Lemtech-KY — Annual Report 2018

Nov 14, 2018

Stock Code: 4912

Lemtech Holdings Co., Limited and subsidiaries

Consolidated Financial Report and Independent Auditor’s Report 2018 and 2017

Address: Genesis Building, 5th Floor, Genesis Close, PO Box 446, Cayman Islands, KY1-1106

Tel: (+886)2-8684-1618

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

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§INDEX§

Item I. Cover II. Table of Contents III. Auditor's Report IV. Consolidated Balance Sheet V. Consolidated Income Statement VI. Consolidated Statements of Changes in Shareholders’ Equity VII. Consolidated Statement of Cash Flow VIII. Notes to consolidated financial statements (1) Company History (2) Financial reporting date and procedures (3) Application of new and revised standards and interpretation (4) Summary of significant accounting policies (5) Main source of significant accounting judgment, estimates and assumptions uncertainty (6) Descriptions of major accounts (7) Related party transactions (8) Pledged assets (9) Significant contingent liabilities and unrecognized contractual commitments (10) Losses due to major disasters (11) Major post-balance sheet events (12) Others (13) Notes of disclosure 1. Disclosure of significant transactions 2. Investment-related information 3. Investments in Mainland China (14) Segment information	Page 1 2 3~6 7 8~9 10 11~12 13 13 13~18 18~30 31 31~58 59~60 61 61~62 62 62 62~63 63~64, 67~72 63~64, 67~72 64,73~74 64~66	Notes to financial statements No.
		- - - - - - - 1 2 3 4 5 6~32 33 34 35 36 37 38 39 39 39 40

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Auditor’s Report

To Lemtech Holdings Co., Limited:

Audit opinions

We have audited the accompanying consolidated balance sheet of Lemtech Holdings Co., Limited and its subsidiary (Lemtech Group) as of December 31, 2018 and 2017, and the related consolidated statement of income, consolidated statement of changes in shareholders equity, consolidated statement of cash flows, and Note of the consolidated financial statements (including major accounting policy) for the years then ended.

In my opinion, the financial statements as referred to present fairly, in all material aspects the financial position of Lemtech Group as of December 31, 2018 and 2017, and the results of its operations and cash flows for the years then ended conformity with the Regulation Governing the Preparation of Financial Reports by Securities Issuers, and applicable IFRS, IAS,SIC, and IFRIC as recognized by the Financial Supervisory Commission .

The basis for opinions

We conducted our audit in accordance with the “Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants”, and generally accepted auditing standards in the Republic of China. Our responsibilities under those standards are further described in the responsibilities of auditors for the audit of the consolidated financial statements. We are independent of Lemtech Group in accordance with the Code of Ethics for certified public accountants in the part relevant to the audit of the consolidated financial statements of Lemtech Group, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believed that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key audit matter

Key audit matters are those matter that, in our professional judgment, were of most significant in our audit of the consolidated statements of Lemtech Group in 2018. These matters were addressed in the content 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 those matters.

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Key audit procedures of the consolidated financial statements of Lemtech Group in 2018 included:

Key audit matters: Recognition of revenue

The consolidated total operating revenues in 2018 for Lemtech Group amounted to NT$6,043,090 thousand, which was NT$1,787,541 thousand more than NT$4,255,549 thousand realized in 2017, an increase of 42 percent. Based on the significance of accounting and Auditing Standards presuming revenue recognition as a significant risk, we have addressed whether operating revenues come from certain customers with specified qualifications actually occurred as a key audit matter. Refer to Note 4 and 23 for accounting policies on revenue recognition.

After reviewing the industry and local economic conditions of Lemtech Group, we have performed the following primary audit procedures:

1. Conducting comparative analysis of individual customers’ percentage of sales, credit period, and percentage change in gross margin. Meanwhile, we have made further inquiries to those mentioned above that have substantial changes, and evaluated the reasonableness of those changes.

2. We have chosen appropriate samples from the sale of the account of Lemtech Group, and examined their original purchase orders, delivery orders and invoices which was confirmed by transaction counterparts. Meanwhile, in order to confirm the authenticity of the transaction information and evaluate the transfer of control of goods, we have verified whether the party names shown on the receipt vouchers are the same as those shown on the transaction certificates.

3. Investigating whether there are significant sales returns and allowances after balance sheet date, and furthermore verifying the authenticity of previous transactions. In addition, based on the credit periods of this type of customers, we have reviewed their conditions to determine if they were reasonable.

Responsibilities of Management and Those in Charge with Governance of the Consolidated Financial Statements

The responsibility of management is to prepare fairly presented consolidated financial statements in conformity with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and IFRS, IAS, IFRIC, SIC recognized and published by the Financial Supervisory Commission and maintain necessary internal control related to the preparation of consolidation of financial statements in order to ensure the material misstatement caused by fraud or error does not exist in the consolidated financial statements.

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

Those in charge of governance (including the Auditing Committee) are responsible for overseeing the reporting process of Lemtech Group.

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Auditor’s 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 and auditor’s report. Reasonable assurance is a high level of assurance, but is not a guarantee that and audit conducted in accordance with the accounting principles generally accepted in the Republic of China will always detect a material misstatement when it exists. Misstatements can arise from fraud or error. If fraud or errors are considered materials, 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 accounting principles generally accepted in the Republic of China, we exercise professional judgment and maintain professional skepticism throughout the audit. We also perform the following works:

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 risks, and obtain evidence that is sufficient and appropriate to provide a basis of 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 internal control effective in Lemtech Group.

3. Evaluate the appropriateness of accounting policies used and the reasonability of accounting estimates and related disclosures made by the management.

4. Conclude the appropriateness of the use of the going concern basis of accounting by the management, and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on Lemtech Group and its ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosure is inappropriate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of the auditor’s report. However, future events or conditions may cause Lemtech Group to cease to continue as a going concern.

5. Evaluate the overall presentation, structure, and content of the consolidated statements, including the disclosures, whether the consolidated statements represent the underlying transactions and events in a matter that achieves fair presentation.

6. Obtain sufficient and appropriate audit evidence on the financial information of business entities within the Group in order to express an opinion on the consolidated financial statements. The independent auditor is responsible for guiding, supervising, and implementing the audit of the Group; also, is responsible for forming an opinion on the audit of the Group.

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We communicate with those in charge of 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 in charge of 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 in charge of governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of Lemtech Group of 2018 and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communications.

The engagement partners on the audit resulting in this independent auditors’report are Jui-Chuan Chih and Li-Huang Lee.

Deloitte & Touche

Taipei, Taiwan (Republic of China) March 27, 2019

Notes to Readers

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

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

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(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese)

Lemtech Holdings Co., Limited and subsidiaries

CONSOLIDATED BALANCE SHEETS

December 31, 2018 and 2017

Unit: NT$ thousands

Code 1100 1136 1147 1150 1170 1200 1220 130X 1410 1470 11XX 1550 1600 1801 1840 1915 1920 1985 15XX 1XXX Code 2100 2120 2130 2150 2170 2219 2230 2310 2320 2399 21XX 2530 2540 2570 2645 25XX 2XXX 3110 3200 3320 3350 3300 3410 31XX 36XX 3XXX	Assets CURRENT ASSETS Cash and cash equivalents (Note 6 and 32) Financial assets at amortized cost - current (Note 8, 9 and 32) Debt investments with no active market - current (Note 10, 32 and 34) Notes receivable (Note 11 and 32) Accounts receivable (Note 11, 32 and 33) Other receivables (Note 11 and 32) Current tax assets (Note 25) Inventories (Note 12) Prepayments (Note 17) Other current assets Total current assets NON-CURRENT ASSETS Investments accounted for using the equity method (Note 14 and 33) Property, plant and equipment (Note 15) Net computer software (Note 16) Deferred income tax assets (Note 25) Prepayments for equipment (Note 17) Refundable deposits (Note 17) Long-term prepayments for leases (Note 17) Total non-current assets TOTAL ASSETS Liabilities and equity CURRENT LIABILITIES Shot-term borrowings (Note 18, 32 and 34) Financial liabilities at fair value through profit or loss- Current (Note 7 and 32) Contract liability – current (Note 21 and 23) Notes payables (Note 20 and 32) Accounts payable (Note 20, 32 and 33) Other payables (Note 21 and 32) Current tax liabilities (Note 25) Advances (Note 33) Long-term borrowing maturing within one year (Note 18, 32 and 34) Other current liabilities (Note 21) Total current liabilities NON-CURRENT LIABILITIES Corporate bonds payable (Note 19) Long-term borrowings (Note 18) Deferred tax liabilities (Note 25) Deposits received Total non-current liabilities Total liabilities Equity of the company (Note 22) Capital stock Common stock Capital surplus Retained earnings Special reserve Undistributed earnings Total retained earnings Exchange differences from the translation of financial statements of foreign operations Total equity of the company NON-CONTROLLING INTEREST Total equity TOTAL LIABILITIES AND EQUITY		December 31,2018	December 31,2018	% 10 - - - 41 - - 17 2 - 70 1 23 - - 4 - 2 30 100 19 - 1 5 21 4 - - - - 50 11 - 4 - 15 65 7 15 - 13 13 - 35 - 35 100		December 31,2017	December 31,2017
			Amount $ 550,292 3,842 - 5,379 2,220,152 17,828 31 900,520 103,923 3,147 3,805,114 33,502 1,230,891 22,634 20,847 194,248 2,977 88,214 1,593,313 $ 5,398,427 $ 1,009,466 910 66,510 300,787 1,134,173 200,410 13,318 - - 7,403 2,732,977 576,478 - 208,160 6,708 791,346 3,524,323 395,411 784,347 13,500 662,990 676,490 1,375 1,857,623 16,481 1,874,104 $ 5,398,427				Amount $ 609,909 - 155,728 25,076 1,811,281 8,142 1,805 611,150 97,320 - 3,320,411 13,546 970,751 22,565 17,196 273,394 6,719 92,347 1,396,518 $ 4,716,929 $ 1,535,622 - - 84,698 996,452 155,747 8,766 45,644 119,246 10,161 2,956,336 - 22,320 111,441 7,220 140,981 3,097,317 395,411 678,811 28,925 363,944 392,869 7,821 1,474,912 144,700 1,619,612 $ 4,716,929		%
									13 - 3 1 38 - - 13 2 - 70 - 21 1 - 6 - 2 30 100 33 - - 2 21 3 - 1 3 - 63 - 1 2 - 3 66 8 15 - 8 8 - 31 3 34 100

The notes attached shall constitute an integral part of this Consolidated financial statement.

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(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) Lemtech Holdings Co., Limited and subsidiaries

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

January 1 to December 31, 2018 and 2017

Unit: NT$ Thousand; except for earnings per share in NT$

Code OPERATING REVENUE (Note 23 and 33) 4110 Sales revenue 4190 Sales return and discount 4000 Total operating revenue 5000 OPERATING COST (Note 12 and 33) 5900 GROSS PROFIT OPERATING EXPENSES (Note 24) 6100 Marketing expenses 6200 Administrative expenses 6300 Research and development expenses 6450 Expected credit impairment loss 6000 Total operating expenses 6900 NET OPERATING PROFIT NON-OPERATING INCOME AND EXPENSES (Note 24) 7190 Other income 7020 Other gains and losses 7050 Financial costs 7060 Share of profits of associates 7000 Total non-operating income and expenses 7900 INCOME BEFORE INCOME TAX 7950 INCOME TAX EXPENSES (Note 25) 8200 NET INCOME		2018

(Continued on next page)

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(Continued from previous page)

Code OTHER COMPREHENSIVE INCOME (post-tax profit or loss) 8310 Items that will not be reclassified subsequently to profit or loss: 8341 Exchange differences arising on translation to the presentation currency 8360 Items that may be reclassified subsequently to profit or loss: 8361 Exchange differences on translating the financial statements of foreign operations 8300 Other comprehensive income/(loss) for the year, net of income tax 8500 TOTAL COMPREHENSIVE INCOME FOR THE YEAR NET PROFIT ATTRIBUTABLE TO: 8610 The owners of the company 8620 Non-controlling interest 8600 TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO: 8710 The owners of the company 8720 Non-controlling interest 8700 EARNINGS PER SHARE (Note 26) 9710 Basic 9810 Diluted		2018		% - - - 7 6 1 7 6 1 7	2017
		Amount $ - 9,189) 9,189) $ 396,214 $ 382,474 22,929 $ 405,403 $ 376,028 20,186 $ 396,214 $ 9.67 $ 9.49			Amount ( $ 3,438 ) 25,637 22,199 $ 336,715 $ 298,368 16,148 $ 314,516 $ 321,614 15,101 $ 336,715 $ 7.55 $ 7.54		%
	( (						- 1 1 8 7 - 7 8 - 8

The notes attached shall constitute an integral part of this Consolidated financial statement.

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(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese)

Lemtech Holdings Co., Limited and subsidiaries

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

January 1 to December 31, 2018 and 2017

					January 1 to December 31, 2018 and 2017	January 1 to December 31, 2018 and 2017
Code A1 BALANCE AT JANUARY 1, 2017 T1 Functional currency effects Appropriations of 2016 earnings: B3 Special reserve B5 Cash dividends distributed by the Company D1 Net income in 2017 D3 Other comprehensive income for the year ended December 31, 2017, net of income tax D5 Total comprehensive income for the year ended December 31, 2017 Z1 BALANCE AT DECEMBER 31, 2017 Appropriations of 2017 earnings: B3 Special reserve B5 Cash dividends distributed by the Company Other changes in capital surplus M5 Acquisition of partial interest in a subsidiary. C5 Equity component of convertible bonds issued by the Company D1 Net income in 2018 D3 Other comprehensive income for the year ended December 31, 2018, net of income tax D5 Total comprehensive income for the year ended December 31, 2018 O1 Change in non-controlling interest Z1 BALANCE AT DECEMBER 31, 2018					Equityof the company				Total $ 1,396,350 84,888 ) - 158,164 ) 298,368 23,246 321,614 1,474,912 - 98,853 ) 79,798 25,738 382,474 6,446) 376,028 - $ 1,857,623	Non-controllinginterest $ 129,599 - - - 16,148 ( 1,047) 15,101 144,700 - - ( 79,798 ) - 22,929 ( 2,743) 20,186 ( 68,607) $ 16,481	Unit: NT$ thousands Total equity
		Capital stock $ 395,411 - - - - - - 395,411 - - - - - - - - $ 395,411		Capital surplus $ 747,057 68,246 ) - - - - - 678,811 - - 79,798 25,738 - - - - $ 784,347	Retained earnings Special reserve Undistributed earnings $ 14,546 $ 254,761 ( 1,046 ) ( 15,596 ) 15,425 ( 15,425 ) - ( 158,164 ) - 298,368 - - - 298,368 28,925 363,944 ( 15,425 ) 15,425 - ( 98,853 ) - - - - - 382,474 - - - 382,474 - - $ 13,500 $ 662,990		Exchange differences from the translation of financial statements of foreign operations ( $ 15,425 ) - - - - 23,246 23,246 7,821 - - - - - ( 6,446) ( 6,446) - $ 1,375
					Special reserve $ 14,546 ( 1,046 ) 15,425 - - - - 28,925 ( 15,425 ) - - - - - - - $ 13,500
			(		( (	( ( ( (	( ( (	( ( ( (		( ( ( (	( ( ( ( (	$ 1,525,949 84,888 ) - 158,164 ) 314,516 22,199 336,715 1,619,612 - 98,853 ) - 25,738 405,403 9,189) 396,214 68,607) $ 1,874,104

The notes attached shall constitute an integral part of this Consolidated financial statement.

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(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese)

Lemtech Holdings Co., Limited and subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

January 1 to December 31, 2018 and 2017

Unit: NT$ thousands

Code CASH FLOWS FROM OPERATING ACTIVITIES A10000 Income before income tax A20010 Profits and loss A20100 Depreciation expenses A20200 Amortization expenses A20300 Expected credit impairment loss A20300 Impairment loss recognized on trade receivables A20900 Financial costs A21200 Interest income A22300 Share of (profit)/loss of associates and joint ventures A22500 (Gain)/loss on disposal of property, plant and equipment A23200 Gain on disposal of associates A20400 Net loss on fair value changes of financial liabilities designated as at fair value through profit or loss A23700 Real estate impairment loss (reversal gain) A23800 Inventory valuation and obsolescence losses A24100 Foreign exchange gains- net A29900 Amortization of prepayments for leases A30000 Net change in operating assets and liabilities A31130 Decrease (increase) in notes receivable A31150 Increase in accounts receivable A31180 Decrease (increase) in other receivables A31200 Increase in inventories A31230 Increase in prepayments A31240 Increase in other current assets A32125 Increase in contract liability A32130 Increase in notes payable A32150 Increase in accounts payable A32180 Increase (decrease) in other payables A32210 (Decrease) increase in advance receipts A32230 (Decrease) Increase in other current liabilities A33000 Cash generated from operations (Continued on next page)		2018 $ 542,164 170,333 5,632 12,011 - 41,881 10,268 ) 14,633 ) 527 - 1,990 3,640 ) 11,583 35,482 2,295 19,697 420,329 ) 9,867 ) 293,103 ) 4,352 ) 3,147 ) 66,510 216,089 137,721 45,134 45,644 ) 2,758) 501,308		2017
	( ( ( ( ( ( ( ( ( (		( ( ( ( ( ( ( ( (	$ 394,320 104,608 4,869 - 8,193 22,045 3,535 ) 955 72 ) 499 ) - 1,483 5,905 75,692 ) 2,270 16,607 ) 688,056 ) 33,393 136,614 ) 36,734 ) - - 39,566 403,499 50,590 ) 35,181 1,703 49,591

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(Continued from previous page)

Code A33300 Interest paid A33500 Income tax paid AAAA Net cash inflow from operating activities CASH FLOWS FROM INVESTING ACTIVITIES B07500 Interest received B00050 Proceeds from sale of financial assets measured at cost B00600 Purchase of debt investments with no active market B00700 Proceeds from sale of debt investments with no active market B01800 Acquisition of associates ventures B02700 Purchase of property, plant, and equipment B02800 Proceeds from disposal of property, plant and equipment B04500 Purchase of intangible assets B03700 Increase in refundable deposits B03800 Decrease in Refundable deposits BBBB Net cash outflow from investing activities CASH FLOWS FROM FINANCING ACTIVITIES C01200 Proceeds from issuance of convertible bonds C00100 (Decrease) Increase of short-term loan C01700 Repayments of long-term borrowings C03000 Increase in deposits received C03100 Refunds of guarantee deposits received C04500 Cash dividend distribution C05500 Proceeds from disposal of partial interest in a subsidiary. C05800 Change in non-controlling interest CCCC Net cash inflow (outflow) from financing activities DDDD IMPACT OF CHANGES IN EXCHANGE RATE ON CASH AND CASH EQUIVALENTS EEEE NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS E00100 CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR E00200 BALANCE OF CASH AND CASH EQUIVALENTS, END OF YEAR		2018 $ 35,840 ) 40,917) 424,551 10,449 151,886 - - 8,987 ) 376,435 ) 1,946 5,976 ) - 3,742 223,375) 597,375 526,156 ) 141,566 ) - 512 ) 98,853 ) - 78,656) 248,368) 12,425) 59,617 ) 609,909 $ 550,292		2017
	( ( ( ( ( ( ( ( ( ( ( ( ( (		( ( ( ( ( ( ( ( ( (	$ 20,926 ) 23,411) 5,254 3,744 - 145,223 ) 77,715 - 569,361 ) 652 4,101 ) 546 ) - 637,120) - 1,039,416 119,314 ) 281 - 158,164 ) 3,792 - 766,011 5,419) 128,726 481,183 $ 609,909

The notes attached shall constitute an integral part of this Consolidated financial statement.

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Lemtech Holdings Co., Limited and its subsidiaries

Notes to consolidated financial statements

January 1 to December 31, 2018 and 2017

(Unless otherwise stated, amounts in NT$ Thousand)

1. Company History

Lemtech Group (hereinafter to be referred as the Company) was established in British Cayman Islands in September 2009, and was set up mainly for the organization structure reconstruction to apply and register as an emerging stock listed on the Taipei Exchange. After reconstruction, the Company has became the holding company of Lemtech Global Solution Co. Ltd. (hereinafter to be referred as Global Solution), and acquired at a exchange ratio of 24.99 the Company shares for each Global Solution share. The main business operations for the Company, Global Solution and its subsidiaries (hereinafter to be referred as the Consolidated Company) are manufacturing and designing various kinds of fine blanking dies, die casting non-metal molds, computer connectors, computer thermal modules, and new types of electronic components, as well as selling the Company’s products, etc. The Company has been publicly traded on the Taipei Exchange in April 29, 2011 and transferred to the TWSE (Taiwan Stock Exchange) in May 21, 2015.

The functional currency of the Company is Renminbi (“RMB”), and has been adjusted to New Taiwan Dollars (NT$) from April 1, 2017.

2. Financial reporting date and procedures

The Board of Directors approved the consolidated financial statements for publication on March 27, 2019.

3. Application of new and revised standards and interpretation

• (1) The amended Regulations Governing the Preparation of Financial Reports by Securities Issuers for the first-time adoption and IFRS, IAS, IFRIC and SIC (hereinafter collectively known as “IFRSs”) that have been recognized and approved by the Financial Supervisory Commission (FSC)

Except for the statements given below, the application of the revised “Regulations Governing the Preparation of Financial Reports by Securities Issuers” and the IFRSs recognized by the Financial Supervisory Commission to come into full force will not cause significant change in the accounting policies of the consolidated company.

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1. IFRS 9 “Financial Instruments” and related amendment

IFRS 9, “Financial Instruments” replaced IAS 39, “Financial Statements: Recognition and Measurement,” and was adopted in conjunction with other standards such as the amended IFRS 7, “Financial Instruments: Disclosure.” The new rules in IFRS 9 covered the classification, measurement and impairment of financial assets and general hedge accounting. Refer to Note 4 for further information on accounting principles.

Classification, measurement and impairment of financial assets

The consolidated company evaluated the classification of financial assets effective on January 1, 2018 for retroactive adjustment on the basis of the reality and circumstances of the day and elected not to recompile the statements for comparison. As of January 1, 2018, the categories and book value of financial assets to be measured under IAS 39 and IFRS 9 and the changes therein are specified below:

Category of financial assets	Classification of measurement	Classification of measurement	Book IAS 39 $ 609,909 155,728 1,844,499 6,719	value	Remark
	IAS 39	IFRS 9		IFRS 9
Cash and cash equivalents Time deposit with the original maturity date over three months Notes receivable, accounts receivable and other receivables Refundable deposits	Loans and accounts receivable Loans and accounts receivable Loans and accounts receivable Loans and accounts receivable	Financial assets at amortized cost Financial assets at amortized cost Financial assets at amortized cost Financial assets at amortized cost		$ 609,909 155,728 1,844,499 6,719	(1) (2) (1) (1)

Financial assets based on cost after amortization Add: Reclassification of loans and receivables (IAS 39) Total	Book value of January 1, 2018 (IAS 39)	Book value of January 1, 2018 (IAS 39)		Reclassification		Reevaluation	Book value of January 1, 2018 (IFRS 9)	Book value of January 1, 2018 (IFRS 9)	Effect on retained earnings as of January1,2018	Effect on retained earnings as of January1,2018	Effect on other equity as of January1,2018	Effect on other equity as of January1,2018	Remark
		$ - 2,616,855 2,616,855 $ 2,616,855		$ 2,618,855 ( 2,616,855) - $ -		$ - - - $ -		$ 2,618,855 - 2,616,855 $ 2,616,855		$ - - - $ -		$ - - - $ -	(2)

• (1) According to IAS 39, cash and cash equivalents, time deposits with maturity over three months, notes receivable, accounts receivable, other receivables, and refundable deposits are classified as loans and receivables. However, according to IFRS 9, they are classified as financial assets measured at amortized cost, and should be evaluated as expected credit loss.

• (2) According to IAS 39, it would be classified as debt instruments without an active market and stated at amortized cost, and the original accrued contractual cash flows are solely payments of principal and interest on the principal outstanding. In addition, based on the fact and status as of January 1, 2018, it has been evaluated that its operating model is to receive contractual cash flows. Then based on IFRS 9, it has been classified as stated at amortized cost and evaluated as expected credit loss.

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• IFRS 15 “Revenue from Contracts with Customers” and relating amendments

IFRS 15 regulates the recognition principle for revenue from contracts with customers, which will replace IAS 18 “Revenue”, IAS 11 “Construction Contracts” and relating interpretations. Refer to Note 4 for further information on accounting principles.

The amount of revenue recognized, the net proceeds of the amounts received and receivable should be recognized as contract assets (or liabilities). Before IFRS 15 was applied for, contracts that were settled based on IAS 18 should be recognized as receivables when revenues are recognized.

The Consolidated Company has decided that only for the contracts that haven’t been completed by January 1, 2018 should be traced to apply IFRS 15, and the corresponding cumulative effect will be adjusted to retained earnings at that date:

Upon first-time adoption of IFRS 15, the adjustments to assets, liabilities and equities on January 1, 2018 are listed below:

Contract liability – current Advances Effect of liabilities	Amount before recompilation on January 1, 2018 $ - 45,644 $ 45,644	Adjustment of first use $ 45,644 ( 45,644) $ -	Amount after recompilation on January 1, 2018	Amount after recompilation on January 1, 2018
		(		$ 45,644 - $ 45,644

If the Consolidated Company has applied IAS 18 during 2018, the effects on the corresponding single item and residual amounts adjusted to IFRS 15 are listed below:

The impacts on assets, liabilities, and equity for the current period

Decrease in contract liability Increase in other current liabilities Effect of liabilities	December 31,2018
	( $ 66,510 ) 66,510 $ -

(2) Regulations Governing the Preparation of Financial Reports by Securities Issuers applicable in 2019 and the IFRSs recognized by the Financial Supervisory Commission (hereinafter referred to as “FSC”)

Commission (hereinafter referred to as “FSC”)
The new / amended / revised standards or	IASB publication effective
interpretation	date(Note 1)
“The annual improvement plan for the periods of	January 1, 2019
2015-2017”
Amendments to IFRS 9 “Prepayment Features with	January 1, 2019 (Note 2)
Negative Compensation”
IFRS 16 “Leases”	January 1, 2019
Amendments to IAS19 “Plan Amendment,	January 1, 2019 (Note 3)
Curtailment or Settlement”

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The new / amended / revised standards or	IASB publication effective
interpretation	date (Note1)
Amendments to IAS 28 “Long-term Interest in	January 1, 2019
Associates and Joint Ventures”
IFRIC 23 “Uncertainty under Income Tax	January 1, 2019
Treatments”

• Note 1: Unless otherwise stated, the aforementioned new / amended / revised standards or interpretation are effective in the years after the respective date.

• Note 2: FSC permitted the consolidated company adoption of this amendment before January 1, 2018

• Note 3: The plan amendment, curtailment, or settlement after January 1, 2019 apply to this amendment.

• IFRS 16 “Leases”

IFRS 16 specifies recognition of lease agreements and accounting treatment for lessors and lessees. This standard will replace the relevant interpretations for IAS 17 “Leases” and IFRIC 4 “Determining Whether an Arrangement Contains a Lease.”

Definition of lease

At the adoption of IFRS 16 for the first time, the consolidated company only assesses the contracts signed (or changed) beyond January 1, 2019, to determine if they are (or included) lease on the basis of IFRS 16, and does not reassess contracts determined as lease under IAS 17 and IFRIC 4, and treated these contracts in accordance with the transitional requirement of IFRS 16.

The consolidated company is the lessee

At the adoption of IFRS 16 for the first time, all leases were recognized as tenancy right assets and leasehold liability except low value target of leases and short-term leases of which the expenses incurred were recognized under the straight-line method. The consolidated comprehensive income statement shall present the interest expenses incurred from the depreciations of the utilization of equity assets and leasehold liability under effective interest method. In the consolidated cash flow statement, the principal amount of the lease liability payment is classified as a financing activity and the interest payment is classified as an operating activity. Before IFRS 16 was applied, the contracts classified as operating leases would be recognized as expenses on a linear base, and the prepaid lease payments for acquiring land-use rights in China would be recognized as prepaid lease payments. Cash flows from operation lease were presented as operating activities in the consolidated statement of cash flows. Contracts classified as financing lease were recognized as leasehold assets and payable lease payment in the consolidated balance sheet.

The consolidated company elected to adjust the accumulated influence under IFRS 16 in retrospect as retained earnings on January 1, 2019, and does not recompile comparative information.

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Currently, the contracts that have been issued as operating leases based on IAS 17, the measurements for lease liabilities will be the remaining lease payments which are discounted using the lessee's incremental borrowing rate of interest at that date on January 1, 2019. The total right-of-use assets are measured at the mount of lease liability at that date (the amount of prepaid and payable lease payments previously accrued will also be adjusted). The recognized tenancy right will be subject to assessment for impairment under IAS 36.

The following expedient methods are expected to be applicable to the consolidated company:

• (1) Apply a single discount rate for the measurement of specific leasehold combinations with reasonable similarity.

• (2) Lease to expire on or before December 31, 2019 will be treated as short-term lease.

• (3) The initial cost will not be included in the measurement of tenancy right assets on January 1, 2019.

• (4) Measuring leasehold liability, such as the determination of the term of leases, will be treated from hindsight.

As for the leases classified as financing leases based on IAS 17, the carry amounts of lease assets and lease liabilities as of December 31, 2018 will be recognized as the carrying amount for use-of-right assets and lease liabilities as of January 1, 2019.

The consolidated company is the lessor

In the transitional period, no adjustment of the lease of the Lessors while under IFRS 16 will be applicable from January 1, 2019.

The expected impacts on assets, liabilities, and equity on January 1, 2019.

Prepayments Long-term prepayments for leases Right-of-use assets Effect of assets Leasehold liability- current Leasehold liability- non-current Effect of liabilities	Book value of December 31, 2018 $ 2,251 88,241 - $ 90,492 $ - - $ -	Adjustment of first use ( $ 2,251 ) ( 88,241 ) 207,843 $ 117,351 ( $ 85,846) ( 31,505) ($ 117,351)	Adjustment of book value as of January1,2019
			$ - - 207,843 $ 207,843 ( $ 85,846) ( 31,505) ($ 117,351)

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2. IFRIC 23 “Uncertainty under Income Tax Treatments”

IFRIC 23 clarified that if there is uncertainty in handling income tax, the combined business must assume that the taxation authorities could retrieve all information for review. If the tax treatment as declared may possibly be accepted by the taxation authorities, the taxable income, taxation basis, the unconsumed taxable loss, unconsumed tax deduction, and determination of tax rate shall be congruent with the tax treatment adopted at the time of income tax declaration. If the taxation authorities are unlikely to accept the tax treatment in the declaration, the combined business shall adopt the most possible amount or anticipated value (adopt the method that could more likely forecast the ultimate result under uncertainty between the two) in evaluation. In case of change in reality and circumstance, the combined business shall reevaluate its judgment and evaluation.

Further to the above effects, the assessment of consolidated company on other IFRSs as of the day this consolidated financial statement was approved for release did not cause significant influence on the consolidated financial position and consolidated financial performance.

• (3) The IFRSs released by the IASB but not yet approved and announcement effective by the Financial Supervisory Commission

consolidated financial performance. The IFRSs released by the IASB but not yet approved by the Financial Supervisory Commission	and announcement effective
The new / amended / revised standards or interpretation Amendment to “Definition of a business” in IFRS 3 Amendment to IFRS 10 and IAS 28, “Consolidated Financial Statements and Investment in Associates”. IFRS 17 “Insurance Contracts” Amendments to IAS 1 and IAS 8 “Definition of Materiality”	IASB publication effective date(Note 1)
	January 1, 2020 (Note 2) Undefined January 1, 2021 January 1, 2020 (Note 3)

• Note 1: Unless otherwise stated, the aforementioned new / amended / revised standards or interpretation are effective in the years after the respective date.

• Note 2: The amendment should be applied to the acquisition day in the reporting period for corporate mergers after January 1, 2020 and the acquisition of assets beyond that date.

• Note 3: This amendment is with prospective application for the annual reporting period starting after January 1, 2020.

The companies in the consolidated financial statements will continue to evaluate the effect of the amendment to other IFRSs on the financial positions and performance of the companies in the consolidated financial statements to the date this parent company only financial statement approved and released, and will make appropriate disclosure after the evaluation.

4. Summary of significant accounting policies

• (1) Compliance Statement

The consolidated financial statements are prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers that are authorized by the FSC.

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• (2) Basis of preparation

Further to financial instruments measured at fair value, the content contained in this consolidated financial statement is compiled based on historical data.

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

1. Level 1 input value: refers to the quotation of the same asset or liability in an active market as of the evaluation (before adjustment).

2. Level 2 input value: refers to the direct (the price) or indirect (inference of price) observable input value of asset or liability further to the quotation of Level 1.

3. Level 3 input value: the unobservable input value of asset or liability.

4. (3) Standards in differentiating current and non-current assets and liabilities.

Current assets including:

1. Assets held mainly for trading purpose:

2. Assets expected to be realized within 12 months after the balance sheet date; and

3. Cash and cash equivalents (not including those that are limited to exchange or repay liabilities exceeding 12 months after the balance sheet date).

4. Current liabilities include:

5. Liabilities held for trading purposes;

6. Liabilities to be repaid within 12 months after the balance sheet date, and

7. Liabilities with the repayment deadline that cannot be unconditionally deferred to at least 12 months after the balance sheet date.

For those that are not current assets or liabilities above are classified as non-current assets or liabilities.

• (4) Basis of consolidation

This consolidated financial statement contains the information of the financial statements of the Company and its controlled entities (subsidiaries). The Consolidated Statement of Comprehensive Income already covered the operating profit and/or loss of the subsidiaries, which have been acquired or disposed of the current term, from the date of acquisition until the date of disposal. The subsidiaries’ financial statements have been properly adjusted to make the accounting policies consistent with the accounting policies of the consolidated company. In preparing these consolidated financial statements, the transactions, account balances, incomes and loss and expenses among the individual entities are written off in full amount. The total comprehensive incomes of the subsidiaries were non-controlling interest attributed to the Company’s owners and the non-controlling interest, to become the balance of loss even as the non-controlling interest.

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When the change in the ownership equity on a subsidiary of the Consolidated Company does not result in a loss of control, it is processed as an equity transaction. The book value of the Consolidated Company and the non-controlling equity has been adjusted to reflect the change in the relative equity on the subsidiary. The difference between the adjusted amount of the non-controlling equity and the considerations paid or collected is directly recognized as equity and attributable to the Company’s shareholders.

For detailed information about the subsidiaries, percentage of ownership and main businesses and products please refer to Note 13, table 7 and 8.

(5) Foreign currency

Each business entity that has traded with a currency (foreign currency) other than the functional currency, when preparing financial statements, should have it translated into the functional currency in accordance with the exchange rate on the trading day.

The functional currency of the Company is Renminbi (“RMB”), and based on the regulations of the Taiwan Stock Exchange regarding financial statements, the consolidated financial statements are presented in New Taiwan Dollars (NT$). However, considering the financing management efficiency as a holding company, the Company’s functionality has been altered to plan financing activities for the Group. Due to this change of economic environment, the company’s Board of Directors has made the resolution that the functional currency of the Company will be adjusted to New Taiwan Dollars (NT$) from Renminbi (“RMB”), and will apply IAS 21 “The Effects of Changes in Foreign Exchange Rates” deferral approach from April 1, 2017.

Foreign currency monetary items are translated at the closing rate on each balance sheet date. The exchange differences arising from the settlement of monetary items or translating monetary items are recognized in the current profit or loss.

The foreign non-currency items measured at fair value are translated in accordance with the exchange rate on the fair value determination date and the exchange difference is booked as current profit or loss. However, for the changes in fair value recognized in the other comprehensive profit or loss, the exchange difference is recognized in the other comprehensive profit or loss.

The foreign non-currency items measured at historical cost are translated in accordance with the exchange rate on the transaction date without the need for a translation again.

Upon preparation of the Consolidated Financial Report, the assets and liabilities of the overseas operating institutions (including the subsidiaries, associates, joint ventures or branches in the countries of business operation or those using currencies different from the Company’s) were converted to New Taiwan Dollars based on the exchange rate quoted on every balance sheet date. The profits and losses are translated in accordance with the current average exchange rates, and the exchange differences resulted is booked in other comprehensive profit and loss (and attributable to the Company’s shareholders and non-controlling equity respectively).

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(6) Inventory

Inventories are raw materials, materials, work in process and finished products. Inventory is valued in accordance with the lower of cost or net cash value. When comparing cost and net cash value, except for the homogeneous inventories, it is based on the itemized lower of cost or net cash value. The net realizable value refers to the balance of the estimated sales price less the estimated costs that shall be invested before completion and the estimated costs before completing the sale. Inventory cost is calculated in accordance with the weighted average method.

(7) Investments in the affiliated company

The term “associate” as set forth herein denotes an enterprise, which has significant effect upon the Consolidated Company, but is not a subsidiary or a joint venture.

The Merging Company adopts equity method for investment in associates.

Under the equity method, investments in the affiliated companies were originally recognized at cost; the book value after the acquisition date fluctuates along with the distribution of profit or loss from the affiliated company and other comprehensive profit or loss by the consolidated company. In addition, investments in the Consolidated Company are required to be accounted for using the equity method and interests recognized based on the ownership percentage of the associates.

Acquisition costs in excess of the Consolidated Company's share of net identifiable assets and liabilities (i.e. fair value) in an associated company on the date of acquisition are recognized as goodwill. This goodwill includes book value of the investment and is not amortized. Share of net identifiable assets and liabilities (i.e. fair value) in an associated company that exceeds acquisition cost on the date of acquisition is recognized as gains for the current year.

In the event that the Merging Company’s shares of loss in the associates equal to or exceed its equity in the associates (including the book amount of investment in the associates in equity method and other long-term interest of the Merging Company in the investment composition of the associates), the Merging Company discontinued recognition of the further losses. The Merging Company recognized extra losses and liabilities only in the event of occurrence of legal obligations, presumed obligations or within the scope that the Merging Company had made payment on behalf of the associate.

When the Consolidated Company performs an impairment evaluation, the overall carrying amount of the investments (including Goodwill) are treated as one single asset, and then the impairment test performed to compare its recoverable amount with the carrying amount. The recognized impairment loss will not be allocated to any asset that causes the components of the carrying amount of investments, including Goodwill. Any reversal of the impairment loss can be recognized within the range of the recoverable amount of the subsequently increased investment.

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The profit or loss resulting from the countercurrent, downstream and side-stream transactions between the consolidated company and the affiliated company is recognized in the consolidated financial statement within the range that is irrelevant to the consolidated company’s interest in the affiliated company.

• (8) Property, plant, and equipment

Property, plant and equipment are recognized as costs, and they will be measured by the amount after the costs less the amount of accumulated depreciation and accumulated impairment losses afterwards.

Property, plant, and equipment are depreciated in accordance with the straight-line method in the expected useful lives. Depreciation of each major part is appropriated separately. The consolidated company, at least at the end of each fiscal year, has the estimated durable life, residual value, and depreciation method reviewed; also, delayed the effects of changes in applying accounting estimates.

When derecognizing property, plant and equipment, the difference between the net disposition amount and the book value of the asset is recognized in profits and losses.

• (9) Intangible assets

• Acquired separately

The intangible asset with limited useful life acquired separately was originally measured at cost and subsequently measured at cost, net of accumulated amortization and accumulated impairment losses. Intangible assets shall be subject to amortization under the straight-line method during its life span, and Consolidated Company reviews the estimated useful life, residual value and depreciation method shall be subject to review at least once a year and extend the effect of changes in applicable accounting policy.

1. de-recognition

In removing intangible assets, the difference between the net proceeds of disposition and the book value shall be recognized as income.

• (10) Impairment for tangible assets, intangible assets and contract costs related assets.

The consolidated company assesses whether there is any indication of impairment occurring on the tangible and intangible assets at each balance sheet date. If there is any indication of impairment occurring, the recoverable amount of the asset should be estimated. If the recoverable amount of an individual asset cannot be estimated, the consolidated company is to estimate the recoverable amount of the respective cash-generating unit.

The recoverable amount is the fair value net of cost or the value in use whichever is higher. When the recoverable amount of an individual asset or cash-generating unit is less than its book amount, the book amount of the asset or cash-generating unit should be reduced to its recoverable amount. The impairment loss is recognized in the profit or loss.

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For contracts with customers that apply IFRS 15, inventory, property, plants and equipment, and intangible assets recognized due to contracts with customers will firstly recognize impairment losses according to regulation requirements for inventory write-down and the regulations mentioned above. Secondly, it should be recognized as impairment loss when the carrying amount of relevant assets of contract cost exceed the amount of considerations to which it expects to be entitled from providing relevant goods or services after deducting direct relevant costs. In order to work on the assessment for impairment of cash-generating units, hereafter adding carrying amount of relevant assets of contract costs into the cash-generating units to which it belongs.

When the impairment loss is reversed subsequently, the carrying amount of the assets, cash-generating units or relevant assets of contract cost will increase to the revised recoverable amount, while the carrying amount after increase does not exceed the carrying amount of the assets, cash-generating units or relevant assets of contract costs that would have been at the date of reversal had the impairment loss not been recognized previously (excluding amortization or depreciation). The reversed impairment loss is recognized in the profit or loss.

(11) Financial instruments

When the consolidated company has become a party to the instrument contract, the financial assets and financial liabilities are to be recognized in the consolidated balance sheet.

For the initial recognition of the financial assets and financial liabilities, if the financial assets or financial liabilities are not measured at fair value through profit or loss, it is measured at fair value plus transaction cost that is directly attributable to the acquisition or issuance of financial assets or financial liabilities. The transaction cost directly attributable to the acquisition or issuance of financial assets or financial liabilities that are measured at fair value through profit or loss is immediately recognized in the profit or loss.

1. Financial assets

The regular way of purchase or sale of financial assets are recognized and derecognized based on the accounting on the transaction date.

• (1) Classification of measurement 2018

The Company holds financial assets in the form of financial assets measured on the basis of cost after amortization.

Financial assets based on cost after amortization

If the financial assets of the consolidated company met both of the following conditions, classify as financial assets on the basis of cost after amortization:

• A. Financial assets held under particular mode of operation and the purpose of holding is for the collection of cash flow from contracts; and

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• B. Financial assets held for trading. Cash flow generated on particular dates deriving from the contacts and the cash flow is wholly for the payment of principal and interest accrued from the outstanding amount of the principal.

Financial assets on the basis of cost after amortization (including cash and cash equivalents, notes receivable on the basis of cost after amortization, accounts receivable, other receivables and refundable deposits) shall be determined for the total book value under the effective interest rate method after the initial recognition net of the cost of any impairment after amortization for measurement. Any exchange gains or loss will be recognized as income.

Interest income will be the product of effective interest rate and total book value of financial assets except under the following two conditions:

• A. The interest income of financial assets procured or initiated under credit impairment will be the product of the effective interest rate after credit adjustment and the cost of financial assets after amortization.

• B. Financial assets held for trading. For financial assets that are not purchased or originated as credit-impaired financial assets but subsequently have become credit-impaired financial assets, the entity shall apply the effective interest rate to the amortized cost of the financial asset in subsequent reporting periods.

Cash equivalents are time deposits within 3 months from the date of acquisition, with high liquidity, can be converted into cash with marginal risk on the change in value, and are used for the fulfillment of short-term commitment in cash settlement.

2017

The financial assets held by the consolidated company include loans and receivables.

Loans and receivable

Loans and receivables (including receivable, other receivables, cash and cash equivalents, and bond investments without an active market) are measured at the amortized cost after deducting the impairment losses in accordance with the effective interest method, except for the interest of short-term accounts receivable that is insignificant.

Cash equivalents are time deposits and notice deposit within 3 months from the date of acquisition, with high liquidity, can be converted into cash with marginal risk on the change in value, and are used for the fulfillment of short-term commitment in cash settlement.

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(2) Impairment of financial assets and contract assets 2018

The Consolidated Company evaluates impairment loss of financial assets stated at amortized cost (include notes receivable, accounts receivable, other receivables, and refundable deposit) based on expected credit loss on each balance sheet date.

Notes receivable and receivable accounts shall be recognized for provisions for loss on the basis of anticipated credit loss within the perpetuity of the assets. Other financial assets shall be evaluated for any significant increase of risk from the day of initial recognition. If none is found, recognize for provision for anticipated credit loss along a period of 12 months. If it is, recognize for provision of anticipated credit risk within the perpetuity of the assets.

Anticipated credit loss is the weighted average loss of credit on the basis of the weight of the risk of default. Anticipated credit loss in a period of 12 months means the expected loss of credit from the financial instruments within 12 months due to default. Anticipated credit loss with the perpetuity of the financial instruments means the expected loss of credit from the financial instruments within the perpetuity of these financial instruments.

All impairment of financial assets is recognized through the reduction of the book value of the provisioned account. However, the provision for loss of investment of debt instruments at fair value through comprehensive income shall be recognized as other comprehensive income without the reduction of its book value.

2017

Except for the financial assets measured at fair value through profit or loss, the consolidated company examines whether there is an evidence of impairment occurring on the other financial assets at each balance sheet date. When there is objective evidence of one or more events occurring after the initial recognition of financial assets with a resulting loss to the future cash flow of the financial asset, the impairment of financial assets had already occurred.

For financial assets reported at amortized cost, such as, accounts receivable and other receivables, if such assets are assessed and concluded to be without any evident impairments, a collective assessment of the impairments should be initiated. Objective evidence of impairment for a portfolio of receivables could include the Company’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period of 30 to 45 days, as well as observable changes in national or local economic conditions that correlate with default on receivables.

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The impairment amount of the financial assets measured at amortized cost is the difference between the book value of the assets and the present value of the future cash flows discounted at the financial asset’s original effective interest rate.

For financial assets carried at cost after amortization, the amount of impairment reduced in subsequent periods can be reversed and recognized in profit and loss against a direct adjustment of cumulative impairments or the provision account, provided that the reduction is objectively believed to have been attributable to events occurred after the impairment was recognized. However, the reversal cannot produce a book value that is greater than the amount of cost after amortization (as at the date of reversal) had the financial asset not been impaired in the first place.

Other objective evidence of impairment to financial assets include: severe financial distress or default (e.g. delay or inability to pay interests or principals owed) involving the issuers or debtor, increased likelihood of the debtor undergoing bankruptcy or financial restructuring, or any financial crisis that may render the financial asset no longer available on the active market.

All the impairment loss of financing assets are directly deducted from the carrying amount of financing assets, except for the carrying amount for the accounts receivable and other receivables are deducted from their allowance accounts. The uncollectible receivables and other receivables are credited to the allowance account. The amount previously written off and collected subsequently is credited to the allowance account. Except writing off allowance accounts due to uncollectibles in accounts receivable and other receivables, the changes in the carrying amount of allowance accounts should be recognized in profit and loss.

(3) The de-recognition of financial assets

The consolidated company has financial assets de-recognized only when the contractual rights from the cash flows of a financial asset becomes invalid or when the financial assets are transferred and almost all the risks and rewards of the asset ownership have been transferred to other enterprises.

On the before 2017 (inclusive), when de-recognizing a financial asset, the difference between the book amount and the consideration received plus any cumulative profit or loss recognized in the other comprehensive profit or loss is recognized in the profit or loss. Since the 2018, when particular entry of financial assets measured on the basis of cost after amortization is removed, the difference between its book value and consideration shall be recognized as income. When particular debt instruments measured at fair value through comprehensive income is entirely removed, the total sum of any other accumulated gains or loss of the difference between book value and consideration recognized as other comprehensive income shall be recognized as income. When particular equity instruments measured at fair value through comprehensive income are entirely removed, the accumulated gains of loss shall be directly transferred to retained earnings without being classified as income.

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2. Financial liabilities

• (1) Subsequent measurement

All financial liabilities are measured at the amortized cost in accordance with the effective interest method.

Financial liabilities at fair value through profit or loss

Financial liabilities at fair value through profit or loss include financial liabilities that are held for trading and measured at fair value.

The held-for-trade financial liabilities are measured at fair value with the profit or loss (cluding any dividend or interest paid with the financial liabilities) arising from the reevaluation recognized as profit or loss.

Please refer to Note 32 for the determination of fair value.

• (2) De-recognition of financial liabilities

When de-recognizing financial liabilities, the difference between the book amount and the consideration paid (including any transferred non-cash assets or assumed liabilities) is recognized as profit or loss.

1. Convertible corporate bonds

The compound financial instruments (convertible corporate bonds) issued by the consolidated company are classified as financial liabilities and equity respectively in the original recognition according to the substance of the contractual agreement and the definition of financial liabilities and equity instruments.

In the original recognition, the fair value of the liability is estimated according to the prevailing market interest rate of a similar non-convertible instrument; also, it is measured at the amortized cost that is calculated according to the effective interest method before the conversion or maturity date. The liability of an embedded non-equity derivative is measured at fair value.

The conversion right classified as equity is equal to the residual amount of the total fair value of the compound instrument deducting the fair value of the liability determined individually and net of the income tax effect; also, it will not be measured subsequently. When the conversion right is executed, the relevant liability and equity amount will be transferred to the capital stock and additional paid-in capital - issuance premium. If the conversion rights of the convertible corporate bonds have not been executed on the due date, the amount recognized in the equity will be transferred to the additional paid-in capital - issuance premium.

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The relevant transaction costs of the issuance of convertible corporate bonds are amortized to the liabilities of the instrument (included in the book value of the liability) and the equity (included in the equity) in proportion to the total amortization amount.

• (12) Recognition of revenue

2018

The consolidated company, after identifying the performance obligations, had the transaction price amortized to each performance obligation and recognized as income when the performance obligations were fulfilled.

Commodity sales revenue

Sales revenue comes from selling 3C electronic products and automotive components. When goods were sold, customers have already had the right to use goods and bear the burden of risk for losses and damages occurring to goods, therefore the Consolidated Company recognizes revenues and accounts receivable at the time of the sale.

2017

Income is measured in accordance with the fair value of the considerations received or receivable and net of the customer’s sales return, discount, and other similar discount. Sales return is based on past experience and other relevant factors to reasonably estimate and appropriate future sales return amounts.

Sales of products

The sale of instruments is recognized as income upon fulfilling the following conditions fully:

1. The consolidated company has had the significant risks and rewards of the instrument ownership transferred to the buyer;

2. The consolidated company is not involved in the management of the instruments sold and does not maintain an effective control over the instruments sold.

3. The amount of revenues can be measured reliably.

4. The economic benefits related to the transaction is likely to flow into the consolidated company; and

5. The occurred or occurring cost related to the transaction can be measured reliably.

When material is provided for processing, the significant risks and rewards related to the ownership of the finished goods have not been transferred; therefore, the material provided for processing is not treated as sales.

• (13) Lease

When the lease term is to have all risks and returns attached to the ownership of assets transferred to the lessee, it is classified as a financing lease. All other leases are classified as operating leases.

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The consolidated company is the lessee

The payment of operational leasehold was recognized as expense during the duration of leasehold on the straight-line basis.

• (14) Borrowing costs

Borrowing costs directly belonging to acquiring, building or producing assets that meet the requirements are part of the costs of such assets until the completion of all necessary activities that the assets reaching the status of expected use or sale.

If specific borrowings are temporarily used for investment before the occurrence of capital expenses that meet the requirements, the investment revenues earned will be deducted from the borrowing costs that meet the capitalization conditions.

In addition to the transaction stated in the preceding paragraph, all other loan costs are recognized as profit and loss upon occurring.

• (15) Government grant

A government subsidy can only be recognized when it is firmly believed that the Consolidated Company will comply with the terms added to the government subsidy and will receive such subsidy.

If the government subsidy is used for compensating expenses or losses that have already occurred or for the purpose of immediate financial support to the Consolidated Company without any related cost in the future, it will be recognized as income during the receivable period.

• (16) Employee benefits

1. Short-term employee benefits

Liabilities relating to short-term employee benefits are measured by the non-discounted amount of the expected payment in exchange for employee services.

2. Retirement benefits

Under the defined contribution pension plan, the pension amount appropriated during the service years of the employees is recognized as an expense.

• (17) Income tax

Income tax expense is the sum of the current income tax and deferred income

tax.

1. Income tax expenses in the current period

For subsidiaries in Taiwan, income tax shall be levied in accordance with the Income Tax Act on unappropriated earnings, and provided for as income tax in the year when the annual shareholder meeting resolves to retain the earnings.

The adjustment to prior period income tax payable is booked as current income tax.

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2. Deferred tax

Deferred tax is computed in accordance with the temporary differences between the book value of assets and liabilities and the tax bases of taxable income.

Deferred tax liabilities are generally recognized in accordance with all taxable temporary differences. Deferred tax assets are recognized when there are likely to have taxable income available for deductible temporary difference or loss credit.

All taxable provisional differences relevant to the investment in subsidiaries and associates were recognized as deferred income tax liabilities, except an event while the Consolidated Company’ could control the time point of recovery of the control over the provisional difference or while the said provisional difference would be very likely not recoverable in the foreseeable future. The deductible temporary differences related to such investments are recognized as deferred income tax assets when there is likely a sufficient taxable income available for realizing a temporary difference and within the expected reverse in the foreseeable future.

The book amount of deferred income tax asset must be reviewed at each balance sheet date. The book amount of those that no longer have any sufficient taxable income to recover all or part of the asset, should be adjusted down. Those that are not originally recognized as deferred income tax assets should also be reexamined at each balance sheet date. The book amount of those that are likely to generate taxable income in the future for the recovery of all or part of its assets should be adjusted up.

Deferred income tax assets and liabilities are measured in accordance with the expected liability liquidation or the tax rate in the period when the asset is realized. The tax rate is based on the tax rate and tax laws that are legislated or substantively legislated at the balance sheet date. The measurement of deferred income tax liabilities and assets reflects the tax effect resulting from the book amount of the assets and liabilities expected to be recovered or liquidated at the balance sheet date.

3. Current and deferred income taxes

Current and deferred income taxes are recognized in the profit or loss, except for the current and deferred income taxes related to the items recognized in other comprehensive profit or loss or directly included in the equity are recognized in the other comprehensive profit or loss or directly included in the equity.

If the current income tax or deferred income tax is resulting from a business consolidation, the income tax effect is included in the accounting process for consolidated company.

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5. Main source of significant accounting judgment, estimates and assumptions uncertainty

When the consolidated company adopts accounting policies and the relevant information cannot be retrieved from other sources easily, the management must base things on a historical experience and other relevant factors to make judgments, estimates, and assumptions. Actual results may differ from the estimates.

The management will continue to review the estimates and basic assumptions. If the amendment affects only the current estimates, it is recognized in the current period. If the amendment of accounting estimates affects both current and future periods, it is recognized in the respective current and future periods.

6. Cash and cash equivalents

Cash and cash equivalents
Cash on hand and working capital Bank checking and saving deposits Cash equivalents (with maturity within three months) Bank time deposit	December 31,2018 $ 640 549,652 - $ 550,292	December 31,2017
			$ 550 529,493 79,866 $ 609,909

The deposits in banks showed the following interest rate ranges as of the balance sheet date:

sheet date:	sheet date:
December31,2018 Bank deposits 0.01%~0.33% Financial instruments measured at fair value through profit or loss December 31,2018 Financial liabilities-current Measured at fair value through income under compulsion Derivatives (Undesignated Hedge) – Convertible Options (Note 19) $ 910 Financial assets at amortized cost-2018 Current Investment in domestic Bank deposits – restricted		December31,2017
		0.01%~0.24% December 31,2017
Financial liabilities-current Measured at fair value through income under compulsion Derivatives (Undesignated Hedge) – Convertible Options (Note 19) Financial assets at amortized cost-2018 Current Investment in domestic Bank deposits – restricted
		$ - December 31,2018
			$ 3,842

7. Financial instruments measured at fair value through profit or loss

8. Financial assets at amortized cost - 2018

This type of deposit was classified as debt instruments without an active market based on IAS 39. Please refer to Note 3 and Note 10 for its reclassification and information for 2017.

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9. Credit risk management for investment in debt instruments – 2018

Investments in debt instruments of the Consolidated Company are classified as financial assets stated at amortized cost:

December 31, 2018

December 31, 2018
Total book value Allowance for losses Cost after amortization	At Amortized Cost
		$ 3,842 - $ 3,842

In order to mitigate credit risk, the Consolidated Company’s management appoints designated team to execute credit rating assessment and evaluate the default risk of investment institutions of debt instruments. When there is no credit rating information supplied by external credit rating information, the Company will access an appropriate internal rating based on publicly accessible financial information. The Consolidated Company monitors the changes of credit risk of its debt instrument investments by continually following the material information of financial institutions, and assesses whether there has been a significant increase in credit risk since initial recognition by accessing debt instrument investments.

In order to measure 12-month or full-lifetime expected credit losses of debt instrument investments, the Consolidated company will consider the historical default records and current financial status of the financial institutions provided by an internal credit rating team. The current credit risk evaluation approach of the Consolidated Company and the total carrying amount of debt instrument investments with various credit ratings are shown as below:

Credit rating Normal	Definition The debtors’ credit risk is low and also has sufficient capability to pay off contractual cash flows	Basis for recognizing expected credit losses Anticipated credit loss in 12 months	Expected credit loss rate	Total book value of December 31, 2018 At Amortized Cost $ 3,842	Total book value of December 31, 2018 At Amortized Cost $ 3,842
			0%		$ 3,842

10. Debt investments with no active market - 2017

Debt investments with no active market-2017
Current Time deposit with the original maturity date over three months	December31,2017
		$ 155,728

Partial time deposits are provided to the bank for issuing letter of guarantee and guarantee deposits. Please refer to Note 34 for relevant information.

As of December 31, 2017, interest rate collars with maturity over three months is 0.65% to 1.95%.

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11. Notes receivable, accounts receivable and other receivables

Notes receivable At amortized cost Total book value Less: Allowance for losses Accounts receivable At amortized cost Total book value At FVTOCI Less: Allowance for losses Other receivable Interests receivable Others Accounts receivable	December31,2018 $ 5,379 - $ 5,379 $ 2,118,093 130,136 ( 28,077) $ 2,220,152 $ - 17,828 $ 17,828	December31,2017	December31,2017
	(	(	$ 25,076 - $ 25,076 $ 1,827,900 - 16,619) $ 1,811,281 $ 181 7,961 $ 8,142

2018

(1) At amortized cost

The average credit period for the consolidated company’s sales of goods is 150 days. The Consolidated Company has adopted a policy of only dealing with entities that are permitted after credit evaluation by the Company, and obtaining sufficient collateral, where appropriate, as a means of mitigating the risk of financial loss from defaults. The consolidated company will use other publicly available financial information and historical transaction records to rate major customers. The consolidated company continuously monitors the credit risk exposure and the credit rating of the counterparty; also, it distributes the total transaction amount to different customers with a qualifying credit rating. In addition, it manages credit risk exposure through the credit line of the counterparty reviewed and approved by the Risk Management Committee each year.

The consolidated company adopts the simplified method in IFRS 9 to recognize the allowance for loss of the accounts receivable according to the expected credit losses of the given duration. The full-lifetime expected credit losses are calculated using Provision Matrix, which considers the historical default records and current financial status, industry economic conditions, as well as GDP forecast and industry outlook. According to the indications of the past experience of the Consolidated Company, the Company divided each customer into different risk groups, and then recognized loss allowance based on the expected loss rate of each group.

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As of balance sheet date, the Consolidated Company has no notes receivable that are past due but not recognized allowance. In addition, considering past experience that allowance has never happened, therefore the Company should set expected credit loss rate of notes receivable as 0%.

If there is evidence that the counterparty is facing serious financial difficulties and the consolidated company cannot reasonably expect the recoverable amount back, the consolidated company will directly write off the relevant accounts receivable, but will continue its recourses, and the amount recovered will be recognized in profit or loss.

The consolidated company’s allowance for loss of receivables is determined according to the preparation matrix as follows:

December 31, 2018

Expected credit loss rate Total book value Allowance for loss (expected credit loss of the given duration) Cost after amortization		Not overdue		Overdue 1 to 60 days		Overdue 61 to 120 days		Overdue 121 to 180 days		Overdue 181 to 240 days		Overdue 241 to 365 days		Overdue over 365 days		Total
		0%~4.7% $ 1,552,932 ( 1,271) $ 1,551,661		0%~5.43% $ 458,183 ( 3,721) $ 454,462		0%~11.56% $ 31,483 ( 1,884) $ 29,599		0%~19.88% $ 42,054 ( 1,216) $ 40,838		0%~26.32% $ 901 ( 18) $ 883		0%~49.69% $ 6,619 ( 1,039) $ 5,580		7.73%~100% $ 25,921 ( 18,928) $ 6,993		$ 2,118,093 ( 28,077) $ 2,090,016

Changes in the allowance loss of the accounts receivable are as follows:

Balance, beginning of year (IAS 39) Retroactive application of IFRS 9 adjustments Balance, beginning of year (IFRS 9) Add: An impairment loss is recognized in the current year. Foreign exchange difference Balance, end of year		2018
	(	$ 16,619 - 16,619 12,011 553) $ 28,077

(2) At FVTOCI

For accounts receivable with relatively larger amounts, the Consolidated Company decide to use recourse factoring to the banks depending on the status of operating capital. The business model of the Consolidated Company managing this kind of accounts receivable is to complete its goal through receiving contractual cash flows and selling financial assets. Thus, these kinds of accounts receivable are measured through other comprehensive income in fair value.

2017

The credit policy of the consolidated company in 2017 is same as the aforementioned credit policy in 2018. For estimating allowances for doubtful receivables, since accounts receivable overdue more than 365 days are uncollectible based on past experience, the Consolidated Company recognizes 100% allowance for doubtful receivables. For accounts receivables with aging schedules within 365 days, the allowance for doubtful receivables is assessed by reference to the collectability of receivables by performing the account aging analysis, historical experience and current financial condition of customers.

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For the overdue accounts receivable on the balance sheet date that is without the allowance for bad debts appropriated by the consolidated company, since the credit quality has not been materially changed, the consolidated company’s management believes that the amount can be recovered; therefore, the consolidated company does not have any collateral or other credit enhancements collected for the protection of the accounts receivable.

The age analysis of accounts receivables is as follows:

the accounts receivable. The age analysis of accounts receivables is as follows:
Not overdue 1 ~ 30 days 31 ~ 90 days 91 ~ 180 days 181 ~ 365 days Over 365 days Total	December31,2017
		$ 1,692,268 80,512 19,160 8,558 25,963 1,439 $ 1,827,900

The aging analysis of the overdue accounts receivable without impairment is as follows:

follows:
Below 30 days	December 31,2017
		$ 80,512

The aforementioned aging analysis is based on the overdue days.

Changes in the allowance for bad debt of the accounts receivable are as follows:

Balance as of January 1, 2017 Less: Appropriated bad debt expense of the year Foreign exchange difference Balance as of December 31, 2017	Impairment under groupassessment	Impairment under groupassessment
	(	$ 8,471 8,193 45) $ 16,619

As of December 31, 2017, there is no single one of impaired accounts receivable that is undergoing liquidation or experiencing severe financial difficulties.

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12. Inventory

Inventory
Finished products Work-in-process goods Raw materials	December31,2018 $ 518,020 209,601 172,899 $ 900,520	December31,2017
			$ 128,702 307,725 174,723 $ 611,150

Cost of goods sold related to inventories in 2018 and 2017 amounted to NT$ 4,757,020 thousand and NT$ 3,382,778 thousand, respectively. Cost of goods sold includes the amount of inventory valuation losses NT$11,583 thousand and NT$ 5,905 thousand.

13. Subsidiaries

Subsidiaries included in the consolidated financial statements

The business entities of the consolidated financial statements are as follows:

Investor	Subsidiaryname	Nature of the operation	Percentage of shareholdings	Percentage of shareholdings	Remark
			December 31,2018	December 31,2017
Lemtech Holdings Co., Limited Lemtech Holdings Co., Limited Global Solution Lemtech Precision Material Co., Ltd. Lemtech Precision Material Co., Ltd. Lemtech Precision Material Co., Ltd. Lemtech HK Lemtech HK Lemtech Industrial Services Ltd. (hereinafter referred to as “LIS”)	Lemtech Global Solution Co. Ltd. (formerly known as Super Solution Co., Ltd., hereinafter to be referred as Global Solution) Lemtech Precision Material (China) Co., Ltd. (formerly known as Kunshan Lemtech Precision Material Co., Ltd., hereinafter referred to as Lemtech Precision Material Co.) Lemtech Precision Material (China) Co., Ltd. (formerly known as Kunshan Lemtech Precision Material Co., Ltd., hereinafter referred to as Lemtech Precision Material Co.) LDC Precision Engineering Co., LTD. (hereinafter referred to as “LDC”) Lemtech Technology Limited (hereinafter referred to as “Lemtech HK”) Lemtech Precision Material (CZECH) s.r. o. (hereinafter referred to as “Lemtech CZ”) Lemtech USA Inc. (hereinafter referred to as “Lemtech USA”) Lemtech Industrial Services Ltd. (hereinafter referred to as “LIS”) Kunshan Lemtech Slide Technology Co., Ltd. (hereinafter to be referred as Lemtech Slide Co.)	Investment holding company Manufacturing and designing various kinds of fine blanking dies, die casting non-metal mold, computer connector, computer thermal module, and new type of electronic components, as well as selling the company’s products, etc. Manufacturing and designing various kinds of fine blanking dies, die casting non-metal mold, computer connector, computer thermal module, and new type of electronic components, as well as selling the company’s products, etc. Manufacturing and wholesaling household appliances, audio and video electronic products, other electrical machinery and electronic mechanical devices, automotive and components, other optical and precision mechanical parts. Selling automotive, electronics and computer related components. Manufacturing automotive components (car roof windows, brakes and seat belts, etc.), parts and accessories (steering wheel drive shaft etc.), and supply for consumer electronic components and sever products. Business development in the U.S. market, collecting business information, and providing market and industry information. Selling electronic and computer related components and accessories. Design and manufacture slides, hinges, and relevant mechanical assemblies, as well as selling the company’s products, etc.	100 0.2 99.8 100 100 100 100 57 100	100 - 90 100 100 100 100 57 100	Acquired all of shares through share exchange as of November 23, 2009. Merged Kunshan LDC Precision Machinery Co., Ltd. as of March 17, 2010. (Note 3) Merged Kunshan LDC Precision Machinery Co., Ltd. as of March 17, 2010. (Note 3) Eestablished on May 10, 2000. Eestablished on April 9, 2014. (Note 2) Operated since January 1, 2017. (Note 1) Eestablished on May 31, 2013. (Note 2) Established as of December 17, 2015. Payments of shares were transferred as of April 12, 2016. (Note 4) Eestablished on July 21, 2016. (Note 4)

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Remarks:

1. Lemtech USA, Lemtech CZ, LIS, and Lemtech Slide Co. are non-significant subsidiaries where financial statements were not reviewed by independent auditors; while the Consolidated Company’s management considers that non-significant subsidiaries where financial statements were not reviewed by independent auditors mentioned above shall not cause significant differences.

2. For the Group’s operational plan, future development and enhancing the Company’s competitiveness, the Consolidated Company decided to adjust investment structure in accordance with the board meeting resolution, where the shares of Lemtech USA owned by Global Solution was adjusted to be owned by Lemtech HK, and the shares of Lemtech HK owned by Global Solution was adjusted to be owned by Lemtech Precision Material Co. in December 2015.

3. In order to bring in strategic shareholders for expanding business in Mainland China, the board meeting resolution decided to sell 10% shares of Lemtech Precision Material Co., and completed equity transfer on October 21, 2015. The board meeting resolution on September 28, 2018, decided that the Company buy back 0.2% shares of its subsidiary Lemtech Precision Material Co. and Global Solution buy back 9.8% shares of its subsidiary Lemtech Precision Material Co. Please refer to Note 28 for relevant transactions.

4. In order to simplify organizational structure, the board meeting of Lemtech Precision Material Co. resolved to purchase shares of Lemtech Slide Co. owned by New Fortune Global Limited in two phases. Firstly, the Company purchased shares of LIS owned by the Company through Lemtech HK, then purchased 100% shares of Lemtech Slide Co. owned by New Fortune Global Limited through LIS. In the meantime, LIS issued common shares on November 2016, and Lemtech HK’s ownership interest is reduced due to the additional subscription to the shares of associate by other investors. After reconstruction, the Consolidated Company still has control over Lemtech Slide Co. To simplify organizational structure, the Consolidated Company dissolved New Fortune Global Limited on April 5, 2017.

5. Investments accounted for using the equity method

Associates that are not individually material Aapico Lemtech (I) Lemtech Cryomax (II)	December31,2018 $ 29,692 3,810 $ 33,502	December31,2017	December31,2017
			$ 13,546 - $ 13,546

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• (1) On February 1, 2013, the Consolidated Company entered into an investment agreement with Aapico Hitech Plc. (AH:TB), a listed company on the Stock Exchange of Thailand, and established Aapico Lemtech (Thailand) Co., Ltd. (hereinafter to be referred as Aapico Lemtech) jointly by contributing cash on March 1, 2013. For the Group’s operational plan for the Consolidated Company, the shares of Aapico Lemtch owned by Global Solution are adjusted to be owned by Lemtech HK as of June 30, 2016.

• (2) Lemtech Cryomax System Corp. (hereinafter to be referred as Cryomax Lemtech) was established on April 2, 2015, and 50% of its shares were acquired by Global Solution on November 10, 2018. The NT$ 298 thousand bargain purchase gains arising from the acquisition of Cryomax Lemtech are shown as “associates accounted for using equity method” in the consolidated statements of comprehensive income.

• (3) As of the balance sheet date, the Merging Company showed the following ownership interests and voting powers in associates:

Companyname Aapico Lemtech Lemtech Cryomax	Shareholdingand votingright ratio	Shareholdingand votingright ratio
	December31,2018 40% 50%	December31,2017
		40% -

Profit or loss attributed to associates accounted for using the equity method and proportionate shares of amounts of other comprehensive income as of 2018 and 2017 are based on the recognition and disclosures of investees’ reviewed financial statements unaudited by independent auditors; while the Consolidated Company’s management believes the unaudited financial statements mentioned above will not cause significant influence.

For the nature of businesses, the main operating locations and the registered national information of the companies of above associates, please refer to table 7 “Information on investees, location, and … relevant information etc.”

“Information on investees, location, and … relevant information etc.”	“Information on investees, location, and … relevant information etc.”	“Information on investees, location, and … relevant information etc.”	“Information on investees, location, and … relevant information etc.”
Aggregate information of associates that are not individually material 2018 2017 Share of the Consolidated Company Net income (loss) in current period $ 14,335 ( $ 955 ) Other comprehensive profit or loss 199 1,482 Total Comprehensive income $ 14,534 $ 527
Share of the Consolidated Company Net income (loss) in current period Other comprehensive profit or loss Total Comprehensive income		2018 $ 14,335 199 $ 14,534
			( $ 955 ) 1,482 $ 527

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15. Property, plant and equipment

Cost Balance as of January 1, 2017 Additions Disposition Reclassification Net exchange differences Balance as of December 31, 2017 Accumulated depreciation and impairment Balance as of January 1, 2017 Depreciation expenses Impairment losses recognized Disposition Net exchange differences Balance as of December 31, 2017 December 31, 2017- Net Cost Balance at January 1, 2018 Additions Disposition Reclassification Net exchange differences Balance at December 31, 2018 Accumulated depreciation and impairment Balance at January 1, 2018 Depreciation expenses Impairment loss (reversal) Disposition Reclassification Net exchange differences Balance at December 31, 2018 December 31, 2018- Net	Buildings and structures	Machinery equipment	Transport equipment	Office equipment $ 35,162 3,739 ( 1,820 ) - ( 351) $ 36,730 $ 21,966 5,386 - ( 1,805 ) ( 176) $ 25,371 $ 11,359 $ 36,730 5,747 ( 1,334 ) - ( 691) $ 40,452 $ 25,371 5,537 - ( 1,327 ) - ( 577) $ 29,004 $ 11,448		Leasehold improvement $ 30,225 109 - - ( 340) $ 29,994 $ 26,173 1,992 - - ( 269) $ 27,896 $ 2,098 $ 29,994 34,420 - 6,101 ( 611) $ 69,904 $ 27,896 4,572 - - - ( 693) $ 31,775 $ 38,129	Other equipment	Uncompleted construction and equipment pending inspection $ 90,544 4,987 - ( 90,047 ) 1,024 $ 6,508 $ - - - - - $ - $ 6,508 $ 6,508 4,746 - ( 6,375 ) ( 133) $ 4,746 $ - - - - - - $ - $ 4,746	Total
	$ 245,223 156,586 - 88,196 ( 1,988) $ 488,017 $ 26,842 13,055 - - ( 130) $ 39,767 $ 448,250 $ 488,017 35,915 - ( 6,101 ) ( 9,881) $ 507,950 $ 39,767 25,956 - - ( 153 ) ( 1,273) $ 64,297 $ 443,653	$ 499,893 214,441 ( 9,133 ) 147 ( 4,021) $ 701,327 $ 236,236 48,763 1,483 ( 8,622 ) ( 2,023) $ 275,837 $ 425,490 $ 701,327 176,779 ( 18,765 ) 7,146 ( 14,053) $ 852,434 $ 275,837 77,100 ( 3,640 ) ( 16,323 ) - ( 6,906) $ 326,068 $ 526,366	$ 27,021 3,934 ( 1,762 ) - ( 252) $ 28,941 $ 19,495 3,675 - ( 1,762 ) ( 159) $ 21,249 $ 7,692 $ 28,941 10,781 ( 6,085 ) - ( 559) $ 33,078 $ 21,249 4,153 - ( 6,063 ) - ( 488) $ 18,851 $ 14,227				$ 172,865 21,570 ( 406 ) ( 2,448 ) ( 1,863) $ 189,718 $ 89,638 31,737 - ( 406 ) ( 605) $ 120,364 $ 69,354 $ 189,718 184,442 ( 152 ) ( 8,140 ) ( 3,822) $ 362,046 $ 120,364 53,015 - ( 150 ) - ( 3,505) $ 169,724 $ 192,322		$ 1,100,933 405,366 ( 13,121 ) ( 4,152 ) ( 7,791) $ 1,481,235 $ 420,350 104,608 1,483 ( 12,595 ) ( 3,362) $ 510,484 $ 970,751 $ 1,481,235 452,830 ( 26,336 ) ( 7,369 ) ( 29,750) $ 1,870,610 $ 510,484 170,333 ( 3,640 ) ( 23,863 ) ( 153 ) ( 13,442) $ 639,719 $ 1,230,891

Depreciation expenses is appropriated in accordance with the straight line method and the years of useful life illustrated below:

eful life illustrated below:
Buildings and structures	20 years
Machinery equipment	5 to 10 years
Office equipment	5 years
Transport equipment	5 years
Leasehold improvement	2 to 3 years
Other equipment	2 to 5 years

16. Net computer software

Net computer software
Cost Balance as of January 1, 2017 Acquired separately Disposition Net exchange differences Balance as of December 31, 2017	Costs of computer software
	$ 37,199 4,101 ( 566 ) ( 293) $ 40,441

(Continued on next page)

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(Continued from previous page)

Cumulative amortization and impairment Balance as of January 1, 2017 Amortization expenses Disposition Net exchange differences Balance as of December 31, 2017 December 31, 2017- Net Cost Balance at January 1, 2018 Acquired separately Net exchange differences Balance at December 31, 2018 Cumulative amortization and impairment Balance at January 1, 2018 Amortization expenses Net exchange differences Balance at December 31, 2018 December 31, 2018- Net

Costs of computer software

( $ 13,642 ) ( 4,869 ) 566 69 ($ 17,876) $ 22,565 $ 40,441 5,976 ( 659) $ 45,758 ( $ 17,876 ) ( 5,632 ) 384 ($ 23,124) $ 22,634

Amortization expenses is appropriated in accordance with the straight line method and the years of useful life illustrated below:

Computer software 3 to 10 years

17. Other assets

Other assets
Current Prepayments Prepayment for purchase Prepayments for leases - Current Other prepayments	December 31,2018 $ 6,022 2,251 95,650 $ 103,923	December 31,2017
			$ 15,397 2,298 79,625 $ 97,320

(Continued on next page)

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(Continued from previous page)

Other current assets Payments for others Non-current Prepaymentsfor equipment Refundable deposits Prepayments for leases - Non-current	December 31,2018 $ 3,147 $ 194,248 2,977 88,214 $ 285,439	December 31,2017	December 31,2017
			$ - $ 273,394 6,719 92,347 $ 372,460

As of December 31, 2018 and 2017, prepaid lease payments for land use rights in China are NT$90,465 thousand and NT$94,645 thousand respectively. The Consolidated Company has obtained certificates of total land use rights. The land use rights are amortized on a straight-line basis over their useful lives of 50 years.

18. Borrowings

• (1) Shot-term borrowings

wings Shot-term borrowings
Unsecured borrowings Bank loans	December31,2018 $ 1,009,466	December31,2017
			$ 1,535,622

The revolving bank loan interest rates were 3.16%~5.5% and 2%~4.437%, respectively on December 31 2018 and 2017.

• (2) Long-term borrowings

Long-term borrowings
Unsecured borrowings Bank loans Less: The part entered as due within one year	December 31,2018 $ - - $ -	December 31,2017
		(	$ 141,566 119,246) $ 22,320

The maturity date of unsecured loans is due by September 26, 2019, and the effective interest rates range from 2.57% to 2.97% as of December 31, 2017.

• 41 -

19. Corporate bonds payable

Corporate bonds payable
Domestic unsecured convertible corporate bond Less: Discount on corporate bond discount	December31,2018 $ 600,000 ( 23,522) $ 576,478	December31,2017
	(		$ - - $ -

Domestic unsecured convertible corporate bond

On July 30, 2018, the Company issued 6 thousand units of New Taiwan dollar-denominated unsecured convertible bonds, with each bond having a par value of NT$ 100 thousand and 0% interest rate. Total face value of the bonds is NT$ 600,000 thousand, issued at a price of 100.5% of face value, and the total amount of cash the Company received is NT$603,000 thousand.

• (1) Each bond holder has right to have the bonds converted into common stocks of the Company at the price of NT$220 per share, with conversion period from October 31, 2018 till July 30, 2021.

• (2) If the bonds haven’t been converted at that time, the Company will redeem the outstanding bonds in cash at par value from the bondholders on July 30, 2021.

• (3) Bondholders have the option to request the Company to redeem their bond holdings at face value on July 30, 2020, two years after the issuance date.

The convertible bonds includes assets, liabilities and equity, and the equity components will be expressed as “capital surplus – stock options” under shareholders’ equity. The effective interest rate of liabilities components is initially recognized at 1.55%.

Proceeds from issuance (deducting transaction costs of
NT$3,635 thousand)		$ 599,365
The equity composition (deducting the transaction cost
amortized to the equity for an amount of NT$242
thousand)	(	25,738 )
The financial assets composition on the issuing date		1,080
Recognized in profit and loss (Other profit or loss)	(	1,990 )
Interest calculated at the effective rate of 1.55%		3,761
Liability components as of December 31, 2018.		$ 576,478

20. Notes payable and accounts payable

Notes payable and accounts payable
Notes payable Incurred by operation Accounts payable Incurred by operation	December31,2018 $ 300,787 $ 1,134,173	December31,2017
			$ 84,698 $ 996,452

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Average number of days to pay accounts payable is 120, and amounts due to connected parties were interest-free. The Consolidated Company has made financial risk management policy to ensure all payables could be settled on or before the due date.

21. Other liabilities

Other liabilities
Current Other payables Payables to equipment suppliers and construction contractors. Payables on land and buildings (1) Salary and bonus payables Benefits expenses payable Remuneration to employees and directors and supervisors payable Interest payable Commission payable Payables on customs declaration and logistics fees Others Other liabilities Temporary receipts Others	December31,2018 $ 5,419 - 76,131 1,018 32,986 3,789 1,029 26,396 53,642 $ 200,410 $ 255 7,148 $ 7,403	December31,2017
			$ 7,257 913 63,598 3,382 19,670 1,509 787 24,516 34,115 $ 155,747 $ 77 10,084 $ 10,161

• (1) The remaining payment for real estate acquisitions of Lemtech Precision Material Co. in 2016

22. Equity

• (1) Capital stock

Common stock

y Capital stock Common stock
Authorized number of shares (thousand shares) Authorized capital Number of shares issued with fully paid-in capital (thousand shares) Outstanding capital	December 31,2018 100,000 $ 1,000,000 39,541 $ 395,411	December 31,2017
			100,000 $ 1,000,000 39,541 $ 395,411

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(2) Capital surplus

Capital surplus
May be applied to cover accumulated deficit, distributed in cash or transferred to capital. Effect of functional currency changes Other capital surplus of shares Corporate bond conversion premium The differences between carrying amount and market price of actual acquisition or disposal of shares in subsidiaries. May not be used for any purpose. Recognized equity of the convertible corporate bonds issued	December31,2018 ( $ 68,246 ) 356,379 389,635 80,841 25,738 $ 784,347	December31,2017
		( $ 68,246 ) 356,379 389,635 1,043 - $ 678,811

Such additional paid-in capital can be used to make up for losses; also, when the company is without any loss, it can be applied for cash distribution or capitalization. However, it is limited to a certain percentage of the annual paid-in capital for the purpose of capitalization.

(3) Retained earnings and dividend policy

Pursuant to the Company’s Articles of Incorporation, the Companies Law of the Cayman Islands, and listing rules, the Company should make appropriations from its net income. Firstly the Company should pay taxes, cover accumulated losses, and then recognize special reserve return earnings, if any. If there are any remaining earnings left over, except for those being saved as unappropriated retained earnings by the Board of Directors, shall be distributed as dividends and bonuses to shareholders in proportion to their share of ownership. The proposal of earnings appropriation is prepared by the Board of Directors and resolved by the shareholders.

The Company’s dividend policy shall consider the steady growth of the Company, sustainability of business operations, funding capital needs, strengthening financial structure, and protecting long-term shareholders’ interests in the distribution of earnings. Total dividends should not be lower than 10% of distributable net profit and dividends may be paid in cash or stock, where cash dividends should not be lower than 50% of total dividends. If the Company has no deficit, the Company shall consider financial, operational and business factors to appropriate all of or partial of its legal reserves and additional paid-in capital.

Pursuant to the previous section regarding distribution of dividends or bonuses, in accordance with listing rules, the Company shall appropriate all of or partial of dividends and bonuses via issuing new shares upon the special resolution resolved at the general meeting; amounts less than one share shall be distributed in cash.

For estimated and actual distribution of the employees’ compensation and the directors’ and supervisors’ remuneration, please refer to Note 24(7) employees’ compensation and the directors’ and supervisors’ remuneration.

• 44 -

The Company has a special reserve appropriated and reversed in accordance with FSC.Certificate.Issue.Tzi No. 1010012865 Letter, and “Special reserve appropriation Q&A after the adoption of International Financial Reporting Standards (IFRSs).”

The Company had the earnings distribution of 2017 and 2016 resolved in the shareholders’ meeting held on June 11, 2018 and June 26, 2017, respectively, as follows:

follows:
Special reserve Cash dividends	Appropriation of Earnings 2017 2016 ( $ 15,425 ) $ 15,425 98,853 158,164	Dividend Per	Share(NT$)
	2017 ( $ 15,425 ) 98,853	2017 - $ 2.5	2016
			- $ 4

The Company had resolved in the board meeting the earnings distribution and dividends per share of 2018 on March 27, 2019 as follows:

Cash dividends Stock dividends	Appropriation of Earnings $ 98,853 79,082	Dividend Per Share (NT$)
		$ 2.5 2

The proposal for the distribution of earnings in 2018 is pending on the resolution of the General Meeting of shareholders scheduled to be held in June 17, 2019.

(4) Special reserve

(4) Special reserve
Balance, beginning of year Effect of functional currency changes Appropriation of special reserve Deductions from other equity items (Reversal) special reserve Other equity deduction reversal Balance, end of year (5) Non-controlling interest Balance, beginning of year Net profits of the current year Other comprehensive income of the current year Exchange differences from the translation of financial statements of foreign operations Acquisition of non-controlling interest of Lemtech Precision Material Co. (Note 28) Balance, end of year		2018 $ 28,925 - - 15,425) $ 13,500 2018 $ 144,700 22,929 2,743 ) 148,405) $ 16,481	2017
	(		$ 14,546 ( 1,046 ) 15,425 - $ 28,925 2017
	( (		$ 129,599 16,148 ( 1,047 ) - $ 144,700

1. Revenue

2. 45 -

Revenue from Contracts with Customers Revenue from sale of goods		2018 $ 6,043,090		2017
				$ 4,255,549

• (1) Revenue from sale of goods

Sales revenue comes from selling 3C electronic products and automotive components. When goods were sold, customers have already had the right to use goods and bear the burden of risk for losses and damages occurring to goods, therefore the Consolidated Company recognizes revenues and accounts receivable at the time of the sale.

• (2) Contract balances

the time of the sale. Contract balances
Contract liability – current	December 31,2018
		$ 66,510

• (3) Detailed classification of revenue from contracts with customers

For the detailed classification of revenue, please refer to Note 40.

24. Net profits of the current year

The net income of the current year includes the following items:

• (1) Other income

Other income
		2018			2017
Interest revenue
Bank deposits		$ 10,268		$	3,535
Subsidies revenue		13,500			10,850
Others		2,531			3,198
		$ 26,299		$	17,583
Other gains and losses
		2018			2017
Net foreign exchange gain
(loss)	(	$ 49,300 )		$	62,507
Gain (loss) in disposal of
property, plant and
equipment	(	527 )			72
Net loss on fair value changes
of financial liabilities
designated as at fair value
through profit or loss	(	1,990 )			-
Gain on disposal of associates		-			499
Gain on reversal of impairment
(loss)		3,640	(		1,483 )
Others	(	10,908)	(		2,406)
	(	$ 59,085)		$	59,189

• (2) Other gains and losses

• 46 -

(3) Financial costs Interest from bank borrowings Convertible corporate bonds (4) Gain on reversal of impairment (loss) Property, plants and equipment (included in the other net gain (loss)) (5) Depreciation and amortization Consolidation of depreciation expenses based on functions Operating cost Operating expenses Consolidation of amortization expenses based on functions Operating cost Operating expenses (6) Employee benefits expenses Short-term employee benefits Retirement benefits Defined contribution pension plan Total employee benefits expenses Consolidation based on functions Operating cost Operating expenses		2018 $ 41,881 3,761 $ 45,642 2018 $ 3,640 2018 $ 100,515 69,818 $ 170,333 $ 111 5,521 $ 5,632 2018 $ 610,857 24,157 $ 635,014 $ 320,597 314,417 $ 635,014		2017
				$ 22,045 - $ 22,045 2017
			(	$ 1,483) 2017
				$ 64,318 40,290 $ 104,608 $ 482 4,387 $ 4,869 2017
				$ 491,552 20,805 $ 512,357 $ 259,439 252,918 $ 512,357

• 47 -

• (7) Employees’ compensation and remuneration of directors and supervisors

According to the Company’s Articles of Incorporation, the Company shall allocate profit sharing bonus to employees and compensation to directors of the Company not less than 0.5% and not more than 2% of annual profits during the period, respectively. The Company’s profit sharing bonus to employees and compensation to directors for 2018 and 2017, respectively, had been approved by the Board of Directors of the Company held on March 27, 2019 and March 22, 2018, respectively.

Estimate on ratio

respectively. Estimate on ratio
Remuneration to employees Remuneration to directors/supervisors Amount Remuneration to employees Remuneration to directors/supervisors	2018 0.5% 1% 2018 Cash $ 1,946 3,892	2017
		0.5% 0.6% 2017
		Cash
		$ 1,510 1,922

If there are still changes in the amount specified in the consolidated financial statement after announcement, proceed to the accounting of change and adjusted for booking in the next fiscal year.

The actual amount for remuneration to employees, Directors and Supervisors in 2017 and 2016 did not vary from the amount recognized in the consolidated financial statements of 2017 and 2016.

For further information on the appropriation of remuneration to the employees and Directors and Supervisors by the Board of Taichung Commercial Bank in 2018 and 2017, visit the “MOPS” website of Taiwan Stock Exchange Corporation.

(8) Foreign exchange gain (loss)

Foreign exchange gain (loss)
Total foreign currency exchange gains Total foreign exchange gain (loss) Net profit (loss)		2018 $ 139,532 188,832) $ 49,300)		2017
	( (		(	$ 152,335 89,828) $ 62,507

• 48 -

25. Income tax

• (1) Major components of income tax expense (benefit) are as follows:

e tax Major components of income tax expense (benefit) are as follows:	s:
2018 2017 Current tax Incurred during the year $ 51,694 $ 43,206 Withholding tax for retained earnings distributed by subsidiaries - 3,112 Prior year adjustment ( 4,451) ( 4,816) 47,243 41,502 Deferred tax Incurred during the year 42,882 8,356 Unappropriated retained earnings by subsidiaries 47,729 29,946 Change in tax rate ( 1,093) - 89,518 38,302 Income tax expense recognized in the profit or loss $ 136,761 $ 79,804 Adjustment of accounting income and income tax expense are as follows: 2018 2017 Income before tax from continuing operations $ 542,164 $ 394,320 The reconciliation of imputed income taxes on pretax income at statutory tax rate to income tax expense. (LDC Co., Ltd. adopted tax rates of 20% and 17% for 2018 and 2017, respectively). $ 92,676 $ 42,771 Non-deductible expenses and losses for tax purposes 416 588 The effect of earnings of the subsidiaries upon deferred income tax 47,729 29,946 Withholding tax for retained earnings of subsidiaries - 3,112 Unrecognized deductible temporary differences 650 7,327 Change in tax rate ( 1,093 ) - Others 834 876 Income tax expense of prior years adjusted in the current year ( 4,451) ( 4,816) Income tax expense recognized in the profit or loss $ 136,761 $ 79,804		2017
	(	$ 394,320 $ 42,771 588 29,946 3,112 7,327 - 876 4,816) $ 79,804

LDC Co., Ltd. of the Consolidated Company is subject to an individual of Income Tax Act of the R.O.C, which the applicable income tax rate is 17% for 2017. In February 2018, the Income Tax Act in the R.O.C. was amended and, starting from 2018, the corporate income tax rate was adjusted from 17% to 20%. In addition, the tax rate for 2018 unappropriated retained earnings was reduced from 10% to 5%.Lemtech Precision Material Co., the China subsidiary of the Consolidated Company, received the Certificate of High and New Tech Enterprise from the local

• 49 -

government on November 30, 2016, and could enjoy the preferential tax rates of 15% from 2016 to 2019.

As the earnings distribution to be resolved in the 2019 shareholders’ meeting remains uncertain, the potential income tax consequence of levying an additional 5% income tax on the 2018 undistributed earnings cannot be reliably determined.

• (2) Current income tax asset and liability

Current income tax asset and liability
Current income tax asset Tax refund receivable Current Tax Liability Payable income tax	December 31,2018 $ 31 $ 13,318	December 31,2017
			$ 1,805 $ 8,766

• (3) Deferred income tax assets and liabilities

The movements of deferred tax assets and deferred tax liabilities are as follows:

2018

2018
Deferred income tax assets Temporary difference Allowance to reduce inventory to market Allowance for bad debt Foreign investment income or loss recognized under equity method Unrealized gain or loss Loss deduction Others Subtotal deferred income tax assets Deferred tax liabilities Temporary difference Foreign investment income or loss recognized under equity method Unrealized gain or loss Allowance for bad debt Others Subtotal deferred tax liabilities 2017		Balance, beginning of year $ 3,903 2,491 3,026 1,201 4,089 2,486 $ 17,196 $ 104,376 - - 7,065 $ 111,441	Recognized in theprofit or loss $ 784 1,690 5,934 ( 1,201) ( 3,220) 67 $ 4,054 ( $ 17,507 ) 454 12 110,613 $ 93,572	Recognized in the other comprehensive profit of loss $ - - - - - - $ - $ 434 - - - $ 434	Exchange differences ( $ 92 ) ( 83 ) ( 176 ) - - ( 52) ($ 403) ( $ 178 ) - - 2,891 $ 2,713	Balance, end of year
							$ 4,595 4,098 8,784 - 869 2,501 $ 20,847 $ 87,125 454 12 120,569 $ 208,160

Unrealized gain or loss Allowance for bad debt Others Subtotal deferred tax liabilities 2017		- - 7,065 $ 111,441	454 12 110,613 $ 93,572	- - - $ 434	- - 2,891 $ 2,713	454 12 120,569 $ 208,160	454 12 120,569 $ 208,160
Deferred income tax assets Temporary difference Allowance to reduce inventory to market Allowance for bad debt Foreign investment income or loss recognized under equity method Unrealized gain or loss Loss deduction Others Subtotal deferred income tax assets Deferred tax liabilities Temporary difference Foreign investment income or loss recognized under equity method Others Subtotal deferred tax liabilities		Balance, beginning of year $ 2,392 1,256 - 860 3,444 2,276 $ 10,228 $ 62,823 7,065 $ 69,888	Recognized in theprofit or loss $ 1,524 1,232 2,988 341 645 119 $ 6,849 $ 45,151 - $ 45,151	Recognized in the other comprehensive profit of loss $ - - - - - - $ - $ 1,637 - $ 1,637	Exchange differences ( $ 13 ) 3 38 - - 91 $ 119 ( $ 5,235 ) - ($ 5,235)	Balance, end of year
							$ 3,903 2,491 3,026 1,201 4,089 2,486 $ 17,196 $ 104,376 7,065 $ 111,441

• 50 -

(4) Income tax audit

The declaration for corporate income tax of LDC Co., Ltd. of the Consolidated Company have been examined and approved by the tax authorities for the years through 2016.

26. Earnings per share

through 2016. Earnings per share
Basic earnings per share Diluted earnings per share		2018 $ 9.67 $ 9.49	Unit: NT$ per share 2017 $ 7.55 $ 7.54

The earnings and weighted average common stock shares used in calculating the earnings per share are as follows:

Net profits of the current year

nings per share are as follows: Net profits of the current year
Net profit attributable to the company The net income applied to calculate basic earnings per share Effect of dilutive potential common stock: Net interest on convertible bonds Net profits for the calculation of diluted earnings per share Quantity Weighted average common stock shares used to calculate basic earnings per share Effect of dilutive potential common stock: Convertible corporate bonds Remuneration to employees Weighted average common stock shares used to calculate diluted earnings per share		2018 2017 $ 382,474 $ 298,368 $ 382,474 $ 298,368 3,761 - $ 386,235 $ 298,368 Unit: Thousand shares 2018 2017 39,541 39,541 1,158 - 12 12 40,711 39,553

If the consolidated company may choose to have the employee compensation distributed via a stock or cash dividend, calculate the diluted earnings per share, assuming that the bonus to employees is with a stock dividend distributed, with the weighted average number of shares outstanding included when the potential common stock has a diluted effect. When diluted EPS is calculated in the next year resolves the number of share distribution for employee compensation, the dilution effect is also considered for such potential common shares.

• 51 -

27. Government grant

The Consolidated Company obtained government grants for patents in the amount of NT$13,500 and NT$10,850 thousand for 2018 and 2017, respectively, from Kunshan City Government. Recognized other income of NT$13,500 and NT$10,850 thousand for 2018 and 2017, respectively.

28. Equity transactions with non-controlling interests

In September 2018, the Consolidated Company had acquired 0.2% and 9.8% remaining shares of Lemtech Precision Material Co. from minority interests through the Company and Global Solution, and the acquisition amounts are NT$1,412 and NT$77,244 thousand, respectively. After the acquisition, the overall percentage of ownership by the Consolidated Company increased from 90% to 100%, which are owned 0.2% and 99.8% by the Company and Global Solution, respectively. Since the transaction has not changed the control over subsidiaries by the Consolidated Company, the Consolidated Company considered it as an equity transaction, and the differences of the equity transaction were adjusted to increase additional paid-in capital by NT$79,798 thousand.

Since the transaction referred to above did not change the control of the Consolidated Company over the subsidiaries, the Consolidated Company has it processed as an equity transaction.

nsaction.
Cash consideration paid The net book value of the subsidiary’s assets is calculated in accordance with the relative changes in equity that should be transferred out of the non-controlling equity Adjustments attributable to other equity items of the shareholders of the Company - Exchange differences from the translation of financial statements of foreign operations Equity transaction balance Adjustment of equitytransaction balance Additional paid-in capital - difference between fair value and carrying amount of the acquisition or disposal of subsidiaries	Lemtech Precision MaterialCo.
	2018
	( $ 78,656 ) 148,405 10,049 $ 79,798 Subsidiaries of Lemtech Precision MaterialCo.
		2018
		$ 79,798

• 52 -

29. Cash flow information

Non-cash transactions

The Consolidated Company’s non-cash investment and financing activities in 2018 and 2017 were as follows:

• (1) The cash paid to purchase property, plants and equipment are adjusted as follows:

2018 2017 Current year increase (including prepayments for equipment) $ 366,468 $ 569,847 Mold inventory reclassification 7,216 4,131 Changes in payables to equipment suppliers and construction contractors. 2,751 ( 4,617) The cash paid to purchase property, plants and equipment $ 376,435 $ 569,361 The cash paid to distribute cash dividend of subsidiaries are adjusted as follows: 2017 The subsidiaries declare the amount of cash dividends distributed attributable to the non-controlling interest $ 91,411 Withholding tax for retained earnings distributed ( 9,141 ) Foreign exchange impact amount ( 7,632) The amount of cash paid for dividends of subsidiaries $ 74,638		2017
	$ 91,411 ( 9,141 ) ( 7,632) $ 74,638

• (2) The cash paid to distribute cash dividend of subsidiaries are adjusted as follows:

Lemtech Precision Material Co., a subsidiary of the Company, resolved by the board meeting on March 25, 2016 to pay cash dividends of total amount RMB 182,896 thousand, approximately NT$ 914,114 thousand. During 2016, Lemtech Precision Material Co., a subsidiary of the Company, had paid tax imposed on dividends and part of the dividends amounting to RMB 786 thousand for its parent company Global Solution, and for the remaining amount had all been paid up during 2017.

30. Agreement on operational leasehold

The consolidated company is the lessee

Finance leases are signed for renting plants and equipment, and the lease terms are between 1 and 6 years. All finance lease contracts over 5 years contain clauses for market rental reviews every 5 years. The Consolidated Company does not have a bargain purchase option to acquire the leased plants and equipment at the expiration of the lease periods.

The total future minimum lease payments of the non-cancelable operating leases are as follows:

• 53 -

Less than 1 year 1 ~5 years	December 31,2018 $ 29,145 80,197 $ 109,342	December 31,2017	December 31,2017
			$ 14,932 14,747 $ 29,679

31. Capital risk management

The consolidated company manages capital to ensure the Group’s enterprises to maximize shareholder’s returns by optimizing the balance of debt and equity under the precondition of continuing operation. The overall strategy of the Consolidated Company has not changed since 2017.

The capital structure of the Consolidated Company consists of net debt (borrowings and corporate bonds offset by cash and cash equivalents) and equity of the Consolidated Company (comprising issued capital, capital surplus, retained earnings, and other equity).

The consolidated company is not required to comply with other external capital requirements.

The Consolidated Company’s management reviews the capital structure yearly, and the reviews include taking into consideration the cost of capital and the risks associated with each class of capital. The consolidated company based on the suggestions of management has the overall capital structure balanced by paying dividends, issuing new shares, buying back shares and issuing new debts or paying back old debts.

32. Financial instruments

• (1) Information of fair value – financial instruments not measured by fair value

The Consolidated Company’s management believes that due to the short maturities of the carrying amounts of financial assets and financial liabilities not measured at fair value or with equal amounts to future receivable prices, the carrying values represent a reasonable basis to estimate fair values.

• (2) Information on fair value – financial instruments at fair value on repetition

• Fair value hierarchy

December 31, 2018

Fair value hierarchy December 31, 2018
Financial liabilities at fair value through profit or loss Corporate bonds payable with call provisions		Level 1		Level 2 $ -		Level3 $ 910		Total
		$ -						$ 910

There was no transfer between hierarchy 1 and hierarchy 2 fair value measurements in January 1 to December 31, 2018.

• 54 -

• Reconciliation of financial assets at Level 3 fair value:

• 2018

Reconciliation of financial assets at Level 3 fair value: 2018
Financial liabilities at fair value through profit or loss Balance, beginning of year Recognized in profit and loss (Other profit or loss) New addition Balance, end of year Unrealized gain or loss during the current period	Derivative instruments
	$ - ( 1,990 ) 1,080 ($ 910) ($ 1,990)

1. Evaluation techniques and an input value of Level 3 fair value measurement

Corporate bonds payable with call provisions presumes corporate bonds will be redeemed on July 30, 2021, and the discount rates adopted are based on government bonds with similar issue dates and durations, plus risk premiums.

• (3) Categories of financial instruments

Categories of financial instruments
Financial assets Loans and accounts receivable (Note 1) Financial assets at amortized cost (Note 2) Financial liabilities Measured at fair values through profit and/or loss Financial liabilities at FVTPL Financial liabilities at amortized cost (Note 3)	December 31,2018 $ - 2,800,470 910 3,221,314	December 31,2017
		$ 2,616,855 - - 2,914,085

• Note 1: The balance amount includes loans and receivable measured at cost after amortization, including cash and cash equivalents, Investments in bonds with no public quotations in open market, notes receivable, accounts receivable, other receivables and guarantee deposits paid.

• Note 2: The balance includes financial assets measured at amortized cost which comprises cash and cash equivalents, notes receivable, accounts receivable, other receivables, and refundable deposits.

• Note 3: The balance includes financial liabilities measured at amortized cost which comprises short-term borrowings, notes and accounts payable, other payables, corporate bonds payable and long-term loans.

• 55 -

(4) Purpose and policy of financial risk management

The financial instruments of the Consolidated Company includes various kinds of deposits products, financial products, accounts receivable, accounts payable, corporate bonds payable and borrowings. The Consolidated Company’s corporate treasury function provides services to the business, coordinates access to domestic and international financial markets, monitors and manages the financial risks relating to the operations of the Consolidated Company through internal risk reports which analyzes exposures by degree and magnitude of risks. These risks include market risk (including currency risk and interest rate risk), credit risk and liquidity risk. The Board of Directors manages overall risk with the objective to reduce the potentially adverse effects the market uncertainties may have on its financial performance to the fullest extent.

1. Market Risk

(1) Exchange rate risk

The primary operating locations of the Consolidated Company are China and Taiwan; therefore the Consolidated Company is exposed to foreign exchange rate risks from various kinds of foreign currency risks. In order to minimize the risk, the Consolidated Company monitors fluctuations of foreign currency exchange rates.

As of balance sheet date, the carrying amount of non-functional foreign currency-denominated financial assets and liabilities (including monetary items of non-functional currency eliminated in the consolidated financial statements), please refer to Note 38.

Sensitivity analysis

The Consolidated Company is prone to the impact of changes in USD exchange rates.

The consolidated company’s sensitivity analysis for New Taiwan Dollar (functional currency) to each relevant foreign currency exchange rates that increased or decreased by 1% is illustrated in the following table. The 1% sensitivity is used internally for reporting the exchange rate risk to management and is the assessment by management regarding the reasonable and possible changes in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and foreign currency forward contracts designated as cash flow hedges, and adjusts their translation at the end of the reporting period for a 1% change in foreign currency rates. A positive number below indicates an increase in profit before income tax associated with the NTD strengthens 1% against the relevant currency. For a 1% weakening of the NTD against the relevant currency, there would be an equal and opposite impact on profit before income tax, and the balances below would be negative.

• 56 -

Profit before income tax increase (decrease)		Influence of USD	Influence of USD	Influence of USD
		2018 $ 4,532		2017
			(	$ 3,282)

As of balance sheet date, the effect on profit before income tax mainly results from outstanding and unhedged cash flow of USD-denominated accounts receivable and accounts payable.

(2) Interest rate risk

The significant interest-bearing assets and liabilities of the Consolidated Company will be renewed regularly. The Consolidated Company is exposed to cash flow interest rate risk because of holding bank deposits and loans at both fixed and floating interest rates.

The book value of the financial assets and financial liabilities with interest rate risk exposure on the consolidated company’s balance sheet date is as follows:

date is as follows:
Contain cash flow interest rate risk －Financial assets －Financial liabilities	December31,2018 $ 553,494 1,585,944	December31,2017
		$ 765,087 1,677,188

Sensitivity analysis

The Consolidated Company’s primary interest rate risk exposures are bank deposits, financial assets measured at amortized cost, debt investments or loans without an active market. An increase or decrease of 0.5% basis points is used when reporting interest rate risk internally to key management personnel and represents management’s assessment of change in interest rates.

The sensitivity analysis describes the interest-bearing items owned by the Consolidated Company and changes on a 0.5% interest rate fluctuation at the end of reporting period. A positive number of the following summary table represents when benchmark interest rate increases by 0.5%, other variables were held constant, and it will increase the amounts of profit before income tax in the current period.

An increase in profit before income tax	The impact of an increase in interest rates	The impact of an increase in interest rates	The impact of an increase in interest rates	The impact of an increase in interest rates
		2018 $ 5,162)		2017
	(		(	$ 4,561)

• 57 -

2. Credit Risk

Credit risk meant for the consolidated company’s risk of financial loss due to the counterparty’s failure in fulfilling contractual obligations. As is the nature of the industry in which the Consolidated Company operates, there is no significant concentration of credit risk. The Consolidated company has established procedures where the credit line of customers are granted through credit analysis and investigation based on the appropriate financial information provided by customers to ensure the sales of service will not lead to significant credit risk.

The main counterparties for the accounts receivable and accounts payable of the Consolidated Company are foreign-capital enterprises established in China and internationally well-known businesses. Please refer to Note 11 for credit risk management and impairment conditions.

The bank deposits and other investments in financial assets of the Consolidated Company are primarily deposited in banks with good credit ratings from international credit rating institutions. Therefore there is no significant credit risk.

3. Liquidity Risk

The consolidated company has supported the Group’s operations and mitigated changes in cash flow through management and by maintaining adequate cash and cash equivalent positions. The consolidated company’s management supervises the use of bank financing facilities and ensures the compliance to the loan agreement.

Bank loan is a main source of liquidity to the consolidated company. As of December 31, 2018 and 2017, for the unused credit line by the Consolidated Company, please refer to the following descriptions.

• (1) Liquidity and interest rate risk table of non-derivative financial liabilities December 31, 2018

Floating rate instruments – loans Fixed interest rate instruments – corporate bonds	Weighted average effective interest rate(%) 3.16-5.5 1.55	d	Payment on emand or less than 1 month $ 399,081 - $ 399,081		1 to 2 months $ 176,601 - $ 176,601		3 months to 1 year $ 433,784 - $ 433,784		1 to 5years $ - 600,000 $ 600,000		Over 5year
											$ - - $ -

December 31, 2017

Floating rate instruments – loans	Weighted average effective interest rate(%) 2~4.437	d	Payment on emand or less than 1 month $ 485,088		1 to 2 months $ 458,441		3 months to 1 year $ 681,579		1 to 5years $ 52,080		Over 5year
											$ -

• 58 -

(2) Financing amount

Financing amount
Unsecured credit line - The amount expensed - The amount not yet expensed	December 31, 2018 $ 1,009,466 2,787,465 $ 3,796,931	December 31, 2017
			$ 1,677,188 1,523,832 $ 3,201,020

(5) Information on transfer of financial assets

The relevant information of the accounts receivable factoring of the Company is shown below:

2018

2018
Counterparties Cathay Bank		Balance, beginning	The amount of receivables being factored for the current period		The amount collected for the current period			Balance, ending a	Prepaid mount by the end of the reporting period	The annual interest rate of prepaid amount(%)		Credit line
		$ -		$ 985,468		$ 855,332		$ 130,136	$ 704,179	3.23%~4.1%	$ 1,842,900 ( USD60,000)

2017: None.

The credit line mentioned above is a revolving credit line.

Under the factoring agreement, the Company is liable for the losses incurred on any business dispute (such as sales return or allowances), while the banks are liable for the losses incurred on credit risks.

33. Related party transactions

The transactions, account balances, income, expenses and losses between the company and subsidiaries (related party of the company) are offset at the time of consolidation; therefore, it is not disclosed in this note. The transactions conducted between the consolidated company and other related parties are as follows:

(1) Names and relation

Names and relation
Name Aapico Lemtech Lemtech Cryomax	Affiliation
	Affiliated Enterprises Subsidiaries accounted for under the equity method

• (2) Operating revenue

Operating revenue
Account titles in book Sales revenue	Type of relatedparty Affiliated Enterprises		2018 $ 6,788		2017
					$ 15,893

The sales price and payment terms to related parties were not significantly different from those of sales to third parties.

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• (3) Purchase

Purchase
Type of related party Affiliated Enterprises		2018 $ 5,443		2017
				$ 1,169

The purchase price and payment terms to related parties were not significantly different from those of sales to third parties.

• (4) Accounts receivables – related parties (not including lending to related parties and contract assets)

contract assets)
Account titles in book Accounts receivable	Type of relatedparty Affiliated Enterprises	December 31, 2018 $ 235	December 31, 2017
				$ 520

The outstanding trade receivables from related parties are unsecured. For the years ended December 31, 2018 and 2017, no impairment loss was recognized for trade receivables from related parties.

• (5) Payables to concerned parties (excluding loans borrowed from concerned parties)

Account titles in book Accounts payable	Type of relatedparty Affiliated Enterprises	December 31, 2018 $ 5,684	December 31, 2017	December 31, 2017
				$ -

For balance of payables to concerned parties outstanding, no guarantee has been provided.

• (6) Advances

provided. Advances
Type of relatedparty Affiliated Enterprises	December31,2018 $ 1,193	December31,2017
			$ -

• (7) Endorsement and guarantee

Endorsements and guarantees made for others

Type andName of relatedparty Subsidiaries Amount guaranteed The actual amounts disbursed	December31,2018 $ 934,905 $ 776,845	December31,2017	December31,2017
			$ 1,445,794 $ 1,161,234

• (8) Rewards to management

Sum of remuneration for directors and other key members of management:

Short-term employee benefits		2018 $ 32,329		2017
				$ 31,940

• 60 -

The remunerations to the directors and management are determined by the Remuneration Committee in accordance with individual performance and market trends.

34. Pledged assets

The following assets were provided as collateral for bank borrowings:

Bank deposits – restricted (classified as financial assets which are not stated at amortized cost) Pledge deposits (classified as debt instruments without an active market)	December 31,2018 $ 3,842 - $ 3,842	December 31,2017	December 31,2017
			$ - 148,800 $ 148,800

35. Significant contingent liabilities and unrecognized contractual commitments

In addition to those disclosed in other notes, the significant commitments and contingencies of the Company as of balance sheet date were as follows:

(1) Significant undertaking

In order to diversify the risk of centralized manufacturing in a single region, the Consolidated Company has purchased land which is located at land serial no. 274 and 289, Hwa-Ya lot, Guishan District, Taoyuan City, from an unrelated third party to build for business operations in November 2018. The land area of the subject is 3,588.13 square meters (approximately 1,085.41 ping), with total transaction amount of NT$488,434 thousand. In 2018, the Company has paid the first payment of NT$48,843 thousand; as of March 27, 2019, the Company has paid the second and the third payment of NT$48,843 and NT$40,747 thousand, respectively. After the land ownership transferred is expected to be completed on April 2019, the Company will pay the down payment.

(2) Contingent liabilities

The subsidiary of the Consolidated Company received a statement of civil suit from King Slide Works Co., Ltd (hereinafter to be referred as King Slide Works Co.) on June 26, 2018. The statement of civil suit was brought to Jiangsu Higher People's Court by King Slide Works Co. on June 19, 2018, which has claimed Lemtech Precision Material Co. and Lemtech Slide Co. had been producing, manufacturing and selling slide products without acquiring King Slide Works Co.’s approval and violated its patent rights. Meanwhile, King Slide Works Co. had alleged infringement of patent rights to Jiangsu Higher People's Court, and claimed RMB 100 million of compensation and rights protection expenses of RMB 183,090 and NT$31,748. According to the attorney, Lemtech Precision Material Co. mainly works on the research, production and sales of precision metal stamping parts and molds, and its main products are thermal modules, automotive parts modules, molds and other stamping parts, and is not a manufacturer or retailer for slide products, therefore shall not assume the tort liability of this case; the slide products produced

• 61 -

by Lemtech Slide Co. all have relevant patents (some of them are still under application), which are different from the patents owned by King Slide Works Co., according to the attorney’s preliminary judgment. Besides, there is not enough evidence to support the claim for compensation by King Slide Works Co.; therefore it is unlikely to make compensation. This case was first conducted for court trial on January 25, 2019, and it’s still in the process of its first trial; therefore, it’s not possible to make predictions about the case result.

The infringement alleged to Jiangsu Higher People's Court by King Slide Works Co., and sent out disclaimers to the customers of Lemtech Precision Material Co., which has caused a negative impact on the reputation of Lemtech Precision Material Co. Therefore, on behalf of Lemtech Precision Material Co., the Company has alleged litigation to Taiwan Ciaotou District Court on January 15, 2019.

36. Losses due to major disasters: none.

37. Major post-balance sheet events

In order to expand supply chain stability of automotive parts production in China and improve its gross profit margins, the Consolidated Company plans to acquire 83.33% shares of Zhenjiang Emtron Surface Treatment Co., Ltd in China, as well as its debt obligation. The Company has signed an agreement on January 23, 2019 and paid the transaction amount of US$3,640 thousand.

38. Information of foreign currency assets and liabilities with significant effects

The following information was summarized according to the foreign currencies other than the functional currency of the Company, and the exchange rates disclosed were used to translate the foreign currencies into the functional currency. (Functional currency has been transferred from Renminbi to New Taiwan Dollars as of April 1, 2017). Foreign currency assets and liabilities with significant influence are as follows:

Units: in thousands of each foreign currency and NT$ Thousand

December 31, 2018

December 31, 2018
Financial assets Monetary items USD RMB JPY EUR Financial liabilities Monetary items USD RMB JPY	Foreign currency $ 27,390 194,760 88,574 2,514 12,624 30,000 28,561	Exchange rate 30.6922 4.4720 0.2782 35.2000 30.6922 4.4720 0.2782	NT$
			$ 840,667 870,967 24,641 88,502 387,445 134,160 7,946

• 62 -

December 31, 2017

December 31, 2017
Financial assets Monetary items USD RMB JPY EUR Financial liabilities Monetary items USD JPY	Foreigncurrency $ 19,482 51,509 117,342 1,425 30,486 29,844	Exchangerate 29.8286 4.5577 0.2642 35.57 29.8286 0.2642	NT$
			$ 581,109 234,759 31,002 50,701 909,344 7,885

The Consolidated Company is exposed to foreign exchange risks, primarily with respect to New Taiwan Dollars, Renminbi and U.S. dollars. The following information is expressed in the functional currencies of the entity that held foreign currency; also, the exchange rate disclosed refers to the exchange rate used for having such foreign currency converted into the functional currency. Foreign currency gains/losses of material impact is as follows:

Functional currency NTD RMB USD	2018	Net gain/loss on exchange ( $ 24,868 ) ( 121 ) ( 24,311) ($ 49,300)	2017
	Functional currency vs. presentingcurrency 1.0000 (NT$: NT$) 4.4720 (CNY: NT$) 30.6922 (USD : NT$)		Functional currency vs. presentingcurrency 1.0000 (NT$: NT$) 4.5577 (CNY: NT$) 29.8286 (USD : NT$)	Net gain/loss on exchange
		( ( ( (		(	$ 30,255 14,387 ) 46,639 $ 62,507

39. Notes of disclosure

• (1) Significant transactions and (2) transfer investments:

• The Loaning of funds: Attachment 1.

• Endorsement and Guarantee: Attachment 2.

• Marketable securities held at yearend (excluding investments in subsidiaries, affiliated companies, and joint venture equity): None.

• The cumulative purchase or sale of the same security for an amount exceeding NT$300 million or 20% of paid-in capital: None.

• The acquisition of real estate for an amount exceeding NT$300 million or 20% of paid-in capital: Attached table 3.

• The disposal of real estate for an amount exceeding NT$300 million or 20% of paid-in capital: None.

• The purchase or sale with the related party for an amount exceeding NT$100 million or 20% of paid-in capital: Attached table 4.

• Accounts receivable-related party reaching NTD 100,000 thousand or more than 20% of the Paid-in shares capital: Attached table 5.

• Transaction of derivatives: Note 7 and 32.

• 63 -

• Other: business relationships and significant intercompany transactions between parent and subsidiary units: Attached table 6.

• Information on investees: Attached table 7.

• (3) Investments in Mainland China:

• The name of the investee in mainland China, the main businesses and products, its issued capital, method of investment, information on inflow or outflow of capital, percentage of ownership, investment gain or loss, ending balance, amount received as earnings distributions from the investment, and the limitations on investment: Attached table 8.

• Significant direct or indirect transactions with the investee in mainland China through third regions, its prices, terms of payment, and unrealized gain or loss: Attached table 8.

  • (1) Purchase amount and percentage and the related payables ending balance and percentage

  • (2) Sale amount and percentage and the related receivables ending balance and percentage

  • (3) Property transaction amount and the profit and loss arising from the acquisitions

  • (4) Notes endorsement and guarantee, or the provided collateral ending balance and its purpose

  • (5) The maximum financing balance, ending balance, interest rate interval, and total interest amount

  • (6) Others transactions with significant influences on the profit and loss or financial position, such as, the offer or acceptance of labor services

40. Segment information

Information that is provided to the decision maker for resource allocation and performance evaluation purposes, with emphasis on the types of products or services delivered. The departments of the Merging Company which should be reported are enumerated below:

Research and Development Department in Taiwan

Manufacturing Department in China

Others

• 64 -

Revenues and operating results of segments

• (1) Revenues and operating results of the consolidated company’s continuing units are analyzed in accordance with segments to be reported, which are summarized as follows:

2018

follows: 2018
Revenues from external customers Inter-segment income Department income Interest revenue Other income Financial costs Depreciation and amortization Profit or loss of affiliated companies under the equity method Income tax expense (income) Segment profit (and loss) Segment assets Segment liabilities 2017 Revenues from external customers Inter-segment income Department income Interest revenue Other income Financial costs Depreciation and amortization Profit or loss of affiliated companies under the equity method Income tax expense (income) Segment profit (and loss) Segment assets Segment liabilities	Research and Development Department in Taiwan $ 217,550 68,037 $ 285,587 $ 904 - 2,617 - 5,675 $ 24,347 $ 259,714 $ 94,438 Research and Development Department in Taiwan $ 130,549 20,644 $ 151,193 $ 413 - 2,118 - ( 1,590 ) ($ 8,481) $ 196,548 $ 55,619	Manufacturing Department in China $ 3,812,697 67,081 $ 3,879,778 $ 3,995 48,472 164,528 269,645 81,109 $ 480,684 $ 4,509,044 $ 2,736,247 Manufacturing Department in China $ 3,133,004 50,265 $ 3,183,269 $ 1,682 18,187 107,230 82,349 47,460 $ 269,434 $ 3,546,875 $ 2,271,467		Others $ 2,012,843 302 $ 2,013,145 $ 29,363 21,164 8,820 872,496 49,977 $ 1,027,881 $ 6,516,371 $ 1,808,738 Others $ 991,996 4,942 $ 996,938 $ 10,947 12,996 129 506,159 33,934 $ 643,026 $ 5,089,402 $ 1,682,347	Elimination of intersegment $ - ( 135,420) ($ 135,420) ( $ 23,994 ) ( 23,994 ) - ( 1,127,508 ) - ($ 1,127,509) ($ 5,886,702) ($ 1,115,100) Elimination of intersegment $ - ( 75,851) ($ 75,851) ( $ 9,507 ) ( 9,138 ) - ( 589,463 ) - ($ 589,463) ($ 4,115,896) ($ 912,116)		Total
							$ 6,043,090 - 6,043,090 10,268 16,031 $ 6,069,389 $ 45,642 175,965 14,633 136,761 $ 405,403 $ 5,398,427 $ 3,524,323 Total
						$ 4,255,549 - 4,255,549 3,535 14,048 $ 4,273,132 $ 22,045 109,477 ( 955 ) 79,804 $ 314,516 $ 4,716,929 $ 3,097,317

Sales between segments are carried out at arm’s length.

Segment profit represents the profit earned by each segment, including the allocated headquarter administration costs and director compensation, associates accounted for using the equity method, proceed from disposal of associates, rental income, interest income, disposal of real estate, proceeds from disposal of plants and equipment, proceeds from disposal of investments, net (profit) loss of foreign exchange, financial instruments at fair value through profit or loss, financial costs and income tax expenses. The measured figures are provided for main decision makers to allocate resources to segments and evaluate the performance of each segment.

• 65 -

(2) Main revenues from products and service

The product and labor income from continuing operation of the consolidated company is analyzed as follows:

company is analyzed as follows:
3C electronic products Automotive Building materials Mold and others		2018 $ 3,871,686 1,705,041 76,076 390,287 $ 6,043,090		2017
				$ 2,377,270 1,484,569 92,352 301,358 $ 4,255,549

(3) Information by areas

The Consolidated Company operates mainly in two areas – Taiwan and China

The Consolidated Company's continuing operating revenues from external customers are divided into the following operating geographical locations, and its non-current assets are divided based on the physical locations of the assets shown as follows:

Income generated from external

Asia America Europe		customers 2018 2017 $ 5,689,541 $ 4,204,142 164,330 49,883 189,219 1,524 $ 6,043,090 $ 4,255,549	customers 2018 2017 $ 5,689,541 $ 4,204,142 164,330 49,883 189,219 1,524 $ 6,043,090 $ 4,255,549	Non-Current assets	Non-Current assets	Non-Current assets
		2018 $ 5,689,541 164,330 189,219 $ 6,043,090		December 31, 2018 $ 1,572,466 - - $ 1,572,466	December 31, 2017
						$ 1,379,322 - - $ 1,379,322

Noncurrent asset does not include deferred income tax assets.

• (4) Information on key customers

Revenues amounted to NT$6,043,090 thousand and NT$4,255,549 thousand as of December 31, 2018 and 2017, respectively. Where revenue from single customers contributed 10% or more to the Consolidated Company’s revenue are as follows:

Customer F (Note) Customer G (Note)		2018 $ 1,468,721 1,859,819 $ 3,328,540		2017
				$ 1,100,509 713,611 $ 1,100,233

Note: Revenue comes from electronics.

• 66 -

Lemtech Holdings Co., Limited and its subsidiaries

2018

Unit: Unless otherwise stated, amounts in NT$ Thousand

Fund lent to others

Attached table 1

No. (Note 1)	The lender of fund	The borrower of fund	Transaction title	Are they related parties	Maximum balance – current period	Balance, ending (Note 2)	The actual amounts disbursed	Interest rate collars	Nature of loan	Amount of business transactions	Reasons for the necessity of short-term financing	Amount of provision for bad debts	Collateral	Collateral	Limit of lending to an individual debtor (Note 3)	Total limit of lending (Note 3)	Remarks
													Name	Value
0 0 0 1 1 2 2	Lemtech Holdings Co., Limited Lemtech Holdings Co., Limited Lemtech Holdings Co., Limited Lemtech Global Solution Co. Ltd. Lemtech Global Solution Co. Ltd. LDC Precision Engineering Co., LTD. LDC Precision Engineering Co., LTD.	Lemtech Precision Material (China) Co., Ltd Lemtech Precision Material (Czech) s.r.o. Lemtech Technology Limited Lemtech Precision Material (China) Co., Ltd Lemtech Technology Limited Lemtech Precision Material (Czech) s.r.o. Lemtech Technology Limited	Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables	Yes Yes Yes Yes Yes Yes Yes	$ 247,640 108,720 247,640 560,625 30,955 54,360 54,945	$ 245,720 - 245,720 523,399 30,715 - -	$ 201,240 - - 523,399 30,715 - -	6% 1%-2% 2%-3% 3%-3.5% 3% 1% 3%	Short-term financing needed Short-term financing needed Short-term financing needed Short-term financing needed Short-term financing needed Short-term financing needed Short-term financing needed	$ - - - - - - -	Working capital Working capital Working capital Working capital Working capital Working capital Working capital	$ - - - - - - -	－ － － － － － －	$ - - - - - - -	$ 743,049 743,049 743,049 896,425 896,425 66,111 66,111	$ 743,049 743,049 743,049 896,425 896,425 66,111 66,111

Note 1: The column for numbering is elaborated below:

• (1) Fill in 0 for the issuer.

• (2) The investees are sequentially numbered from 1 and so forth.

Note 2: For public companies proposed the lending of funds before the Board for resolution case by case pursuant to Article 14-1 of the “Regulations Governing Loaning of Funds and Making of Endorsements/Guarantees by Public Companies”, the amount approved by the Board but not yet being drawn shall still be included in the amount for announcement for the disclosure of risk being assumed. If the loans are being retired in the future, disclose the outstanding balance to reflect the adjustment of risk. For public companies proposed the lending of funds before the Board for resolution case by case pursuant to Article 14-2 of the “Regulations Governing Loaning of Funds and Making of Endorsements/Guarantees by Public Companies” whereby the Board resolved to authorize the Chairman to effect the drawdown or in revolving credit in tranches within specific limit and in the year, the amount and the limit approved by the Board shall still be announced as the outstanding balance. In subsequent retirement of loans, repeated drawdown shall still be considered and the amount and the limit approved by the Board shall still be announced as the outstanding balance.

• Note 3: (1) The limit and balance of loans to be granted on single counterparts should be applied according to the “Procedures for Lending Funds to Other Parties” approved by the shareholders’ meeting of the Company: for granting loans to any company who has a business relationship with the Company, 1. total amount for the granted loan should not exceed 20% of the Company’s net worth; and the total amount for the granted loan to a company having business relationship with the Company shall not exceed the total transaction amount between the parties during the period of twelve (12) months prior to the time of lending. Value of business transaction refers to the amount of purchase or sale between two parties, whichever the higher. 2. The total amount for the granted loan to a company for funding for a short-term period shall not exceed 40% of the net worth of the Company; and the total amount for the granted loan to a company shall not exceed 40% of the net worth of the Company.

• (2) In accordance with the procedures mentioned above, in lending funds by the Company to other parties in need of funds for a short-term period, the limit and balance is 40% of the net worth NT$1,857,623 thousand, which is NT$743,049 thousand; and as for the total amount for the granted loan to a company shall not exceed 40% of the net worth NT$1,857,623 thousand, which is NT$743,049 thousand.

• (3) In accordance with the procedures mentioned above, in lending funds by Lemtech Global Solution Co. Ltd. to other parties in need of funds for a short-term period, the limit and balance is 40% of the net worth NT$2,241,062 thousand, which is NT$896,425 thousand; and as for the total amount for the granted loan to a company shall not exceed 40% of the net worth NT$2,241,062 thousand, which is NT$896,425 thousand.

• (4) In accordance with the procedures mentioned above in lending funds by LDC Precision Industry Co., Ltd. to other parties in need of funds for a short-term period, the limit and balance is 40% of the net worth NT$165,277 thousand, which is NT$66,111 thousand; and as for the total amount for the granted loan to a company shall not exceed 40% of the net worth NT$165,277 thousand, which is NT$66,111 thousand.

• 67 -

Unit: NT$ Thousand

Lemtech Holdings Co., Limited and its subsidiaries

Endorsements and guarantees made for others

2018

Attached table 2

No. (Note 1)	The company providing the endorsement and/or guarantee	The party receiving the endorsement and/or guarantee	The party receiving the endorsement and/or guarantee	The limit of endorsements and/or guarantees to a single business entity	Maximum balance of endorsement / guarantee made during the current period	Balance of endorsement / guarantee at end of the period	The actual amounts disbursed	The endorsements and/or guarantees secured with property	Total endorsements and guarantees as a percentage of equity in the most recent financial statement	The upper limit of an endorsement and/or guarantee	Guarantee and endorsement of parent company to subsidiary	Guarantee and endorsement of subsidiary to parent company	Guarantee and endorsement in Mainland China
		Company name	Relation (Note2)
0 0 0 0 1	Lemtech Holdings Co., Limited Lemtech Holdings Co., Limited Lemtech Holdings Co., Limited Lemtech Holdings Co., Limited Lemtech Precision Material (China) Co., Ltd	Kunshan Lemtech Slide Technology Co., Ltd. Lemtech Precision Material (Czech) s.r.o. Lemtech Technology Limited Lemtech Precision Material (China) Co., Ltd Lemtech Precision Material (Czech) s.r.o.	3 3 3 3 2	$ 2,229,148 2,229,148 2,229,148 2,229,148 853,112	$ 30,715 289,920 1,162,990 399,295 152,208	$ 30,715 105,600 491,440 307,150 -	$ 30,715 70,400 491,440 184,290 -	$ - - - - -	1.65% 5.68% 26.46% 16.53% -	$ 5,572,869 5,572,869 5,572,869 5,572,869 853,112	Yes Yes Yes Yes No	No No No No No	Yes No No Yes No

Note 1: The column for numbering is elaborated below:

• (1) Fill in 0 for the issuer.

• (2) The investees are sequentially numbered from 1 and so forth.

• Note 2: Relationship between guarantor and guarantee is classified into the following six categories:

• (1) Any company who has a business relationship with the Company.

• (2) Any subsidiary whose voting shares are fifty percent (50%) or more owned, directly or indirectly by the Company.

• (3) Any parent company who directly or indirectly owns fifty percent (50%) or more of the Company's voting shares.

• (4) Subsidiaries whose voting shares are at least 90% owned, directly or indirectly, by the Company.

• (5) Where a company fulfills its contractual obligations by providing mutual endorsements/guarantees for another company in the same industry or for joint builders for purposes of undertaking a construction project.

• (6) Where all capital contributing shareholders make endorsements/guarantees for their jointly invested company in proportion to their shareholding percentages.

• (7) Where inter-enterprises make guarantees based on the performance guarantees obligation under a pre-sale house purchase agreement in accordance with the Consumer Protection Act.

• Note 3: (1) The maximum amount permitted to make endorsements/guarantees are dealt with in accordance with the Procedures for Endorsement & Guarantee of the Company which are promulgated pursuant to Article 36 and Article 38 of the Taiwan Securities and Exchange Act and Regulations and approved by a shareholders’ meeting: the maximum amount of endorsement/guarantee provided by the Company shall not exceed 300% of the Company's net worth in the current period. The amount of endorsement/guarantee for any one endorsee/guarantee company shall not exceed 120% of the Company's net worth in the current period. Where endorsements/guarantees are provided for an entity due to a business relationship with the Company, the amount of the endorsement/guarantee with respect to the business or company cannot exceed the business transaction amount between the parties (“Business transaction amount” refers the amount of purchases or sales between the parties, whichever is greater). The net worth should be based on the most recent financial statement, which is audited and attested by a certified public accountant. Endorsements/guarantees between subsidiaries whose voting shares are at least 90% owned, directly or indirectly, by the Company, the amount if endorsements/guarantees shall not exceed 10% of the Company's net worth. Endorsements/guarantees between subsidiaries whose voting shares are 100% owned, directly or indirectly, by the Company is free from the limit.

• (2) According to the procedures mentioned above, the maximum amount of the endorsements/guarantees by the Company is NT$ 5,572,869 thousand, which is 300% of the Company’s net worth NT$ 1,857,623 thousand; while the maximum amount of an endorsements/guarantees to a company or business is NT$ 2,229,148 thousand, which is 120% of the Company’s net worth NT$ 1,857,623 thousand.

• (3) Lemtech Precision Material (China) Co., Ltd has established relevant procedures otherwise. The maximum amount of the endorsements/guarantees amount of Lemtech Precision Material (China) Co., Ltd is NT$ 853,112 thousand, which is 50% of the Company’s net worth NT$ 1,706,223 thousand; while the maximum amount of an individual loan to a company or business is NT$ 853,112 thousand, which is 50% of the Company’s net worth NT$ 1,706,223 thousand.

• 68 -

Lemtech Holdings Co., Limited and its subsidiaries

Acquisition of real estate exceeding NT$300 million or 20% of paid-in capital.

2018

Attached table 3

Unit: Unless otherwise stated, NT$ Thousand

Companies acquiring properties	Asset title	Date of occurrence	Transactions amount	Payment status	Counterparties	Relation	If the counterparty is a related party, the information onprevious transaction	If the counterparty is a related party, the information onprevious transaction	If the counterparty is a related party, the information onprevious transaction	If the counterparty is a related party, the information onprevious transaction	Reference for price determination	Purpose of acquisition and the state of use	Other terms and conditions
							Owner	Relationship with the issuer	Date of transfer	Amount
Lemtech Holdings Co., Limited	Land	2018/11/09	$ 488,434	$ 48,843	Note	None	Not applicable	-	-	$ -	Based on real estate market conditions and professional appraisal reports.	For the needs of operations and production.	None

• Note 1: The acquired assets shall be appraised pursuant to relevant rules should states the appraisal results in the column of “the reference basis for price determination.”

• Note 2: Paid-in capital is the paid-in capital of the parent company. In the case of an issuer with shares having no par value or a par value other than NT$10, regarding the regulations of a transaction amount reaching 20% of the Company's paid-in capital, the amount shall be calculated using 10% of the equity attributable to owners of the parent in the balance sheet.

• Note 3: The event date refers to the transaction date, payment date, commission date, account transfer date, board resolution date, or other dates when the trade counterparty and trade amount is confirmed, whichever is sooner.

• Note 4: Where a trading counterparty is a natural person and not an associate, they shall be exempt from disclosure.

• 69 -

Lemtech Holdings Co., Limited and its subsidiaries

The purchase or sale with the related party for an amount exceeding NT$100 million or 20% of paid-in capital

January 1 to December 31, 2018

Attached table 4

Unit: Unless otherwise stated, NT$ Thousand

The company of purchase or sales	Counterparties	Relation		Transaction situation	Transaction situation	Transaction situation	Situation and reason that the transaction terms are different fromgeneral transactions	Situation and reason that the transaction terms are different fromgeneral transactions	Notes receivables (payables) and trade receivables (payables)	Notes receivables (payables) and trade receivables (payables)	Remarks
			Purchase (sales)	Amount	Percentage in total purchase (sale) amount %	Loan period	Unit price	Loan period	Balance	Accounted for percentage of total accounts receivable (accounts payable)
Lemtech Precision Material (China) Co., Ltd	Lemtech Technology Limited	Subsidiaries	Sales	$ 179,584	4.32%	Payment term is due 120 days from the invoice date	According to the transfer pricing policy of the Company	-	Accounts receivable $ 158,780	10.14%

• 70 -

Lemtech Holdings Co., Limited and its subsidiaries

Accounts receivable-related party reaching NTD 100,000 thousand or more than 20% of the Paid-in shares capital

2018

Attached table 5

Unit: NT$ Thousand

Companies listed in receivables	Name of counterparty	Relation	Balance of related party receivables	Turnover	Overdue relatedpartyreceivables	Overdue relatedpartyreceivables	Amount of related party receivables collected after maturity	Amount of provision for bad debts
					Amount	Disposition method
Lemtech Precision Material (China) Co., Ltd Lemtech Holdings Co., Limited Lemtech Global Solution Co. Ltd.	Lemtech Technology Limited Lemtech Precision Material (China) Co., Ltd Lemtech Precision Material (China) Co., Ltd	Subsidiaries Sub-subsidiary Subsidiaries	Accounts receivable $ 158,780 Other receivables 203,923 Other receivables $ 528,792	Note 2 Note 2 Note 2	$ - - -	－ － －	$ 146,732 203,923 -	$ - - -

Note 1: Long-term investments accounted for under the equity method of consolidated entities have been eliminated. Note 2: They are other receivables, therefore will not be included for calculating receivable turnover ratio.

• 71 -

Unit: NT$ Thousand

Lemtech Holdings Co., Limited and its subsidiaries

Business relationship and significant transactions between the parent company and subsidiaries

2018

Attached table 6

No.	Trader’s name	Counterparty	Relationship with trader (Note)		Transactions
				Title	Amount (thousand)	Terms and conditions	Accounted-for percent of total consolidated revenue or percent of total assets
0 0 1 1 2 2 2 2 2 3 3 4 4	Lemtech Holdings Co., Limited Lemtech Holdings Co., Limited Lemtech Global Solution Co. Ltd. Lemtech Global Solution Co. Ltd. Lemtech Precision Material (China) Co., Ltd Lemtech Precision Material (China) Co., Ltd Lemtech Precision Material (China) Co., Ltd Lemtech Precision Material (China) Co., Ltd Lemtech Precision Material (China) Co., Ltd Lemtech Technology Limited Lemtech Industrial Services Ltd LDC Precision Engineering Co., LTD. LDC Precision Engineering Co., LTD.	Lemtech Technology Limited Lemtech Precision Material (China) Co., Ltd Lemtech Precision Material (China) Co., Ltd Lemtech Technology Limited Lemtech Precision Material (Czech) s.r.o. Lemtech Precision Material (Czech) s.r.o. Lemtech Technology Limited Lemtech Technology Limited Lemtech Technology Limited Kunshan Lemtech Slide Technology Co., Ltd. Kunshan Lemtech Slide Technology Co., Ltd. Lemtech Technology Limited Lemtech Technology Limited	1 1 1 1 1 1 1 1 1 3 1 3 3	Other revenue, other expenses Other receivables (payables) Other receivables (payables) Other receivables (payables) Receivable (payable) accounts Sales revenue (purchases) Receivable (payable) accounts Account payable (accounts receivable) Sales revenue (purchases) Purchases (sales revenue) Purchases (sales revenue) Sales revenue (purchases) Receivable (payable) accounts	$ 24,220 203,923 528,792 30,692 28,207 28,627 158,780 42,441 179,584 47,986 21,668 63,773 26,713	General trading condition General trading condition General trading condition General trading condition General trading condition General trading condition General trading condition General trading condition General trading condition General trading condition General trading condition General trading condition General trading condition	0.40% 3.78% 9.80% 0.57% 0.52% 0.47% 2.94% 0.79% 2.97% 0.79% 0.36% 1.05% 0.49%

• Note 1: The information of business operation between the parent company and its subsidiaries should be documented in the respectively numbered column as follows: 1. Fill in “0” for parent company.

• The subsidiaries are sequentially numbered from 1 and so forth.

Note 2: The relationship with the traders is classified into three categories, which should be specified (the transaction conducted between the parent company and its subsidiaries or between two subsidiaries need not be disclosed in duplication. Such as: if the parent company has the transaction with the subsidiaries disclosed, the subsidiaries need not to have it disclosed in duplication. If one of the two subsidiaries has the transaction disclosed, the other subsidiary needs not to have it disclosed in duplication).

1. The Parent Company to the Subsidiary.

2. The Subsidiary to the Parent Company.

3. The Subsidiary to the Subsidiary.

4. Note 3: Calculate the ratio of the transaction amount to consolidate the total income or total assets. For the assets and liabilities account, calculate the ratio of the ending balance to the consolidated total assets. For the profits and losses account, calculate the ratio of the end cumulated amount to the consolidated total income.

Note 4: Since there is no relevant transaction to follow, its transaction terms are determined by actual operational needs.

Note 5: All the transactions mentioned above have been eliminated on consolidated financial statements.

Note 6: The Company may determine discretionally whether to have the material transactions in the table illustrated according to its materiality.

• 72 -

Unit: NT$ Thousand

Lemtech Holdings Co., Limited and its subsidiaries Information regarding investee’s name and location, et al.

2018

Attached table 7

Investor	Name of investee	Location	Principal business	Sum of initial investment	Sum of initial investment		End shareholding	End shareholding	Net income of investee	Recognized investment Income	Remarks
				Currentperiod-end	The end of lastyear	Quantity	Percentage %	Bookvalue
The Company The Company Lemtech Global Solution Co. Ltd. Lemtech Precision Material (China) Co., Ltd Lemtech Precision Material (China) Co., Ltd Lemtech Precision Material (China) Co., Ltd Lemtech Technology Limited Lemtech Technology Limited Lemtech Industrial Services Ltd. Lemtech Technology Limited Lemtech Global Solution Co. Ltd.	Controlling Lemtech Global Solution Co. Ltd. Lemtech Precision Material (China) Co., Ltd Lemtech Precision Material (China) Co., Ltd Lemtech Technology Limited LDC Precision Engineering Co., LTD. Lemtech Precision Material (Czech) s.r.o. Lemtech USA Inc. Lemtech Industrial Services Ltd. Kunshan Lemtech Slide Technology Co., Ltd. With significant influence. Aapico Lemtech Co.,Ltd Lemtech Cryomax System Corp.	Mauritius Kunshan, China Kunshan, China Hong Kong Taiwan Czech U.S. Samoa Kunshan, China Thailand Taiwan	Investment Manufacturing and designing various kinds of fine blanking dies, die casting non-metal molds, computer connectors, computer thermal modules, and new types of electronic components, as well as selling the company’s products, etc. Manufacturing and designing various kinds of fine blanking dies, die casting non-metal molds, computer connectors, computer thermal modules, and new types of electronic components, as well as selling the company’s products, etc. Selling automotive, electronics and computer related components. Manufacturing and wholesaling household appliances, audio and video electronic products, other electrical machinery and electronic mechanical devices, automotive and components, other optical and precision mechanical parts. Manufacturing automotive components (car roof windows, brakes and seat belts, etc.), parts and accessories (steering wheel drive shaft etc.), and supplies for consumer electronic components and sever products. Business development in the U.S. market, collecting business information, and providing market and industry information. Selling electronics and computer parts and components Design and manufacture slides, hinges, and relevant accessories, as well as selling the company’s products, etc. Designing, manufacturing, production, and assembly automotive, electronics and computer components and accessories. Sales, automotive, electronics and computer components.	$ 112,397 1,412 323,279 597 9,524 195,984 1,502 46,792 69,758 16,452 3,650	$ 112,397 - 246,035 597 9,524 269 1,502 46,792 69,758 16,452 -	2,500,000 126,000 62,874,000 - - - - 1,425,000 - 160,000 500,000	100 0.2 99.8 100 100 100 100 57 100 40 50	$ 2,241,062 3,384 1,702,810 426,465 165,277 130,572 149 21,847 31,451 29,692 3,810	$ 406,646 466,048 466,048 284,868 24,347 ( 39,561 ) ( 655 ) ( 10,821 ) ( 8,744 ) 38,195 353	$ 406,646 393 465,655 284,868 24,347 ( 39,561 ) ( 655 ) ( 6,168 ) ( 8,744 ) 14,164 171	Subsidiaries Subsidiaries Sub-subsidiary Third-tier subsidiaries. Third-tier subsidiaries. Third-tier subsidiaries. Third-tier subsidiaries. Third-tier subsidiaries. Third-tier subsidiaries. Investments accounted for under equity method. Investments accounted for under equity method.

Note 1: Information on investments in Mainland China please refers to table 8.

• 73 -

Lemtech Holdings Co., Limited and its subsidiaries

Information regarding investment in the territory of mainland china

2018

Attached table 8

Unit : NT$ thousand; Foreign currency amount in thousands

1. Name of invested company in China, principal business, paid-in capital, mode of investment, outward/inward remittance of fund, shareholding percentage, investment income, book value of investment and investment income repatriated to Taiwan:

Invested Company in China	Principal business	Paid-in shares Capital	Mode of investments	Accumulated amount of investment remitted from Taiwan at beginning	Amount of investment r current	emitted or recovered in period	Accumulated amount of investment remitted from Taiwan at ending	Net income of investee	Shareholdings of the Company’s direct or indirect investment(%)	Recognized in this period Investment gains/loss	Investment at end of year Book Value	ROI remittedtoTaiwan at ending
					Outward remittance	Recover
Lemtech Precision Material (China) Co., Ltd Lemtech Precision Material (China) Co., Ltd Kunshan Lemtech Slide Technology Co., Ltd.	Manufacturing and designing various kinds of fine blanking dies, die casting non-metal molds, computer connectors, computer thermal modules, and new types of electronic components, as well as selling the company’s products, etc. Manufacturing and designing various kinds of fine blanking dies, die casting non-metal molds, computer connectors, computer thermal modules, and new types of electronic components, as well as selling the company’s products, etc. Design and manufacture slides, hinges, and relevant mechanical assemblies, as well as selling the company’s products, etc.	$ 273,372 ( RMB 63,000 ) 273,372 ( RMB 63,000 ) 69,758 ( RMB 15,000 )	Lemtech Global Solution Co. Ltd. has invested and owns 99.8% of the shares. Lemtech Group. has invested and owns 0.2% of the shares. Lemtech Industrial Services Ltd. has invested and owns 100% of the shares.	$ - - -	$ - - -	$ - - -	$ - - -	$ 466,048 466,048 ( 8,744 )	99.8 0.2 51	$ 465,655 (Note) 393 (Note) ( 8,744 ) (Note)	$ 1,702,810 3,384 31,451	$ - - -

Note: Profit or loss on investments was recognized based on the financial statements for the same period which was audited by parent company’s accountants.

1. Limit of investment in Mainland China:

Limit of investment in Mainland China:
Accumulated investment from Taiwan to Mainland China at ending	Amount of investment approved by Investment Commission of MOEA	Investment amount approved by the Investment Commission MOEAIC
$ -	Not applicable	Not applicable

1. Significant transactions, either directly or indirectly through a third area, with investee companies in the Mainland Area, please refer to table 6.

2. For endorsements and guarantees or collaterals provided, either directly or indirectly through a third area, with investee companies in the Mainland Area, please refer to table 2.

3. For financing, either directly or indirectly through a third area, with investee companies in the Mainland Area, please refer to table 1.

4. Other income or loss or significant transactions that affected the financial position of the Company: None.

5. 74 -