MERRY — Audit Report / Information 2019

Oct 25, 2019

MERRY ELECTRONICS CO., LTD. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT ACCOUNTANTS DECEMBER 31, 2019 AND 2018

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REPORT OF INDEPENDENT ACCOUNTANTS TRANSLATED FROM CHINESE

To the Board of Directors and Shareholders of Merry Electronics Co., Ltd.

Opinion

We have audited the accompanying consolidated balance sheets of Merry Electronics Co., Ltd. and its subsidiaries (the “Group”) as at December 31, 2019 and 2018, and the related consolidated statements of comprehensive income, of changes in equity and of cash flows for the years then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, based on our audits and the reports of other auditors, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at December 31, 2019 and 2018, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with the “Regulations Governing the Preparation of Financial Reports by Securities Issuers” and the International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the Financial Supervisory Commission.

Basis for opinion

We conducted our audits 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 (ROC GAAS). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the Code of Professional Ethics for Certified Public Accountants in the Republic of China (the “Code”), and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key audit matters

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

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The key audit matters in relation to the consolidated financial statements for the year ended December 31, 2019 are outlined as follows:

Cut-off on sales revenue from distribution warehouses

Description

Refer to Note 4(31) for accounting policy on revenue recognition.

The Group recognises revenue upon delivery or pick-up of goods (the transfer of control of ownership) by customers at the warehouses. Warehouse sales revenue constitutes 32% of total operating revenue for the year ended December 31, 2019. The Group’s revenue recognition is based on inventory movement records of warehouses based on the reports provided by warehouse custodians or bill of lading reports recorded on network platform. As the hubs are located in various locations and there are numerous custodians, the frequency and contents of statements provided by custodians vary, and customers are from different places, the process of revenue recognition contains numerous manual procedures, which would potentially result in inaccurate timing of revenue recognition and the discrepancy between physical inventory quantities in the hubs and quantities per accounting records. Thus, we consider the cut-off on sales revenue from distribution warehouses a key audit matter.

How our audit addressed the matter

We performed the following audit procedures in relation to the above key audit matter:

• A. Understood, evaluated and verified the Group’s procedures for warehouse sales revenue and internal control, including:

• (a) Interviewing the staff from different departments of the sales revenue process from distribution warehouse, and confirming the consistency by comparing interview results with the process of warehouse sales revenue recognition obtained.

• (b) Verifying the internal control of warehouse distribution (checked the terms of transaction / timing of ownership transfer and dates of supporting documents and verifying transactions recognised in the appropriate period by reconciling the quantities of supporting documents with invoices) to confirm the accuracy of the timing of revenue recognition.

• B. Performed cut-off procedures on sales revenue from distribution warehouses recognised during a specific period before and after the period-end, including verifying delivery schedule of distribution warehouses and ensuring the movements of inventories contained in the statements and cost of goods sold had been recognised in the appropriate period;

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• C. Performed physical inventory count observation or confirmed the inventory quantities with hub custodian and agreed the results to accounting records.

Valuation of inventories

Description

Refer to Note 4(12) for accounting policies on inventory valuation, Note 5(1) for significant accounting estimates and assumptions related to inventory valuation, and Note 6(6) for details of allowance for inventory valuation losses. As of December 31, 2019, the balances of inventories and allowance for inventory valuation losses were NT$2,300,204 thousand and NT$182,672 thousand, respectively. The Group has a high risk of incurring inventory valuation loss or obsolescence due to fluctuations in market demand and rapidly evolving technology. Further, the measurement of net realisable value of inventories involves subjective judgement resulting in a high degree of estimation uncertainty. Thus, we consider the allowance for inventory valuation loss a key audit matter.

How our audit addressed the matter

We performed the following audit procedures in relation to the above key audit matter:

• A. Understood and assessed the reasonableness of the subsequent inventory valuation and the provision for loss on obsolete and slow-moving inventory.

• B. Inspected the annual plan of the physical inventory count and observed the inventory count; evaluated the effectiveness of the procedures used to identify and control obsolete inventories.

• C. Obtained inventory aging report and verified dates of movements with supporting documents, and ensured the accuracy of inventory aging classification and its consistency with the policies.

• D. Obtained the net realisable value of each kind of inventory and checked whether the applied calculation logic was in agreement with all inventory, tested the supporting documents related to the estimation basis for net realisable value of inventories including verifying the supporting documents of sales and purchase prices, as well as recalculating and assessing the reasonableness of allowance for inventory valuation losses.

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Other matter - parent company only financial reports

We have audited and expressed an unqualified opinion on the parent company only financial statements of Merry Electronics Co., Ltd. as at and for the years ended December 31, 2019 and 2018.

Responsibilities of management and those charged with governance for the consolidated financial statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the “Regulations Governing the Preparation of Financial Reports by Securities Issuers” and the International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the Financial Supervisory Commission, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

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

Those charged with governance, including independent directors and supervisors, are responsible for overseeing the Group’s financial reporting process.

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 an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ROC GAAS will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with ROC GAAS, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

A. Identify and assess the risks of material misstatement of the consolidated financial statements,

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whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

B.

C.

Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.

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

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

E.

F.

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

Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

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

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other

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matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

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

Wang, Yu-Juan

Xu, Jian-Ye

For and on behalf of PricewaterhouseCoopers, Taiwan February 27, 2020

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The accompanying consolidated financial statements are not intended to present the financial position and results of operations and cash flows in accordance with accounting principles generally accepted in countries and jurisdictions other than the Republic of China. The standards, procedures and practices in the Republic of China governing the audit of such financial statements may differ from those generally accepted in countries and jurisdictions other than the Republic of China. Accordingly, the accompanying consolidated financial statements and report of independent accountants are not intended for use by those who are not informed about the accounting principles or auditing standards generally accepted in the Republic of China, and their applications in practice.

As the financial statements are the responsibility of the management, PricewaterhouseCoopers cannot accept any liability for the use of, or reliance on, the English translation or for any errors or misunderstandings that may derive from the translation.

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MERRY ELECTRONICS CO., LTD AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2019 AND 2018

(Expressed in thousands of New Taiwan dollars)

Assets	Notes 6(1) 6(2) 6(3) 6(4) 7 7 6(6) 6(7) 6(2) 6(3) 6(8) 6(9) 6(10) 6(11) 6(29) 6(12)	December 31, 2019 AMOUNT % $ 6,589,863 26 16,913 - 202,077 1 451 - 5,448,381 21 12,934 - 49,485 - 385,368 2 2,117,532 8 270,473 1 15,093,477 59 21,301 - 2,533,407 10 3,951,152 15 2,285,093 9 155,434 1 1,502,776 6 151,674 - 101,256 - 10,702,093 41 $ 25,795,570 100	December 31, 2018	December 31, 2018
		AMOUNT $ 6,589,863 16,913 202,077 451 5,448,381 12,934 49,485 385,368 2,117,532 270,473 15,093,477 21,301 2,533,407 3,951,152 2,285,093 155,434 1,502,776 151,674 101,256 10,702,093 $ 25,795,570	AMOUNT $ 8,512,129 166,048 259,226 895 8,574,012 23,083 75,386 729,785 3,074,672 225,634 21,640,870 18,174 1,482,779 3,426,878 1,988,191 - 1,552,242 82,335 140,107 8,690,706 $ 30,331,576	%
Current assets 1100 Cash and cash equivalents 1110 Financial assets at fair value through profit or loss - current 1120 Current financial assets at fair value through other comprehensive income 1150 Notes receivable, net 1170 Accounts receivable, net 1180 Accounts receivable due from related parties, net 1200 Other receivables 1210 Other receivables - related parties 130X Inventories 1470 Other current assets 11XX Current Assets Non-current assets 1510 Financial assets at fair value through profit or loss - noncurrent 1517 Non-current financial assets at fair value through other comprehensive income 1550 Investments accounted for under equity method 1600 Property, plant and equipment 1755 Right-of-use assets 1780 Intangible assets 1840 Deferred income tax assets 1900 Other non-current assets 15XX Non-current assets 1XXX Total assets				28 1 1 - 28 - - 2 10 1
				71
				- 5 11 7 - 5 - 1
				29
				100

(Continued)

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MERRY ELECTRONICS CO., LTD AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2019 AND 2018

(Expressed in thousands of New Taiwan dollars)

Liabilities and Equity	Notes 6(13) 6(2) 7 6(14) 7 6(29) 6(15) 6(16) 6(17) 6(29) 6(20) 6(21) 6(22) 6(23) 9 11	December 31, 2019 AMOUNT % $ 470,890 2 11,799 - 74 - 2,773,441 11 3,920,251 15 973,026 4 137,703 - 258,597 1 417,964 2 8,963,745 35 2,229,959 9 62,000 - 956,478 4 88,694 - 86,295 - 410,007 2 3,833,433 15 12,797,178 50 2,086,684 8 3,870,105 15 1,745,768 7 269,144 1 3,834,442 15 1,027,834 4 12,833,977 50 164,415 - 12,998,392 50 $ 25,795,570 100	December 31, 2018	December 31, 2018
		AMOUNT $ 470,890 11,799 74 2,773,441 3,920,251 973,026 137,703 258,597 417,964 8,963,745 2,229,959 62,000 956,478 88,694 86,295 410,007 3,833,433 12,797,178 2,086,684 3,870,105 1,745,768 269,144 3,834,442 1,027,834 12,833,977 164,415 12,998,392 $ 25,795,570	AMOUNT $ 4,753,434 6,976 74 5,330,461 4,412,969 1,171,824 37,410 293,442 170,952 16,177,542 2,882,721 - 702,341 - 85,930 403,615 4,074,607 20,252,149 1,996,625 2,789,111 1,539,341 269,144 3,189,563 147,032 9,930,816 148,611 10,079,427 $ 30,331,576	%
Current liabilities 2100 Short-term borrowings 2120 Financial liabilities at fair value through profit or loss - current 2150 Notes payable 2170 Accounts payable 2180 Accounts payable - related parties 2200 Other payables 2220 Other payables - related parties 2230 Current income tax liabilities 2300 Other current liabilities 21XX Current Liabilities Non-current liabilities 2530 Corporate bonds payable 2540 Non-current portion of borrowings 2570 Deferred income tax liabilities 2580 Non-current lease liabilities 2640 Accrued pension liabilities 2670 Other non-current liabilities, others 25XX Non-current liabilities 2XXX Total Liabilities Equity attributable to owners of parent Share capital 3110 Share capital - common stock Capital surplus 3200 Capital surplus Retained earnings 3310 Legal reserve 3320 Special reserve 3350 Unappropriated retained earnings Other equity interest 3400 Other equity interest 31XX Equity attributable to owners of the parent 36XX Non-controlling interest 3XXX Total equity Significant contingent liabilities and unrecognised contract commitments Significant events after the balance sheet date 3X2X Total liabilities and equity				16 - - 18 14 4 - 1 -
				53
				10 - 2 - - 2
				14
				67
				7 9 5 1 11 -
				33
				-
				33
				100

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

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MERRY ELECTRONICS CO., LTD AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

(Expressed in thousands of New Taiwan dollars, except earnings per share)

Items

Year ended December 31 2019 2018 Notes AMOUNT % AMOUNT % 6(24) $ 36,397,793 100 $ 35,494,808 100 6(6) ( 31,357,874) ( 86) ( 30,769,740) ( 86) 5,039,919 14 4,725,068 14 6(27)(28) ( 397,602) ( 1) ( 350,439) ( 1) ( 1,101,580) ( 3) ( 968,491) ( 3) ( 1,305,385) ( 4) ( 1,103,005) ( 3) ( 2,804,567) ( 8) ( 2,421,935) ( 7) 2,235,352 6 2,303,133 7 6(25) 383,263 1 240,595 - 6(2)(3)(26) 44,344 - ( 32,952) - ( 81,319) - ( 48,453) - 6(8) 664,557 2 263,926 1 1,010,845 3 423,116 1 3,246,197 9 2,726,249 8 6(29) ( 715,051) ( 2) ( 665,400) ( 2) $ 2,531,146 7 $ 2,060,849 6

4000 Sales revenue 5000 Operating costs 5900 Net operating margin Operating expenses 6100 Selling expenses 6200 General and administrative expenses 6300 Research and development expenses 6000 Total operating expenses 6900 Operating profit Non-operating income and expenses 7010 Other income 7020 Other gains and losses 7050 Finance costs 7060 Share of profit of associates and joint ventures accounted for under equity method 7000 Total non-operating income and expenses 7900 Profit before income tax 7950 Income tax expense 8200 Profit for the year

(Continued)

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MERRY ELECTRONICS CO., LTD AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

(Expressed in thousands of New Taiwan dollars, except earnings per share)

Items

Year ended December 31 2019 2018 Notes AMOUNT % AMOUNT % 6(18) ($ 15,027) - ($ 7,051) - 6(23) 1,150,081 3 ( 2,530,480) ( 7) - - ( 5,513) - ( 120) - 1,410 - 1,134,934 3 ( 2,541,634) ( 7) 6(23) ( 119,248) - 14,447 - 6(23) ( 2,377) - 18,639 - 6(23) ( 140,011) - ( 87,285) - 52,830 - 12,720 - ( 208,806) - ( 41,479) - $ 926,128 3 ($ 2,583,113) ( 7) $ 3,457,274 10 ($ 522,264) ( 1) $ 2,548,612 7 $ 2,064,265 6 ( 17,466) - ( 3,416) - $ 2,531,146 7 $ 2,060,849 6 $ 3,466,522 10 ($ 514,200) ( 1) ( 9,248) - ( 8,064) - $ 3,457,274 10 ($ 522,264) ( 1) 6(30) $ 12.51 $ 10.47 6(30) $ 11.54 $ 10.35

Other comprehensive income Components of other comprehensive income that will not be reclassified to profit or loss 8311 Other comprehensive income, before tax, actuarial gains (losses) on defined benefit plans 8316 Total expenses, by nature 8320 Share of other comprehensive income of associates and joint ventures accounted for using equity method, components of other comprehensive income that will not be reclassified to profit or loss 8349 Income tax related to components of other comprehensive income that will not be reclassified to profit or loss 8310 Components of other comprehensive income (loss) that will not be reclassified to profit or loss Components of other comprehensive income that will be reclassified to profit or loss 8361 Financial statements translation differences of foreign operations 8367 Unrealised gains (losses) from investments in debt instruments measured at fair value through other comprehensive income, net 8370 Share of other comprehensive income of associates and joint ventures accounted for using equity method, components of other comprehensive income that will be reclassified to profit or loss 8399 Income tax relating to the components of other comprehensive income 8360 Components of other comprehensive loss that will be reclassified to profit or loss 8300 Total other comprehensive income (loss) for the year 8500 Total comprehensive income (loss) for the year Profit (loss), attributable to: 8610 Owners of parent 8620 Non-controlling interest Total Net Income Comprehensive income (loss) attributable to: 8710 Owners of the parent 8720 Non-controlling interest Total Comprehensive Income (Loss) Basic earnings per share 9750 Total basic earnings per share Diluted earnings per share 9850 Total diluted earnings per share

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

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MERRY ELECTRONICS CO., LTD AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

(Expressed in thousands of New Taiwan dollars)

Year 2018 Balance at January 1, 2018 Effect of restospective application and retrospective restatement Balance at January 1 after adjustments Profit (loss) Other comprehensive loss Total comprehensive income (loss) Appropriations and distribution of 2017 earnings: Legal reserve Cash dividends Issuance of convertible bonds Convertible bonds converted to equity shares Share-based payment Retirement of treasury shares Disposal of investments in equity instruments at fair value through other comprehensive income Acquisition of additional equity in subsidiaries Recognition of change in equity of associates in proportion to the Group's ownership Acquisition of non-controlling interests in subsidiaries Balance at December 31, 2018 Year 2019 Balance at January 1, 2019 Profit (loss) Other comprehensive income (loss) Total comprehensive income (loss) Appropriations and distribution of 2018 earnings: Legal reserve Cash dividends Issuance of common stock for cash Convertible bonds converted to equity shares Share-based payment Disposal of investments in equity instruments at fair value through other comprehensive income Recognition of change in equity of associates in proportion to the Group's ownership Acquisition of non-controlling interests in subsidiaries Balance at December 31, 2019	Notes						Equityattributable to	Equityattributable to	Equityattributable to	Equityattributable to	owners of theparent								Non- controlling interest		Total equity
			Share capital - common stock		Capital surplus, additional paid-in capital			R	etained Earnings			d	Financial statements translation ifferences of foreign operations	Treasurystocks			Total
							Legal reserve		Special reserve		Unappropriated retained earnings
	6(16) 6(19) 6(22) 6(16) 6(19) 6(3)		$ 2,004,721 - 2,004,721 - - - - - - 1,409 9,165 ( 18,670 ) - - - - $ 1,996,625 $ 1,996,625 - - - - - 40,000 48,851 1,208 - - - $ 2,086,684		$ 2,985,304 - 2,985,304 - - - - - 133,326 13,565 120,515 ( 66,129 ) - ( 402,072 ) 4,602 - $ 2,789,111 $ 2,789,111 - - - - - 408,000 636,587 25,256 - 11,151 - $ 3,870,105		$ 1,177,121 - 1,177,121 - - - 362,220 - - - - - - - - - $ 1,539,341 $ 1,539,341 - - - 206,427 - - - - - - - $ 1,745,768		$ 269,144 - 269,144 - - - - - - - - - - - - - $ 269,144 $ 269,144 - - - - - - - - - - - $ 269,144		$ 4,292,018 3,766 4,295,784 2,064,265 ( 11,154 ) 2,053,111 ( 362,220 ) ( 3,143,838 ) - - - - 346,726 - - - $ 3,189,563 $ 3,189,563 2,548,612 ( 12,022 ) 2,536,590 ( 206,427 ) ( 1,751,419 ) - - - 68,104 - ( 1,969 ) $ 3,834,442		$ 3,074,587 ( 3,766 ) 3,070,821 - ( 2,567,311 ) ( 2,567,311 ) - - - - ( 9,752 ) - ( 346,726 ) - - - $ 147,032 $ 147,032 - 929,932 929,932 - - - - 18,974 ( 68,104 ) - - $ 1,027,834		($ 98,743 ) - ( 98,743 ) - - - - - - - 13,944 84,799 - - - - $ - $ - - - - - - - - - - - - $ -		$ 13,704,152 - 13,704,152 2,064,265 ( 2,578,465 ) ( 514,200 ) - ( 3,143,838 ) 133,326 14,974 133,872 - - ( 402,072 ) 4,602 - $ 9,930,816 $ 9,930,816 2,548,612 917,910 3,466,522 - ( 1,751,419 ) 448,000 685,438 45,438 - 11,151 ( 1,969 ) $ 12,833,977		$ 82 - 82 ( 3,416 ) ( 4,648 ) ( 8,064 ) - - - - - - - - - 156,593 $ 148,611 $ 148,611 ( 17,466 ) 8,218 ( 9,248 ) - - - - - - - 25,052 $ 164,415		$ 13,704,234 - 13,704,234 2,060,849 ( 2,583,113 ) ( 522,264 ) - ( 3,143,838 ) 133,326 14,974 133,872 - - ( 402,072 ) 4,602 156,593 $ 10,079,427 $ 10,079,427 2,531,146 926,128 3,457,274 - ( 1,751,419 ) 448,000 685,438 45,438 - 11,151 23,083 $ 12,998,392

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

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MERRY ELECTRONICS CO., LTD AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31

(Expressed in thousands of New Taiwan dollars)

CASH FLOWS FROM OPERATING ACTIVITIES Profit before tax Adjustments Adjustments to reconcile profit (loss) Depreciation-Property, plant and equipment Depreciation-Right-of-use assets Amortisation Expected credit loss Amortisation on long-term rent prepaid Share-based payments Treasury share-based payments Compensation cost of cash capital increase reserved for employee preemption Loss on financial assets or liabilities at fair value through profit or loss Share of profit of associates and joint ventures accounted for using equity method Interest income Dividend income Deferred income of government's compensation Loss on disposal of property, plant and equipment Finance costs Interest expense-lease liability Changes in operating assets and liabilities Changes in operating assets Financial assets mandatorily measured at fair value through profit or loss Notes receivable, net Accounts receivable Other receivables Other receivables - related parties Inventories Prepayments Other current assets Acquisition of financial assets at fair value through profit or loss - non-current Changes in operating liabilities Notes payable Accounts payable Accounts payable - related parties Other payables Other payables - related parties Other current liabilities Decrease (increase) in net defined benefit Cash inflow generated from operations Interest received Dividend income Interest paid Income taxes paid Gain on valuation of disposal of financial assets at fair value through other comprehensive income Net cash flows from operating activities

Year ended December 31 Notes 2019 2018 $ 3,246,197 $ 2,726,249 6(9) 206,457 197,670 6(9)(25) 73,295 - 6(11)(27) 132,426 94,691 12(2) 21,164 6,045 - 3,180 6(19) 52,158 90,298 - 26,734 - 3,993 6(2) ( 6,834 ) 16,904 6(8) ( 664,557 ) ( 263,926 ) 6(25) ( 70,090 ) ( 58,430 ) 6(25) ( 73,953 ) ( 72,379 ) ( 724 ) ( 586 ) 6(26) 3,552 798 79,093 48,453 6(10) 2,226 - 6(32) 158,903 276,558 444 ( 910 ) 3,123,579 ( 1,809,613 ) 29,341 ( 22,457 ) 344,251 ( 455,747 ) 917,132 ( 572,527 ) 55,086 16,904 45,051 649,227 ( 3,127 ) ( 18,174 ) - ( 1,304 ) ( 2,457,391 ) 878,273 ( 482,284 ) 500,112 ( 276,184 ) ( 41,476 ) 105,514 23,672 75,688 ( 56,974 ) ( 14,662 ) ( 32,921 ) 4,621,751 2,152,337 70,428 61,714 73,953 72,379 ( 47,656 ) ( 45,686 ) ( 492,478 ) ( 618,556 ) ( 833 ) - 4,225,165 1,622,188

(Continued)

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MERRY ELECTRONICS CO., LTD AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31

(Expressed in thousands of New Taiwan dollars)

CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of financial assets at fair value through other comprehensive income Proceeds from disposal of financial assets at fair value through other comprehensive income Acquisition of investments accounted for using equity method Acquisition of property, plant and equipment Proceeds from disposal of property, plant and equipment Acquisition of intangible assets Proceeds from disposal of intangible assets Decrease (increase) in other financial assets Decrease in guarantee deposits Proceeds from disposal of subsidiary Proceeds from disposal of subsidiary Net cash flows used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES (Decrease) increase in short-term borrowings Increase (decrease) in other non-current liabilities Proceeds from issuance of bonds Repayment of principal portion of lease liabilites Proceeds from long-term borrowings Cash dividends paid Employee purchase of treasury shares Cancellation of restricted employee shares Proceeds from issuance of shares Net cash flows (used in) from financing activities Effect of change in foreign currency exchange Net (decrease) increase in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year

Year ended December 31 Notes 2019 2018 6(3) $ - ( $ 332,429 ) 6(32) 143,315 603,040 - ( 452,564 ) 6(32) ( 607,310 ) ( 624,079 ) 94,132 5,289 6(32) ( 69,681 ) ( 57,336 ) - 1,154 ( 3,215 ) 4,186 9,630 ( 4,876 ) ( 4,425 ) - - ( 1,106,733 ) ( 437,554 ) ( 1,964,348 ) 6(33) ( 4,269,747 ) 2,582,573 7,430 ( 60,208 ) - 3,015,000 6(9) ( 96,425 ) - 62,000 - ( 1,751,419 ) ( 3,143,838 ) - 13,944 ( 6,720 ) ( 1,095 ) 448,000 - ( 5,606,881 ) 2,406,376 ( 102,996 ) ( 38,226 ) ( 1,922,266 ) 2,025,990 8,512,129 6,486,139 $ 6,589,863 $ 8,512,129

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

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MERRY ELECTRONICS CO., LTD AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

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

1. HISTORY AND ORGANISATION

Merry Electronics Co., Ltd. (the “Company”) was incorporated as a company limited by shares under the provisions of the Company Act of the Republic of China (R.O.C.) on December 24, 1975. The Company is primarily engaged in manufacturing, processing, repairing, sales of electric appliance and audiovisual electric products, telecommunication equipment and apparatus, computers and computing peripheral equipments, restrained telecom radio frequency equipments, medical appliances, as well as electronic parts and components; planning, design as well as output of service items’ equipments; production as well as marketing management consultant of service items’ relevant business. The Company’ shares were listed on the Taipei Exchange since August 1998 and transferred to the Taiwan Stock Exchange starting September 2000 with approval. The Company merged with its subsidiary, HUGES HI-TECH INC., on September 1, 2005. The Company was the surviving company while HUGES HI-TECH INC. was the dissolved company.

2. THE DATE OF AUTHORISATION FOR ISSUANCE OF THE CONSOLIDATED FINANCIAL STATEMENTS AND PROCEDURES FOR AUTHORISATION

These consolidated financial statements were authorised for issuance by the Board of Directors on February 27, 2020.

3. APPLICATION OF NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS

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

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

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Effective date by
International Accounting
New Standards, Interpretations and Amendments Standards Board
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New Standards,Interpretations and Amendments	Effective date by International Accounting Standards Board
Amendments to IFRS 9, ‘Prepayment features with negative	January 1, 2019
compensation’
IFRS 16, ‘Leases’	January 1, 2019
Amendments to IAS 19, ‘Plan amendment, curtailment or settlement’	January 1, 2019
Amendments to IAS 28, ‘Long-term interests in associates and joint	January 1, 2019
ventures’
IFRIC 23, ‘Uncertainty over income tax treatments’	January 1, 2019
Annual improvements to IFRSs 2015-2017 cycle	January 1, 2019
The above standards and interpretations have no significant impact to the Group’s financial condition
and financial performance based on the Group’s assessment.

A. IFRS 16, ‘Leases’

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

• (b) The Group has elected to apply IFRS 16 by not restating the comparative information (referred herein as the ‘modified retrospective approach’) when applying “IFRSs” effective in 2019 as endorsed by the FSC. Accordingly, the Group increased ‘right-of-use asset’ by $245,942

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thousand,increased ‘lease liability’ by $197,151 thousand and increased/decreased retained earnings by $48,791 thousand with respect to the lease contracts of lessees on January 1, 2019.

• (c) The Group has used the following practical expedients permitted by the standard at the date of initial application of IFRS 16:

• i. Reassessment as to whether a contract is, or contains, a lease is not required,

• instead, the application of IFRS 16 depends on whether or not the contracts were previously identified as leases applying IAS 17 and IFRIC 4.

• ii. The use of a single discount rate to a portfolio of leases with reasonably similar characteristics.

• iii. The accounting for operating leases whose period will end before December

• 31, 2019 as short-term leases and accordingly, rent expense of $956 thousand was recognised in 2019.

• (d) The Group calculated the present value of lease liabilities by using the weighted average incremental borrowing interest rate range from 0.75% to 10.88%.

• (e) The Group recognised lease liabilities which had previously been classified as

• ‘operating leases’under the principles of IAS 17, ‘Leases’. The reconciliation between operating lease commitments under IAS 17 measured at the present value of the remaining lease payments,discounted using the lessee’s incremental borrowing rate and lease liabilities recognised as of January 1, 2019 is as follows:

recognised as of January 1, 2019 is as follows:
Operating lease commitments disclosed by applying IAS 17 as at December 31, 2018		$	207,433
Add: Lease payable recognised under finance lease by
applying IAS 17 as at December 31, 2018			-
Less: Short-term leases	(		956)
Less: Low-value assets	(		1,056)
Total lease contracts amount recognised as lease liabilities by applying
IFRS 16 on January 1, 2019		$	205,421
Incremental borrowing interest rate at the date of
initial application			0.75%~10.88%
Lease liabilities recognised as at January 1, 2019 by applying IFRS 16		$	197,151

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

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

follows:
New Standards,Interpretations andAmendments	Effective date by International Accounting StandardsBoard
Amendment to IAS 1 and IAS 8, ‘Disclosure Initiative-Definition of Material’ Amendments to IFRS 3, ‘Definition of a business’ Amendments to IFRS 9, IAS 39 and IFRS 7 ,‘Interest rate benchmark reform’	January 1, 2020 January 1, 2020 January 1, 2020

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

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IFRSs issued by IASB but not yet endorsed by the FSC

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

New Standards, Interpretations and Amendments Amendments to IFRS 10 and IAS 28, ‘Sale or contribution of assets between an investor and its associate or joint venture’

IFRS 17, ‘Insurance contracts’ Amendments to IAS 1, ‘Classification of liabilities as current or non-current’

Effective date by International Accounting Standards Board To be determined by International Accounting Standards Board January 1, 2021 January 1, 2021

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

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

• (1) Compliance statement

The consolidated financial statements of the Group have been prepared in accordance with the “Regulations Governing the Preparation of Financial Reports by Securities Issuers”, International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the FSC (collectively referred herein as the “IFRSs”).

• (2) Basis of preparation

• A. Except for the following items, the consolidated financial statements have been prepared under the historical cost convention:

  • (a) Financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss.

  • (b) Financial assets and liabilities at fair value through other comprehensive income measured at fair value.

  • (c) Defined benefit liabilities recognised based on the net amount of pension fund assets less present value of defined benefit obligation.

• B. The preparation of financial statements in conformity with IFRSs requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 5.

• (3) Basis of consolidation

• A. Basis for preparation of consolidated financial statements:

  • (a) All subsidiaries are included in the Group’s consolidated financial statements. Subsidiaries are all entities (including structured entities) controlled by the Group. The Group controls an entity when the Group is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Consolidation of subsidiaries begins from the date the Group obtains control of the subsidiaries and ceases when the Group loses control of the subsidiaries.

  • (b) Inter-company transactions, balances and unrealised gains or losses on transactions between companies within the Group are eliminated. Accounting policies of subsidiaries have been adjusted where necessary to ensure consistency with the policies adopted by the Group.

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• (c) Profit or loss and each component of other comprehensive income are attributed to the owners of the parent and to the non-controlling interests. Total comprehensive income is attributed to the owners of the parent and to the non-controlling interests even if this results in the noncontrolling interests having a deficit balance.

• (d) Changes in a parent’s ownership interest in a subsidiary that do not result in the parent losing control of the subsidiary (transactions with non-controlling interests) are accounted for as equity transactions, i.e. transactions with owners in their capacity as owners. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity.

• (e) When the Group loses control of a subsidiary, the Group remeasures any investment retained in the former subsidiary at its fair value. That fair value is regarded as the fair value on initial recognition of a financial asset or the cost on initial recognition of the associate or joint venture. Any difference between fair value and carrying amount is recognised in profit or loss. All amounts previously recognised in other comprehensive income in relation to the subsidiary are reclassified to profit or loss on the same basis as would be required if the related assets or liabilities were disposed of. That is, when the Group loses control of a subsidiary, all gains or losses previously recognised in other comprehensive income in relation to the subsidiary should be reclassified from equity to profit or loss, if such gains or losses would be reclassified to profit or loss when the related assets or liabilities are disposed of.

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B. Subsidiaries included in the consolidated financial statements:

Name of Name of Main business investor subsidiary activities MEHO MERRY ELECTRONICS (HK) CO., LTD. ("MEST") Trading of the same products as the Company's. MEHO MERRY ELECTRONICS (THAILAND) CO.,LTD.("METC") The same main business as the Company's. MEHO MERRY ELECTRONICS (U.S.A.) CO.,LTD. ("MECA") Agency sales of microphone and security system manufactured by affiliates. MEHO DANNY DYNAMICS LIMITED("DDBV") It is engaged in general investment business. MEHO MERRY ELECTRONICS (SINGAPORE) PTE.LTD. ("MESG") Manufacturing of other electronic components and circuit board. MEHO MERRY HEALTHCARE CO., LTD. ("MHKY") It is engaged in sales of medical device. MEHO ASIAN ELITE INTERNATIONA L LTD.("MSCS") Manufacturing and sales of speaker and amplifier. MEHO Indigo Enterprise Inc.("INSA") It is engaged in general investment business. MEHO BIOTEST MEDICAL CORPORATION ("BTTT") It is engaged in manufacturing of medical device. MEST MERRY ELECTRONICS (SHENZHEN)CO., LTD. ("MECL") The same main business as the Company's.	December31,2019 December31,2018 100.00% 100.00% 99.99% 99.99% 99.90% 99.90% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 70.00% 70.00% 70.00% 70.00% 100.00% - 100.00% 100.00% Ownership(%)	December31,2019 December31,2018 100.00% 100.00% 99.99% 99.99% 99.90% 99.90% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 70.00% 70.00% 70.00% 70.00% 100.00% - 100.00% 100.00% Ownership(%)	Description
	100.00% 99.99% 99.90% 100.00% 100.00% 100.00% 70.00% 70.00% 100.00% 100.00%	100.00% 99.99% 99.90% 100.00% 100.00% 100.00% 70.00% 70.00% - 100.00%	NOTE 4 NOTE 8 NOTE 2 NOTE 2、9 NOTE 19

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Name of Name of Main business investor subsidiary activities DDBV Universal Capital Investment Limited ("UCMU") It is engaged in general investment business. DDBV MERRYTECH (HK) CO.LIMITED ("MTHK") It is engaged in general investment business. INSA Sonavox Canada Inc. ("SOCV") Develop-to-order and appearance design of speaker and amplifier. SOCV Sonavox Canada Holding. ("SOCA") It is engaged in general investment business. SOCA Seas Fabrikker ("SENM") Manufacturing and sales of speaker monomer. MHKY FULICARE CO., LTD. ("FUSA") It is engaged in general investment business. FUSA Fulicare Medical Instruments (Suzhou)Co.,Ltd ("FUCS") It is engaged in manufacturing of medical device. FUSA Fulicare Medical Instruments Technical Services (Suzhou)Co.,Ltd ("MHTS") Providing medical device and technical service. FUSA Fulicare Medical Instruments (Xiamen) Co.,Ltd ("FUCX") It is engaged in manufacturing of medical device. FUCS Fulicare Medical Instruments (Suzhou)Co.,Ltd ("MHMI") It is engaged in sales of medical device.	December31,2019 December31,2018 Ownership(%) 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 0.00% 100.00% 100.00% - 100.00% 100.00%	Description
		NOTE 6 NOTE 2、5 NOTE 2、10 NOTE 2 NOTE 11、20 NOTE 12 NOTE 13 NOTE 7 NOTE 12

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Name of Name of Main business investor subsidiary activities FUCS Xiamen Etimbre Hearing Technology Co.LTD ("ETCX") Research and development, manufacturing as well as sales of hearing aid, hearing device and acoustics equipment. FUSA 、 FUCS Austar Hearing Science And Technology (Xiamen) Co. , Ltd ("ASCX") Research and development, manufacturing as well as sales of hearing aid, hearing device and acoustics equipment. ASCX Austar Hearing Science And Technology (Zhangzhou) Co., Ltd.("MHCZ") It is engaged in manufacturing of hearing aid and acoustics for rehabilitation device. ASCX Xiamen Laiyate Medical Devices Co. , Ltd ("LACX") It is engaged in research and development as well as technical sales of software functions for hearing aid.	December31,2019 December31,2018 Ownership(%) 100.00% 100.00% 99.50% - 100.00% 100.00% 100.00% 100.00%	Description
		NOTE 3、15 NOTE 3、16 NOTE 3、17 NOTE 3、18

• Note 1: The Group established the subsidiary, Fulicare Medical Instruments (Suzhou) Co., Ltd., in

• May 2018.

• Note 2: The Group acquired Indigo Enterprise Inc. and Asian Elite International Ltd. in July 2018.

• Note 3: The Group acquired 99.5% of shares in Austar Hearing Science And Technology （ Xiamen) Co., Ltd. through jointly holding by MHFM and MHFC as well as acquired 100% of shares in Xiamen Etimbre Hearing Technology Co.LTD through MHFM.

• Note 4: The Group amended abbreviation of ‘DANNY DYNAMICS LIMITED’for the year, the former abbreviation was ‘DANNY’.

• Note 5: The Group amended abbreviation of ‘Sonavox Canada Inc.’ for the year, the former abbreviation was ‘SECV’.

• Note 6:The Group amended abbreviation of ‘MERRYTECH(HK) CO.LIMITED’for the year, the former abbreviation was ‘MTCH’.

• Note 7: The Group established the subsidiary, Fulicare Medical Instruments (Xiamen) Co., Ltd., in June 10, 2019.

• Note 8: The Group amended abbreviation of ‘MERRY HEALTHCARE CO.,LTD’ for the year, the former abbreviation was ‘MHCH’.

• Note 9: The Group amended abbreviation of ‘Indigo Enterprises Inc.’ for the year, the former abbreviation was ‘IEAA’.

• Note 10: The Group amended abbreviation of ‘Sonavox Canada Holding.’ for the year, the former abbreviation was ‘SECH’.

• Note 11: The Group amended abbreviation of ‘FULICARE CO., LTD.’ for the year, the former

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abbreviation was ‘MHFC’.

• Note 12: The Group amended abbreviation of ‘Fulicare Medical Instruments (Suzhou) Co., Ltd.,’ for the year, the former abbreviation was ‘MHFM’.

• Note 13: The liquidation of Fulicare Medical Instruments Technical Services (Suzhou) Co., Ltd was completed in May 2019.

• Note 14: The liquidation of Fulicare Medical Instruments (Suzhou) Co., Ltd was completed in April 2019.

• Note 15: The Group amended abbreviation of ‘ Xiamen Etimbre Hearing Technology Co.,Ltd’ for the year, the former abbreviation was ‘MHEH’.

• Note 16: The Group amended abbreviation of ‘Austar Hearing Science &Technology (Xiamen) Co., Ltd’ for the year, the former abbreviation was ‘MHAT’.

• Note 17: The Group amended abbreviation of ‘Zhangzhou Austar Hearing Science &Technology Co., Ltd’ for the year, the former abbreviation was ‘MHCZ’.

• Note 18:The Group amended abbreviation of ‘Xiamen Laiyate Medical Devices Co., Ltd’ for the year, the former abbreviation was ‘MHLA’.

• Note 19: In July 2019, Biotest Medical Corp. was merged with the Group.

• Note 20: On December 27, 2018, the Board of Directors of the Group approved the software cooperation and issued new shares as reward.

• C. Subsidiaries not included in the consolidated financial statements: None.

• D. Adjustments for subsidiaries with different balance sheet dates: None.

• E. Significant restrictions

  • None.

• F. Subsidiaries that have non-controlling interests that are material to the Group: None.

• (4) Foreign currency translation

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). The consolidated financial statements are presented in New Taiwan dollars, which is the Company’s functional and the Group’s presentation currency.

• A. Foreign currency transactions and balances

• (a) Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are remeasured. Foreign exchange gains and losses resulting from the settlement of such transactions are recognised in profit or loss in the period in which they arise,

• (b) Monetary assets and liabilities denominated in foreign currencies at the period end are retranslated at the exchange rates prevailing at the balance sheet date. Exchange differences arising upon re-translation at the balance sheet date are recognised in profit or loss.

• (c) Non-monetary assets and liabilities denominated in foreign currencies held at fair value through profit or loss are re-translated at the exchange rates prevailing at the balance sheet date; their translation differences are recognised in profit or loss. Non-monetary assets and liabilities denominated in foreign currencies held at fair value through other comprehensive income are re-translated at the exchange rates prevailing at the balance sheet date; their translation differences are recognised in other comprehensive income. However, nonmonetary assets and liabilities denominated in foreign currencies that are not measured at fair value are translated using the historical exchange rates at the dates of the initial transactions.

• (d) All other foreign exchange gains and losses based on the nature of those transactions are presented in the statement of comprehensive income within ‘Other gains and losses’.

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• B. Translation of foreign operations

  • (a) The operating results and financial position of all the group entities, associates and joint arrangements that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

    • i. Assets and liabilities for each balance sheet presented are translated at the closing exchange rate at the date of that balance sheet;

    • ii. Income and expenses for each statement of comprehensive income are translated at average exchange rates of that period; and

    • iii. All resulting exchange differences are recognised in other comprehensive income.

  • (b) When the foreign operation partially disposed of or sold is a subsidiary, cumulative exchange differences that were recorded in other comprehensive income are proportionately transferred to the non-controlling interest in this foreign operation. In addition, even when the Group retains partial interest in the former foreign subsidiary after losing control of the former foreign subsidiary, such transactions should be accounted for as disposal of all interest in the foreign operation.

  • (c) Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing exchange rates at the balance sheet date.

• (5) Classification of current and non-current items

• A. Assets that meet one of the following criteria are classified as current assets; otherwise they are classified as non-current assets:

  • (a) Assets arising from operating activities that are expected to be realised, or are intended to be sold or consumed within the normal operating cycle;

  • (b) Assets held mainly for trading purposes;

  • (c) Assets that are expected to be realised within twelve months from the balance sheet date;

  • (d) Cash and cash equivalents, excluding restricted cash and cash equivalents and those that are to be exchanged or used to settle liabilities more than twelve months after the balance sheet date.

• B. Liabilities that meet one of the following criteria are classified as current liabilities; otherwise they are classified as non-current liabilities:

  • (a) Liabilities that are expected to be settled within the normal operating cycle;

  • (b) Liabilities arising mainly from trading activities;

  • (c) Liabilities that are to be settled within twelve months from the balance sheet date;

  • (d) Liabilities for which the repayment date cannot be extended unconditionally to more than twelve months after the balance sheet date. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.

• (6) Cash equivalents

• Cash equivalents refer to short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Time deposits that meet the definition above and are held for the purpose of meeting short-term cash commitments in operations are classified as cash equivalents.

• (7) Financial assets at fair value through profit or loss

• A. Financial assets at fair value through profit or loss are financial assets that are not measured at amortised cost or fair value through other comprehensive income.

• B. On a regular way purchase or sale basis, financial assets at fair value through profit or loss are recognised and derecognised using trade date accounting.

• C. At initial recognition, the Group measures the financial assets at fair value and recognises the transaction costs in profit or loss. The Group subsequently measures the financial assets at fair

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value, and recognises the gain or loss in profit or loss.

• D. The Group recognises the dividend income when the right to receive payment is established, future economic benefits associated with the dividend will flow to the Group and the amount of the dividend can be measured reliably.

• (8) Financial assets at fair value through other comprehensive income

• A. Financial assets at fair value through other comprehensive income comprise equity securities which are not held for trading, and for which the Group has made an irrevocable election at initial recognition to recognise changes in fair value in other comprehensive income and debt instruments which meet all of the following criteria:

• (a) The objective of the Group’s business model is achieved both by collecting contractual cash flows and selling financial assets; and

• (b) The assets’ contractual cash flows represent solely payments of principal and interest.

• B. On a regular way purchase or sale basis, financial assets at fair value through other comprehensive income are recognised and derecognised using trade date accounting.

• C. At initial recognition, the Group measures the financial assets at fair value plus transaction costs.The Group subsequently measures the financial assets at fair value:

• (a) The changes in fair value of equity investments that were recognised in other comprehensive income are reclassified to retained earnings and are not reclassified to profit or loss following the derecognition of the investment. Dividends are recognised as revenue when the right to receive payment is established, future economic benefits associated with the dividend will flow to the Group and the amount of the dividend can be measured reliably.

• (b) Except for the recognition of impairment loss, interest income and gain or loss on foreign exchange which are recognised in profit or loss, the changes in fair value of debt instruments are taken through other comprehensive income. When the financial asset is derecognised, the cumulative gain or loss previously recognised in other comprehensive income is reclassified from equity to profit or loss.

• (9) Accounts and notes receivable

• A. Accounts and notes receivable entitle the Group a legal right to receive consideration in exchange for transferred goods or rendered services.

• B. The short-term accounts and notes receivable without bearing interest are subsequently measured at initial invoice amount as the effect of discounting is immaterial.

• (10) Impairment of financial assets

• For debt instruments measured at fair value through other comprehensive income including accounts receivable at each reporting date, the Group recognises the impairment provision for 12 months expected credit losses if there has not been a significant increase in credit risk since initial recognition or recognises the impairment provision for the lifetime expected credit losses (ECLs) if such credit risk has increased since initial recognition after taking into consideration all reasonable and verifiable information that includes forecasts. On the other hand, for accounts receivable or contract assets that do not contain a significant financing component, the Group recognises the impairment provision for lifetime ECLs.

• (11) Derecognition of financial assets

• The Group derecognises a financial asset when the contractual rights to receive the cash flows from the financial asset expire.

• The Group derecognises a financial asset when one of the following conditions is met:

• A. The contractual rights to receive the cash flows from the financial asset expire.

• B. The contractual rights to receive cash flows of the financial asset have been transferred and the Group has transferred substantially all risks and rewards of ownership of the financial asset.

• C. The contractual rights to receive cash flows of the financial asset have been transferred; however, the Group has not retained control of the financial asset.

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• (12) Inventories

• Inventories are stated at the lower of cost and net realisable value. Cost is determined using the weighted-average method. The cost of finished goods and work in progress comprises raw materials, direct labour, other direct costs and related production overheads (allocated based on normal operating capacity). It excludes borrowing costs. The item by item approach is used in applying the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated cost of completion and applicable variable selling expenses.

• (13) Investments accounted for using equity method / associates

• A. Associates are all entities over which the Group has significant influence but not control. In general, it is presumed that the investor has significant influence, if an investor holds, directly or indirectly 20 percent or more of the voting power of the investee. Investments in associates are accounted for using the equity method and are initially recognised at cost.

• B. The Group’s share of its associates’ post-acquisition profits or losses is recognised in profit or loss, and its share of post-acquisition movements in other comprehensive income is recognised in other comprehensive income. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the associate.

• C. When changes in an associate’s equity do not arise from profit or loss or other comprehensive income of the associate and such changes do not affect the Group’s ownership percentage of the associate, the Group recognises change in ownership interests in the associate in ‘capital surplus’ in proportion to its ownership.

• D. Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been adjusted where necessary to ensure consistency with the policies adopted by the Group.

• (14) Property, plant and equipment

• A. Property, plant and equipment are initially recorded at cost. Borrowing costs incurred during the construction period are capitalised.

• B. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to profit or loss during the financial period in which they are incurred.

• C. Land is not depreciated. Other property, plant and equipment apply cost model and are depreciated using the straight-line method to allocate their cost over their estimated useful lives. Each part of an item of property, plant, and equipment with a cost that is significant in relation to the total cost of the item must be depreciated separately.

• D. The assets’ residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each financial year-end. If expectations for the assets’ residual values and useful lives differ from previous estimates or the patterns of consumption of the assets’ future economic benefits embodied in the assets have changed significantly, any change is accounted for as a change in estimate under IAS 8, ‘Accounting Policies, Changes in Accounting Estimates and Errors’, from the date of the change. The estimated useful lives of property, plant and equipment are as follows:

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Buildings and structures	5~60 years
Machinery and equipment	2~12 years
Transportation equipment	7~12 years
Office equipment	3~10 years
Others	1~10 years

(15) Leasing arrangements (lessee) － right-of-use assets/ lease liabilities

• Effective 2019

• A. Leases are recognised as a right-of-use asset and a corresponding lease liability at the date at which the leased asset is available for use by the Group. For short-term leases or leases of low value assets, lease payments are recognised as an expense on a straight-line basis over the lease term.

• B. Lease liabilities include the net present value of the remaining lease payments at the commencement date, discounted using the incremental borrowing interest rate. Lease payments are comprised of the fixed payments, less any lease incentives receivable.

  • The Group subsequently measures the lease liability at amortised cost using the interest method and recognises interest expense over the lease term. The lease liability is remeasured and the amount of remeasurement is recognised as an adjustment to the right-of-use asset when there are changes in the lease term or lease payments and such changes do not arise from contract modifications.

• C. At the commencement date, the right-of-use asset is stated at cost comprising the following: (a) The amount of the initial measurement of lease liability;

  • (b) Any lease payments made at or before the commencement date; and

  • (c) Any initial direct costs incurred by the lessee.

  • The right-of-use asset is measured subsequently using the cost model and is depreciated from the commencement date to the earlier of the end of the asset’s useful life or the end of the lease term. When the lease liability is remeasured, the amount of remeasurement is recognised as an adjustment to the right-of-use asset.

• (16) Leased assets/ operating leases (lessee)

Prior to 2018

Payments made under an operating lease (net of any incentives received from the lessor) are recognised in profit or loss on a straight-line basis over the lease term.

• (17) Intangible assets

• A. Computer software

Computer software is stated at cost and amortised on a straight-line basis over its estimated useful life of 1 to 10 years.

• B. Goodwill

  • Goodwill arises in a business combination accounted for by applying the acquisition method.

• C. Intangible assets, mainly patent rights, trademark rights and business rights, are amortised on a straight-line basis over their estimated useful lives of 3 to 10 years.

• (18) Impairment of non-financial assets

• A. The Group assesses at each balance sheet date the recoverable amounts of those assets where there is an indication that they are impaired. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell or value in use. Except for goodwill, when the circumstances or reasons for recognizing impairment loss for an asset in prior years no longer exist or diminish, the impairment loss is reversed. The increased carrying amount due to reversal should not be more than what the depreciated or amortised historical cost would have been if the impairment had not been recognised.

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• B. The recoverable amounts of goodwill, intangible assets with an indefinite useful life and intangible assets that have not yet been available for use are evaluated periodically. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. Impairment loss of goodwill previously recognised in profit or loss shall not be reversed in the following years.

• C. For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the cash-generating units, or groups of cash-generating units, that is/are expected to benefit from the synergies of the business combination. Each unit or group of units to which the goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes. Goodwill is monitored at the operating segment level.

• (19) Borrowings

• Borrowings comprise long-term and short-term bank borrowings. Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in profit or loss over the period of the borrowings using the effective interest method.

• (20) Notes and accounts payable

• A. Accounts payable are liabilities for purchases of raw materials, goods or services and notes payable are those resulting from operating and non-operating activities.

• B. The short-term notes and accounts payable without bearing interest are subsequently measured at initial invoice amount as the effect of discounting is immaterial.

• (21) Financial liabilities at fair value through profit or loss

• A. Financial liabilities are classified in this category of held for trading if acquired principally for the purpose of repurchasing in the short-term or financial liabilities at fair value through profit or loss. Financial liabilities that meet one of the following criteria are designated as at fair value through profit or loss at initial recognition:

• (a) Hybrid (combined) contracts; or

• (b) They eliminate or significantly reduce a measurement or recognition inconsistency; or

• (c) They are managed and their performance is evaluated on a fair value basis, in accordance with a documented risk management policy.

• B. At initial recognition, the Group measures the financial liabilities at fair value. All related transaction costs are recognised in profit or loss. The Group subsequently measures these financial liabilities at fair value with any gain or loss recognised in profit or loss.

• (22) Convertible bonds payable

• A. Convertible bonds issued by the Group contain conversion options (that is, the bondholders have the right to convert the bonds into the Group’s common shares by exchanging a fixed amount of cash for a fixed number of common shares), call options and put options. The Group classifies the bonds payable upon issuance as a financial asset, a financial liability or an equity instrument in accordance with the contract terms. They are accounted for as follows:

• (a) The embedded call options and put options are recognised initially at net fair value as ‘financial assets or financial liabilities at fair value through profit or loss’. They are subsequently remeasured and stated at fair value on each balance sheet date; the gain or loss is recognised as ‘gain or loss on valuation of financial assets or financial liabilities at fair value through profit or loss’.

• (b) The host contracts of bonds are initially recognised at fair value. Any difference between the initial recognition and the redemption value is accounted for as the premium or discount on bonds payable and subsequently is amortised in profit or loss as an adjustment to ‘ finance costs ’ over the period of circulation using the effective interest method.

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  - (c) The embedded conversion options which meet the definition of an equity instrument are initially recognised in ‘capital surplus—share options’ at the residual amount of total issue price less the amount of financial assets or financial liabilities at fair value through profit or loss and bonds payable as stated above. Conversion options are not subsequently remeasured.

  - (d) Any transaction costs directly attributable to the issuance are allocated to each liability or equity component in proportion to the initial carrying amount of each abovementioned item.

  - (e) When bondholders exercise conversion options, the liability component of the bonds (including bonds payable and `‘` financial assets or financial liabilities at fair value through profit or loss `’` ) shall be remeasured on the conversion date. The issuance cost of converted common shares is the total book value of the abovementioned liability component and ‘capital surplus—share options’.

• (23) Derecognition of financial liabilities

• A financial liability is derecognised when the obligation specified in the contract is either discharged or cancelled or expires.

• (24) Non-hedging and embedded derivatives

Non-hedging derivatives are initially recognised at fair value on the date a derivative contract is entered into and recorded as financial assets or financial liabilities at fair value through profit or loss. They are subsequently remeasured at fair value and the gains or losses are recognised in profit or loss.

• (25) Provisions

Provisions (including warranties, decommissioning, restructuring, onerous contracts, and contingent liabilities from business combinations, etc.) are recognised when the Group has a present legal or constructive obligation as a result of past events, and it is probable that an outflow of economic resources will be required to settle the obligation and the amount of the obligation can be reliably estimated. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation on the balance sheet date, which is discounted using a pre-tax discount rate that reflects the current market assessments of the time value of money and the risks specific to the obligation. When discounting is used, the increase in the provision due to passage of time is recognised as interest expense. Provisions are not recognised for future operating losses.

• (26) Employee benefits

• A. Short-term employee benefits

Short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in respect of service rendered by employees in a period and should be recognised as expense in that period when the employees render service.

• B. Pensions

• (a) Defined contribution plans

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

• (b) Defined benefit plans

• i. Net obligation under a defined benefit plan is defined as the present value of an amount of pension benefits that employees will receive on retirement for their services with the Group in current period or prior periods. The liability recognised in the balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the balance sheet date less the fair value of plan assets. The net defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The rate used to discount is determined by using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension liability; when there is no

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deep market in high-quality corporate bonds, the Group uses interest rates of government bonds (at the balance sheet date) instead.

     - ii. Remeasurements arising on defined benefit plans are recognised in other comprehensive income in the period in which they arise and are recorded as retained earnings.

• C. Employees’ compensation and directors’ and supervisors’ remuneration

  • Employees’ compensation and directors’ and supervisors’ remuneration are recognised as expense and liability, provided that such recognition is required under legal or constructive obligation and those amounts can be reliably estimated. Any difference between the resolved amounts and the subsequently actual distributed amounts is accounted for as changes in estimates. If employee compensation is paid by shares, the Company calculates the number of shares based on the closing price at the previous day of the board meeting resolution.

• (27) Employee share based payment

• A. For the equity-settled share-based payment arrangements, the employee services received are measured at the fair value of the equity instruments granted at the grant date, and are recognised as compensation cost over the vesting period, with a corresponding adjustment to equity. The fair value of the equity instruments granted shall reflect the impact of market vesting conditions and non-vesting conditions. Compensation cost is subject to adjustment based on the service conditions that are expected to be satisfied and the estimates of the number of equity instruments that are expected to vest under the non-market vesting conditions at each balance sheet date. Ultimately, the amount of compensation cost recognised is based on the number of equity instruments that eventually vest.

• B. Restricted stocks:

  • (a) Restricted stocks issued to employees are measured at the fair value of the equity instruments granted at the grant date, and are recognised as compensation cost over the vesting period.

  • (b) For restricted stocks where those stocks do not restrict distribution of dividends to employees and employees are not required to return the dividends received if they resign during the vesting period, the Group recognises the fair value of the dividends received by the employees who are expected to resign during the vesting period as compensation cost at the date of dividends declared.

  • (c) For restricted stocks where employees have to pay to acquire those stocks, if employees resign during the vesting period, they must return the stocks to the Group and the Group must refund their payments on the stocks, the Group recognises the payments from the employees who are expected to resign during the vesting period as liabilities at the grant date, and recognises the payments from the employees who are expected to be eventually vested with the stocks in ’capital surplus – others’.

• (28) Income tax

• A. The tax expense for the period comprises current and deferred tax. Tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or items recognised directly in equity, in which cases the tax is recognised in other comprehensive income or equity.

• B. The current income tax expense is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the Company and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in accordance with applicable tax regulations. It establishes provisions where appropriate based on the amounts expected to be paid to the tax authorities. An additional tax is levied on the unappropriated retained earnings and is recorded as income tax expense in the year the stockholders resolve to retain the earnings.

• C. Deferred tax is recognised, using the balance sheet liability method, on temporary differences

~29~

arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated balance sheet. However, the deferred tax is not accounted for if it arises from initial recognition of goodwill or of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred tax is provided on temporary differences arising on investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.

• D. Deferred tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. At each balance sheet date, unrecognised and recognised deferred tax assets are reassessed.

• E. A deferred tax asset shall be recognised for the carryforward of unused tax credits resulting from acquisitions of equipment or technology, research and development expenditures and equity investments to the extent that it is possible that future taxable profit will be available against which the unused tax credits can be utilised.

• (29) Share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or stock options are shown in equity as a deduction, net of tax, from the proceeds.

• (30) Dividends

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

• (31) Revenue recognition

• A. Sales of goods

  • (a) The Group manufactures and sells radio apparatus, communication devices, consumer electronics as well as electronic parts and components. Sales are recognised when control of the products has transferred, being when the products are delivered to the wholesaler, the wholesaler has full discretion over the channel and price to sell the products, and there is no unfulfilled obligation that could affect the wholesaler’s acceptance of the products. Delivery occurs when the products have been shipped to the specific location, the risks of obsolescence and loss have been transferred to the wholesaler, and either the wholesaler has accepted the products in accordance with the sales contract, or the Group has objective evidence that all criteria for acceptance have been satisfied.

  • (b) The furniture is often sold with volume discounts based on aggregate sales over a 12-month period. Revenue from these sales is recognised based on the price specified in the contract, net of the estimated sales discounts. Accumulated experience is used to estimate and provide for the sales discounts and allowances, using the expected value method, and revenue is only recognised to the extent that it is highly probable that a significant reversal will not occur. The estimation is subject to an assessment at each reporting date. A refund liability is recognised for expected sales discounts and allowances payable to customers in relation to sales made until the end of the reporting period. The sales usually are made with a credit term of 30 days. As the time interval between the transfer of committed goods or service and the payment of customer does not exceed one year, the Group does not adjust the transaction price to reflect the time value of money.

  • (c) A receivable is recognised when the goods are delivered as this is the point in time that the

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consideration is unconditional because only the passage of time is required before the payment is due.

• (32) Government grants

• Government grants are recognised at their fair value only when there is reasonable assurance that the Group will comply with any conditions attached to the grants and the grants will be received. Government grants are recognised in profit or loss on a systematic basis over the periods in which the Group recognises expenses for the related costs for which the grants are intended to compensate. Government grants related to property, plant and equipment are recognised as non-current liabilities and are amortised to profit or loss over the estimated useful lives of the related assets using the straight-line method.

• (33) Business combinations

• A. The Group uses the acquisition method to account for business combinations. The consideration transferred for an acquisition is measured as the fair value of the assets transferred, liabilities incurred or assumed and equity instruments issued at the acquisition date, plus the fair value of any assets and liabilities resulting from a contingent consideration arrangement. All acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. For each business combination, the Group measures at the acquisition date components of non-controlling interests in the acquiree that are present ownership interests and entitle their holders to the proportionate share of the entity’s net assets in the event of liquidation at either fair value or the present ownership instruments’ proportionate share in the recognised amounts of the acquiree’s identifiable net assets. All other non-controlling interests should be measured at the acquisition-date fair value.

• B. The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the fair value of any previous equity interest in the acquiree over the fair value of the identifiable assets acquired and the liabilities assumed is recorded as goodwill at the acquisition date. If the total of consideration transferred, non-controlling interest in the acquiree recognised and the fair value of previously held equity interest in the acquiree is less than the fair value of the identifiable assets acquired and the liabilities assumed, the difference is recognised directly in profit or loss on the acquisition date.

• (34) Operating segments

• Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The Group’s chief operating decision-maker is responsible for allocating resources and assessing performance of the operating segments.

• CRITICAL ACCOUNTING JUDGEMENTS, ESTIMATES AND KEY SOURCES OF ASSUMPTION UNCERTAINTY

• The preparation of these consolidated financial statements requires management to make critical judgements in applying the Group’s accounting policies and make critical assumptions and estimates concerning future events. Assumptions and estimates may differ from the actual results and are continually evaluated and adjusted based on historical experience and other factors. Such assumptions and estimates have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year; and the related information is addressed below:

• (1) Critical accounting estimates and assumptions

• A. Impairment assessment of goodwill

• The impairment assessment of goodwill relies on the Group’s subjective judgement, including identifying cash-generating units, allocating assets and liabilities as well as goodwill to related cash-generating units, and determining the recoverable amounts of related cash-generating units. As of December 31, 2019, the Group recognised goodwill, net of impairment loss, amounted to $937,379.

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B. Evaluation of inventories

As inventories are stated at the lower of cost and net realisable value, the Group must determine the net realisable value of inventories on balance sheet date using judgements and estimates. Due to the rapid technology innovation, the Group evaluates the amounts of normal inventory consumption, obsolete inventories or inventories without market selling value on balance sheet date, and writes down the cost of inventories to the net realisable value. Such an evaluation of inventories is principally based on the demand for the products within the specified period in the future. Therefore, there might be material changes to the evaluation. As of December 31, 2019, the carrying amount of inventories was $2,117,532.

6. DETAILS OF SIGNIFICANT ACCOUNTS

(1) Cash and cash equivalents

December31,2019 Cash on hand and revolving funds 723 $ Checking accounts and demand deposits 4,445,967 Time deposits 774,145 Short-term paper 1,369,028 6,589,863 $	December31,2018 4,358 $ 4,663,889 3,224,030 619,842 8,512,119 $

• A. The Group transacts with a variety of financial institutions all with high credit quality to disperse credit risk, so it expects that the probability of counterparty default is remote.

• B. The Group has no cash and cash equivalents pledged to others.

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

Items Current items: Financial assets mandatorily measured at fair value through profit or loss - Funds - Non-hedging derivatives - Stocks - Call options of convertible bonds Valuation adjustment Non-current items: - Funds Items Current items: Financial liabilities held for trading - Non-hedging derivatives	December31,2019 December31,2018 - $ 51,262 $ 14,138 6,176 169 108,949 2,290 4,200 316 4,539) ( 16,913 $ 166,048 $ 21,301 $ 18,174 $ December31,2019 December31,2018 11,799 $ 6,976 $

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

Year ended Year ended December 31, 2019 December 31, 2018 Net gains on financial assets at fair value through profit or loss $ 69,428 $ 62,842

• B. The Group entered into contracts relating to derivative financial assets which were not accounted for under hedge accounting. The information is listed below:

Derivativeinstruments		Contract amount (Notionalprincipal) Contract period Contract price USD63,000 thousand 2019/12/12~ 2020/2/27 NTD 30.017~30.310 USD63,000 thousand 2019/12/12~ 2020/2/27 NTD 29.935~30.220 Contract amount (Notionalprincipal) Contract period Contract price USD54,300 thousand 2018/12/12~ 2019/1/29 NTD 30.649~30.756 USD 54,300 thousand 2018/12/12~ 2019/1/29 NTD 30.709~30.811 December 31, 2019 December 31, 2018
Forward foreign exchange contract to sell Forward foreign exchange contract to buy Derivativeinstruments
Forward foreign exchange contract to sell Forward foreign exchange contract to buy

The group entered into forward foreign exchange contracts to hedge exchange rate risk of import and export proceeds. However, these forward foreign exchange contracts are not accounted for under hedge accounting.

• C. As of December 31, 2019 and 2018, there was no uncollected proceeds.

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

(Remainder of page intentionally left blank)

~33~

(3) Financial assets at fair value through other comprehensive income

Items		December31,2019			December31,2018
Current items:
Debt instruments
Closed-end fund	$	-		$	50,000
Bonds		119,854			120,421
Valuation adjustment		867			3,855
		120,721			174,276
Equity instruments
Stocks		76,080			83,834
Valuation adjustment		5,276			1,116
Total		81,356			84,950
	$	202,077		$	259,226
Non-current items:
Equity instruments
Listed stocks		775,130			748,154
Emerging stocks		-			40,106
Unlisted stocks		64,182			77,532
Total		839,312			865,792
Valuation adjustment		1,697,071			619,963
Accumulated impairment	(	2,976)	(		2,976)
	$	2,533,407		$	1,482,779

• A. The Group has elected to classify equity and debt investments that are considered to be strategic investments or steady dividend income as financial assets at fair value through other comprehensive income. The fair value of such investments amounted to $2,735,484 as at December 31, 2019 and 2018, respectively.

• B. During the year ended December 31, 2019, the Group repurchased bond investments at fair value of $50,833 thousand due to the maturity of bonds and resulted in cumulative losses on disposal amounting to $833 thousand (shown as other gains and losses). Aiming to satisfy its capital needs, the Company sold $88,988 thousand of equity investments at fair value and resulted in cumulative gains on disposal amounting to $68,104 thousand (transferred from other equity interest to unappropriated retained earnings) during the year ended December 31, 2019. During the year ended December 31, 2018, the Company redeemed the debt investment at fair value of $156,192 thousand due to maturity of bond which resulted in cumulated gain on disposals was $13,602 thousand (shown as other gains and losses). Aiming to satisfy the capital needs, the Company sold $443,288 thousand of equity investment at fair value which resulted in cumulative gains on disposal amounting to $346,726 thousand (transferred from other equity interest to unappropriated earnings) during the year ended December 31, 2018.

~34~

• C. Amounts recognised in profit or loss and other comprehensive income in relation to the financial assets at fair value through other comprehensive income are listed below:

2019 2018

==> picture [470 x 210] intentionally omitted <==

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

Equity instruments at fair value through other
comprehensive income
Fair value change recognised in other
comprehensive income $ 1,150,648 ($ 2,530,480)
Cumulative losses reclassified to
retained earnings due to derecognition ($ 68,104) ($ 346,726)
Debt instruments at fair value through other
comprehensive income
Fair value change recognised in other
($ 2,111) $ 5,037
comprehensive income
Cumulative other comprehensive income
reclassified to profit or loss
Reclassified due to derecognition ($ 833) $ 13,602
Interest income recognised in profit or loss $ 4,922 $ 6,190
----- End of picture text -----

• D. As at December 31, 2019 and 2018, without taking into account any collateral held or other credit enhancements, the maximum exposure to credit risk in respect of the amount that best represents the financial assets at fair value through other comprehensive income held by the Group was $2,735,484 and $1,742,005, respectively.

• E. Information relating to credit risk of financial assets at fair value through other comprehensive income is provided in Note 12(2).

• F. The counterparties of the Company’s investments in debt instruments have good credit quality; those debt securities are all rated as investment grade.

• G. The Company recognised interest income of $4,922 and $6,190 thousand on debt instruments held for the years ended December 31, 2019 and 2018, respectively.

• (4) Accounts receivable

Accounts receivable
		December31,2019		December 31, 2018
Accounts receivable		$	5,477,888	$	8,619,080
Less: Allowance for uncollectible accounts	(		29,507) (		9,349)
		$	5,448,381	$	8,574,012
A. The ageing analysis of accounts receivable	that were past due but not			impaired is as follows:
		December31,2019		December31,2018
Not past due		$	5,425,988	$	8,398,276
Up to 30 days			11,003		184,170
31 to 90 days			19,593		754
91 to 180 days			8,674		161
Over 180 days			12,630		-
		$	5,477,888	$	8,583,361

The above ageing analysis was based on past due date.

• B. As of December 31, 2019 and 2018, and January 1, 2018, the balances of receivables (including notes receivable) from contracts with customers amounted to $5,477,888 thousand, $8,619,080 thousand, and $6,462,730 thousand, respectively.

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• C. The Group does not hold any collateral as security.

• D. The Company entered into a factoring agreement which has no right of recourse with Bank of America. As of December 31, 2019, there were no account receivable that were expected to be transferred (reclassified as financial assets at fair value through other comprehensive income). Please refer to Note 6(5) for information on transfers of financial assets.

• E. Information relating to credit risk of accounts receivable is provided in Note 12(2).

• (5) Transfer of financial assets

Transferred financial assets that are derecognised in their entirety

On October 2, 2019, the Group entered into a factoring agreement with Bank of America to sell its accounts receivable. Under the agreement, the Group is not obligated to bear the default risk of the transferred accounts receivable, but is liable for the losses incurred on any business dispute. The Group does not have any continuing involvement in the transferred accounts receivable. Thus, the Group derecognised the transferred accounts receivable. As of December 31, 2019, there was no amount that had been past due.

(6) Inventories

Inventories
Raw materials Work in progress Finished goods Raw materials Work in progress Finished goods		December 31, 2019
	Cost 872,722 $ 224,109 1,203,373 2,300,204 $	Allowance for valuation loss 105,167) ($ 6,245) ( 71,260) ( (182,672) $ December 31, 2018	Bookvalue
			767,555 $ 217,864 1,132,113
			2,117,532 $
	Cost 1,535,690 $ 481,447 1,188,465 3,205,602 $	Allowance for valuation loss 69,449) ($ 4,225) ( 57,256) ( 130,930) ($	Bookvalue
			1,466,241 $ 477,222 1,131,209
			3,074,672 $

The cost of inventories recognised as expense for the year :	The cost of inventories recognised as expense for the year :
	Year ended December		Year	ended December
	31,	2019		31,2018
Cost of goods sold	$	31,215,308	$	30,650,791
Loss on decline in market value		51,742		97,290
Loss on inventory retirement		90,904		21,226
Loss on physical inventory	(	80)		433
	$	31,357,874	$	30,769,740

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(7)	Other current assets
			December	31,2019			December31,2018
	Input tax		$	139,180		128,781 $
	Prepayment for purchases			14,689			22,300
	Contract Asset			31,585			-
	Others			85,019			74,553
			$	270,473		225,634 $
(8)	Investments accounted for using equity method
	A. Details are as follows：
			Years ended December 31,
			2019				2018
	Associates with Significant influence
	MERRY	$	2,842,636		$		2,422,186
	ELECTRONICS(SUZHOU)CO.,LTD
	(MECE)
	Associates with Insignificant influence
	MERRY ELECTRONICS
	(HUIZHOU)CO.,LTD. (MECH)			666,377			525,324
	Guangdong Luxshare & Merry
	Electronics Co., Ltd was			376,606			414,222
	established. (MEDG)
	LEOHAB ENTERPRISE CO.,LTD.
	(LEOHAB)			66,395			64,030
	MERRY ELECTRONICS
	(SHANGHAI)CO.,LTD
	MECS	(		862)			1,116
		$	3,951,152		$		3,426,878
	B. Gain or loss from Associates accounted	for	using equity method：
	Investee		2019				2018
	MECE		$	526,872	$		36,033
	MECH			165,334			240,968
	MEDG		(	31,338)	(		22,752)
	LEOHAB			5,693			10,030
	MECS		(	2,004)	(		353)
			$	664,557		$	263,926

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C. Associates

(a) The basic information of the associates that are material to the Group is as follows: Shareholding ratio Company Principal place December December Nature of Methods of name of business 31, 2019 31, 2018 relationship measurement MECE Mainland China 49.00% 49.00% Holding more Equity method than 20% of voting right of stockholders

(b) The summarised financial information of the associates that are	(b) The summarised financial information of the associates that are	(b) The summarised financial information of the associates that are	(b) The summarised financial information of the associates that are	(b) The summarised financial information of the associates that are	material	to the Group is as
follows:
Balance sheet
			MERRY ELECTRONICS(SUZHOU)CO.,LTD
			December31,2019		December 31, 2018
Current assets		$	4,547,442		$	5,654,641
Non-current assets			6,646,976			6,997,805
Current liabilities		(	5,034,091)	(		5,459,121)
Non-current liabilities		(	225,852)	(		2,078,076)
Total net assets		$	5,934,475		$	5,115,249
Share in associate's net assets		$	2,907,893		$	2,506,472
(Un)Realised Profits and		(	65,257)	(		84,286)
Losses from Upstream(Sidestream)
transactions
Carrying amount of the associate		$	2,842,636		$	2,422,186
Statement of comprehensive income
		MERRY ELECTRONICS(SUZHOU)CO.,LTD
			Years endedDecember31
			2019		2018
Revenue	$		12,490,913 $			9,159,172
Profit for the period from
continuing operations	$		1,036,414 $			1,204
Total comprehensive income	$		1,036,414 $			1,204
(c) The carrying amount of the Group’s interests in all individually immaterial						associates and the
Group’s share of the operating results are summarised below:
			Years ended	December		31,
			2019			2018
Gain or loss from associates
accounted for using equity method		$	137,685		$	227,893
& joint ventures
Other comprehensive loss, net of tax		(	25,618)	(		26,406)
Total comprehensive loss		($	112,067)		($	201,487)

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(9) Property, plant and equipment

Year ended December 31, 2019

Cost Openingbalance Additions Reductions Transfers Land 594,180 $ - $ - $ - $ Land improvements 619 - - - Buildings and structures 1,011,569 58,003 93,048) ( 45,605 Machinery 1,207,962 375,607 74,479) ( - Transportation equipment 32,873 1,658 2,858) ( - Office equipment 225,472 27,927 5,910) ( 85) ( Others 126,302 26,045 12,976) ( - Unfinished construction 3,578 140,382 - 11,265) ( Sub total 3,202,555 629,622 $ 189,271) ($ 34,255 $ Accumulated amortization and impairment Land - $ - $ - $ - $ Land improvements 423) ( 130) ( - - Buildings and structures 397,541) ( 30,071) ( 23,690 45,605) ( Machinery 562,733) ( 137,315) ( 47,771 - Transportation equipment 16,165) ( 4,245) ( 2,858 - Office equipment 147,023) ( 22,871) ( 5,398 4 Others 90,479) ( 11,831) ( 11,870 - Sub total 1,214,364) ( 206,463) ($ 91,587 $ 45,601) ($ Total 1,988,191 $

Effect of foreign currency exchange differences Endingbalance 2,095 $ 596,275 $ 37 656 5,369) ( 1,016,760 37,073) ( 1,472,017 899) ( 30,774 4,804) ( 242,600 3,298) ( 136,073 167) ( 132,528 49,478) ($ 3,627,683 - $ - $ 27) ( 580) ( 10,334 439,193) ( 15,682 636,595) ( 528 17,024) ( 3,212 161,280) ( 2,522 87,918) ( 32,251 $ 1,342,590) ( 2,285,093 $

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Year ended December 31, 2018

															Effect of foreign
						First-time merger									currency
Cost			Openingbalance			effects			Additions			Reductions	exchange differences				Endingbalance
Land	$		288,086	$		-	$		304,776	$		-	$		1,318	$	594,180
Land improvements			596			-			-			-			23		619
Buildings and
structures			985,725			-			15,319			36,182	(		1,278)		1,011,569
Machinery			1,032,173			25,349			201,923			93	(		13,237)		1,207,962
Transportation
equipment			16,819			11,835			5,125			-	(		495)		32,873
Office equipment			197,320			9,364			25,518			2,060	(		1,773)		225,472
Others			105,031			15,604			12,470			1,363	(		3,166)		126,302
Unfinished construction			-			1,083			2,495			-			-		3,578
Subtotal			2,625,750	$		63,235	$		567,626	$		39,698	($		18,608)		3,202,555
Accumulated amortization
and impairment
Land		$	-		$	-		$	-		$	-		$	-	$	-
Land improvements	(		288)			-	(		122)			-	(		13)	(	423)
Buildings and
structures	(		339,978)			-	(		50,693)	(		35,982)			4,733	(	397,541)
Machinery	(		477,946)	(		13,123)	(		113,792)	(		31)			6,917	(	562,733)
Transportation
equipment	(		9,697)	(		3,880)	(		2,593)	(		397)			217	(	16,165)
Office equipment	(		126,457)	(		5,972)	(		21,543)	(		1,158)			1,182	(	147,023)
Others	(		77,906)	(		7,678)	(		8,927)			-			1,704	(	90,479)
Subtotal	(		1,032,272)	($		30,653)	($		197,670)	($		37,568)	$		14,740	(	1,214,364)
Total	$		1,593,478													$	1,988,191

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－ (10) Leasing arrangements lessee Effective 2019

• A. The Group leases various assets including land, buildings, machinery and equipment, business vehicles, multifunction printers. Rental contracts are typically made for periods of 1 to 30 years. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose covenants, but leased assets may not be used as security for borrowing purposes.

• B. The carrying amount of right-of-use assets and the depreciation charge are as follows:

follows:
Land Buildings Machinery and equipment Transportation equipment Office equipment Other equipment		December31,2019		Year ended December 31,2019
		Carrying amount		Depreciation charge
		34,417 $ 111,662 6,797 2260 298 - 155,434 $		3,401 $ 63,565 3,633 1913 172 611 73,295 $

• C. For the year ended December 31,2019, the additions to right-of-use assets was $49,111 thousand.

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

Items affecting profit or loss Interest expense on lease liabilities		Year ended December31,2019
		$ 2,226

• E. For the year ended December 31, 2019, the Group’s total cash outflow for leases was $96,425 thousand.

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(11) Intangible assets

Year ended December 31, 2019

(11)Intangible assets		Year ended December 31,2019
Cost Openingbalance Goodwill 931,678 $ Computer software 149,690 Customer relationship 326,550 Trademarks 61,481 Technical skills 115,748 Others 7,027 Sub-total 1,592,174 Accumulated amortization and impairment Patents 100) ($ Computer software 4,160) ( Customer relationship 21,582) ( Trademarks 2,298) ( Technical skills 11,792) ( Sub-total 39,932) ( Total 1,552,242 $		First-time merger effects Additions Reductions 5,701 $ - $ - $ - 64,111 3,455) ( - - - - - - - - - 9,000 4,011 - 14,701 $ 68,122 $ 3,455) ($ - $ 3,557) ($ - $ - 56,137) ( 3,455 - 44,064) ( - - 5,518) ( - - 23,150) ( - - $ 132,426) ($ 3,455 $	Transfers - $ 247,450 - - - 17,201 264,651 $ 17,201) ( 247,450) ( - - -	Effect of foreign currency exchange differences Endingbalance - $ 937,379 $ 368) ( 457,428 - 326,550 - 61,481 - 115,748 56 37,295 312) ($ 1,935,881 3 $ 20,855) ($ 10) ( 304,302) ( 33) ( 65,679) ( 218 7,598) ( 271 34,671) ( 449 $ 433,105) ( 1,502,776 $
			264,651) ($

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Year ended December 31, 2018

																Effect of foreign
						First-time merger										currency
	Cost		Opening	balance			effects			Additions			Reductions		exchange differences			Ending balance
Goodwill			$	139,735		$	791,789		$	-		$	-		$	154		$	931,678
Patents				19,264			-			5,051	(		17,201)	(		87)			7,027
Computer	software			373,522			5,730			18,808	(		248,056)	(		314)			149,690
Trademarks				-			61,481			-			-			-			61,481
Technical skills				-			115,748			-			-			-			115,748
Others				1,142			131			-	(		1,154)	(		119)			-
Sub-total				533,663		$	1,301,429		$	23,859	($		266,411)	($		366)			1,592,174
Accumulated amortization
andimpairment
Patents		($		14,318)		$	-	($		2,986)		$	17,201		$	3	($		100)
Computer	software	(		190,811)	(		5,170)	(		56,488)			248,056			253	(		4,160)
Customer	relationship			-			-	($		21,311)			-	(		271)	(		21,582)
Trademarks				-			-	($		2,331)			-			33	(		2,298)
Technical skills				-			-	(		11,575)			-	(		217)	(		11,792)
Sub-total		(		205,129)	($		5,170)	($		94,691)		$	265,257	($		199)	(		39,932)
Total			$	328,534														$	1,552,242

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A. Details of amortisation on intangible assets are as follows:

Year ended December 31, Year ended December 31,

	Year ended December 31,	Year ended December 31,
Operating costs Selling expenses Administrative expenses Research and development expenses	2019 $ 13,959 13,671 66,190 38,606 $132,426	2018
		$ 13,301 5,514 42,592 33,284 $ 94,691

• B. On September 1, 2005, the Group merged with HUGES HI-TECH INC., Thus, the transaction generated goodwill in the amount of $139,735 thousand. In line with International Accounting Standard No. 36, goodwill acquired from a merger shall be tested for impairment every year. The recoverable amount of all cash-generating units calculated using the value-in-use exceeded their carrying amount, so goodwill was not impaired. The key assumptions used for value-in-use calculations are as follows:

The cash flow projections are based on financial budgets approved by the management covering a five-year period, the Company estimates a 10% year-on-year growth in sales as the Company will launch new products and improve its technology from 2020 to 2024, the estimation is based on the assumption that the Company is committed to developing and taking bluetooth orders and the experience of sale growths of 5%, 94%, 84%, 34% and 3% from 2015 to 2019, respectively. Management determined budgeted gross margin based on past performance and their expectations of market development. The weighted average growth rates used are consistent with the projection included in industry reports. The discount rate of 16.03% used was pre-tax and reflected specific risks relating to the relevant operating segments.

• C. As of December 31, 2019, the goodwill arose from acquiring Asian Elite International Ltd. and Indigo Enterprise Inc. amounting to $581,644 thousand due to the benefits from production technology and market channel such as smart speakers of the companies that are expected to be merged. The goodwill from business combination shall be tested annually at least for impairment in accordance with IAS 36.

• The recoverable amount of all cash-generating units calculated using the value-in-use exceeded their carrying amount, so goodwill was not impaired. The key assumptions used for value-in-use calculations are as follows:

The cash flow projections are based on financial budgets approved by the management covering a five-year period. As the Company is committed to developing and taking smart speaker orders, it expects 29%, 28%, 40%, 33% and 5% year-on-year growth in sales from 2020 to 2024 through the launching of new products and improving its technologies during this period. Management determined budgeted gross margin based on past performance and its expectations of market development. The weighted average growth rate used are consistent with the projection included in industry reports. The discount rate of 18.63% used was pre-tax and reflected specific risks relating to the relevant operating segments.

• D. As of December 31, 2019, the goodwill arose from acquiring Austar Hearing Science And Technology （ Xiamen) Co. , Ltd. amounting to $210,299 thousand due to the benefits from production technology and market channel such as smart speakers of the companies that are expected to be merged. The goodwill from business combination shall be tested annually at least for impairment in accordance with IAS 36.

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The recoverable amount of all cash-generating units calculated using the value-in-use exceeded their carrying amount, so goodwill was not impaired. The key assumptions used for value-in-use calculations are as follows:

The cash flow projections are based on financial budgets approved by the management covering a five-year period. As the Company is committed to developing and taking smart speaker orders, it expects 8%, 7%, 7%, 7% and 7% year-on-year growth in sales from 2019 to 2023 through the launching of new products and improving its technologies during this period.

Management determined budgeted gross margin based on past performance and its expectations of market development. The weighted average growth rates used are consistent with the projection included in industry reports. The discount rate of 15.60% used was pre-tax and reflected specific risks relating to the relevant operating segments.

• E. As of December 31, 2019, the Group merged with Biotest Medical Corp. and generated goodwill in the amount of $5,701 thousand. Because the merged company has many certificates in manufacturing of medical instrument, the Group expects that the acquisition will expand the market benefit of health care personal sound amplification products. In line with International Accounting Standards No. 36, goodwill acquired from merger shall be tested for impairment every year.

The recoverable amount of all cash-generating units calculated using the value-in-use exceeded their carrying amount, so goodwill was not impaired. The key assumptions used for value-in-use calculations are as follows:

The estimation of cash flow is in line with the 5-year-financial budget which was assessed by the management. Because the Company is engaged in the hearing aids product orders, the development of new products and techniques were expected to enhance from 2020 to 2024. Thus the sales volume would grow at rates of 0%, 100%, 88%, 41% and 2%, comparing with the prior year.

• Management determined budgeted gross margin based on past performance and their expectations of market development. The weighted average growth rates used are consistent with the projection included in industry reports. The discount rates used (14.13%) were pre-tax and reflected specific risks relating to the relevant operating segments.

• (12) Other non-current assets

risks relating to the relevant operating segments. ther non-current assets
Prepayments for PP&E(including intangible asset) Land access Refundable deposits Others		Years endedDecember31,
		2019 72,863 $ - 17,577 10,816 101,256 $	2018
			55,634 $ 48,791 19,004 16,678
			140,107 $

• A. The subsidiary-MEST signed land use right contracts with an individual and ROOT LAND LIMITED for the use of the land in Sha Tin Dist. Hong Kong with terms of 25 and 58 years, respectively, in 1990 and 1995. All rentals had been paid on the contract dates.

• B. The subsidiary-MECL signed land use right contracts with the People’s Republic of China for the use of the land in Bao’an District Shenzhen city with term of 50 years, in 1994, 2011 and 2015. All rentals had been paid on the contract dates.

• C. The Company acquired land and buildings in Taichung Industrial Park from SUNTEX MANUFACTURE CORP. in total prepayment amount of NT$ 308,664 thousand for the purpose of office expansion as resolved at the meeting of the Board of Directors on February 26, 2018. The land and buildings were transferred and recognised under property, plant and equipment on April 2, 2018.

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D. Details of amortisation on land access are as follows:

Administrative expenses

Year ended December 31, 2018 $ 3,180

Note: On January 1, 2019, the Group reclassified land use right to right-of-use asset. Please refer to Note 6(10) for details.

(13) Short-term borrowings

Type of borrowings December 31, 2019 Interest rate range Collateral Credit loan $ 470,890 2.14% ～ 4.79% - Type of borrowings December 31, 2018 Interest rate range Collateral Credit loan $ 4,753,434 0.69% ～ 4.13% -

Bank borrowings

Bank borrowings

Interest expense recognised in profit or loss amounted to $44,528 thousand and $48,453 thousand for the years ended December 31, 2019 and 2018, respectively.

(14) Other payables

ther payables
Payroll payable Employee bonus payable Payables on equipment (Including intangible assets) Compensation due to directors and supervisors Other accrued expenses Other accrued expenses-non related parties Others		Years endedDecember31,
		2019 308,353 $ 219,531 77,952 68,392 183,922 57,261 57,615 973,026 $	2018
			384,657 $ 162,732 51,240 54,244 248,396 242,976 27,579
			1,171,824 $

(15) Other current liabilities

ther current liabilities
onds payable Contract liability Advance receipts Lease liability - current Other current liabilities Total Bonds payable Less: Discount on bonds payable				Years ended		December 31,
				2019			2018
				105,438 $ 232,976 30,119 49,431			26,111 $ 117,052 - 27,789
				417,964 $			170,952 $
				December31,2019			December31,2018 3,000,000 (117,279) 2,882,721
		$		2,289,500 (59,541) 2,229,959		$
		$				$

(16) Bonds payable

• A. The details of the second domestic unsecured convertible bonds issued by the Company on the December 11, 2018 are as follows:

• (a) The terms of the second domestic unsecured convertible bonds issued by the Company are as follows:

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i. The competent authority has been approved the Company’s second time raising and issuance of domestic unsecured corporate bonds. The bonds are for a total issuance amount of US$3,015,000 million dollars and a coupon rate of 0%, cover a 3-year period of issuance and a circulation period from December 11, 2018 to December 11, 2021, and will be redeemed in cash at face value at the maturity date. The bonds were listed on the Taipei Exchange on December 11, 2018.

ii. The bondholders have the right to ask for conversion of the bonds into common shares of the Company by Taiwan Depository & Clearing Corporation through Securities Firms during the period from the date after three months of the bonds issue to the maturity date, except for the stop transfer period as specified in the terms of the bonds or the laws/regulations and the Company’s book closure date of stock dividends, book closure date of cash dividends, the period between the date that is 15 business days before the book closure date of a capital increase to the ex-right date, the period between the record date of a capital reduction and the prior day before the commencement of share trading after shares are repurchased. The rights and obligations of the new shares converted from the bonds are the same as the issued and outstanding common shares.

iii. The conversion price of the bonds is set up based on the pricing model in the terms of the bonds, and is subject to adjustments if the condition of the anti-dilution provisions occurs subsequently. The conversion price will be reset based on the pricing model in the terms of the bonds on each effective date regulated by the terms. As of December 31, 2019, the conversion price of convertible bonds was $139.3 per share.

iv. The Company may repurchase all the bonds outstanding in cash at the bonds’ face value at any time after the following events occur: (i) the closing price of the Company common shares is above the then conversion price by 30% for 30 consecutive trading days during the period from the date after one month of the bonds issue to 40 days before the maturity date, or (ii) the outstanding balance of the bonds is less than 10% of total initial issue amount during the period from the date after three months of the bonds issue to 40 days before the maturity date.

v. Under the terms of the bonds, all bonds redeemed (including bonds repurchased from the Taipei Exchange), matured and converted are retired and not to be re-issued; all rights and obligations attached to the bonds are also extinguished.

• (b) As of December 31, 2019, the bonds totalling $710,500 thousand (face value) had been converted into 4,884 thousand shares of common stock. After the issuance of the convertible bonds, if the number of common shares increases, the Company shall adjust the conversion price to $139.3 per share in line with the formula of the issuance article.

• B. Regarding the issuance of convertible bonds, the equity conversion options amounting to $101,750 thousand were separated from the liability component and were recognised in ‘capital surplus - share options’ in accordance with IAS 32. The call options embedded in bonds payable were separated from their host contracts and were recognised in ‘financial assets at fair value through profit or loss’ in net amount in accordance with IFRS 9 because the economic characteristics and risks of the embedded derivatives were not closely related to those of the host contracts.

• C. The details of the first domestic unsecured convertible bonds issued by the Company on January 29, 2015 are as follows:

• (a) The terms of the first domestic unsecured convertible bonds issued by the Company are as follows:

  • i. The competent authority has approved the Company’s first time raising and issuance of domestic unsecured corporate bonds. The bonds are with a total issuance amount of US$1,507,500 thousand dollars and a coupon rate of 0%, cover a 3-year period of issuance and a circulation period from January 29, 2015 to January 29, 2018, and will be redeemed

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in cash at 100.5% of face value at the maturity date. The bonds were listed on the Taipei Exchange on January 29, 2015.

  - ii. The bondholders have the right to ask for conversion of the bonds into common shares of the Company by Taiwan Depository & Clearing Corporation through Securities Firms during the period from the date after one month of the bonds issue to the maturity date, except for the stop transfer period as specified in the terms of the bonds or the laws/regulations and the Company’s book closure date of stock dividends, book closure date of cash dividends, the period between the date that is 15 business days before the book closure date of a capital increase to the ex-right date, the period between the record date of a capital reduction and the prior day before the commencement of share trading after shares are repurchased. The rights and obligations of the new shares converted from the bonds are the same as the issued and outstanding common shares.

  - iii. The conversion price of the bonds is set up based on the pricing model in the terms of the bonds, and is subject to adjustments if the condition of the anti-dilution provisions occurs subsequently. The conversion price will be reset based on the pricing model in the terms of the bonds on each effective date regulated by the terms. As of December 31, 2017, the conversion price of convertible bonds was $105.7 per share.

  - vi. The Company may repurchase all the bonds outstanding in cash at the bonds’ face value at any time after the following events occur: (i) the closing price of the Company common shares is above the then conversion price by 30% for 30 consecutive trading days during the period from the date after one month of the bonds issue to 40 days before the maturity date, or (ii) the outstanding balance of the bonds is less than 10% of total initial issue amount during the period from the date after one months of the bonds issue to 40 days before the maturity date.

  - v. Under the terms of the bonds, all bonds redeemed (including bonds repurchased from the Taipei Exchange), matured and converted are retired and not to be re-issued; all rights and obligations attached to the bonds are also extinguished.

• (b) As of January 31, 2018, the bonds were all converted.

• D. Regarding the issuance of convertible bonds, the equity conversion options amounting to $0 thousand were separated from the liability component and were recognised in ‘capital surplus— share options’ in accordance with IAS 32. The call options embedded in bonds payable were separated from their host contracts and were recognised in ‘financial assets or liabilities at fair value through profit or loss’ in net amount in accordance with IAS 39 because the economic characteristics and risks of the embedded derivatives were not closely related to those of the host contracts.

(Remainder of page intentionally left blank)

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- (17) Long term borrowings

Type of Borrowing period borrowings and repayment term Interest rate range Collateral December 31, 2019 Long-term bank borrowings S ecured Borrowing period is from borrowings 2019/12/30 to 2024/12/15; Promissory interest is repayable monthly; 0.63% Note 、 principal is repayable in 36 Note installments from 2022/1/15. $ 62,000

The subsidiary of the Company, BTTT, entered into a long-term loan contract with Taipei Fubon Bank in the total amount of $500,000 thousand. As of December 31, 2019, the drawing amount was $62,000 thousand.

Aforementioned contract regulates:

In the credit period, following financial ratio shall be maintained and the audited/reviewed financial statements shall be checked every semi-year:

• (a) Current ratio shall not lower than 100%;

• (b) Debt ratio shall not higher than 160%;

• (c) Interest coverage ratio shall not lower than 10.

The Group’s audited consolidated financial statements of 2019 did not violate the restriction.

Note: The above mentioned secured borrowings were guaranteed by the Company’s parent company.

• (18) Pensions

• A. (a) The Company and its domestic subsidiaries have a defined benefit pension plan in accordance with the Labor Standards Law, covering all regular employees’ service years prior to the enforcement of the Labor Pension Act on July 1, 2005 and service years thereafter of employees who chose to continue to be subject to the pension mechanism under the Law. Under the defined benefit pension plan, two units are accrued for each year of service for the first 15 years and one unit for each additional year thereafter, subject to a maximum of 45 units. Pension benefits are based on the number of units accrued and the average monthly salaries and wages of the last 6 months prior to retirement. The Company and its domestic subsidiaries contribute monthly an amount equal to 5.1% of the employees’ monthly salaries and wages to the retirement fund deposited with Bank of Taiwan, the trustee, under the name of the independent retirement fund committee. Also, the Company and its domestic subsidiaries would assess the balance in the aforementioned labor pension reserve account by December 31, every year. If the account balance is insufficient to pay the pension calculated by the aforementioned method to the employees expected to qualify for retirement in the following year, the Company and its domestic subsidiaries will make contributions for the deficit by next March.

  • (b) The amounts recognised in the balance sheet are as follows:

Present value of defined benefit obligations Fair value of plan assets Net defined benefit liability	December31,2019 December31,2018 140,594 $ 125,392 $ 57,118) ( 41,348) ( 83,476 $ 84,044 $

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(c) Movements in net defined benefit liabilities are as follows:

Present value of defined benefit obligations Fair value of planassets Net defined benefitliability Years ended December 31, 2019 Balance at January 1 125,392 $ 41,348) ($ 84,044 $ Current service cost 284 - 284 Interest (expense) income 1,230 404) ( 826 Past service cost - - - 126,906 41,752) ( 85,154 Remeasurements: Return on plan assets (excluding amounts included in interest income or expense) - 1,312) ( 1,312) ( Change in demographic assumptions 4 - 4 Change in financial assumptions 3,653 - 3,653 Experience adjustments 12,682 - 12,682 16,339 1,312) ( - Pension fund contribution - 16,705) ( 16,705) ( Paid pension 2,651) ( 2,651) ( - Balance at December 31 140,594 $ 57,118) ($ 83,476 $ Present value of defined benefit obligations Fair value of plan assets Net defined benefit liability Years ended December 31, 2018 Balance at January 1 154,607 $ 42,475) ($ 112,132 $ Current service cost 1,246 - 1,246 Interest (expense) income 1,512 408) ( 1,104 Past service cost 2,706) ( 779 1,927) ( 154,659 42,104) ( 112,555 Remeasurements: Return on plan assets (excluding amounts included in interest income or expense) - 1,070) ( 1,070) ( Experience adjustments 8,121 - 8,121 8,121 1,070) ( 7,051 Pension fund contribution - 1,336) ( 1,336) ( Paid pension 37,388) ( 3,162 34,226) ( Balance at December 31 125,392 $ 41,348 $ 84,044 $		Present value of defined benefit obligations	Fair value of planassets		Net defined benefitliability

(d) The Bank of Taiwan was commissioned to manage the Fund of the Company’s and domestic

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subsidiaries’ defined benefit pension plan in accordance with the Fund’s annual investment and utilisation plan and the “Regulations for Revenues, Expenditures, Safeguard and Utilisation of the Labor Retirement Fund” (Article 6: The scope of utilisation for the Fund includes deposit in domestic or foreign financial institutions, investment in domestic or foreign listed, over-the-counter, or private placement equity securities, investment in domestic or foreign real estate securitization products, etc.). With regard to the utilisation of the Fund, its minimum earnings in the annual distributions on the final financial statements shall be no less than the earnings attainable from the amounts accrued from two-year time deposits with the interest rates offered by local banks. If the earnings is less than aforementioned rates, government shall make payment for the deficit after being authorized by the Regulator. The Company and domestic subsidiaries have no right to participate in managing and operating that fund and hence the Company and domestic subsidiaries are unable to disclose the classification of plan assets fair value in accordance with IAS 19 paragraph 142. The composition of fair value of plan assets as of December 31, 2019 and 2018 is given in the Annual Labor Retirement Fund Utilisation Report announced by the government.

(e) The principal actuarial assumptions used were as follows:

Discount rate Future salary increases	Years ended December 31, 2019	Year ended December 31,2018
	0.75% 3.00%	1.00% 3.00%

Future mortality rate was estimated based on the 5th Taiwan Standard Ordinary Experience Mortality Table.

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

December 31,2019 Effect on present value of defined benefit obligation December 31, 2018 Effect on present value of defined benefit obligation	Discount rate	Discount rate	Discount rate		Future salaryincreases	Future salaryincreases
	Increase 0.25%		Decrease 0.25%		Increase 0.25%	Decrease 0.25%
	3,653) ( 3,331) (		3,800 3,468		3,706 3,391	3,584) ( 3,275) (

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

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

• (f) The Company expects to pay contribution for pension plan amounting to $3,176 thousand in 2020.

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• (g) As of December 31, 2019, the weighted average duration of the retirement plan is 10 years. The analysis of timing of the future pension payment was as follows:

Within 1 year	$	2,921
1-2 year(s)		5,049
2-5 years		21,923
Over 5 years		122,460
	$	152,353

• B. (a) Effective July 1, 2005, the Company and its domestic subsidiaries have established a defined contribution pension plan (the “New Plan”) under the Labor Pension Act (the “Act”), covering all regular employees with R.O.C. nationality. Under the New Plan, the Company and its domestic subsidiaries contribute monthly an amount based on 6% of the employees’ monthly salaries and wages to the employees’ individual pension accounts at the Bureau of Labor Insurance. The benefits accrued are paid monthly or in lump sum upon termination of employment.

• (b) The pension costs under defined contribution pension plans of the Group for the years ended December 31, 2019 and 2018, were $29,017 thousand and $26,435 thousand, respectively.

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(19) Share-based payment

The Company issued restricted stocks to employees as resolved at the meeting of Board of Directors on October 24, 2019, April 27, 2017 and May 9, 2016 with grant dates on November 2, 2019, October 26, 2018, December 29, 2017, June 16, 2017 and December 21, 2016, the relevant information is as follows:

• A. For the years ended December 31, 2018 and 2017, the Group’s share-based payment arrangements were as follows:

Type of arrangement	Grant date	Quantity granted	Contract period	Vesting conditions
Restricted stocks to employees Restricted stocks to employees Treasury stock transferred to employees Restricted stocks to employees Treasury stock transferred to employees Restricted stocks to employees Cash capital increase reserved for employee preemption Restricted stocks to empolyee	2016.12.21 2017.06.16 2017.10.30 2017.12.29 2018.07.02 2018.10.26 2018.12.28 2019.11.02	1,542 units 458 units 95 units 196 units 307 units 878 units 363 units 813 units	3 years 3 years - 3 years - 3 years - 3 years	Note Note - Note - Note - Note

Note: Depending on the employee’s tenure in the Company (1 to 3 years), the employees can vest stocks at the ratio of 30%, 30% and 40% in three years based on the number of stocks written on the notification. The conditions for vesting restricted stocks are as follows:

• (a) For the employees who are currently working in the Company, whose services have reached 1 year and achieved the performance of the most recent year’s consolidated financial statements and the target personal performance, the ceiling of vested share ratio is 30%.

• (b) For the employees who are currently working in the Company, whose services have reached 2 year and achieved the performance of the most recent year’s consolidated financial statements and the target personal performance, the ceiling of accumulated vested share ratio is 60%.

• (c) For the employees who are currently working in the Company, whose services have reached 3 year and achieved the performance of the most recent year’s consolidated financial statements and the target personal performance, the ceiling of accumulated vested share ratio is 100%.

• (d) The Company will repurchase and retire the stocks that do not meet the conditions of vesting for the employees who resign during the vesting period or do not meet the condition of vesting

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by the issuance price.

The aforementioned restricted stocks issued by the Company cannot be transferred during the vesting period and the commissioned trust custodians execute the shareholders’ rights on behalf of the employees.

• B. Details of the share-based payment arrangements are as follows:

• (a) The first restricted stocks to employees in 2016

Options outstanding at January 1 Restricted stocks vested Employee restricted shares retired Options outstanding at December 31	No. of options Weighted- average exercise price (in dollars) 542 $ 10 ( 4) 10 (538) 10 - 10 2019	No. of options Weighted- average exercise price (in dollars) 1,037 $ 10 ( 408) 10 ( 87) 10 542 10 2018	No. of options Weighted- average exercise price (in dollars) 1,037 $ 10 ( 408) 10 ( 87) 10 542 10 2018
		1,037 ( 408) ( 87) 542	$ 10 10 10 10

• (b) The second restricted stocks to employees in 2016

Options outstanding at January 1 Restricted stocks granted to employees Employee restricted shares retired Options outstanding at December 31	2019	2019	Weighted- average exercise price (in dollars) 445 10 $ ( 129) 10 (22) 10 294 10 2018 No. of options
	No. of options	Weighted- average exercise price (in dollars)
	294 - (134) 160	10 $ - 10 10

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(c) The first restricted stocks to employees in 2017

			2019	2019	2019			2018	2018
					Weighted-				Weighted-
						average			average exercise
	No. of				exercise price		No.	of		price
	options				(in dollars)		options		(in dollars)
Options outstanding
at January 1		164		$		-		196	$	-
Restricted stocks granted
to employees	(	49)				-		-		-
Employee restricted
shares retired	(		7)			-	(	32)		-
Options outstanding at December 31		108				-		164		-
(d) The second restricted stocks to employees in					2017
					2019				2018
						Weighted-				Weighted-
						average			average exercise
	No.		of		exercise price		No. of			price
	options					(in dollars)	options			(in dollars)
Options outstanding at
January 1			862		$	-		-	$	-
Restricted stocks granted
to employees				-		-		878		-
Restricted stocks Vested	(		251)			-		-		-
Employee restricted
shares retired	(		13)			-	(	16)		-
Options outstanding at December 31			598			-		862		-
(e) The first restricted stocks to employees		in	2019
		2019						2018
				Weighted-					Weighted-
			average exercise					average		exercise
	No. of				price		No. of		price
	options			(indollars)			options	(indollars)
Options outstanding at
January 1	-		$			-	-	$		-
Restricted stocks granted
to employees	813					-	-			-
Employee restricted
shares retired	-					-	-			-
Options outstanding at December 31	813					-	-			-

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C. The fair value of stock options granted on grant date is measured using the closing price on the grant date. Relevant information is as follows:

Type of arrangement Grant date The first restricted stocks to employees in 2016 2016.12.21 The second restricted stocks to employees in 2016 2016.06.16 Treasury stock transferred to employees 2017.10.30 The first restricted stocks to employees in 2017 2017.12.29 Treasury stock transferred to employees 2018.07.02 The second restricted stocks to employees in 2017 2018.10.26 Cash capital increase reserved for employees preemption 2018.12.28 The first restricted stocks to empolyees in 2019.11.02	Stock price	Exercise price Expected price volatility 10 - 10 - 45.42 - 0 - 45.42 - 0 - 112 - 0	Expected option life	Expected dividends	Risk- free interest rate	Fair value per unit
	125 187 220 194.5 132.5 139.5 123 150		- - - - - - -	- - - - - - -	- - - - - - -	115 177 174.58 194.5 87.08 139.5 11 150

D. Expenses incurred on share-based payment transactions are shown below:

Equity-settled		Year ended December 31,2019	Year ended December 31,2018
		52,158 $	121,025 $

(20) Share capital

A. As of December 31, 2019, the Company’s authorised capital was $4,000,000, consisting of 400,000 thousand shares of ordinary stock (including 5,000 thousand shares reserved for employee stock options), and the paid-in capital was $2,086,684 thousand with a par value of $10 (in dollars) per share.

Movements in the number of the Company’s ordinary shares outstanding are as follows:

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	Years ended December 31,	Years ended December 31,
	2019	2018
At January 1	$ 199,663	$	200,472
Employee restricted shares retired	( 692)	(	157)
Issuance of restricted shares to employees	813		1,074
Conversion of convertible bonds	4,884		141
Retirement of treasury share	-	(	1,867)
Issuance of common stock for cash	4,000		-
At December 31	$208,668	$	199,663

• (a) On April 27, 2017, the Board of Directors has resolved for the Company to issue employee restricted stocks (please refer to Note 6(16)). The issuance was approved by the regulatory authority on November 29, 2017 and effective on January 22, 2018 and with a subscription price of $0 (in dollars) per share. The registrations were completed on February 26, 2018 and November 15, 2018 for ordinary shares issued of 196 thousand shares and 878 thousand shares, respectively. The employee restricted ordinary shares issued are subject to certain transfer restrictions before their vesting conditions are met. Other than these restrictions, the rights and obligations of these shares issued are the same as other issued ordinary shares.

• (b) On April 26, 2018 and October 25, 2018, the Board of Directors of the Company resolved to retire employee restricted share of 157,500 shares. The effective dates for the capital reduction were May 14, 2019 and October 25, 2018. The capital reduction through retirement of employee restricted shares was completed.

• (c) On April 25, 2019 and July 26, 2019, the Board of Directors of the Company resolved to retire employee restricted share of 692,200 shares. The effective dates for the capital reduction were April 30, 2019 and July 31, 2019. The capital reduction through retirement of employee restricted shares was completed.

• (d) On December 11, 2018, the Company issued the 2[nd] unsecured convertible bonds. As of December 31, 2019, the face value of those convertible bonds amounted to $710,500, which had been converted into 4,884 thousand common shares. Please refer to Note 6(16) for further information.

• (e) In 2019, the Company increased its capital in cash amounting to $448,000 thousand with an issuance price at 112 per share and premium at $411,993 thousand. The effective date for the capital increase was set on January 18, 2019. The registration of the capital increase was completed on February 13, 2019.

• (f) On October 24, 2019, the Board of Directors of the Company resolved to issue employee restricted shares (please refer to Note 6(19)). The issuance was approved by the Competent Authority on September 16, 2019. The Company issued 813 thousand common shares with the effective date set on November 2, 2019. The subscription price is $0 per share and the registration was completed. The employee restricted shares issued are subject to certain transfer restrictions before their vesting conditions are qualified. Other than these restrictions, the rights and obligations of these shares issued are the same as other issued ordinary shares.

• B. Treasury shares

• (a) Movements in the Company’s treasury shares are as follows (in thousands): Year 2019 : None.

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Reason for reacquisition Transferred to employees				YearendedDecember31,2018	YearendedDecember31,2018	Number of shares at end
		Number of shares at beginning		Additions	Reductions
		2,174		-	2,174) (	-

• (b) Pursuant to the R.O.C. Securities and Exchange Act, the number of shares bought back as treasury share should not exceed 10% of the number of the Company’s issued and outstanding shares and the amount bought back should not exceed the sum of retained earnings, paid-in capital in excess of par value and realised capital surplus.

• (c) Pursuant to the R.O.C. Securities and Exchange Act, treasury shares should not be pledged as collateral and is not entitled to dividends before it is reissued.

• (d) Pursuant to the R.O.C. Securities and Exchange Act, treasury shares should be reissued to the employees within three years from the reacquisition date and shares not reissued within the three-year period are to be retired. Treasury shares to enhance the Company’s credit rating and the stockholders’ equity should be retired within six months of acquisition.

• (e) The Company retired 1,867 thousand treasury shares which were repurchased from June 16 to August 14, 2015 for the purpose of transferring to employees as resolved at the meeting of the Board of Directors on July 26, 2018 with the capital reduction effective date set on September 28, 2018.

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(21) Capital surplus

Pursuant to the R.O.C. Company Act, capital surplus arising from paid-in capital in excess of par value on issuance of common stocks and donations can be used to cover accumulated deficit or to issue new stocks or cash to shareholders in proportion to their share ownership, provided that the Company has no accumulated deficit. Further, the R.O.C. Securities and Exchange Act requires that the amount of capital surplus to be capitalised mentioned above should not exceed 10% of the paidin capital each year. Capital surplus should not be used to cover accumulated deficit unless the legal reserve is insufficient.

reserve is insufficient.
At January 1 Issuance of restricted shares to employees Restricted stocks vested Employee restricted stocks retired Proceeds from issuance of convertible bonds Ordinary shares converted from convertible bonds Proceeds from issuing shares Recognition of change in equity of associates in portion to the Company’s ownership At December 31					2019
		Share premium	Share option		Employee restricted stocks			Others	Total
		$ 2,376,147 - 45,123 - - 668,163 411,993 -	$ 137,319 - - - - ( 31,576) ( 3,993) -		$ 256,324 113,820 ( 45,123) ( 88,564) - - - -			$ 19,321 - - - - - - 11,151 $ 30,472	2,789,111 $ 113,820 - ( 88,564) - 636,587 408,000 11,151 $ 3,870,105
		$ 3,501,426		$101,750		$236,457

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At January 1 Issuance of restricted shares to employees Restricted stocks vested Employee restricted stocks retired Proceeds from issuance of convertible bonds Ordinary shares converted from convertible bonds Proceeds from issuing shares Treasury stock transferred to employees Retirement of treasury share Acquisition of additional share agreements in a subsidiary Recognition of change in equity of associates in portion to the Company’s ownership At December 31				2018		Total
		Share premium	Share option	Employee restricted stocks	Others
	$ 2,719,952 - 69,665 - - 14,248 - - ( 25,646) ( 402,072) -		$ 683 - - - 133,326 ( 683) 3,993 - - - -	$ 236,200 111,741 ( 69,665) ( 21,952) - - - - - - -	$ 28,469 - - - - - - 26,733 ( 40,483) - 4,602 $19,321	2,985,304 $ 111,741 - ( 21,952) 133,326 13,565 3,993 26,733 ( 66,129) ( 402,072) 4,602 $2,789,111
	$2,376,147		$137,319	$256,324

(22) Retained earnings

A. Under the Company’s Articles of Incorporation, the current year’s earnings, after deduction of mandatory income tax, shall first be used to offset prior years’ operating losses and then 10% of the remaining amount shall be set aside as legal reserve. After the provision or reversal of special reserve, the appropriation of the remaining earnings along with the unappropriated earnings of prior years shall be proposed by the Board of Directors and approved by the shareholders. According to the dividend policy adopted by the Board of Directors, 30% to 80% of the

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• Company’s accumulated distributable earnings shall be appropriated as dividends, and cash dividends shall account for at least 5% of the total dividends distributed.

• B. The Company’s dividend policy is summarised below: as the Company operates in a volatile business environment and is in the stable growth stage, the residual dividend policy is adopted taking into consideration the Company’s financial structure, operating results and future expansion plans. In order to encourage employees and operation team, if the Company has any profit for the current year, the Company shall set aside 5% to 10% as employees’ compensation and no more than 2% as directors’ and supervisors’ remuneration. The employees’compensation shall be distributed in the form of stock and cash by a resolution adopted by a majority vote at a meeting of Board of Directors attended by two-thirds of the total number of directors and report it in the shareholders’ meeting. Employees entitled to receive stock or cash as compensation include employees of subsidiaries of the company meeting certain specific requirements.

• C. Except for covering accumulated deficit or issuing new stocks or cash to shareholders in proportion to their share ownership, the legal reserve shall not be used for any other purpose. The use of legal reserve for the issuance of stocks or cash to shareholders in proportion to their share ownership is permitted, provided that the distribution of the reserve is limited to the portion in excess of 25% of the Company’s paid-in capital.

• D. (a) In accordance with the regulations, the Company shall set aside special reserve from the debit balance on other equity items at the balance sheet date before distributing earnings. When debit balance on other equity items is reversed subsequently, the reversed amount could be included in the distributable earnings.

• (b) The amounts previously set aside by the Company as special reserve on initial application of IFRSs in accordance with Jin-Guan-Zheng-Fa-Zi Letter No. 1010012865, dated April 6, 2012, shall be reversed proportionately when the relevant assets are used, disposed of or reclassified subsequently. Such amounts are reversed upon disposal or reclassified if the assets are investment property of land, and reversed over the use period if the assets are investment property other than land. As of December 31, 2019, the balance of capital surplus as aforementioned was 269,144 thousand.

• E. The Company distributed cash dividends amounting to $8.6 and $16.44 per share, respectively, as resolved by the meeting of Board of Directors on June 19, 2019 and June 13, 2018. The abovementioned distribution of earnings for the years ended December 31, 2018 and 2017 was in agreement with those amounts proposed by the Board of Directors on February 26, 2019 and February 26, 2018.

• F. The appropriation of cash dividends of year 2019 as resolved by the Board of Directors on February 27, 2020 amounted to $7.7.

• G. For the information relating to employees’ compensation and directors’ and supervisors’ remuneration, please refer to Note 6(28).

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(23) Other equity items

2019	Exchange differences on translation of foreign financial statements	Unrealised gains (losses) from investments in debt instruments measured at fair value through other comprehensive income	Unrealised gains (losses) from investments in equity instruments measured at fair value through other comprehensive income	Cost of unearned employee compensation Total ($ 223,900) $ 147,032 - - ( 121,950) ( 121,950) 52,158 52,158 88,766 88,766 - 1,148,537 - ( 833) - ( 68,104) - ( 113,955) - 25,493 - ( 153,522) - 27,337 ($204,926) $1,027,834	Cost of unearned employee compensation Total ($ 223,900) $ 147,032 - - ( 121,950) ( 121,950) 52,158 52,158 88,766 88,766 - 1,148,537 - ( 833) - ( 68,104) - ( 113,955) - 25,493 - ( 153,522) - 27,337 ($204,926) $1,027,834
At January 1 Issuance of restricted shares to employees Amortisation of employee restricted stocks Employee restricted shares retired Revaluation - gross Revaluation transferred to profit or loss - gross Revaluation transferred to retained earnings – gross Revaluation – tax Currency translation differences: - Group - Tax on Group - Associates - Tax on associates At December 31	($ 242,186) - - - - - - - ( 113,955) 25,493 ( 153,522) 27,337 ($456,833)	$ 3,244 - - - ( 1,544) ( 833) - - - - - -	$ 609,874 - - - 1,150,081 - ( 68,104) ( 3,125) - - - -
		$867	$1,688,726		$1,027,834

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2018	Exchange differences on translation of foreign financial statements	Unrealised gains (losses) from investments in debt instruments measured at fair value through other comprehensive income	Unrealised gains (losses) from investments in equity instruments measured at fair value through other comprehensive income	Unrealised gains (losses) on available-for-sale financial assets	Cost of unearned employee compensation Total ($ 214,148) $ 3,074,587 - ( 3,766) ( 122,481) ( 122,481) 90,298 90,298 22,431 22,431 - ( 2,511,564) - ( 346,726) - ( 13,879) - - - 19,095 - ( 3,834) - ( 87,285) - 16,554 ($223,900) $147,032	Total
At January 1 Effects of simple retrospection Issuance of restricted shares to employees Amortisation of employee restricted stocks Employee restricted shares retired Revaluation - gross Revaluation transferred to retained earnings – gross Revaluation – associates Revaluation – tax Currency translation differences: - Group - Tax on Group - Associates - Tax on associates At December 31	($ 186,716) - - - - - - - - 19,095 ( 3,834) ( 87,285) 16,554 ($242,186)	$ - ( 15,395) - - - 5,037 - - - - - - -	$ - 3,487,080 - - - ( 2,516,601) ( 346,726) ( 13,879) - - - - -	$ 3,475,451 ( 3,475,451) - - - - - - - - - - -
		$3,244	$609,874	$-		$147,032

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(24) Operating revenue

Year ended December Year ended December 31, 2019 31, 2018 Revenue from contracts with customers $ 36,397,793 $ 35,494,808

A. Disaggregation of revenue from contracts with customers

The Group derives revenue from the transfer of goods and services over time and at a point in time in the following major product lines and geographical regions:

		Year ended December 31,2019	Year ended December 31,2019	Year ended December 31,2019
Total segment revenue Revenue from internal segment transactions Revenue from external customer contracts Main Region Europe US Mainland china Taiwan Others Total			Electronic devices
	Taiwan Shenzhen Singapore 30,723,659 $ 15,004,984 $ 4,210,433 $ 78,386) ( 14,680,937) ( 24,820) ( 30,645,273 324,047 4,185,613 10,883,812 122,367 3,534,768 16,775,583 2,370 414,243 1,406,833 177,939 173,319 511,482 15,899 - 1,067,563 5,472 63,283 30,645,273 $ 324,047 $ 4,185,613 $			Others Total 1,807,379 $ 51,746,455 $ 564,519) ( 15,348,662) ( 1,242,860 36,397,793 269,605 14,810,552 563,203 17,755,399 364,505 2,122,596 825 528,206 44,722 1,181,040 1,242,860 $ 36,397,793 $

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Year ended December 31, 2018
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Total segment revenue Revenue from internal segment transactions Revenue from external customer contracts Main Region Europe US Mainland china Taiwan Others Total			Electronic	devices	Others Total 1,410,462 $ 53,513,233 $ 686,930) ( 17,311,485) ( 723,532 34,771,276 161,059 15,677,444 274,358 15,658,221 284,988 2,757,642 825 400,920 2,302 1,000,581 723,532 $ 35,494,808 $
	Taiwan Shenzhen Singapore 30,438,179 $ 17,616,499 $ 4,048,083 $ 8,674) ( 17,308,852) ( 13,959) ( 30,429,505 307,647 4,034,124 11,997,550 117,279 3,401,556 14,811,909 1,569 570,385 2,291,548 181,106 - 399,809 286 - 928,689 7,407 62,183 30,429,505 $ 307,647 $ 4,034,124 $

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B. Contract assets and liabilities ：

December31,2019 December31,2018 Contract assets 31,585 $ - $ Contract liabilities 105,438 $ 26,111 $	January1,2018 - $ 2,486 $

(25) Other income

Government grants Dividend income Interest income from bank deposits Interest income from financial assets not at fair value through profit or loss Sample income Rent income Other Total	2019 2018 173,967 $ 59,410 $ 73,953 72,379 70,090 52,239 4,922 6,190 25,810 15,631 8,083 7,243 26,438 27,503 383,263 $ 240,595 $ Years ended December 31,

(26) Other gains and losses

Other gains and losses
			Years ended	December	31,
			2019		2018
Net gains on financial assets (liabilities) at fair
value through profit or loss		$	69,428	$	62,842
Net currency exchange (losses) gain	(		10,780)	(	28,321)
Losses on disposal of
property, plant and equipment	(		3,552)	(	798)
Gains / (losses) on disposals
of investment			936	(	13,602)
Other losses	(		11,688)	(	53,073)
Total	$		44,344	($	32,952)

(27) Expenses by nature

Expenses by nature
Employee benefit expense Depreciation charge - property, plant and equipment Depreciation charge - right of use asset Amortisation charge (NOTE) Total		Years endedDecember31,
		2019 2,729,703 $ 206,463 73,295 132,426 3,141,887 $	2018
			2,930,132 $ 197,670 - 97,871
			3,225,673 $

Note: 2018 includes amortisation of land use right.

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(28) Employee benefit expense

mployee benefit expense
Wages and salaries Share-based payments Labour and health insurance fees Pension costs Directors’ remuneration Other personnel expenses		Years ended December 31,
		2019 2,206,825 $ 52,158 59,380 131,464 135,949 143,827 2,729,603 $	2018 2,475,688 $ 120,716 51,151 119,876 46,372 116,329 2,930,132 $

• Note: For the years ended December 31, 2019 and 2018, the Group has 11,764 and 12,744 employees, respectively. From January 1, 2019 to June 19, 2019, there was 3 non-employee directors. After reelecting directors on June 19, 2019, there was 5 non-employee directors until December 31, 2019. For the year ended December 31, 2018, there was 4 non-employee directors.

• A. In accordance with the Articles of Incorporation of the Company, a ratio of distributable profit of the current year, after covering accumulated losses, shall be distributed as employees ‘compensation and directors’ and supervisors’ remuneration. The ratio shall not be lower than 5~10% for employees’ compensation and shall not be higher than 2% for directors’ and supervisors’ remuneration.

• B. The details of employees’ compensation and directors’ and supervisors’ remuneration of the Company are as follows:

Company are as follows:
Employees’ compensation Directors’ and supervisors’ remuneration		Years ended December 31,
		2019 205,176 $ 68,392 273,568 $	2018
			162,732 $ 54,244
			216,976 $

The abovementioned amounts were recognised in wages and salaries.

Employees’ compensation and directors’ and supervisors’ remuneration of 2018 as resolved at the Board of Directors’ meeting were in agreement with those amounts recognised in the profit or loss of 2018.

Information about employees’ compensation and directors’ and supervisors’ remuneration of the Company as resolved by the Board of Directors will be posted in the “Market Observation Post System” at the website of the Taiwan Stock Exchange.

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(29) Income tax

A. Income tax expense

(a) Components of income tax expense:

Income tax A. Income tax expense (a) Components of income tax expense:
	Year		ended December		Year			ended December
			31,	2019				31,2018
Current tax:
Current tax on profits for the year	$			457,820	$			394,590
Tax on undistributed surplus earnings				4,763				11,008
Prior year income tax (over)
underestimation				14,960				118,511
Total current tax				477,543				524,109
Deferred tax:
Origination and reversal of temporary
differences				237,508				141,291
Income tax expense	$			715,051	$			665,400
(b) The income tax (charge)/credit relating	to	components of other comprehensive income is as
follows:
				2019				2018
Exchange differences changes on
translation of foreign financial statements		($		25,493)		$		3,834
Exchange differences changes on
translation of foreign financial statements
- associates		(		27,337)	(			16,554)
Changes in fair value of available-for-sale
financial assets				3,125				-
Remeasurement of defined
benefit obligations		(		3,005)	(			1,410)
		($		52,710)	($			14,130)
B. Reconciliation between income tax expense and accounting profit
				Years ended			December 31,
				2019				2018
Current tax:
Tax calculated based on profit		$		773,356			$	606,729
before tax and statutory tax rate
Expenses disallowed by tax regulation		(		7,677)				401
Tax exempt income by tax regulation		(		5,673)			(	9,571)
Effect from investment tax credits		(		65,287)			(	58,991)
Tax on undistributed surplus earnings				4,763				11,008
Prior year income tax under
(over) estimation				14,960				118,511
Others				609			(	2,687)
Income tax expense		$		715,051			$	665,400

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• C. Amounts of deferred tax assets or liabilities as a result of temporary differences, tax losses and investment tax credits are as follows:

Deferred tax assets: - Temporary differences: Unrealised exchange loss Income tax expense Remeasurement of defined benefit obligations Allowance for bad debts Unallocated appropriation of pension Accumulated unused compensated absences Allowance for inventory valuation losses and loss for obsolete and slow- moving inventories Amortisation of discounts on corporate bonds Cumulative translation adjustment of long-term Others Total - Deferred tax liabilities Gain on overseas long-term investment Cumulative translation adjustment of long-term equity investments Adjustment of land value increment tax Unrealised loss/(gain) on valuation of financial instruments Others Total			2019	2019	2019
	2019/1/1 9,982 $ 981 15,236 7,033 193 4,949 13,718 427 - 29,816 82,335 $ 58,227) ($ 15,832) ( 800) ( 14,041) ( 83,441) ( 702,341 $	2019/1/1	Recognised in profit or loss		Recognised in other comprehensive income		2019/12/31
			6,045) ($ 1,280 - 633) ( 193) ( 1,524 10,570 6,917 - 17,476 29,336 $ 284,530) ($ - - 527 17,159 266,844) ($	- $ - 3,005 - - - - - 36,998 - 40,003 $ - $ 15,832 - 3,125) ( - 12,707 $		3,937 $ 701 18,241 6,400 - 6,473 24,288 7,344 36,998 47,292 151,674 $ 872,575) ($ - 800) ( 16,639) ( 66,282) ( 956,478) ($

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Deferred tax assets: - Temporary differences: Unrealised exchange loss Income tax expense Remeasurement of defined benefit obligations Allowance for bad debts Unallocated appropriation of pension Unrealised impairment loss Accumulated unused compensated absences Allowance for inventory valuation losses and loss for obsolete and slow- moving inventories Amortisation of discounts on corporate bonds Investment tax credits Others Total - Deferred tax liabilities Gain on overseas long-term investment Cumulative translation adjustment of long-term equity investments Adjustment of land value increment tax Unrealised loss/(gain) on valuation of financial instruments Others Total					2018
	2018/1/1 3,812 $ 131 13,826 5,913 6,436 595 4,560 2,779 - 17,624 3,966 59,642 $ 447,279) ($ 28,552) ( 800) ( 16,256) ( - 492,887) ($	2018/1/1	Recognised in profit or loss		Recognised in other comprehensive income	Consolidation		2018/12/31
			6,170 $ - - 1,120 6,243) ( 595) ( 389 10,646 427 17,624) ( 3,152 2,558) ($ 140,948) ($ - - 2,215 - 138,733) ($		- $ - 1,410 - - - - - - - - 1,410 $ - $ 12,720 - - - 12,720 $	- $ 850 - - - - - 293 - - 22,698 23,841 $ - $ - - - 83,441) ( 83,441) ($	9,982 $ 981 15,236 7,033 193 - 4,949 13,718 427 - 29,816 82,335 $ 588,227) ($ 15,832) ( 800) ( 14,041) ( 83,441) ( 702,341) ($

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

• E. MERRY HEALTHCARE CO., LTD., TAIWAN BRANCH (CAYMAN) through 2017 have been

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assessed and approved by the Tax Authority.

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

(30) Earnings per share

rnings per share
Basic earnings pershare Profit attributable to ordinary shareholders of the parent Diluted earnings pershare Profit attributable to ordinary shareholders of the parent Assumed conversion of all dilutive potential ordinary shares Employees’ compensation Convertible bonds Employee restricted shares Profit attributable to ordinary shareholders of the parent plus assumed conversion of all dilutive potential ordinary shares		Year		Weighted average number of ordinary shares outstanding (shareinthousands) Earnings per share (indollars) 203,745 12.51 $ 203,745 1,375 17,874 308 223,302 11.54 $ endedDecember31,2019
		Amount aftertax 2,548,612 $ $ 2,548,612 - 27,669 -		Weighted average number of ordinary shares outstanding (shareinthousands)
				203,745 203,745 1,375 17,874 308 223,302	12.51 $ 11.54 $
		2,576,281 $

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Year ended December 31, 2018

Basic earnings pershare Profit attributable to ordinary shareholders of the parent Diluted earnings pershare Profit attributable to ordinary shareholders of the parent Assumed conversion of all dilutive potential ordinary shares Employees’ compensation Convertible bonds Employee restricted shares Profit attributable to ordinary shareholders of the parent plus assumed conversion of all dilutive potential ordinary shares		Amount aftertax 2,064,265 $ $ 2,064,265 - - -		Weighted average number of ordinary shares outstanding (shareinthousands)	Earnings per share (in dollars)
				197,147 197,147 1,610 - 669 199,426	10.47 $ 10.35 $
		2,064,265 $

• A. The number of weighted-average outstanding shares is included for assumed conversion of all dilutive potential ordinary shares at the calculation of diluted earnings per share, based on the assumption that employees’ compensation will be all distributed in the form of shares.

• B. The number of weighted-average shares outstanding is calculated by considering the weightedaverage number of treasury shares for the years ended December 31, 2019 and 2018.

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(31) Business combinations

• A. On July 31, 2019, the Company acquired 94.2% of ordinary shares of BIOTEST MEDICAL CORPORATION in cash amounting to $9,420 thousand and obtained the control over company. The company has multiple certifications in medical device manufactured. As a result of the acquisition, the Group is expected to increase its presence in the market and expand its market of personal sound amplifier.

• B. The following table summarises the consideration paid for BIOTEST MEDICAL CORPORATION and the fair values of the assets acquired and liabilities assumed at the acquisition date, as well as the non-controlling interest’s proportionate share of the recognised amounts of acquiree’s identifiable net assets at the acquisition date:

amounts of acquiree’s identifiable net assets at the acquisition date:	amounts of acquiree’s identifiable net assets at the acquisition date:
Cash outflow generated from acquisitions Purchase consideration Cash paid The fair value of previous controlled BIOTEST MEDICAL CORPORATION at the acquisition date Total identifiable net assets Carrying amount of increase on cash and cash equivalents of the subsidiary at acquisition Effect from changes of consolidated entities Cash Prepayments Other current assets Intangible assets Refundable deposits Notes payable Other payables Indentified net assets Goodwill Cash paid ($ Plus: Carrying amount of cash when acquired Effect of cash from business combination ($			December31,2019
		$ 9,420 5,220 14,640 4,995 57,209 60 9,000 60 ( 386) (62,000) 8,939 $ 5,701 BTTT 9,420) 4,995 4,425)
	($ ($

• C. Cash outflow generated from acquisitions

• D. For the period from July 1, 2018 to December 31, 2018, Asian Elite International Ltd. and Indigo Enterprise Inc. jointly contributed operating revenue and profit before income tax in the amounts of $595,533 thousand and $18,870 thousand, respectively, since the Group merged with them on July 1, 2018. Had Asian Elite International Ltd. and Indigo Enterprise Inc. been consolidated from January 1, 2018, the consolidated statement of comprehensive income would show operating revenue increase by $1,267,247 thousand and profit before income tax by $39,481 for the year ended December 31, 2018.

• E. On July 1, 2018, the Company acquired 70% of ordinary shares of ASIAN ELITE INTERNATIONAL LTD. and Indigo Enterprise Inc. in cash amounting to $945,560 thousand and obtained the control over these companies. Those companies are engaged in manufacturing,

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sales, research and development of speaker and amplifier in the People’s Republic of China, Canada and Norway. As a result of the acquisition, the Group is expected to increase its presence in these markets and expand its markets of smart speaker. The investment were carried out in two stages, the Company acquired 70% of shares in amount of US$28,203 thousand at the first stage and acquired another 30% of shares in amount of US$12,087 thousand at the second stage, the second stage payment will be made on maturity day during three years after the initial settlement date and the acquisition is completed unless the transferor refuses to transfer by written notice. According to relevant contract liabilities standard, the payment obligation of subsequent 30% of share was recognised (shown as ‘Other non-current liabilities, others’).

F. The following table summarises the consideration paid for ASIAN ELITE INTERNATIONAL LTD. and Indigo Enterprise Inc. and the fair values of the assets acquired and liabilities assumed at the acquisition date, as well as the non-controlling interest’s proportionate share of the recognised amounts of acquiree’s identifiable net assets at the acquisition date:

				July1,2018	July1,2018	July1,2018
Purchase consideration
Cash paid				$		945,560
Non-controlling interest’s proportionate share	of the recognised
amounts of acquiree’s identifiable net assets						155,964
					1,101,524
Total identifiable net assets
Carrying amount of increase on cash and cash	equivalents of the
subsidiary at acquisition
Effect from changes of consolidated entities
Cash						157,208
Accounts receivable						293,228
Inventories						195,904
PP&E						25,057
Intangible assets						417,711
Other receivables						13,490
Prepayments						9,353
Other current assets						10,350
Deferred income tax asset						23,842
Other non-current assets						2,084
Accounts payable			(			292,859)
Other payables			(			217,441)
Deferred income tax liability			(			83,460)
Other non-current liablities			(			34,587)
Indentified net assets						519,880
Goodwill				$		581,644
G. Cash outflow generated from acquisitions
	INSAandMSCS		ASCXandETCX			Total
Cash paid	($	945,560)	($	338,606)		($ 1,284,166)
Plus: Carrying amount of cash when acquired		157,208		20,225		177,433
Effect of cash from business combination	($	788,352)	($	318,381)		($1,106,733)

H. For the period from July 1, 2018 to December 31, 2018, Asian Elite International Ltd. and Indigo

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Enterprise Inc. jointly contributed operating revenue and profit before income tax in the amounts of $595,533 thousand and $18,870 thousand, respectively, since the Group merged with them on July 1, 2018. Had Asian Elite International Ltd. and Indigo Enterprise Inc. been consolidated from January 1, 2018, the consolidated statement of comprehensive income would show operating revenue increased by $1,267,247 thousand and profit before income tax by $39,481, respectively, for the year ended December 31, 2018.

• I. On July 31, 2018, the Group acquired 99.5% of equity of Austar Hearing Science And Technology （ Xiamen) Co., Ltd. and Xiamen Etimbre Hearing Technology Co. LTD for a cash consideration of $338,606 thousand and obtained the control over them thereafter. Those investees are engaged in manufacturing, sales, research and development as well as related channel of hearing aid, hearing device and acoustics equipment. The Group expects that the merger will expand the operational scale and hearing aid devices market.

• J. The following table summarises the consideration paid for Austar Hearing Science And Technology （ Xiamen) Co., Ltd. and Xiamen Etimbre Hearing Technology Co.LTD and the fair values of the assets acquired and liabilities assumed at the acquisition date, as well as the noncontrolling interest’s proportionate share of the recognised amounts of acquiree’s identifiable net assets at the acquisition date:

assets at the acquisition date:
			July31,2018
Purchase consideration
Cash paid		$	338,606
Non-controlling interest’s proportionate share of the recognised
amounts of acquiree’s identifiable net assets			629
			339,235
Total identifiable net assets
Carrying amount of increase on cash and cash equivalents of the
subsidiary at acquisition
Effect from changes of consolidated entities
Cash			20,225
Accounts receivable			10,774
Inventories			61,967
Other receivables			4,521
Prepayments			2,066
Other current assets			1,839
Long-term investments in stocks			155
PP&E			7,525
Intangible assets			86,759
Other non-current assets			9,344
Due to banks	(		7,157)
Accounts payable	(		28,760)
Other payables	(		25,559)
Other non-current liablities	(		14,609)
Indentified net assets			129,090
Goodwill		$	210,145

K. For the period from July 31, 2018 to December 31, 2018, Austar Hearing Science And

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Technology （ Xiamen) Co., Ltd. and Xiamen Etimbre Hearing Technology Co. LTD jointly contributed operating revenue and profit before income tax in the amounts of $193,809 thousand and $6,693 thousand, respectively, since the Group merged with them on July 31, 2018. Had Austar Hearing Science And Technology （ Xiamen) Co. , Ltd and Xiamen Etimbre Hearing Technology Co. LTD been consolidated from January 1, 2018, the consolidated statement of comprehensive income would show operating revenue increased by $398,333 thousand and profit before income tax by $34,009, respectively, for the year ended December 31, 2018.

(32) Supplemental cash flow information

(2)

A. Investing activities with partial cash payments

Financing activities with no cash flow effects Purchase of property, plant and equipment Add: Opening balance of payable on equipment Ending balance of prepayments for equipment Less: Beginning balance of prepayments for equipment Ending balance of payable on equipment Cash paid during the year Purchase of intangible assets Add: Opening balance of payable Ending balance of prepayments Less: Opening balance of prepayments Ending balance of payable Cash paid during the year Disposal of financial assets at fair value through profit or loss Add: payment for prior period purchases during the year purchases unpaid during the year Net cash flows received during the year

2019 2018 618,357 $ 569,756 $ 48,588 98,721 41,911 23,588 23,588) ( 19,398) ( 77,958) ( 48,588) ( 607,310 $ 624,079 $ Years ended December 31 2019 2018 68,122 $ 23,859 $ 2,652 8,258 30,953 32,046 32,046) ( 4,175) ( - 2,652) ( 69,681 $ 57,336 $ Years endedDecember31, 2019 2018 158,903 $ 281,225) ($ - - - 4,667 158,903 $ 276,558) ($ Years endedDecember31,

B. Financing activities with no cash flow effects

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C. Financial assets at fair value through other comprehensive income

		Years ended	December	31,
		2019		2018
Disposal of financial assets at fair value
through other comprehensive income	($	147,651)	($	473,701)
Add: Uncollected proceeds from
disposal during the year		4,335		-
Less: Collected proceeds from prior
period disposal		-	(	129,339)
Net cash flows received during the year	($	143,316)	($	603,040)

D. Financing activities with no cash flow effects:

Financing activities with no cash flow effects:
Convertible bonds being converted to capital stocks	2019 2018 48,851 $ 1,409 $ Years ended December31,
		2018
		1,409 $

(33) Changes in liabilities from financing activities

Short-term borrowings At January 1, 2019 4,735,434 $ Changes in cash flow from financing activities 4,269,747) ( Impact of changes in foreign exchange rate 12,797) ( Changes in other non-cash items - At December 31, 2019 470,890 $ At January 1, 2019 Changes in cash flow from financing activities Impact of changes in foreign exchange rate Changes in acquisition of subsidiaries Changes in loss of control in subsidiaries Changes in fair value Changes in other non-cash items At December 31, 2019	Short-term borrowings	Lease liability Convertible bond Long-term borrowings Liabilities from financing activities-gross - $ 2,882,721 $ - $ 7,636,155 $ 96,425) ( - 62,000 4,304,172) ( - - - 12,797) ( 215,238 652,762) ( - 437,524) ( 118,813 $ 2,229,959 $ 62,000 $ 2,881,662 $ Short-term borrowings Convertible bond Liabilities from financing activities-gross 2,172,618 $ - $ 2,172,618 $ 2,582,573 3,015,000 5,597,573 8,914) ( - 8,914) ( 7,157 - 7,157 - - - - - - - 132,279) ( 132,279) ( 4,753,434 $ 2,882,721 $ 7,636,155 $	Lease liability Convertible bond Long-term borrowings Liabilities from financing activities-gross - $ 2,882,721 $ - $ 7,636,155 $ 96,425) ( - 62,000 4,304,172) ( - - - 12,797) ( 215,238 652,762) ( - 437,524) ( 118,813 $ 2,229,959 $ 62,000 $ 2,881,662 $ Short-term borrowings Convertible bond Liabilities from financing activities-gross 2,172,618 $ - $ 2,172,618 $ 2,582,573 3,015,000 5,597,573 8,914) ( - 8,914) ( 7,157 - 7,157 - - - - - - - 132,279) ( 132,279) ( 4,753,434 $ 2,882,721 $ 7,636,155 $	Lease liability Convertible bond Long-term borrowings Liabilities from financing activities-gross - $ 2,882,721 $ - $ 7,636,155 $ 96,425) ( - 62,000 4,304,172) ( - - - 12,797) ( 215,238 652,762) ( - 437,524) ( 118,813 $ 2,229,959 $ 62,000 $ 2,881,662 $ Short-term borrowings Convertible bond Liabilities from financing activities-gross 2,172,618 $ - $ 2,172,618 $ 2,582,573 3,015,000 5,597,573 8,914) ( - 8,914) ( 7,157 - 7,157 - - - - - - - 132,279) ( 132,279) ( 4,753,434 $ 2,882,721 $ 7,636,155 $	Convertible bond	Convertible bond		Long-term borrowings	Liabilities from financing activities-gross
		$ ( $
			$
				2,172,618 $ 2,582,573 8,914) ( 7,157 - - - 4,753,434 $		- $ 3,015,000 - - - - 132,279) ( 2,882,721 $

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(34) Government grants

• A. The subsidiary, MECL, entered into a subsidy agreement with Economy, Trade and Information Commission of Shenzhen Municipality for the year ended December 31, 2016, which agreed to subsidise the Company with the maximum of RMB 3 million to purchase equipment and computer software. As of December 2018, the Company received RMB 3 million (shown as other non-current liabilities) and was in the process of purchasing the equipment and computer software.

• B. For the year ended December 31, 2018, the subsidiary, MECL, applied for Entrepreneur Research and Development Funding Plan from the Science and Technology Innovation Committee of Shenzhen Municipality for the subsidies amounting to RMB 5 million thousand (NTD 22,360 thousand).

• C. For the year ended December 31, 2018, the subsidiary, MECL, applied for Strategic Emerging Industries and Support Plans for Future Industrial Development Special Funds for the subsidies amounting to RMB 2 million thousand (NTD 8,944 thousand).

• D. For the year ended December 31, 2018, the subsidiary, MECL, applied to Shenzhen economic and trade information commission for The doubling plan of technological transformation in shenzhen expands effective investment funds for industry, the grant amounted to RMB 12,720 thousand (NTD 54,760 thousand).

• E. For the year ended December 31, 2018, the subsidiary, MECL, applied to Shenzhen economic and trade information commission for The doubling plan of Longhua district industrial development special fund manufacturing industry development special fund, the grant amounted RMB 1,210 thousand (NTD 5,209 thousand).

• F. For the year ended December 31, 2018, the subsidiary, MECL, applied to Longhua District economic service bureau for Longhua district special fund for industrial development - loan interest subsidy, the grant amounted RMB 770 thousand (NTD 3,315 thousand).

• G. For the year ended December 31, 2018, the subsidiary, MECL, applied to Longhua district science and technology innovation bureau for Longhua district enterprise R&D investment in the first batch of funding, the grant amounted RMB3,282 thousand, it has received RMB1,969 thousand ( NTD 8,477 thousand).

• H. For the year ended December 31, 2019, the subsidiary, MECL, applied for Subsidy plan for key industrial enterprises in Shenzhen to increase production and efficiency, the grant amounted RMB 3,000 thousand (NTD 13,709 thousand).

• I. For the year ended December 31, 2019, the subsidiary, MECL, applied for Shenzhen Longhua District industrial development special fund project, the grant amounted RMB 500 thousand (NTD 2,285 thousand).

• J. For the year ended December 31, 2019, the subsidiary, MECL, applied for Shenzhen foreign trade steady growth structural support plan, the grant amounted RMB 3,116 thousand (NTD 14,239 thousand).

• K. For the year ended December 31, 2019, the subsidiary, MECL, applied to economic service bureau of Longhua District for Shenzhen technology center Longhua District supporting funds, the grant amounted to RMB 2,000 thousand (NTD 8,610 thousand).

• L. For the year ended December 31, 2019, the subsidiary, MECL, applied to Economy, Trade and Information Commission of Shenzhen Municipality for Top 100 supporting funds, the grant amounted to RMB 1,000 thousand (NTD 4,305 thousand).

• M. For the year ended December 31, 2019 and 2018, the subsidiary, MECL, applied to Science and Technology Innovation Committee of Shenzhen Municipality for Enterprise research and development funding scheme, the grant amounted to RMB 1,744 thousand and 5,000 (NTD 7,508 thousand and 22,360 thousand), respectively.

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7. RELATED PARTY TRANSACTIONS

Name

MERRY ELECTRONICS(SUZHOU)CO.,LTD (MECE)

MERRY ELECTRONICS (HUIZHOU)CO.,LTD.(MECH) MERRY ELECTRONICS (SHANGHAI)CO.,LTD(MECS)

Guangdong Luxshare & Merry Electronics Co., Ltd.(MEDG) LEOHAB ENTERPRISE CO.,LTD.(LEOHAB) NEOCENE TECHNOLOGY CO.,LTD MERRY FULING CO.,LTD., TAIWAN BRANCH(MHNCTW)

Relationship Affiliated company Affiliated company Affiliated company Affiliated company

Affiliated company Other related party Other related party

(1) Significant related party transactions

A. Operating revenue:

gnificant related party transactions Operating revenue: NEOCENE TECHNOLOGY CO.,LTD MERRY FULING CO.,LTD., TAIWAN BRANCH(MHNCTW)		Other related party Other related party
Sales of goods: MEDG MECH MECE MECS LEOHAB Others Total		Years ended December 31,
		2019 2018 32,856 $ 2,990 $ 28,015 12,363 23,946 66,402 2,731 11,112 2,478 3,058 578 - 90,604 $ 95,925 $

The prices of goods sold to related parties are based on the different product’s profitability and adjusted annually as there is no comparable transaction for the goods sold to the third parties. The credit terms to related parties are 60 days end of month and 30 to 120 days end of month to the third parties.

B. Purchases:

the third parties. Purchases:
Purchases of goods MECE MECH MEDG MHNCTW Total		Years ended December 31,
		2019 12,149,308 $ 4,050,323 1,005,709 6 17,205,346 $	2018
			8,754,589 $ 4,800,765 350,429 -
			13,905,783 $

The associates are manufacturers for the Group’s products and the prices are based on the different product’s profitability and adjusted annually as there is no comparable transaction for the goods purchased from the third parties. The payment terms are 60 days end of month and 30 to 120 days end of month to the third parties.

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C. Receivables from related parties:

Receivables from related parties:
December31,2019 Accounts receivable MECH - $ MECE 11,946 MECS 872 MEDG 107 MHNCTW 9 Total 12,934 $ Other receivables MECH 328,449 $ MECE 37,559 MEDG 18,926 Others 434 Total 385,368 $	December31,2018 4,534 $ 15,190 3,255 104 - 23,083 $
	676,684 $ 29,472 - 23,629
	729,785 $

Other receivables mainly were the purchases of raw materials on the behalf of Merry Electronics (Huizhou) Co., Ltd. for the years ended December 31, 2019 and 2018. D. Payables to related parties:

D. Payables to related	parties:
				December31,2019		December31,2018
Accounts payable
MECE				$	3,074,208	$	2,428,878
MECH					579,327		1,693,833
MEDG					266,710		290,258
MHNCTW					6		-
Total				$	3,920,251	$	4,412,969
Other payables
MECE				$	91,481	$	37,339
Others					46,222		71
Total				$	137,703	$	37,410
Other payables	mainly	were	mould	developing	expenses	payment that	MERRY
ELECTRONICS(SUZHOU)		CO.,	LTD paid on behalf of		the parent company.
E. Property transactions:

(a) Disposal of property, plant and equipment:

MECE MEDG MECH Total		Year ended December 31, 2019 326 $ 375 446 1,147 $	Year ended December 31, 2018 - $ - - - $

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(b) Acquisition of property, plant and equipment:

Year ended December 31,2019 MECE 84,343 $ MEDG 80,756 Total 165,099 $	Year ended December 31,2018 - $ - - $

• F. Loans to related parties Please refer to table 1.

• G. Provision of endorsements and guarantees Please refer to table 2.

(2) Key management compensation

F. Loans to related parties Please refer to table 1. G. Provision of endorsements and guarantees Please refer to table 2. Key management compensation
Salaries and other short-term employee benefits Post-employment benefits Share-based payments		2019 2018 117,777 $ 111,094 $ 247 939 18,635 13,706 136,659 $ 125,739 $ Years ended December 31,

8. PLEDGED ASSETS

None.

9. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNISED CONTRACT COMMITMENTS

Capital expenditures contracted for at the balance sheet date but not yet incurred is as follows:

Property, plant and equipment Intangible assets	December31,2019 256,968 $ 186,405 443,373 $	December31,2018
		84,290 $ 26,344 110,634 $

10. SIGNIFICANT DISASTER LOSS

None.

11. SIGNIFICANT EVENTS AFTER THE BALANCE SHEET DATE

To increase its international market competitiveness and increase its product plants abroad, the Company planned an investment in Vietnam. On February 27, 2020, the Board of Directors of the Company approved to establish a joint venture, Merry Li-Hsun (Vietnam) Co., Ltd. (temporary name), with Lanto Electronic Ltd. The Company will invest USD 12,240 and acquired 51% share equity.

12. OTHERS

(1) Capital management

The Company’s capital management is to ensure it has sufficient financial resource and operating plans to meet operational capital for future needs, capital expenditure, research and development expense, obligation repayment and dividend distribution within the next year.

The Company monitors capital by reassessing debt ratios periodically. The debt ratios as at December 31, 2019 and 2018 were as follows:

Total debt Total assets Debt ratio	December 31,2019 12,797,178 $ 25,795,570 50%	December 31,2018
		12,797,178 $ 25,795,570 50%

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(2) Financial instruments

A. Financial instruments by category

ancial instruments inancial instruments by category
Financial assets Financial assets at fair value through profit or loss Financial assets mandatorily measured at fair value through profit or loss Financial assets at fair value through other comprehensive income Designation of equity instrument Qualifying equity instrument Financial assets at amortised cost/Loans and receivables Cash and cash equivalents Contract assets Accounts receivable Other receivables Guarantee deposits paid Derivative financial assets for hedging Financial liabilities Financial liabilities at fair value through Financial liabilities held for trading Financial liabilities at amortised cost Short-term borrowings Notes payable Accounts payable Other accounts payable Corporate bonds payable (including current portion) Lease liability Contract liability Long-term borrowings Deposits received	December31,2019 38,214 $ 2,614,763 $ 120,721 2,735,484 $ 6,589,863 $ 31,585 5,461,315 434,853 17,638 12,535,254 $ December31,2019 11,799 $ 470,890 74 6,693,692 1,110,729 2,229,959 118,813 105,348 62,000 2,828 10,806,132 $	December31,2018
		184,222 $
		1,567,729 $ 174,276
		1,742,005 $
		8,512,129 $ - 8,597,095 805,171 19,004
		17,933,399 $
		December31,2018
		8,337 $ 4,753,434 74 9,743,430 1,209,234 2,882,721 - 26,111 - -
		18,621,980 $

B. Financial risk management policies

(a) The Group’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk, interest rate risk and price risk), credit risk and liquidity risk.

(b) Group treasury identifies, evaluates and hedges financial risks in close co-operation with the Group’s operating units. Such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments, and investment of excess liquidity.

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• C. Significant financial risks and degrees of financial risks

• (a) Market risk

Foreign exchange risk

• i. The Group operates internationally and is exposed to foreign exchange risk arising from the transactions of the Company and its subsidiaries used in various functional 、

• currency, primarily with respect to the USD RMB and HKD. Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities.

• ii. The Group’s businesses involve some non-functional currency operations (the Company’s and certain subsidiaries’ functional currency: NTD; other certain subsidiaries’ functional 、

• currency: USD RMB and HKD). The information on assets and liabilities denominated in foreign currencies whose values would be materially affected by the exchange rate fluctuations is as follows:

(Remainder of page intentionally left blank)

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• B. The Company’s businesses involve some non-functional currency operations (the Company’s functional currency: NTD). The information on assets and liabilities denominated in foreign currencies whose values would be materially affected by the exchange rate fluctuations is as follows:

December 31, 2019

(Foreign currency: functional currency) Financial assets Monetary items Cash in banks USD : NTD RMB : NTD USD : HKD HKD : NTD USD : RMB USD : THB RMB : HKD Receivables USD：HKD USD：NTD USD：RMB USD：THB SGD：USD	(Foreign currency: functional currency) Financial assets Monetary items Cash in banks USD : NTD RMB : NTD USD : HKD HKD : NTD USD : RMB USD : THB RMB : HKD Receivables USD：HKD USD：NTD USD：RMB USD：THB SGD：USD	Foreign currency amount (In thousands)	Exchange rate	Book value (NTD)		Sensitivityanalysis	Sensitivityanalysis
					Degree of variation	Effects on profit or loss	Effect on other comprehensive income
		45,571 42,433 8,549 1,060 12,096 1,361 1,612 671 157,140 43,517 3,478 2,435	29.9800 4.3050 7.7890 3.8490 6.9640 29.6890 1.1185 7.8300 29.9800 6.9640 29.6890 0.7432	1,366,219 $ 182,674 66,588 16,148 362,638 41,235 7,136 5,226 4,711,057 $ 1,304,640 104,270 54,252	3% 3% 3% 3% 3% 3% 3% 3% 3% 3% 3% 3%	40,987 $ 5,480 1,998 484 10,879 1,237 214 157 141,332 $ 39,139 3,128 1,628	- $ - - - - - - $ - - - -

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December 31, 2019

		December 31,2019
(Foreign currency: functional currency) Non-monetary items USD：NTD Investments Accounted for Using Equity Method USD：NTD HKD：NTD RMB：NTD Financial liabilities Non-monetary items Bank loan USD：NTD USD：RMB USD：CAD Payables HKD：RMB RMB：NTD USD：NTD USD：RMB Current financial investments at fair value through other comprehensive income	Foreign currency amount (In thousands) Exchange rate 3,033 29.9800 94,818 29.9800 172,906 3.8490 87,480 4.3050 1,600 30.7200 3,971 6.8700 2,600 1.3040 5,671 0.8941 197,913 4.3050 155,831 29.9800 22,426 6.9640	Book value (NTD) Degree of variation 90,929 $ 3% 2,842,636 $ 3% 665,514 3% 376,601 3% 89,940 $ 3% 282,861 3% 77,948 3% 5,070 $ 3% 852,015 3% 4,671,813 3% 679,360 3%	Effects on profit or loss Effect on other comprehensive income Sensitivityanalysis - $ 2,728 $ - $ 85,279 $ - 19,965 - 11,298 2,698 $ - $ 8,486 - 2,338 - 152 $ - 25,560 - 140,154 - 20,381 -
			- $ - $ - - 2,698 $ 8,486 2,338 152 $ 25,560 140,154 20,381	2,728 $ 85,279 $ 19,965 11,298 - $ - - - - - -

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(Foreign currency: functional currency) Financial assets Monetary items Cash in banks USD : NTD RMB : NTD HKD : NTD USD : HKD USD : RMB USD : THB Receivables USD：NTD USD：HKD USD：RMB	(Foreign currency: functional currency) Financial assets Monetary items Cash in banks USD : NTD RMB : NTD HKD : NTD USD : HKD USD : RMB USD : THB Receivables USD：NTD USD：HKD USD：RMB			December 31,2018	December 31,2018
		Foreign currency amount (In thousands)	Exchange rate	Book value (NTD)		Sensitivityanalysis
					Degree of variation	Effects on profit or loss	Effect on other comprehensive income
		84,311 16,048 2,382 8,006 7,208 3,500 236,327 1,183 80,702	30.72 4.47 3.92 7.83 6.87 32.22 30.72 7.83 6.87	2,589,612 $ 71,767 9,340 245,904 221,394 107,503 7,258,784 $ 36,336 2,478,762	3% 3% 3% 3% 3% 3% 3% 3% 3%	77,688 $ 2,153 280 7,377 6,642 3,225 217,764 $ 1,090 74,363	- $ - - - - - - - $ -

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

December 31, 2018
Sensitivity analysis
Foreign currency
(Foreign currency: functional amount Exchange Book value Degree of Effects on Effect on other
currency) (In thousands) rate (NTD) variation profit or loss comprehensive income
----- End of picture text -----

Non-monetary items
Current financial investments at
fair value through other
comprehensive income
USD：NTD	3,305	30.72		101,513	3%		-		3,045
Investments Accounted for
Using Equity Method
USD：NTD	78,860	30.72	$	2,422,185	3%	$	-	$	72,666
HKD：NTD	134,262	3.92		526,441	3%		-		15,793
RMB：NTD	92,428	4.47		413,338	3%		-		12,400
Financial liabilities
Non-monetary items
Bank loan
USD：NTD	1,600	30.72	$	49,144	3%	$	1,474	$	-
USD：RMB	3,971	6.87		121,969	3%		3,659		-
Payables
USD：NTD	180,384	30.72	$	5,540,495	3%	$	166,215		-
RMB：NTD	263,799	4.47		1,179,709	3%		35,391		-
USD：RMB	43,397	6.87		1,332,939	3%		39,988		-
HKD：RMB	11,519	0.88		45,166	3%		1,355		-

Total exchange gain (loss), including realised and unrealised arising from significant foreign exchange variation on the monetary items held by the Group for the years ended December 31, 2019 and 2018, amounted to $10,780 thousand and $28,321 thousand, respectively.

~86~

Price risk

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

• ii. The Group’s investments in equity securities comprise shares and open-end funds issued by the domestic companies. The prices of equity securities would change due to the change of the future value of investee companies. If the prices of these equity securities had increased/decreased by 3% with all other variables held constant, post-tax profit for the years ended December 31, 2019 and 2018 would have increased/decreased by $654 and $5,215, respectively, as a result of gains/losses on equity securities classified as at fair value through profit or loss. Other components of equity would have increased/decreased by $78,443 and $48,552, respectively, as a result of other comprehensive income classified as available-for-sale equity investment and equity investment at fair value through other comprehensive income.

Cash flow and fair value Interest rate risk

• i. The Group’s borrowings are measured at amortised cost. The borrowings are periodically contractually repriced and to that extent are also exposed to the risk of future changes in market interest rates.

• ii. If the borrowing interest rate had increased/decreased by 0.25% with all other variables held constant, profit, net of tax for the years ended December 31, 2019 and 2018 would have increased/decreased by $1,066 and $9,507, respectively. The main factor is that changes in interest expense result in floating-rate borrowings.

(b) Credit risk

• i. The Group adopts following assumptions under IFRS 9 to assess whether there has been a significant increase in credit risk on that instrument since initial recognition:

• (i) If the contract payments were past due over 30 days based on the terms, there has been a significant increase in credit risk on that instrument since initial recognition.

• (ii) For investments in bonds that are traded over the counter, if any external credit rating agency rates these bonds as investment grade, the credit risk of these financial assets is low.

• ii. The following indicators are used to determine whether the credit impairment of debt instruments has occurred:

• (i) It becomes probable that the issuer will enter bankruptcy or other financial reorganization due to their financial difficulties;

• (ii) The disappearance of an active market for that financial asset because of financial difficulties;

• (iii) Default or delinquency in interest or principal repayments;

• (iv) Adverse changes in national or regional economic conditions that are expected to cause a default.

• iii. The Group classifies customers’ accounts receivable, contract assets in accordance with geographic area. The Group applies the modified approach using provision matrix to estimate expected credit loss under the provision matrix basis.

• iv. The Group wrote-off the financial assets, which cannot be reasonably expected to be recovered, after initiating recourse procedures. However, the Group will continue executing the recourse procedures to secure their rights.

~87~

• v. The Group used the forecastability of adjust historical and timely information to assess the default possibility of accounts receivable, contract assets and lease payments receivable. As of December 31, 2019 and 2018, the provision matrix is as follows:

Not past due December 31, 2019 Expected loss rate 0.06% Total book value 5,425,988 $ Loss allowance 3,489) ($ Not past due December 31, 2018 Expected loss rate 0.09% Total book value 8,398,276 $ Loss allowance 7,839) ($	Not past due	Up to 30days 13.94% 11,003 $ 1,534) ($ Up to 30 days		31 to 60days	61 to 90days 36.96% 7,327 $ 2,708) ($ 61 to 90 days
			3.85% 12,266 $ 472) ($ 31 to 60 days
		0.65% 184,170 $ 1,206) ($	11.68% 591 $ 69) ($		45.40% 163 $ 74) ($

• vi. Movements in relation to the Group applying the modified approach to provide loss allowance for accounts receivable are as follows:

allowance for accounts receivable are as follows:
At January 1 Provision for impairment Effect of foreign exchange At December 31 At January 1 Provision for impairment At December 31	2019
	Accounts receivable 9,349 $ 21,164 1,006) ( 29,507 $ Accounts receivable 2018
		3,390 $ 5,959 9,349 $

For provisioned loss in 2019 and 2018, the impairment losses arising from customers’ contracts are amounts to $21,164 and $4,348, respectively.

• x. The Group assessed there was no debt instrument at fair value through other comprehensive income impaired.

• xi. For investments in debt instruments at amortised cost and at fair value through other comprehensive income, the credit rating levels are presented below:

~88~

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

December 31, 2019
Lifetime
Significant
increase in Impairment
12 months credit risk of credit Total
Financial assets at fair value
through other comprehensive
income
Group 1 $ 120,721 $ - $ - $ 120,721
December 31, 2018
Lifetime
Significant
increase in Impairment
12 months credit risk of credit Total
Financial assets at fair value
through other comprehensive
income
Group 1 $ 174,277 $ - $ - $ 174,277
----- End of picture text -----

Group 1: Debt instruments designated as investment grade.

• (c) Liquidity risk

• i. Cash flow forecasting is performed in the operating entities of the Group and aggregated by Group treasury. Group treasury monitors rolling forecasts of the Group’s liquidity requirements to ensure it has sufficient cash to meet operational needs.

• ii. Group treasury invests surplus cash in interest bearing current accounts, time deposits, money market deposits and marketable securities, choosing instruments with appropriate maturities or sufficient liquidity to provide sufficient head-room as determined by the above-mentioned forecasts.

• iii. The table below analyses the Group’s non-derivative financial liabilities and net-settled or gross-settled derivative financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date for nonderivative financial liabilities and to the expected maturity date for derivative financial liabilities. The amounts disclosed in the table are the contractual undiscounted cash flows.

• iv. The Company has $10,698,351 thousand in undrawn borrowing facilities.

~89~

December 31,2019 Non-derivative financial liabilities Short-term borrowings Notes payable Accounts payable Other payables -related parties Other payables Bonds payable Long-term borrowings Lease liabilities Other current liabilities Derivative financial liabilities Forward exchange contracts December 31,2019	Less than 3 months	Between 3 months and 1year	Between 1 and 2 years	Between 2 and 5years	Over 5 years	Total
	397,574 $ 74 2,357,770 3,920,206 1,080,715 - 83 9,346 48,711 11,799 Less than 3 months	92,354 $ - 415,671 45 30,014 - 295 20,388 721 - Between 3 months and 1year	- $ - - - - - 393 18,217 - - Between 1 and 2years	- $ - - - - 2,289,500 62,606 30,374 - - Between 2 and 5years	- $ - - - - - - 42,953 - - Over 5 years	489,928 $ 74 2,773,441 3,920,251 1,110,729 2,289,500 63,377 121,278 49,432 11,799 Total
Non-derivative financial liabilities Short-term borrowings Notes payable Accounts payable Other payables -related parties Other payables Other current liabilities Derivative financial liabilities Accounts payable- related parties Forward exchange contracts	4,531,576 $ 74 4,692,987 4,373,183 1,080,248 21,205 4,373,183 6,976	234,775 $ - 637,474 119,444 668 39,786 -	- $ - - - - - -	- $ - - - - - -	- $ - - - - - -	4,766,351 $ 74 5,330,461 1,199,692 21,873 4,412,969 6,976

~90~

(3) Fair value information

• A. The different levels that the inputs to valuation techniques are used to measure fair value of financial and non-financial instruments have been defined as follows:

• Level 1:Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. A market is regarded as active where a market in which transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. The fair value of the Group’s investment in listed stocks, and derivative instruments with quoted market prices is included in Level 1.

• Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. The fair value of the Group’s investment in derivative instruments & Equity Instrument is included in Level 2.

• Level 3: Unobservable inputs for the asset or liability. The fair value of the Group’s investment in certain derivative instruments, equity investment without active market and is included in Level 3.

• B. Financial instruments not measured at fair value

• Financial instruments not measured at fair value include the carrying amounts of cash and cash equivalents, notes receivable, accounts receivable, other receivables, short-term borrowings, notes payable, accounts payable and other payables.

• C. The related information of financial and non-financial instruments measured at fair value by level on the basis of the nature, characteristics and risks of the assets and liabilities at December 31, 2019 and 2018 is as follows:

2019 and 2018 is as follows:
December 31,2019 Assets Recurring fair value measurements Financial assets at fair value through profit or loss -Equity securities -Forward exchange contracts -Call options of convertible bonds Financial assets at fair value through comprehensine profit or loss -Equity securities -Debt securities Total Liabilities Recurring fair value measurements Financial liabilities at fair value through profit or loss -Forward exchange contracts	Level 1 485 $ - - 2,485,433 120,721 2,606,639 $ - $	Level 2 - $ 14,138 - - - 14,138 $ 11,799 $	Level 3 21,301 $ - 2,290 129,330 - 152,921 $ - $	Total
				21,786 $ 14,138 2,290 2,614,763 120,721
				2,773,698 $
				11,799 $

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December 31, 2018 Level 1 Level 2 Level 3 Total
Assets
Recurring fair value measurements
Financial assets at
fair value through
profit or loss
-
-Equity securities $ 103,972 $ $ 18,174 $ 122,146
-Funds 51,700 - - 51,700
- -
-Call options of 4,200 4,200
convertible bonds
-Debt securities 174,276 - - 174,276
Total $ 1,754,809 $ 6,176 $ 165,242 $ 1,926,227
----- End of picture text -----

Liabilities Recurring fair value measurements Financial liabilities at fair value through profit or loss

==> picture [455 x 13] intentionally omitted <==

• D. The methods and assumptions the Group used to measure fair value are as follows:

• i.The instruments the Group used market quoted prices as their fair values (that is,Level 1) are listed below by characteristics:

Listed shares Emerging stocks Open-end fund Market quoted price Closing price at Last transaction quoted Net asset value at evaluation date prices at evaluation date evaluation date

• ii. Except for financial instruments with active markets, the fair value of other financial instruments is measured by using valuation techniques or by reference to counterparty quotes. The fair value of financial instruments measured by using valuation techniques can be referred to current fair value of instruments with similar terms and characteristics in substance, discounted cash flow method or other valuation methods,

• iii. Forward exchange contracts are usually valued based on the current forward exchange rate.

• vi.The output of valuation model is an estimated value and the valuation technique may not be able to capture all relevant factors of the Group’s financial and non-financial instruments. Therefore, the estimated value derived using valuation model is adjusted accordingly with additional inputs, for example, model risk or liquidity risk and etc. In accordance with the Group’s management policies and relevant control procedures relating to the valuation models used for fair value measurement, management believes adjustment to valuation is necessary in order to reasonably represent the fair value of financial and non-financial instruments at the consolidated balance sheet. The inputs and pricing information used during valuation are carefully assessed and adjusted based on current market conditions.

• E. For the years ended December 31, 2019 and 2018, there was no transfer between Level 1 and Level 2.

~92~

• F. The following chart is the movement of Level 3 for the years ended December 31, 2019 and 2018:

At January 1 Added in the year Sold in the year Gains recognised in profit or loss Gains / (losses) recognised in other comprehensive income At December 31	2019 2018 165,242 $ 166,630 $ 3,127 56,025 - 45,650) ( 1,910) ( 4,194 488) ( 15,957) ( 152,921 $ 165,242 $

• G. The following is the qualitative information of significant unobservable inputs and sensitivity analysis of changes in significant unobservable inputs to valuation model used in Level 3 fair value measurement:

Equity securities Profit instruments Call options of convertible bonds Equity securities	Fair value at December 31, 2019 81,689 $ 21,786 2,290 Fair value at December 31, 2018		Valuation technique Market comparable companies Net asset value Binary tree convertible bond valuation model Valuation technique	Significant unobservable input N/A N/A Risk-free interest rate Stock price Volatility Significant unobservable input N/A	Range (weighted average) 15,267 $ 21,786 0.4816% 167.5 32.97% Range (weighted average)	Relationship of inputs to fair value
						The higher the multiplier, the higher the fair value N/A The higher the risk- free interest rate, the lower the fair value The higher the stock price, the higher the fair value The higher the stock price volatility, the higher the fair value Relationship of inputs to fair value N/A
	11,169 $	Market comparable companies			594 $

• H. The Group has carefully assessed the valuation models and assumptions used to measure fair value. However, use of different valuation models or assumptions may result in different measurement. The following is the effect of profit or loss or of other comprehensive income from financial assets and liabilities categorised within Level 3 if the inputs used to valuation models have changed:

~93~

December 31, 2019

Input Change Favourable change Unfavourable change Financial assets Call options of convertible bonds Risk-free interest rate ±20bp - $ - $ Stock price ±10% 1,603 1,145) ( Volatility ±5% 2,290 229) ( Equity securities Cash flow ±10% - - 3,893 $ 1,374) ($ Recognised in profit or loss Input Change Favourable change Unfavourable change Financial assets Call options of convertible bonds Risk-free interest rate ±20bp - $ - $ Stock price ±10% 900 1,200) ( Volatility ±5% 1,200 1,200) ( Equity securities Stock price ±10% - - Volatility ±5% - - 2,100 $ 2,400) ($ December Recognised in profit or loss	Input Change Favourable change Unfavourable change Financial assets Call options of convertible bonds Risk-free interest rate ±20bp - $ - $ Stock price ±10% 1,603 1,145) ( Volatility ±5% 2,290 229) ( Equity securities Cash flow ±10% - - 3,893 $ 1,374) ($ Recognised in profit or loss Input Change Favourable change Unfavourable change Financial assets Call options of convertible bonds Risk-free interest rate ±20bp - $ - $ Stock price ±10% 900 1,200) ( Volatility ±5% 1,200 1,200) ( Equity securities Stock price ±10% - - Volatility ±5% - - 2,100 $ 2,400) ($ December Recognised in profit or loss	Input Change Favourable change Unfavourable change Financial assets Call options of convertible bonds Risk-free interest rate ±20bp - $ - $ Stock price ±10% 1,603 1,145) ( Volatility ±5% 2,290 229) ( Equity securities Cash flow ±10% - - 3,893 $ 1,374) ($ Recognised in profit or loss Input Change Favourable change Unfavourable change Financial assets Call options of convertible bonds Risk-free interest rate ±20bp - $ - $ Stock price ±10% 900 1,200) ( Volatility ±5% 1,200 1,200) ( Equity securities Stock price ±10% - - Volatility ±5% - - 2,100 $ 2,400) ($ December Recognised in profit or loss	Input Change Favourable change Unfavourable change Financial assets Call options of convertible bonds Risk-free interest rate ±20bp - $ - $ Stock price ±10% 1,603 1,145) ( Volatility ±5% 2,290 229) ( Equity securities Cash flow ±10% - - 3,893 $ 1,374) ($ Recognised in profit or loss Input Change Favourable change Unfavourable change Financial assets Call options of convertible bonds Risk-free interest rate ±20bp - $ - $ Stock price ±10% 900 1,200) ( Volatility ±5% 1,200 1,200) ( Equity securities Stock price ±10% - - Volatility ±5% - - 2,100 $ 2,400) ($ December Recognised in profit or loss	Input Change Favourable change Unfavourable change Financial assets Call options of convertible bonds Risk-free interest rate ±20bp - $ - $ Stock price ±10% 1,603 1,145) ( Volatility ±5% 2,290 229) ( Equity securities Cash flow ±10% - - 3,893 $ 1,374) ($ Recognised in profit or loss Input Change Favourable change Unfavourable change Financial assets Call options of convertible bonds Risk-free interest rate ±20bp - $ - $ Stock price ±10% 900 1,200) ( Volatility ±5% 1,200 1,200) ( Equity securities Stock price ±10% - - Volatility ±5% - - 2,100 $ 2,400) ($ December Recognised in profit or loss	Input Change Favourable change Unfavourable change Financial assets Call options of convertible bonds Risk-free interest rate ±20bp - $ - $ Stock price ±10% 1,603 1,145) ( Volatility ±5% 2,290 229) ( Equity securities Cash flow ±10% - - 3,893 $ 1,374) ($ Recognised in profit or loss Input Change Favourable change Unfavourable change Financial assets Call options of convertible bonds Risk-free interest rate ±20bp - $ - $ Stock price ±10% 900 1,200) ( Volatility ±5% 1,200 1,200) ( Equity securities Stock price ±10% - - Volatility ±5% - - 2,100 $ 2,400) ($ December Recognised in profit or loss		Favourable change Unfavourable change - $ - $ - - - - 8,169 8,169 8,169 $ 8,169 $ Recognised in other comprehensive income 31,2018 Recognised in other comprehensive income	Favourable change Unfavourable change - $ - $ - - - - 8,169 8,169 8,169 $ 8,169 $ Recognised in other comprehensive income 31,2018 Recognised in other comprehensive income	Favourable change Unfavourable change - $ - $ - - - - 8,169 8,169 8,169 $ 8,169 $ Recognised in other comprehensive income 31,2018 Recognised in other comprehensive income
			$
					Recognised in profit or loss
				Favourable change Unfavourable change - $ - $ 900 1,200) ( 1,200 1,200) ( - - - - 2,100 $ 2,400) ($			Favourable change		Unfavourable change
	Risk-free interest rate Stock price Volatility Stock price Volatility	±20bp ±10% ±5% ±10% ±5%					- $ - - 1,117 - 1,117 $		- $ - - 1,117 - 1,117 $

13. SUPPLEMENTARY DISCLOSURES

(1) Significant transactions information

• A. Loans to others: Please refer to table 1.

• B. Provision of endorsements and guarantees to others: Please refer to table 2.

• C. Holding of marketable securities at the end of the period (not including subsidiaries, associates and joint ventures): Please refer to table 3.

• D. Acquisition or sale of the same security with the accumulated cost exceeding $300 million or 20% of the Company’s paid-in capital: None.

• E. Acquisition of real estate reaching $300 million or 20% of paid-in capital or more: None.

• F. Disposal of real estate reaching $300 million or 20% of paid-in capital or more: None.

• G. Purchases or sales of goods from or to related parties reaching $100 million or 20% of paid-in capital or more: Please refer to table 4.

• H. Receivables from related parties reaching $100 million or 20% of paid-in capital or more: Please refer to table 5.

• I. Trading in derivative instruments undertaken during the reporting periods: Please refer to Note 6(2).

• J. Significant inter-company transactions during the reporting periods: Purchases or sales of goods from or to related parties reaching $100 million or more: Please refer to table 6.

~94~

(2) Information on investees

Names, locations and other information of investee companies (not including investees in Mainland China) ： Please refer to table 7.

(3) Information on investments in Mainland China

• A. Basic information: Please refer to table 8.

• B. Significant transactions, either directly or indirectly through a third area, with investee companies in the Mainland Area: Please refer to table 9.

14. SEGMENT INFORMATION

(1) General information

Management has determined the reportable operating segments based on the reports reviewed by the chief operating decision-maker that are used to make strategic decisions. Business organisation is divided into Taiwan, Shenzhen, Suzhou and other segments based on the operating regions. The Company’s revenue is mainly from manufacturing and sales of microphones, receivers, speakers and other electronic components.

(2) Measurement of segment information

The Group evaluates the performance of the operating segments based on post-tax profit or loss.

• (3) Information about segment profit or loss, assets and liabilities

The segment information provided to the chief operating decision-maker for the reportable segments is as follows:

• A. The segment information provided to the chief operating decision-maker for the reportable segments for the year ended December 31, 2019 is as follows:

			Taiwan			Shenzhen			Singapore			Total
Revenue
Revenue from external		$	30,723,659		$	15,004,984		$	4,210,433		$	49,939,076
customer
Inter-segment revenue	(		78,386)	(		14,680,937)	(		24,820)	(		14,784,143)
Revenue total		$	30,645,273		$	324,047		$	4,185,613		$	35,154,933
Segment profit		$	2,547,377		$	129,310		$	304,673		$	2,981,416
segment profit (loss)
contains：
Interest revenue		$	48,522		$	6,089		$	-		$	54,611
Interest expense			63,385			31,171			419			66,975
Depreciation &
amortization			83,384			35,339			223			118,946
Income tax expense			597,188			17,041			66,334			680,563
Recognised investment
profit which is adopting
equity method			1,441,489			-			-			1,441,489

Note: The Group does not use segment information relating to assets and liabilities to evaluate segment performance. As a result, such information is not disclosed.

~95~

• B. The segment information provided to the chief operating decision-maker for the reportable segments for the year ended December 31, 2018 is as follows:

Revenue Revenue from external customer Inter-segment revenue Revenue total Segment profit segment profit (loss) contains： Interest revenue Interest expense Depreciation & amortization Income tax expense Recognised investment profit which is adopting equity method	Taiwan 30,419,173 $ 19,006 30,438,179 $ 2,055,620 $ 40,417 $ 31,217 74,529 428,809 227,446	Shenzhen 425,821 $ 17,310,441 17,736,262 $ 249,395 $ 16,865 $ 14,909 134,423 166,596 240,615	Singapore 4,030,125 $ 13,959 4,044,084 $ 310,343 $ - $ - 2,998 63,555 -	Total
				34,875,119 $ 17,343,406 52,218,525 $ 2,615,358 $ 57,282 $ 46,126 211,950 658,960 468,061

Note: The Group does not use segment information relating to assets and liabilities to evaluate segment performance. As a result, such information is not disclosed.

• C. The Group’s reportable operating segments are classified based on the operating regions.

• D. The accounting policies of the operating segments are in agreement with the significant accounting policies summarised in Note 4. The Group’s segment profit (loss) is measured with the current profit (loss), which is used as a basis for the Group in assessing the performance of the operating segments.

(4) Reconciliation for segment income (loss)

Sales between segments are carried out at arm’s length. The revenue from external customers reported to the chief operating decision-maker is measured in a manner consistent with that in the statement of comprehensive income.

• A. A reconciliation of income after adjustment and total segment income from continuing operations is provided as follows:

is provided as follows:
Adjusted revenue from reportable segments Adjusted revenue from other operating segments Total operating segments Elimination of inter-segment revenue Total consolidated operating revenue		2019		2018
	49,939,076 $ 1,807,379 51,746,455 15,348,662) ( 36,397,793 $		52,222,525 $ 1,290,699 53,513,224 18,018,416) ( 35,494,808 $

~96~

B. A reconciliation of adjusted current income before tax and the income before tax from continuing operations is provided as follows:

operations is provided as follows:
		2019		2018
Adjusted income from reportable	$	2,981,416	$	2,615,358
segments after income tax
Adjusted (loss)income from other operating
segments after income tax		500,482		24,887
Total operating segments		3,481,498		2,640,245
Income from elimination of inter-segment
revenue	(	950,352)	(	579,396)
Income from continuing operations
after income tax	$	2,531,146	$	2,060,849

(5) Information on products and services

Revenues from external customers are mainly manufacturing, processing, repairing and sales of radio apparatus, communication devices, consumer electronics, automatic control system, electronic security systems and fire protection system as well as electronic components; planning, design as well as output of service items’ equipment; production as well as marketing management consultant of service items’ relevant business. Details of revenue is as follows:

Years ended December 31,

Finished goods sales revenue Technical service revenue	2019 36,328,892 $ 68,901 36,397,793 $	2018
		35,461,662 $ 33,146
		35,494,808 $

(6) Geographical information

Geographical	information
Geographical	information for	the years ended		December 31,	2018	and 2019 is as follows:
	YearendedDecember31,2019				YearendedDecember31,2018
				Non-current				Non-current
		Revenue		assets		Revenue		assets
US	$	17,755,399	$	2,081	$	15,233,862	$	781
Switzerland		1,873,498		-		3,209,505		-
Denmark		5,026,268		-		4,214,060		-
China		2,122,596		1,864,371		3,740,292		1,560,603
Netherlands		5,688,103		-		6,921,151		13,710,813
Other		3,931,929		16,657,989		2,175,938		-
	$	36,397,793	$	18,524,441	$	35,494,808	$	15,272,197

(7) Major customer information

Major customer information of the Group for the years ended December 31, 2019 and 2018 is as follows:

follows:
A B	Revenue % Segment 11,744,903 $ 32% Taiwan 11,598,275 32% Taiwan 23,343,178 $ Year ended December 31,2019		Year ended December 31,2018
	Revenue 11,744,903 $ 11,598,275 23,343,178 $	% 32% 32%	Revenue 14,116,651 $ 8,300,890 22,417,541 $	% 40% 23%	Segment
					Taiwan Taiwan

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MERRY ELECTRONICS CO., LTD.

Table 1

Expressed in thousands of NTD

Loans to others

Year ended December 31, 2019

(Except as otherwise indicated)

Interest rate Nature of loan(Note 3) Amount of transactions with the borrower Reason for short-term financing Allowance for doubtful accounts Maximum outstanding balance for the year ended December 31, 2019 Balance at December 31, 2019 Actual amount drawn down No. Creditor Borrower General ledger account Is a related party	Collateral	Limit on loans granted to a singleparty (Note 2)	Ceiling on total loans granted (Note 1)	Note
	Item Value
0 MEHO MECE Other receivables Y 926,000 $ - $ - $ - 2 - $ Business operation - $ 0 MEHO BTTT Other receivables Y 180,000 118,000 - 0.98% 2 - Business operation - 0 MEHO METC Other receivables Y 200,000 200,000 - - 2 - Business operation - 1 MECL ASCX Other receivables Y 31,073 - - - 2 - Business operation -	- - $ Commercial paper 80,000 - - - -	5,133,591 $ 5,133,591 5,133,591 1,020,588	5,133,591 $ 5,133,591 5,133,591 5,133,591

Note 1: The ceiling on total loans to others is the Company net assets; for short-term financing, the limit to a single party is 40% of the Company net assets. Note 2: (1)For business transactions, limit on loans granted for a single party is the amount of the transactions.

(2)For short-term financing, limit on loans granted for a single party is 40% of the net assets of the Company. Note 3: (1) For business transactions.

(2) For short-term financing.

Table 1,page1

MERRY ELECTRONICS CO., LTD.

Provision of endorsements and guarantees to others

Year ended December 31, 2019

Table 2

Expressed in thousands of NTD

(Except as otherwise indicated)

Number (Note 1) Endorser/ guarantor	Party being endorsed/guaranteed	Limit on endorsements/ guarantees provided for a single party (Note 3)	Maximum outstanding endorsement/ guarantee amount as of December 31, 2019	Outstanding endorsement/ guarantee amount at December 31, 2019	Actual amount drawn down	Amount of endorsements/ guarantees secured with collateral	Ratio of accumulated endorsement/ guarantee amount to net asset value of the endorser/ guarantor company	Ceiling on total amount of endorsements/ guarantees provided (Note 4)	Provision of endorsements/ guarantees by parent company to subsidiary	Provision of endorsements/ guarantees by subsidiary to parent company	Provision of endorsements/ guarantees to the party in Mainland China	Footnote
	Companyname Relationship with the endorser/ guarantor (Note 2)
0 MEHO 0 MEHO 0 MEHO	SOCV 2 SENM 2 BTTT 2	10,267,182 $ 10,267,182 10,267,182	108,640 $ 30,440 1,700,000	108,640 $ 30,440 1,700,000	80,704 $ - 62,000	- $ - -	0.85 0.24 13.25	12,833,977 $ 12,833,977 12,833,977	Y Y Y	N N N	N N N

Note 1: The numbers filled in for the endorsements/guarantees provided by the Company or subsidiaries are as follows:

• (1)The Company is ‘0’.

• (2)The subsidiaries are numbered in order starting from ‘1’.

• Note 2: Relationship between the endorser/guarantor and the party being endorsed/guaranteed is classified into the following six categories; fill in the number of category each case belongs to: (1)Having business relationship.

• (2)The Company holds over 50% of the voting rights directly or indirectly.

• (3)This company holds over 50% of the voting rights of the Company directly or indirectly.

• (4)The Company holds over 90% of the voting rights directly or indirectly.

Note 3: The guarantees and endorsements for a single party should not exceed 80% of the Company’s net assets.

Note 4: The ceiling on total amount of endorsements/guarantees provided to others by the Company is 100% of the Company's net assets.

Table 2, Page 1

MERRY ELECTRONICS CO., LTD.

Holding of marketable securities at the end of the period (not including subsidiaries, associates and joint ventures) December 31, 2019

Table 3

Expressed in thousands of NTD

(Except as otherwise indicated)

Securities held by Marketable securities(Note 1) Relationship with the securities issuer General ledger account		As of December	31, 2019		Note
	Numberofshares	Bookvalue (inthousands)	Ownership (%)	Fairvalue (inthousands)
The Company ARRIS International plc. - Financial assets mandatorily measured at fair value through profit or loss Valuation adjustment The Company JAFCO - Non-current financial assets mandatorily measured at fair value through profit or loss The Company 2881B.TW - Equity instruments measured at fair value through other comprehensive income The Company 2882B.TW - Equity instruments measured at fair value through other comprehensive income The Company P18QNBF3F10306 - Equity instruments measured at fair value through other comprehensive income MEST EBIUH - Equity instruments measured at fair value through other comprehensive income Valuation adjustment The Company Stock - 6679.TW - Measured at fair value through other comprehensive income - non-current The Company Stock - 4943.TW - Measured at fair value through other comprehensive income - non-current The Company Stock - 3290.TW - Measured at fair value through other comprehensive income - non-current The Company Stock - FUJITER Semiconductor CO.,LTD. - Measured at fair value through other comprehensive income - non-current The Company Stock - NETVOX TECHNOLOGY CO., LTD - Measured at fair value through other comprehensive income - non-current The Company Stock - EVER THAI AGRI-PRODUCT CO.,LTD. - Measured at fair value through other comprehensive income - non-current The Company Stock - SUNSINO SME Development Co., Ltd. - Measured at fair value through other comprehensive income - non-current The Company Stock - LINSATION - Measured at fair value through other comprehensive income - non-current MEST Stock - Perfect Fortune Inc. - Measured at fair value through other comprehensive income - non-current MEST Stock - LOYAL WIRE& CABLE COMPANY LTD. - Measured at fair value through other comprehensive income - non-current Valuation adjustment	1 700 683 585 3,000 1,000 1,054 12,091 5,723 2,781 324 733 169 75 2,126 1,159	169 $ 316	- 0.71% - - - - 2.55% 8.85% 5.75% 9.79% 1.32% 5.55% 0.36% 7.50% 18.33% 18.33%	485 $
				21,301 $
		485 $
		21,301 $
		40,980 $ 35,100 89,550 30,304		43,916 $ 37,440 90,550 30,171
		195,934 6,143		202,077 $
				187,085 $ 2,121,990 95,002 13,850 - 6,425 2,123 8,772 67,839 30,321
		202,077 $
		34,976 $ 648,164 99,990 27,812 2,976 6,425 2,123 8,772 8,184 7,890
		847,312 2,976) ( 1,689,071		2,533,407 $
		2,533,407 $

Table 3,page1

Table 4

Expressed in thousands of NTD

MERRY ELECTRONICS CO., LTD.

Purchases or sales of goods from or to related parties reaching $100 million or 20% of paid-in capital or more

Year ended December 31, 2019

(Except as otherwise indicated)

Purchaser/seller	Counterparty	Relationshipwith the counterparty			Tr	ansaction	Differences in	transaction terms compared to third party transactions(Note 1)	Notes/accounts r	eceivable(payable)	Note
			Purchases (sales)	Amount	Percentage of total purchases (sales)	Credit term	Unitprice	Credit term	Balance(Note 2)	Percentage of total notes/accounts receivable(payable)
The Company The Company The Company The Company METC MESG MESG MESG MECL MECL	MEDG MECH MECE MECL MECE METC MECL MECH MEDG MECE	Investment accounted for using the equity method Investment accounted for using the equity method Investment accounted for using the equity method A subsidiary of the Company Investment accounted for using the equity method A subsidiary of the Company A subsidiary of the Company Investment accounted for using the equity method Investment accounted for using the equity method Investment accounted for using the equity method	Purchases Purchases Purchases Purchases Purchases Purchases Purchases Purchases Purchases Purchases	$ 884,721 1,847,478 11,875,381 13,479,637 100,284 353,053 1,325,366 2,202,779 120,988 173,643	2% 5% 33% 37% 0% 1% 4% 6% 0% 0%	60 days end of month after offsetting with accounts receivable 60 days end of month after offsetting with accounts receivable 60 days end of month after offsetting with accounts receivable 60 days end of month after offsetting with accounts receivable 60 days end of month after offsetting with accounts receivable 60 days end of month after offsetting with accounts receivable 60 days end of month after offsetting with accounts receivable 60 days end of month after offsetting with accounts receivable 60 days end of month after offsetting with accounts receivable 60 days end of month after offsetting with accounts receivable	(Note 1) (Note 1) (Note 1) (Note 1) (Note 1) (Note 1) (Note 1) (Note 1) (Note 1) (Note 1)	30~120 days end of month for the third parties 30~90 days end of month for the third parties 30~120 days end of month for the third parties 30~120 days end of month for the third parties 30~120 days end of month for the third parties 30~120 days end of month for the third parties 30~120 days end of month for the third parties 30~90 days end of month for the third parties 30~90 days end of month for the third parties 30~120 days end of month for the third parties	( 164,742) ( 451,901) ( 2,987,747) ( 1,761,651) ( 9,765) ( 121,626) ( 286,911) ( 298,459) ( 101,968) ( 75,197)	2% 7% 44% 26% 0% 2% 4% 4% 1% 1%	(Note 3) (Note 3) (Note 3)

Note 1: For purchase transactions with related parties, the price is based on the profitability of the product and will be adjusted annually. Note 2: The balance is the net amount after offsetting accounts receivable and payable due from/ to related parties. Note 3: Inter-company transactions between companies within the Group are eliminated.

Table 4,page1

MERRY ELECTRONICS CO., LTD.

Receivables from related parties reaching $100 million or 20% of paid-in capital or more

December 31, 2019

Table 5

Expressed in thousands of NTD (Except as otherwise indicated)

Creditor	Counterparty	Relationship with the counterparty	Balance as at December 31,2019(Note 1)	Turnover rate	Overdue receivables	Overdue receivables	Amount collected subsequent to the balance sheet date(Note 2)	Allowance for doubtful accounts
					Amount	Action taken
MECL MECL METC	The Company MESG MESG	Parent Company A subsidiary of the Company A subsidiary of the Company	$ 1,761,651 286,911 121,626	5.67 4.38 4.20	- $ - -	- - -	744,418 $ 148,440 86,051	- $ - -

Note 1: Inter-company transactions between companies within the Group are eliminated. Note 2: The balance was as at February 27, 2020.

Table 5,page1

Table 6

MERRY ELECTRONICS CO., LTD.

Significant inter-company transactions during the reporting periods Year ended December 31, 2019

Expressed in thousands of NTD (Except as otherwise indicated)

Number (Note 1)	Companyname	Counterparty				Transaction
			Relationship (Note 2)	General ledger account	Amount	Transaction terms	Percentage of consolidated total operating revenues or total assets (Note 3)
0 0 1 1 1 1	MEHO MEHO MESG MESG MESG MESG	MECL MECL MECL METC MECL METC	1 1 3 3 3 3	Purchases Accounts payable Purchases Purchases Accounts payable Accounts payable	$ 13,479,637 1,761,651 1,325,366 353,053 286,911 121,626	The price is based on the profitability of the product The balance shown was net of receivables as agreed by both parties The price is based on the profitability of the product The price is based on the profitability of the product The balance shown was net of receivables as agreed by both parties The balance shown was net of receivables as agreed by both parties	37% 7% 4% 1% 1% 0%

Note 1: The numbers filled in for the transaction company in respect of inter-company transactions are as follows:

1. Parent company is ‘0’.

2. The subsidiaries are numbered in order starting from ‘1’.

Note 2: Relationship between transaction company and counter party is classified into the following three categories; fill in the number of category each case belongs to (If transactions between parent company and subsidiaries or between subsidiaries refer to the same transaction, it is not required to disclose twice. For example, if the parent company has already disclosed its transaction with a subsidiary, then the subsidiary is not required to disclose the transaction; for transactions between two subsidiaries, if one of the subsidiaries has disclosed the transaction, then the other is not required to disclose the transaction.):

1. Parent company to subsidiary.

2. Subsidiary to parent company.

3. Subsidiary to subsidiary.

4. Note 3: Regarding percentage of transaction amount to consolidated total operating revenues or total assets, it is computed based on period-end balance of transaction to consolidated total assets for balance sheet accounts and based on accumulated transaction amount for the period to consolidated total operating revenues for income statement accounts.

Table 6,page1

MERRY ELECTRONICS CO., LTD.

Information on investees Year ended December 31, 2019

Table 7

Expressed in thousands of NTD

(Except as otherwise indicated)

Investor	Investee	Location	Main business activities	Initial inves	tment amount	Shares h	eld as at December 31	,2019	Net profit (loss) of the investee for the year ended December 31,2019	Investment income (loss) recognised by the Company for the year ended December 31,2019	Note
				Balance as at December 31,2019	Balance as at December 31,2018	Number of shares (in thousand shares)	Ownership (%)	Book value
The Company The Company The Company The Company The Company The Company The Company The Company The Company DDBV DDBV MHKY INSA SOCV SOCA	MEST DDBV LEOHAB ENTERPRISE MECA MESG METC MHKY INSA BTTT UCMU MTHK FUSA SOCV SOCA SENM	HONG KONG British Virgin IS. Taichung City U.S.A SINGAPORE THAILAND CAYMAN SAMOA Taichung City MAURITIUS HONG KONG SAMOA CANADA CANADA NORWAY	General investment business Plastic injection molding and metal stamping Technique, marketing and after service Sales of medical device General investment business Sales of medical device General investment business General investment business General investment business Sale and development of speaker and power amplifier General investment business Manufacture and sales of speaker monomer Microphone, components and product and sale of other electric products Sales of microphone, receiver and speaker Sales of microphone, receiver and speaker	981,113 $ 1,479,925 96,666 28,887 92,132 484,358 648,129 865,832 14,901 151 1,392,956 579,758 30 11,112 23	981,113 $ 1,479,925 96,666 28,887 92,132 484,358 523,265 865,832 - 151 1,392,956 454,913 30 11,112 23	25,658 48,005 13,395 999 800 5,060 20,902 - 9,000 5 48,000 - - - -	100.00 100.00 30.91 99.90 100.00 99.99 100.00 70.00 100.00 100.00 100.00 95.94 100.00 100.00 100.00	3,627,334 $ 2,838,996 66,395 36,408 660,634 554,432 541,594 794,473 27,792 698) ( 2,842,636 780,260 52,215 63,049 49,016	675,409 $ 506,553 18,418 3,724 307,560 11,855) ( 7,757) ( 61,098) ( 3,003 - 506,553 10,458) ( 23,508) ( 1,815) ( 1,815) (	675,996 $ 525,582 5,693 3,720 307,560 10,765) ( 7,757) ( 42,769) ( 13,152 - - - - - -	(Note 1) (Note 1) (Note 1) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2)

Note 1: The investment income included unrealised gains or losses and realised gains arising from upstream transactions.

• Note 2: The investee is second subsidiary and investment income (loss) is not shown.

Table 7,page1

MERRY ELECTRONICS CO., LTD.

Information on investees in Mainland China Year ended December 31, 2019

Table 8

Expressed in thousands of NTD (Except as otherwise indicated)

Investee in Mainland China	Main business activities	Paid-in capital	Investment method	Accumulated amount of remittance from Taiwan to Mainland China as of January1, 2019	Amount re to Mainla remitted ba years ende	mitted from Taiwan nd China / Amount ck to Taiwan for the d December 31, 2019	Accumulated amount of remittance from Taiwan to Mainland China as of December 31, 2019	Net income of investee for the year ended December 31, 2019	Ownership held by the Company (direct or indirect)	Investment income (loss) recognised by the Company for the year ended December 31, 2019	Book value of investments in Mainland China as of December 31, 2019 (Note 5)	Accumulated amount of investment income remitted back to Taiwan as of December 31, 2019	Note
					Remitted to Mainland China	Remitted back to Taiwan
MECL MECE MECS Perfect Fortune Inc. LOYAL WIRE& CABLE COMPANY LTD. MECH FUCS MHTS MEDG MHMI MSCS ETCX	Manufacture of medical device Medical device technical service Sales of medical device Manufacture of speaker and amplifier Retail sales of hearing products Research and development of sound equipment, earphones, mobile power supply, charging box, cable, connector, electronic components, plastic hardware, mould and antenna Manufacture and sales of microphone, receiver, speaker and mobile phone Manufacture and sales of microphone, receiver and speaker Electric wire, electric cable and other wire processing Electric wire, electric cable and other wire processing Microphone, receiver, speaker, security system, induction cooker and other electronic component International trade, transit trade and trading consulting; trading amongst companies in bonded area and trading agency in the area	410,456 $ 2,693,806 7,145 44,648 128,445 430,500 276,309 - 861,000 - 148,835 2,153	(Note 2) (Note 2) (Note 2) (Note 2、4) (Note 2、4) (Note 2) (Note 2) (Note 2) (Note 1) (Note 2) (Note 1) (Note 2)	453,191 $ 1,369,285 6,055 107,624 - 420,687 310,763 12,154 452,564 2,526 79,728 2,237	- $ - - - - - - - - - - -	- $ - - - - - - - - - - -	453,191 $ 1,369,285 6,055 107,624 - 420,687 310,763 12,154 452,564 2,526 79,728 2,237	509,314 $ 1,036,414 11,618 20,443 12,913 338,952 6,764) ( 58 68,202) ( 3) ( 3,450 6,689) (	100.00% 49.00% 49.00% 18.33% 18.33% 49.00% 95.94% - 49.00% - 70.00% 95.94%	509,314 526,872 5,693 - - 165,334 6,620) ( 58 31,338) ( 3) ( 2,415 6,512) (	2,551,470 $ 2,842,636 863) ( 67,836 30,319 666,377 565,369 - 376,606 - 93,666 5,280) (	2,282,120 $ 295,185 40,321 4,125 - - - - - - - -	(Note 3) (Note 3) (Note 3) (Note 6) (Note 3) (Note 7) (Note 3)

Table 8,page1

MERRY ELECTRONICS CO., LTD.

Information on investees in Mainland China Year ended December 31, 2019

Table 8

Expressed in thousands of NTD (Except as otherwise indicated)

Investee in Mainland China	Main business activities	Paid-in capital	Investment method	Accumulated amount of remittance from Taiwan to Mainland China as of January1, 2019	Amount re to Mainla remitted ba years ende	mitted from Taiwan nd China / Amount ck to Taiwan for the d December 31, 2019	Accumulated amount of remittance from Taiwan to Mainland China as of December 31, 2019	Net income of investee for the year ended December 31, 2019	Ownership held by the Company (direct or indirect)	Investment income (loss) recognised by the Company for the year ended December 31, 2019	Book value of investments in Mainland China as of December 31, 2019 (Note 5)	Accumulated amount of investment income remitted back to Taiwan as of December 31, 2019	Note
					Remitted to Mainland China	Remitted back to Taiwan
ASCX LACX FUCX ASCZ	Manufacture and sales of hearing aid, hearing device and acoustics equipment Sales of medical device Manufacture of hearing aid and acoustics for rehabilitation device Research and development and technical sales of software for hearing aid use	57,089 21,525 17,220 88,908	(Note 2) (Note 2) (Note 2) (Note 2)	275,537 22,180 17,744 -	- - - 94,845	- - - -	275,537 22,180 17,744 94,845	30,537 5,149 9,505 9,246) (	95.46% 95.46% 95.46% 95.94%	29,150 5,067 9,311 8,870) (	54,348 30,364 29,881 76,756	- - - -
							3,627,120 $

Note 1: Reinvesting in the investee in Mainland China through the parent company.

Note 2: Through investing in an existing company in the third area, which then invested in the investee in Mainland China. Note 3: The financial statements that are audited and attested by R.O.C. parent company’s CPA.

Note 4: The investee is the reinvestment company of MERRY ELECTRONICS (HK) CO.,LTD. shown as non-current financial assets at fair value through other comprehensive income. Note 5: The amount in the table is translated into New Taiwan dollars at the closing exchange rates prevailing at the balance sheet date. Note 6: MHTS has completed the liquidation process in May 2019.

Note 7: MHMI has completed the liquidation process in April 2019.

Companyname	Accumulated amount of remittance from Taiwan to Mainland China as of December 31,2019	Investment amount approved by the Investment Commission of the Ministry of Economic Affairs(MOEA)	Ceiling on investments in Mainland China imposed by the Investment Commission of MOEA
Merry Electronics Co., Ltd.	$ 3,627,120	$ 3,727,090	$ 7,700,386

Note 1: (2001) Tai-Cai-Zheng (1) Letter No. 006130 of Securities and Futures Commission, Ministry of Finance, R.O.C

Table 8,page2

MERRY ELECTRONICS CO., LTD.

Significant transactions conducted with investees in Mainland China directly or indirectly through other companies in the third areas Year ended December 31, 2019

Table 9

Expressed in thousands of NTD (Except as otherwise indicated)

Provision of

								Provision of	Provision of
Investee in Mainland China	Counterparty	Sale(purchase)		Propertyt	ransaction	accounts receivable	(payable)	endorsements/guarantees or collaterals			Financing			Others
		Amount	%	Amount	%	Balance at December 31,2018	%	Balance at December 31,2018	Purpose	Maximum balance during the year ended December 31, 2019	Balance at December 31,2019	Interest rate	Interest during the year ended December 31,2019
MECL MECL MECL MECL	MESG MEHO MECE MEDG	$ 1,325,366 13,479,637 ( 173,643) ( 120,988)	4% 37% 0% 0%	- $ - - -	- - - -	$ 286,911 1,761,651 ( 75,197) ( 101,968)	4% 26% 1% 1%	- $ - - -	- - - -	- $ - - -	- $ - - -	- - - -	- $ - - -	- - - -

Table 9,page1