager		 Huang Lihong - -
Eterbright Solar
Corporation		 Chairman Representative of HIWIN Technologies Corp.:
Chuo Yung-Tsai		 19,458,751 8%
Co-Chairman Chuo Wenheng 1,308,477 1%
Director Representative of Wu Yueqin 171,449,427 74%
Director Li Xunqin 2,225,766 1%
Director Chuo Xiuyu 808,467 0%
Director/Gener
al Manager		 Lin Mingyao 89,437 0%
Supervisor Liao Kehuang 66,377 0%
HIWIN Italy Chairman Representative of HIWIN Technologies Corp.:
Chuo Yung-Tsai		 Note 1 100%
General
Manager		 Yang Chuangbao - -
HIWIN Singapore Pte.
Ltd.		 Chairman Representative of HIWIN Technologies Corp.:
Chuo Yung-Tsai		 5,000,000 100%
Director Chuo
Wenheng,
You
Kaisheng,
Chen
Yongxiang		 - -
General
Manager		 Chen Yongxiang - -
HIWIN Corporation,
South Korea		 Chairman Representative of HIWIN Technologies Corp.:
Chuo Yung-Tsai		 1,440,000 100%
Director Chuo Wenheng, You Kaisheng - -
Supervisor Lin Yifeng - -
General
Manager		 Chang Yun-Jie - -

135

HIWIN China Chairman Representative of HIWIN Technologies Corp.:
Chuo Yung-Tsai		 Note 1 100%
Director Tsai Huey-Chin, You Kaisheng - -
Supervisor Lin Yifeng - -
General
Manager		 Peng Yanqi - -
Luren Precision Chairman Chuo Yung-Tsai 455,606 1%
Co-Chairman Chuo Wenheng 361,813 1%
Director Representative of HIWIN Technologies Corp.:
Song Xiande		 21,710,747 71%
Director Representative of HIWIN Technologies Corp.:
Tsai Huey-Chin
Director Representative of HIWIN Technologies Corp.:
Lin Yifeng
Director All Horng Gear Industry Co., LTD. 1,526,250 5%
Director Taiwan Gong Ji Chang Co., Ltd. 280,078 1%
Supervisor Xu Yujun 243,298 1%
General
Manager		 Song Xiande 61,135 0%
HIWIN Healthcare
Corp., Samoa		 Chairman Representative of HIWIN Technologies Corp.:
Tsai Huey-Chin		 100,000 100%
Luren Precision
U.S.A.		 Chairman Chen Shirui 460,000 100%
Luren Precision
Shanghai		 Chairman Hong Chi-Hsiung Note 1 100%
Matrix Machine Tool
(Coventry) Ltd.		 Director Representative of HIWIN Technologies Corp.:
Song Xiande		 2,000,000 52%
Director Representative of HIWIN Technologies Corp.:
Hsue Chih-Chiang
Director Nelson Chiow - -
Director Paul Farndon - -

Note 1: shares unissued.

Note 2: data as of April 30th, 2019

136

(vi) Business Status of Affiliates

Unit: NTD Thousand

Company Name Paid-in
Capital		 Total
Assets		 Total
Liabilities		 Net Value Operating
Revenue		 Operatin
g Profit
(Loss)		 Profit
(Loss) of
the Current
Period		 Earnings
per Share
(NT$)
HIWIN
Corporation, U.S.A.		 303,495 1,199,441 587,807 1,207,344 175,613 127,001 59.13
611,634
HIWIN Germany
GmbH		 2,731,031 1,037,998 1,693,033 3,557,822 437,019 323,618 Note 1
224,257
HIWIN
Corporation, Japan		 121,676 1,290,374 983,755 306,619 2,241,155 260,992 219,527 4,050.31
Eterbright Solar
Corporation		 2,311,515 1,522,644 1,283,185 239,459 282,010 (616,473) (1,070,898) (4.63)
HIWIN Italy 296,580 851,909 730,722 121,187 1,061,863 54,888 51,947 Note 1
117,550 97,704 121,209 (23,505) 179,262 (10,833) (13,844) (2.77)
HIWIN Singapore
Pte. Ltd.
HIWIN
Corporation, South
Korea		 202,945 376,131 9,432 477,425 (40,665) (44,416) (30.84)
366,699
HIWIN China 1,498,040 3,250,395 1,891,120 2,980,906 348,807 283,651 Note 1
1,359,275
(7.56)
Luren Precision (230,617)
305,250 1,309,607 1,153,232 156,375 543,875 (249,829)
HIWIN Healthcare
Corp., Samoa		 9,157 6,184 2,973 19,729 (40) (23) (0.23)
3,108
- - - (2,015) 1,060 Note 4
Luren Precision
Japan
(Note 4)		 - 1,852
14,721 - - - 1,482 (6,083) 10,097 21.95
Luren Precision
Chicago Co.,Ltd
54,144 67,141 (12,997) 77,256 (3,273) (3,540) Note1
Luren Precision
Shanghai		 14,047
Matrix Machine
Tool (Coventry)
Ltd.		 240,480 495,965 189,793 306,172 70,461 5,049 396 0.09

Note 1: shares unissued.

Note 2: If the Affiliates are foreign companies, convert the related figures to NT$ at the rate on the report day:

137

Closing Rate Average Rate
1 USD： NTD30.715 30.149
1 EUR： NTD35.20 35.61
1 JPY： NTD0.2782 0.2730
1 SGD： NTD22.48 22.35
1 KRW： NTD0.02775 0.02761
1 CNY︰ NTD4.472 4.560
1 GBP： NTD 38.88 39.84

Note 3: the base date of the financial information of Affiliates’ business status is Dec. 31, 2018. Note 4: Luren Precision Japan has completed liquidation in June, 2018

(vii) Consolidated Financial Statements of Affiliates: Please refer to Appendix i. (viii) Related Reports: None.

  • ii. Private Placement of Securities during the Past Year and up to the Annual Report Publication Date: None.

  • iii. Holding or Disposal of Stocks of the Company by Subsidiaries in the Past Year and up to the Annual Report Publication Date: None.

  • iv. Other Necessary Supplemental Information: None.

  • v. Events Having Significant Impacts on Shareholders’ Equity or Security Price According to Article 36.2.2 of Securities Exchange Act in the Past Year and up to the Issuance of Annual Report: None.

138

INDEPENDENT AUDITORS’ REPORT

The Board of Directors and Shareholders HIWIN Technologies Corporation

Opinion

We have audited the accompanying consolidated financial statements of HIWIN Technologies Corporation (the “Corporation”) and its subsidiaries (collectively the “Group”), which comprise the consolidated balance sheets as of December 31, 2018 and 2017, and the consolidated statements of comprehensive income, changes in equity and cash flows for the years then ended, and the notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as of December 31, 2018 and 2017, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), IFRIC Interpretations (IFRIC), and SIC Interpretations (SIC) endorsed and issued into effect 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 Attestation of Financial Statements by Certified Public Accountants and auditing standards generally accepted in the Republic of China. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with The Norm of Professional Ethics for Certified Public Accountant of the Republic of China, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements for the year ended December 31, 2018. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Key audit matters of the Group’s consolidated financial statements for the year ended December 31, 2018 are as follows:

139

Revenue recognition

The sales of the Group mainly rely on distribution channels. Revenue from the sale of goods is recognized when the Group satisfied the performance obligations. There is a risk that revenue might be recognized even when specific conditions have not been satisfied. Because of the risk of misstatement and materiality of sales revenue generated by distribution channels, we identified sales revenue as a key audit matter. The accounting policy on sales revenue recognition is disclosed in Note 4 to the consolidated financial statements.

Our key audit procedures performed in respect of revenue recognition included the following:

  1. We understood and tested the design and operating effectiveness of related internal controls over the acceptance of order and shipping procedures; we selected sample sales transactions of distribution channels and verified that the receiving of the order and the timing of the revenue recognition were in accordance with the terms of transaction.

  2. We validated the terms of transactions against sales contracts and orders with major distributors to ensure that the terms of transaction and the timing of the revenue recognition are in accordance; we tested the records of sales returns against source documents and we checked whether there was any unusual item during the year and after the balance sheet date.

Valuation and impairment assessment of inventory

As of December 31, 2018, the carrying amount of inventory was $8,933,731 thousand. Such carrying amount of inventory is the lower of cost or net realizable value which is determined subject to the management’s judgment and estimation uncertainty. Therefore, valuation and impairment assessment of inventory is identified as a key audit matter. The accounting policy on the valuation and impairment assessment of inventory and the details of inventory are disclosed in Notes 4, 5 and 11 to the consolidated financial statements.

Our key audit procedures performed in respect of the valuation and impairment assessment included the following:

  1. We understood the related internal control and procedures on the valuation of inventory and assessed that valuation including impairment assessment conforms to the approved procedures.

  2. We assessed the reasonableness of provision for impairment of inventory by reference to aging of inventories and the level of inventory consumed and sold during the year.

  3. We tested the net realizable value of sample inventory items against the selling price, and we checked the completeness and accuracy of the information of net realizable value.

140

  1. We compared the actual sales amount of the sample inventory items with the book value to ascertain that the carrying value of the inventory does not exceed the net realizable value.

  2. We evaluated the adequacy of provision for obsolete and damaged stock based on the condition of inventory during our observation of inventory counts.

Other Matter

We have also audited the parent company only financial statements of HIWIN Technologies Corporation as of and for the years ended December 31, 2018 and 2017 on which we have issued an unmodified report.

141

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

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers, and the IFRS, IAS, IFRIC, and SIC endorsed and issued into effect 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 consolidated financial statements that are free from material misstatement, whether due to fraud or error.

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

Those charged with governance, including the audit committee, are responsible for overseeing the Group’s financial reporting process.

Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ 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 the 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 consolidated financial statements.

As part of an audit in accordance with the auditing standards generally accepted in the 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 consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

  2. 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 Group’s internal control.

  3. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

142

  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 Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the consolidated 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 Group to cease to continue as a going concern.

  2. Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

  3. Obtain sufficient and appropriate audit evidence regarding the financial information of entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision, and performance of the group audit. We remain solely responsible for our audit opinion.

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 consolidated financial statements for the year ended December 31, 2018 and are therefore the key audit matters. We describe these matters in our auditors’ 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 Hsiao-Fang Yen and Done-Yuin Tseng.

Deloitte & Touche Taichung, Taiwan Republic of China

March 26, 2019

143

Notice to Readers

The accompanying consolidated financial statements are intended only to present the consolidated financial position, financial performance and cash flows in accordance with 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 consolidated financial statements are those generally applied in the Republic of China.

For the convenience of readers, the independent auditors’ report and the accompanying consolidated financial statements have been translated into English from the original Chinese version prepared and used in the Republic of China. If there is any conflict between the English version and the original Chinese version or any difference in the interpretation of the two versions, the Chinese-language independent auditors’ report and consolidated financial statements shall prevail.

144

HIWIN TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2018 AND 2017

(In Thousands of New Taiwan Dollars)

ASSETS
CURRENT ASSETS
Cash and cash equivalents (Notes 4 and 6)

Financial assets at fair value through profit or loss - current (Notes 4 and 7)
Notes receivable from unrelated parties, net (Notes 4, 5 and 10)
Notes receivable from related parties, net (Notes 4, 5 and 29)
Trade receivables from unrelated parties, net (Notes 4, 5 and 10)
Trade receivables from related parties, net (Notes 4, 5 and 29)
Inventories (Notes 4, 5 and 11)
Other current assets (Notes 6, 16, 29 and 30)

Total current assets

NON-CURRENT ASSETS
Financial assets at fair value through other comprehensive income - non-current (Notes 4 and 8)
Held-to-maturity financial assets - non-current (Note 4)
Financial assets at amortized cost - non-current (Note 4)
Financial assets measured at cost - non-current (Notes 4 and 9)
Investments accounted for using the equity method (Notes 4 and 13)
Property, plant and equipment (Notes 4, 14, 29 and 30)
Goodwill (Note 4)
Deferred tax assets (Notes 4 and 22)
Prepayments for machinery and equipment (Note 15)
Refundable deposits (Note 4)
Long-term prepayments for lease (Notes 16 and 30)
Other non-current assets (Notes 4 and 10)

Total non-current assets

TOTAL

LIABILITIES AND EQUITY
CURRENT LIABILITIES
Short-term borrowings (Notes 17 and 30)

Financial liabilities at fair value through profit or loss - current (Notes 4 and 7)
Contract liabilities - current (Note 4)
Notes payable
Trade payables to unrelated parties
Trade payables to related parties (Note 29)
Other payables (Notes 18 and 29)
Current tax liabilities (Notes 4 and 22)
Current portion of long-term borrowings (Notes 17 and 30)
Other current liabilities (Note 4)

Total current liabilities

NON-CURRENT LIABILITIES
Long-term borrowings (Notes 17 and 30)
Deferred tax liabilities (Notes 4 and 22)
Net defined benefit liabilities - non-current (Notes 4 and 19)
Other non-current liabilities (Note 29)

Total non-current liabilities

Total liabilities

EQUITY ATTRIBUTABLE TO OWNERS OF THE CORPORATION
Common stock
Capital surplus
Retained earnings
Legal reserve
Special reserve
Unappropriated earnings
Other equity

Total equity attributable to owners of the Corporation
NON-CONTROLLING INTERESTS

Total equity

TOTAL
 2018
Amount
%
$ 2,787,232
6
282
-
1,032,146
2
1,449
-
5,022,035 10
23,845
-
8,933,731 18

653,564

2


18,454,284
38

934,160
2
-
-
2,803
-
-
-
179,532
-
25,226,895 52
256,163
1
461,625
1
2,965,011
6
79,840
-
163,314
-

169,215

-


30,438,558
62

$ 48,892,842
100

$ 6,194,778 13
5,775
-
185,501
-
12,431
-
5,410,616 11
179,292
-
2,889,502
6
846,332
2
1,799,826
4

114,846

-


17,638,899
36

6,011,746 12
456,389
1
310,863
1

36,545

-


6,815,543
14


24,454,442
50

3,005,620
6
3,236,274
6
2,166,826
4
250,940
1
15,145,659 31

375,140

1

24,180,459 49

257,941

1


24,438,400
50

$ 48,892,842
100
 2017
Amount
%
$ 2,752,876
7

548
-

792,084
2

2,835
-

3,588,337 10

28,527
-

5,394,388 14

552,027

2

13,111,622
35

-
-

2,919
-

-
-

320,464
1

161,910
-

21,303,831 57

177,915
1

262,196
1

1,873,978
5

59,938
-

170,331
-

128,454

-

24,461,936
65
$ 37,573,558
100
$ 4,951,437 13

3,038
-

-
-

8,815
-

4,061,777 11

241,775
1

1,744,921
5

347,338
1

1,754,159
5

205,479

-

13,318,739
36

7,087,273 19

238,446
-

319,857
1

9,394

-

7,654,970
20

20,973,709
56

2,801,573
7

308,630
1

1,893,024
5

265,533
1

11,275,276 30

(250,940)

(1)

16,293,096 43

306,753

1

16,599,849
44
$ 37,573,558
100
































































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

145

HIWIN TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

SALES (Notes 4 and 29)

COST OF GOODS SOLD (Notes 11, 21 and 29)

GROSS PROFIT

OPERATING EXPENSES (Notes 21 and 29)
Selling and marketing expenses
General and administrative expenses
Research and development expenses

Total operating expenses

PROFIT FROM OPERATIONS

NON-OPERATING INCOME AND EXPENSES
Subsidy revenue (Note 4)
Finance costs (Notes 4 and 21)
Share of profit of associates accounted for using
equity method (Notes 4 and 13)
Interest income (Note 4)
Other income (Note 29)
Net foreign exchange gain (Notes 4 and 32)
Other expenses
Valuation loss on financial assets (liabilities) at
fair value through profit or loss (Note 4)
Impairment loss (Notes 4 and 14)

Total non-operating income and expenses

PROFIT BEFORE INCOME TAX
INCOME TAX EXPENSE (Notes 4 and 22)

NET PROFIT FOR THE YEAR
 2018
Amount
%
$ 29,333,129 100
17,703,549
60

11,629,580
40

1,815,214
6
2,009,174
7
1,385,997

5

5,210,385
18

6,419,195
22

73,623
-
(146,985)
-
29,611
-
53,757
-
108,458
-
39,496
-
(39,438)
-
(17,757)
-
(424,000)
(1)

(323,235)
(1)

6,095,960 21
1,205,537

4

4,890,423
17
 2017






























Amount
%
$ 21,164,764 100
13,582,126
64
7,582,638
36

1,530,831
7

1,515,397
7
1,191,309

6
4,237,537
20
3,345,101
16

84,941
-

(131,357) (1)

23,399
-

37,898
-

80,378
-

28,830
-

(41,005)
-

(67,577)
-
(548,473)
(2)
(532,966)
(3)

2,812,135 13
560,615

3
2,251,520
10
(Continued)

146

HIWIN TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

OTHER COMPREHENSIVE INCOME (Note 4)
Items that will not be reclassified subsequently
to profit or loss:
Remeasurement of defined benefit plans
(Note19)

Unrealized gain (loss) on investments in
equity instruments at fair value through
other comprehensive income
Income tax relating to items that will not be
reclassified subsequently to profit or loss
(Note 22)


Items that may be reclassified subsequently to
profit or loss:
Exchange differences on translating foreign
operations
Income tax relating to items that may be
reclassified subsequently to profit or loss
(Note 22)


Other comprehensive loss for the year, net
of income tax

TOTAL COMPREHENSIVE INCOME FOR THE
YEAR

NET PROFIT ATTRIBUTABLE TO:
Owners of the Corporation

Non-controlling interests



TOTAL COMPREHENSIVE INCOME
ATTRIBUTABLE TO:
Owners of the Corporation

Non-controlling interests



EARNINGS PER SHARE (Note 23)
Basic

Diluted
 2018
Amount
%
$ (12,610)
-
519,283
1
5,403

-

512,076

1

(45,889)
-
17,517

-

(28,372)

-

483,704

1

$ 5,374,127
18

$ 5,392,257 19
(501,834)
(2)

$ 4,890,423
17



$ 5,878,542 20
(504,415)
(2)

$ 5,374,127
18



$ 18.44

$ 18.29
 2017


































Amount
%
$ (53,292)
-

-
-
8,357

-
(44,935)

-

17,610
-
(2,978)

-
14,632

-
(30,303)

-
$ 2,221,217
10
$ 2,738,019 13
(486,499)
(2)
$ 2,251,520
11

$ 2,709,808 13
(488,591)
(3)
$ 2,221,217
10

$ 9.49
$ 9.46

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

147

HIWIN TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars, Except Dividends Per Share)

BALANCE AT JANUARY 1, 2017

Appropriation of 2016 earnings
Legal reserve
Special reserve
Cash dividends - NT$1.6 per share
Share dividends - NT$0.2 per share


Difference between consideration received or paid and the carrying amount
of the subsidiaries' net assets during actual disposal or acquisition

Changes in non-controlling interests

Net profit for the year ended December 31, 2017
Other comprehensive income (loss) for the year ended December 31, 2017,
net of income tax

Total comprehensive income (loss) for the year ended December 31, 2017

BALANCE AT DECEMBER 31, 2017

Effect of retrospective application

BALANCE AT JANUARY 1, 2018, AS RESTATED

Appropriation of 2017 earnings
Legal reserve
Special reserve
Cash dividends - NT$3.5 per share
Share dividends - NT$0.3 per share


Issuance of ordinary shares for cash

Difference between consideration received or paid and the carrying amount
of the subsidiaries' net assets during actual disposal or acquisition

Changes in non-controlling interests

Disposals of investments in equity instruments designated as at fair value
through other comprehensive income

Net profit for the year ended December 31, 2018
Other comprehensive income (loss) for the year ended December 31, 2018,
net of income tax

Total comprehensive income (loss) for the year ended December 31, 2018

BALANCE AT DECEMBER 31, 2018
 Equity Attributable to Owners of the Corporation (Note 20) Equity Attributable to Owners of the Corporation (Note 20) Equity Attributable to Owners of the Corporation (Note 20) Non-controlling
Interests
Total
(Notes 12 and 25)
$ 14,101,611
$ 698,307


-
-

-
-

(439,462 )
-

-

-


(439,462)

-


(78,861)

78,861


-

18,176


2,738,019
(486,499 )

(28,211)

(2,092)


2,709,808

(488,591)


16,293,096

306,753


173,362

-


16,466,458

306,753


-
-

-
-

(980,551 )
-

-

-


(980,551)

-


3,047,644

-


(231,634)

231,634


-

223,969


-

-


5,392,257
(501,834 )

486,285

(2,581)


5,878,542

(504,415)

$ 24,180,459
$ 257,941
 Total Equity
$ 14,799,918

-

-

(439,462 )

-

(439,462)

-

18,176

2,251,520

(30,303)

2,221,217

16,599,849

173,362

16,773,211

-

-

(980,551 )

-

(980,551)

3,047,644

-

223,969

-

4,890,423

483,704

5,374,127
$ 24,438,400



















Common Stock
$ 2,746,640

-
-
-

54,933


54,933


-


-

-

-


-


2,801,573


-


2,801,573

-
-
-

84,047


84,047


120,000


-


-


-

-

-


-

$ 3,005,620
 Capital Surplus
Additional Paid-in
Employee Stock
Capital
Option
$ 308,630
$ -


-
-

-
-

-
-

-

-


-

-


-

-


-

-


-
-

-

-


-

-


308,630

-


-

-


308,630

-


-
-

-
-

-
-

-

-


-

-


2,922,204

5,440


-

-


-

-


-

-


-
-

-

-


-

-

$ 3,230,834
$ 5,440
 Retained Earnings Unappropriated
Earnings

$ 9,459,908


(132,682 )

(173,909 )

(439,462 )

(54,933)


(800,986)


(78,868)


-


2,738,019

(42,797)


2,695,222


11,275,276


33,915


11,309,191


(273,802 )

14,593

(980,551 )

(84,047)


(1,323,807)


-


(231,634)


-


8,396


5,392,257

(8,744)


5,383,513

$ 15,145,659
 Other Equity
Unrealized Gain
(Loss) Financial
Exchange
Assets at Fair
Differences on
Value Through
Translating
Other
Foreign Operations
Comprehensive
$ (265,533)
$ -


-
-

-
-

-
-

-

-


-

-


7

-


-

-


-
-

14,586

-


14,586

-


(250,940)

-


-

139,447


(250,940)

139,447


-
-

-
-

-
-

-

-


-

-


-

-


-

-


-

-


-

(8,396)


-
-

(24,254)

519,283


(24,254)

519,283

$ (275,194)
$ 650,334

Exchange
Differences on
Translating
Foreign Operations
$ (265,533)


-

-

-

-


-


7


-


-

14,586


14,586


(250,940)


-


(250,940)


-

-

-

-


-


-


-


-


-


-

(24,254)


(24,254)

$ (275,194)
Additional Paid-in
Capital
$ 308,630


-

-

-

-


-


-


-


-

-


-


308,630


-


308,630


-

-

-

-


-


2,922,204


-


-


-


-

-


-

$ 3,230,834

























Legal Reserve
$ 1,760,342


132,682

-

-

-


132,682


-


-


-

-


-


1,893,024


-


1,893,024


273,802

-

-

-


273,802


-


-


-


-


-

-


-

$ 2,166,826
 Special Reserve
$ 91,624


-

173,909

-

-


173,909


-


-


-

-


-


265,533


-


265,533


-

(14,593 )

-

-

(14,593)


-


-


-


-


-

-


-

$ 250,940

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

148

HIWIN TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars)

CASH FLOWS FROM OPERATING ACTIVITIES
Income before income tax

Adjustments for :
Depreciation expenses

Amortization expenses
Reversal of impairment loss on receivables
Expected credit loss recognized on receivables
Net loss on fair value change of financial assets and liabilities
at fair value through profit or loss
Finance costs
Interest income
Compensation costs of employee share options
Share of profit or loss of associates accounted for using equity
method
Loss on disposal of property, plant and equipment
Impairment loss recognized on financial assets
Impairment loss recognized on non-financial assets
Dividend income
Unrealized foreign currency exchange loss, net
Other
Changes in operating assets and liabilities
Financial instruments held for trading
Financial assets mandatorily classified as at fair value through
profit or loss
Notes receivable
Trade receivables

Inventories

Other current assets
Contract liabilities
Notes payable
Trade payables

Other payables

Other current liabilities
Net defined benefit liabilities

Cash generated from operations

Interest received
Dividend received
Interest paid
Income taxes paid

Net cash generated from operating activities
 2018
$ 6,095,960
1,764,557
52,852
-
15,749
5,493
146,985
(53,757)
52,644
(29,611)
11,777
-
542,734
(26,193)
(37,732)
116
-
(2,490)
(242,041)
(1,394,898)
(3,430,873)
(77,579)
67,791
3,616
1,253,238
1,145,181
26,526
(21,604)

5,868,441
55,717
26,193
(145,969)
(654,527)

5,149,855
 2017
$ 2,812,135
1,581,949

31,628

(53,096)

-

2,490

131,357

(37,898)

-

(23,399)

2,784

34,000

406,458

(3,300)

(29,599)

114

4,265

-

(225,674)

486,022

(695,402)

(123,420)

-

(2,096)
2,046,559

552,078

16,924
(8,822)
6,906,057

27,309

3,300

(131,171)
(239,523)
6,565,972
(Continued)
  • 149 -

HIWIN TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars)

2018
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition financial assets at fair value through other
comprehensive income
$ (32,334)
Proceeds from sale of financial assets at fair value through other
comprehensive income
14,750
Return of capital from financial assets at fair value through other
comprehensive income
96,533
Net cash outflow on acquisition of subsidiaries (Note 24)
(218,850)
Payments for property, plant and equipment
(3,882,160)
Proceeds from disposal of property, plant and equipment
21,800
Decrease (increase) in refundable deposits
(19,016)
Decrease in other financial assets
10,883
Increase in other non-current assets
(93,696)
Increase in prepayments for machinery and equipment
(3,326,344)
Increase in prepayments for lease
-
Dividend received from associates

5,123

Net cash used in investing activities
(7,423,311)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from short-term borrowings
1,240,039
Proceeds from long-term borrowings
1,760,924
Repayments of long-term borrowings
(2,783,349)
Increase in guarantee deposit received
8,576
Increase in other non-current liabilities
-
Dividends paid
(980,551)
Proceeds from issuance of ordinary shares
2,995,000
Acquisition of additional shares of subsidiary
-
Changes in non-controlling interests

71,921

Net cash generated from (used in) financing activities
2,312,560

EFFECTS OF EXCHANGE RATE CHANGES ON THE
BALANCE OF CASH AND CASH EQUIVALENTS HELD IN
FOREIGN CURRENCIES

(4,748)

NET INCREASE IN CASH AND CASH EQUIVALENTS
34,356
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF
THE YEAR
2,752,876

CASH AND CASH EQUIVALENTS AT THE END OF THE
YEAR
$ 2,787,232

The accompanying notes are an integral part of the consolidated financial statements.		 2017
$ -

-

-

-
(3,555,837)

4,475

10,600

68,567

(68,861)
(1,785,874)

(89,502)
3,961
(5,412,471)

232,065
1,830,647
(2,139,872)

-

928

(439,462)

-

(8,156)
26,332
(497,518)
(5,005)

650,978
2,101,898
$ 2,752,876
(Concluded)
  • 150 -

HIWIN TECHNOLOGIES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

1. GENERAL INFORMATION

HIWIN Technologies Corporation (the “Corporation”) was incorporated on October 11, 1989. It manufactures and sells ballscrews, linear guideways, industrial robots, aerospace automation equipment parts, computer numerical control (CNC) milling machines and medical equipment.

The Corporation was approved by the Securities and Futures Bureau (SFB), Financial Supervisory Commission (FSC) to become a public corporation on April 16, 1997. The shares of the Corporation have been listed on the Taiwan Stock Exchange (TWSE) since June 26, 2009.

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

2. APPROVAL OF FINANCIAL STATEMENTS

The consolidated financial statements were approved by the Corporation’s board of directors on March 26, 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), Interpretations of IFRS (IFRIC), and Interpretations of IAS (SIC) (collectively, the “IFRSs”) endorsed and issued into effect by the FSC

Except for the following whenever applied, the initial application of the amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the IFRSs endorsed and issued into effect by the FSC would not have any material impact on the accounting policies of the Corporation and its subsidiaries (collectively referred to as the “Group”):

1) IFRS 9 “Financial Instruments” and related amendment

IFRS 9 supersedes IAS 39 “Financial Instruments: Recognition and Measurement”, with consequential amendments to IFRS 7 “Financial Instruments: Disclosures” and other standards. IFRS 9 sets out the requirements for classification, measurement and impairment of financial assets and hedge accounting. Refer to Note 4 for information relating to the relevant accounting policies.

Classification, measurement and impairment of financial assets

On the basis of the facts and circumstances that existed as at January 1, 2018, the Group has performed an assessment of the classification of recognized financial assets and has elected not to restate prior reporting periods.

  • 151 -

The following table shows the original measurement categories and carrying amount under IAS 39 and the new measurement categories and carrying amount under IFRS 9 for each class of the Group’s financial assets and financial liabilities as at January 1, 2018.

Financial Assets
Cash and cash equivalents

Derivatives

Notes receivable (including
related parties), trade
receivables (including
related parties) and
refundable deposits

Debt securities

Equity securities

Financial Assets
FVTPL
FVTOCI
Remeasurement of financial
assets at cost (IAS 39)
Amortized cost
Add: Reclassification from loans
and receivables (IAS 39)
Add: Reclassification from held-
to-maturity (IAS 39)		 Measurement Category Carrying
IAS 39
$2,752,876
548
4,471,721
2,919
320,464
Retained
Earnings
Effect on
January 1,
2018
$ -


-

33,915


33,915


-

-


-

$ 33,915
 Amount
IFRS 9
Remark
$2,752,876
(a)

548
-
4,471,721
(a)

2,919
(b)
493,826
(c)
Other
Equity
Effect on
January 1,
2018
Remark
$ -

-

139,447
(c)

139,447

-
(a)

-
(b)

-
$ 139,447
IAS 39
IFRS 9
Loans and receivables
Amortized cost
Held‑for‑trading
Mandatorily at fair value
through profit or loss
(FVTPL)
Loans and receivables
Amortized cost
Held-to-maturity
Amortized cost
Financial assets measured
at cost
Fair value through other
comprehensive income -
equity instruments
(FVTOCI)
IAS 39
Carrying
Amount
as of
January 1,
2018
Reclassifi-
cations
Remea-
surements
IFRS 9
Carrying
Amount
as of
January 1,
2018
$ 548
$ -
$ -
$ 548

-
-
-
-

-

320,464

173,362

493,826


-

320,464

173,362

493,826

- 7,224,597
- 7,224,597

-

2,919

-

2,919


-
7,227,516

-
7,227,516

$ 548
$ 7,547,980
$ 173,362
$ 7,721,890

  • a) Cash and cash equivalents, notes receivable (including related parties), trade receivables (including related parties) and refundable deposits that were previously classified as loans and receivables under IAS 39 were classified as at amortized cost with an assessment of expected credit losses under IFRS 9.

  • b) Debt investments previously classified as held-to-maturity financial assets and measured at amortized cost under IAS 39 were classified as at amortized cost with an assessment of expected credit losses under IFRS 9, because on January 1, 2018, the contractual cash flows were solely payments of principal and interest on the principal outstanding and these investments were held within a business model whose objective is to collect contractual cash flows.

  • c) Investments in unlisted shares previously measured at cost under IAS 39 have been classified at designated as at FVTOCI under IFRS 9 and were remeasured at fair value. Consequently, an increase of $173,362 thousand was recognized in both financial assets at FVTOCI and other equity - unrealized gain (loss) on financial assets at FVTOCI on January 1, 2018.

  • 152 -

The Group recognized under IAS 39 impairment loss on certain investments in equity securities previously measured at cost and the loss was accumulated in retained earnings. Since those investments were designated as at FVTOCI under IFRS 9 and no impairment assessment is required, an adjustment was made that resulted in a decrease of $33,915 thousand in other equity - unrealized gain (loss) on financial assets at FVTOCI and an increase of $33,915 thousand in retained earnings on January 1, 2018.

  • 2) IFRS 15 “Revenue from Contracts with Customers” and related amendment

IFRS 15 establishes principles for recognizing revenue that apply to all contracts with customers and supersedes IAS 18 “Revenue”, IAS 11 “Construction Contracts” and a number of revenuerelated interpretations. Refer to Note 4 for related accounting policies.

  • b. Amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the IFRSs endorsed by the FSC for application starting from 2019.
New, Amended or Revised Standards and Interpretations
(the“New IFRSs”)
Annual Improvements to IFRSs 2015-2017 Cycle

Amendments to IFRS 9 “Prepayment Features with Negative
Compensation”

IFRS 16 “Leases”

Amendments to IAS 19 “Plan Amendment, Curtailment or
Settlement”

Amendments to IAS 28 “Long-term Interests in Associates and
Joint Ventures”

IFRIC 23 “Uncertainty over Income Tax Treatments”
 Effective Date
Announced by IASB (Note
1)
January 1, 2019
January 1, 2019 (Note 2)
January 1, 2019
January 1, 2019 (Note 3)
January 1, 2019
January 1, 2019

  • 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 FSC permits the election for early adoption of the amendments starting from 2018.

  • Note 3: The Group shall apply these amendments to plan amendments, curtailments or settlements occurring on or after January 1, 2019.

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.

Definition of a lease

Upon initial application of IFRS 16, the Group will elect to apply the guidance of IFRS 16 only to contracts entered into (or changed) on or after January 1, 2019 in determining whether those contracts are, or contain, a lease. Contracts identified as containing a lease under IAS 17 and IFRIC 4 will not be reassessed and will be accounted for in accordance with the transitional provisions under IFRS 16.

  • 153 -

The Group as lessee

Upon initial application of IFRS 16, the Group will recognize right-of-use assets, and lease liabilities for all leases on the consolidated balance sheets except for those whose payments under low-value and short-term leases will be recognized as expenses on a straight-line basis. On the consolidated statements of comprehensive income, the Group will present the depreciation expense charged on right-of-use assets separately from the interest expense accrued on lease liabilities; interest is computed using the effective interest method. On the consolidated statements of cash flows, cash payments for the principal portion of lease liabilities will be classified within financing activities; cash payments for the interest portion will be classified within operating activities. Currently, payments under operating lease contracts, are recognized as expenses on a straight-line basis. Prepaid lease payments for land use rights of land located in China are recognized as prepayments for leases. Cash flows for operating leases are classified within operating activities on the consolidated statements of cash flows.

The Group anticipates applying IFRS 16 retrospectively with the cumulative effect of the initial application of this standard recognized on January 1, 2019. Comparative information will not be restated.

Lease liabilities will be recognized on January 1, 2019 for leases currently classified as operating leases with the application of IAS 17. Lease liabilities will be measured at the present value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate on January 1, 2019. Right-of-use assets will be measured at an amount equal to the lease liabilities, adjusted by the amount of any prepaid or accrued lease payments. Except for the following practical expedients which are to be applied, the Group will apply IAS 36 to all right-of-use assets.

The Group expects to apply the following practical expedients:

  • 1) The Group will apply a single discount rate to a portfolio of leases with reasonably similar characteristics to measure lease liabilities.

  • 2) The Group will account for those leases for which the lease term ends on or before December 31, 2019 as short-term leases.

The Group as lessor

The Group will not make any adjustments for leases in which it is a lessor and will account for those leases with the application of IFRS 16 starting from January 1, 2019.

Anticipated impact on assets, liabilities and equity

Adjusted
Carrying Adjustments Carrying
Amount as of Arising from Amount as of
December 31, Initial January 1,
2018 Application
2019
Prepayments for leases-current $ 3,547 $ (3,547) $ -
Prepayments for leases-non-current
163,314
(163,314)
-
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Right-of-use assets

Total effect on assets

Lease liabilities - current

Lease liabilities - non-current

Total effect on liabilities

Retained earnings

Total effect on equity
 -

$ 166,861

$ -
-

$ -

$ -

$ -
 918,407

$ 751,546

$ 116,056
635,490

$ 751,546

$ -

$ -
 918,407
$ 918,407
$ 116,056
635,490
$ 751,546
$ -
$ -

Except for the above impact, as of the date the consolidated financial statements were authorized for issue, the Group assessed that the application of other standards and interpretations will not have significantly effect on the Group’s financial position and financial performance.

  • c. New IFRSs in issue but not yet endorsed and issued into effect by the FSC
New IFRSs
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 Material”
 Effective Date
Announced by IASB (Note
1)
January 1, 2020 (Note 2)
To be determined by IASB
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 Group shall apply these amendments to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after January 1, 2020 and to asset acquisitions that occur on or after the beginning of that period.

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

As of the date the financial statements were authorized for issue, the Company is continuously assessing the possible impact that the application of other standards and interpretations will have on the Company’s financial position and financial performance and will disclose the relevant impact when the assessment is completed.

  • 155 -

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 and IFRSs as endorsed and issued into effect by the FSC.

  • b. Basis of preparation

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

The fair value measurements, which are grouped into Levels 1 to 3 based on the degree to which the fair value measurement inputs are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:

  • 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 an 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 an asset or liability.

  • c. Classification of current and non-current assets and liabilities

Current assets include:

  • 1) Assets held primarily for the purpose of trading;

  • 2) Assets expected to be realized within twelve months after the reporting period; and

  • 3) Cash and cash equivalents unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.

Current liabilities include:

  • 1) Liabilities held primarily for the purpose of trading;

  • 2) Liabilities due to be settled within 12 months after the reporting period; and

  • 3) Liabilities for which the Group does not have an unconditional right to defer settlement for at least 12 months after the reporting period.

Assets and liabilities that are not classified as current are classified as non-current.

  • 156 -

d. Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and the entities controlled by the Company (i.e. its subsidiaries).

Income and expenses of subsidiaries acquired or disposed of during the period are included in the consolidated statement of profit or loss and other comprehensive income from the effective dates of acquisitions up to the effective dates of disposals, as appropriate.

When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by the Company.

All intra-group transactions, balances, income and expenses are eliminated in full upon consolidation. Total comprehensive income of subsidiaries is attributed to the owners of the Corporation and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.

Changes in the Group’s ownership interests in subsidiaries that do not result in the Group losing control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the interests of the Group and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognized directly in equity and attributed to the owners of the Company.

See Note 12, tables 9 and 10 for detailed information on subsidiaries (including the percentages of ownership and main businesses).

e. Business combinations

Acquisitions of businesses are accounted for using the acquisition method. Acquisition-related costs are generally recognized in profit or loss as they are incurred.

Goodwill is measured as the excess of the sum of the consideration transferred and the fair value of the acquirer’s previously held equity interests in the acquire over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. f. Foreign currencies

In preparing the financial statements of each individual Group entity, transactions in currencies other than the entity's functional currency (i.e. foreign currencies) are recognized at the rates of exchange prevailing at the dates of the transactions.

At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Exchange differences on monetary items arising from settlement or translation are recognized in profit or loss in the period.

Non-monetary items that are measured at historical cost in a foreign currency are translated using the exchange rate at the date of transaction.

For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group’s foreign operations (including of the subsidiaries or associates in other countries or currencies used are different with the Corporation) are translated into New Taiwan dollars using exchange rates prevailing at the end of each reporting period. Income and expense items

  • 157 -

are translated at the average exchange rates for the period. Exchange differences arising are recognized in other comprehensive income and attributed to the owners of the Corporation and non-controlling interests as appropriate.

g. Inventories

Inventories consist of raw materials, supplies, work-in-process, finished goods and merchandise and are stated at the lower of cost or net realizable value. Inventory write-downs are made by item, except where it may be appropriate to group similar or related items. The net realizable value is the estimated selling price of inventories less all estimated costs of completion and costs necessary to make the sale. Inventories are recorded at weighted-average cost on the balance sheet date.

h. Investment in associates

An associate is an entity over which the Group has significant influence and which is neither a subsidiary nor an interest in a joint venture.

The Group uses the equity method to account for its investments in associates.

Under the equity method, investments in an associate is initially recognized at cost and adjusted thereafter to recognize the Group’s share of the profit or loss and other comprehensive income of the associate. The Group also recognizes the changes in the Group’s share of equity of associates.

Any excess of the cost of acquisition over the Group’s share of the net fair value of the identifiable assets and liabilities of an associate at the date of acquisition is recognized as goodwill, which is included within the carrying amount of the investment and is not amortized. Any excess of the Group’s share of the net fair value of the identifiable assets and liabilities over the cost of acquisition, after reassessment, is recognized immediately in profit or loss.

When the Group subscribes for additional new shares of an associate at a percentage different from its existing ownership percentage, the resulting carrying amount of the investment differs from the amount of the Group’s proportionate interest in the associate. The Group records such a difference as an adjustment to investments with the corresponding amount charged or credited to capital surplus - changes in capital surplus from investments in associates accounted for using the equity method. If the Group’s ownership interest is reduced due to its additional subscription of the new shares of associate, the proportionate amount of the gains or losses previously recognized in other comprehensive income in relation to that associate is reclassified to profit or loss on the same basis as would be required had the investee directly disposed of the related assets or liabilities. When the adjustment should be debited to capital surplus, but the capital surplus recognized from investments accounted for using the equity method is insufficient, the shortage is debited to retained earnings.

When the Group’s share of losses of an associate equals or exceeds its interest in that associate (which includes any carrying amount of the investment accounted for using the equity method and long-term interests that, in substance, form part of the Group’s net investment in the associate), the Group discontinues recognizing its share of further losses. Additional losses and liabilities are recognized only to the extent that the Group has incurred legal obligations, or constructive obligations, or made payments on behalf of that associate.

  • 158 -

The entire carrying amount of an investment (including goodwill) is tested for impairment as a single asset by comparing its recoverable amount with its carrying amount. Any impairment loss recognized is nor allocated to any asset; including goodwill, that form part of carrying amount of the investment. Impairment loss is deducted from carrying amount. Any reversal of that impairment loss is recognized to the extent that the recoverable amount of the investment subsequently increases.

The Group discontinues the use of the equity method from the date on which its investment ceases to be an associate. Any retained investment is measured at fair value at that date, and the fair value is regarded as the investment’s fair value on initial recognition as a financial asset. The difference between the previous carrying amount of the associate attributable to the retained interest and its fair value is included in the determination of the gain or loss on disposal of the associate. The Group accounts for all amounts previously recognized in other comprehensive income in relation to that associate on the same basis as would be required had that associate directly disposed of the related assets or liabilities.

When a group entity transacts with its associate, profits and losses resulting from the transactions with the associate are recognized in the Group’ consolidated financial statements only to the extent of interests in the associate that are not related to the Group.

  • i. Property, plant, and equipment

Property, plant and equipment are measured at cost, less recognized accumulated depreciation and recognized accumulated impairment loss.

Properties, plant and equipment in the course of construction are measured at cost less any recognized impairment loss. Cost includes professional fees and borrowing costs eligible for capitalization. Such assets are depreciated and classified to the appropriate categories of property, plant and equipment when completed and ready for their intended use.

Depreciation of property, plant and equipment (including assets held under finance leases) is recognized using the straight-line method. Each significant part is depreciated separately. If a lease term is shorter than the assets’ useful lives, such assets are depreciated over the lease term. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in the estimates accounted for on a prospective basis.

On derecognition of an item of property, plant and equipment, the difference between the sales proceeds and the carrying amount of the asset is recognized in profit or loss.

  • j. Goodwill

Goodwill arising from the acquisition of a business is carried at cost as established at the date of acquisition of the business less accumulated impairment loss.

For the purposes of impairment testing, goodwill is allocated to each of the Group’s cashgenerating units or groups of cash-generating units (referred to as “cash-generating units”) that is expected to benefit from the synergies of the combination.

  • 159 -

A cash-generating unit to which goodwill has been allocated is tested for impairment annually or more frequently when there is an indication that the unit may be impaired, by comparing its carrying amount, including the attributed goodwill, with its recoverable amount. However, if the goodwill allocated to a cash-generating unit was acquired in a business combination during the current annual period, that unit shall be tested for impairment before the end of the current annual period. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then pro rata to the other assets of the unit based on the carrying amount of each asset in the unit. Any impairment loss is recognized directly in profit or loss. Any impairment loss recognized on goodwill is not reversed in subsequent periods.

If goodwill has been allocated to a cash-generating unit and the entity disposes of an operation within that unit, the goodwill associated with the operation which is disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal, and is measured on the basis of the relative values of the operation disposed of and the portion of the cash-generating unit retained.

  • k. Intangible assets

  • 1) Intangible assets acquired separately

Intangible assets with finite useful lives that are acquired separately are initially measured at cost and subsequently measured at cost less accumulated amortization. Amortization is recognized on a straight-line basis. The estimated useful lives, residual values, and amortization methods are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.

  • 2) Internally-generated intangible assets - research and development expenditures

Expenditures on research activities are recognized as expenses in the period in which they are incurred.

An internally-generated intangible asset arising from the development phase of an internal project is recognized if, and only if, all of the following have been demonstrated:

  • a) The technical feasibility of completing the intangible asset so that it will be available for use or sale;

  • b) The intention to complete the intangible asset and use or sell it;

  • c) The ability to use or sell the intangible asset;

  • d) How the intangible asset will generate probable future economic benefits;

  • e) The availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and

  • f) The ability to measure reliably the expenditures attributable to the intangible asset during its development.

  • 160 -

The amount initially recognized for internally-generated intangible assets is the sum of the expenditures incurred from the date when such an intangible asset first meets the recognition criteria listed above. Subsequent to initial recognition, such intangible assets are measured on the same basis as intangible assets that are acquired separately.

3) Derecognition of intangible assets

On derecognition of an intangible asset, the difference between the net disposal proceeds and the carrying amount of the asset is recognized in profit or loss.

  • l. Impairment of tangible and intangible assets other than goodwill

At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible assets (excluding goodwill) to determine whether there is any indication that those assets have suffered any impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. When it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Corporate assets are allocated to the individual cash-generating units on a reasonable and consistent basis of allocation.

The recoverable amount is the higher of fair value less costs to sell and value in use. If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the asset or cash-generating unit is reduced to its recoverable amount, with the resulting impairment loss recognized in profit or loss.

When an impairment loss is subsequently reversed, the carrying amount of the corresponding asset or cash-generating unit is increased to the revised estimate of its recoverable amount, but only to the extent of the carrying amount (less amortization and depreciation) that would have been determined had no impairment loss been recognized on the asset or cash-generating unit in prior years. A reversal of an impairment loss is recognized in profit or loss.

m. Financial instruments

Financial assets and financial liabilities are recognized when a group entity becomes a party to the contractual provisions of the instruments.

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issuance of financial assets and financial liabilities (other than financial assets and financial liabilities at FVTPL) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at FVTPL are recognized immediately in profit or loss.

1) Financial assets

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

  • a) Measurement categories

  • 161 -

2018

Financial assets are classified into the following categories: Financial assets at FVTPL, financial assets at amortized cost, and equity instruments at FVTOCI.

  • i. Financial asset at FVTPL

Financial asset is classified as at FVTPL when such financial asset is mandatorily classified as at FVTPL. Financial assets mandatorily classified as at FVTPL do not meet the amortized cost criteria or the FVTOCI criteria.

Financial assets at FVTPL are subsequently measured at fair value, with any gains or losses arising on remeasurement recognized in profit or loss. Fair value is determined in the manner described in Note 28.

  • ii. Financial assets at amortized cost

Financial assets that meet the following conditions are subsequently measured at amortized cost:

  • i) The financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows; and

  • ii) The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Subsequent to initial recognition, financial assets at amortized cost, including cash and cash equivalents, notes receivable, trade receivables, and refundable deposits at amortized cost, are measured at amortized cost, which equals gross carrying amount determined using the effective interest method less any impairment loss. Exchange differences are recognized in profit or loss.

Interest income is calculated by applying the effective interest rate to the gross carrying amount of such financial asset, except for:

  • i) Purchased or originated credit-impaired financial asset, for which interest income is calculated by applying the credit-adjusted effective interest rate to the amortized cost of such financial asset; and

  • ii) Financial assets that are not credit-impaired on purchase or origination but have subsequently become credit-impaired, for which interest income is calculated by applying the effective interest rate to the amortized cost of such financial asset.

Cash equivalents include time deposits with original maturities within 3 months from the date of acquisition, which are highly liquid, readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. These cash equivalents are held for the purpose of meeting short-term cash commitments.

  • 162 -

iii. Investments in equity instruments at FVTOCI

On initial recognition, the Group may make an irrevocable election to designate investments in equity instruments as at FVTOCI. Designation at FVTOCI is not permitted if the equity investment is held for trading or if it is contingent consideration recognized by an acquirer in a business combination.

Investments in equity instruments at FVTOCI are subsequently measured at fair value with gains and losses arising from changes in fair value recognized in other comprehensive income and accumulated in other equity. The cumulative gain or loss will not be reclassified to profit or loss on disposal of the equity investments, instead, it will be transferred to retained earnings.

Dividends on these investments in equity instruments are recognized in profit or loss when the Group’s right to receive the dividends is established, unless the dividends clearly represent a recovery of part of the cost of the investment.

2017

Financial assets are classified into the following categories: Financial assets at FVTPL, held-to-maturity investments, available-for-sale financial assets, and loans and receivables.

  • i. Financial assets at FVTPL

Financial assets are classified as at FVTPL when such financial assets are held for trading.

Financial assets at FVTPL are stated at fair value, with any gains or losses arising on remeasurement recognized in profit or loss. The net gain or loss recognized in profit or loss earned on such a financial asset. The fair value is determined in the manner described in Note 28.

  • ii. Held-to-maturity investments

Domestic bonds, which the Group has a positive intent and ability to hold to maturity, are classified as held-to-maturity investments.

Subsequent to initial recognition, held-to-maturity investments are measured at amortized cost using the effective interest method less any impairment.

iii. Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated as available-for-sale or are not classified as loans and receivables, held-to-maturity investments or financial assets at FVTPL.

Available-for-sale financial assets are measured at fair value. Changes in the carrying amounts of available-for-sale monetary financial assets (relating dividends on available-for-sale equity investments) are recognized in profit or loss. Other changes in the carrying amount of available-for-sale financial assets are recognized

  • 163 -

in other comprehensive income and will be reclassified to profit or loss when such investments are disposed of or are determined to be impaired.

Dividends on available-for-sale equity instruments are recognized in profit or loss when the Group’s right to receive the dividends is established.

Available-for-sale equity investments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured and derivatives that are linked to and must be settled by delivery of such unquoted equity investments are measured at cost less any identified impairment loss at the end of each reporting period and presented in a separate line item as financial assets measured at cost. If, in a subsequent period, the fair value of the financial assets can be reliably measured, the financial assets are remeasured at fair value. The difference between the carrying amount and the fair value of such financial assets is recognized in other comprehensive income. Any impairment losses are recognized in profit and loss.

  • iv. Loans and receivables

Loans and receivables (including trade receivables, cash and cash equivalents, note receivable, trade receivable, and refundable deposits) are measured using the effective interest method at amortized cost less any impairment, except for shortterm receivables when the effect of discounting is immaterial.

Cash equivalents include time deposits with original maturities within 3 months from the date of acquisition, which are highly liquid, readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. These cash equivalents are held for the purpose of meeting short-term cash commitments.

  • b) Impairment of financial assets

2018

The Group recognizes a loss allowance for expected credit losses on financial assets at amortized cost (including trade receivables).

The Group always recognizes lifetime expected credit loss (i.e. ECL) for trade receivables. For all other financial instruments, the Group recognizes lifetime ECL when there has been a significant increase in credit risk since initial recognition. If, on the other hand, the credit risk on the financial instrument has not increased significantly since initial recognition, the Group measures the loss allowance for that financial instrument at an amount equal to 12-month ECL.

Expected credit losses reflect the weighted average of credit losses with the respective risks of default occurring as the weights. Lifetime ECL represents the expected credit loss that will result from all possible default events over the expected life of a financial instrument. In contrast, 12-month ECL represents the portion of lifetime ECL that is expected to result from default events on a financial instrument that are possible within 12 months after the reporting date.

  • 164 -

The Group recognizes an impairment gain or loss in profit or loss for all financial instruments with a corresponding adjustment to their carrying amount through a loss allowance account.

2017

Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired when there is objective evidence, as a result of one or more events that occurred after the initial recognition of such financial assets, that the estimated future cash flows of the investment have been affected.

Financial assets at amortized cost, such as notes receivables, trade receivables and heldto-maturity investments, are assessed for impairment on a collective basis even if they were assessed not to be impaired individually. Objective evidence of impairment for a portfolio of receivables could include the Group’s past experience with collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period, as well as observable changes in national or local economic conditions that correlate with defaults on receivables.

For a financial asset at amortized cost, the amount of the impairment loss recognized is the difference between such an asset’s carrying amount and the present value of its estimated future cash flows, discounted at the financial asset’s original effective interest rate.

For a financial asset at amortized cost, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment (at the date on which the impairment is reversed) does not exceed what the amortized cost would have been had the impairment not been recognized.

For available-for-sale equity investments, a significant or prolonged decline in the fair value of the security below its cost is considered to be objective evidence of impairment.

For all other financial assets, objective evidence of impairment could include significant financial difficulty of the issuer or counterparty, breach of contract such as a default or delinquency in interest or principal payments, it becoming probable that the borrower will enter bankruptcy or financial re-organization, or the disappearance of an active market for those financial assets because of financial difficulties.

When an available-for-sale financial asset is considered to be impaired, cumulative gains or losses previously recognized in other comprehensive income are reclassified to profit or loss in the period.

In respect of available-for-sale equity securities, impairment loss previously recognized in profit or loss is not reversed through profit or loss. Any increase in fair value subsequent to impairment is recognized in other comprehensive income.

  • 165 -

For a financial assets measured at cost, the amount of the impairment loss is measured as the difference between such an asset’s carrying amount and the present value of its estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment loss will not be reversed in subsequent periods.

The carrying amount of a financial asset is reduced by the impairment loss directly for all financial assets, with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When trade receivables are considered uncollectible, they are written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognized in profit or loss except for uncollectible trade receivables that are written off against the allowance account.

  • c) Derecognition of financial assets

The Group derecognizes a financial asset only when the contractual rights to the cash flows from the asset expire or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party.

Before 2018, on derecognition of a financial asset in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss which had been recognized in other comprehensive income is recognized in profit or loss. Starting from 2018, on derecognition of a financial asset at amortized cost in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable is recognized in profit or loss. On derecognition of an investment in an equity instrument at FVTOCI, the difference between the asset’s carrying amount and the sum of the consideration received and receivable is recognized in profit or loss, and the cumulative gain or loss that had been recognized in other comprehensive income is transferred directly to retained earnings, without recycling through profit or loss.

2) Financial liabilities

  • a) Subsequent measurement

Except the following situations, all the financial liabilities are measured at amortized cost using the effective interest method:

Financial liabilities at FVTPL

Financial liabilities are classified as at FVTPL when such financial liabilities are held for trading.

Financial liabilities held for trading are stated at fair value, with any gain or loss arising on remeasurement recognized in profit or loss. The fair value is determined in the manner described in Note 28.

  • b) Derecognition of financial liabilities

  • 166 -

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

  • 3) Derivative financial instruments

The Group enters into foreign exchange forward to manage its exposure to foreign exchange rate risks.

Derivatives are initially recognized at fair value at the date on which the derivative contracts are entered into and are subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognized in profit or loss immediately. When the fair value of derivative financial instrument is positive, the derivative is recognized as a financial asset; when the fair value of derivative financial instrument is negative, the derivative is recognized as a financial liability.

  • n. Provision

Provisions are measured at the best estimate of the discounted cash flows of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation.

Provisions for the expected cost of warranty obligations to assure that products comply with agree-upon specifications are recognized on the date of sale of the relevant products at the best estimate of the expenditure required to settle the Group’s obligation.

  • o. Revenue recognition

2018

The Group identifies the contract with the customers, allocates the transaction price to the performance obligations, and recognizes revenue when performance obligations are satisfied.

For contract where the period between the date on which the Group transfers a promised good or service to a customer and the date on which the customer pays for that good or service is one year or less, the Group does not adjust the promised amount of consideration for the effects of a significant financing component.

Sales of goods are recognized as revenue when the goods are delivered to the customer’s specific location/the goods are shipped/the goods are picked up because it is the time when the customer acquisition of control. Trade receivable is recognized concurrently. The transaction price received is recognized as a contract liability until the customer acquisition control of the good.

The Group does not recognize revenue on materials delivered to subcontractors because this delivery does not involve a transfer of control.

  • 167 -

2017

Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated customer returns, rebates and other similar allowances. Sales returns are recognized at the time of sale provided the seller can reliably estimate future returns and recognizes a liability for returns based on previous experience and other relevant factors.

1) Sale of goods

Revenue from the sale of goods is recognized when all the following conditions are satisfied:

  • a) The Group has transferred to the buyer the significant risks and rewards of ownership of the goods;

  • b) The Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;

  • c) The amount of revenue can be measured reliably;

  • d) It is probable that the economic benefits associated with the transaction will flow to the Group; and

  • e) The costs incurred or to be incurred in respect of the transaction can be measured reliably.

The Group does not recognize sales revenue on materials delivered to subcontractors because this delivery does not involve a transfer of risks and rewards of materials ownership.

  • 2) Dividend and interest income

Dividend income from investments is recognized when a shareholder’s right to receive payment has been established and provided that it is probable that the economic benefits will flow to the Group and that the amount of income can be measured reliably.

Interest income from a financial asset is recognized when it is probable that the economic benefits will flow to the Group and the amount of income can be measured reliably. Interest income is accrued on a time basis by reference to the principal outstanding and at the applicable effective interest rate applicable.

  • p. Leasing

Leases are classified as finance leases whenever the terms of a lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

  • 1) The Group as lessor

Rental income from operating leases is recognized on a straight-line basis over the term of the relevant lease.

  • 168 -

2) The Group as lessee

Assets held under finance leases are initially recognized as assets of the Group at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the consolidated balance sheets as a finance lease obligation.

Finance expenses implicit in lease payments for each period are recognized immediately in profit or loss, unless they are directly attributable to qualifying assets, in which case, they are capitalized.

Operating lease payments are recognized as expenses on a straight-line basis over the lease term.

  • q. Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. Other than that which is stated above, all other borrowing costs are recognized in profit or loss in the period in which they are incurred.

  • r. Government grants

Government grants are not recognized until there is reasonable assurance that the Group will comply with the conditions attaching to them and that the grants will be received.

Government grants are recognized in profit or loss on a systematic basis over the periods in which the Group recognizes as expenses the related costs for which the grants are intended to compensate. Specifically, government grants whose primary condition is that the Group should purchase, construct or otherwise acquire non-current assets are recognized as deferred revenue and transferred to profit or loss on a systematic and rational basis over the useful lives of the related assets.

Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Group with no future related costs are recognized in profit or loss in the period in which they become receivable.

  • s. Employee benefits

  • 1) Short-term employee benefits

Liabilities recognized in respect of short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in exchange for the related services.

  • 2) Retirement benefits

Payments to defined contribution retirement benefit plans are recognized as expenses when employees have rendered service entitling them to the contributions.

  • 169 -

Defined benefit costs (including service cost, net interest and remeasurement) under the defined benefit retirement benefit plans are determined using the projected unit credit method. Service cost and net interest on the net defined benefit liabilities are recognized as employee benefits expense in the period in which they occur. Remeasurement, comprising actuarial gains and losses and the return on plan assets (excluding interest), is recognized in other comprehensive income in the period in which they occur. Remeasurement recognized in other comprehensive income is reflected immediately in retained earnings and will not be reclassified to profit or loss.

Net defined benefit liabilities represent the actual deficit in the Group’s defined benefit plan. Any surplus resulting from this calculation is limited to the present value of any refunds from the plans or reductions in future contributions to the plans.

  • t. Share-based payment arrangements

The fair value at the grant date of the employee share options is expensed on a straight-line basis over the vesting period, based on the Group’s best estimates of the number of shares or options that are expected to ultimately vest, with a corresponding increase in capital surplus - employee share options It is recognized as an expense in full at the grant date if vested immediately. The grant date of issued ordinary shares for cash which are reserved for employees is the date on which the number of shares that the employees purchase is confirmed.

At the end of each reporting period, the Group revises its estimate of the number of employee share options expected to vest. The impact of the revision of the original estimates is recognized in profit or loss such that the cumulative expenses reflect the revised estimate, with a corresponding adjustment to capital surplus - employee share options.

  • u. Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

1) Current tax

According to the Income Tax Law, an additional tax of unappropriated earnings is provided for as income tax in the year the shareholders approve to retain earnings.

Adjustments of prior years’ tax liabilities are added to or deducted from the current year’s tax provision.

  • 2) Deferred tax

Deferred tax is calculated on temporary differences between the carrying amounts of assets and liabilities and the corresponding tax bases used in the computation of taxable profit.

Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized.

Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries and associates. Deferred tax assets arising from deductible temporary differences associated with such investments are only recognized to the extent

  • 170 -

that it is probable that there will be sufficient taxable profits against which to utilize the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the assets to be recovered. A previously unrecognized deferred tax asset is also reviewed at the end of each reporting period and recognized to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liabilities are settled or the assets are realized, based on tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

  • 3) Current and deferred taxes for the year

Current and deferred taxes are recognized in profit or loss, except when they relate to items that are recognized in other comprehensive income or directly in equity, in which case, the current and deferred taxes are also recognized in other comprehensive income or directly in equity respectively.

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the Group’s accounting policies, management is required to make judgments, estimations and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised if the revisions affect only that period or in the period of the revisions and future periods if the revisions affect both current and future periods.

  • a. Estimated impairment of financial assets - 2018

The provision for impairment of trade receivables and investments in debt instruments is based on assumptions about risk of default and expected loss rates. The Group uses judgement in making these assumptions and in selecting the inputs to the impairment calculation, based on the Group’s historical experience, existing market conditions as well as forward looking estimates as of the end of each reporting period. For details of the key assumptions and inputs used, see Note 10. Where the actual future cash inflows are less than expected, a material impairment loss may arise.

  • b. Estimated impairment of trade receivables - 2017

When there is objective evidence of impairment loss of receivables, the Group takes into consideration the estimation of the future cash flows of such assets. The amount of impairment loss is measured as the difference between such an asset’s carrying amount and the present value of its estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s

  • 171 -

original effective interest rate. Where the actual future cash flows are less than expected, a material impairment loss may arise.

  • c. Write-down of inventories

The net realizable value of inventories is the estimated selling price in the ordinary course of business less the estimated costs of completion and disposal. The estimation of net realizable value is based on current market conditions and historical experience with product sales of a similar nature. Changes in market conditions may have a material impact on the estimation of the net realizable value.

  • 172 -

6. CASH AND CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS
Cash on hand

Checking accounts and demand deposits

Pledged time deposits
Cash equivalents
Time deposits


Less: Pledged time deposits
Current (classified as other current assets)


Rate of interest per annum (%)
Cash in bank
Pledged time deposits		 December 31





2018
$ 2,091
2,512,010
2,000
273,131

2,789,232
(2,000)

$ 2,787,232

0.00-1.76
1.07		 2017
$ 2,049
1,767,744

12,883
983,083
2,765,759
(12,883)
$ 2,752,876
0.00-2.75
0.05-1.04

7. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS

The financial assets and liabilities at FVTPL were derivative financial instruments of foreign exchange forward contracts under IAS 39. They have been classified as mandatorily measured at FVTPL under IFRS 9. At the end of the reporting period, outstanding foreign exchange forward contracts not under hedge accounting were as follows:

Currency Maturity Date Notional Amount
December 31, 2018
Sell EUR/NT 2019.2.1-2019.3.22 EUR2,100/NTD73,964
D
Sell CNY/NT 2019.1.28-2019.4.16 CNY165,000/NTD728,0
D 28
December 31, 2017
Sell EUR/NT 2018.1.9-2018.2.21 EUR2,600/NTD92,486
D
Sell CNY/NT 2018.1.26-2018.2.26 CNY120,000/NTD540,7
D 34

The Group entered into foreign exchange forward contracts to manage exposures due to exchange rate fluctuations of foreign currency denominated assets and liabilities.

  • 173 -

8. FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME NON - CURRENT - 2018

INCOME NON - CURRENT - 2018
December 31,
Investments in equity instruments at
FVTOCI 2018
Domestic listed ordinary shares in emerging
market
HIWIN Mikrosystem Corp. (HIWIN
Mikrosystem) $ 719,894
Domestic unlisted ordinary shares
Taichung International Country Club 2,620
Sunengine Corporation Ltd. (Sunengine) -
King Kong Iron Work Ltd. -
Overseas unlisted ordinary shares
Kaland Holdings Corp. (Kaland) 208,326
HIWIN (Schweiz) GmbH
3,320
$ 934,160

The Investment Commission of Ministry of Economic Affairs (MOEA) approved the Corporation’s investment in Suzhou YIFU Finance Leasing Co., Ltd. (YIFU Finance). The investment in the amount of USD8,168 thousand was made through investments in Kaland and Cheer Tone Group Limited in British Virgin Islands (BVI). YIFU Finance mainly engages in finance leasing services.

These investments in equity instruments are not held for trading. Instead, they are held for medium to long-term strategic purposes. Accordingly, the management elected to designate these investments in equity instruments as at FVTOCI as they believe that recognizing short-term fluctuations in these investments’ fair value in profit or loss would not be consistent with the Group’s strategy of holding these investments for long-term purposes. These investments in equity instruments were classified as financial assets measured at cost under IAS 39. Refer to Notes 3 and 9 for information relating to their reclassification and comparative information for 2017.

In October 2018, the Group sold its shares in HIWIN Mikrosystem with a fair value of $14,750 thousand and, the Group transferred the unrealized gain of $8,396 thousand from other equity to retained earnings.

  • 174 -

9. FINANCIAL ASSETS MEASURED AT COST - NON-CURRENT - 2017

December 31, December 31,
Investee 2017
Domestic unlisted ordinary shares
HIWIN Mikrosystem $
63,440
Sunengine 15,338
Taichung International Country Club 2,100
King Kong Iron Work Ltd. -
80,878
Overseas unlisted ordinary shares
Kaland 236,266
HIWIN (Schweiz) GmbH 3,320
$ 320,464

Management believed that the fair value of the above unlisted equity investments held by the Group cannot be reliably measured due to the very significant range of reasonable fair value estimates; therefore, they were measured at cost less impairment at the end of reporting period.

10. NOTES RECEIVABLE AND TRADE RECEIVABLES

NOTES RECEIVABLE AND TRADE RECEIVABLES
Notes receivable from unrelated parties
At amortized cost
Gross carrying amount

Less: Allowance for impairment loss


Trade receivables from unrelated parties
At amortized cost
Gross carrying amount

Less: Allowance for impairment loss

 December 31





2018
$ 1,034,168
(2,022)

$ 1,032,146

$ 5,040,320
(18,285)

$ 5,022,035
 2017
$ 798,833
(6,749)
$ 792,084
$ 3,606,959
(18,622)
$ 3,588,337
  • 175 -

a. Notes receivable

The aging of notes receivable for the Group was as follows:

Not past due

Past due

 December 31 December 31


2018
$ 1,034,168
-

$ 1,034,168
 2017
$ 798,833
-
$ 798,833

The above aging schedule was based on the past due days.

  • b. Trade receivables

For the year ended December 31, 2018

The Group determines the credit period of sales of goods based on the counterparty’s credit rating, location and transaction terms.

In order to minimize credit risk, the 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 allowance is made for possible irrecoverable amounts. In this regard, the management believes the Group’s credit risk was significantly reduced.

The Group applies the simplified approach to providing for expected credit losses prescribed by IFRS 9, which permits the use of lifetime expected loss provision for all trade receivables. The expected credit losses on trade receivables are estimated by reference to past default experience of the debtor and an analysis of the debtor’s current financial position, adjusted for general economic conditions of the industry in which the debtors operate and an assessment of both the current as well as the forecast direction of economic conditions at the reporting date. As the Group’s historical credit loss experience does not show significantly different loss patterns for different customer segments, the provision for loss allowance based on past due status is not further distinguished according to the Group’s different customer base.

The Group writes off a trade receivable when there is information indicating that the debtor is in severe financial difficulty and there is no realistic prospect of recovery. For trade receivables that have been written off, the Group continues to engage in enforcement activity to attempt to recover the receivables due. Where recoveries are made, these are recognized in profit or loss.

The following table details the loss allowance of trade receivables.

December 31, 2018

Expected credit loss rate
Gross carrying amount

Loss allowance
(Lifetime ECL)

Amortized cost
 Not Past Due
0.001%-0.1%
$ 4,469,106

(3,986)

$ 4,465,120
 1 to 120 Days
121 to 360 Days Over 360 Days
0.01%-40%
2%-100%
10%-100%
$ 541,941 $ 15,727 $ 13,546

(3,387)

(3,268)

(7,644)

$ 538,554
$ 12,459
$ 5,902
 Total
$ 5,040,320

(18,285)
$ 5,022,035
  • 176 -

The movements of the loss allowance were as follows (other receivables are classified as other noncurrent assets):


current assets):

Balance at January 1, 2018 per IAS 39

Adjustment on initial application of IFRS
9
Balance at January 1, 2018 per IFRS 9
Net remeasurement of loss allowance
Amounts written off
Foreign exchange translation gains and
losses
Balance at December 31, 2018

For the year ended December 31, 2017		 For the Year Ended December 31, 2018
Notes
Receivable
Trade
Receivables
Other
Receivables



$ 6,749 $ 18,622 $ 13,697

-

-

-
6,749
18,622
13,697
(4,723)
20,472
-
-
(21,628)
-

(4)

819

-
$ 2,022
$ 18,285
$ 13,697

The Group determines the credit period of sales of goods based on the counterparty’s credit rating, location and transaction terms. In determining the recoverability of a trade receivable, the Group considered any change in the credit quality of the trade receivable since the date credit was initially granted to the end of the reporting period. Allowance for impairment loss was recognized based on estimated irrecoverable amounts determined by reference to past default experience of the counterparties and an analysis of their current financial position.

The aging of receivables from unrelated parties was as follows:

December 31,
2017
Not past due $ 3,416,345
1-30 days 135,418
31- 60 days 13,677
61-120 days 4,952
121-180 days 17,419
More than 180 days
19,148
$ 3,606,959

The above aging schedule was based on the past due days.

  • 177 -

The movements of the loss allowance were as follows (other receivables are classified as other non-current assets):


Balance at January 1, 2017

Impairment loss recognized (reversed) on
receivables
Amounts written off
Foreign exchange translation gains and
losses
Balance at December 31, 2017
 For the Year Ended December 31, 2017
Notes
Receivable
Trade
Receivables
Other
Receivables



$ 5,073 $ 88,656 $ 13,697
1,721
(54,817)
-
-
(11,553)
-

(45)

(3,664)

-
$ 6,749
$ 18,622
$ 13,697

Trade receivables include amounts that are past due but for which the Group has not recognized a specific allowance for doubtful receivables after the assessment since there has not been a significant change in the credit quality of its customers and the amounts are still considered recoverable.

The aging of receivables that were past due but not impaired was as follows:

December 31, December 31,
2017
1-30 days $
4,237
31-60 days 664
$
4,901

The aging of trade receivables that were impaired was as follows:

The aging of trade receivables that were impaired was as follows:
December 31,
2017
1-30 days $ 131,181
31-60 days 13,013
61-120 days 4,952
121-180 days 17,419
More than 180 days
19,148
$ 185,713

The above aging of trade receivables before deducting the allowance for impairment loss was based on the past due days.

  • 178 -

11. INVENTORIES

Merchandise

Finished goods

Work in process

Raw materials and supplies

Inventory in transit

 December 31 December 31





2018
$ 3,427
2,844,562
2,084,429
3,614,625
386,688

$ 8,933,731
 2017
$ 16,135
1,648,349
1,536,234
1,876,093
317,577
$ 5,394,388

The cost of inventories recognized as cost of goods sold for the years ended December 31, 2018 and 2017 was $17,703,549 thousand and $13,582,126 thousand, respectively.

The cost of inventories recognized as cost of goods sold for the years ended December 31, 2018 and 2017 included inventory write-downs (reversal of inventory write-downs) of $118,734 thousand and $(108,015) thousand, and unallocated fixed overhead of $244,814 thousand and $185,720 thousand, respectively. Previous write-downs were reversed as a result of increased selling prices in markets and consumption of inventory.

  • 179 -

12. SUBSIDIARIES

a. Subsidiaries included in the consolidated financial statements

Subsidiaries included in the consolidated financial statements
Investor
Investee
Main Business
The Corporation
HIWIN Corporation, U.S.A.
(“HIWIN USA”)
Manufacture and sale of aerospace
parts, ballscrews, linear guideways
and industrial robots
HIWIN Corporation, Japan
(“HIWIN Japan”)
Manufacture and sale of aerospace
parts, ballscrews, linear guideways
and industrial robots
HIWIN GmbH
(“HIWIN Germany”)
Manufacture and sale of aerospace
parts, ballscrews, linear guideways
and industrial robots
Eterbright Solar Corporation
(“Eterbright”)
Research, development, design,
manufacture and sale of solar cell,
electronic components, electric
power supply, electric transmission
and power distribution machinery
products
HIWIN Singapore Pte. Ltd.
(“HIWIN Singapore”)
Manufacture and sale of aerospace
parts, ballscrews, linear guideways
and industrial robots
HIWIN Corporation Co., Ltd.
(“HIWIN Korea”)
Manufacture and sale of aerospace
parts, ballscrews, linear guideways
and industrial robots
HIWIN Technologies (China)
Corporation (“HIWIN
China”)
Manufacture and sale of aerospace
parts, ballscrews, linear guideways
and industrial robots
Luren Precision Co., LTD
(“Luren”)
Research, development, produce,
manufacture and sale of gear
cutting tools and machinery
HIWIN Healthcare Corp.
Sale of medical robot
HIWIN S.R.L. (“HIWIN Italy”) Sale of aerospace parts, ballscrews,
linear guideways and industrial
robots
Matrix Machine Tool
(Coventry) Limited (Matrix)
Design, integrated application,
research, development,
manufacture and sale of thread
forming machinery
HIWIN Germany HIWIN Italy
Sale of aerospace parts, ballscrews,
linear guideways and industrial
robots
Luren
Luren Precision (Japan) Inc.
(“Luren Japan”)
Sale of gear cutting tools and
machinery
Luren Precision Machinery
(Shanghai) Co., Ltd.
(“Luren Shanghai”)
Sale of gear cutting tools and
machinery
Luren Precision Chicago Co.,
Ltd. (“Luren USA”)
Sale of gear cutting tools and
machinery		 % of Ownership
December 31
2018
2017
100
100
100
100
100
100
74
65
100
100
100
100
100
100
58
48
100
100
100
94
52
-
-
6
-
100
100
100
100
100

Luren USA are not major subsidiaries; its financial statements have not been audited. The management believes that an audit of the financial statements of Luren USA would not result in significant impact on the Group’s consolidated financial statements.

The Corporation proceeds 6% of HIWIN Italy’s shares which were owned by HIWIN Germany with the amount of $228,540 thousand by return of capital from HIWIN Germany.

Luren Precision (Japan) Inc. has been liquidated in June 2018.

  • 180 -

  • b. Details of subsidiaries that have material non-controlling interests

Name of Subsidiary
Eterbright
Luren
Matrix		 Proportion of Ownership and
Voting Rights Held by Non-
controlling Interests
December 31
2018
2017
26%
35%
42%
52%
48%
-

See Tables 9 and 10 for the information on place of incorporation and principal place of business.

Name of Subsidiary
Eterbright

Luren

Matrix

 Loss and Comprehensive
Loss Allocated to Non-
controlling Interests
For the Year Ended
December 31
2018
2017
$(378,881) $(448,380)
(107,130) (40,211)
(18,404)

-

$(504,415)
$(488,591)
 Loss and Comprehensive
Loss Allocated to Non-
controlling Interests
For the Year Ended
December 31
2018
2017
$(378,881) $(448,380)
(107,130) (40,211)
(18,404)

-

$(504,415)
$(488,591)
 Accumulated
Non-controlling Interests		 Accumulated
Non-controlling Interests		 Accumulated
Non-controlling Interests
December 31



2018
$(378,881)
(107,130)
(18,404)

$(504,415)

2018
$ 61,852
62,444
133,645

$ 257,941
 2017
$ 215,944
90,809
-
$ 306,753

Summarized financial information in respect of each of the Group’s subsidiaries that has material non-controlling interests is set out below. The summarized financial information below represents amounts before intragroup eliminations.

Eterbright


Current assets

Non-current assets

Current liabilities

Non-current liabilities

Equity

Equity attributable to:
Owners of Eterbright

Non-controlling interests of Eterbright

 December 31 December 31








2018

$ 329,932
1,192,712
(1,195,102)
(88,083)

$ 239,459

$ 177,607
61,852

$ 239,459
 2017
$ 352,284
1,734,994
(1,330,749)
(146,172)
$ 610,357
$ 394,413
215,944
$ 610,357
  • 181 -
Revenue

Net loss for the year

Other comprehensive loss for the year

Total comprehensive loss for the year

Loss and total comprehensive loss attributable to:
Owners of Eterbright

Non-controlling interests of Eterbright


Net cash inflow (outflow) from:
Operating activities

Investing activities
Financing activities

Net cash inflow (outflow)

Luren and Luren’s subsidiaries
Current assets

Non-current assets

Current liabilities

Non-current liabilities

Equity

Equity attributable to:
Owners of Luren

Non-controlling interests of Luren

 For the Year Ended December
31		 For the Year Ended December
31		 For the Year Ended December
31









2018
2017
$ 282,010
$ 266,298
$(1,070,898) $(1,241,729)
-

-
$(1,070,898)
$(1,241,729)
$ (692,017) $ (793,349)
(378,881)

(448,380)
$(1,070,898)
$(1,241,729)
$ (503,544) $ (374,553)
(94,065)
(236,318)
558,409

691,484
$ (39,200)
$ 80,613
December 31







2018
$ 718,689

593,238

(810,474)
(345,078)

$ 156,375

$ 90,400
65,975

$ 156,375
 2017
$ 713,428

526,087

(718,688)
(338,252)
$ 182,575
$ 88,092
94,483
$ 182,575
  • 182 -
Revenue

Net loss for the year

Other comprehensive income (loss) for the year

Total comprehensive loss for the year

Loss attributable to:
Owners of Luren

Non-controlling interests of Luren


Total comprehensive loss attributable to:
Owners of Luren

Non-controlling interests of Luren


Net cash inflow (outflow) from:
Operating activities

Investing activities

Financing activities

Net cash inflow (outflow)

Matrix


Current assets
Non-current assets
Current liabilities
Non-current liabilities
Equity
Equity attributable to:
Owners of Matrix
Non-controlling interests of Matrix		 For the Year Ended December
31		 For the Year Ended December
31














2018
2017
$ 550,151
$ 686,929
$ (230,617) $ (70,310)
4,417

(4,043)
$ (226,200)
$ (74,353)
$ (121,448) $ (33,531)
(109,169)

(36,779)
$ (230,617)
$ (70,310)
$ (118,927) $ (35,482)
(107,273)

(38,871)
$ (226,200)
$ (74,353)
$ (106,063) $ (108,879)

(93,538)
(230,542)
208,038

296,534
$ 8,437
$ (42,887)
December 31, 2018
$ 317,668
178,297
(65,779)

(124,014)
$ 306,172
$ 158,409

147,763
$ 306,172
  • 183 -
For the Six Months Ended For the Six Months Ended
December 31,
2018
Revenue $
70,461
Net income for the period $
396
Other comprehensive loss for the period (8,504)
Total comprehensive loss for the period $ (8,108)
Loss attributable to:
Owners of Matrix $
204
Non-controlling interests of Matrix 192
$
396
Total comprehensive loss attributable to:
Owners of Matrix $ (3,822)
Non-controlling interests of Matrix (4,286)
$ (8,108)
Net cash inflow (outflow) from:
Operating activities $ 120,693
Investing activities (105,257)
Financing activities 108,484
Net cash inflow $ 123,920

13. INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD

Associates that are not individually materials

The Group's share of:
Profit for the year

Other comprehensive income (loss) for the year

Total comprehensive income for the year
 December 31 December 31
2018
2017
$ 179,532
$ 161,910
For the Year Ended
December 31


2018
$ 29,611
-

$ 29,611
 2017
$ 23,399
-
$ 23,399

Except for HIWIN S.R.O., investments accounted for by the equity method and the share of profit or loss and other comprehensive income of those investments were calculated based on the financial statements that have been audited. Management believes there is no material impact on the equity method accounting or the calculation of the share of profit or loss and other comprehensive income, from the financial statements of HIWIN S.R.O. that have not been audited.

  • 184 -

14. PROPERTY, PLANT AND EQUIPMENT

Cost
Land

Buildings and improvements
Machinery and equipment

Transportation equipment
Leased assets
Leasehold improvements
Miscellaneous equipment
Construction in progress
Prepayments for land


Accumulated depreciation
and impairment
Buildings and improvements
Machinery and equipment

Transportation equipment

Leased assets

Leasehold improvements

Miscellaneous equipment

 For the Year Ended December 31, 2018 For the Year Ended December 31, 2018











Beginning
Balance
Acquisitions
through
Business
Combinations
$ 3,920,528 $ 64,336

7,537,359
113,165
12,164,422
28,251
162,989
-
2,203
4,607
105,614
-
1,930,596
10,744
3,525,700
-

-

-

29,349,411
$ 221,103

1,290,229 $ -
5,553,545
26,850
79,561
-
2,203
3,668
53,266
-

1,066,776

8,980


8,045,580
$ 39,498

$ 21,303,831		 Additions
$ 4,371

146,450

1,061,323

45,002

-

7,782

268,252

2,323,421

23,112

$ 3,879,713

$ 237,970

1,626,238

26,763

266

42,133

382,540

$ 2,315,910
 Disposals
Reclassified
Amount
Translation
Adjustments
$ - $ - $ 891

(1,174 )
2,223,696
(21,510 )

(628,851 )
2,056,255
(2,586 )

(9,369 )
(3,082 )
(1,055 )

-
-
(8 )

(3,635 )
-
680

(59,834 )
195,240
442

- (2,236,387 )
(2,125 )

-

-

-

$ (702,863)
$ 2,235,722
$ (25,271)

$ (1,174 ) $ - $ (1,306 )

(607,387 )
-
(415 )

(7,312 )
(1,753 )
(488 )

-
-
12

(2,331 )
-
712

(51,082)

1,753

703

$ 669,286
$ -
$ (782)

 Ending
Balance
$ 3,990,126

9,997,986
14,678,814

194,485

6,802

110,441

2,345,440

3,610,609

23,112

34,957,815


1,525,719

6,598,831

96,771

6,149

93,780

1,409,670


9,730,920

$ 25,226,895
Cost
Land

Buildings and improvements
Machinery and equipment

Transportation equipment
Leased assets
Leasehold improvements
Miscellaneous equipment

Construction in progress

Prepayments for land


Accumulated depreciation
and impairment
Buildings and improvements
Machinery and equipment

Transportation equipment

Leased assets

Leasehold improvements

Miscellaneous equipment


 For the Year Ended December 31, 2017 For the Year Ended December 31, 2017 For the Year Ended December 31, 2017














Beginning
Balance
$ 3,862,080
6,730,210
10,889,205
141,078
3,223
113,837
1,569,673
1,462,767

63,858

24,835,931

1,113,534
5,052,136
69,428
39
62,602

742,163

7,039,902

$17,796,029		 Additions
$ 639

40,349

406,130

29,159

-

11,784

147,043
2,815,550

-

$ 3,450,654

$ 172,090
1,556,035

26,647

-

26,929

404,623

$ 2,186,324
 Disposals

$ -

(373)
(1,060,505)

(17,591)

(911)

(37,911)

(80,556)

-

-

$ (1,197,847)

$ (223)
(1,055,296)

(16,271)

(911)

(37,814)

(80,073)

$ (1,190,588)
 Reclassified
Amount
Translation
Adjustments
$ 63,858 $ (6,049)

741,520
25,653
1,918,495
11,097

6,142
4,201

-
(109)

18,864
(960)

293,246
1,190

(742,785)
(9,832)

(63,858)

-

$ 2,235,482
$ 25,191

$ - $ 4,828

(1,639)
2,309

(2,039)
1,796

3,135
(60)

2,614
(1,065)

487

(424)

$ 2,558
$ 7,384

 Ending
Balance
$ 3,920,528
7,537,359
12,164,422

162,989

2,203

105,614
1,930,596
3,525,700

-
29,349,411
1,290,229
5,553,545

79,561

2,203

53,266
1,066,776
8,045,580
$21,303,831

As a result of the declining selling price of the products of Eterbright due to strong competition, the estimated future cash flows expected from the related equipment decreased. Eterbright carried out a review of the recoverable amount of that related equipment and determined that the carrying amount exceeded the recoverable amount. The review led to the recognition of an impairment loss of $424,000 thousand and $500,000 thousand, respectively, which was recognized as impairment loss in the year ended December 31, 2018 and 2017. Eterbright determined the recoverable amount

  • 185 -

of the relevant assets on the basis of their value in use. The discount rate used in measuring the value in use was 6.96% and 6.78% per annum, respectively.

The above items of property, plant and equipment are depreciated on a straight-line basis over the estimated useful life of the asset:

Buildings and improvements Main buildings 20-55 years Electrical power equipment 35 years Engineering system 8-55 years Machinery and equipment Machinery equipment 3-20 years Inspection equipment 3-10 years Transportation equipment 2-10 years Leased assets 5 years Leasehold improvements 3-15 years Miscellaneous equipment 3-15 years

Property, plant and equipment pledged as collateral for bank borrowings were set out in Note 30.

15. PREPAYMENTS FOR MACHINERY AND EQUIPMENT

The aging of prepayments for machinery and equipment was as follows:

The Date of Initial Cost Contribution
Within 1 year

1-2 years
2-5 years
More than 5 years

 December 31 December 31


2018
$ 1,803,689
872,359
273,966
14,997

$ 2,965,011
 2017
$ 1,177,543

361,833

294,577
40,025
$ 1,873,978

In order to achieve expertise and mastery in the key manufacturing technology, reduce product costs and improve the autonomy of equipment, the Group designs, develops, and assembles equipment by itself. The prepayments for machinery and equipment include both internallydeveloped and outsourced equipment.

16. PREPAYMENTS FOR LEASE

PREPAYMENTS FOR LEASE
Current (classified as other current asset)

Non-current

 December 31


2018
$ 3,547
163,314

$ 166,861
 2017
$ 3,621
170,331
$ 173,952

The prepayment for lease is land use right of HIWIN China. Within the land use right usage period, the holder of right has the right of usufruct, ownership transfer and sublease and is responsible for paying taxes and dues levied on the holding and use of the land use right. The leased land is utilized to build manufacturing facilities, research and development center and office buildings.

Prepayments for lease pledged as collateral for bank borrowings were set out in Note 30.

  • 186 -

17. BORROWINGS

a. Short-term borrowings

Secured borrowings (Note 30)
Working capital loans

Loans for export sales
Loans for purchasing raw material
Usance letters of credit


Unsecured borrowings
Line of credit borrowings


Rate of interest per annum (%)
Working capital loans
Loans for export sales
Loans for purchasing raw material
Usance letters of credit
Line of credit borrowings		 December 31 December 31




2018
$ 1,575,944
820,500
48,334
-

2,444,778
3,750,000

$ 6,194,778

0.88-4.10
0.80-1.56
1.06-1.50
-
0.82-0.98		 2017
$ 1,414,018
1,037,540

10,052
85,308
2,546,918
2,404,519
$ 4,951,437
1.43-2.89
0.80-1.93
1.76
0.84-1.93
0.85-1.81

b. Long-term borrowings

Secured borrowings(Note 30)
Secured loans

Unsecured borrowings
Unsecured loans


Less: Current portion

Long-term borrowings

Rate of interest per annum (%)
Secured loans
Unsecured loans		 December 31 December 31




2018
$ 7,754,076
57,496

7,811,572
(1,799,826)

$ 6,011,746

1.02-4.90
1.50-2.10		 2017
$ 8,255,932
585,500
8,841,432
(1,754,159)
$ 7,087,273
1.02-4.90
1.14-2.10
  • 187 -

18. OTHER PAYABLES

OTHER PAYABLES
Payables for salaries and bonuses

Payables for compensation to employees
Payables for remuneration to directors
Payables for annual leave
Payables for purchases of building and equipment
Others

 December 31


2018
$ 1,182,992
514,662
246,182
179,312
63,850
702,504

$ 2,889,502
 2017
$ 720,282

245,035

115,536

146,897

66,297
450,874
$ 1,744,921

19. RETIREMENT BENEFIT PLANS

a. Defined contribution plans

The Corporation, Eterbright and Luren adopted a pension plan under the Labor Pension Act (the LPA), which is a state-managed defined contribution plan. Under the LPA, an entity makes monthly contributions to employees’ individual pension accounts at 6% of monthly salaries and wages.

HIWIN Germany, HIWIN Japan, HIWIN Singapore, HIWIN Korea, HIWIN China, HIWIN Italy, Matrix and Luren Shanghai have pension plans which pay for an annuity and certain types of insurance under the local regulations.

HIWIN USA and Luren USA have defined contribution pension plans, which are independently administered.

b. Defined benefit plans

The defined benefit plans adopted by the Corporation and Luren of the Group in accordance with the Labor Standards Law is operated by the government of the ROC. Pension benefits are calculated on the basis of the length of service and average monthly salaries of the 6 months before retirement. The Corporation and Luren contribute amounts equal to 2% and 4%, respectively of total monthly salaries and wages to a pension fund administered by the pension fund monitoring committee. Pension contributions are deposited in the Bank of Taiwan in the committee’s name. Before the end of each year, the Group assesses the balance in the pension fund. If the amount of the balance in the pension fund is inadequate to pay retirement benefits for employees who conform to retirement requirements in the next year, the Group is required to fund the difference in one appropriation that should be made before the end of March of the next year. The pension fund is managed by the Bureau of Labor Funds, Ministry of Labor (“the Bureau”); the Group has no right to influence the investment policy and strategy.

  • 188 -

The amounts included in the consolidated balance sheets in respect of the Group’s defined benefit plans were as follows:


benefit plans were as follows:
Present value of defined benefit obligation

Fair value of plan assets

Net defined benefit liabilities
 December 31


2018
$ 447,382
(136,519)

$ 310,863
 2017
$ 456,443
(136,586)
$ 319,857

Movements in net defined benefit liability were as follows:

Present Value
of the Defined Fair Value of Net Defined
Benefit the Plan Benefit
Obligation Assets Liabilities
Balance at January 1, 2017
 $ 403,760 $ (128,373)
 $ 275,387
Service cost
Current service cost
4,647		 -
4,647
Net interest expense (income)
6,238
(2,026)
4,212
Recognized in profit or loss
10,885
(2,026)
8,859
Remeasurement
Return on plan assets (excluding
amounts included in net interest)
-		 460 460
Actuarial loss - changes in demographic
assumptions
599		 - 599
Actuarial loss - changes in financial
assumptions
17,569		 - 17,569
Actuarial loss - experience adjustments
34,664		 -
34,664
Recognized in other comprehensive
income
52,832
460
53,292
Contributions from the employer
-
(17,541)
(17,541)
Benefits paid
(11,034)
10,894
(140)
Balance at December 31, 2017
456,443
(136,586)
319,857
Service cost
Current service cost
4,587		 -
4,587
Net interest expense (income)
5,667
(1,706)
3,961
Recognized in profit or loss
10,254
(1,706)
8,548
Remeasurement
Return on plan assets (excluding
amounts included in net interest)
-		 (3,698) (3,698)
Actuarial profit - changes in
demographic assumptions
(3,492)		 - (3,492)
Actuarial loss - changes in financial
assumptions
13,129		 - 13,129
Actuarial loss - experience adjustments
6,671		 -
6,671
Recognized in other comprehensive
income
16,308
(3,698)
12,610
  • 189 -
Contributions from the employer

Benefits paid

Balance at December 31, 2018
-
(35,623)

$ 447,382
(22,368)
27,839

$ (136,519)
(22,368)
(7,784)
$ 310,863

Through the defined benefit plans under the Labor Standards Law, the Group is exposed to the following risks:

  • 1) Investment risk: The plan assets are invested in domestic and foreign equity and debt securities, bank deposits, etc. The investment is conducted at the discretion of the Bureau or under the mandated management. However, in accordance with relevant regulations, the return generated by plan assets should not be below the interest rate for a 2-year time deposit with local banks.

  • 2) Interest risk: A decrease in the government bond interest rate will increase the present value of the defined benefit obligation; however, this will be partially offset by an increase in the return on the plans’ debt investments.

  • 3) Salary risk: The present value of the defined benefit obligation is calculated by reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the present value of the defined benefit obligation.

The actuarial valuations of the present value of the defined benefit obligation were carried out by qualified actuaries. The significant assumptions used for the purposes of the actuarial valuations were as follows:


valuations were as follows:
Discount rates
Expected rates of salary increase

Turnover rate
 December 31
2018
2017
1.00%
1.25%
2.00%, 3.00% 2.00%, 3.00%
1.14%, 0.44%
1.22%

If possible reasonable changes in each of the significant actuarial assumptions will occur and all other assumptions will remain constant, the present value of the defined benefit obligation would increase (decrease) as follows:

The Corporation

The Corporation
Discount rate
0.25% increase

0.25% decrease

Expected rate of salary increase
0.25% increase

0.25% decrease

Turnover rate
10% increase

10% decrease
 December 31





2018
$ (10,234)

$ 10,651

$ 10,518

$ (10,610)

$ (556)

$ 559
 2017
$ (10,549)
$ 10,987
$ 10,877
$ (10,499)
$ (752)
$ 757
  • 190 -

Luren

Luren
December 31,
2018
Discount rate
0.25% increase $ (2,164)
0.25% decrease $
2,259
Expected rate of salary increase
0.25% increase $
2,209
0.25% decrease $ (2,128)
Turnover rate
10% increase $ (15)
10% decrease $
15
December 31,
2017
Discount rate
0.50% increase $ (6,468)
0.50% decrease $
7,140
Expected rate of salary increase
0.50% increase $
6,977
0.50% decrease $ (6,393)

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 expected contributions to the plan for the next year

The average duration of the defined benefit obligation		 December 31 December 31
2018
$ 11,925

11 years,
12 years
 2017
$ 12,197
11.1 years,
15 years

20. EQUITY

  • a. Ordinary share
Number of shares authorized (in thousands)

Shares authorized

Number of shares issued and fully paid (in thousands)

Shares issued
 December 31 December 31



2018
500,000

$ 5,000,000

300,562

$ 3,005,620
 2017
300,000
$ 3,000,000
280,157
$ 2,801,573
  • 191 -

Fully paid ordinary shares, which have a par value of $10, carry one vote per share and carry a right to dividends.

On May 10, 2018, the Corporation’s board of directors resolved to issue 12,000 thousand ordinary shares, with a par value of NT$10, for a consideration of NT$250 per share. On June 28, 2018, the above transaction was approved by the FSC, and the subscription base date was determined as at September 5, 2018 by the board of directors.

  • b. Capital surplus

The capital surplus arising from shares issued in excess of par may be used to offset a deficit; in addition, when the Corporation has no deficit, such capital surplus may be distributed as cash dividends or transferred to share capital (limited to a certain percentage of the Corporation’s capital surplus and to once a year).

Capital surplus arising from expired employee share option (issuance of ordinary shares for cash) is used to offset a deficit only.

  • c. Retained earnings and dividends policy

Under the dividend policy as set forth in the amended Articles, where the Corporation made profit in a fiscal year, the profit shall be first utilized for paying taxes, offsetting losses of previous years, setting aside as legal reserve 10% of the remaining profit, setting aside special reserve in accordance with the laws and regulations, setting at most 6% as dividends, and then any remaining profit together with any undistributed retained earnings shall be used by the Corporation’s board of directors as the basis for proposing a distribution plan, which should be resolved in the shareholders’ meeting for the distribution of dividends and bonuses to shareholders. For the policies on distribution of employees’ compensation and remuneration of directors after the amendment, refer to c. Employees’ compensation and remuneration of directors in Note 21-c.

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

The appropriations of earnings for 2017 and 2016 which have been approved in the shareholders’ meetings on June 27, 2018 and June 28, 2017, respectively, were as follows:


Legal reserve

Appropriation (reversal)
special reserve
Cash dividends

Share dividends		 Appropriation of Earnings
For the Year Ended
December 31
2017
2016
$ 273,802 $ 132,682
(14,593) 173,909
980,551 439,462
84,047
54,933		 Dividends Per Share (NT$)
For the Year Ended
December 31
2017
2016



$ 3.5
$ 1.6

0.3
0.2
  • 192 -

The appropriation of earnings for 2018 had been proposed by the Corporation’s board of directors on March 26, 2019. The appropriation and dividends per share were as follows:

Appropriation Dividends Per
of Earnings Share (NT$)
Legal reserve
$ 539,226
Reversal special reserve (250,940)
Cash dividends 2,103,934
$ 7.0
Share dividends 90,169
0.3

The appropriation of earnings for 2018 are subject to the resolution in the shareholders’ meeting to be held on June 28, 2019.

21. NET PROFIT FROM CONTINUING OPERATIONS

  • a. Information about capitalized interest

Capitalized interest

Capitalization rates
 For the Year Ended December
31
2018
2017
$ 55,947 $ 42,723
1.38%-4.90% 0.86%-4.90%
  • b. Employee benefits expense, depreciation and amortization expenses
Operating Operating
Costs Expenses Total
For the Year Ended December 31, 2018
Short-term employee benefits
 $ 4,663,793 $ 2,553,123 $ 7,216,916
Post-employment benefits
Defined contribution plans 140,245
93,028
233,273
Defined benefit plans 6,823
1,725
8,548
Other employee benefits 238,453
133,126
371,579
Depreciation expenses
 1,475,461
289,096		 1,764,557
Amortization expenses 15,110
37,742
52,852
For the Year Ended December 31, 2017
Short-term employee benefits
 3,396,301 1,882,741 5,279,042
Post-employment benefits
Defined contribution plans 101,290
68,243
169,533
Defined benefit plans 7,019
1,840
8,859
Other employee benefits 139,837
58,980
198,817
Depreciation expenses
 1,336,759
245,190		 1,581,949
Amortization expenses 8,529
23,099
31,628

  • 193 -

  • c. Employees’ compensation and remuneration of directors

The Corporation accrued employees’ compensation and remuneration of directors at rates of no less than 1% and no higher than 4%, respectively, of net profit before income tax, employees’ compensation, and remuneration of directors. The employees’ compensation and remuneration of directors for the years ended December 31, 2018 and 2017 which have been approved by the Corporation’s board of directors on March 26, 2019 and March 22, 2018, respectively, were as follows:


follows:
Cash

Employees’ compensation
Remuneration of directors		 For the Year Ended December 31
2018
Accrual rate
Amount


7.0% $ 492,363
3.5%
246,182		 2017
Accrual rate
Amount

6.6% $ 231,072

3.3%
115,536

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

There was no difference between the actual amounts of employees’ compensation and remuneration of directors paid and the amounts recognized in the consolidated financial statements for the year ended December 31, 2017 and 2016.

Information on the employees’ compensation and remuneration of directors resolved by the Corporation’s board of directors in 2019 and 2018 is available at the Market Observation Post System website of the Taiwan Stock Exchange.

22. TAXES

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

Current tax
In respect of the current year

Income tax of unappropriated earnings

Adjustments for prior years

Deferred tax
In respect of the current year
Adjustments to deferred tax attributable to changes in tax
rates and laws
Income tax expense recognized in profit or loss
 For the Year Ended December
31		 For the Year Ended December
31		 For the Year Ended December
31




2018
$ 957,582
137,142
69,379

37,546
3,888

$ 1,205,537
 2017
$ 446,254

52,549
7,914

53,898
-
$ 560,615
  • 194 -

A reconciliation of accounting profit and income tax expense is as follows:


Income tax expense calculated at the statutory rate

Non-deductible expenses in determining taxable income
Tax-exempt income
Others
Income tax on unappropriated earnings
Investment tax credits used
Loss carryforwards used

Current tax

Unrecognized deductible temporary differences and loss
carryforwards
Adjustments to deferred tax attributable to changes in tax
rates and laws
Adjustments for prior years’ tax

Income tax expense recognized in profit or loss
 For the Year Ended December
31		 For the Year Ended December
31		 For the Year Ended December
31





2018
$ 1,700,554

1,490
(262,407)
(1,083)
137,142
(370,877)
(154,157)

1,050,662
81,608
3,888
69,379

$ 1,205,537
 2017
$ 656,471

258

(141,894)

3,461

52,549

(74,316)
-

496,529
56,172
-
7,914
$ 560,615

In 2017, the applicable corporate income tax rate used by the group entities in the ROC is 17%. However, the Income Tax Act in the ROC was amended in 2018, and the corporate income tax rate was adjusted from 17% to 20%, effective in 2018. In addition, the rate of the corporate surtax applicable to the 2018 unappropriated earnings will be reduced from 10% to 5%. The applicable tax rate used by subsidiaries in China is 25%. Tax rates used by other group entities operating in other jurisdictions are based on the tax laws in those jurisdictions.

As the status of the 2019 appropriation of earnings is uncertain, the potential income tax consequences of the 2018 unappropriated earnings are not reliably determinable.

  • b. Income tax expense (gain) recognized in other comprehensive income

Deferred tax
Effect of change in tax rate

In respect of the current year:
Translation of foreign operations
Remeasurement of defined benefit plans

 For the Year Ended December
31		 For the Year Ended December
31		 For the Year Ended December
31


2018
$ (11,232)
(8,437)
(3,251)

$ (22,920)
 2017
$ -

2,978
(8,357)
$ (5,379)
  • 195 -

c. Deferred tax assets and liabilities

Deferred tax assets and liabilities
Deferred tax assets
Temporary differences
Unrealized intercompany profit

Doubtful debts
Allowance for inventory devaluation
Payable for annual leave
Defined benefit obligation
Impairment loss on financial assets
Provisions
FVTPL financial liabilities
Exchange difference on foreign
operations
Deferred expenses
Unrealized foreign currency exchange
loss
Others


Deferred tax liabilities
Temporary differences
Unappropriated earnings of
subsidiaries
Unrealized foreign currency exchange
gain
Depreciation expenses
Intangible assets
Others

 For the Year Ended December 31, 2018





Opening
Balance
Recognized in
Profit or Loss
Recognized in
Other
Comprehensive
Income
$ 101,499 $ 134,080 $ -
3,096
(2,759)
-
38,852
23,635
-
18,178
6,215
-
21,609
(180)
5,403
8,226
(1,204)
-
5,335
2,328
-
423
5,487
-
51,457
-
17,517
3,512
4,013
-
90
(67)
-

9,919

4,961

-

$ 262,196
$ 176,509
$ 22,920

$ 201,265 $ 211,222 $ -
5,344
3,422
-
7,738
(4,083)
-
6,529
(866)
-

17,570

8,248

-

$ 238,446
$ 217,943
$ -
 Closing
Balance
$ 235,579

337

62,487

24,393

26,832

7,022

7,663

5,910

68,974

7,525

23

14,880
$ 461,625
$ 412,487

8,766

3,655

5,663

25,818
$ 456,389
  • 196 -
Deferred tax assets
Temporary differences
Unrealized intercompany profit

Doubtful debts
Allowance for inventory devaluation
Payable for annual leave
Defined benefit obligation
Impairment loss on financial assets
Provisions
FVTPL financial liabilities
Exchange difference on foreign
operations
Deferred expenses
Unrealized foreign currency exchange
loss
Others


Deferred tax liabilities
Temporary differences
Unappropriated earnings of
subsidiaries
Unrealized foreign currency exchange
gain
Depreciation expenses
Intangible assets
Others

 For the Year Ended December 31, 2017





Opening
Balance
Recognized in
Profit or Loss
Recognized in
Other
Comprehensive
Income
$ 69,241 $ 32,258 $ -
8,892
(5,796)
-
44,052
(5,200)
-
12,416
5,762
-
14,010
(758)
8,357
2,158
6,068
-
5,112
223
-
-
423
-
54,435
-
(2,978)
16,649
(13,137)
-
13,426
(13,336)
-

6,773

3,146

-

$ 247,164
$ 9,653
$ 5,379

$ 145,834 $ 55,431 $ -
132
5,212
-
-
7,738
-
6,904
(375)
-

22,025

(4,455)

-

$ 174,895
$ 63,551
$ -
 Closing
Balance
$ 101,499

3,096

38,852

18,178

21,609

8,226

5,335

423

51,457

3,512

90

9,919
$ 262,196
$ 201,265

5,344

7,738

6,529

17,570
$ 238,446

d. Deductible temporary differences and unused loss carryforwards for which no deferred tax assets have been recognized in the consolidated balance sheets

Investment loss

Deductible temporary difference
Loss carryforwards

 December 31 December 31


2018
$ 1,497,120
303,019
4,757,464

$ 6,557,603
 2017
$ 773,260

233,704
3,938,525
$ 4,945,489

  • 197 -

  • e. Information about unused loss carryforwards

Loss carryforwards as of December 31, 2018 comprised of:

Investee
Eterbright

HIWIN Japan

Luren

HIWIN Korea

HIWIN Singapore

HIWIN Italy

Matrix

 Unused
Amount
Expiry Year
$ 3,564,963
110-117

378,571
108-115

354,519
112-117

174,340
112-117

105,332
no limit

99,312
no limit
80,427
no limit
$ 4,757,464
  • f. Information about tax-exemption

As of December 31, 2018, profits attributable to the following expansion projects were exempted from income tax for a 5-year period:

Expansion of Construction Project Tax-exemption Period Cash injection in 2009 January 2016 to December 2020

  • g. Income tax assessments

The tax returns of the Corporation, Eterbright and Luren through 2016 have been assessed by the tax authorities.

23.EARNINGS PER SHARE

ARNINGS PER SHARE
Net profit
Attributable
to Number of
 Earnings Per
Owners of the Shares Share
(In
Corporation Thousands)
(NT$)
For the Year Ended December 31, 2018
Basic earnings per share
Profit for the year attributable to owners of
the Corporation
 $ 5,392,257
292,441
$18.44
Effect of potentially dilutive ordinary shares:
Employees’ compensation
-
2,358
Diluted earnings per share
Profit for the year attributable to owners of
the Corporation plus effect of potentially
dilutive common stock
 $ 5,392,257
294,799		 $18.29
  • 198 -
Net profit
Attributable
to Number of
 Earnings Per
Owners of the Shares Share
(In
Corporation Thousands)
(NT$)
For the Year Ended December 31, 2017
Basic earnings per share
Profit for the year attributable to owners of
the Corporation
 $ 2,738,019
288,562
$9.49
Effect of potentially dilutive ordinary shares:
Employees’ compensation
-
808
Diluted earnings per share
Profit for the year attributable to owners of
the Corporation plus effect of potentially
dilutive common stock
 $ 2,738,019
289,370		 $9.46

The weighted average number of shares outstanding used for the earnings per share computation was adjusted retroactively for the issuance of bonus shares on July 29, 2018. The basic and diluted earnings per share adjusted retrospectively for the year ended December 31, 2017 were as follows:

Unit: NT$ Per Share

Before After
Retrospective Retrospective
Adjustment Adjustment
Basic earnings per share $ 9.77
 $ 9.49
Diluted earnings per share $ 9.75
 $ 9.46

If the Group offered to settle compensation paid to employees in cash or shares, the Group assumed the entire amount of the compensation will be settled in shares and the resulting potential shares were included in the weighted average number of shares outstanding used in the computation of diluted earnings per share, as the effect is dilutive. Such dilutive effect of the potential shares is included in the computation of diluted earnings per share until the number of shares to be distributed to employees is resolved in the following year.

  • 199 -

24. BUSINESS COMBINATIONS

a. Subsidiaries acquired

Proportion of
Voting Equity Consideration
Date of Interests Transferred
Subsidiary Principal Activity Acquisition Acquired (%)
(Cash)
Matrix Design, integrated June 29, 2018 52 $240,480
application,
research,
development,
manufacture and
sale of thread
forming machinery

Matrix was acquired in order to obtain the key technologies of manufacturing equipment.

  • b. Assets acquired and liabilities assumed at the date of acquisition
Current assets
Cash and cash equivalents

Trade receivables
Inventories
Other current assets
Non-current assets
Property, plant and equipment
Other non-current assets
Current liabilities
Trade and other payables
Other current liability
Non-current liabilities
Other non-current liability


Goodwill arising on acquisition
Consideration transferred

Less: Fair value of identifiable net assets acquired

Goodwill arising on acquisition
 $ 21,630
2,947
99,952
48,211
181,605
1,073
(21,905)
(452)
(18,781)
$ 314,280
$ 240,480
(162,232)
$ 78,248

c. Goodwill arising on acquisition

The goodwill recognized in the acquisitions of Matrix mainly represents the control premium included in the cost of the combinations. In addition, the consideration paid for the combinations effectively included amounts attributed to the benefits of expected synergies, revenue growth, future market development and the assembled workforces of Matrix. These benefits are not recognized separately from goodwill because they do not meet the recognition criteria for identifiable intangible assets.

  • 200 -

  • d. Net cash outflow on the acquisition of subsidiaries

Consideration paid in cash

Less: Cash and cash equivalent balances acquired

 $ 240,480
(21,630)
$ 218,850

25. EQUITY TRANSACTIONS WITH NON-CONTROLLING INTERESTS

On December 31, 2018, the Corporation subscribed for additional new shares of Eterbright at a percentage different from its existing ownership percentage, increasing its continuing interest from 65% to 74%.

On November 30, 2018, the Corporation subscribed for additional new shares of Luren at a percentage different from its existing ownership percentage, increasing its continuing interest from 48% to 58%.

On March 2, 2017, the Corporation subscribed for additional new shares of Eterbright at a percentage different from its existing ownership percentage, increasing its continuing interest from 58% to 65%.

On June 30, September 29 and October 31, 2017, the Corporation acquired additional shares of Luren, increasing its continuing interest from 47% to 48%.

The above transactions were accounted for as equity transactions, since the Corporation did not cease to have control over the subsidiaries.

26. OPERATING LEASE ARRANGEMENTS

The Group’s future minimum lease payments on land, factory building, inventory warehouse and employee dormitory based on operating lease agreements are as follows:

Year
2019

2020
2021
2022
2023

 Amount
$ 131,736
89,531
73,520
37,133
31,822
$ 363,742

27. CAPITAL MANAGEMENT

To support the need to expand and enhance the plant and equipment, the Group has to maintain appropriate amount of capital. Therefore, the capital management of the Group focuses on ensuring that it has the necessary financial resources and operation plans to support operating

  • 201 -

funds, capital expenditure, research and development, repayment of debt and dividend payment in the future 12 months.

Key management personnel of the Group review the capital structure periodically. As part of this review, the key management personnel consider the cost of capital and the risks associated with each class of capital. Based on recommendations of the key management personnel, in order to balance the overall capital structure, the Group may adjust the amount of dividends paid to shareholders and the amount of new debt issued or existing debt redeemed.

28.FINANCIAL INSTRUMENTS

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

  • 1) Fair value hierarchy

December 31, 2018

The Company’s financial assets and liabilities at FVTPL are measured at fair value using Level 2 inputs, and the financial assets at FVTOCI are measured at fair value using Level 1 inputs and Level 3 inputs.

December 31, 2017

The Company’s financial assets and liabilities at FVTPL are measured at fair value using Level 2 inputs.

There were no transfers between Level 1 and 2 in the year ended December 31, 2017.

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

Financial Instruments Valuation Techniques and Inputs

Derivatives - foreign Discounted cash flow. currency forward contracts Future cash flows are estimated based on observable forward exchange rates at the end of the reporting period and contract forward rates, discounted at a rate that reflects the credit risk of various counterparties.

  • b. Categories of financial instruments
Categories of financial instruments
Financial assets
FVTPL
Mandatorily classified as at FVTPL

Held for trading		 December 31
2018
2017
$ 282 $ -
-
548
  • 202 -
Loans and receivables - 7,224,597
Financial assets at amortized cost 8,949,350
-
Held-to-maturity financial assets -
2,919
Financial assets measured at cost -
320,464
Financial assets at FVTOCI
Equity instruments 934,160
-
Financial liabilities
FVTPL
Mandatorily classified as at FVTPL 5,775
-
Held for trading -
3,038
Financial liabilities at amortized cost 22,498,191 19,850,157

The balances included loans and receivables measured at amortized cost, which comprise cash and cash equivalents, notes receivable (including from related parties), trade receivables (including from related parties) and refundable deposits.

The balances included financial assets measured at amortized cost, which comprise cash and cash equivalents, notes receivables (including from related parties), trade payables (including from related parties), financial assets at amortized cost non-current and refundable deposits.

The balances included financial liabilities measured at amortized cost, which comprise shortterm borrowings, notes payable, trade payables (including from related parties), other payables and long-term borrowings.

  • c. Financial risk management objectives and policies

The Group’s major financial instruments include equity and debt investments, trade receivables, trade payables and borrowings. The Group’s Corporate Treasury function provides services to the business, monitors and manages the financial risks relating to the operations of the Group. These risks include market risk (including foreign currency risk and interest rate risk), credit risk and liquidity risk.

The plans for material treasury activities are reviewed by the audit committee and the board of directors in accordance with procedures required by relevant regulations and internal controls.

  • 1) Market risk

The Group entered into some derivative financial instruments, mainly forward foreign exchange contracts, to manage its exposure to foreign currency risk on translation of sales and receivables that arise from export of precision component to USA, Germany, Japan and China.

There had been no change to the Group’s exposure to market risks or the manner in which these risks were managed and measured.

  • a) Foreign currency risk

The Group’s operating activities and net investment in foreign operations are denominated in foreign currencies. Consequently, the Group is exposed to foreign

  • 203 -

currency risk. To protect against reductions in value and the volatility of future cash flows caused by changes in foreign exchange rates, the Group utilizes foreign exchange forward contracts to hedge its currency exposure. These instruments help to reduce, but do not eliminate, the impact of foreign currency exchange rate movements.

Net investment in foreign operations is a strategic investment. Therefore, the Group does not hedge its investment in foreign operations.

The carrying amounts of the Group’s foreign currency denominated monetary assets and monetary liabilities and derivatives exposed to foreign currency risk at the end of the reporting period are set out in Note 32.

Sensitivity analysis

The Group was mainly exposed to the USD, EUR, JPY and CNY.

The sensitivity analysis of foreign currency risk used in reporting foreign currency risk internally to key management personnel mainly focuses on the foreign currency monetary items at the end of the reporting period. Assuming a 1% increase movement in the levels of the NTD against the relevant foreign currency, the post-tax profit for the years ended December 31, 2018 and 2017 would have decreased by $52,320 thousand and $40,437 thousand, respectively.

b) Interest rate risk

The Group is exposed to interest rate risk because entities in the Group borrowed funds floating interest rates.

The carrying amounts of the Group’s financial assets and financial liabilities with exposure to interest rates at the end of the reporting period were as follows:

Fair value interest rate risk
Deposits in bank
Cash flow interest rate risk
Deposits in bank
Short-term borrowings
Long-term borrowings		 December 31
2018
2017
$ 339 $ 371,751
2,642,345 2,316,026
6,194,778 4,951,437
7,811,572 8,841,432
Sensitivity analysis		 December 31

For floating rate liabilities, the analysis was prepared assuming the amount of the liability outstanding at the end of the reporting period was outstanding for the whole year. A 1% 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.

  • 204 -

If interest rates had been 1% higher and all other variables were held constant, the Group’s post-tax profit for the years ended December 31, 2018 and 2017 would have decreased by $90,912 thousand and $95,258 thousand, respectively.

2) Credit risk

Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in financial loss to the Group. As at the end of the reporting period, the counterparties are reputable organizations; thus, the Group is not expected to have a significant credit risk.

Trade receivables consisted of a large number of customers, spread across diverse industries. On-going credit evaluation is performed on the financial condition of trade receivables.

The Group’s concentration of credit risk by geographical locations was mainly in Asia, which accounted for 63% and 68% of the total trade receivables as of December 31, 2018 and 2017, respectively.

3) Liquidity risk

The Group manages liquidity risk by monitoring and maintaining a level of cash deemed adequate to finance the Group’s operations and mitigate the effects of fluctuations in cash flows. In addition, management monitors the utilization of bank borrowings and ensures compliance with loan covenants.

The Group relies on bank borrowings as a significant source of liquidity. As of December 31, 2018 and 2017, the Group had available unutilized bank loan facilities of $8,371,563 thousand and $8,045,164 thousand, respectively.

The following table details the Group’s remaining contractual obligations for its financial liabilities with agreed repayment periods. The tables below had been drawn up based on the undiscounted contractual maturities of the financial liabilities.


December 31, 2018
Non-derivative financial liabilities
Non-interest bearing

Variable interest rate liabilities


Derivative financial liabilities
Foreign exchange forward contracts		 Less Than
1 Year
$ 8,491,841
7,994,604

$16,486,445

$ 5,775
 1-5 Years
$ -
3,604,902

$ 3,604,902

$ -
 5+ Years
$ -
2,406,844
$ 2,406,844
$ -
  • 205 -

December 31, 2017
Non-derivative financial liabilities
Non-interest bearing

Variable interest rate liabilities


Derivative financial liabilities
Foreign exchange forward contracts		 Less Than
1 Year
$ 6,057,288
6,705,596

$12,762,884

$ 3,038
 1-5 Years
$ -
4,671,385

$ 4,671,385

$ -
 5+ Years
$ -
2,415,888
$ 2,415,888
$ -

29. TRANSACTIONS WITH RELATED PARTIES

Balances and transactions between the Corporation and its subsidiaries, which are related parties of the Corporation, have been eliminated on consolidation and are not disclosed in this note. Details of significant transactions between the Group and other related parties are disclosed below.

  • a. Related party name and categories
Related Party
HIWIN S.R.O.

Mega-Fabs Motion Systems Ltd. (Mega-Fabs)
Coventry Matrix Technologies Ltd.

HIWIN Mikrosystem

HIWIN Investment and Holding Corporation

HIWIN Technologies Foundation in Education
(HIWIN Foundation)

Taiwan Automation Intelligence and Robotics
Association

All Horng Gear Industry Co., Ltd

Taiwan Gong Ji Chang Co., Ltd
 Relationship with the Consolidated
Corporation
Associates
Associates
Others
Others
Others
Others
Others (non-related party from August 9,
2017.)
Others
Others
  • b. Operating transactions
Operating transactions
1) Sales of goods
Associates

Others

 For the Year Ended December
31


2018
$ 224,120
127,938

$ 352,058
 2017
$ 174,296
132,682
$ 306,978

Due to the specific differences of the products, the selling prices for related parties and those for third parties are not comparable. The selling price is primarily quoted at cost plus a reasonable margin according to the market price.

  • 206 -
2) Purchases of goods
Others

Associates

 For the Year Ended December
31		 For the Year Ended December
31		 For the Year Ended December
31


2018
$ 1,167,761
46

$ 1,167,807
 2017
$ 877,794
4
$ 877,798

The products purchased from related parties and those from third parties are not the same; therefore, their prices are not comparable.

3) Other operating transactions

Non-operating income - dividend income (classified as
other revenue)
Others

Non-operating income - other income
Others

Manufacturing and operating expenses
Others

Associates


Operating expenses - donations
HIWIN Foundation

4) Notes receivable
Others

5) Trade receivables
Associates

Others


6) Other receivables (classified as other current assets)
Others
 For the Year Ended December
31		 For the Year Ended December
31		 For the Year Ended December
31





2018
2017
$ 1,213
$ 344
$ 240
$ 270
$ 6,740 $ 11,451
4,226

-
$ 10,966
$ 11,451
$ 34,480
$ 17,500
December 31




2018
$ 1,449

$ 20,463
3,382

$ 23,845

$ 112
 2017
$ 2,835
$ 20,709
7,818
$ 28,527
$ 190
  • 207 -
7) Trade payables
Others

Associates


8) Other payables
Others

9) Other non-current liabilities
Others

c. Acquisition of property, plant and equipment		 December 31 December 31




2018
$ 179,292
-

$ 179,292

$ 1,809

$ 18,157
 2017
$ 241,120
655
$ 241,775
$ 438
$ -
Purchase Price
For the Year Ended December
31
2018
2017
Others
$ -
$ 2,050
d. Disposals of property, plant and equipment
Proceeds
Gain on Disposal
For the Year Ended
December 31
For the Year Ended
December 31
2018
2017
2018
2017
Others
$ 300
$ -
$ 20
$ -		 Purchase Price Purchase Price Purchase Price Purchase Price
For the Year Ended December
31
For the Year Ended
December 31
2018
$ 20
 2017
$ -

e. Compensation of key management personnel

Compensation of key management personnel
Short-term employee benefits

Post-employment benefits

Share-based payments

Other long-term employee benefits

 For the Year Ended December
31




2018
$ 492,262
1,066
2,281
1,583

$ 497,192
 2017
$ 307,938

4,070

-
1,675
$ 313,683

The remuneration of directors and key executives was determined by the remuneration committee with regard to the performance of individuals and market trends.

  • 208 -

30. ASSETS PLEDGED AS COLLATERAL OR FOR SECURITY

The following assets had been pledged or mortgaged as collateral for short-term and long-term bank loans:


loans:
Property, plant and equipment

Land use right
Pledge deposits (classified as other current assets)

 December 31


2018
$14,265,514
80,866
2,000

$14,348,380
 2017
$13,300,630

84,355
12,883
$13,397,868

31. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED COMMITMENTS

  • a. As of December 31, 2018 and 2017, unused letters of credit for purchases of raw materials and machinery and equipment amounted to $397,191 thousand and $222,912 thousand, respectively.

  • b. As of December 31, 2018 and 2017, the Group had a commitment to purchase property, plant and equipment for $1,892,393 thousand and $2,685,367 thousand, respectively.

32. 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:

Financial assets
Monetary items
USD

EUR
JPY
CNY
Non-monetary items
USD
ILS
Financial liabilities
Monetary items
USD
EUR
JPY
CNY		 December 31, 2018
Foreign
Currencies
Exchange
Rate
Carrying
Amount
$ 36,693
30.715
$ 1,127,027
46,251
35.20
1,628,020
3,260,177
0.2782
906,981
804,447
4.472
3,597,488
5,017
30.715
154,118
10,871
8.152
88,615
10,910
30.715
335,088
4,411
35.20
155,275
731,384
0.2782
203,471
5,732
4.472
25,633		 December 31, 2017
Foreign
Currencies
Exchange
Rate
Carrying
Amount
$ 26,881
29.76
$ 799,980

35,148
35.57
1,250,229

1,902,185
0.2642
502,557

602,109
4.565
2,748,626

8,168
29.76
243,080

8,729
8.566
74,775

6,284
29.76
187,009

2,221
35.57
79,003

559,025
0.2642
147,694

3,457
4.565
15,779
  • 209 -

The Group is mainly exposed to USD, EUR, JPY and CNY. The following information was aggregated by the functional currencies of the group entities, and the exchange rates between respective functional currencies and the presentation currency were disclosed. The significant (realized and unrealized) foreign exchange gains (losses) were as follows:

Foreign
Currencies
NTD
 For the Year Ended December 31 For the Year Ended December 31
2018
Exchange Rate
Net Foreign
Exchange
Gain
1 (NTD:NTD)
$ 47,077
 2017
Exchange Rate
Net Foreign
Exchange
Gain
1 (NTD:NTD)
$ 13,185

33. SEPARATELY DISCLOSED ITEMS

  • a. Information about significant transactions and investees:

  • 1) Financing provided to others. (Table1)

  • 2) Endorsements/guarantees provided. (Table 2)

  • 3) Marketable securities held (excluding investments in subsidiaries, associates and joint controlled entities). (Table 3)

  • 4) Marketable securities acquired and disposed at costs or prices at least NT$300 million or 20% of the paid-in capital. (Table 4)

  • 5) Acquisition of individual real estate at costs of at least NT$300 million or 20% of the paidin capital. (Table 5)

  • 6) Disposal of individual real estate at prices of at least NT$300 million or 20% of the paid-in capital. (None)

  • 7) Total purchases from or sales to related parties amounting to at least NT$100 million or 20% of the paid-in capital. (Table 6)

  • 8) Receivables from related parties amounting to at least NT$100 million or 20% of the paidin capital. (Table 7)

  • 9) Trading in derivative instruments. (Notes 7 and 28)

10) Other: intercompany relationships and significant intercompany transactions. (Table 8) 11) Information on investees. (Table 9)

  • b. Information on investments in mainland China

  • 1) Information on any investee company in mainland China, showing the name, principal business activities, paid-in capital, method of investment, inward and outward remittance of funds, ownership percentage, net income of investees, investment income or loss, carrying amount of the investment at the end of the period, repatriations of investment income, and limit on the amount of investment in the mainland China area. (Table 10)

  • 210 -

  • 2) Any of the following significant transactions with investee companies in mainland China, either directly or indirectly through a third party, and their prices, payment terms, and unrealized gains or losses:

  • a) The amount and percentage of purchases and the balance and percentage of the related payables at the end of the period. (None)

  • b) The amount and percentage of sales and the balance and percentage of the related receivables at the end of the period. (Tables 6 and 8)

  • c) The amount of property transactions and the amount of the resultant gains or losses. (None)

  • d) The balance of negotiable instrument endorsements or guarantees or pledges of collateral at the end of the year and the purposes. (None)

  • e) The highest balance, the end of year balance, the interest rate range, and total current period interest with respect to financing of funds. (None)

  • f) Other transactions that have a material effect on the profit or loss for the period or on the financial position, such as the rendering or receipt of services. (None)

34. SEGMENT INFORMATION

Information reported to the chief operating decision maker for the purpose of resource allocation and assessment of segment performance focuses on the types of goods or services delivered or provided. The Group’s reportable segments are linear guideways, ballscrews and others.

  • a. Segment revenues and results

The following was an analysis of the Group’s revenue and results from continuing operations by reportable segment.


by reportable segment.
Linear guideways

Ballscrews

Others

Total from continuing operations

Subsidy revenue
Finance costs
Share of profit of associates
accounted for using equity method
Interest income
Other income
Net foreign exchange gain
Other expenses
Valuation loss on financial assets
(liabilities) at fair value through
profit or loss
Impairment loss
Profit before income tax		 For the Year Ended December 31
Segment Revenue
2018
2017
$ 17,337,365 $ 11,815,483

7,129,981
5,128,057

4,865,783

4,221,224
$ 29,333,129
$ 21,164,764
 Segment Profit




2018
$ 17,337,365

7,129,981

4,865,783

$ 29,333,129




2018
$ 4,565,165


1,800,919

53,111


6,419,195
73,623
(146,985)
29,611
53,757
108,458
39,496
(39,438)
(17,757)

(424,000)

$ 6,095,960
 2017
$ 2,576,663
859,081

(90,643)

3,345,101

84,941

(131,357)
23,399

37,898

80,378

28,830

(41,005)
(67,577)
(548,473)

$ 2,812,135
  • 211 -

Segment revenue reported above represents revenue generated from external customers. The intersegment sales are eliminated or the years ended December 31, 2018 and 2017.

Segment profit represented the profit before tax earned by each segment without subsidy revenue, finance costs, share of profit of associates accounted for using equity method, interest income, other income, net foreign exchange gain, other expenses, valuation loss on financial assets (liabilities) at fair value through profit or loss, impairment loss and income tax expense. This was the measure reported to the chief operating decision maker for the purpose of resource allocation and assessment of segment performance.

  • b. Segment total assets and liabilities

The Group had not reported segment assets and liabilities information to the chief operating decision maker. Thus, no disclosure is made.

  • c. Geographical information

The Group operates in Taiwan, Germany, China, Japan, and USA.

The Group’s revenue from continuing operations from external customers and information about its non-current assets by location of assets are detailed below.

Taiwan

Germany

China

Japan

USA

Others

 Revenue from
External Customers
Year Ended December 31
2018
2017
$17,316,281 $13,368,957
3,533,755 2,542,286
2,968,077 1,592,060
2,216,685 1,162,034
1,207,781 1,060,802
2,090,550
1,438,625

$29,333,129
$21,164,764
 Non-current Assets Non-current Assets
December 31






2018
$17,316,281
3,533,755
2,968,077
2,216,685
1,207,781
2,090,550

$29,333,129





2018
$25,319,181
1,053,574
1,364,661

63,196

476,403
1,440,952

$29,717,967
 2017
$19,544,855
1,056,953
1,152,261

27,686

405,866
1,831,285
$24,018,906
  • d. Information about major customers

No single customers contributed 10% or more to the Group’s revenue for both 2018 and 2017.

  • 212 -

TABLE 1

HIWIN TECHNOLOGIES CORPORATION AND SUBSIDIARIES

FINANCING PROVIDED TO OTHERS FOR THE YEAR ENDED DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars)

No. Lender Borrower Financial Statement
Account		 Related
Parties		 Highest Balance
for the Year
(Note 4)		 Ending Balance
(Note 4)
Actual
Borrowing
Amount
(Note 5)		 Interest
Rate		 Nature of
Financing
(Note 2)
Business
Transaction
Amounts		 Reasons
for Short-
term
Financing		 Allowance
for
Impairment
Loss		 Collateral Collateral Financing
Limit for
Each
Borrower
(Note 1)		 Aggregate
Financing
Limits
(Note 3)
Item Value
0
0
1
1		 The Corporation
The Corporation
Luren
Luren		 HIWIN Italy
Eterbright
Luren Japan
Luren
Shanghai		 Other receivables from
related parties
Other receivables from
related parties
Other receivables from
related parties
Other receivables from
related parties		 Yes
Yes
Yes
Yes		 $ 114,723
510,000
3,074
13,234		 $ 55,582

-

-

11,208		 $ 55,582

-

-

11,208		 1.76%
1.76%
1.895%
1.895%		 1
2
1
1		 Sales
$771,056
-
Sales
23,726
Sales
66,982		 -
Operating
capital
-
-		 $ -
-
-
-		 -
Promissory
note and
equipment
-
-		 $ -
630,000
-
-		 $ 299,200

2,311,515

6,955

13,461		 $ 7,254,138

7,254,138

31,275

31,275

Note 1: The total amount for lending to a company for funding shall not exceed 10% of the net assets of the Corporation in the latest financial report. In addition, the total amount of lending to any one borrower shall not be more than the borrower’s paid-in capital. The total amount for lending to a company for funding shall not exceed 10% of the net assets of Luren in the latest financial report. In addition, the total amount of lending to any one borrower shall not be more than the borrower’s paid-in capital. When the lending is for business relationship by the Corporation and Luren, the lending shall be subject to not only the restriction set forth in the above instructions but also the principle that the business has occurred. The amount for lending to a company for funding shall not exceed the maximum amount of sales or purchases in the latest year or the latest twelve months when the lending occurs.

Note 2: Nature of the loan funds:

  1. Business relationship.

  2. Necessary for short-term financing.

  3. Note 3: For the financing provided by each subsidiary, the maximum amount should not exceed 30% of the Corporation’s net assets as shown in its latest financial statements. For the financing provided by each subsidiary, the maximum amount should not exceed 20% of Luren’s net assets as shown in its latest financial statements.

Note 4: The ending balance amount has been approved by the board of directors.

Note 5: Significant intercompany accounts and transactions have been eliminated.

  • 213 -

TABLE 2

HIWIN TECHNOLOGIES CORPORATION AND SUBSIDIARIES

ENDORSEMENTS/GUARANTEES PROVIDED FOR THE YEAR ENDED DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars and Foreign Currency)

No. Endorser/Guarantor Endorsee/Guaranteed Party Endorsee/Guaranteed Party Limits on
Endorsemen
t/
Guarantee
Given on
Behalf of
Each Party
(Note 1)		 Maximum
Amount
Endorsed/
Guaranteed
During the
Year		 Outstanding
Endorsement/
Guarantee at
the End of the
Year		 Actual
Borrowing
Amount		 Amount
Endorsed/
Guaranteed
by
Collaterals		 Ratio of
Accumulated
Endorsement
/
Guarantee to
Net Equity in
Latest
Financial
Statements
(%)

Aggregate
Endorsement
/
Guarantee
Limit
(Note 2)		 Endorsement
/
Guarantee
Given by
Parent on
Behalf of
Subsidiaries		 Endorsement
/
Guarantee
Given by
Subsidiaries
on Behalf of
Parent		 Endorsement
/
Guarantee
Given on
Behalf of
Companies in
Mainland
China
Name Relationship
0
0
0
0
0		 The Corporation
The Corporation
The Corporation
The Corporation
The Corporation		 Eterbright
HIWIN
Singapore
HIWIN Korea
HIWIN Japan
Luren		 Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary		 $ 2,311,515
112,400
199,800
600,077
400,000		 $ 1,600,000

92,145
(USD
3,000)

138,218
(USD
4,500)

600,077
(JPY 2,157,000)

400,000		 $ 1,600,000

92,145
(USD
3,000)

138,218
(USD
4,500)

600,077
(JPY 2,157,000)

400,000		 $ 954,000

57,191
(USD 1,862)

99,824
(USD 3,250)

-

90,000		 $ -

-

-

-

-		 6.6
0.4
0.6
2.5
1.7		 $ 8,463,161
8,463,161
8,463,161
8,463,161
8,463,161		 Yes
Yes
Yes
Yes
Yes		 -
-
-
-
-		 -
-
-
-
-

Note 1: The maximum is 10% of the net assets of the Corporation as shown in the latest financial statements. In addition, the amount shall not exceed the endorsee’s paid-in capital. However, the amount of guarantee to subsidiaries is not subject to the above restrictions after the approval of the board of director, and the amount shall not exceed 50% of the Corporation’s net assets in the latest financial statements.

Note 2: The maximum amount of the total guarantee is 35% of the Corporation’s net assets as shown in its latest financial statements.

Note 3: The amounts denominated in foreign currency were translated into New Taiwan dollars at prevailing exchange rate on December 31, 2018.

  • 214 -

TABLE 3

HIWIN TECHNOLOGIES CORPORATION AND SUBSIDIARIES

MARKETABLE SECURITIES HELD DECEMBER 31, 2018

(In Thousands of New Taiwan Dollars and Foreign Currency)

Holding Company Name Type and Name of Marketable
Securities		 Relationship with the
Holding Company		 Financial Statement Account December 31, 2018 December 31, 2018 Note
Shares Carrying
Amount		 Percentage
of
Ownership		 Fair Value
The Corporation
HIWIN Germany		 Government bonds
Central Government Bonds 1999-3
Share capital
Kaland
Sunengine
HIWIN Mikrosystem
Taichung International Country
Club
King Kong Iron Work Ltd.
Share capital
HIWIN (Schweiz) GmbH
-
-
-
-
-
-
-		 Financial assets at amortized cost - non-
current
Financial assets at FVTOCI - non-current
Financial assets at FVTOCI - non-current
Financial assets at FVTOCI - non-current
Financial assets at FVTOCI - non-current
Financial assets at FVTOCI - non-current
Financial assets at fair value through other
comprehensive income - non-current		 -
323,289
2,063,681
9,516,113
1
76,300
-		 $ 2,803
208,326
-
719,894
2,620
-
3,320
(EUR
72 )		 -
19
10
9
-
-
19		 $ 2,803
208,326
-
719,894
2,620
-
3,320
(EUR
72 )




Note: Information about the investment in subsidiary and associates; please see Tables 9 and 10.

  • 215 -

TABLE 4

HIWIN TECHNOLOGIES CORPORATION AND SUBSIDIARIES

MARKETABLE SECURITIES ACQUIRED AND DISPOSED AT COSTS OR PRICE AT LEAST $300 MILLION OR 20% OF THE PAID-IN CAPITAL FOR THE YEAR ENDED DECEMBER 31, 2018

(In Thousands of New Taiwan Dollars)

Company
Name		 Type and
Name of
Marketable
Securities		 Financial Statement
Account
Counterpart
y		 Relationshi
p		 Beginning Balance Beginning Balance Acquisition Acquisition Disposal Disposal Ending Balance Ending Balance Ending Balance
Shares Amount Shares Amount Shares Amount Carrying
Amount
Gain (Loss)
on Disposal

Others		 Shares Amount
The
Corporation		 Share capital Investments
accounted for
using equity
method		 Eterbright Subsidiary 138,838,55
9		 $ 394,413 67,320,508 $ 673,205 - $ - $ -
$ -		 $ (890,011)
(Note 1)

171,449,427
(Note 2)
$ 177,607

  • Note 1: Including investment loss accounted for using equity method of $692,017 thousand, and decrease in net assets of $197,994 thousand from subscribing for additional new shares at a percentage different from its existing ownership percentage.

  • Note 2: Due to the capital reduction for offsetting the deficit, the shares that the company held decreased by 34,709,640 shares.

  • Note 3: Significant intercompany accounts and transactions have been eliminated.

  • 216 -

TABLE 5

HIWIN TECHNOLOGIES CORPORATION AND SUBSIDIARIES

ACQUISITION OF INDIVIDUAL REAL ESTATE AT COSTS OF AT LEAST $300 MILLION OR 20% OF THE PAID-IN CAPITAL FOR THE YEAR ENDED DECEMBER 31, 2018

(In Thousands of New Taiwan Dollars)

Buyer Property Event Date Transaction
Amount		 Payment Status Counterparty Relationship Information on Previous Title Transfer if Counterparty Information on Previous Title Transfer if Counterparty Information on Previous Title Transfer if Counterparty is a Related Party Pricing Reference Purpose of
Acquisition		 Other
Terms
**Property Owner ** Relationship Transaction Date Amount
The Corporation Yunlin Technology Industrial Park, the
factory in shiliuban		 2018.3.22 $ 358,000 $ 336,516 Reiju Construction Co., Ltd. None - - - $ - Contractors bid Factory Construction -
  • 217 -

TABLE 6

HIWIN TECHNOLOGIES CORPORATION AND SUBSIDIARIES

TOTAL PURCHASES FROM OR SALES TO RELATED PARTIES AMOUNTING TO AT LEAST $100 MILLION OR 20% OF THE PAID-IN CAPITAL FOR THE YEAR ENDED DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars)

Company Name Related Party Relationship Transaction Details Transaction Details Abnormal Transaction Abnormal Transaction Notes/Accounts Receivable
(Payable)		 Notes/Accounts Receivable
(Payable)		 Note
Purchase/Sale Amount
(Note)		 % to Total Payment Terms Unit Price Payment
Terms		 Ending
Balance
(Note)		 % to Total
The Corporation
HIWIN China
HIWIN Germany
HIWIN Japan
HIWIN Italy
HIWIN USA
HIWIN Korea		 HIWIN China
HIWIN Germany
HIWIN Japan
HIWIN Italy
HIWIN USA
HIWIN Korea
HIWIN
Mikrosystem
The Corporation
The Corporation
HIWIN
Mikrosystem
HIWIN S.R.O
The Corporation
The Corporation
The Corporation
HIWIN
Mikrosystem
The Corporation		 Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Others
Parent Company
Parent Company
Others
Associate
Parent Company
Parent Company
Parent Company
Others
Parent Company		 Sale
Sale
Sale
Sale
Sale
Sale
Purchase
Purchase
Purchase
Purchase
Sale
Purchase
Purchase
Purchase
Purchase
Purchase		 $(2,423,559)
(1,897,709)
(1,449,817)
(771,056)
(563,025)
(367,991)
420,193
2,423,559
1,897,709
256,099
(224,099)
1,449,817
771,056
563,025
283,620
367,991
(10 )

(8 )

(6 )

(3 )

(2 )

(1 )
3
91
65
9

(6 )
93
80
59
30
78		 O/A 120 days
O/A 90-120 days
O/A 150 days
O/A 180 days
O/A 120 days
O/A 180 days
Net 120 days after
monthly closing
O/A 120 days
O/A 90-120 days
O/A 90 days
O/A 45 days
O/A 150 days
O/A 180 days
O/A 120 days
O/A 90 days
O/A 180 days		 $ -

-
-
-
-
-


-
-

-
-
-
-
-
-
-
-		 -
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-		 $ 783,464
395,954
757,241
625,989
244,421
215,765
(16,056)
(783,464)
(395,954)
(46,243)
20,463
(757,241)
(625,989)
(244,421)
(60,968)
(215,765)		 11
6
11
9
3
3

-

(99)

(76)

(9)
11

(95)

(88)

(78)

(19)

(98)

Note: Significant intercompany accounts and transactions have been eliminated except HIWIN Mikrosystem and HIWIN S.R.O.

  • 218 -

TABLE 7

HIWIN TECHNOLOGIES CORPORATION AND SUBSIDIARIES

RECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars)

Company Name Related Party Relationship Ending Balance (Note) Turnover Rate Overdue Overdue Amounts Received
in Subsequent
Year
Allowance for
Impairment Loss
Amount Actions Taken
The Corporation HIWIN China
HIWIN Japan
HIWIN Germany
HIWIN USA
HIWIN Korea
HIWIN Italy
HIWIN Italy		 Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary		 Trade receivables from related parties $ 783,464
Trade receivables from related parties
757,241
Trade receivables from related parties
395,954
Trade receivables from related parties
244,421
Trade receivables from related parties
215,765
Trade receivables from related parties
625,989
Other receivables from related parties
55,663		 3.40
2.39
4.56
3.07
2.51
1.52
-		 $ -
-
-
-
-
-
-		 -
-
-
-
-
-
-		 $ 624,438
234,239
182,414
107,753
83,944
110,732
-		 $ -

-

-

-

-

-

-

Note: Significant intercompany accounts and transactions have been eliminated.

  • 219 -

TABLE8

HIWIN TECHNOLOGIES CORPORATION AND SUBSIDIARIES

INTERCOMPANY RELATIONSHIPS AND SIGNIFICANT TRANSACTIONS FOR THE YEAR ENDED DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars)

No. Investee Company Counterparty Relationship (Note 1) Transaction Details Transaction Details

Financial Statement Account		 Amount (Note 2) Payment Terms % to
Total Sales or Assets
0 The Corporation HIWIN Japan
HIWIN Germany
HIWIN USA
HIWIN China
HIWIN Korea
HIWIN Italy		 1
1
1
1
1
1
1
1
1
1
1
1
1		 Sales
Trade receivables
Sales
Trade receivables
Sales
Trade receivables
Sales
Trade receivables
Sales
Trade receivables
Sales
Trade receivables
Other receivables		 $ 1,449,817
757,241
1,897,709
395,954
563,025
244,421
2,423,559
783,464
367,991
215,765
771,056
625,989
55,663		 O/A 150 days
O/A 150 days
O/A 90-120 days
O/A 90-120 days
O/A 120 days
O/A 120 days
O/A 120 days
O/A 120 days
O/A 180 days
O/A 180 days
O/A 180 days
O/A 180 days
-		 5
2
6
1
2
-
8
2
1
-
3
1
-

Note 1: Relationship of counterparty; (1) parent company to subsidiary; (2) subsidiary to parent company.

Note 2: Significant intercompany accounts and transactions have been eliminated.

  • Note 3: Unrealized gains from HIWIN China are $168,650 thousand.

  • 220 -

TABLE 9

HIWIN TECHNOLOGIES CORPORATION AND SUBSIDIARIES

INFORMATION ON INVESTEES FOR THE YEAR ENDED DECEMBER 31, 2018

(In Thousands of New Taiwan Dollars and Foreign Currency)

Investor Company Investee Company Location Main Businesses and Products Original Investment Amount Original Investment Amount As of December 31, 2018 As of December 31, 2018 As of December 31, 2018 Net Income
(Loss) of the
Investee		 Share of
Profit (Loss)		 Note
December 31,
2018		 December 31,
2017		 Shares % Carrying
Amount
The Corporation
HIWIN Germany
Luren		 HIWIN Germany
HIWIN USA
HIWIN Japan
Mega-Fabs
Eterbright
HIWIN Singapore
HIWIN Korea
Luren
HIWIN Healthcare Corp.
HIWIN Italy
Matrix
HIWIN S.R.O.
HIWIN Italy
Luren Japan
Luren USA		 Germany
United States of America
Japan
Israel
Taiwan
Singapore
Korea
Taiwan
Samoa
Italy
United Kingdom
Czech Republic
Italy
Japan
United States of America		 Manufacture and sale of aerospace parts, ballscrews,
linear guideways and industrial robots
Manufacture and sale of aerospace parts, ballscrews,
linear guideways and industrial robots
Manufacture and sale of aerospace parts, ballscrews,
linear guideways and industrial robots
Research, manufacture and sale of drivers and
controllers
Research, development, design, manufacture and sale
of solar cell, electronic components, electric power
supply, electric transmission and power distribution
machinery products
Manufacture and sale of aerospace parts, ballscrews,
linear guideways and industrial robots
Manufacture and sale of aerospace parts, ballscrews,
linear guideways and industrial robots
Research, development, produce, manufacture and sale
of gear cutting tools and machinery
Sale of medical robots
Sale of aerospace parts, ballscrews, linear guideways,
and industrial robots
Design, integrated application, research, development,
manufacture and sale of thread forming machinery
Sale of aerospace parts, ballscrews, linear guideways,
and industrial robots
Sale of aerospace parts, ballscrews, linear guideways,
and industrial robots
Sale of gear cutting tools and machinery
Sale of gear cutting tools and machinery		 $ 224,257
353,844
817,642
42,444
2,983,554
117,550
202,945
521,983
3,108
296,580
240,480
104
(CZK
70)
-
7,956
14,721		 $ 452,797

353,844
817,642

42,444

2,310,349

117,550

202,945

367,109
3,108

68,040

-
104
(CZK
70)

241,214
(EUR
6,500)

7,956
14,721
-

2,148,000
54,200

240,000
171,449,427

5,000,000

1,440,000

17,647,761
100,000

-

2,400,000
-
-

-
460,000		 100
100
100
40
74
100
100
58
100
100
52
32
-
-
100		 $ 1,289,175
423,670
126,122
121,444
177,607
(42,366)
(45,214)
261,205
2,974
(63,471)
221,274
58,088
(EUR
1,650)
-
(Note 2)
-		 $ 323,618

127,001

219,527

43,642

(1,070,898)

(13,844)

(44,416)

(230,617)

(23)

51,947

396
(Note 1)

(Note 1)

(Note 1)

(Note 1)		 $ 323,618

127,001

219,527

17,457

(692,017)

(13,844)

(44,416)

(122,859)

(23)

49,258

(14,860)

(Note 1)

(Note 1)

(Note 1)

(Note 1)		 Subsidiary
Subsidiary
Subsidiary
Investments
accounted for
using equity
method
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Investments
accounted for
using equity
method
Subsidiary
Indirectly owned
subsidiary
Indirectly owned
subsidiary

Note 1: Not applicable.

Note 2: Luren Japan completed its liquidation procedures in June, 2018.

Note 3: Significant intercompany accounts and transactions have been eliminated except Mega-Fabs and HIWIN S.R.O.

Note 4: Information on investment in Mainland China, please see Table 10.

  • 221 -

HIWIN TECHNOLOGIES CORPORATION AND SUBSIDIARIES

INFORMATION ON INVESTMENTS IN MAINLAND CHINA FOR THE YEAR ENDED DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars and Foreign Currency)

Investee Company Main Businesses and Products Main Businesses and Products Paid-in Capital Method of
Investment		 Method of
Investment		 Accumulated
Outward
Remittance for
Investment from
Taiwan as of
January 1, 2018		 Remittance of Funds Remittance of Funds Remittance of Funds Accumulated
Outward
Remittance for
Investment from
Taiwan as of
December 31,
2018		 Net Income
(Loss) of the
Investee		 % Ownership of
Direct or
Indirect
Investment
Investment
Gain (Loss)		 Carrying
Amount as of
December 31,
2018		 Accumulated
Repatriation of
Investment
Income as of
December 31,
2018
Outward Inward
YIFU Finance
HIWIN China
Luren Shanghai		 Finance lease
Manufacture and sale of aerospace
parts, ballscrews, linear guideways
and industrial robots
Sale of gear cutting tools and machinery		 $ 258,405
(USD
8,413)
1,498,040
(CNY 300,000)

14,047
(USD
439)
(Note 1)

(Note 2)

(Note 2)		 $ 236,266
(USD
8,168)
1,498,040
(CNY 300,000)
14,047
(USD
439)		 $ -
-
-		 $ 96,533
(USD
3,151)

-

-
$ 139,733
(USD
5,017)
1,498,040
(CNY 300,000)
14,047
(USD
439)		 $ 201,456
283,651
(3,540)		 19
100

58		 (Note 3)
$ 283,651
(Notes 4 and 6)
(1,737)
(Notes 4 and 6)		 $ 208,326
1,722,470
(Note 6)
(7,514)
(Note 6)		 $ 20,062
(USD
655)


-


-
Investor Company Accumulated Outward Remittance for
Investment in Mainland China as of
December 31, 2018		 Investment Amounts Authorized by
Investment Commission, MOEA		 Upper Limit on the Amount of Investment
Stipulated by Investment Commission,
MOEA
The Corporation $ 1,637,773
(USD 5,017 and CNY 300,000)		 $ 1,633,393
(USD 9,500 and CNY 300,000)		 (Note 5)
Luren $ 14,047
(USD
439 )		 $ 14,047
(USD
439 )		 $ 93,825
(Note 5)

Note 1: The investment was made through a corporation established in a third country, which, in turn, invested in companies located in Mainland China.

Note 2: The investment in Mainland China was made directly.

Note 3: The investment in Kaland is financial asset measured at FVTOCI; thus, no investment gain or loss is recognized.

Note 4: The investment gain (loss) is recognized according to the financial statements audited by the Corporation’s independent auditors.

Note 5: According to “Regulation for Screening of Application to Engage in Technical Cooperation in Mainland China” issued by the Investment Commission of Ministry of Economic Affairs, the investment in Mainland China has no maximum limitation since the Corporation had acquired the IDB approval of the Corporation’s establishment of an operating headquarter in Taiwan. The upper limit investment amount of Luren is 60% of the net assets of Luren in the latest financial report.

Note 6: Significant intercompany accounts and transactions have been eliminated.

  • 222 -

INDEPENDENT AUDITORS’ REPORT

The Board of Directors and Shareholders HIWIN Technologies Corporation

Opinion

We have audited the accompanying financial statements of HIWIN Technologies Corporation (the “Company”), which comprise the balance sheets as of December 31, 2018 and 2017, and the statements of comprehensive income, changes in equity and cash flows for the years then ended, and the notes to the financial statements, including a summary of significant accounting policies (collectively referred to as the “financial statements”).

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and its financial performance and its cash flows for the years then ended in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers.

Basis for Opinion

We conducted our audits in accordance with the Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants and auditing standards generally accepted in the Republic of China. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with The Norm of Professional Ethics for Certified Public Accountant of the Republic of China, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements for the year ended December 31, 2018. 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 matters of the Company’s financial statements for the year ended December 31, 2018 are as follows:

Revenue recognition

The sales of the Company mainly rely on distribution channels. Revenue from the sale of goods is recognized when the Company satisfies the performance obligations. There is a risk that revenue might be recognized even when specific conditions have not been satisfied. Because of the risk of misstatement and materiality of sales revenue generated by distribution channels, we identified sales revenue as a key audit matter. The accounting policy on sales revenue recognition is disclosed in Note 4 to the financial statements.

Our key audit procedures performed in respect of revenue recognition included the following:

  1. We understood and tested the design and operating effectiveness of related internal controls over the acceptance of order and shipping procedures; we selected sample sales transactions of distribution channels and verified that the receiving of the order and the timing of the revenue recognition were in accordance with the terms of transaction.

  2. We validated the terms of transactions against sales contracts and orders with major distributors to ensure that the terms of transaction and the timing of the revenue recognition are in accordance; we tested the records of sales returns against source documents and we checked whether there was any unusual item during the year and after the balance sheet date.

Valuation and impairment assessment of inventory

As of December 31, 2018, the carrying amount of inventory was $5,977,276 thousand. Such carrying amount of inventory is the lower of cost or net realizable value which is determined subject to the management’s judgment and estimation uncertainty. Therefore, valuation and impairment assessment of inventory is identified as a key audit matter. The accounting policy on the valuation and impairment assessment of inventory and the details of inventory are disclosed in Notes 4, 5 and 11 to the financial statements.

Our key audit procedures performed in respect of the valuation and impairment assessment included the following:

  1. We understood the related internal control and procedures on the valuation of inventory and assessed that valuation including impairment assessment conforms to the approved procedures.

  2. We assessed the reasonableness of provision for impairment of inventory by reference to aging of inventories and the level of inventory consumed and sold during the year.

  3. We tested the net realizable value of sample inventory items against the selling price, and we checked the completeness and accuracy of the information of net realizable value.

  4. We compared the actual sales amount of the sample inventory items with the book value to ascertain that the carrying value of the inventory does not exceed the net realizable value.

  5. We evaluated the adequacy of provision for obsolete and damaged stock based on the condition of inventory during our observation of inventory counts.

  6. 223 -

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 the Regulations Governing the Preparation of Financial Reports by Securities Issuers and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

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

Those charged with governance, including the audit committee, are responsible for overseeing the Company’s financial reporting process.

Auditors’ 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, whether due to fraud or error, and to issue an auditors’ 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 the 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 the auditing standards generally accepted in the 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, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

  2. 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.

  3. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

  4. Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the 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.

  5. 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.

  6. Obtain sufficient and appropriate audit evidence regarding the financial information of 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 audit. We remain solely responsible for our audit opinion.

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, 2018 and are therefore the key audit matters. We describe these matters in our auditors’ 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 Hsiao-Fang Yen and Done-Yuin Tseng.

Deloitte & Touche Taichung, Taiwan Republic of China

March 26, 2019

  • 224 -

Notice to Readers

The accompanying financial statements are intended only to present the financial position, financial performance and cash flows in accordance with 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 applied in the Republic of China.

For the convenience of readers, the independent auditors’ report and the accompanying financial statements have been translated into English from the original Chinese version prepared and used in the Republic of China. If there is any conflict between the English version and the original Chinese version or any difference in the interpretation of the two versions, the Chinese-language independent auditors’ report and financial statements shall prevail.

  • 225 -

HIWIN TECHNOLOGIES CORPORATION

BALANCE SHEETS DECEMBER 31, 2018 AND 2017

(In Thousands of New Taiwan Dollars)

ASSETS
CURRENT ASSETS
Cash and cash equivalents (Notes 4 and 6)

Financial assets at fair value through profit or loss - current (Notes 4 and 7)
Notes receivable from unrelated parties, net (Notes 4, 5 and 10)
Trade receivables from unrelated parties, net (Notes 4, 5 and 10)
Trade receivables from related parties, net (Notes 4, 5 and 27)
Inventories (Notes 4, 5 and 11)
Other current assets (Note 27)

Total current assets

NON-CURRENT ASSETS
Financial assets at fair value through other comprehensive income - non-current (Notes 4 and 8)
Held-to-maturity financial assets - non-current (Note 4)
Financial assets at amortized cost - non-current (Note 4)
Financial assets measured at cost - non-current (Notes 4 and 9)
Investments accounted for using the equity method (Notes 4, 12, 22, 23 and 27)
Property, plant and equipment (Notes 4, 13, 27 and 28)
Deferred tax assets (Notes 4 and 20)
Prepayments for machinery and equipment (Notes 14 and 27)
Refundable deposits (Note 4)
Other non-current assets (Note 4)

Total non-current assets

TOTAL

LIABILITIES AND EQUITY
CURRENT LIABILITIES
Short-term borrowings (Notes 15 and 28)

Financial liabilities at fair value through profit or loss - current (Notes 4 and 7)
Contract liabilities - current (Note 4)
Notes payable
Trade payables to unrelated parties
Trade payables to related parties (Note 27)
Other payables (Notes 16 and 27)
Current tax liabilities (Notes 4 and 20)
Current portion of long-term borrowings (Notes 15 and 28)
Other current liabilities (Note 4)

Total current liabilities

NON-CURRENT LIABILITIES
Long-term borrowings (Notes 15 and 28)
Deferred tax liabilities (Notes 4 and 20)
Net defined benefit liabilities - non-current (Notes 4 and 17)
Guarantee deposits
Credit balance for investments accounted for using the equity method (Notes 4 and 12)

Total non-current liabilities

Total liabilities

EQUITY
Common stock
Capital surplus
Retained earnings
Legal reserve
Special reserve
Unappropriated earnings
Other equity

Total equity

TOTAL
 2018
Amount
%
$ 1,433,225
3
282
-
189,647
-
3,699,722
8
3,138,408
7
5,977,276 14

374,372

1


14,812,932
33

930,840
2
-
-
2,803
-
-
-
4,345,941 10
20,804,336 47
399,682
1
2,864,639
7
16,996
-

49,584

-


29,414,821
67

$ 44,227,753
100

$ 4,550,000 10
5,775
-
104,833
-
12,431
-
5,165,874 12
34,942
-
2,241,906
5
615,008
1
1,604,194
4

46,987

-


14,381,950
32

4,792,936 11
421,253
1
287,229
1
12,875
-

151,051

-


5,665,344
13


20,047,294
45

3,005,620
7
3,236,274
7
2,166,826
5
250,940
1
15,145,659 34

375,140

1


24,180,459
55

$ 44,227,753
100
 2017
Amount
%
$ 1,071,127
3

548
-

290,417
1

2,755,161
8

2,172,060
7

3,422,111 10

332,382

1

10,043,806
30

-
-

2,919
-

-
-

317,144
1

3,907,514 12

16,833,733 51

230,702
1

1,750,533
5

15,925
-

24,305

-

23,082,775
70
$ 33,126,581
100
$ 3,381,036 10

3,038
-

-
-

8,815
-

3,747,182 12

41,845
-

1,280,071
4

317,650
1

1,600,492
5

86,623

-

10,466,752
32

5,818,110 17

206,609
1

280,180
1

300
-

61,534

-

6,366,733
19

16,833,485
51

2,801,573
8

308,630
1

1,893,024
6

265,533
1

11,275,276 34

(250,940)

(1)

16,293,096
49
$ 33,126,581
100



























































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

  • 226 -

HIWIN TECHNOLOGIES CORPORATION

STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

SALES (Notes 4 and 27)

COST OF GOODS SOLD (Notes 11, 19 and 27)

GROSS PROFIT
UNREALIZED GAIN (Note 4)

REALIZED GROSS PROFIT

OPERATING EXPENSES (Notes 19 and 27)
Selling and marketing expenses
General and administrative expenses
Research and development expenses

Total operating expenses

PROFIT FROM OPERATIONS

NON-OPERATING INCOME AND EXPENSES
Subsidy revenue (Note 4)
Finance costs (Notes 4 and 19)
Share of profit or loss of subsidiaries and
associates accounted for using equity method
(Notes 4 and 12)
Interest income (Notes 4 and 27)
Other income (Note 27)
Net foreign exchange gain (Notes 4 and 30)
Other expenses
Valuation loss on financial assets (liabilities) at
fair value through profit or loss (Note 4)
Impairment loss (Note 4)

Total non-operating income and expenses

PROFIT BEFORE INCOME TAX
INCOME TAX EXPENSE (Notes 4 and 20)

NET PROFIT FOR THE YEAR
 2018
Amount
%
$ 24,600,218 100
15,172,408
62

9,427,810 38
(580,844)
(2)

8,846,966
36

478,366
2
1,106,090
4
1,184,638

5

2,769,094
11

6,077,872
25

38,174
-
(80,098)
-
132,493
1
37,739
-
66,661
-
48,374
-
(12,860)
-
(17,757)
-
-

-

212,726

1

6,290,598 26
898,341

4

5,392,257
22
 2017

































Amount
%
$ 17,053,792 100
10,932,061
64

6,121,731 36
(189,752)
(1)
5,931,979
35

406,664
2

669,429
4
1,003,157

6
2,079,250
12
3,852,729
23

51,943
-

(101,733) (1)

(588,435) (3)

27,085
-

46,139
-

11,076
-

(1,707)
-

(67,577)
-
(48,473)

-
(671,682)
(4)

3,181,047 19
443,028

3
2,738,019
16

(Continued)

  • 227 -

HIWIN TECHNOLOGIES CORPORATION

STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

OTHER COMPREHENSIVE INCOME (Note 4)
Items that will not be reclassified subsequently
to profit or loss:
Remeasurement of defined benefit plans
(Note17)

Unrealized gain on investment in equity
instruments at fair value through other
comprehensive income
Share of other comprehensive income (loss)
of subsidiaries and associates accounted for
using the equity method
Income tax relating to items that will not be
reclassified subsequently to profit or loss
(Note 20)


Items that may be reclassified subsequently to
profit or loss:
Exchange differences on translating foreign
operations
Share of the other comprehensive income
(loss) of subsidiaries and
associates/accounted for using the equity
method
Income tax relating to items that may be
reclassified subsequently to profit or loss
(Note 20)


Other comprehensive gain (loss) for the
year, net of income tax

TOTAL COMPREHENSIVE INCOME FOR THE
YEAR

EARNINGS PER SHARE (Note 21)
Basic

Diluted
 2018
Amount
%
$ (16,254)
-
519,283
2
2,107
-
5,403

-

510,539

2

(42,185)
-
414
-
17,517

-

(24,254)

-

486,285

2

$ 5,878,542
24

$ 18.44

$ 18.29
 2017




















Amount
%
$ (49,160)
-

-
-

(1,994)
-
8,357

-
(42,797)

-

17,521
-

43
-
(2,978)

-
14,586

-
(28,211)

-
$ 2,709,808
16
$ 9.49
$ 9.46

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

(Concluded)

  • 228 -

HIWIN TECHNOLOGIES CORPORATION

STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars, Except Dividends Per Share)

BALANCE AT JANUARY 1, 2017

Appropriation of 2016 earnings
Legal reserve
Special reserve
Cash dividends - NT$1.6 per share
Share dividends - NT$0.2 per share


Difference between consideration received or paid and the carrying amount of the
subsidiaries' net assets during actual disposal or acquisition

Net profit for the year ended December 31, 2017
Other comprehensive income (loss) for the year ended December 31, 2017, net of income
tax

Total comprehensive income (loss) for the year ended December 31, 2017

BALANCE AT DECEMBER 31, 2017
Effect of retrospective application

BALANCE AT JANUARY 1, 2018 AS RESTATED

Appropriation of 2017 earnings
Legal reserve
Special reserve
Cash dividends - NT$3.5 per share
Share dividends - NT$0.3 per share


Issuance of ordinary shares for cash

Difference between consideration received or paid and the carrying amount of the
subsidiaries' net assets during actual disposal or acquisition

Disposals of investments in equity instruments at fair value through other comprehensive
income

Net profit for the year ended December 31, 2018
Other comprehensive income (loss) for the year ended December 31, net of income tax

Total comprehensive income (loss) for the year ended December 31, 2018

BALANCE AT DECEMBER 31, 2018
 Common Stock
(Note 18)
$ 2,746,640

-
-
-

54,933


54,933


-

-

-


-

2,801,573

-


2,801,573

-
-
-

84,047


84,047


120,000


-


-

-

-


-

$ 3,005,620
 Capital Surplus (Note 18)
Additional Paid-in
Capital
Employee stock
option
$ 308,630
$ -


-
-

-
-

-
-

-

-


-

-


-

-


-
-

-

-


-

-


308,630
-

-

-


308,630

-


-
-

-
-

-
-

-

-


-

-


2,922,204

5,440


-

-


-

-


-
-

-

-


-

-

$ 3,230,834
$ 5,440
 Retained Earnings (Note 18)
Legal Reserve
Special Reserve
Unappropriated
Earnings
$ 1,760,342
$ 91,624
$ 9,459,908


132,682
-
(132,682)

-
173,909
(173,909)

-
-
(439,462)

-

-

(54,933)


132,682

173,909

(800,986)


-

-

(78,868)


-
-
2,738,019

-

-

(42,797)


-

-

2,695,222


1,893,024
265,533
11,275,276

-

-

33,915


1,893,024

265,533

11,309,191


273,802
-
(273,802)

-
(14,593)
14,593

-
-
(980,551)

-

-

(84,047)


273,802

(14,593)

(1,323,807)


-

-

-


-

-

(231,634)


-

-

8,396


-
-
5,392,257

-

-

(8,744)


-

-

5,383,513

$ 2,166,826
$ 250,940
$ 15,145,659
 Other Equity (Note 4)
Unrealized Gain
(Loss) Financial
Exchange
Assets at Fair
Differences on
Value Through
Translating
Other
Foreign
Operations
Comprehensive
Income
$ (265,533)
$ -


-
-

-
-

-
-

-

-


-

-


7

-


-
-

14,586

-


14,586

-


(250,940)
-

-

139,447


(250,940)

139,447


-
-

-
-

-
-

-

-


-

-


-

-


-

-


-

(8,396)


-
-

(24,254)

519,283


(24,254)

519,283

$ (275,194)
$ 650,334
 Total Equity
$ 14,101,611

-

-

(439,462)

-

(439,462)

(78,861)

2,738,019

(28,211)

2,709,808

16,293,096

173,362

16,466,458

-

-

(980,551)

-

(980,551)

3,047,644

(231,634)

-

5,392,257

486,285

5,878,542
$ 24,180,459
















































Legal Reserve

$ 1,760,342


132,682

-

-

-


132,682


-


-

-


-


1,893,024

-


1,893,024


273,802

-

-

-


273,802


-


-


-


-

-


-

$ 2,166,826

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

  • 229 -

HIWIN TECHNOLOGIES CORPORATION

STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars)

CASH FLOWS FROM OPERATING ACTIVITIES
Income before income tax

Adjustments for :
Depreciation expenses

Amortization expenses
Expected credit loss recognized on trade receivables
Reversal of impairment loss on receivables
Net loss on fair value change of financial assets and liabilities
at fair value through profit or loss
Finance costs
Interest income
Dividend income
Compensation costs of employee share options
Share of profit or loss of subsidiaries and associates
Loss on disposal of property, plant and equipment
Impairment loss recognized on financial assets
Impairment loss recognized (reversed) on non-financial assets
Unrealized gains
Unrealized foreign currency exchange gain, net
Other
Changes in operating assets and liabilities
Financial instruments held for trading
Financial assets mandatorily classified as at fair value through
profit or loss
Notes receivable
Trade receivables

Inventories

Other current assets
Contract liabilities
Notes payable
Trade payables

Other payables
Other current liabilities
Net defined benefit liabilities

Cash generated from operations

Interest received
Dividend received
Interest paid
Income taxes paid

Net cash generated from operating activities
 2018
$ 6,290,598
1,330,812
17,850
2,807
-
5,493
80,098
(37,739)
(23,511)
52,644
(132,493)
12,065
-

(1,000)
580,844
(37,429)
116
-
(2,490)
101,788
(1,874,785)
(2,423,191)
(42,110)
58,391
3,616
1,409,269
944,176
6,806
(9,205)

6,313,420
37,859
23,511
(81,291)
(532,399)

5,761,100
 2017
$ 3,181,047
1,176,025

8,560

-

(61,259)

2,490

101,733

(27,085)

(344)

-

588,435

1,178

34,000

12,473

189,752

(27,410)

114

4,265

-

(180,313)

(323,306)

(477,808)

351,313

-

(1,136)
1,887,671

488,805

12,481
(4,595)
6,937,086

27,128

344

(101,703)
(154,086)
6,708,769
(Continued)
  • 230 -

HIWIN TECHNOLOGIES CORPORATION

STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars)

CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition financial assets at fair value through other
comprehensive income

Proceeds from sale of financial assets at fair value through other
comprehensive income
Return of capital from financial assets at fair value through other
comprehensive income
Net cash outflow on acquisition of subsidiaries (Note 22)
Payments for property, plant and equipment

Proceeds from disposal of property, plant and equipment
Increase in refundable deposits
Decrease in other financial assets
Increase in other non-current assets
Increase in prepayments for machinery and equipment

Net cash used in investing activities

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from (repayments of) short-term borrowings

Proceeds from long-term borrowings

Repayments of long-term borrowings

Increase in guarantee deposit received
Dividends paid
Proceeds from issuance of ordinary shares

Acquisition of additional shares of subsidiary

Net cash generated from (used in) financing activities

NET INCREASE IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF
THE YEAR

CASH AND CASH EQUIVALENTS AT THE END OF THE
YEAR
 2018
$ (32,334)
14,750
96,533
(240,480)
(3,346,522)
5,486
(1,071)
-
(46,751)
(3,195,050)

(6,745,439)

1,168,964
1,531,860
(2,553,332)
12,575
(980,551)
2,995,000
(828,079)

1,346,437

362,098
1,071,127

$ 1,433,225
 2017
$ -

-

-

-
(2,385,953)

2,555

(5,305)

41,928

(21,625)
(1,620,190)
(3,988,590)

(645,894)
1,076,000
(1,916,913)

-

(439,462)

-
(591,386)
(2,517,655)

202,524
868,603
$ 1,071,127

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

(Concluded)

  • 231 -

HIWIN TECHNOLOGIES CORPORATION

NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

1. GENERAL INFORMATION

HIWIN Technologies Corporation (the “Company”) was incorporated on October 11, 1989. It manufactures and sells ballscrews, linear guideways, industrial robots, aerospace automation equipment parts, CNC (computer numerical control) milling machines and medical equipment.

The Company was approved by the Securities and Futures Bureau (SFB), Financial Supervisory Commission (FSC) to become a public corporation on April 16, 1997. The shares of the Company have been listed on the Taiwan Stock Exchange (TSE) since June 26, 2009.

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

2. APPROVAL OF FINANCIAL STATEMENTS

The financial statements were approved by the Company’s board of directors on March 26, 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), Interpretations of IFRS (IFRIC), and Interpretations of IAS (SIC) (collectively, the “IFRSs”) endorsed and issued into effect by the FSC

Except for the following, whenever applied, the initial application of the amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the IFRSs endorsed and issued into effect by the FSC would not have any material impact on the accounting policies of the Company:

  • 1) IFRS 9 “Financial Instruments” and related amendment

IFRS 9 supersedes IAS 39 “Financial Instruments: Recognition and Measurement”, with consequential amendments to IFRS 7 “Financial Instruments: Disclosures” and other standards. IFRS 9 sets out the requirements for classification, measurement and impairment of financial assets and hedge accounting. Refer to Note 4 for information relating to the relevant accounting policies.

Classification, measurement and impairment of financial assets

On the basis of the facts and circumstances that existed as at January 1, 2018, the Company has performed an assessment of the classification of recognized financial assets and has elected not to restate prior reporting periods.

  • 232 -

The following table shows the original measurement categories and carrying amount under IAS 39 and the new measurement categories and carrying amount under IFRS 9 for each class of the Company’s financial assets and financial liabilities as at January 1, 2018.

Measurement Category
Financial Assets
IAS 39
IFRS 9
Cash and cash
equivalents
Loans and receivables
Amortized cost
Derivatives
Held‑for‑trading
Mandatorily at fair value
through profit or loss
Notes receivable, trade
receivables and
refundable deposits
Loans and receivables
Amortized cost
Debt securities
Held-to-maturity
Amortized cost
Equity securities
Financial assets measured
at cost
Fair value through other
comprehensive income -
equity instruments
Financial Assets
IAS 39
Carrying
Amount
as of
January 1,
2018
Reclassifi-
cations
Remea-
surements
IFRS 9
Carrying
Amount as
of
January 1,
2018

FVTPL
$ 548
$ -
$ -
$ 548

FVTOCI
-
-
-
-
Remeasurement of financial
assets at cost (IAS 39)

-

317,144

173,362

490,506


-

317,144

173,362

490,506

Amortized cost
Add: Reclassification from
loans and receivables
(IAS 39)
- 6,304,690
-
6,304,690
Add: Reclassification from
held-to-maturity (IAS 39)

-

2,919

-

2,919


-
6,307,609

-
6,307,609

$ 548
$ 6,624,753
$ 173,362
$ 6,798,663
 Measurement Category Carrying
IAS 39
$ 1,071,127
548
5,233,563
2,919
317,144
Retained
Earnings
Effect on
January 1,
2018
$ -


-

33,915


33,915


-

-


-

$ 33,915
 Amount
IFRS 9
Remark
$ 1,071,127
(a)

548
-
5,233,563
(a)

2,919
(b)

490,506
(c)
Other
Equity
Effect on
January 1,
2018
Remark
$ -

-

139,447
(c)

139,447

-
(a)

-
(b)

-
$ 139,447

  • a) Cash and cash equivalents, notes receivable, trade receivables and refundable deposits that were previously classified as loans and receivables under IAS 39 were classified as at amortized cost with an assessment of expected credit losses under IFRS 9.

  • b) Debt investments previously classified as held-to-maturity financial assets and measured at amortized cost under IAS 39 were classified as at amortized cost with an assessment of expected credit losses under IFRS 9, because on January 1, 2018, the contractual cash flows were solely payments of principal and interest on the principal outstanding and these investments were held within a business model whose objective is to collect contractual cash flows.

  • c) Investments in unlisted shares previously measured at cost under IAS 39 have been classified at designated as at FVTOCI under IFRS 9 and were remeasured at fair value. Consequently, an increase of $173,362 thousand was recognized in both financial assets at FVTOCI and other equity - unrealized gain (loss) on financial assets at FVTOCI on January 1, 2018.

  • 233 -

The Company recognized under IAS 39 impairment loss on certain investments in equity securities previously measured at cost and the loss was accumulated in retained earnings. Since those investments were designated as at FVTOCI under IFRS 9 and no impairment assessment is required, an adjustment was made that resulted in a decrease of $33,915 thousand in other equity - unrealized gain (loss) on financial assets at FVTOCI and an increase of $33,915 thousand in retained earnings on January 1, 2018.

  • 2) IFRS 15 “Revenue from Contracts with Customers” and related amendment

IFRS 15 establishes principles for recognizing revenue that apply to all contracts with customers and supersedes IAS 18 “Revenue”, IAS 11 “Construction Contracts” and a number of revenuerelated interpretations. Refer to Note 4 for related accounting policies.

  • b. Amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the IFRSs endorsed by the FSC for application starting from 2019
New, Amended or Revised Standards and Interpretations
(the“New IFRSs”)
Annual Improvements to IFRSs 2015-2017 Cycle

Amendments to IFRS 9 “Prepayment Features with Negative
Compensation”

IFRS 16 “Leases”

Amendments to IAS 19 “Plan Amendment, Curtailment or
Settlement”

Amendments to IAS 28 “Long-term Interests in Associates and
Joint Ventures”

IFRIC 23 “Uncertainty over Income Tax Treatments”
 Effective Date
Announced by IASB (Note
1)
January 1, 2019
January 1, 2019 (Note 2)
January 1, 2019
January 1, 2019 (Note 3)
January 1, 2019
January 1, 2019

  • 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 FSC permits the election for early adoption of the amendments starting from 2018.

  • Note 3: The Company shall apply these amendments to plan amendments, curtailments or settlements occurring on or after January 1, 2019.

IFRS 16 “Leases”

IFRS 16 sets out the accounting standards for lease that will supersede IAS 17 “Leases”, IFRIC 4 “Determining whether an Arrangement contains a Lease”, and a number of related interpretations.

Definition of a lease

Upon initial application of IFRS 16, the Company will elect to apply the guidance of IFRS 16 only to contracts entered in determining whether contracts are, or contain, a lease only to contracts entered into (or changed) on or after January 1, 2019. Contracts identified as containing a lease under IAS 17 and IFRIC 4 will not be reassessed and will be accounted for in accordance with the transitional provisions under IFRS 16.

  • 234 -

The Company as lessee

Upon initial application of IFRS 16, the Company will recognize right-of-use assets and lease liabilities for all leases on the balance sheets except for those whose payments under low-value and short-term leases will be recognized as expenses on a straight-line basis. On the statements of comprehensive income, the Company will present the depreciation expense charged on right-of-use assets separately from the interest expense accrued on lease liabilities; interest is computed using the effective interest method. On the statements of cash flows, cash payments for the principal portion of lease liabilities will be classified within financing activities; cash payments for the interest portion will be classified within operating activities. Currently, 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 statements of cash flows.

The Company anticipates applying IFRS 16 retrospectively with the cumulative effect of the initial application of this standard recognized on January 1, 2019. Comparative information will not be restated.

Lease liabilities will be recognized on January 1, 2019 for leases currently classified as operating leases with the application of IAS 17. Lease liabilities will be measured at the present value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate on January 1, 2019. Right-of-use assets will be measured at an amount equal to the lease liabilities. The Company will apply IAS 36 to all right-of-use assets.

The Company expects to apply the following practical expedients:

  • 1) The Company will apply a single discount rate to a portfolio of leases with reasonably similar characteristics to measure lease liabilities.

  • 2) The Company will account for those leases for which the lease term ends on or before December 31, 2019 as short-term leases.

The Company as lessor

The Company will not make any adjustments for leases in which it is a lessor and will account for those leases with the application of IFRS 16 starting from January 1, 2019.

Anticipated impact on assets, liabilities and equity

Adjusted
Carrying Adjustments Carrying
Amount as of Arising from Amount as of
December 31, Initial January 1,
2018 Application
2019
Right-of-use assets $
-		 $ 269,082 $ 269,082
Total effect on assets $
-
 $ 269,082 $ 269,082
Lease liabilities - current $
-		 $
55,521		 $ 55,521
Lease liabilities - non-current - 213,561
213,561
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Total effect on liabilities

Retained earnings

Total effect on equity
 $ -

$ -

$ -
 $ 269,082

$ -

$ -
 $ 269,082
$ -
$ -

Except for the above impact, as of the date the financial statements were authorized for issue, the Company assessed that the application of other standards and interpretations will not have significantly effect on the Company’s financial position and financial performance.

  • c. New IFRSs in issue but not yet endorsed and issued into effect by the FSC
New IFRSs in issue but not yet endorsed and issued into effect by the FSC
New IFRSs
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 Material”
 Effective Date
Announced by IASB (Note
1)
January 1, 2020 (Note 2)
To be determined by IASB
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 business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after January 1, 2020 and to asset acquisitions that occur on or after the beginning of that period.

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

As of the date the financial statements were authorized for issue, the Company is continuously assessing the possible impact that the application of other standards and interpretations will have on the Company’s financial position and financial performance and will disclose the relevant impact when the assessment is completed.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

  • a. Statement of compliance

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

  • b. Basis of preparation

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

  • 236 -

The fair value measurements, which are grouped into Levels 1 to 3 based on the degree to which the fair value measurement inputs are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:

  • 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 an 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 an asset or liability.

When preparing these parent company only financial statements, the Company used the equity method to account for its investments in subsidiaries and associates. In order for the amounts of the net profit for the year, other comprehensive income for the year and total equity in the parent company only financial statements to be the same with the amounts attributable to the owners of the Company in its consolidated financial statements, adjustments arising from the differences in accounting treatments between the parent company only basis and the consolidated basis were made to investments accounted for using the equity method, the share of profit or loss of subsidiaries and associates, the share of other comprehensive income of subsidiaries, associates and the related equity items, as appropriate, in these parent company only financial statements.

  • c. Classification of current and non-current assets and liabilities

Current assets include:

  • 1) Assets held primarily for the purpose of trading;

  • 2) Assets expected to be realized within 12 months after the reporting period; and

  • 3) Cash and cash equivalents unless the asset is restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period.

Current liabilities include:

  • 1) Liabilities held primarily for the purpose of trading;

  • 2) Liabilities due to be settled within 12 months after the reporting period; and

  • 3) Liabilities for which the Company does not have an unconditional right to defer settlement for at least 12 months after the reporting period.

Assets and liabilities that are not classified as current are classified as non-current.

  • 237 -

d. Foreign currencies

In preparing the parent company only financial statements, transactions in currencies other than the company’s functional currency (i.e. foreign currencies) are recognized at the rates of exchange prevailing at the dates of the transactions.

At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Exchange differences on monetary items arising from settlement or translation are recognized in profit or loss in the period.

Non-monetary items that are measured at historical cost in a foreign currency are translated using the exchange rate at the date of transaction.

For the purpose of presenting the parent company only financial statements, the functional currencies of the Company and the group entities (including subsidiaries and associates in other countries that use currencies which are different from the currency of the Company) are translated into the presentation currency, the New Taiwan dollar, as follows: Assets and liabilities are translated at the exchange rates prevailing at the end of the reporting period; and income and expense items are translated at the average exchange rates for the period. The resulting currency translation differences are recognized in other comprehensive income.

  • e. Inventories

Inventories consist of raw materials, supplies, work-in-process, finished goods and merchandise and are stated at the lower of cost or net realizable value. Inventory write-downs are made by item, except where it may be appropriate to group similar or related items. The net realizable value is the estimated selling price of inventories less all estimated costs of completion and costs necessary to make the sale. Inventories are recorded at weighted-average cost on the balance sheet date.

  • f. Investments in subsidiaries

The Company uses the equity method to account for its investments in subsidiaries.

A subsidiary is an entity that is controlled by the Company.

Under the equity method, an investment in a subsidiary is initially recognized at cost and adjusted thereafter to recognize the Company’s share of the profit or loss and other comprehensive income of the subsidiary. The Company also recognizes the changes in the Company’s share of equity of subsidiaries attributable to the Company.

Changes in the Company’s ownership interest in a subsidiary that do not result in the Company losing control of the subsidiary are equity transactions. The Company recognizes directly in equity any difference between the carrying amount of the investment and the fair value of the consideration paid or received.

When the Company’s share of losses of a subsidiary exceeds its interest in that subsidiary (which includes any carrying amount of the investment accounted for using the equity method and long-term interests that, in substance, form part of the Company’s net investment in the subsidiary), the Company continues recognizing its share of further losses.

  • 238 -

Any excess of the cost of acquisition over the Company’s share of the net fair value of the identifiable assets and liabilities of a subsidiary at the date of acquisition is recognized as goodwill, which is included within the carrying amount of the investment and is not amortized. Any excess of the Company’s share of the net fair value of the identifiable assets and liabilities over the cost of acquisition is recognized immediately in profit or loss.

The Company assesses its investment for any impairment by comparing the carrying amount with the estimated recoverable amount as assessed based on the investee’s financial statements as a whole. Impairment loss is recognized when the carrying amount exceeds the recoverable amount. If the recoverable amount of the investment subsequently increases, the Company recognizes a reversal of the impairment loss; the adjusted post-reversal carrying amount should not exceed the carrying amount that would have been recognized (net of amortization or depreciation) had no impairment loss been recognized in prior years. An impairment loss recognized on goodwill cannot be reversed in a subsequent period.

When the Company loses control of a subsidiary, it recognizes the investment retained in the former subsidiary at its fair value at the date when control is lost. The difference between the fair value of the retained investment plus any consideration received and the carrying amount of the previous investment at the date when control is lost is recognized as a gain or loss in profit or loss. Besides this, the Company accounts for all amounts previously recognized in other comprehensive income in relation to that subsidiary on the same basis as would be required if the Company had directly disposed of the related assets or liabilities.

Profits or losses resulting from downstream transactions are eliminated in full only in the parent company’s financial statements. Profits and losses resulting from upstream transactions and transactions between subsidiaries are recognized only in the parent company’s financial statements only to the extent of interests in the subsidiaries that are not related to the Company.

g. Investment in associates

An associate is an entity over which the Company has significant influence and which is neither a subsidiary nor an interest in a joint venture.

The Company uses the equity method to account for its investments in associates.

Under the equity method, investments in an associate is initially recognized at cost and adjusted thereafter to recognize the Company’s share of the profit or loss and other comprehensive income of the associate. The Company also recognizes the changes in the Company’s share of equity of associates.

Any excess of the cost of acquisition over the Company’s share of the net fair value of the identifiable assets and liabilities of an associate at the date of acquisition is recognized as goodwill, which is included within the carrying amount of the investment and is not amortized. Any excess of the Company’s share of the net fair value of the identifiable assets and liabilities over the cost of acquisition, after reassessment, is recognized immediately in profit or loss.

When the Company subscribes for additional new shares of an associate at a percentage different from its existing ownership percentage, the resulting carrying amount of the investment differs from the amount of the Company’s proportionate interest in the associate. The Company records such a difference as an adjustment to investments with the corresponding amount charged or credited to capital surplus - changes in capital surplus from

  • 239 -

investments in associates accounted for using the equity method. If the Company’s ownership interest is reduced due to its additional subscription of the new shares of associate, the proportionate amount of the gains or losses previously recognized in other comprehensive income in relation to that associate is reclassified to profit or loss on the same basis as would be required had the investee directly disposed of the related assets or liabilities. When the adjustment should be debited to capital surplus, but the capital surplus recognized from investments accounted for using the equity method is insufficient, the shortage is debited to retained earnings.

When the Company’s share of losses of an associate equals or exceeds its interest in that associate (which includes any carrying amount of the investment accounted for using the equity method and long-term interests that, in substance, form part of the Company’s net investment in the associate), the Company discontinues recognizing its share of further losses. Additional losses and liabilities are recognized only to the extent that the Company has incurred legal obligations, or constructive obligations, or made payments on behalf of that associate.

The entire carrying amount of an investment (including goodwill) is tested for impairment as a single asset by comparing its recoverable amount with its carrying amount. Any impairment loss recognized is not allocated to any asset, including goodwill, that form part of carrying amount of the investment. Any reversal of that impairment loss is recognized to the extent that the recoverable amount of the investment subsequently increases.

The Company discontinues the use of the equity method from the date on which its investment ceases to be an associate. Any retained investment is measured at fair value at that date, and the fair value is regarded as the investment’s fair value on initial recognition as a financial asset. The difference between the previous carrying amount of the associate attributable to the retained interest and its fair value is included in the determination of the gain or loss on disposal of the associate. The Company accounts for all amounts previously recognized in other comprehensive income in relation to that associate on the same basis as would be required had that associate directly disposed of the related assets or liabilities.

When the Company transacts with its associate, profits and losses resulting from the transactions with the associate are recognized in the Company’ parent company only financial statements only to the extent of interests in the associate that are not related to the Company.

  • h. Property, plant, and equipment

Property, plant and equipment are measured at cost, less recognized accumulated depreciation.

Properties, plant and equipment in the course of construction are measured at cost less any recognized impairment loss. Cost includes professional fees and borrowing costs eligible for capitalization. Such assets are depreciated and classified to the appropriate categories of property, plant and equipment when completed and ready for intended use.

Depreciation of property, plant and equipment (including assets held under finance leases) is recognized using the straight-line method. Each significant part is depreciated separately. If a lease term is shorter than the assets’ are depreciated over the lease term. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in the estimates accounted for on a prospective basis.

  • 240 -

On derecognition of an item of property, plant and equipment, the difference between the sales proceeds and the carrying amount of the asset is recognized in profit or loss.

  • i. Intangible assets

Intangible assets with finite useful lives that are acquired separately are initially measured at cost and subsequently measured at cost less accumulated amortization. Amortization is recognized on a straight-line basis. The estimated useful lives, residual values, and amortization methods are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.

On derecognition of an intangible asset, the difference between the net disposal proceeds and the carrying amount of the asset is recognized in profit or loss.

  • j. Impairment of tangible and intangible assets

At the end of each reporting period, the Company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered any impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. When it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs. Corporate assets are allocated to the individual cash-generating units on a reasonable and consistent basis of allocation.

The recoverable amount is the higher of fair value less costs to sell and value in use. If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the asset or cash-generating unit is reduced to its recoverable amount, with the resulting impairment loss recognized in profit or loss.

When an impairment loss is subsequently reversed, the carrying amount of the corresponding asset or cash-generating unit is increased to the revised estimate of its recoverable amount, but only to the extent of the carrying amount (less amortization and depreciation) that would have been determined had no impairment loss been recognized on the asset or cash-generating unit in prior years. A reversal of an impairment loss is recognized in profit or loss.

  • k. Financial instruments

Financial assets and financial liabilities are recognized when the Company becomes a party to the contractual provisions of the instruments.

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issuance of financial assets and financial liabilities (other than financial assets and financial liabilities at FVTPL) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at FVTPL are recognized immediately in profit or loss.

1) Financial assets

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

  • 241 -

  • a) Measurement categories

2018

Financial assets are classified into the following categories: Financial assets at FVTPL, financial assets at amortized cost, and equity instruments at FVTOCI.

  • i. Financial asset at FVTPL

Financial asset is classified as at FVTPL when such financial asset is mandatorily classified as at FVTPL. Financial assets mandatorily classified as at FVTPL do not meet the amortized cost criteria or the FVTOCI criteria.

Financial assets at FVTPL are subsequently measured at fair value, with any gains or losses arising on remeasurement recognized in profit or loss. Fair value is determined in the manner described in Note 26.

  • ii. Financial assets at amortized cost

Financial assets that meet the following conditions are subsequently measured at amortized cost:

  • i) The financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows; and

  • ii) The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Subsequent to initial recognition, financial assets at amortized cost, including cash and cash equivalents, notes receivable, trade receivables, and refundable deposits at amortized cost, are measured at amortized cost, which equals gross carrying amount determined using the effective interest method less any impairment loss. Exchange differences are recognized in profit or loss.

Interest income is calculated by applying the effective interest rate to the gross carrying amount of such financial asset, except for:

  • i) Purchased or originated credit-impaired financial asset, for which interest income is calculated by applying the credit-adjusted effective interest rate to the amortized cost of such financial asset; and

  • ii) Financial assets that are not credit-impaired on purchase or origination but have subsequently become credit-impaired, for which interest income is calculated by applying the effective interest rate to the amortized cost of such financial asset.

Cash equivalents include time deposits with original maturities within 3 months from the date of acquisition, which are highly liquid, readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. These cash equivalents are held for the purpose of meeting short-term cash commitments.

  • 242 -

  • iii. Investments in equity instruments at FVTOCI

On initial recognition, the Company may make an irrevocable election to designate investments in equity instruments as at FVTOCI. Designation at FVTOCI is not permitted if the equity investment is held for trading or if it is contingent consideration recognized by an acquirer in a business combination.

Investments in equity instruments at FVTOCI are subsequently measured at fair value with gains and losses arising from changes in fair value recognized in other comprehensive income and accumulated in other equity. The cumulative gain or loss will not be reclassified to profit or loss on disposal of the equity investments, instead, it will be transferred to retained earnings.

Dividends on these investments in equity instruments are recognized in profit or loss when the Company’s right to receive the dividends is established, unless the dividends clearly represent a recovery of part of the cost of the investment.

2017

Financial assets are classified into the following categories: Financial assets at fair value through profit or loss, held-to-maturity investments, available-for-sale financial assets, and loans and receivables.

  • i. Financial assets at FVTPL

Financial assets are classified as at FVTPL when such financial assets are held for trading.

Financial assets at FVTPL are stated at fair value, with any gains or losses arising on remeasurement recognized in profit or loss. The net gain or loss recognized in profit or loss earned on such a financial asset. The fair value is determined in the manner described in Note 26.

  • ii. Held-to-maturity investments

Domestic bonds, which the Company has a positive intent and ability to hold to maturity, are classified as held-to-maturity investments.

Subsequent to initial recognition, held-to-maturity investments are measured at amortized cost using the effective interest method less any impairment.

iii. Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated as available-for-sale or are not classified as loans and receivables, held-to-maturity investments or financial assets at FVTPL.

Available-for-sale financial assets are measured at fair value. Changes in the carrying amounts of available-for-sale monetary financial assets (relating dividends on available-for-sale equity investments) are recognized in profit or loss. Other

  • 243 -

changes in the carrying amount of available-for-sale financial assets are recognized in other comprehensive income and will be reclassified to profit or loss when such investments are disposed of or are determined to be impaired.

Dividends on available-for-sale equity instruments are recognized in profit or loss when the Company’s right to receive the dividends is established.

Available-for-sale equity investments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured and derivatives that are linked to and must be settled by delivery of such unquoted equity investments are measured at cost less any identified impairment loss at the end of each reporting period and presented in a separate line item as financial assets measured at cost. If, in a subsequent period, the fair value of the financial assets can be reliably measured, the financial assets are remeasured at fair value. The difference between the carrying amount and the fair value of such financial assets is recognized in other comprehensive income. Any impairment losses are recognized in profit and loss.

iv. Loans and receivables

Loans and receivables (including trade receivables, cash and cash equivalents, note receivable, trade receivable, and refundable deposits) are measured using the effective interest method at amortized cost less any impairment, except for shortterm receivables when the effect of discounting is immaterial.

Cash equivalents include time deposits with original maturities within 3 months from the date of acquisition, which are highly liquid, readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. These cash equivalents are held for the purpose of meeting short-term cash commitments.

  • b) Impairment of financial assets

2018

The Company recognizes a loss allowance for expected credit losses on financial assets at amortized cost (including trade receivables).

The Company always recognizes lifetime expected credit Loss (i.e. ECL) for trade receivables. For all other financial instruments, the Company recognizes lifetime ECL when there has been a significant increase in credit risk since initial recognition. If, on the other hand, the credit risk on the financial instrument has not increased significantly since initial recognition, the Company measures the loss allowance for that financial instrument at an amount equal to 12-month ECL.

Expected credit losses reflect the weighted average of credit losses with the respective risks of default occurring as the weights. Lifetime ECL represents the expected credit loss that will result from all possible default events over the expected life of a financial instrument. In contrast, 12-month ECL represents the portion of lifetime ECL that is expected to result from default events on a financial instrument that are possible within 12 months after the reporting date.

  • 244 -

The Company recognizes an impairment gain or loss in profit or loss for all financial instruments with a corresponding adjustment to their carrying amount through a loss allowance account.

2017

Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired when there is objective evidence, as a result of one or more events that occurred after the initial recognition of such financial assets, that the estimated future cash flows of the investment have been affected.

Financial assets at amortized cost, such as notes receivables, trade receivables and heldto-maturity investments, are assessed for impairment on a collective basis even if they were assessed not to be impaired individually. Objective evidence of impairment for a portfolio of receivables could include the Company’s past experience with collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period, as well as observable changes in national or local economic conditions that correlate with defaults on receivables.

For a financial asset at amortized cost, the amount of the impairment loss recognized is the difference between such an asset’s carrying amount and the present value of its estimated future cash flows, discounted at the financial asset’s original effective interest rate.

For a financial asset at amortized cost, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment (at the date on which the impairment is reversed) does not exceed what the amortized cost would have been had the impairment not been recognized.

For available-for-sale equity investments, a significant or prolonged decline in the fair value of the security below its cost is considered to be objective evidence of impairment.

For all other financial assets, objective evidence of impairment could include significant financial difficulty of the issuer or counterparty, breach of contract such as a default or delinquency in interest or principal payments, it becoming probable that the borrower will enter bankruptcy or financial re-organization, or the disappearance of an active market for those financial assets because of financial difficulties.

When an available-for-sale financial asset is considered to be impaired, cumulative gains or losses previously recognized in other comprehensive income are reclassified to profit or loss in the period.

In respect of available-for-sale equity securities, impairment loss previously recognized in profit or loss is not reversed through profit or loss. Any increase in fair value subsequent to impairment is recognized in other comprehensive income.

  • 245 -

For a financial asset measured at cost, the amount of the impairment loss is measured as the difference between such an asset’s carrying amount and the present value of its estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment loss will not be reversed in subsequent periods.

The carrying amount of a financial asset is reduced by the impairment loss directly for all financial assets, with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When trade receivables are considered uncollectible, they are written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognized in profit or loss except for uncollectible trade receivables that are written off against the allowance account.

  • c) Derecognition of financial assets

The Company derecognizes a financial asset only when the contractual rights to the cash flows from the asset expire or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party.

Before 2018, on derecognition of a financial asset in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss which had been recognized in other comprehensive income is recognized in profit or loss. Starting from 2018, on derecognition of a financial asset at amortized cost in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable is recognized in profit or loss. On derecognition of an investment in an equity instrument at FVTOCI, the difference between the asset’s carrying amount and the sum of the consideration received and receivable is recognized in profit or loss, and the cumulative gain or loss that had been recognized in other comprehensive income is transferred directly to retained earnings, without recycling through profit or loss.

2) Financial liabilities

  • a) Subsequent measurement

Except the following situations, all the financial liabilities are measured at amortized cost using the effective interest method:

Financial liabilities at FVTPL

Financial liabilities are classified as at FVTPL when such financial liabilities are held for trading.

Financial liabilities held for trading are stated at fair value, with any gain or loss arising on remeasurement recognized in profit or loss. The fair value is determined in the manner described in Note 26.

  • 246 -

  • b) Derecognition of financial liabilities

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

  • 3) Derivative financial instruments

The Company enters into foreign exchange forward contracts to manage its exposure to foreign exchange rate risks.

Derivatives are initially recognized at fair value at the date on which the derivative contracts are entered into and are subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognized in profit or loss immediately. When the fair value of a derivative financial instrument is positive, the derivative is recognized as a financial asset; when the fair value of derivative financial instrument is negative, the derivative is recognized as a financial liability.

  • l. Provision

Provisions are measured at the best estimate of the discounted cash flows of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation.

Provisions for the expected cost of warranty obligations to assure that products comply with agree-upon specifications are recognized on the date of sale of the relevant products at the best estimate by the management of the Company of the expenditure required to settle the Company’s obligation.

m. Revenue recognition

2018

The Company identifies the contract with the customers, allocates the transaction price to the performance obligations, and recognizes revenue when performance obligations are satisfied.

For contract where the period between the date on which the Company transfers a promised good or service to a customer and the date on which the customer pays for that good or service is one year or less, the Company does not adjust the promised amount of consideration for the effects of a significant financing component.

Sales of goods are recognized as revenue when the goods are delivered to the customer’s specific location/the goods are shipped/the goods are picked up because it is the time when the customer acquisition of control. Trade receivable is recognized concurrently. The transaction price received is recognized as a contract liability until the customer acquisition control of the good.

The Company does not recognize revenue on materials delivered to subcontractors because this delivery does not involve a transfer of control.

  • 247 -

2017

Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated customer returns, rebates and other similar allowances. Sales returns are recognized at the time of sale provided the seller can reliably estimate future returns and recognizes a liability for returns based on previous experience and other relevant factors.

1) Sale of goods

Revenue from the sale of goods is recognized when the goods are delivered and titles have passed, at which time all the following conditions are satisfied:

  • a) The Company has transferred to the buyer the significant risks and rewards of ownership of the goods;

  • b) The Company retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;

  • c) The amount of revenue can be measured reliably;

  • d) It is probable that the economic benefits associated with the transaction will flow to the Company; and

  • e) The costs incurred or to be incurred in respect of the transaction can be measured reliably.

The Company does not recognize sales revenue on materials delivered to subcontractors because this delivery does not involve a transfer of risks and rewards of materials ownership.

  • 2) Dividend and interest income

Dividend income from investments is recognized when a shareholder’s right to receive payment has been established and provided that it is probable that the economic benefits will flow to the Company and that the amount of income can be measured reliably.

Interest income from a financial asset is recognized when it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably. Interest income is accrued on a time basis by reference to the principal outstanding and at the applicable effective interest rate applicable.

  • n. Leasing

Leases are classified as finance leases whenever the terms of a lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

  • 1) The Company as lessor

Rental income from operating leases is recognized on a straight-line basis over the term of the relevant lease.

  • 248 -

  • 2) The Company as lessee

Assets held under finance leases are initially recognized as assets of the Company at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the balance sheets as a finance lease obligation.

Finance expenses implicit in lease payments for each period are recognized immediately in profit or loss, unless they are directly attributable to qualifying assets, in which case, they are capitalized.

Operating lease payments are recognized as expenses on a straight-line basis over the lease term.

  • o. Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. Other than that which is stated above, all other borrowing costs are recognized in profit or loss in the period in which they are incurred.

  • p. Government grants

Government grants are not recognized until there is reasonable assurance that the Company will comply with the conditions attaching to them and that the grants will be received.

Government grants are recognized in profit or loss on a systematic basis over the periods in which the Company recognizes as expenses the related costs for which the grants are intended to compensate. Specifically, government grants whose primary condition is that the Company should purchase, construct or otherwise acquire non-current assets are recognized as deferred revenue and transferred to profit or loss on a systematic and rational basis over the useful lives of the related assets.

Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Company with no future related costs are recognized in profit or loss in the period in which they become receivable.

q. Employee benefits

  • 1) Short-term employee benefits

Liabilities recognized in respect of short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in exchange for the related services.

  • 2) Retirement benefits

Payments to defined contribution retirement benefit plans are recognized as expenses when employees have rendered service entitling them to the contributions.

  • 249 -

Defined benefit costs (including service cost, net interest and remeasurement) under the defined benefit retirement benefit plans are determined using the projected unit credit method. Service cost and net interest on the net defined benefit liabilities are recognized as employee benefits expense in the period in which they occur. Remeasurement, comprising actuarial gains and losses and the return on plan assets (excluding interest), is recognized in other comprehensive income in the period in which they occur. Remeasurement recognized in other comprehensive income is reflected immediately in retained earnings and will not be reclassified to profit or loss.

Net defined benefit liabilities represent the actual deficit in the Company’s defined benefit plan. Any surplus resulting from this calculation is limited to the present value of any refunds from the plans or reductions in future contributions to the plans.

r. Share-based payment arrangements

The fair value at the grant date of the employee share options is expensed on a straight-line basis over the vesting period, based on the Company’s best estimates of the number of shares or options that are expected to ultimately vest, with a corresponding increase in capital surplus - employee share options. It is recognized as an expense in full at the grant date if vested immediately. The grant date of issued ordinary shares for cash which are reserved for employees is the date on which the number of shares that the employees purchase is confirmed.

At the end of each reporting period, the Company revises its estimate of the number of employee share options expected to vest. The impact of the revision of the original estimates is recognized in profit or loss such that the cumulative expenses reflect the revised estimate, with a corresponding adjustment to capital surplus - employee share options.

  • s. Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

1) Current tax

According to the Income Tax Law, an additional tax of unappropriated earnings is provided for as income tax in the year the shareholders approve to retain earnings.

Adjustments of prior years’ tax liabilities are added to or deducted from the current year’s tax provision.

  • 2) Deferred tax

Deferred tax is calculated on temporary differences between the carrying amounts of assets and liabilities and the corresponding tax bases used in the computation of taxable profit.

Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized.

Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries and associates. Deferred tax assets arising from deductible

  • 250 -

temporary differences associated with such investments are only recognized to the extent that it is probable that there will be sufficient taxable profits against which to utilize the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the assets to be recovered. A previously unrecognized deferred tax asset is also reviewed at the end of each reporting period and recognized to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liabilities are settled or the assets are realized, based on tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

  • 3) Current and deferred taxes for the year

Current and deferred taxes are recognized in profit or loss, except when they relate to items that are recognized in other comprehensive income or directly in equity, in which case, the current and deferred taxes are also recognized in other comprehensive income or directly in equity respectively.

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the Company's accounting policies, management is required to make judgments, estimations and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised if the revisions affect only that period or in the period of the revision and future periods if the revisions affects both current and future periods.

  • a. Estimated impairment of financial assets - 2018

The provision for impairment of trade receivables and investments in debt instruments is based on assumptions about risk of default and expected loss rates. The Company uses judgement in making these assumptions and in selecting the inputs to the impairment calculation, based on the Company’s historical experience, existing market conditions as well as forward looking estimates as of the end of each reporting period. For details of the key assumptions and inputs used, see Note 10. Where the actual future cash inflows are less than expected, a material impairment loss may arise.

  • 251 -

  • b. Estimated impairment of trade receivables - 2017

When there is objective evidence of impairment loss of receivables, the Company takes into consideration the estimation of the future cash flows of such assets. The amount of impairment loss is measured as the difference between such an asset’s carrying amount and the present value of its estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. Where the actual future cash flows are less than expected, a material impairment loss may arise.

  • c. Write-down of inventories

The net realizable value of inventories is the estimated selling price in the ordinary course of business less the estimated costs of completion and disposal. The estimation of net realizable value is based on current market conditions and historical experience with product sales of a similar nature. Changes in market conditions may have a material impact on the estimation of the net realizable value.

6. CASH AND CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS
Cash on hand

Checking accounts and demand deposits

Cash equivalents
Time deposits


Rate of interest per annum (%)
Cash in bank		 December 31



2018
$ 1,658
1,431,567
-

$ 1,433,225

0.00-0.48		 2017
$ 1,434

698,656
371,037
$ 1,071,127
0.00-2.50

7. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS

The financial assets and liabilities at fair value through profit or loss were derivative financial instruments of foreign exchange forward contracts under IAS 39. They have been classified as mandatorily measured at FVTPL under IFRS 9. At the end of the reporting period, outstanding foreign exchange forward contracts not under hedge accounting were as follows:

Currency Maturity Date Notional Amount
December 31, 2018
Sell EUR/NT 2019.2.1-2019.3.22 EUR2,100/NTD73,964
D
Sell CNY/NT 2019.1.28-2019.4.16 CNY165,000/NTD728,0
D 28
  • 252 -

Currency Maturity Date Notional Amount December 31, 2017 Sell EUR/NT 2018.1.9-2018.2.21 EUR2,600/NTD92,486 D Sell CNY/NT 2018.1.26-2018.2.26 CNY120,000/NTD540,7 D 34

The Company entered into foreign exchange forward contracts to manage exposures due to exchange rate fluctuations of foreign currency denominated assets and liabilities.

8. FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME - NON-CURRENT - 2018

Investments in equity instruments at FVTOCI

December 31, 2018

Domestic listed at emerging market common shares

HIWIN Mikrosystem Corp. (HIWIN Mikrosystem) $ 719,894

Domestic unlisted common shares

Taichung International Country Club 2,620 Sunengine Corporation Ltd. (Sunengine) - King Kong Iron Work Ltd. - Overseas unlisted common shares Kaland Holdings Corp. (Kaland) 208,326 $ 930,840

The Investment Commission of Ministry of Economic Affairs (MOEA) approved the Company’s investment in Suzhou YIFU Finance Leasing Co., Ltd. (YIFU Finance). The investment in the amount of USD8,168 thousand was made through investing Kaland and Cheer Tone Group Limited in British Virgin Islands (BVI). YIFU Finance mainly engages in finance leasing services.

These investments in equity instruments are not held for trading. Instead, they are held for medium to long-term strategic purposes. Accordingly, the management elected to designate these investments in equity instruments as at FVTOCI as they believe that recognizing short-term fluctuations in these investments’ fair value in profit or loss would not be consistent with the Company’s strategy of holding these investments for long-term purposes. These investments in equity instruments were classified as financial assets measured at cost under IAS 39. Refer to Note 3 and Note 9 for information relating to their reclassification and comparative information for 2017.

  • 253 -

In October 2018, the Company sold its shares in HIWIN Mikrosystem, with a fair value of $14,750 thousand and, the Company transferred the unrealized gain of $8,396 thousand from other equity to retained earnings.

9. FINANCIAL ASSETS MEASURED AT COST - NON-CURRENT - 2017

December 31, December 31,
Investee 2017
Domestic unlisted common shares
HIWIN Mikrosystem $
63,440
Sunengine 15,338
Taichung International Country Club 2,100
King Kong Iron Work Ltd. -
80,878
Overseas unlisted common shares
Kaland Holdings Corp. (Kaland) $ 236,266
$ 317,144
(Concluded)

Management believed that the fair value of the above unlisted equity investments held by the Company cannot be reliably measured due to the very significant range of reasonable fair value estimates; therefore, they were measured at cost less impairment at the end of reporting period.

10. NOTES RECEIVABLE AND TRADE RECEIVABLES

NOTES RECEIVABLE AND TRADE RECEIVABLES
Notes receivable from unrelated parties
At amortized cost
Gross carrying amount

Less: Allowance for impairment loss


Trade receivables from unrelated parties
At amortized cost
Gross carrying amount

Less: Allowance for impairment loss

 December 31





2018
$ 191,562
(1,915)

$ 189,647

$ 3,703,713
(3,991)

$ 3,699,722
 2017
$ 293,350
(2,933)
$ 290,417
$ 2,755,570
(409)
$ 2,755,161
  • 254 -

a. Notes receivable

The aging of notes receivable for the Company was as follows:

Not past due

Past due

 December 31 December 31


2018
$ 191,562
-

$ 191,562
 2017
$ 293,350
-
$ 293,350

The above aging schedule was based on the past due days.

  • b. Trade receivables

For the year ended December 31, 2018

The Company determines the credit period of sales of goods based on the counterparty’s credit rating, location and transaction terms.

In order to minimize credit risk, the management of the Company 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 Company reviews the recoverable amount of each individual trade debt at the end of the reporting period to ensure that adequate allowance is made for possible irrecoverable amounts. In this regard, the management believes the Company’s credit risk was significantly reduced.

The Company applies the simplified approach to providing for expected credit losses prescribed by IFRS 9, which permits the use of lifetime expected loss provision for all trade receivables. The expected credit losses on trade receivables are estimated by reference to past default experience of the debtor and an analysis of the debtor’s current financial position, adjusted for general economic conditions of the industry in which the debtors operate and an assessment of both the current as well as the forecast direction of economic conditions at the reporting date. As the Company’s historical credit loss experience does not show significantly different loss patterns for different customer segments, the provision for loss allowance based on past due status is not further distinguished according to the Company’s different customer base.

The Company writes off a trade receivable when there is information indicating that the debtor is in severe financial difficulty and there is no realistic prospect of recovery. For trade receivables that have been written off, the Company continues to engage in enforcement activity to attempt to recover the receivables due. Where recoveries are made, these are recognized in profit or loss.

The following table details the loss allowance of trade receivables.

December 31, 2018

Expected credit loss rate
Gross carrying amount

Loss allowance
(Lifetime ECL)

Amortized cost
 Not Past Due
0.001%
$ 3,356,937

(34)

$ 3,356,903
 1 to 120 Days
121 to 360 Days Over 360 Days
0.1%-1%
2%-4%
10%-100%
$ 338,510 $ 606 $ 7,660

(339)

(12)

(3,606)

$ 338,171
$ 594
$ 4,054
 Total
$ 3,703,713

(3,991)
$ 3,699,722
  • 255 -

The movements of loss allowance were as follows:


Balance at January 1, 2018 per IAS 39

Adjustment on initial application of IFRS 9

Balance at January 1, 2018 per IFRS 9
Add: Net remeasurement of loss allowance
Less: Amounts written off

Balance at December 31, 2018

For the year ended December 31, 2017		 For the Year Ended December
31, 2018
Notes
Receivable
Trade
Receivables
$ 2,933 $ 409

-

-
2,933
409
(1,018)
3,825

-

(243)
$ 1,915
$ 3,991

The Company determines the credit period of sales of goods based on the counterparty’s credit rating, location and transaction terms. In determining the recoverability of a trade receivable, the Company considered any change in the credit quality of the trade receivable since the date credit was initially granted to the end of the reporting period. Allowance for impairment loss was recognized based on estimated irrecoverable amounts determined by reference to past default experience of the counterparties and an analysis of their current financial position.

The aging of receivables from unrelated parties was as follows:

December 31,
2017
Not past due $ 2,695,959
1-30 days 49,518
31- 60 days 2,535
61-120 days -
121-180 days -
More than 180 days
7,558
$ 2,755,570

The above aging schedule was based on the past due days.

The movements of loss allowance were as follows:


Balance at January 1, 2017

Impairment loss recognized (reversed) on receivables

Balance at December 31, 2017
 For the Year Ended December
31, 2017
Notes
Receivable
Trade
Receivables
$ 1,130 $ 63,471

1,803

(63,062)
$ 2,933
$ 409
  • 256 -

Trade receivables include amounts that are past due but for which the Company has not recognized a specific allowance for doubtful receivables after the assessment since there has not been a significant change in the credit quality of its customers and the amounts are still considered recoverable.

There were no receivables that were past due but not impaired on December 31, 2017.

The aging of trade receivables that were impaired was as follows:

The aging of trade receivables that were impaired was as follows:
December 31,
2017
0-60 days $ 2,748,012
61- 120 days -
121-180 days -
More than 180 days
7,558
$ 2,755,570

The above aging of trade receivables before deducting the allowance for impairment loss was based on the past due days.

11. INVENTORIES

NTORIES
Merchandise

Finished goods
Work in process

Raw materials and supplies

Inventory in transit

 December 31




2018
$ 3,346
809,397
1,633,173
3,195,287
336,073

$ 5,977,276
 2017
$ 2,774

357,496
1,302,814
1,456,944
302,083
$ 3,422,111

The cost of inventories recognized as cost of goods sold for the years ended December 31, 2018 and 2017 was $15,172,408 thousand and $10,932,061 thousand, respectively.

The cost of inventories recognized as cost of goods sold for the years ended December 31, 2018 and 2017 included reversal of inventory write-downs of $1,000 thousand and $2,000 thousand, and unallocated fixed overhead of $107,606 thousand and $94,147 thousand, respectively. Previous write-downs were reversed as a result of increased selling prices in markets and consumption of inventory.

  • 257 -

12. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD

Investments in subsidiaries

Investments in associates


a. Investments in subsidiaries
HIWIN GmbH (“HIWIN Germany”)

HIWIN Corporation, U.S.A. (“HIWIN USA”)

HIWIN Corporation, Japan (“HIWIN Japan”)

Eterbright Solar Corporation (“Eterbright”)

HIWIN Singapore Pte. Ltd. (“HIWIN Singapore”)

HIWIN Corporation (“HIWIN Korea”)

HIWIN Technologies (China) Corporation (“HIWIN
China”)

Luren Precision Co., LTD(“Luren”)

HIWIN Healthcare Corp.

HIWIN S.R.L. (“HIWIN Italy”)

Matrix Machine Tool (Coventry) Limited (“Matrix”)


Add: Credit balance of investments accounted for using the
equity method transferred to non-current liability


Name of subsidiary
HIWIN Germany
HIWIN USA
HIWIN Japan
Eterbright
HIWIN Singapore
HIWIN Korea
HIWIN China
Luren
HIWIN Healthcare Corp.
HIWIN Italy
Matrix		 December 31


2018
2017
$ 4,224,497 $ 3,799,910
121,444

107,604
$ 4,345,941
$ 3,907,514
December 31
2018
2017
$ 1,289,175 $ 1,181,668

423,670
376,012

126,122
(11,851)

177,607
394,413

(42,366)
(19,053)

(45,214)
29,377
1,722,470 1,554,905

261,205
260,631

2,974
2,904
$ (63,471) $ (30,630)

221,274

-
4,073,446 3,738,376

151,051

61,534
$ 4,224,497
$ 3,799,910
Proportion of Ownership and
Voting Rights
2018
2017
100%
100%
100%
100%
100%
100%
74%
65%
100%
100%
100%
100%
100%
100%
58%
48%
100%
100%
100%
94%
52%
-
  • 258 -

Refer to Note 24 to the Company’ consolidated financial statements for the year ended December 31, 2018, for the disclosures of the Company’s acquisitions of Matrix.

The directors of the Company concluded that the Company has the practical ability to direct Luren, unilaterally, and hence, the Company has control over Luren.

The Company proceeds 6% of HIWIN Italy’s shares which owned by HIWIN Germany within the amount of 228,540 thousand by return of capital from HIWIN Germany.

The investments in subsidiaries accounted for using the equity method and the share of profit of loss and other comprehensive income of those investments for the year ended December 31, 2018 and 2017 was based on the subsidiaries’ financial statements which have been audited for the same year.

  • b. Investments in associates
Associates that are not individually materials

The Company's share of:
Profit for the year

Other comprehensive income (loss) for the year

Total comprehensive income for the year
 December 31 December 31
2018
2017
$ 121,444
$ 107,604
For the Year Ended December
31


2018
$ 17,457
-

$ 17,457
 2017
$ 10,990
-
$ 10,990

Investments accounted for using the equity method and the share of profit or loss and other comprehensive income of those investments for the years ended December 31, 2018 and 2017 were calculated based on the financial statements which have been audited.

13. PROPERTY, PLANT AND EQUIPMENT

Cost
Land

Buildings and improvements
Machinery and equipment
Transportation equipment
Miscellaneous equipment
Construction in progress

 For the Year Ended December 31, 2018 Ended December 31, 2018



Beginning
Balance
$ 3,774,107

6,422,532
9,188,619
36,343
1,151,134

2,349,644

22,922,379
 Additions
$ -

5,623

987,536

32,482

212,192

2,127,541

$ 3,365,374
 Disposals
$ -

(1,174)

(585,823)

(2,900)

(50,685)

-

$ (640,582)
 Reclassified
Amount
$ -

928,931

1,911,103

-

169,841

(928,931)

$ 2,080,944
 Ending
Balance
$ 3,774,107

7,355,912
11,501,435

65,925

1,482,482

3,548,254
27,728,115
  • 259 -
Accumulated depreciation
Buildings and improvements
Machinery and equipment

Transportation equipment

Miscellaneous equipment


 For the Year Ended December 31, 2018 Ended December 31, 2018





Beginning
Balance
1,094,138
4,375,670
15,696

603,142


6,088,646

$ 16,833,733		 Additions
$ 153,148

1,138,455

6,520

160,041

$ 1,458,164
 Disposals
$ (1,175)

(576,878)

(2,899)

(42,079)

$ (623,031)
 Reclassified
Amount
$ -

-

-

-

$ -

 Ending
Balance

1,246,111

4,937,247

19,317

721,104

6,923,779
$ 20,804,336
Cost
Land

Buildings and improvements
Machinery and equipment
Transportation equipment
Miscellaneous equipment
Construction in progress
Prepayments for land


Accumulated depreciation
Buildings and improvements
Machinery and equipment

Transportation equipment

Miscellaneous equipment


 For the Year Ended December 31, 2017 Ended December 31, 2017









Beginning
Balance
$ 3,709,611

5,954,165
8,615,971
43,699
1,018,285
832,384

63,858

20,237,973

955,633
4,431,017
22,774

538,558


5,947,982

$ 14,289,991		 Additions
$ 638

5,487

297,683

2,429

99,924

1,980,297

-

$ 2,386,458

$ 138,663

995,173

5,848

140,716

$ 1,280,400
 Disposals
$ -

(158)
(1,054,214)

(12,959)

(76,138)

-

-

$ (1,143,469)

$ (158)
(1,050,520)

(12,926)

(76,132)

$ (1,139,736)
 Reclassified
Amount
$ 63,858

463,038

1,329,179

3,174

109,063

(463,037)

(63,858)

$ 1,441,417

$ -

-

-

-

$ -

 Ending
Balance
$ 3,774,107

6,422,532

9,188,619

36,343

1,151,134

2,349,644

-
22,922,379

1,094,138

4,375,670

15,696

603,142

6,088,646
$ 16,833,733

The above items of property, plant and equipment are depreciated on a straight-line basis over the estimated useful life of the asset:

Buildings and improvements Main buildings 25-55 years Electrical power equipment 35 years Engineering system 8-55 years Machinery and equipment Machinery equipment 3-12 years Inspection equipment 3-10 years Transportation equipment 5-10 years Miscellaneous equipment 3-15 years

Property, plant and equipment pledged as collateral for bank borrowings were set out in Note 28.

  • 260 -

14. PREPAYMENTS FOR MACHINERY AND EQUIPMENT

The aging of prepayments for machinery and equipment was as follows:

The date of initial cost contribution
Within 1 year

1-2 years
2-5 years
More than 5 years

 December 31 December 31


2018
$ 1,751,432
824,244
273,966
14,997

$ 2,864,639
 2017
$ 1,109,144

338,180

263,184
40,025
$ 1,750,533

In order to achieve expertise and mastery in the key manufacturing technology, reduce product costs and improve the autonomy of equipment, the Company designs, develops, and assembles equipment by itself. The prepayments for machinery and equipment include both internallydeveloped and outsourced equipment.

15. BORROWINGS

a. Short-term borrowings

Secured borrowings(Note 28)
Loans for export sales

Usance letters of credit

Unsecured borrowings
Line of credit borrowings


Rate of interest per annum (%)
Loans for export sales
Usance letters of credit
Line of credit borrowings		 December 31 December 31



2018
$ 800,000
-

800,000
3,750,000

$ 4,550,000

0.80
-
0.82-0.98		 2017
$ 1,009,000
2,036
1,011,036
2,370,000
$ 3,381,036
0.80-0.93
0.90
0.92-1.00
  • 261 -

b. Long-term borrowings

Secured borrowings(Note 28)
Secured loans

Unsecured borrowings
Unsecured loans


Less: Current portion

Long-term borrowings

Rate of interest per annum (%)
Secured loans
Unsecured loans		 December 31 December 31




2018
$ 6,397,130
-

6,397,130
(1,604,194)

$ 4,792,936

1.03-1.76
-		 2017
$ 6,918,602
500,000
7,418,602
(1,600,492)
$ 5,818,110
1.02-1.76
1.14-1.23

16.OTHER PAYABLES

Payables for salaries and bonuses

Payables for compensation to employees
Payables for remuneration to directors
Payables for annual leave
Payables for purchases of building and
equipment
Others

 December 31 December 31


2018
$ 1,052,563
492,363
246,182
115,818
23,827
311,153

$ 2,241,906
 2017
$ 620,156

231,072

115,536

101,497
4,975
206,835
$ 1,280,071

17. RETIREMENT BENEFIT PLANS

  • a. Defined contribution plans

The Company adopted a pension plan under the Labor Pension Act (the LPA), which is a statemanaged defined contribution plan. Under the LPA, an entity makes monthly contributions to employees’ individual pension accounts at 6% of monthly salaries and wages.

  • b. Defined benefit plans

The defined benefit plans adopted by the Company in accordance with the Labor Standards Law is operated by the government of the ROC. Pension benefits are calculated on the basis of

  • 262 -

the length of service and average monthly salaries of the 6 months before retirement. The Company contribute amounts equal to 2% of total monthly salaries and wages to a pension fund administered by the pension fund monitoring committee. Pension contributions are deposited in the Bank of Taiwan in the committee’s name. Before the end of each year, the Company assesses the balance in the pension fund. If the amount of the balance in the pension fund is inadequate to pay retirement benefits for employees who conform to retirement requirements in the next year, the Company is required to fund the difference in one appropriation that should be made before the end of March of the next year. The pension fund is managed by the Bureau of Labor Funds, Ministry of Labor (“the Bureau”); the Company has no right to influence the investment policy and strategy.

The amounts included in the balance sheets in respect of the Company’s defined benefit plans were as follows:

Present value of defined benefit obligation

Fair value of plan assets

Net defined benefit liabilities

Movements in net defined benefit liability were as follows:
Present Value
of the Defined
Benefit
Obligation
Balance at January 1, 2017
$ 319,923
Service cost
Current service cost

3,371
Net interest expense (income)

4,729
Recognized in profit or loss

8,100
Remeasurement
Return on plan assets (excluding
amounts included in net interest)

-
Actuarial loss - changes in demographic
assumptions

37
Actuarial loss - changes in financial
assumptions

10,547
Actuarial loss - experience adjustments
38,181
Recognized in other comprehensive
income

48,765
Contributions from the employer

-
Benefits paid

(9,126)

Balance at December 31, 2017

367,662
Service cost
Current service cost

3,229		 December 31
2018
2017
$ 370,039 $ 367,662

(82,810)

(87,482)
$ 287,229
$ 280,180
Fair Value of
the Plan
Assets
Net Defined
Benefit
Liabilities
$ (84,308)
$ 235,615

-
3,371

(1,233)

3,496

(1,233)

6,867

395
395

-
37

-
10,547

-

38,181

395

49,160

(11,322)
(11,322)

8,986

(140)

(87,482)

280,180

-
3,229
  • 263 -
Present Value
of the Defined Fair Value of Net Defined
Benefit the Plan Benefit
Obligation Assets Liabilities
Net interest expense (income)
4,557		 (1,092)
3,465
Recognized in profit or loss
7,786		 (1,092)
6,694
Remeasurement
Return on plan assets (excluding
amounts included in net interest)
-		 (2,396) (2,396)
Actuarial loss - changes in demographic
assumptions
529		 - 529
Actuarial loss - changes in financial
assumptions
10,215		 - 10,215
Actuarial loss - experience adjustments
7,906		 -
7,906
Recognized in other comprehensive
income
18,650		 (2,396)
16,254
Contributions from the employer
-		 (15,899)
(15,899)
Benefits paid
(24,059)
 24,059
-
Balance at December 31, 2018
 $ 370,039 $
(82,810)
 $ 287,229

Through the defined benefit plans under the Labor Standards Law, the Company is exposed to the following risks:

  • 1) Investment risk: The plan assets are invested in domestic and foreign equity and debt securities, bank deposits, etc. The investment is conducted at the discretion of the Bureau or under the mandated management. However, in accordance with relevant regulations, the return generated by plan assets should not be below the interest rate for a 2-year time deposit with local banks.

  • 2) Interest risk: A decrease in the government bond interest rate will increase the present value of the defined benefit obligation; however, this will be partially offset by an increase in the return on the plans’ debt investments.

  • 3) Salary risk: The present value of the defined benefit obligation is calculated by reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the present value of the defined benefit obligation.

The actuarial valuations of the present value of the defined benefit obligation were carried out by qualified actuaries. The significant assumptions used for the purposes of the actuarial valuations were as follows:

Discount rates
Expected rates of salary increase
Turnover rate		 December 31
2018
2017
1.00%
1.25%
2.00%
2.00%
1.14%
1.22%
  • 264 -

If possible reasonable changes in each of the significant actuarial assumptions will occur and all other assumptions will remain constant, the present value of the defined benefit obligation would increase (decrease) as follows:

Discount rate
0.25% increase

0.25% decrease

Expected rate of salary increase
0.25% increase

0.25% decrease

Turnover rate
10% increase

10% decrease
 December 31 December 31





2018
$ (10,234)

$ 10,651

$ 10,518

$ (10,160)

$ (556)

$ 559
 2017
$ (10,549)
$ 10,987
$ 10,877
$ (10,499)
$ (752)
$ 757

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 expected contributions to the plan for the next year

The average duration of the defined benefit obligation		 December 31 December 31
2018
$ 5,925

11 years		 2017
$ 5,979
11.1 years

18.EQUITY

  • a. Common stock
Common stock
Number of shares authorized (in thousands)

Shares authorized

Number of shares issued and fully paid (in thousands)

Shares issued
 December 31



2018
500,000

$ 5,000,000

300,562

$ 3,005,620
 2017
300,000
$ 3,000,000
280,157
$ 2,801,573

Fully paid ordinary shares, which have a par value of $10, carry one vote per share and carry a right to dividends.

On May 10, 2018, the Company’s board of directors resolved to issue 12,000 thousand ordinary shares, with a par value of NT$10, for a consideration of NT$250 per share. On June 28, 2018, the above transaction was approved by the FSC, and the subscription base date was determined as at September 5, 2018 by the board of directors.

  • 265 -

b. Capital surplus

The capital surplus arising from shares issued in excess of par 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 transferred to share capital (limited to a certain percentage of the Company’s capital surplus and once a year).

Capital surplus arising from employee share option expires of issuance of ordinary share for cash is used to offset a deficit only.

c. Retained earnings and dividend policy

Under the dividend policy as set forth in the amended Articles, where the Company made profit in a fiscal year, the profit shall be first utilized for paying taxes, offsetting losses of previous years, setting aside as legal reserve 10% of the remaining profit, setting aside special reserve in accordance with the laws and regulations, setting at most 6% as dividends, and then any remaining profit together with any undistributed retained earnings shall be used by the Company’s board of directors as the basis for proposing a distribution plan, which should be resolved in the shareholders’ meeting for distribution of dividends and bonus to shareholders. For the policies on distribution of employees’ compensation and remuneration of directors before and after amendment, please refer to c. Employees’ compensation and remuneration of directors in Note 19-c.

The legal reserve may be used to offset deficits. 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 appropriations of earnings for 2017 and 2016 which have been approved in the shareholders’ meetings on June 27, 2018, and June 28, 2017, respectively, were as follows:


Legal reserve

Appropriation (reversal)
special reserve
Cash dividends

Share dividends		 Appropriation of Earnings
For the Year Ended
December 31
2017
2016
$ 273,802 $ 132,682
(14,593) 173,909
980,551 439,462
84,047
54,933		 Dividends Per Share (NT$)
For the Year Ended
December 31
2017
2016


$ 3.5
$ 1.6

0.3
0.2

The appropriation of earnings for 2018 had been proposed by the Company’s board of directors on March 26, 2019. The appropriation and dividends per share were as follows:

Appropriation Dividends Per Dividends Per
of Earnings Share (NT$)
Legal reserve $ 539,226
Reversal special reserve (250,940)
Cash dividends 2,103,934 $ 7
Share dividends 90,169 0.3
  • 266 -

The appropriation of earnings for 2018 are subject to the resolution in the shareholders’ meeting to be held on June 28, 2019.

19. NET PROFIT FROM CONTINUING OPERATIONS

  • a. Information about capitalized interest
n about capitalized interest

Capitalized interest
Capitalization rates		 For the Year Ended December
31
2018
2017
$ 46,125 $ 35,622
1.38%-1.46% 1.34%-1.47%
  • b. Employee benefits expense, depreciation and amortization expenses
Operating Operating Operating
Costs Expenses Total
For the Year Ended December 31, 2018
Short-term employee benefits
Salary
 $ 3,595,463 $ 1,053,752 $ 4,649,215
Labor and health insurance 253,839 70,612
324,451
Post-employment benefits
Defined contribution plans 111,379 32,363
143,742
Defined benefit plans 6,158 536
6,694
Remuneration to directors - 261,286
261,286
Other employee benefits 204,722 59,046
263,768
Depreciation expenses
 1,168,791 162,021 1,330,812
Amortization expenses 12,281 5,569
17,850
Operating Operating
Costs Expenses Total
For the Year Ended December 31, 2017
Short-term employee benefits
Salary
 $ 2,512,956 $
757,098		 $ 3,270,054
Labor and health insurance 201,431 58,764
260,195
Post-employment benefits
Defined contribution plans 81,492 25,442
106,934
Defined benefit plans 6,120 747
6,867
Remuneration to directors - 130,603
130,603
Other employee benefits 118,761 32,952
151,713
Depreciation expenses
 1,032,625 143,400 1,176,025
Amortization expenses 5,488 3,072
8,560

As of December 31, 2018 and 2017, the Company had are 5,390 and 4,856 employees, respectively. There were 6 non-employee directors for both year. The head counts were the same as those used as basis in the calculation of employee benefit expense.

  • 267 -

  • c. Employees’ compensation and remuneration of directors

The Company accrued employees’ compensation and remuneration of directors at rates of no less than 1% and no higher than 4%, respectively, of net profit before income tax, employees’ compensation, and remuneration of directors. The employees’ compensation and remuneration of directors and supervisors for the years ended December 31, 2018 and 2017 which have been approved by the Company’s board of directors on March 26, 2019 and March 22, 2018, respectively, were as follows:


respectively, were as follows:
Cash

Employees’ compensation
Remuneration of directors		 For the Year Ended December 31
2018
Accrual rate
Amount


7.0% $ 492,363
3.5%
246,182		 2017
Accrual rate
Amount

6.6% $ 231,072

3.3%
115,536

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

There was no difference between the actual amounts of employees’ compensation and remuneration of directors paid and the amounts recognized in the financial statements for the year ended December 31, 2017 and 2016.

Information on the employees’ compensation and remuneration of directors resolved by the Company’s board of directors in 2019 and 2018 is available at the Market Observation Post System website of the Taiwan Stock Exchange.

20.TAXES

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

Current tax
In respect of the current year

Income tax of unappropriated earnings
Adjustments for prior years
Deferred tax
In respect of the current year
Adjustments to deferred tax attributable to changes in tax
rates and laws
Income tax expense recognized in profit or loss
 For the Year Ended December
31		 For the Year Ended December
31		 For the Year Ended December
31


2018
$ 623,318
137,142
69,297
61,604
6,980

$ 898,341
 2017
$ 340,032

52,549

7,858

42,589
-
$ 443,028
  • 268 -

A reconciliation of accounting profit and income tax expense is as follows:


Income tax expense calculated at the statutory rate

Nondeductible expenses in determining taxable income
Tax-exempt income
Others
Income tax on unappropriated earnings
Investment tax credits used

Current tax
Unrecognized deductible temporary differences
Adjustments to deferred tax attributable to changes in tax
rates and laws
Adjustments for prior years’ tax

Income tax expense recognized in profit or loss
 For the Year Ended December
31		 For the Year Ended December
31		 For the Year Ended December
31



2018
$ 1,258,120
1,490
(262,407)
(1,003)
137,142
(370,877)

762,465
59,599
6,980
69,297

$ 898,341
 2017
$ 540,778

258

(141,894)

1,623

52,549
(74,316)

378,998

56,172
-
7,858
$ 443,028

In 2017, the applicable corporate income tax rate used by the Company is 17%. However, the Income Tax Act in the ROC was amended in 2018, and the corporate income tax rate was adjusted from 17% to 20%, effective in 2018. In addition, the rate of the corporate surtax applicable to the 2018 unappropriated earnings will be reduced from 10% to 5%.

As the status of the 2019 appropriation of earnings is uncertain, the potential income tax consequences of the 2018 unappropriated earnings are not reliably determinable.

b. Income tax expense (gain) recognized in other comprehensive income


Deferred tax
Effect of change in tax rate

In respect of the current year:
Translation of foreign operations
Remeasurement of defined benefit plans

 For the Year Ended December
31		 For the Year Ended December
31		 For the Year Ended December
31


2018
$ (11,232)
(8,437)
(3,251)

$ (22,920)
 2017
$ -

2,978
(8,357)
$ (5,379)
  • 269 -

c. Deferred tax assets and liabilities

Deferred tax assets and liabilities
Deferred tax assets
Temporary differences
Unrealized intercompany profit

Doubtful debts
Defined benefit obligations
Allowance for inventory devaluation
Impairment loss on financial assets
Payable for annual leave
FVTPL financial liabilities
Provisions
Exchange difference on foreign
operations
Others


Deferred tax liabilities
Temporary differences
Unappropriated earnings of
subsidiaries
Unrealized foreign currency exchange
gain
 For the Year Ended December 31, 2018





Opening
Balance
Recognized in
Profit or Loss
Recognized in
Other
Comprehensive
Income
$ 101,499 $ 134,080 $ -
25
(25)
-
21,609
(180)
5,403
27,370
4,630
-
8,226
(1,204)
-
17,255
5,909
-
423
676
-
2,791
2,188
-
51,457
-
17,517

47

(14)

-

$ 230,702
$ 146,060
$ 22,920

$ 201,265 $ 211,222 $ -

5,344

3,422

-

$ 206,609
$ 214,644
$ -
 Closing
Balance
$ 235,579

-

26,832

32,000

7,022

23,164

1,099

4,979

68,974

33
$ 399,682
$ 412,487

8,766
$ 421,253
  • 270 -
Deferred tax assets
Temporary differences
Unrealized intercompany profit

Doubtful debts
Defined benefit obligations
Allowance for inventory devaluation
Impairment loss on financial assets
Payable for annual leave
FVTPL financial liabilities
Provisions
Exchange difference on foreign
operations
Unrealized foreign currency exchange
loss
Others


Deferred tax liabilities
Temporary differences
Unappropriated earnings of
subsidiaries
Unrealized foreign currency exchange
gain
FVTPL financial assets

 For the Year Ended December 31, 2017





Opening
Balance
Recognized in
Profit or Loss
Recognized in
Other
Comprehensive
Income
$ 69,241 $ 32,258 $ -
3,007
(2,982)
-
14,010
(758)
8,357
27,710
(340)
-
2,158
6,068
-
10,900
6,355
-
-
423
-
2,076
715
-
54,435
-
(2,978)
13,426
(13,426)
-

10,899

(10,852)

-

$ 207,862
$ 17,461
$ 5,379

$ 145,834 $ 55,431 $ -
-
5,344
-

725

(725)

-

$ 146,559
$ 60,050
$ -
 Closing
Balance
$ 101,499

25

21,609

27,370

8,226

17,255

423

2,791

51,457

-

47
$ 230,702
$ 201,265

5,344

-
$ 206,609
  • d. Deductible temporary differences and unused loss carryforwards for which no deferred tax assets have been recognized in the parent company only balance sheets
Investment loss
 December 31 December 31
2018
$ 1,497,120
 2017
$ 773,260
  • e. Information about tax-exemption

As of December 31, 2018, profits attributable to the following expansion projects were exempted from income tax for a 5-year period:

Expansion of Construction Project
Cash injection in 2009		 Tax-exemption Period
January 2016 to December 2020
  • f. Income tax assessments

The tax returns of the Company through 2016 have been assessed by the tax authorities.

  • 271 -

21.EARNINGS PER SHARE

For the Year Ended December 31, 2018
Basic earnings per share
Profit for the year

Effect of potentially dilutive ordinary shares:
Employees’ compensation

Diluted earnings per share
Profit for the year plus effect of potentially
dilutive common stock

For the Year Ended December 31, 2017
Basic earnings per share
Profit for the year

Effect of potentially dilutive ordinary shares:
Employees’ compensation

Diluted earnings per share
Profit for the year plus effect of potentially
dilutive common stock
 Number of
Earnings Per
Shares
Share
Net profit
(In
Thousands)
(NT$)
$ 5,392,257
292,441
$18.44
-

2,358
$ 5,392,257

294,799
$18.29
$ 2,738,019
288,562
$ 9.49
-

808
$ 2,738,019

289,370
$ 9.46

The weighted average number of shares outstanding used for the earnings per share computation was adjusted retroactively for the issuance of bonus shares on July 29, 2018. The basic and diluted earnings per share adjusted retrospectively for the year ended December 31, 2017 were as follows:

Unit: NT$ Per Share
Before After
Retrospective Retrospective
Adjustment Adjustment
Basic earnings per share $
9.77
 $ 9.49
Diluted earnings per share $
9.75
 $ 9.46

If the Company offered to settle compensation paid to employees in cash or shares, the Company assumed the entire amount of the compensation will be settled in shares and the resulting potential shares were included in the weighted average number of shares outstanding used in the computation of diluted earnings per share, as the effect is dilutive. Such dilutive effect of the potential shares is included in the computation of diluted earnings per share until the number of shares to be distributed to employees is resolved in the following year.

  • 272 -

22. ACQUISITION OF SUBSIDIARY WILL OBTAINED CONTROL

Proportion of
Voting Equity Consideration
Date of Interests Transferred
Subsidiary Principal Activity Acquisition Acquired (%)
(Cash)
Matrix
 Design, integrated June 29, 2018 52 $240,480
application, research,
development,
manufacture and sale of
thread forming
machinery

Matrix was acquired in order to obtain the key technologies of the manufacturing equipment. For the details about the acquisition of Matrix, refer to Note 24 to the consolidated financial statements for the year ended December 31, 2018.

23. PARTIAL ACQUISITION OF SUBSIDIARIES - WITHOUT LOSS OF CONTROL

On December 31, 2018, the Company subscribed for additional new shares of Eterbright at a percentage different from its existing ownership percentage, increasing its continuing interest from 65% to 74%.

On November 30, 2018, the Company subscribed for additional new shares of Luren at a percentage different from its existing ownership percentage, increasing its continuing interest from 48% to 58%.

On March 2, 2017, the Company subscribed for additional new shares of Eterbright at a percentage different from its existing ownership percentage, increasing its continuing interest from 58% to 65%.

On June 30, September 29 and October 31, 2017, the Company acquired additional shares of Luren, increasing its continuing interest from 47% to 48%.

The above transactions were accounted for as equity transactions, since the Company did not cease to have control over the subsidiaries.

24. OPERATING LEASE ARRANGEMENTS

The Company’s future minimum lease payments on land, factory building, inventory warehouse and employee dormitory based on operating lease agreements are as follows:

Year
2019

2020
2021
2022
2023
 Amount
$ 56,000
35,538
26,199
21,033
19,903

$ 158,673

  • 273 -

25. CAPITAL MANAGEMENT

To support the need to expand and enhance the plant and equipment, the Company has to maintain appropriate amount of capital. Therefore, the capital management of the Company focuses on ensuring that it has the necessary financial resources and operation plans to support operating funds, capital expenditure, research and development, repayment of debt and dividend payment in the future 12 months.

Key management personnel of the Company review the capital structure periodically. As part of this review, the key management personnel consider the cost of capital and the risks associated with each class of capital. Based on recommendations of the key management personnel, in order to balance the overall capital structure, the Company may adjust the amount of dividends paid to shareholders and the amount of new debt issued or existing debt redeemed.

26. FINANCIAL INSTRUMENTS

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

  • 1) Fair value hierarchy

December 31, 2018

The Company’s financial assets and liabilities at fair value through profit or loss are measured at fair value using Level 2 inputs, and the financial assets at fair value through other comprehensive income are measured at fair value using Level 1 inputs and Level 3 inputs.

December 31, 2017

The Company’s financial assets and liabilities at fair value through profit or loss are measured at fair value using Level 2 inputs.

There were no transfers between Level 1 and 2 in the year ended December 31, 2017.

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

measurement
Financial Instruments
Derivatives - foreign
currency forward
contracts		 Valuation Techniques and Inputs
Discounted cash flow.
Future cash flows are estimated based on observable
forward exchange rates at the end of the reporting period
and contract forward rates, discounted at a rate that
reflects the credit risk of various counterparties.
  • 274 -

b. Categories of financial instruments

Categories of financial instruments
Financial assets
FVTPL
Mandatorily classified as at FVTPL

Held for trading
Loans and receivables
Financial assets at amortized cost

Held-to-maturity financial assets
Financial assets measured at cost
Financial assets at FVTOCI
Equity instruments
Financial liabilities
FVTPL
Mandatorily classified as at FVTPL
Held for trading
Financial liabilities at amortized cost
 December 31
2018
2017
$ 282 $ -
-
548
- 6,304,690
8,480,801
-
-
2,919
-
317,144
930,840
-
5,775
-
-
3,038
18,415,158 15,877,851

The balances included loans and receivables measured at amortized cost, which comprise cash and cash equivalents, notes receivable, trade receivables (including from related parties) and refundable deposits.

The balances included financial assets measured at amortized cost, which comprise cash and cash equivalents, notes receivable, trade receivables (including from related parties), financial assets at amortized cost non-current and refundable deposits.

The balances included financial liabilities measured at amortized cost, which comprise shortterm borrowings, notes payable, trade payables (including from related parties), other payables, long-term borrowings and guarantee deposits.

  • c. Financial risk management objectives and policies

The Company’s major financial instruments include equity and debt investments, trade receivables, trade payables and borrowings. The Company’s Corporate Treasury function provides services to the business, monitors and manages the financial risks relating to the operations of the Company. These risks include market risk (including foreign currency risk and interest rate risk), credit risk and liquidity risk.

The plans for material treasury activities are reviewed by the audit committee and the board of directors in accordance with procedures required by relevant regulations and internal controls.

1) Market risk

The Company entered into some derivative financial instruments, mainly forward foreign exchange contracts, to manage its exposure to foreign currency risk on translation of sales

  • 275 -

and receivables that arise from export of precision component to USA, Germany, Japan and China.

There had been no change to the Company’s exposure to market risks or the manner in which these risks were managed and measured.

a) Foreign currency risk

The Company’s operating activities and net investment in foreign operations are denominated in foreign currencies. Consequently, the Company is exposed to foreign currency risk. To protect against reductions in value and the volatility of future cash flows caused by changes in foreign exchange rates, the Company utilizes foreign exchange forward contracts to hedge its currency exposure. These instruments help to reduce, but do not eliminate, the impact of foreign currency exchange rate movements.

Net investment in foreign operations is a strategic investment. Therefore, the Company does not hedge its investment in foreign operations.

The carrying amounts of the Company’s foreign currency denominated monetary assets and monetary liabilities and derivatives exposed to foreign currency risk at the end of the reporting period are set out in Note 30.

Sensitivity analysis

The Company was mainly exposed to the USD, EUR, JPY and CNY.

The sensitivity analysis of foreign currency risk used in reporting foreign currency risk internally to key management personnel mainly focuses on the foreign currency monetary items at the end of the reporting period. Assuming a 1% increase movement in the levels of the NTD against the relevant foreign currency, the post-tax losses for the years ended December 31, 2018 and 2017 would have decreased by $52,097 thousand and $40,220 thousand, respectively.

b) Interest rate risk

The Company is exposed to interest rate risk because entities in the Company borrowed funds at floating interest rates.

The carrying amounts of the Company’s financial assets and financial liabilities with exposure to interest rates at the end of the reporting period were as follows.

Fair value interest rate risk
Deposits in bank

Cash flow interest rate risk
Deposits in bank

Short-term borrowings

Long-term borrowings
 December 31
2018
2017
$ - $ 371,037
1,289,174
624,165
4,550,000 3,381,036
6,397,130 7,418,602
  • 276 -

Sensitivity analysis

For floating rate liabilities, the analysis was prepared assuming the amount of the liability outstanding at the end of the reporting period was outstanding for the whole year. A 1% 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 1% higher and all other variables were held constant, the Company’s post-tax profit for the years ended December 31, 2018 and 2017 would decrease by $77,264 thousand and $84,456 thousand, respectively.

2) Credit risk

Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in financial loss to the Company. As at the end of the reporting period, the counterparties are reputable organizations; thus, the Company is not expected to have a significant credit risk.

Trade receivables consisted of a large number of customers, spread across diverse industries. On-going credit evaluation is performed on the financial condition of trade receivables.

The Company’s concentration of credit risk by geographical locations was mainly in Asia, which accounted for 82% and 87% of the total trade receivables as of December 31, 2018 and 2017, respectively.

3) Liquidity risk

The Company manages liquidity risk by monitoring and maintaining a level of cash deemed adequate to finance the Company’s operations and mitigate the effects of fluctuations in cash flows. In addition, management monitors the utilization of bank borrowings and ensures compliance with loan covenants.

The Company relies on bank borrowings as a significant source of liquidity. As of December 31, 2018 and 2017, the Company had available unutilized bank loan facilities of $5,902,201 thousand and $6,764,432 thousand, respectively.

The following table details the Company’s remaining contractual obligations for its financial liabilities with agreed repayment periods. The tables below had been drawn up based on the undiscounted contractual maturities of the financial liabilities.

Less Than
1 Year
December 31, 2018
Non-derivative financial liabilities
Non-interest bearing
$ 7,455,153
Variable interest rate liabilities
6,154,194
 1-5 Years
$ -
3,069,057
 5+ Years
$ -
1,723,879
  • 277 -


Derivative financial liabilities
Foreign exchange forward contracts
December 31, 2017
Non-derivative financial liabilities
Non-interest bearing

Variable interest rate liabilities


Derivative financial liabilities
Foreign exchange forward contracts		 Less Than
1 Year
$13,609,347

$ 5,775

$ 5,077,913
4,981,528

$10,059,441

$ 3,038
 1-5 Years
$ 3,069,057

$ -

$ -
3,826,839

$ 3,826,839

$ -
 5+ Years
$ 1,723,879
$ -
$ -
1,991,271
$ 1,991,271
$ -

27. TRANSACTIONS WITH RELATED PARTIES

The significant transactions between the Company and its related parties, other than those disclosed in other note, are summarized as follow:

  • a. Related party name and categories

Related Party Name Related Party Categories HIWIN Germany Subsidiaries HIWIN USA Subsidiaries HIWIN Japan Subsidiaries Eterbright Subsidiaries HIWIN Singapore Subsidiaries HIWIN Korea Subsidiaries HIWIN China Subsidiaries Luren Subsidiaries HIWIN Healthcare Corp. Subsidiaries HIWIN Italy Subsidiaries Matrix Subsidiaries Mega-Fabs Motion Systems Ltd. (Mega-Fabs) Associates HIWIN Mikrosystem Others HIWIN Investment and Holding Corporation Others HIWIN Technologies Foundation in Education Others (HIWIN Foundation) Taiwan Automation Intelligence and Robotics Others (non-related party from August 9, Association 2017)

  • 278 -

b. Operating transactions

Operating transactions

1) Sales of goods
HIWIN China
Subsidiaries
Others		 For the Year Ended December 31



2018
$ 2,423,599
5,255,732
89,527

$ 7,768,858
 2017
$ 1,296,660
2,916,251
89,383
$ 4,302,294

Due to the specific differences of the products, the selling prices for related parties and those for third parties are not comparable. The selling price is primarily quoted at cost plus a reasonable margin according to the market price.


2) Purchases of goods
Others

Subsidiaries

 For the Year Ended December 31 For the Year Ended December 31 For the Year Ended December 31


2018
$ 420,193
48,820

$ 469,013
 2017
$ 137,956
9,185
$ 147,141

The products purchased from related parties and those from third parties are not the same, therefore, their prices are not comparable.

3) Other operating transactions


Non-operating income - dividend income
(classified as other income)
Others
Non-operating income - other income
Subsidiaries
Others
Manufacturing and operating expenses
Subsidiaries
Others
Associates
Operating expenses - donations
HIWIN Foundation		 For the Year Ended December 31 For the Year Ended December 31 For the Year Ended December 31







2018
$ 1,213

$ 16,482

240

$ 16,722

$ 13,841

6,381
4,226

$ 24,448

$ 34,480
 2017
$ 344
$ 6,363
270
$ 6,633
$ 5,711
11,410
-
$ 17,121
$ 17,500
  • 279 -
c. 4) Trade receivables
HIWIN China

HIWIN Japan
Subsidiaries


5) Other receivables (classified as other current assets)
Subsidiaries

6) Trade payables
Others

Subsidiaries


7) Other payables
Subsidiaries

Others


8) Prepayments for machinery and equipment
Subsidiaries

Loans to related parties
Other receivables (classified as other current assets)
HIWIN Italy


Interest income
Subsidiaries










2018
$ 1,338
 2017
$ 3,988
  • 280 -

The Company provided HIWIN Italy with short-term loans at rates comparable to market interest rates.

  • d. Acquisition of property, plant and equipment
Acquisition of property, plant and equipment

Subsidiaries

Others

 Purchase Price
For the Year Ended December 31


2018
$ 44,206
-

$ 44,206
 2017
$ 31,067
2,050
$ 33,117
  • e. Disposals of property, plant and equipment
Subsidiaries

Others

 Proceeds
For the Year Ended
December 31
2018
2017
$ 5,075 $ -
300

-

$ 5,375
$ -
 Gain on Disposal Gain on Disposal
For the Year Ended
December 31


2018
$ 5,075
300

$ 5,375

2018
$ 564
20

$ 584
 2017
$ -
-
$ -
  • f. Endorsements and guarantees

For the information about the endorsements and guarantees for subsidiaries as of December 31, 2018, refer to Table 2.

  • g. Acquisition of additional interest in related parties

Eterbright

HIWIN Japan
Matrix
HIWIN Italy
Luren

 For the Year Ended December 31 For the Year Ended December 31 For the Year Ended December 31


2018
$ 673,205
-
240,480
228,540
154,874

$ 1,297,099
 2017
$ 473,668

109,560

-

-
8,158
$ 591,386
  • 281 -

h. Compensation of key management personnel

Compensation of key management personnel
Short-term employee benefits

Post-employment benefits

Share-based payments

 For the Year Ended December 31
2018
2017
$ 421,983 $ 246,494

814
3,744

2,281

-
$ 425,078
$ 250,238
2018
$ 421,983
814
2,281

$ 425,078
 2017
$ 246,494

3,744
-
$ 250,238

The remuneration of directors and key executives was determined by the remuneration committee having regard to the performance of individuals and market trends.

28. ASSETS PLEDGED AS COLLATERAL OR FOR SECURITY

The following assets had been pledged or mortgaged as collateral for short-term and long-term bank loans:

Property, plant and equipment
 December 31 December 31
2018
$12,340,522
 2017
$11,171,913

29. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED COMMITMENTS

  • a. As of December 31, 2018 and 2017, unused letters of credit for purchases of raw materials and machinery and equipment amounted to $271,350 thousand and $209,991 thousand, respectively.

  • b. As of December 31, 2018 and 2017, the Company had a commitment to buy property, plant and equipment for $1,731,391 thousand and $2,238,905 thousand, respectively.

  • 282 -

30. SIGNIFICANT ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

The following information was aggregated by the foreign currencies other than functional currencies of the Company 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:

Financial assets
Monetary items
USD

EUR
JPY
CNY
Non-monetary items
USD
EUR
ILS
KRW
CNY
JPY
GBP
Financial liabilities
Monetary items
USD
EUR
JPY
CNY
Non-monetary items
SGD		 December 31, 2018
Foreign
Currencies
Exchange
Rate
Carrying
Amount
$ 35,681
30.715
$ 1,095,945
45,941
35.20
1,617,117
3,244,356
0.2782
902,580
796,802
4.472
3,563,299
24,252
30.715
744,899
51,540
35.20
1,814,220
10,870
8.152
88,615
339,891
0.0278
9,432
422,880
4.472
1,891,120
1,102,151
0.2782
306,618
4,065
38.88
158,046
10,011
30.715
307,501
4,180
35.20
147,127
695,135
0.2782
193,387
4,209
4.472
18,823
1,046
22.48
23,505		 December 31, 2017
Foreign
Currencies
Exchange
Rate
Carrying
Amount
$ 24,510
29.76
$ 729,404

35,003
35.57
1,245,042

1,839,028
0.2642
485,871

595,961
4.565
2,720,562

23,191
29.76
690,152

41,069
35.57
1,460,832

8,729
8.566
74,775

1,948,573
0.0281
54,794

360,676
4.565
1,646,486

298,024
0.2642
78,738

-
39.96
-

4,786
29.76
142,427

2,077
35.57
73,893

390,001
0.2642
103,038

3,457
4.565
15,779

426
22.26
9,487

The significant (realized and unrealized) foreign exchange gains (losses) were as follows:

For the Year Ended December 31

Foreign
Currencies
USD
JPY
EUR
CNY		 2018
Exchange Rate
Net Foreign
Exchange
Gain (Loss)
30.149
$ 23,850
0.2730
41,471
35.61
22,004
4.560

(31,504)
$ 55,821		 2017
Exchange Rate
Net Foreign
Exchange
Gain (Loss)

30.432
$ (45,615)

0.2713
(8,561)

34.35
69,635
4.507

(7,526)
$ 7,933
  • 283 -

31. SEPARATELY DISCLOSED ITEMS

  • a. Information about significant transactions and investees:

  • 1) Financing provided to others. (Table1)

  • 2) Endorsements/guarantees provided. (Table 2)

  • 3) Marketable securities held (excluding investments in subsidiaries, associates and joint controlled entities). (Table 3)

  • 4) Marketable securities acquired and disposed at costs or prices at least NT$300 million or 20% of the paid-in capital. (Table 4)

  • 5) Acquisition of individual real estate at costs of at least NT$300 million or 20% of the paid-in capital. (Table 5)

  • 6) Disposal of individual real estate at prices of at least NT$300 million or 20% of the paid-in capital. (None)

  • 7) Total purchases from or sales to related parties amounting to at least NT$100 million or 20% of the paid-in capital. (Table 6)

  • 8) Receivables from related parties amounting to at least NT$100 million or 20% of the paid-in capital. (Table 7)

  • 9) Trading in derivative instruments. (Notes 7 and 26) 10) Information on investees. (Table 8)

  • b. Information on investments in mainland China

  • 1) Information on any investee company in mainland China, showing the name, principal business activities, paid-in capital, method of investment, inward and outward remittance of funds, ownership percentage, net income of investees, investment income or loss, carrying amount of the investment at the end of the period, repatriations of investment income, and limit on the amount of investment in the mainland China area. (Table 9)

  • 2) Any of the following significant transactions with investee companies in mainland China, either directly or indirectly through a third party, and their prices, payment terms, and unrealized gains or losses:

    • a) The amount and percentage of purchases and the balance and percentage of the related payables at the end of the period. (None)

    • b) The amount and percentage of sales and the balance and percentage of the related receivables at the end of the period. (Table 6)

    • c) The amount of property transactions and the amount of the resultant gains or losses. (None)

    • d) The balance of negotiable instrument endorsements or guarantees or pledges of collateral at the end of the year and the purposes. (None)

    • e) The highest balance, the end of year balance, the interest rate range, and total current period interest with respect to financing of funds. (None)

    • f) Other transactions that have a material effect on the profit or loss for the period or on the financial position, such as the rendering or receipt of services. (None)

  • 284 -

TABLE 1

HIWIN TECHNOLOGIES CORPORATION AND SUBSIDIARIES

FINANCING PROVIDED TO OTHERS FOR THE YEAR ENDED DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars)

No. Lender Borrower Financial Statement
Account		 Related
Parties		 Highest Balance
for the Year
(Note 4)		 Ending Balance
(Note 4)
Actual
Borrowing
Amount		 Interest
Rate		 Nature of
Financing
(Note 2)
Business
Transaction
Amounts		 Reasons
for Short-
term
Financing		 Allowance
for
Impairment
loss		 Collateral Collateral Financing
Limit for
Each
Borrower
(Note 1)		 Aggregate
Financing
Limits
(Note 3)
Item Value
0
0
1
1		 The Company
The Company
Luren
Luren		 HIWIN Italy
Eterbright
Luren Japan
Luren
Shanghai		 Other receivables from
related parties
Other receivables from
related parties
Other receivables from
related parties
Other receivables from
related parties		 Yes
Yes
Yes
Yes		 $ 114,723
510,000
3,074
13,234		 $ 55,582

-

-

11,208		 $ 55,582

-

-

11,208		 1.76%
1.76%
1.895%
1.895%		 1
2
1
1		 Sales
$771,056
-
Sales
23,726
Sales
66,982		 -
Operating
capital
-
-		 $ -
-
-
-		 -
Promissory
note and
equipment
-
-		 $ -
630,000
-
-		 $ 299,200

2,311,515

6,955

13,461		 $ 7,254,138

7,254,138

31,275

31,275

Note 1: The total amount for lending to a company for funding shall not exceed 10% of the net assets of the Company in the latest financial report. In addition, the total amount of lending to any one borrower shall not be more than the borrower’s paid-in capital. The total amount for lending to a company for funding shall not exceed 10% of the net assets of Luren in the latest financial report. In addition, the total amount of lending to any one borrower shall not be more than the borrower’s paid-in capital. When the lending is for business relationship by the Company and Luren, the lending shall be subject to not only the restriction set forth in the above instructions but also the principle that the business has occurred. The amount for lending to a company for funding shall not exceed the maximum amount of sales or purchases in the latest year or the latest twelve months when the lending occurs.

Note 2: Nature of the loan funds:

  1. Business relationship.

  2. Necessary for short-term financing.

Note 3: For the financing provided by each subsidiary, the maximum amount should not exceed 30% of the Company’s net assets as shown in its latest financial statements. For the financing provided by each subsidiary, the maximum amount should not exceed 20% of Luren’s net assets as shown in its latest financial statements.

Note 4: The ending balance amount has been approved by the board of directors.

  • 285 -

TABLE 2

HIWIN TECHNOLOGIES CORPORATION AND SUBSIDIARIES

ENDORSEMENTS/GUARANTEES PROVIDED FOR THE YEAR ENDED DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars and Foreign Currency)

No. Endorser/Guarantor Endorsee/Guaranteed Party Endorsee/Guaranteed Party Limits on
Endorsemen
t/
Guarantee
Given on
Behalf of
Each Party
(Note 1)		 Maximum
Amount
Endorsed/
Guaranteed
During the
Year		 Outstanding
Endorsement/
Guarantee at
the End of the
Year		 Actual
Borrowing
Amount		 Amount
Endorsed/
Guaranteed
by
Collaterals		 Ratio of
Accumulated
Endorsement
/
Guarantee to
Net Equity in
Latest
Financial
Statements
(%)

Aggregate
Endorsement
/
Guarantee
Limit
(Note 2)		 Endorsement
/
Guarantee
Given by
Parent on
Behalf of
Subsidiaries		 Endorsement
/
Guarantee
Given by
Subsidiaries
on Behalf of
Parent		 Endorsement
/
Guarantee
Given On
behalf of
Companies in
Mainland
China
Name Relationship
0
0
0
0
0		 The Company
The Company
The Company
The Company
The Company		 Eterbright
HIWIN
Singapore
HIWIN Korea
HIWIN Japan
Luren		 Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary		 $ 2,311,515
112,400
199,800
600,077
400,000		 $ 1,600,000

92,145
(USD
3,000)

138,218
(USD
4,500)

600,077
(JPY 2,157,000)

400,000		 $ 1,600,000

92,145
(USD
3,000)

138,218
(USD
4,500)

600,077
(JPY 2,157,000)

400,000		 $ 954,000

57,191
(USD 1,862)

99,824
(USD 3,250)

-

90,000		 $ -

-

-

-

-		 6.6
0.4
0.6
2.5
1.7		 $ 8,463,161
8,463,161
8,463,161
8,463,161
8,463,161		 Yes
Yes
Yes
Yes
Yes		 -
-
-
-
-		 -
-
-
-
-

Note 1: The maximum is 10% of the net assets of the Company as shown in the latest financial statements. In addition, the amount shall not exceed the endorsee’s paid-in capital. However, the amount of guarantee to subsidiaries are not subject to the above restrictions after the approval of the board of director and the amount shall not exceed 50% of the Company’s net assets in the latest financial statements.

Note 2: The maximum amount of the total guarantee is 35% of the Company’s net assets as shown in its latest financial statements.

Note 3: The amounts denominated in foreign currency were translated into New Taiwan dollars at prevailing exchange rate on December 31, 2018.

  • 286 -

TABLE 3

HIWIN TECHNOLOGIES CORPORATION AND SUBSIDIARIES

MARKETABLE SECURITIES HELD DECEMBER 31, 2018

(In Thousands of New Taiwan Dollars and Foreign Currency)

Holding Company Name Type and Name of Marketable
Securities		 Relationship with the
Holding Company		 Financial Statement Account December 31, 2018 December 31, 2018 Note
Shares Carrying
Amount		 Percentage
of
Ownership		 Fair Value
The Company
HIWIN Germany		 Central
Capital
-
-
-
-
-
-
-		 Financial assets at amortized cost - non-
current
Financial assets at fair value through other
comprehensive income - non-current
Financial assets at fair value through other
comprehensive income - non-current
Financial assets at fair value through other
comprehensive income - non-current
Financial assets at fair value through other
comprehensive income - non-current
Financial assets at fair value through other
comprehensive income - non-current
Financial assets at fair value through other
comprehensive income - non-current		 -
323,289
2,063,681
9,516,113
1
76,300
-		 $ 2,803
208,326
-
719,894
2,620
-
3,320
(EUR
72 )		 -
19
10
9
-
-
19		 $ 2,803
208,326
-
719,894
2,620
-
3,320
(EUR
72 )




Note : Information about the investment in subsidiary and associates; please see Tables 8 and 9.

  • 287 -

TABLE 4

HIWIN TECHNOLOGIES CORPORATION AND SUBSIDIARIES

MARKETABLE SECURITIES ACQUIRED AND DISPOSED AT COSTS OR PRICE AT LEAST $300 MILLION OR 20% OF THE PAID-IN CAPITAL FOR THE YEAR ENDED DECEMBER 31, 2018

(In Thousands of New Taiwan Dollars)

Company
Name		 Type and
Name of
Marketable
Securities		 Financial Statement
Account
Counterpart
y		 Relationshi
p		 Beginning Balance Beginning Balance Acquisition Acquisition Disposal Disposal Ending Balance Ending Balance Ending Balance
Shares Amount Shares Amount Shares Amount Carrying
Amount
Gain (Loss)
on Disposal

Others		 Shares Amount
The Company Capital stock Investments
accounted for
using equity
method		 Eterbright Subsidiary 138,838,55
9		 $ 394,413 67,320,508 $ 673,205 - $ - $ - $ - $ (890,011)
(Note 1)

171,449,427
(Note 2)
$ 177,607

Note 1: Including investment loss accounted for using equity method of $692,017 thousand and decrease in net assets of $197,994 thousand from subscribing for additional new shares at a percentage different from its existing ownership percentage.

Note 2: Due to the capital reduction for offsetting the deficit, the shares held decreased by 34,709,640 shares.

  • 288 -

TABLE 5

HIWIN TECHNOLOGIES CORPORATION AND SUBSIDIARIES

ACQUISITION OF INDIVIDUAL REAL ESTATE AT COSTS OF AT LEAST $300 MILLION OR 20% OF THE PAID-IN CAPITAL FOR THE YEAR ENDED DECEMBER 31, 2018

(In Thousands of New Taiwan Dollars)

Buyer Property Event Date Transaction
Amount		 Payment Status
Counterparty		 Relationship Information on Previous Title Transfer If Counterparty is a Related Party Information on Previous Title Transfer If Counterparty is a Related Party Information on Previous Title Transfer If Counterparty is a Related Party Information on Previous Title Transfer If Counterparty is a Related Party Pricing Reference
Purpose of
Acquisition		 Other
Terms
Property Owner Relationship Transaction Date Amount
The Company Yunlin Technology Industrial Park, the
factory in shiliuban		 2018.3.22 $ 358,000 $ 336,516 Reiju Construction Co., Ltd. None - - - $ - Contractors bid Factory -
  • 289 -

TABLE 6

HIWIN TECHNOLOGIES CORPORATION AND SUBSIDIARIES

TOTAL PURCHASES FROM OR SALES TO RELATED PARTIES AMOUNTING TO AT LEAST $100 MILLION OR 20% OF THE PAID-IN CAPITAL FOR THE YEAR ENDED DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars)

Company Name Related Party Relationship Transaction Details Transaction Details Abnormal Transaction Abnormal Transaction Notes/Accounts Receivable
(Payable)		 Notes/Accounts Receivable
(Payable)		 Note
Purchase/Sale Amount
(Note)		 % to Total Payment Terms Unit Price Payment
Terms		 Ending
Balance		 % to Total
The Company
HIWIN China
HIWIN Germany
HIWIN Japan
HIWIN Italy
HIWIN USA
HIWIN Korea		 HIWIN China
HIWIN Germany
HIWIN Japan
HIWIN Italy
HIWIN USA
HIWIN Korea
HIWIN
Mikrosystem
The Company
The Company
HIWIN
Mikrosystem
HIWIN S.R.O
The Company
The Company
The Company
HIWIN
Mikrosystem
The Company		 Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Others
Parent Company
Parent Company
Others
Associate
Parent Company
Parent Company
Parent Company
Others
Parent Company		 Sale
Sale
Sale
Sale
Sale
Sale
Purchase
Purchase
Purchase
Purchase
Sale
Purchase
Purchase
Purchase
Purchase
Purchase		 $(2,423,559)
(1,897,709)
(1,449,817)
(771,056)
(563,025)
(367,991)
420,193
2,423,559
1,897,709
256,099
(224,099)
1,449,817
771,056
563,025
283,620
367,991
(10 )

(8 )

(6 )

(3 )

(2 )

(1 )
3
91
65
9

(6 )
93
80
59
30
78		 O/A 120 days
O/A 90-120 days
O/A 150 days
O/A 180 days
O/A 120 days
O/A 180 days
Net 120 days after
monthly closing
O/A 120 days
O/A 90-120 days
O/A 90 days
O/A 45 days
O/A 150 days
O/A 180 days
O/A 120 days
O/A 90 days
O/A 180 days		 $ -

-
-
-
-
-


-
-

-
-
-
-
-
-
-
-		 -
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-		 $ 783,464
395,954
757,241
625,989
244,421
215,765
(16,056)
(783,464)
(395,954)
(46,243)
20,463
(757,241)
(625,989)
(244,421)
(60,968)
(215,765)		 11
6
11
9
3
3

-

(99)

(76)

(9)
11

(95)

(88)

(78)

(19)

(98)

Note: Unrealized gains with HIWIN China are $168,650 thousand.

  • 290 -

TABLE 7

HIWIN TECHNOLOGIES CORPORATION AND SUBSIDIARIES

RECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL DECEMBER 31, 2018

(In Thousands of New Taiwan Dollars)

Company Name Related Party Relationship Ending Balance (Note) Turnover Rate Overdue Overdue Amounts Received
in Subsequent
Year
Allowance for
Impairment Loss
Amount Actions Taken
The Company HIWIN China
HIWIN Japan
HIWIN Germany
HIWIN USA
HIWIN Korea
HIWIN Italy
HIWIN Italy		 Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary		 Trade receivables from related parties $ 783,464
Trade receivables from related parties
757,241
Trade receivables from related parties
395,954
Trade receivables from related parties
244,421
Trade receivables from related parties
215,765
Trade receivables from related parties
625,989
Other receivables from related parties
55,663		 3.40
2.39
4.56
3.07
2.51
1.52
-		 $ -
-
-
-
-
-
-		 -
-
-
-
-
-
-		 $ 624,438
234,239
182,414
107,753
83,944
110,732
-		 $ -

-

-

-

-

-

-
  • 291 -

TABLE 8

HIWIN TECHNOLOGIES CORPORATION AND SUBSIDIARIES

INFORMATION ON INVESTEES FOR THE YEAR ENDED DECEMBER 31, 2018

(In Thousands of New Taiwan Dollars and Foreign Currency)

Investor Company Investee Company Location Main Businesses and Products Original Investment Amount Original Investment Amount As of December 31, 2018 December 31, 2018 Net Income
(Loss) of the
Investee		 Share of
Profit (Loss)		 Note
December 31,
2018		 December 31,
2017		 Shares % Carrying
Amount
The Company
HIWIN Germany
Luren		 HIWIN Germany
HIWIN USA
HIWIN Japan
Mega-Fabs
Eterbright
HIWIN Singapore
HIWIN Korea
Luren
HIWIN Healthcare Corp.
HIWIN Italy
Matrix
HIWIN S.R.O.
HIWIN Italy
Luren Precision (Japan) Inc.
Luren Precision Chicago Co.,
Ltd.		 Germany
United States of America
Japan
Israel
Taiwan
Singapore
Korea
Taiwan
Samoa
Italy
United Kingdom
Czech Republic
Italy
Japan
United States of America		 Manufacture and sale of aerospace parts, ballscrews,
linear guideways and industrial robots
Manufacture and sale of aerospace parts, ballscrews,
linear guideways and industrial robots
Manufacture and sale of aerospace parts, ballscrews,
linear guideways and industrial robots
Research, manufacture and sale of drivers and
controllers
Research, development, design, manufacture and
sale of solar cell, electronic components, electric
power supply, electric transmission and power
distribution machinery products
Manufacture and sale of aerospace parts, ballscrews,
linear guideways and industrial robots
Manufacture and sale of aerospace parts, ballscrews,
linear guideways and industrial robots
Research, development, produce, manufacture and
sale of gear cutting tools and machinery
Sale of medical robots
Sale of aerospace parts, ballscrews, linear
guideways, and industrial robots
Design, integrated application, research,
development, manufacture and sale of thread
forming machinery
Sale of aerospace parts, ballscrews, linear
guideways, and industrial robots
Sale of aerospace parts, ballscrews, linear
guideways, and industrial robots
Sale of gear cutting tools and machinery
Sale of gear cutting tools and machinery
$ 224,257

353,844

817,642
42,444
2,983,554

117,550

202,945
521,983
3,108
296,580
240,480
104
(CZK
70)
-
7,956
14,721		 $ 452,797

353,844
817,642

42,444

2,310,349

117,550

202,945

367,109
3,108

68,040

-

104
(CZK
70)

241,214
(EUR
6,500)

7,956
14,721
-

2,148,000
54,200

240,000
171,449,427

5,000,000

1,440,000

17,647,761
100,000

-

2,400,000

-

-

-
460,000		 100
100
100
40
74
100
100
58
100
100
52
32
-
-
100		 $ 1,289,175
423,670
126,122
121,444
177,607
(42,366)
(45,214)
261,205
2,974
(63,471)
221,274
58,088
(EUR
1,650)
-
(Note 2)
-		 $ 323,618

127,001

219,527

43,642

(1,070,898)

(13,844)

(44,416)

(230,617)

(23)

51,947

396

(Note 1)

(Note 1)

(Note 1)

(Note 1)		 $ 323,618

127,001

219,527

17,457

(692,017)

(13,844)

(44,416)

(122,859)

(23)

49,258

(14,860)

(Note 1)

(Note 1)

(Note 1)

(Note 1)		 Subsidiary
Subsidiary
Subsidiary
Investments
accounted for
using equity
method
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Investments
accounted for
using equity
method
Subsidiary
Indirectly
owned
subsidiary
Indirectly
owned
subsidiary

Note 1: Not applicable.

Note 2: Luren Precision (Japan) Inc. completed its liquidation procedures in June, 2018.

Note 3: Information on investment in Mainland China, please see Table 9.

  • 292 -

TABLE 9

HIWIN TECHNOLOGIES CORPORATION AND SUBSIDIARIES

INFORMATION ON INVESTMENTS IN MAINLAND CHINA FOR THE YEAR ENDED DECEMBER 31, 2018

(In Thousands of New Taiwan Dollars and Foreign Currency)

Investee Company Main Businesses and Products Main Businesses and Products Paid-in Capital Method of
Investment		 Method of
Investment		 Accumulated
Outward
Remittance for
Investment from
Taiwan as of
January 1, 2018		 Remittance of Funds Remittance of Funds Remittance of Funds Accumulated
Outward
Remittance for
Investment from
Taiwan as of
December 31,
2018		 Net Income
(Loss) of the
Investee		 % Ownership of
Direct or
Indirect
Investment
Investment
Gain (Loss)		 Carrying
Amount as of
December 31,
2018		 Accumulated
Repatriation of
Investment
Income as of
December 31,
2018
Outward Inward
YIFU Finance
HIWIN China
Luren Shanghai		 Finance lease
Manufacture and sale of aerospace
parts, ballscrews, linear guideways
and industrial robots
Sale of gear cutting tools and machinery		 $ 258,405
(USD
8,413)
1,498,040
(CNY 300,000)

14,047
(USD
439)
(Note 1)

(Note 2)

(Note 2)		 $ 236,266
(USD
8,168)
1,498,040
(CNY 300,000)
14,047
(USD
439)		 $ -
-
-		 $ 96,533
(USD
3,151)

-

-
$ 139,733
(USD
5,017)
1,498,040
(CNY 300,000)
14,047
(USD
439)		 $ 201,456
283,651
(3,540)		 19
100

58		 (Note 3)
$ 283,651
(Note 4)
(1,737)
(Note 4)		 $ 208,326
1,722,470

(7,514)		 $ 20,062
(USD
655)

-

-
Investor Company Accumulated Outward Remittance for
Investment in Mainland China as of
December 31, 2018		 Investment Amounts Authorized by
Investment Commission, MOEA		 Upper Limit on the Amount of Investment
Stipulated by Investment Commission,
MOEA
The Company $ 1,637,773
(USD 5,017 and CNY 300,000)		 $ 1,633,393
(USD 9,500 and CNY 300,000)		 (Note 5)
Luren $ 14,047
(USD
439 )		 $ 14,047
(USD
439 )		 $ 93,825
(Note 5)

Note 1: The investment was made through a corporation established in a third country, which, in turn, invested in companies located in Mainland China.

Note 2: The investment in Mainland China was made directly.

Note 3: The investment in Kaland is financial asset measured at fair value through other comprehensive income; thus, no investment gain or loss is recognized.

Note 4: The investment gain (loss) is recognized according to the financial statements audited by the Company’s independent auditors.

Note 5: According to “Regulation for Screening of Application to Engage in Technical Cooperation in Mainland China” issued by the Investment Commission of Ministry of Economic Affairs, the investment in Mainland China has no maximum limitation since the Company had acquired the IDB approval of the Company’s establishment of an operating headquarter in Taiwan. The upper limit investment amount of Luren is 60% of the net assets of Luren in the latest financial report.

  • 293 -

THE CONTENTS OF STATEMENTS OF MAJOR ACCOUNTING ITEMS

ITEM STATEMENT INDEX

ITEM STATEMENT INDEX
MAJOR ACCOUNTING ITEMS IN ASSETS, LIABILITIES
AND EQUITY
STATEMENT OF CASH AND CASH EQUIVALENTS 1
STATEMENT OF FINANCIAL ASSETS AT FAIR Note 7
VALUE THROUGH PROFIT OR LOSS
STATEMENT OF NOTES RECEIVABLE, 2
STATEMENT OF TRADE RECEIVABLES FROM 3
UNRELATED PARTIES
STATEMENT OF INVENTORIES 4
STATEMENT OF FINANCIAL ASSETS AT FAIR 5
VALUE THROUGH OTHER COMPREHENSIVE
INCOME – NON-CURRENT
STATEMENT OF CHANGES IN INVESTMENTS 6
ACCOUNTED FOR USING EQUITY METHOD
STATEMENT OF CHANGES IN PROPERTY, PLANT Note 13
AND
EQUIPMENT
STATEMENT OF CHANGES IN ACCUMULATED Note 13
DEPRECIATION AND ACCUMULATED
IMPAIRMENT OF PROPERTY, PLANT AND
EQUIPMENT
STATEMENT OF DEFERRED INCOME TAX ASSETS Note 20
STATEMENT OF SHORT-TERM BANK BORROWINGS 7
STATEMENT OF TRADE PAYABLES TO 8
UNRELATED PARTIES
STATEMENT OF OTHER PAYABLES Note 16
STATEMENT OF LONG-TERM BANK BORROWINGS 9
STATEMENT OF DEFERRED INCOME TAX Note 20
LIABILITIES
MAJOR ACCOUNTING ITEMS IN PROFIT OR LOSS
STATEMENT OF NET REVENUE 10
STATEMENT OF OPERATING COSTS 11
STATEMENT OF OPERATING EXPENSES 12
STATEMENT OF NON-OPERATING INCOME AND STATEMENT OF
EXPENSES COMPREHENSIVE INCOME
STATEMENT OF LABOR, DEPRECIATION AND Note 19
AMORTIZATION BY FUNCTION
  • 294 -

STATEMENT 1

HIWIN TECHNOLOGIES CORPORATION

STATEMENT OF CASH AND CASH EQUIVALENTS DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars and Foreign Currency)

Item
Foreign
Currency
Exchange
Rate
Cash on hand
NTD

Foreign currency



Cash in banks
Checking accounts

Demand deposits

Foreign deposits
USD
6,472
30.715

EUR
5,802
35.20

CNY
63,771
4.472

JPY
522,426
0.2782

GBP
66
38.88



 Amount
$ 390
1,268
1,658


142,393

453,066

198,774

204,241

285,186

145,339
2,568
1,431,567

$ 1,433,225
  • 295 -

STATEMENT 2

HIWIN TECHNOLOGIES CORPORATION

STATEMENT OF NOTES RECEIVABLE DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars)

Client Name
Non-related parties
Company 26

Company 19
Others (Note)

Less: Allowance for impairment loss

 Amount
$ 20,245
13,240
158,077
191,562
(1,915)
$ 189,647

Note: The amount of individual client included in others does not exceed 5% of the account balance.

  • 296 -

STATEMENT 3

HIWIN TECHNOLOGIES CORPORATION

STATEMENT OF TRADE RECEIVABLES FROM UNRELATED PARTIES DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars)

Client Name
Unrelated parties
Company 28

Company 9
Company 14
Company 25
Company 22
Others (Note)


Less: Allowance for impairment loss

 Amount
$ 681,171
324,593
294,755
288,188
254,785
1,860,221
3,703,713
(3,991)
$ 3,699,722

Note: The amount of individual client included in others does not exceed 5% of the account balance.

  • 297 -

STATEMENT 4

HIWIN TECHNOLOGIES CORPORATION

STATEMENT OF INVENTORIES DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars)

Item
Merchandise

Finished goods
Work in process

Raw materials

Inventories in transit

 Amount




Cost
Market Price
(Note 1)
$ 3,346 $ 3,346
809,397 1,617,153
1,633,173 1,633,173
3,195,287 3,195,287
336,073

336,073
$ 5,977,276
$ 6,785,032

Note 1: Inventories are stated at the lower of cost or net realizable.

Note 2: Inventories are not provided as a collateral.

  • 298 -

STATEMENT 5

HIWIN TECHNOLOGIES CORPORATION

STATEMENT OF FINANCIAL ASSET AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME - NON-CURRENT FOR THE YEAR ENDED DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars)

Investees
HIWIN Mikrosystem
Sunengine (Note 1)
Taichung International Country Club
King Kong Iron Work Ltd.
Kaland (Note 2)		 Balance, January 1, 2018 as
Restated
Shares
Fair Value
8,662,082 $ 179,023
4,925,255
15,338
1
2,100
76,300
-
323,289
294,045
$ 490,506		 Additions
Shares
Amount
1,149,031 $ 555,621

-
-

-
520

-
-
-
10,814
$ 566,955		 Decrease
Shares
Amount

295,000 $ 14,750
2,861,574
15,338

-
-

-
-
-
96,533
$ 126,621		 Balance, December 31, 2018
Shares
Fair Value
Collateral
9,516,113 $ 719,894
None
2,063,681
-
None

1
2,620
None

76,300
-
None
323,289
208,326
None
$ 930,840
Shares
1,149,031

-

-

-
-
 Shares

295,000
2,861,574

-

-
-

Note 1: The number of shares reduced due to capital reduction for offsetting the deficit.

Note 2: The amount of decrease due to return of capital.

  • 299 -

STATEMENT 6

HIWIN TECHNOLOGIES CORPORATION

STATEMENT OF CHANGES IN INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD FOR THE YEAR ENDED DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Investees
Investments in subsidiaries
HIWIN Germany
HIWIN USA
HIWIN Japan
Eterbright

HIWIN Singapore (Note 1)
HIWIN Korea (Note 1)
HIWIN China
Luren

HIWIN Healthcare Corp.
HIWIN Italy (Note 1)
Matrix
Investments in associates
Mega-Fabs		 Balance, January 1, 2018
Shares
Amount
-
$ 1,181,668
2,148,000
376,012
54,200
(11,851 )
138,838,559
394,413
5,000,000
(19,053 )
1,440,000
29,377
-
1,554,905
11,651,778
260,631
100,000
2,904
-
(30,630 )
-

-
$ 3,738,376
240,000
$ 107,604		 Addition s
Amount
$ -
-
-
673,205

-
-
-
154,874
-
228,540

240,480
$ 1,297,099
$ -
Decrease (Note 2)
Shares
Amount
-
$ (228,540 )

-
-
-
-
( 34,709,640 )
-
-
-
-
-
-
-
(1,747,767 )
-
-
-
-
-
-

-

$ (228,540)

-
$ -
 Change of
Subsidiaries’
Ownership
Share of
Profit (Loss)
and other
comprehensive
Income (loss) of
Subsidiaries
and Associates
in Using the
Equity
Equity
Method
$ 221,964
$ 323,618

-
127,001
-
219,527
(197,994 )
(692,017 )
-
(13,844 )
-
(44,416 )
-
283,651
(33,640 )
(120,338 )
-
(23 )
(221,964 )
49,258

-

(14,860)

$ (231,634)
$ 117,557

$ -
$ 17,457
 Exchange
Differences
on
Translating
of Foreign
Operations
$ (18,236 )
16,638
8,354
-

(174 )

(946 )
(39,017 )
-
93
(1,253 )

(4,027)

$ (38,568)

$ (3,617)
 Unrealized
Gain
$ (191,299 )
(95,981 )
(89,908 )
-


(9,295 )

(29,229 )

(77,069 )
(322 )
-

(87,422 )

(319)
$ (580,844)
$ -		 Balance, December 31, 2018 Amount
$ 1,289,175

423,670
126,122
177,607
(42,366 )
(45,214 )
1,722,470
261,205
2,974
(63,471 )

221,274

$ 4,073,446

$ 121,444
 Net Equity

Value
$ 1,693,033

587,808
306,618
177,607

(23,505 )
9,432
1,891,120
85,563
2,974
121,187

143,345

$ 4,995,182

$ 88,615
 Original
Investment
Cost
December 31,
2018
Collateral
$ 224,257
Nil
353,844
Nil
817,642
Nil
2,983,554
Nil
117,550
Nil
202,945
Nil
1,498,040
Nil
521,983
Nil
3,108
Nil
296,580
Nil

240,480
Nil
$ 7,259,983
$ 42,444
Nil
Shares
-

2,148,000
54,200
138,838,559
5,000,000
1,440,000
-
11,651,778
100,000
-
-


240,000
 Shares
-

-
-
67,320,508
-
-
-
7,743,750
-
-
2,400,000


-
 Shares
-

-
-
( 34,709,640 )
-
-
-
(1,747,767 )
-
-
-


-
 Shares
Ownership (%)

-
100


2,148,000
100

54,200
100
171,449,427
74

5,000,000
100

1,440,000
100

-
100
17,647,761
58
100,000
100

-
100
2,400,000
52


240,000
40

Note 1: The balance, December 31, 2018 classificated as credit balance of investments accounted for using the equity method.

Note 2: The number of shares decrease due to capital reduction for offsetting deficit and the amount decrease due to return of capital.

  • 300 -

STATEMENT 7

HIWIN TECHNOLOGIES CORPORATION

STATEMENT OF SHORT-TERM BANK BORROWINGS DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars)

Type
Maturity Date
(Note)
Interest Rates
(%)
Loans for export sales
The Export-Impure Bank of the Republic of
China, Taichung Branch
108.12.17
0.80

Line of credit borrowing
Bank of Taiwan, Taichung Industrial Park
Branch
108.3.25
0.95
Bank SinoPac, Xitun Branch
108.1.25
0.89
Land Bank of Taiwan, Taichung Branch
108.1.25
0.98
Bank of China, Taipei Branch
108.6.17
0.85
Bangkok Bank Public Company Ltd.,
Taichung Branch
108.1.25
0.93
HSBC Bank (Taiwan) Limited, Nankang
Branch
108.3.21
0.85
China Construction Bank Corporation Limited,
Taipei Branch
108.6.17
0.92
Mizuho Bank Ltd., Taichung Branch
108.3.27
0.82


 Amount
$ 800,000
700,000
330,000
100,000
400,000
350,000
300,000
700,000
870,000
3,750,000
$ 4,550,000

Note: The date of maturity date is the last date of multiple loans.

  • 301 -

STATEMENT 8

HIWIN TECHNOLOGIES CORPORATION

STATEMENT OF TRADE PAYABLES TO UNREALTED PARTIES DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars)

Vendor Name
Unrelated parties
Others (Note)
 Amount
$ 5,165,874

Note: The amount of individual vendor in others does not exceed 5% of the account balance.

  • 302 -

STATEMENT 9

HIWIN TECHNOLOGIES CORPORATION

STATEMENT OF LONG-TERM BANK BORROWING DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars)

Type
Borrowing Period
(Note 2)
Repayment
Interest Rate
(%)
Secured loan
Bank of Taiwan, Taichung Industrial Park
Branch
2011.5.23-
2031.11.21
Repayable monthly or semiannually form June 23, 2004, in 6,
36, 48, 60, 144 and 180 installments
1.30-1.76

The Export-Impure Bank of the Republic of
China, Taichung Branch
2016.2.1-2023.12.28
Repayable semiannually from August 1, 2017, in 10
installments
1.03-1.05
Land Bank of Taiwan, Taichung Branch
2007.6.4-2020.6.4
Repayable monthly from July 4, 2007, in 156 installments
1.47

 Current
Portion
Non-Current
Portion
$ 1,418,495
$ 4,284,086

178,000
505,000
7,699

3,850

$ 1,604,194
$ 4,792,936
 Total
$ 5,702,581
683,000
11,549
$ 6,397,130

Note 1: Property, plant and equipment pledged as collateral in amount of 12,340,522 thousand for bank borrowings.

Note 2: The period are the earliest loan date and the last due date of the multiple borrowings.

  • 303 -

STATEMENT 10

HIWIN TECHNOLOGIES CORPORATION

STATEMENT OF NET REVENUE FOR THE YEAR ENDED DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars)

Item
Shipments (In thousands of units)
Linear guideways
About 18,265

Ballscrews
About 1,803

Other


Less: Sales return
Sales discount

Sales
 Amount
$15,256,462
6,504,003
2,848,766
24,609,231
(5,177)
(3,836)
$24,600,218
  • 304 -

STATEMENT 11

HIWIN TECHNOLOGIES CORPORATION

STATEMENT OF OPERATIONG COSTS FOR THE YEAR ENDED DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars)

Item
Raw materials, beginning of year

Raw materials purchased

Sale of raw materials
Raw materials scrapped
Raw materials, end of year

Raw materials used
Supplies, beginning of year
Supplies purchased

Sale of supplies
Transferred to manufacturing expense and
prepayments for machinery and equipment

Supplies, end of year

Supplies used
Direct labor
Manufacturing expenses
Manufacturing cost
Work in process, beginning of year
Work in process, end of year
Cost of finished goods
Finished goods, beginning of year
Finished goods, end of year
Transferred to research and development and
selling expense
Other adjustment
Cost of goods sold
Merchandise, beginning of year
Merchandise purchased
Transferred to manufacturing expense
Transferred from prepayment for machinery
and equipments
Merchandise, end of year

Cost of merchandise sold
Cost of raw materials and supplies sold
Reversal of inventory write-downs
Loss from inventories scraps
Maintenance and warranty expense
Unallocated fixed overhead
Revenue from sale of scraps
Operating Costs		 Amount
$ 1,390,070
8,436,645
(69,812)
(18,103)
(2,851,865)
$ 6,886,935
450,687
3,889,723
(53,000)
(3,527,374)
(760,036)
-
3,468,509
5,702,014
16,057,458
1,318,183
(1,644,716)
15,730,925
421,398
(877,314)
(233,320)

(64,639)
14,977,050
2,774
7,470
(1,476)
29,779
(3,346)
35,201
122,812
(1,000)
18,103
23,729
107,606

(111,093)
$15,172,408
  • 305 -

STATEMENT 12

HIWIN TECHNOLOGIES CORPORATION

STATEMENT OF OPERATING EXPENSES FOR THE YEAR ENDED DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars)

Item
Selling and
Marking
Expenses
General and
Administrati
ve Expenses
Research and
Development
Expenses
Salary
$ 134,928 $ 664,350 $ 657,478
Depreciation expense
7,278
77,951
76,792
Donation
-
67,691
-
Shipping expense
74,964
843
2,053
Others

261,196

295,255

448,315

Total
$ 478,366
$ 1,106,090
$ 1,184,638
 Total
$ 1,456,756

162,021

67,691

77,860
1,004,766
$ 2,769,094
  • 306 -

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