MTI — Audit Report / Information 2018

Nov 13, 2018

MICROELECTRONICS TECHNOLOGY,

INC.

PARENT COMPANY ONLY FINANCIAL

STATEMENTS AND REPORT OF INDEPENDENT

ACCOUNTANTS

DECEMBER 31, 2018 AND 2017

-----------------------------------------------------------------------------------------------------------------------------------For the convenience of readers and for information purpose only, the auditors’ report and the accompanying financial statements have been translated into English from the original Chinese version prepared and used in the Republic of China. In the event of any discrepancy between the English version and the original Chinese version or any differences in the interpretation of the two versions, the Chinese-language auditors’ report and financial statements shall prevail.

REPORT OF INDEPENDENT ACCOUNTANTS TRANSLATED FROM CHINESE

To the Board of Directors and Shareholders of Microelectronics Technology, Inc.

Opinion

We have audited the accompanying parent company only balance sheets of Microelectronics Technology, Inc. (the “Company”) as at December 31, 2018 and 2017, and the related parent company only statements of comprehensive income, of changes in equity and of cash flows for the years then ended, and notes to the parent company only financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying parent company only financial statements present fairly, in all material respects, the parent company only financial position of the Company as at December 31, 2018 and 2017, and its parent company only financial performance and its parent company only cash flows for the years then ended in accordance with the “Regulations Governing the Preparation of Financial Reports by Securities Issuers”.

Basis for opinion

We conducted our audits in accordance with the “Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants” and 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 parent company only Financial Statements section of our report. We are independent of the Company 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 parent company only financial statements of the current period. These matters were addressed in the context of our audit of the parent company only 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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Key audit matters for the Company’s parent company only financial statements for the year ended December 31, 2018 are stated as follows:

Intangible assets - assessment of goodwill impairment

Description

As of December 31, 2018, goodwill amounted to NT$ 143,637 thousand. For information on evaluation of goodwill impairment, please refer to Note 6(10), impairment of non-financial assets. The Company estimates recoverable amount utilizing the future cash flows of goodwill’s cash generating unit and appropriate discount rates in order to determine whether goodwill is impaired. The estimation of future cash flows involves various assumptions, which may have significant effects on the estimation of recoverable amount. Thus, it has been identified as a key audit matter.

How our audit addressed the matter

We performed the following audit procedures on the above key audit matter:

1. Interviewed with management in order to obtain an understanding of the procedures in relation to identifying cash-generating units and estimating the future cash flows. Compared the financial forecast for the year ended December 31, 2019 with the budget approved by the Board of Directors to ensure they are consistent.

2. Interviewed with management in order to obtain an understanding of development plans and schedules of the projects.

3. Assessed the key assumption that management used to estimate future cash flows, including operating revenue growth rate and gross margin, and evaluated the parameters used in determining the discount rate, including the risk-free rate of return that was used to calculate cost of equity, industry’s risk coefficient and long-term market return.

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Allowance for inventory valuation losses

Description

Please refer to Note 6(6) for the details of inventories. As of December 31, 2018, the balances of inventories and allowance for inventory valuation losses amounted to NT$841,622 thousand and NT$129,476 thousand, respectively. Since inventory is material to the financial statements and the determination of net realisable value of the obsolete inventory usually involves management’s subjective judgement, therefore, we determined valuation of inventories that are over a certain age and individually identified as obsolete or slow-moving as a key audit matter.

How our audit addressed the matter

We performed the following audit procedures on the above key audit matter:

1. Obtained an understanding of management policies on obsolete or slow-moving inventories, and verified the reasonableness of determining the obsolescence of inventory.

2. Tested the movements of inventories, and sampled individual inventory item numbers to check whether the classification of inventory aging is correct.

3. For obsolete or slow-moving inventories, sampled individual inventory item numbers to check progress of inventory clearance and evaluated the reasonableness of determining the allowance for inventory valuation losses

Responsibilities of management and those charged with governance for the parent company only financial statements

Management is responsible for the preparation and fair presentation of the parent company only financial statements in accordance with the “Regulations Governing the Preparation of Financial Reports by Securities Issuers” and for such internal control as management determines is necessary to enable the preparation of parent company only financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the parent company only financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate

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the Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance, including audit committee, are responsible for overseeing the Company’s financial reporting process.

Auditor’s responsibilities for the audit of the parent company only financial statements

Our objectives are to obtain reasonable assurance about whether the parent company only 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 parent company only 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:

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

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

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

4. Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the parent company only financial statements or, if such

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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 Company to cease to continue as a going concern.

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

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

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

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

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

Lin, Yu-Kuan[Li, Tien-Yi ]

For and on behalf of PricewaterhouseCoopers, Taiwan March 19, 2019

------------------------------------------------------------------------------------------------------------------------------------------------The accompanying parent company only 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 parent company only 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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MICROELECTRONICS TECHNOLOGY, INC.

PARENT COMPANY ONLY BALANCE SHEETS

(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS)

Assets	Notes 6(1) 6(2)(13) 6(4) 6(5) 6(5) 6(5) and 7 7 6(6) 8 6(3) 12(4) 6(7) 6(8) 6(9)(10) 6(27)	December 31, 2018 AMOUNT % $ 629,590 12 383 - 20,930 1 68,362 2 1,344,046 26 14,715 - 3,320 - 10,537 - 712,146 14 46,435 1 - - 2,850,464 56 13,753 - - - 1,662,473 32 80,754 2 157,552 3 357,858 7 5,413 - 2,277,803 44 $ 5,128,267 100	December 31, 2017	December 31, 2017
		AMOUNT $ 629,590 383 20,930 68,362 1,344,046 14,715 3,320 10,537 712,146 46,435 - 2,850,464 13,753 - 1,662,473 80,754 157,552 357,858 5,413 2,277,803 $ 5,128,267	AMOUNT $ 637,523 1,690 - 9,280 1,386,696 42 106,910 70,709 461,255 13,549 21,916 2,709,570 - 17,372 1,616,466 46,630 164,753 338,289 3,304 2,186,814 $ 4,896,384	%
Current assets 1100 Cash and cash equivalents 1110 Financial assets at fair value through profit or loss - current 1136 Current financial assets at amortised cost 1150 Notes receivable 1170 Accounts receivable, net 1180 Accounts receivable - related parties 1200 Other receivables 1210 Other receivables - related parties 130X Inventories 1410 Prepayments 1470 Other current assets 11XX Total current assets Non-current assets 1517 Financial assets at fair value through other comprehensive income - non-current 1523 Available-for-sale financial assets - non-current 1550 Investments accounted for under equity method 1600 Property, plant and equipment 1780 Intangible assets 1840 Deferred income tax assets 1900 Other non-current assets 15XX Total non-current assets 1XXX Total assets				13 - - - 28 - 2 2 9 - 1
				55
				- - 33 1 4 7 -
				45
				100

(Continued)

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MICROELECTRONICS TECHNOLOGY, INC.

PARENT COMPANY ONLY BALANCE SHEETS

(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS)

Liabilities and Equity

December 31, 2018 December 31, 2017 Notes AMOUNT % AMOUNT % 6(11) $ 446,153 9 $ 506,972 10 6(12) 95 - 3,829 - 6(21) 7,519 - - - 438,504 9 438,994 9 7 641,890 13 377,381 8 6(13) 269,633 5 230,378 5 7 118,716 2 90,676 2 6(16) 16,166 - 19,946 - 7 109,111 2 161,914 3 2,047,787 40 1,830,090 37 6(16) 1,622 - 2,143 - 6(27) 106,562 2 78,500 2 6(15) 212,739 4 215,561 4 320,923 6 296,204 6 2,368,710 46 2,126,294 43 6(17) 2,280,283 45 2,280,283 47 6(18) 402,937 8 402,937 8 6(19) 19,761 - 5,372 - 83,446 2 21,052 - 166,556 3 143,892 3 6(20) ( 193,426) ( 4) ( 83,446 ) ( 1 ) 2,759,557 54 2,770,090 57 9 11 $ 5,128,267 100 $ 4,896,384 100

Current liabilities 2100 Short-term borrowings 2120 Financial liabilities at fair value through profit or loss - current 2130 Current contract liabilities 2170 Accounts payable 2180 Accounts payable - related parties 2200 Other payables 2220 Other payables - related parties 2250 Provisions for liabilities - current 2300 Other current liabilities 21XX Total current liabilities Non-current liabilities 2550 Provisions for liabilities - non- current 2570 Deferred income tax liabilities 2600 Other non-current liabilities 25XX Total non-current liabilities 2XXX Total Liabilities Equity Share capital 3110 Common stock Capital reserve 3200 Capital surplus Retained earnings 3310 Legal reserve 3320 Special reserve 3350 Unappropriated retained earnings Other equity interest 3400 Other equity interest 3XXX Total equity Significant contingent liabilities and unrecognised contract commitments Significant events after the balance sheet date 3X2X Total liabilities and equity

The accompanying notes are an integral part of these parent company only financial statements.

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MICROELECTRONICS TECHNOLOGY, INC.

PARENT COMPANY ONLY STATEMENTS OF COMPREHENSIVE INCOME

(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS, EXCEPT EARNINGS PER SHARE DATA)

Items

YearendedDecember31 2018 2017 Notes AMOUNT % AMOUNT % 6(21) and 7 $ 7,124,093 100 $ 6,560,807 100 6(6) and 7 ( 6,245,468 ) ( 88) ( 5,563,032) ( 85 ) 878,625 12 997,775 15 6(25)(26) and 7 ( 256,252 ) ( 4) ( 194,686) ( 3 ) ( 59,617 ) ( 1) ( 62,259) ( 1 ) ( 609,657 ) ( 8) ( 613,205) ( 9 ) ( 6 ) - - - ( 925,532 ) ( 13) ( 870,150) ( 13 ) ( 46,907 ) ( 1) 127,625 2 6(22) 56,339 1 33,294 - 6(23) and 7 18,329 - ( 33,700) ( 1 ) 6(24) ( 16,139 ) - ( 7,619) - 6(7) 49,087 - 49,744 1 107,616 1 41,719 - 60,709 - 169,344 2 6(27) ( 8,600 ) - ( 8,749) - $ 52,109 - $ 160,595 2 6(15) ($ 13,957 ) - ($ 18,401) - 6(3) ( 1,685 ) - - - 6(7) ( 1,553 ) - - - 12(4) - - ( 4,041) - 6(7) 195 - ( 69,589) ( 1 ) 6(27) ( 36 ) - 11,236 - ($ 17,036 ) - ($ 80,795) ( 1 ) $ 35,073 - $ 79,800 1 6(28) $ 0.23 $ 0.73 6(28) $ 0.23 $ 0.70

4000 Operating revenue 5000 Operating costs 5900 Gross profit Operating expenses 6100 Selling expenses 6200 General and administrative expenses 6300 Research and development expenses 6450 Loss of expected credit impairment 6000 Total operating expenses 6900 Operating (loss) profit Non-operating income and expenses 7010 Other income 7020 Other gains and losses 7050 Finance costs 7070 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 Other comprehensive income (loss) Components of other comprehensive loss that will not be reclassified to profit or loss 8311 Losses on remeasurements of defined benefit plans 8316 Unrealised loss from financial assets measured at fair value through other comprehensive income 8330 Share of other comprehensive income of associates and joint ventures accounted for under equity method, components of other comprehensive income that will not be reclassified to profit or loss Components of other comprehensive income that will be reclassified to profit or loss 8362 Unrealized loss on valuation of available-for-sale financial assets 8380 Share of other comprehensive income of associates and joint ventures accounted for under 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 that will be reclassified to profit or loss 8300 Total other comprehensive loss for the year 8500 Total comprehensive income for the year 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 parent company only financial statements.

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MICROELECTRONICS TECHNOLOGY, INC. PARENT COMPANY ONLY STATEMENTS OF CHANGES IN EQUITY

(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS)

2017 Balance at January 1, 2017 Profit for the year Other comprehensive loss for the year Total comprehensive income Conversion of convertible bonds Appropriation of 2016 earnings Legal reserve Special reserve Cash dividends Balance at December 31, 2017 2018 Balance at January 1, 2018 Effects of retrospective application Balance at January 1, 2018 after adjustments Profit for the year Other comprehensive income (loss) for the year Total comprehensive income Appropriation of 2017 earnings Legal reserve Special reserve Cash dividends Disposal of financial assets at fair value through other comprehensive income (loss) Balance at December 31, 2018	Notes	Commonstock	Commonstock		Capital	re	serves			Retained earnings	Retained earnings	Retained earnings	Otherequityinterest	Otherequityinterest	Otherequityinterest		Totalequity
					Additional paid-incapital		Share options		Legal reserve	Special reserve		Unappropriated retained earnings	Currency translation differences of foreign operations	Unrealised gain or loss on financial assets measured at fair value through other comprehensive income	Unrealized gain or loss on available-for- sale financial assets
	6(3) 6(13)(14) 6(19) 3(1) 6(3) 6(19) 6(3)		$ 2,133,226 - - - 147,057 - - - $ 2,280,283 $ 2,280,283 - 2,280,283 - - - - - - - $ 2,280,283		$ 149,190 - - - 253,747 - - - $ 402,937 $ 402,937 - 402,937 - - - - - - - $ 402,937	$ 12,182 - - - ( 12,182 ) - - - $ - $ - - - - - - - - - - $ -			$ - - - - - 5,372 - - $ 5,372 $ 5,372 - 5,372 - - - 14,389 - - - $ 19,761		$ - - - - - - 21,052 - $ 21,052 $ 21,052 - 21,052 - - - - 62,394 - - $ 83,446	$ 53,721 160,595 ( 18,401 ) 142,194 - ( 5,372 ) ( 21,052 ) ( 25,599 ) $ 143,892 $ 143,892 106,011 249,903 52,109 ( 13,957 ) 38,152 ( 14,389 ) ( 62,394 ) ( 45,606 ) 890 $ 166,556	($ 4,274 ) - ( 54,819 ) ( 54,819 ) - - - - ($ 59,093 ) ($ 59,093 ) - ( 59,093 ) - 159 159 - - - - ($ 58,934 )	$ - - - - - - - - $ - $ - ( 130,364 ) ( 130,364 ) - ( 3,238 ) ( 3,238 ) - - - ( 890 ) ($ 134,492 )	($ 16,778 ) - ( 7,575 ) ( 7,575 ) - - - - ($ 24,353 ) ($ 24,353 ) 24,353 - - - - - - - - $ -	$ 2,327,267 160,595 ( 80,795 ) 79,800 388,622 - - ( 25,599 ) $ 2,770,090 $ 2,770,090 - 2,770,090 52,109 ( 17,036 ) 35,073 - - ( 45,606 ) - $ 2,759,557

The accompanying notes are an integral part of these parent company only financial statements.

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MICROELECTRONICS TECHNOLOGY, INC.

PARENT COMPANY ONLY STATEMENTS OF CASH FLOWS (EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS)

CASH FLOWS FROM OPERATING ACTIVITIES Profit before tax Adjustments Adjustments to reconcile profit (loss) Loss on expected credit impairment Provision for bad debts Depreciation Amortization Net loss (gain) on financial assets at fair value through profit or loss Net gain on financial liabilities at fair value through profit or loss Interest income Dividend income Interest expense Gain on disposal of property, plant and equipment Share of profit of associates accounted for under the equity method Gain on disposal of available-for-sale financial assets Changes in operating assets and liabilities Changes in operating assets Notes receivable Accounts receivable Accounts receivable - related parties Other receivable Other receivables - related parties Inventories Prepayments Changes in operating liabilities Accounts payable Accounts payable - related parties Other payables Other payables - related parties Provisions for liabilities Contract liabilities Unearned receipts Other current liabilities Accrued pension liabilities Cash inflow (outflow) generated from operations Interest received Dividend received Interest paid Income taxes paid Net cash flows from (used in) operating activities

Notes 2018 2017 $ 60,709 $ 169,344 6 - - 223 6(8)(25) 17,560 25,620 6(9)(25) 14,757 14,081 6(2)(23) 1,307 ( 2,535 ) 6(23) ( 3,734 ) ( 1,566 ) 6(22) ( 4,083 ) ( 7,683 ) 6(22) ( 556 ) ( 649 ) 6(24) 16,139 7,619 6(23) ( 4,889 ) ( 1,299 ) 6(7) ( 49,087 ) ( 49,744 ) 6(23) - ( 5,604 ) ( 59,082 ) 6,827 42,644 ( 120,573 ) ( 14,673 ) 1,142 103,527 ( 64,689 ) 60,172 ( 61,637 ) ( 250,891 ) 90,293 ( 32,659 ) 7,706 ( 490 ) 198,323 264,509 ( 740,804 ) 27,174 27,213 28,040 ( 31,612 ) ( 4,301 ) 4,575 4,012 - - 78,317 ( 44,996 ) 35,731 ( 16,779 ) ( 1,905 ) 154,336 ( 423,286 ) 4,146 8,292 556 649 ( 15,929 ) ( 4,588 ) ( 143 ) ( 817 ) 142,966 ( 419,750 )

(Continued)

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MICROELECTRONICS TECHNOLOGY, INC.

PARENT COMPANY ONLY STATEMENTS OF CASH FLOWS (EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS)

CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of financial assets at amortized cost Acquisition of property, plant and equipment Proceeds from disposal of property, plant and equipment Proceeds from disposal of financial assets at fair value through other comprehensive income Proceeds from disposal of available-for-sale financial assets Acquisition of intangible assets Increase in guarantee deposits paid Decrease in guarantee deposits paid Increase in restricted financial assets Decrease in restricted financial assets Net cash flows used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Increase in short-term borrowings Decrease in short-term borrowings Cash dividends paid Net cash flows (used in) from financing activities Net decrease in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year

Notes 2018 2017 ($ 20,930 ) $ - 6(30) ( 44,404 ) ( 33,221 ) 6,675 4,790 6(3) 1,934 - - 5,977 6(9) ( 7,556 ) ( 18,243 ) ( 2,109 ) ( 11 ) - 6 - ( 21,916 ) 21,916 56,950 ( 44,474 ) ( 5,668 ) 2,980,964 1,893,098 ( 3,041,783 ) ( 1,552,311 ) 6(19) ( 45,606 ) ( 25,599 ) ( 106,425 ) 315,188 ( 7,933 ) ( 110,230 ) 637,523 747,753 $ 629,590 $ 637,523

The accompanying notes are an integral part of these parent company only financial statements.

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MICROELECTRONICS TECHNOLOGY, INC. NOTES TO THE FINANCIAL STATEMENTS

YEARS ENDED 2018 AND 2017

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

1. HISTORY AND ORGANISATION

Microelectronics Technology Inc. (the “Company”) was incorporated as company limited by shares under the provisions of the Company Act of the Republic of China (R.O.C.). The Company is primarily engaged in design, manufacture and sales of terrestrial microwave, satellite and photoelectric communication system products, and related customised products.

On January 1, 2011, the Company merged with the subsidiary, Global PCS Inc.. Under the merger, the Company is the surviving company while Global PCS Inc. was the dissolved company.

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

PROCEDURES FOR AUTHORISATION

These financial statements were authorised for issuance by the Board of Directors on March 19, 2019.

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 the FSC effective from 2018 are as follows:

follows:
New Standards,Interpretations and Amendments	Effective date by International Accounting Standards Board
Amendments to IFRS 2, ‘Classification and measurement of share-based payment transactions’ Amendments to IFRS 4, ‘Applying IFRS 9 Financial instruments with IFRS 4 Insturance contracts' IFRS 9, ‘Financial instruments’ IFRS 15, ‘Revenue from contracts with customers’ Amendments to IFRS 15, ‘Clarifications to IFRS 15 Revenue from contracts with customers' Amendments to IAS 7, ‘Disclosure initiative’ Amendments to IAS 12, ‘Recognition of deferred tax assets for unrealised losses’ Amendments to IAS 40, ‘Transfers of investment property’	January 1, 2018 January 1, 2018 January 1, 2018 January 1, 2018 January 1, 2018 January 1, 2017 January 1, 2017 January 1, 2018

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New Standards,Interpretations and Amendments

Effective date by International Accounting Standards Board

IFRIC 22, ‘Foreign currency transactions and advance consideration’ Annual improvements to IFRSs 2014-2016 cycle- Amendments to IFRS 1, ‘First-time adoption of International Financial Reporting Standards’ Annual improvements to IFRSs 2014-2016 cycle - Amendments to IFRS 12, ‘Disclosure of interests in other entities’ Annual improvements to IFRSs 2014-2016 cycle - Amendments to IAS 28, ‘Investments in associates and joint ventures’

January 1, 2018 January 1, 2018 January 1, 2017 January 1, 2018

Except for the following, the above standards and interpretations have no significant impact to the Company’s financial condition and financial performance based on the Company’s assessment.

• A. IFRS 9, ‘Financial instruments’

• (a) Equity instruments would be classified as financial asset at fair value through profit or loss, unless an entity makes an irrevocable election at inception to present subsequent changes in the fair value of an investment in an equity instrument that is not held for trading in other comprehensive income.

• (b) The Company has elected not to restate prior period financial statements using the modified retrospective approach under IFRS 9. For details of the significant effect as at January 1, 2018, please refer to Note 12(4) B.

• B. IFRS 15, ‘Revenue from contracts with customers’ and amendments

• (a) IFRS 15, ‘Revenue from contracts with customers’ replaces IAS 11, ‘Construction contracts’, IAS 18 ‘Revenue’ and relevant interpretations. According to IFRS 15, revenue is recognised when a customer obtains control of promised goods or services. A customer obtains control of goods or services when a customer has the ability to direct the use of, and obtain substantially all of the remaining benefits from, the asset.

  • The core principle of IFRS 15 is that an entity recognises revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. An entity recognises revenue in accordance with that core principle by applying the following steps: Step 1: Identify contracts with customer.

  • Step 2: Identify separate performance obligations in the contract(s).

  • Step 3: Determine the transaction price. Step 4: Allocate the transaction price.

  • Step 5: Recognise revenue when the performance obligation is satisfied.

Further, IFRS 15 includes a set of comprehensive disclosure requirements that requires an entity

to disclose sufficient information to enable users of financial statements to understand the

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nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.

• (b) The Company has elected not to restate prior period financial statements and recognised the cumulative effect of initial application as retained earnings at January 1, 2018, using the modified retrospective approach under IFRS 15. The significant effects of adopting the modified transition as of January 1, 2018 are summarised below:

Affected items	Book value under previous revenue standard - $ 161,914 161,914 $	Adjustment for initial Application of IFRS15 3,507 $ 3,507) ( - $	Adjusted amount after IFRS15adoption	Description
January1,2018			3,507 $ 158,407	1 1
Contract liabilities Other current liabilities Total liabilities
			161,914 $

• A. Presentation of liabilities in relation to contracts with customers

  • Under IFRS 15, The Company revised some presentations on the balance sheets, and liabilities in relation to sales contracts are recognised as contract liabilities, but were previously presented as advance sales receipts in the balance sheet. As of January 1, 2018, the balance would amount to $3,507.

• B. Please refer to Note 12 (5) for other disclosures in relation to the first application of IFRS 15.

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

the Company

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

follows:
New Standards,Interpretations and amendments	Effective date by International Accounting Standards Board
Amendments to IFRS 9, ‘Prepayment features with negative compensation’ IFRS 16, ‘Leases’ Amendments to IAS 19, ‘Plan amendment, curtailment or settlement’ Amendments to IAS 28, ‘Long-term interests in associates and joint ventures’ IFRIC 23, ‘Uncertainty over income tax treatments’ Annual improvements to IFRSs 2015-2017 cycle	January 1, 2019 January 1, 2019 January 1, 2019 January 1, 2019 January 1, 2019 January 1, 2019

Except for the following, the above standards and interpretations have no significant impact to the Company’s financial condition and financial performance based on the Company’s assessment. IFRS 16, ‘Leases’

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

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types of leases differently. IFRS 16 only requires enhanced disclosures to be provided by lessors. The Company expects to recognise the lease contract of lessees in line with IFRS 16. However, the Company does not intend to restate the financial statements of prior period (collectively referred herein as the “modified retrospective approach”). On January 1, 2019, it is expected that ‘right-ofuse asset’ and lease liability will be increased by $248,243.

(3) 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:

endorsed by the FSC are as follows:
New Standards,Interpretations and Amendments	Effective date by International Accounting Standards Board
Amendment to IAS 1 and IAS 8, ‘Disclosure Initiative-Definition of Material’ Amendments to IFRS 3, ‘Definition of a business’ Amendments to IFRS 10 and IAS 28, ‘Sale or contribution of assets between an investor and its associate or joint venture’ IFRS 17, ‘Insurance contracts’	January 1, 2020 January 1, 2020 To be determined by International Accounting Standards Board January 1, 2021

The above standards and interpretations have no significant impact to the Company’s financial condition and financial performance based on the Company’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 Company have been prepared in accordance with the “Regulations Governing the Preparation of Financial Reports by Securities Issuers”.

(2) Basis of preparation

• A. Except for the following items, the 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/Availablefor- sale financial assets 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 Company’s accounting policies. The areas involving a higher degree of judgement

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or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 5.

• C. In adopting IFRS 9 and IFRS 15 effective January 1, 2018, the Company has elected to apply modified retrospective approach whereby the cumulative impact of the adoption was recognised as retained earnings or other equity as of January 1, 2018 and the financial statements for the year ended December 31, 2017 were not restated. The financial statements for the year ended December 31, 2017 were prepared in compliance with International Accounting Standard 39 (‘IAS 39’), International Accounting Standard 18 (‘IAS 18’) and related financial reporting interpretations. Please refer to Notes 12(4) and (5) for details of significant accounting policies and details of significant accounts.

• (3) Foreign currency translation

Items included in the financial statements of each of the Company’s entities are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). The financial statements are presented in New Taiwan dollars, which is the Company’s functional 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 foreign exchange gains and losses are presented in the statement of comprehensive income within ‘other gains and losses’.

• B. Translation of foreign operations

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

  • i. Assets and liabilities presented in each balance sheet are translated at the closing exchange

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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) 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.

• (4) 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.

(5) 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.

(6) 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 Company measures the financial liabilities at fair value. All related transaction costs are recognised in profit or loss. The Company subsequently measures these

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financial liabilities at fair value with any gain or loss recognised in profit or loss.

• D. Dividends are recognised as revenue when the right to receive payment is established, future economic benefits associated with the dividend will flow to the Company and the amount of the dividend can be measured reliably.

• (7) 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 Company has made an irrevocable election at initial recognition to recognise changes in fair value in 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 Company measures the financial assets at fair value plus transaction costs. The Company subsequently measures the financial assets at fair value, 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 Company and the amount of the dividend can be measured reliably.

• (8) Financial assets at amortised cost

• A. Financial assets at amortised cost are those that meet all of the following criteria:

• (a) The objective of the Company’s business model is achieved by collecting contractual cash flows.

• (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 amortised cost are recognised and derecognised using trade date accounting.

• C. At initial recognition, the Company measures the financial assets at fair value plus transaction costs. Interest income from these financial assets is included in finance income using the effective interest method. A gain or loss is recognised in profit or loss when the asset is derecognised or impaired.

• D. The Company’s time deposits which do not fall under cash equivalents are those with a short maturity period and are measured at initial investment amount as the effect of discounting is immaterial.

• (9) Accounts and notes receivable

• A. Accounts and notes receivable entitle the Company 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.

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(10) Impairment of financial assets

For financial assets at amortised cost, at each reporting date, the Company 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 that do not contain a significant financing component, the Company recognises the impairment provision for lifetime ECLs.

• (11) Derecognition of financial assets

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

• (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 labor, other direct costs and related production overheads. 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-subsidiaries

• A. Subsidiaries are all entities controlled by the Company. The Company controls an entity when the Company 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.

• B. Unrealised gains or losses resulting from inter-company transactions with subsidiaries are eliminated. Necessary adjustments are made to the accounting policies of subsidiaries, to be consistent with the accounting policies of the Company.

• C. The Company’s share of its subsidiaries’ post-acquisition profits or losses is recognized in profit or loss, and its share of post-acquisition movement in other comprehensive income is equals or exceeds its interest in the subsidiary, the Company continues to recognize its share in the subsidiary’s loss proportionately.

• D. According to “Rules Governing the Preparation of Financial Statements by Securities Issuers”, profit for the year and other comprehensive income for the year reported in the parent company only financial statements, shall be equal to profit for the year and other comprehensive income attributable to owners of the parent reported in the consolidated financial statements, equity reported in the parent company only financial statements shall be equal to equity attributable to owners of parent reported in the consolidated financial statements.

• (14) Property, plant and equipment

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

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• 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 Company 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. 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:

Machinery and equipment 3 ~ 6 years Office equipment 3 ~ 6 years Transportation equipment 5 years Leasehold improvements 3 years

(15) Operating leases (lessee)

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.

(16) Intangible assets

• A. Computer software is stated at cost and amortised on a straight-line basis over its estimated useful life of 3 years.

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

• C. Acquired special technologies are amortised on a straight-line basis over their estimated useful lives of 5 years.

(17) Impairment of non-financial assets

• A. The Company 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 amount of goodwill will be assessed 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.

(18) 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.

• (19) Accounts payable

• A. Accounts payable are liabilities for purchases of raw materials, goods or services.

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

(20) 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. Derivatives are also categorised as financial liabilities held for trading unless they are designated as hedges.

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

(21) Derecognition of financial liabilities

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

(22) Offsetting financial instruments

Financial assets and liabilities are offset and reported in the net amount in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously.

(23) Convertible bonds payable

• Convertible corporate bonds issued by the Company contain conversion options (that is, the bondholders have the right to convert the bonds into the Company’s common shares by exchanging a fixed amount of cash for a fixed number of common shares), call options and put options. The

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Company classifies the bonds payable and derivative features embedded in convertible corporate bonds on initial recognition as a financial asset, a financial liability or an equity instrument (‘capital surplus-share options’) in accordance with the substance of the contractual arrangement and the definitions of a financial asset, a financial liability and an equity instrument. Convertible corporate bonds are accounted for as follows:

• A. Call options and put options embedded in convertible corporate bonds 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. Bonds payable of convertible corporate bonds is initially recognised at fair value and subsequently stated at amortised cost. Any difference between the proceeds and the redemption value is accounted for as the premium or discount on bonds payable and presented as an addition to or deduction from bonds payable, which is amortised in profit or loss as an adjustment to the ‘finance costs’ over the period of bond circulation using the effective interest method.

• C. Conversion options embedded in convertible corporate bonds issued by the Company, 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 amounts of ‘financial assets or liabilities at fair value through profit or loss’ and ‘bonds payable-net’ as stated above. Conversion options are not subsequently remeasured.

• D. Any transaction costs directly attributable to the issuance of convertible corporate bonds are allocated to the liability and equity components in proportion to the allocation of proceeds.

• 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’) is remeasured on the conversion date. The book value of common shares issued due to the conversion is based on the adjusted book value of the abovementioned liability component plus the book value of capital surplus-share options.

(24) Provisions

• Provision-warranties are recognised when the Company 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.

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(25) 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 the 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 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 defined benefit net 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 government bonds (at the balance sheet date) 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.

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

• 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.

• (26) Employee share based payment

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 nonvesting 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.

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(27) 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 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, except where the timing of the reversal of the temporary difference is controlled by the Company 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. Current income tax assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. Deferred tax assets and liabilities are offset on the balance sheet when the entity has the legally enforceable right to offset current tax assets against current tax liabilities and they are levied by the same taxation authority on either the same entity or different entities that intend to settle on a net basis or realise the asset and settle the liability simultaneously.

(28) 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.

(29) Dividends

Dividends are recorded in the Company’s financial statements in the period in which they are

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approved by the Company’s shareholders. Cash dividends are recorded as liabilities.

• (30) Revenue recognition

• A. Sales of goods

  • (a) The Company manufactures and sells terrestrial microwave, satellite, and related costumed products. Sales are recognised when control of the products has transferred, being when the products are delivered to the customer, the customer has full discretion over the channel and price to sell the products, and there is no unfulfilled obligation that could affect the customer’s acceptance of the products. Delivery occurs when the products have been shipped to the specific location, the risks of obsolescence and loss have been transferred to the customer, and either the customer has accepted the products in accordance with the sales contract, or The Company has objective evidence that all criteria for acceptance have been satisfied.

  • (b) Revenue from these sales is recognised based on the price specified in the contract. 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. The sales usually are made with a credit term of 30 to 90 days, which is consistent with market practice. As the time interval between the transfer of committed goods or service and the payment of customer does not exceed one year, The Company does not adjust the transaction price to reflect the time value of money.

  • (c) The Company’s obligation to provide a refund for faulty products under the standard warranty terms is recognised as a provision.

  • (d) A receivable is recognised when the goods are delivered as this is the point in time that the consideration is unconditional because only the passage of time is required before the payment is due.

• B. Technical services on product development

  • (a) The Company provides technical services on product development. Revenue from providing services is recognised in the accounting period in which the services are rendered. For fixed-price contracts, revenue is recognised based on the actual service provided to the end of the reporting period as a proportion of the total services to be provided. This is determined based on the actual costs spent relative to the total expected cost. The customer pays at the time specified in the payment schedule. If the services rendered exceed the payment, a contract asset is recognised. If the payments exceed the services rendered, a contract liability is recognised.

  • (b) The Company’s estimate about revenue, costs and progress towards complete satisfaction of a performance obligation is subject to a revision whenever there is a change in circumstances. Any increase or decrease in revenue or costs due to an estimate revision is reflected in profit or loss during the period when the management become aware of the changes in circumstances.

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• C. Incremental costs of obtaining a contract

• Given that the contractual period lasts less than one year, the Company recognises the incremental costs of obtaining a contract as an expense (mainly arisen from sales commissions) when incurred although the Company expects to recover those costs.

5. CRITICAL ACCOUNTING JUDGEMENTS, ESTIMATES AND KEY SOURCES OF

ASSUMPTION UNCERTAINTY

The preparation of these financial statements requires management to make critical judgements in applying the Company’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. The related information is addressed below:

(1) Critical judgements in applying the Company’s accounting policies

• None.

(2) Critical accounting estimates and assumptions

• A. Impairment assessment of tangible and intangible assets (including goodwill)

• The Company assesses impairment based on its subjective judgement and determines the separate cash flows of a specific group of assets, useful lives of assets and the future possible income and expenses arising from the assets depending on how assets are utilised and industrial characteristics. Any changes of economic circumstances or estimates due to the change of Group strategy might cause material impairment on assets in the future.

• The impairment assessment of goodwill relies on the Company’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. Please refer to Note 6(9), (10) for the information on goodwill impairment.

As of December 31, 2018, the Company’s property, plant and equipment and intangible assets (including goodwill) amounted to $80,754 and $157,552, respectively.

• B. Realisability of deferred tax assets

• Deferred tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences can be utilised. Assessment of the realisability of deferred tax assets involves critical accounting judgements and estimates of the management, including the assumptions of expected future sales revenue growth rate and profit rate, available tax credits, tax planning, etc. Any variations in global economic environment, industrial environment, and laws and regulations might cause material adjustments to deferred tax assets.

• As of December 31, 2018, the Company recognised deferred tax assets amounting to $357,858.

• C. Evaluation of inventories

As inventories are stated at the lower of cost and net realisable value, the Company must determine

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the net realisable value of inventories on balance sheet date using judgements and estimates. Due to the rapid technology innovation, the Company 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.

As of December 31, 2018, the carrying amount of inventories was $712,146.

• D. Calculation of net defined benefit liabilities

When calculating the present value of defined pension obligations, the Company must apply judgements and estimates to determine the actuarial assumptions on balance sheet date, including discount rates and future salary growth rate. Any changes in these assumptions could significantly impact the carrying amount of defined pension obligations.

As of December 31, 2018, the carrying amount of net defined benefit liabilities was $212,739.

• E. Financial assets-fair value measurement of unlisted stocks without active market The fair value of unlisted stocks held by the Company that are not traded in an active market is determined considering those companies’ recent funding raising activities and technical development status, fair value assessment of other companies of the same type, market conditions and other economic indicators existing on balance sheet date. Any changes in these judgements and estimates will impact the fair value measurement of these unlisted stocks. Please refer to Note 12(3) for the financial instruments fair value information.

As of December 31, 2018, the carrying amount of unlisted stocks without active market was $8,401.

6. DETAILS OF SIGNIFICANT ACCOUNTS

(1) Cash and cash equivalents

TAILS OF SIGNIFICANT ACCOUNTS Cash and cash equivalents
Cash on hand and revolving funds Deposits in transit Checking accounts and demand deposits Time deposits	December 31,2018 130 $ 36,816 341,444 251,200 629,590 $	December 31,2017
		41 $ 1,411 238,481 397,590
		637,523 $

• A. The Company 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. Information on restricted cash as of December 31, 2017 reclassified as other financial assets (shown as ‘Other current financial assets’) is provided in Note 8.

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

B. Information on restricted cash as of December 31, 2017 reclassified as (shown as ‘Other current financial assets’) is provided in Note 8. Financial assets at fair value through profit or loss	other financial assets
Items Current items: Financial assets mandatorily measured at fair value through profit or loss Derivative instruments	December 31,2018
	383 $
	383 $

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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:

loss are listed below:
	Year ended December31,2018
Financial assets mandatorily measured at fair value
through profit or loss
Derivative instruments	($	1,307)

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

Derivative instruments Current items: Foreign exchange swap transactions	Unit: In thousands Contract amount (Notionalprincipal) Contractperiod 5,000 USD 107.12.12~ 108.02.15 December 31,2018
	Contract amount (Notionalprincipal) 5,000 USD

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

• C. Information on financial assets at fair value through profit or loss as of December 31, 2017 is provided in Note 12(4).

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

Items	December	31,2018
Non-current items：
Equity instruments
Emerging stocks	$	3,060
Unlisted stocks		25,000
Valuation adjustments	(	14,307)
	$	13,753

• A. The Company has elected to classify equity instrument investments that are considered to be strategic investments as financial assets at fair value through other comprehensive income. The fair value of such investments amounted to $13,753 as at December 31, 2018.

• B. For the year ended December 31, 2018, the Company sold emerging stocks at the fair value of $1,934, and the accumulated gain on disposal of investments amounted to $890.

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• 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:

Year ended December 31, 2018

Equity instruments at fair value through other comprehensive income Fair value change recognised in other comprehensive (loss) income ($ 1,685) Cumulative gains (losses) reclassified to retained earnings due to derecognition $ 890

• D. Information on available-for-sale financial assets and financial assets at cost as of December 31, 2017 is provided in Note 12(4).

(4) Financial assets at amortised cost

Items December 31, 2018 Current items: Time deposits $ 20,930

• A. Amounts recognised in profit or loss in relation to financial assets at amortised cost are listed below:

Year ended December 31, 2018 Interest income $ 309

• B. As at December 31, 2018, without taking into account other credit enhancements, the maximum exposure to credit risk in respect of the amount that best represents the financial assets at amortised cost held by The Company was $20,930.

• C. Information relating to credit risk of financial assets at amortised cost is provided in Note 12(2).

• D. On December 31, 2017, details of financial assets at amortised cost reclassified as other financial assets (shown as ‘Other current assets’) in accordance with IAS 39 are provided in Note 12(4).

(5) Notes and accounts receivable

Notes and accounts receivable
	December	31,2018	December	31,2017
Notes receivable	$	68,362	$	9,280
Less: Allowance for uncollectible accounts		-		-
	$	68,362	$	9,280
Accounts receivable	$	1,345,288	$	1,387,894
Accounts receivable - related party		14,715		42
Less: Allowance for uncollectible accounts	(	1,242)	(	1,198)
	$	1,358,761	$	1,386,738

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• A. The ageing analysis of accounts receivable and notes receivable that were past due but not impaired is as follows:

is as follows:
Not past due Up to 90 days 91 to 180 days Over 180 days	Accounts receivable Notes receivable 1,208,198 $ 68,362 $ 147,195 - 125 - 4,485 - 1,360,003 $ 68,362 $ December 31,2018	December 31,2017
	Accounts receivable 1,208,198 $ 147,195 125 4,485 1,360,003 $	Accounts receivable 933,058 $ 302,475 145,076 7,327 1,387,936 $	Notes receivable
			9,280 $ - - -
			9,280 $

The above ageing analysis was based on past due date.

• B. The Company recognised $0 in profit or loss for the interest income for both the years ended December 31, 2018 and 2017.

• C. As at December 31, 2018 and 2017, without taking into account other credit enhancements, the maximum exposure to credit risk in respect of the amount that best represents the Company’s notes receivable were $68,362 and $9,280, respectively. As of December 31, 2018 and 2017, the maximum exposure to credit risk in respect of the amount that best represents the Company’s accounts receivable were $1,358,761 and $1,386,738, respectively.

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

• (6) Inventories

Inventories
Raw materials Work in progress Finished goods Inventory in transit Raw materials Work in progress Finished goods			December 31,2018		Book value 327,928 $ 106,679 277,241 298 712,146 $
	Cost 363,898 $ 147,269 330,157 298 841,622 $ Cost 197,892 $ 66,828 291,959 556,679 $		Allowance for inventory valuation losses 35,970) ($ 40,590) ( 52,916) ( - 129,476) ($ December 31,2017
		Cost		Allowance for inventory valuation losses		Book value
		197,892 $ 66,828 291,959		37,319) ($ 15,506) ( 42,599) ( 95,424) ($		160,573 $ 51,322 249,360
		556,679 $				461,255 $

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The cost of inventories recognized as expense for the year:

				Years ended December 31,	Years ended December 31,	Years ended December 31,
				2018		2017
	Cost of goods sold		$	6,190,315	$	5,516,352
	Loss on decline in market value			55,153		46,680
	Recognised as selling and R&D expenses			17,720		7,480
			$	6,263,188	$	5,570,512
(7)	Investments accounted for using equity method
			December31,2018		December31,2017
	Subsidiary-Sasson International Holding Inc.	$		1,662,473 $		1,616,466
				2018		2017
	At January 1		$	1,616,466	$	1,635,848
	Share of profit or loss of investments accounted	for		49,087		49,744
	using equity method
	Unrealized gain (loss)		(	1,722)		455
	Changes in other equity item-unrealized gain (loss)		(	1,553)	(	3,534)
	on financial assets
	Currency exchange			195	(	66,047)
	At December 31		$	1,662,473	$	1,616,466

For the information of the Company’s subsidiary – Sasson International Holding Inc., please refer to Note 4 (3) in the Company’s consolidated financial statements for the year ended December 31, 2018.

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(8) Property, plant and equipment

Property, plant and equipment
Machinery and Transportation Leasehold equipment Office equipment equipment improvements At January 1, 2018 Cost 872,032 $ 47,358 $ 389 $ 1,371 $ Accumulated depreciation and impairment 833,098) ( 40,690) ( 389) ( 343) ( 38,934 $ 6,668 $ - $ 1,028 $ 2018 Opening net book amount as at January 1 38,934 $ 6,668 $ - $ 1,028 $ Additions 41,993 6,294 - 1,571 Disposals 4,364) ( - - - Depreciation expense 13,323) ( 3,604) ( - 633) ( At December 31 63,240 $ 9,358 $ - $ 1,966 $ At December 31, 2018 Cost 777,959 $ 53,275 $ 389 $ 2,942 $ Accumulated depreciation and impairment 714,719) ( 43,917) ( 389) ( 976) ( 63,240 $ 9,358 $ - $ 1,966 $	Unfinished construction and equipment under acceptance Total - $ 921,150 $ - 874,520) ( - $ 46,630 $ - $ 46,630 $ 6,190 56,048 - 4,364) ( - 17,560) ( 6,190 $ 80,754 $ 6,190 $ 840,755 $ - 760,001) ( 6,190 $ 80,754 $	Total
		80,754 $

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Machinery and Transportation Leasehold equipment Office equipment equipment improvements At January 1, 2017 Cost 878,987 $ 42,571 $ 389 $ - $ Accumulated depreciation and impairment 834,710) ( 37,127) ( 389) ( - 44,277 $ 5,444 $ - $ - $ 2017 Opening net book amount as at January 1 44,277 $ 5,444 $ - $ - $ Additions 20,289 4,815 - 1,371 Disposals 3,946) ( - - - Depreciation expense 21,686) ( 3,591) ( - 343) ( At December 31 38,934 $ 6,668 $ - $ 1,028 $ At December 31, 2017 Cost 872,032 $ 47,358 $ 389 $ 1,371 $ Accumulated depreciation and impairment 833,098) ( 40,690) ( 389) ( 343) ( 38,934 $ 6,668 $ - $ 1,028 $	Unfinished construction and equipment under acceptance Total - $ 921,947 $ - 872,226) ( - $ 49,721 $ - $ 49,721 $ - 26,475 - 3,946) ( - 25,620) ( - $ 46,630 $ - $ 921,150 $ - 874,520) ( - $ 46,630 $	Total
		46,630 $

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(9) Intangible assets

Intangible assets
					Acquired special
		Goodwill			technology	Computer	sofware			Total
At January 1, 2018
Cost	$	143,637		$	404,895	$	321,682	$		870,214
Accumulated amortisation		-	(		404,895)	(	300,566)	(		705,461)
	$	143,637		$	-	$	21,116	$		164,753
2018
Opening net book amount
as at January 1	$	143,637		$	-	$	21,116	$		164,753
Additions		-			-		7,556			7,556
Amortisation charge		-			-	(	14,757)	(		14,757)
At December 31	$	143,637		$	-	$	13,915	$		157,552
At December 31, 2018
Cost	$	143,637		$	404,895	$	329,185	$		877,717
Accumulated amortisation		-	(		404,895)	(	315,270)	(		720,165)
	$	143,637		$	-	$	13,915	$		157,552
					Acquired special
		Goodwill			technology	Computer	sofware			Total
At January 1, 2017
Cost	$	143,637		$	404,895	$	303,439	$		851,971
Accumulated amortisation		-	(		404,895)	(	286,485)	(		691,380)
	$	143,637		$	-	$	16,954	$		160,591
2017
Opening net book amount
as at January 1	$	143,637		$	-	$	16,954	$		160,591
Additions		-			-		18,243			18,243
Amortisation charge		-			-	(	14,081)	(		14,081)
At December 31	$	143,637		$	-	$	21,116	$		164,753
At December 31, 2017
Cost	$	143,637		$	404,895	$	321,682	$		870,214
Accumulated amortisation		-	(		404,895)	(	300,566)	(		705,461)
	$	143,637		$	-	$	21,116	$		164,753
Details of amortisation	on intangible assets			are as follows:
					Years ended		December 31,
					2018				2017
Operating costs					$	3,837	$			3,111
Selling expenses						-				1
General and administrative		expenses				-				1
Research and development		expenses				10,920				10,968
					$	14,757	$			14,081

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• (10) Impairment of non-financial assets

• Goodwill is allocated to the Company’s cash-generating units identified according to operating segment. The recoverable amount of all cash-generating units has been determined based on valuein-use calculations. These calculations use pre-tax cash flow projections based on financial budgets approved by the management covering a five-year period. Cash flows beyond the five-year period are extrapolated using the estimated growth rates stated below. The recoverable amount of all cashgenerating 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:

Years ended December 31,

Operating revenue growth rate Gross margin Discount rate			2018	Over 6 years			2017
		Up to 1 year	2~5 years			Up to 1 year	2~5 years	Over 6 years
		9% 14% 15.71%	9% 14% 15.71%	0% 14% 15.71%		5.70% 15% 11.41%	13% 17%~20% 11.41%	0% 20% 11.41%

• A. Operating revenue growth rate: taking into consideration the estimated operation and sales plans.

• B. Gross margin: calculated based on the historical data and taking into consideration the estimated operation and sales plans.

• C. Discount rate: the discount rates used were pre-tax and reflected specific risks relating to the relevant operating segments.

(11) Short-term borrowings

Type of borrowings Bank borrowings Borrowings for material purchase Type of borrowings Bank borrowings Borrowings for material purchase	December 31,2018 446,153 $ December 31,2017 506,972 $	Interest rate range Collateral 3.22%~3.60% None Interest rate range Collateral 1.84%~2.46% None

For the years ended December 31, 2018 and 2017, the Company recognised interest expense in profit or loss amounting to $16,139 and $4,868, respectively.

(12) Financial liabilities at fair value through profit or loss

Items Current items: Financial liabilities held for trading Non-hedging derivatives	December 31,2018 95 $	December 31,2017 3,829 $

• A. For the years ended December 31, 2018 and 2017, the Company recognised net gain on financial liabilities held for trading amounting to $3,734 and $1,566, respectively.

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• B. Explanations of the transactions and contract information in respect of derivative financial liabilities that the Company does not adopt hedge accounting are as follows:

					Unit: In thousands	Unit: In thousands
		December	31,2018		December	31,2017
Non-derivative financial	Contract amount			Contract amount
liabilities for hedging	(Notionalprincipal)		Contractperiod	(Notionalprincipal)		Contractperiod
Current items:
Foreign exchange swap	USD	2,500	2018.12.13~	USD	5,300	2017.11.13~
transactions			2019.01.17			2018.01.16

• C. The Company entered into foreign exchange swap contracts to sell forward contracts to hedge exchange rate risk of export proceeds. However, these forward contracts are not accounted for under hedge accounting.

(13) Other payables

under hedge accounting. Other payables
Bonds payable Employee bonus payable Accrued export expenses Payables for machinery and equipment Accrued repairs and maintenance expense Accrued commission Others Bonds payable Less: Discount on bonds payable	December 31,2018 92,973 $ 78,858 16,307 13,689 14,413 53,393 269,633 $ December 31,2018 - $ - - $	December 31,2017
		109,985 $ 28,336 4,436 14,773 13,997 58,851
		230,378 $
		December 31,2017
		- $ -
		- $

(14) Bonds payable

• A. On October 31, 2016, the terms and conditions of the Company’s second domestic secured convertible bonds are as follows:

• (a) Total issuance amount and face value: The total issuance amount of those convertible bonds was NT$401,200, at a par value of NT$100, and bonds were issued at the price of 100.3% of the bonds’ face value.

• (b) Issuance period: 3 years, which is starting from October 31, 2016 to October 31, 2019. (c) Coupon rate: 0%.

• (d) Repayment and terms: Bonds are repaid at maturity. Except if the Company redeems ahead of time, repurchase from Taiwan Stock Exchange or OTC for retirement or covert to common stocks under the terms of bonds.

• (e) Conversion period: The conversion right can be exercised after one month from issue date (December 1, 2016) to maturity date (October 31, 2019) subject to conversion, or any lockup period in accordance with laws and regulations. No right and obligation are different with

~37~

other common stocks issued by the Company.

• (f) The conversion price of the bonds is set up based on the pricing model specified in the terms of the bonds, and is subject to adjustments if the condition of the anti-dilution provisions occurs subsequently. The conversion price was NTD 27.5 per share upon issuance.

• (g) The Company’s redemption: The bonds may be redeemed, in whole or in part, at the option of the Company at any time on or after one month from issue date (December 1, 2016) through 40 days prior to maturity date (September 20, 2019) at 10% of their principal amount, provided the closing price of the Company’s common shares on the Taiwan Stock Exchange exceed 30% (inclusive) of the conversion price over 30 consecutive trading days, or the outstanding balance of the bonds is lower than 10% of the total initial issuance amount.

• (h) In accordance with the conversion’s rule, all the convertible bonds which had been repurchased from secondary market, repaid or converted to common stocks would be retired and no longer to resell or reissue.

• B. Regarding the issuance of convertible bonds, the equity conversion options amounting to $12,182 were separated from the liability component and were recognised in ‘capital surplus-share options’ in accordance with IAS 32. The redemption embedded in bonds payable were separated from their host contracts and were recognised $800 in ‘financial assets at fair value through profit or loss’ 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. The effective annual interest rate of the bonds after separation was 1.14%.

• C. On November 17, 2016, the Company issued common stocks amounting to 13 million shares. The conversion price of the convertible bonds had been reset from NT$27.5 to NT$27.2 per share based on the pricing model specified in the conversion rules.

• D. On October 2, 2017, the Company exercised redemption under the terms of bonds, No. 18, and was terminated trading on Taipei Exchange. These convertible bonds all were converted to common stocks amounting to 14,706 thousand shares, and the registration for the conversion was completed.

(15) Pensions

• A. (a) The Company has a defined benefit pension plan in accordance with the Labor Standards Act, 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 2% 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.

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Also, the Company 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 will make contributions for the deficit by next March.

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

	December	31,2018	December	31,2017
Present value of defined benefit obligations	$	304,736	$	305,349
Fair value of plan assets	(	91,997)	(	89,788)
Net defined benefit liability	$	212,739	$	215,561

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

	Present value of defined	Present value of defined		Fair value of		Net defined
		benefit obligations		plan assets		benefit liability
2018
At January 1	($	305,349)	$	89,788	($	215,561)
Current service cost	(	1,530)		-	(	1,530)
Interest (expense) income	(	3,359)		988	(	2,371)
	(	310,238)		90,776	(	219,462)
Remeasurements:
Return on plan assets (excluding		-		2,580		2,580
amounts included in interest
income or expense)
Change in financial assumptions	(	5,931)		-	(	5,931)
Experience adjustments	(	10,606)		-	(	10,606)
	(	16,537)		2,580	(	13,957)
Pension fund contribution		-		3,677		3,677
Paid pension		22,039	(	5,036)		17,003
At December 31	($	304,736)	$	91,997	($	212,739)

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	Present value of defined	Present value of defined		Fair value of		Net defined
		benefit obligations		plan assets		benefit liability
2017
At January 1	($	284,455)	$	85,391	($	199,064)
Current service cost	(	1,658)		-	(	1,658)
Interest (expense) income	(	3,982)		1,195	(	2,787)
	(	290,095)		86,586	(	203,509)
Remeasurements:
Return on plan assets (excluding		-	(	297)	(	297)
amounts included in interest
income or expense)
Change in financial assumptions	(	9,260)		-	(	9,260)
Experience adjustments	(	8,844)		-	(	8,844)
	(	18,104)	(	297)	(	18,401)
Pension fund contribution		-		3,499		3,499
Paid pension		2,850		-		2,850
At December 31	($	305,349)	$	89,788	($	215,561)

(d) The Bank of Taiwan was commissioned to manage the Fund of the Company’s and domestic 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 authorised 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, 2018 and 2017 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 December31,	Years ended December31,
	2018 0.90% 2.00%	2017
		1.10%
		2.00%

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

Sensitivity analysis of the effect on present value of defined benefit obligation due from the changes of main actuarial assumptions was as follows:

Increase 1% Decrease 1% December 31, 2018 Effect on present value of defined benefit obligation 29,548) ($ 30,616 $ December 31, 2017 Effect on present value of defined benefit obligation 30,979) ($ 32,146 $ Discount rate	Increase 1% Decrease 1% 27,380 $ 26,612) ($ 28,968 $ 28,114) ($ Future salaryincreases

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 were consistent with previous period.

• (f) Expected contributions to the defined benefit pension plans of The Company for the year ending December 31, 2019 amount to $3,629.

• (g) As of December 31, 2018, the weighted average duration of the retirement plan is 10 years.

• B. (a)Effective July 1, 2005, the Company has 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 contributes 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 Company for the years ended December 31, 2018 and 2017, were $17,429 and $17,689, respectively.

(16) Provisions

Provisions
		2018			2017
Balance at January 1	$		22,089	$		17,514
Additional provisions			2,369			9,393
Used during the year	(		6,670)	(		4,818)
Balance at December 31	$		17,788	$		22,089

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Analysis of total provisions:

Current Non-current	December 31,2018 16,166 $ 1,622 $	December 31,2017
		19,946 $
		2,143 $

The Company gives warranties on sales-related products. Provision for warranty is estimated based on historical warranty data of uninterruptible power supply and solar energy products.

(17) Share capital

A. As of December 31, 2018, the Company’s authorised capital was $7,000,000, consisting of 0.7 billion shares of ordinary stock (including 50 million shares reserved for employee stock options and convertible bonds issued by the Company), and the paid-in capital was $2,280,283 with a par value of $10 (in dollars) per share. All proceeds from shares issued have been collected.

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

(Unit: In thousand shares)

At January 1 Convertible bonds payable exercisable At December 31	2018 228,028 - 228,028	2017
		213,322 14,706
		228,028

Note: As of December 31, 2017, the registration for 3,316 thousand shares have not been completed.

B. In 2012, the Company issued convertible bonds amounting to $1,800,000, which were converted to common stocks amounting to 130,719 thousand shares in private placement. In 2016, the Company decreased the capital, and the common stocks remained 65,359 thousand shares after decreasing the capital. On March 22, 2018 and June 21, 2018, the Board of Directors and shareholders approved to implement belatedly procedures in relation to the public issuance and applying for trading on the market, respectively. The common stocks issued under private placement amounted to 65,359 thousand shares, which was approved by the Competent Authority on August 6, 2018.

(18) 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. However, capital surplus should not be used to cover accumulated deficit unless the legal reserve is insufficient.

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(19) Retained earnings

• A. Under the Company's Articles of Incorporation, the current year's earnings, if any, shall first be used to pay all taxes and offset prior year's operating losses, then 10% of the remaining amount shall be set aside as legal reserve until the legal reserve equals the total capital stock balance. After setting aside or reversal of a special reserve in accordance with related laws, the Company shall appropriate dividends to preferred stock. The Board of Directors should present the distribution of the remaining earnings along with accumulated unappropriated earnings for the approval of the shareholders to distribute dividends to shareholders.

• B. As the Company is in the growth stage, the Company took into consideration the economic environment and nature of industry as well as its future capital needs and long-term financial plans in order to ensure subsequent operation and stable development. Based on the Company’s future budget of capital expenditure and demand of capital, the Company appropriated no less than 30% of distributable earnings to shareholders’ dividends, but if the distributable earnings is lower than 5% of paid-in capital, no dividends will be distributed. Cash dividend has a first priority when distributing shareholders’ dividends, and the ratio is 30~100% of current total dividends. Remaining dividend can be distributed in the form of stocks. The appropriation of retained earnings will be proposed by the Board of Directors every year, and will be approved by the shareholders.

• 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. 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.

• E. The Company recognised cash dividends distributed to owners amounting to $45,606 ($0.2 (in dollars) per share) and $25,599 ($0.12 (in dollars) per share) for the years ended December 31, 2018 and 2017, respectively. On March 19, 2019, the Board of Directors during their meeting proposed for the distribution of dividends from 2018 earnings in the amount of $45,606 at $0.2 (in dollars) per share, which has not been approved by the shareholders.

• F. For the information relating to employees’ compensation and directors’ remuneration, please refer to Note 6(26).

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2018

(20) Other equity items

Unrealised gain or loss on financial assets

At January 1 Effects of retrospective application At January 1, after adjustments The Company's effect Revaluation transferred to retained earnings Effects of associate accounted for under equity method Tax effects of associate accounted for under equity method At December 31 At January 1 The Company's effect Effects of associate accounted for under equity Tax effects of associate accounted for under equity method At December 31		measured at fair value through other comprehensive income	Unrealized gain or loss on available for-sale financial assets	Currency translation Total 59,093) ($ 83,446) ($ - 106,011) ( 59,093) ( 189,457) ( - 1,685) ( - 890) ( 195 1,358) ( 36) ( 36) ( 58,934) ($ 193,426) ($ Currency translation Total 4,274) ($ 21,052) ($ - 4,041) ( 66,055) ( 69,589) ( 11,236 11,236 59,093) ($ 83,446) ($
	- $ 130,364) ( 130,364) ( 1,685) ( 890) ( 1,553) ( - 134,492) ($		24,353) ($ 24,353 - - - - - - $ 2017
	Unrealised gain or loss on financial assets measured at fair value through other comprehensive income		Unrealized gain or loss on available for-sale financial assets
		- $ - - - - $	16,778) ($ 4,041) ( 3,534) ( - 24,353) ($

(21) Operating revenue

Revenue from contracts with customers

	Year ended December	31,2018
	$	7,124,093

A. Disaggregation of revenue from contracts with customers

The Company derives revenue in the following major product lines and geographical regions: Year ended December 31, 2018

Revenue from external customer contracts	USA Mainland China Other 87,596 $ 1,043,582 $ 227,180 $ Terrestrial microwave communicationproducts	USA Mainland China Other 87,596 $ 1,043,582 $ 227,180 $ Terrestrial microwave communicationproducts	USA Other 5,127,333 $ 638,402 $ Satellite communicationproducts	Total
	USA 87,596 $	Mainland China 1,043,582 $	USA 5,127,333 $
				7,124,093 $

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B. Contract liabilities from customers

• (a) The Company has recognised the following revenue-related contract liabilities:

December 31, 2018

Contract liabilities: Contract liabilities- sales contracts $ 7,519

• (b) Revenue recognised that was included in the contract liability balance at the beginning of the

year

Year ended December 31, 2018

Revenue recognised that was included in the contract liability balance at the beginning of the sales contracts

$ 1,839

C. Related disclosures for 2017 operating revenue are provided in Note 12(5) B.

(22) Other income

Other income
Interest income: Interest income from bank deposits Dividend income Other income, others	Years ended December 31,
	2018 4,083 $ 556 51,700 56,339 $	2017
		7,683 $ 649 24,962
		33,294 $

(23) Other gains and losses

Other gains and losses
		Years ended	December 31,
		2018		2017
Gains on disposals of property, plant and	$	4,889		$	1,299
equipment
Gains on disposals of available-for-sale financial		-			5,604
assets
Gains on financial assets (liabilities) at fair value		2,427			4,101
through profit or loss
Currency exchange gains		11,189	(		36,091)
Other gains and losses	(	176)	(		8,613)
	$	18,329	($		33,700)

(24) Finance costs

Finance costs
Interest expense	Years ended December31,
	2018 16,139 $	2017
		7,619 $

~45~

(25) Expenses by nature

Expenses by nature
Employee benefit expense Depreciation charges on property, plant and equipment Amortisation (including amortisation on the land use right)	Years ended December 31,
	2018 452,615 $ 17,560 14,757 484,932 $	2017
		495,332 $ 25,620 14,081
		535,033 $

(26) Employee benefit expense

Employee benefit expense
Salary expenses Labor and health insurance fees Pension costs Other personnel expenses	Years ended December 31,
	2018 382,803 $ 32,450 21,330 16,032 452,615 $	2017
		423,951 $ 32,567 22,134 16,680
		495,332 $

• A. According to the Articles of Incorporation of the Company, the ratio of distributable profit of the current year shall not be lower than 7% for employees’ compensation in the form of stocks/cash, and employees must be working for the Company. The current year's earnings, if any, shall not be higher than 1% for directors’ remuneration. Appropriation of employees’ compensation and directors’ remuneration shall be submitted to the shareholders’ meeting. If the Company has accumulated deficit, earnings should be reserved to cover losses and then be appropriated to employees’ compensation and directors’ remuneration based on the abovementioned ratios.

• B. For the years ended December 31, 2018 and 2017, employees’ compensation was accrued at $4,619 and $12,885, respectively; while directors’ remuneration was accrued at $660 and $1,841, respectively. The aforementioned amounts were recognised in salary expenses.

• The employees’ compensation and directors’ remuneration were estimated and accrued based on 7% and 1%, respectively, of distributable profit for the year ended December 31, 2018. The employees’ compensation and directors’ and supervisors’ remuneration resolved by the Board of Directors were $4,619 and $658, respectively, and the employees’ compensation will be distributed in the form of cash.

For 2017, the employees’ compensation and directors’ remuneration resolved by the Board of Directors amounted to $12,885 and $1,818, respectively. The difference of $23 between the amounts resolved by the Board of Directors and the amounts recognised in the 2017 financial statements, mainly resulting from estimation, had been adjusted in the profit or loss of 2018.

~46~

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

• (27) Income tax

• A. Income tax expense

  • (a) Components of income tax expense:

e tax ome tax expense Components of income tax expense:
		Years ended	December 31,
		2018	2017
Current tax:
Tax of foreign source income withheld at
source	$	143	$	326
Total current tax		143		326
Deferred tax:
Origination and reversal of temporary		9,258		2,603
differences
Impact of tax losses		45,044		5,820
Impact of change in tax rate	(	45,845)		-
Total deferred tax		8,457		8,423
Income tax expense	$	8,600	$	8,749

• (b)The income tax (charge)/credit relating to components of other comprehensive income (loss) is as follows:

is as follows:
			Years ended	December 31,
			2018		2017
Currency translation differences of foreign operations		$	36	($	11,236)
Reconciliation between income tax expense and accounting profit:
			Years ended	December 31,
			2018		2017
Tax calculated based on profit before tax and	$		12,142	$	28,789
statutory tax rate (note)
Change in assessment of realization of deferred tax assets			42,160	(	20,366)
Tax of foreign source income withheld at			143		326
source
Impact of change in tax rate	(		45,845)		-
Income tax expense	$		8,600	$	8,749

• B. Reconciliation between income tax expense and accounting profit:

Note: For the years ended December 31, 2018 and 2017, the applicable tax rate was based on the parent company’s applicable tax rate of 20% and 17%, respectively.

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

are as follows:
Recognised in Recognised in other comprehensive At January 1 profit or loss income At December31 Deferred tax assets: -Temporary differences: Allowance for inventory valuation losses 16,222 $ 9,673 $ - $ 25,895 $ Unrealised warranty cost of after-sale service 3,755 197) ( - 3,558 Unrealised pension 36,645 5,903 - 42,548 Others 402 401) ( - 1 -Tax losses 281,265 4,591 - 285,856 Subtotal 338,289 $ 19,569 $ - $ 357,858 $ Deferred income tax liabilities: Unrealised gain on long-term investments 66,154) ($ 21,428) ($ - $ 87,582) ($ Unrealised exchange gain 6,518) ( 5,531) ( - 12,049) ( Exchange differences on foreign financial statements 5,828) ( - 36) ( 5,864) ( Others - 1,067) ( - 1,067) ( Subtotal 78,500) ($ 28,026) ($ 36) ($ 106,562) ($ Total 259,789 $ 8,457) ($ 36) ($ 251,296 $ 2018		2018
			At December31
			25,895 $ 3,558 42,548 1 285,856
			357,858 $
			106,562) ($
			251,296 $

Recognised in Recognised in other comprehensive At January 1 profit or loss income At December31 Deferred tax assets: -Temporary differences: Allowance for inventory valuation losses 14,430 $ 1,792 $ - $ 16,222 $ Unrealised warranty cost of after-sale service 2,977 778 - 3,755 Unrealised pension 33,841 2,804 - 36,645 Others 940 538) ( - 402 -Tax losses 287,085 5,820) ( - 281,265 Subtotal 339,273 $ 984) ($ - $ 338,289 $ Deferred income tax liabilities: Unrealised gain on long-term investments 57,697) ($ 8,457) ($ - $ 66,154) ($ Unrealised exchange gain 7,536) ( 1,018 - 6,518) ( Exchange differences on foreign financial statements 17,064) ( - 11,236 5,828) ( Subtotal 82,297) ($ 7,439) ($ 11,236 $ 78,500) ($ Total 256,976 $ 8,423) ($ 11,236 $ 259,789 $ 2017		2017	2017
			Recognised in other comprehensive income At December31 - $ 16,222 $ - 3,755 - 36,645 - 402 - 281,265 - $ 338,289 $ - $ 66,154) ($ - 6,518) ( 11,236 5,828) ( 11,236 $ 78,500) ($ 11,236 $ 259,789 $	At December31

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• D. Expiration dates of unused tax losses and amounts of unrecognised deferred tax assets are as follows:

	December 31,2018	December 31,2018
Year incurred 2011 2012 2013 2014 2015	Amount filed/ Assessed 1,121,209 $ 1,356,066 1,086,632 407,616 240,322 .	Unused amount 838,246 $ 1,356,066 1,086,632 407,616 240,322 3,928,882 $	Unrecognised deferred tax assets - $ 765,030 1,086,632 407,616 240,322 2,499,600 $	Expiry year
				2021 2022 2023 2024 2025

	December 31,2017	December 31,2017
Year incurred 2011 2012 2013 2014 2015	Amount filed/ Assessed 1,121,209 $ 1,356,066 1,086,632 407,616 240,322	Unused amount 838,246 $ 1,356,066 1,086,632 407,616 240,322 3,928,882 $	Unrecognised deferred tax assets - $ 539,810 1,086,632 407,616 240,322 2,274,380 $	Expiry year
				2021 2022 2023 2024 2025

• E. The Company’s income tax returns through 2016 have been 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 on February 7, 2018, the Company’s applicable income tax rate was raised from 17% to 20% effective from January 1, 2018. The Company has assessed the impact of the change in income tax rate.

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(28) Earnings per share

Earnings per share
Basic earnings per share Profit attributable to the parent Diluted earnings per share Profit attributable to the parent Assumed conversion of all dilutive potential ordinary shares Employees’ compensation Basic earnings per share Profit attributable to the parent Diluted earnings per share Profit attributable to the parent Assumed conversion of all dilutive potential ordinary shares Employees’ compensation Convertible bond	Year ended December 31,2018
	Weighted average number of ordinary shares outstanding Earnings per share Amount after tax (share in thousands) (in dollars) 52,109 $ 228,028 0.23 $ 52,109 228,028 - 226 52,109 $ 228,254 0.23 $ Year ended December 31,2017		Earnings per share (in dollars)
			0.23 $
			0.23 $
	Amount after tax 160,595 $ 160,595 - - 160,595 $	Weighted average number of ordinary shares outstanding (share in thousands) 219,052 219,052 428 8,976 228,456	Earnings per share (in dollars)
			0.73 $
			0.70 $

(29) Operating leases

The Company leases plant and production line located in Innovation Road II, Hsinchu Science Park, Hsinchu from Cybertan Technology Inc. with a term of 5 years under operating lease agreements in July 2015. These leases have terms expiring between 2018 and 2021, and all these lease agreements are renewable at the end of the lease period based on the market price. The Company recognised rental expenses of $25,856 and $25,965 for theses leases in profit or loss for the years ended December 31, 2018 and 2017, respectively.

The future aggregate minimum lease payments payable under non-cancellable operating leases are as follows:

~50~

Not later than one year Later than one year but not later than five years	December 31,2018 27,636 $ 13,818 41,454 $	December 31,2017 25,938 $ 38,907 64,845 $

(30) Supplemental cash flow information

A. Investing activities with partial cash payments:

pplemental cash flow information Investing activities with partial cash payments:
Financing activities with no cash flow effects: 2018 2017 Purchase of property, plant and equipment 56,048 $ 26,475 $ Add: Opening balance of payable on equipment 4,436 11,182 Ending balance of prepayment for equipment 227 - Less: Ending balance of payable on equipment 16,307) ( 4,436) ( Cash paid during the year 44,404 $ 33,221 $ Years ended December 31, 2018 2017 Convertible bonds converted to capital stocks - $ 388,622 $ Years ended December 31,	Years ended December 31,
		2017
	2018 - $	2017
		388,622 $

B. Financing activities with no cash flow effects:

(31) Changes in liabilities from financing activities

Changes in liabilities from financing activities
		Short-term borrowings
January 1, 2018	$	506,972
Changes in cash flow from financing activities	(	60,819)
December 31, 2018	$	446,153

1. RELATED PARTY TRANSACTIONS (1) Names of related parties and relationship

Names of related parties Relationship with the Company Sasson International Holding, Inc. The Company's directly owned subsidiary Welltop Technology Co., Ltd. The Company's indirectly owned subsidiary MTI Laboratory, Inc. The Company's indirectly owned subsidiary RadioComp ApS The Company's indirectly owned subsidiary Jupiter Network Corp. The Company's indirectly owned subsidiary Jupiter Technology (Wuxi) Inc. The Company's indirectly owned subsidiary Communication Technology Limited The Company's indirectly owned subsidiary Company Cybertan Technology Inc. Entities with significant influence to the Group IQE Taiwan Corporation Substantial related party

~51~

(2) Significant related party transactions and balances

A. Operating revenue

gnificant related party transactions and balances Operating revenue
Sales of goods: Subsidiaries Entities with significant influence to the Group	Years ended December 31,
	2018 1,290 $ 17,367 18,657 $	2017
		1,049 $ 770
		1,819 $

Goods are sold based on the price lists in force and terms that would be available to third parties. The credit term for the related party is 30 days after invoice date, and the credit term for the general customers is 30 to 90 days after invoice date or monthly billings.

• B. Purchases

Purchases
Purchases of goods: Jupiter Technology (Wuxi) Inc. Entities with significant influence to the Group	Years ended December 31,
	2018 4,333,797 $ 263 4,334,060 $	2017
		3,727,050 $ -
		3,727,050 $

Goods are purchased based on the price lists in force and terms that would be available to third parties. The payment term for the related party is 60 days after invoice date, and the payment term for the general supplier is 30 to 90 days after monthly billings.

• C. Receivables from related parties

term for the general supplier is 30 to 90 days after Receivables from related parties	monthly billings.	monthly billings.
Accounts payable: Subsidiaries Entities with significant influence to the Group Other receivables: Subsidiaries Entities with significant influence to the Group Subtotal Total	December 31,
	2018 191 $ 14,524 14,715 9,748 789 10,537 25,252 $	2017
		42 $ -
		42
		68,811 1,898
		70,709
		70,751 $

~52~

D. Payables to related parties

D. Payables to related parties	D. Payables to related parties	D. Payables to related parties	D. Payables to related parties	D. Payables to related parties
E. Other current liabilities F. Research and development expenses G. Property transactions: 2018 2017 Accounts payable: Jupiter Technology (Wuxi) Inc. 641,658 $ 377,381 $ Entities with significant influence to the Group 232 - 641,890 377,381 Other payables: MTI Laboratory, Inc. 78,297 55,945 Radiocamp Aps 40,419 34,731 Subtotal 118,716 90,676 Total 760,606 $ 468,057 $ December 31, 2018 2017 Jupiter Technology (Wuxi) Inc. 97,714 $ 140,751 $ December31, 2018 2017 MTI Laboratory, Inc. 196,583 $ 205,129 $ RadioComp ApS 83,330 86,364 $279,913 $291,493 Years ended December 31, Disposal proceeds Gain on disposal Disposal proceeds Gain on disposal Disposal of equipment Subsidiaries 2,977 $ 14 $ 4,919 $ 810 $ Purchase of equipment Subsidiaries 660 $ - $ - $ - $ Year ended December 31,2018 Year ended December 31,2017						December 31,
										2017
										377,381 $ -
										377,381
										55,945 34,731
										90,676
										468,057 $
					$
					$
					$
		Disposal proceeds		Gain on disposal				Disposal proceeds
		2,977 $ 660 $		14 $ - $				4,919 $ - $

• H. Operating lease transactions

• (a) For the years ended December 31, 2018 and 2017, rent expense to entities with significant influence to the Company amounted to $25,856 and $25,965, respectively.

• (b) As of December 31, 2018 and 2017, prepaid rents to entities with significant influence to the Company amounted to $1,904 and $1,585, respectively.

• (c) As of December 31, 2018 and 2017, guarantee deposits paid (shown as ‘Other non-current assets’) to entities with significant influence to the Company both amounted to $1,972.

~53~

• (d) For the years ended December 31, 2018 and 2017, other income to entities with significant influence to the Company amounted to $26 and $45, respectively.

(3) Key management compensation

Key management compensation
Salaries and other short-term employee benefits Post-employment benefits	Years ended December 31,
	2018 28,586 $ 2,201 30,787 $	2017
		41,488 $ 2,447
		43,935 $

8. PLEDGED ASSETS

The Company’s assets pledged as collateral are as follows:

Pledged asset Time deposits (Note)	December 31,2018 December 31,2017 - $ 21,916 $ Book value	Purpose
	December 31,2018 - $
		Guarantee for tax refund

Note: Shown as ‘other non-current asset’ as of December 31, 2017.

9. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNISED CONTRACT

COMMITMENTS

None.

10. SIGNIFICANT DISASTER LOSS

None.

11. SIGNIFICANT EVENTS AFTER THE BALANCE SHEET DATE

Information on the appropriation of 2018 earnings approved by the Board of Directors is provided in Note 6(19).

12. OTHERS

(1) Capital management

The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going concern in order to provide returns for shareholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, issue new shares or sell assets to reduce debt.

(2) Financial instruments

A. Financial instruments by category

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Financial assets Financial assets at fair value through profit or loss Financial assets mandatorily measured at fair value through profit or loss Financial assets held for trading Financial assets at fair value through other comprehensive income Designation of equity instrument Available-for-sale financial assets Financial assets at amortised cost/Loans and receivables Cash and cash equivalents Financial assets at amortised cost Notes receivable Accounts receivable Other receivables Guarantee deposits paid Other financial assets Financial liabilities Financial liabilities at fair value through profit or loss Financial liabilities held for trading Financial liabilities at amortised cost Short-term borrowings Accounts payable Other payables	December 31,2018 383 $ - 13,753 - 629,590 20,930 68,362 1,358,761 13,857 5,413 - 2,111,049 $ December 31,2018 95 $ 446,153 1,080,394 388,349 1,914,991 $	December 31,2017
		- $ 1,690 - 17,372 637,523 - 9,280 1,386,738 177,619 3,304 21,916
		2,255,442 $
		December 31,2017
		3,829 $ 506,972 816,375 321,054
		1,648,230 $

• B. Financial risk management policies

• (a) The Company’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. The Company’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Company’s financial position and financial performance. The Company uses derivative financial instruments to hedge certain risk exposures (see Notes 6(2) and 6(12)).

• (b) Risk management is carried out by a central treasury department (Group treasury) under policies approved by the Board of Directors. Group treasury identifies, evaluates and hedges financial risks in close co-operation with the Company’s operating units. The Board provides written principles for overall risk management, as well as written policies covering specific areas and matters, 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.

~55~

• C. Significant financial risks and degrees of financial risks

• (a) Market risk

Foreign exchange risk

• i. The Company operates internationally and is exposed to exchange rate risk arising from the transactions of the Company and its subsidiaries used in various functional currency, primarily with respect to the USD, EUR and RMB. Exchange rate risk arises from future commercial transactions and recognised assets and liabilities.

• ii. Management has set up a policy to require group companies to manage their foreign exchange risk against their functional currency. The Company companies are required to hedge their entire foreign exchange risk exposure with the Company treasury. To manage their foreign exchange risk arising from future commercial transactions and recognised assets and liabilities, entities in the Company use forward foreign exchange contracts, transacted with Company treasury.

• iii.The Company hedges foreign exchange rate by using forward exchange and cross currency swap contracts. However, the Company does not adopt hedging accounting. Details of financial assets or liabilities at fair value through profit or loss are provided in Note 6(2) and (12).

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

(Foreign currency： functional currency) Financial assets Monetary items USD:NTD RMB:NTD EUR:NTD Financial liabilities Monetary items USD:NTD RMB:NTD EUR:NTD		Foreign currency amount (In thousands) Exchange rate Book value (NTD) 56,936 $ 30.72 1,749,074 $ 14,235 4.48 63,773 1,025 35.20 36,080 48,217 $ 30.72 1,481,226 $ 18,921 4.48 84,766 1,183 35.20 41,642 December 31,2018	Foreign currency amount (In thousands) Exchange rate Book value (NTD) 56,936 $ 30.72 1,749,074 $ 14,235 4.48 63,773 1,025 35.20 36,080 48,217 $ 30.72 1,481,226 $ 18,921 4.48 84,766 1,183 35.20 41,642 December 31,2018	Foreign currency amount (In thousands) Exchange rate Book value (NTD) 56,936 $ 30.72 1,749,074 $ 14,235 4.48 63,773 1,025 35.20 36,080 48,217 $ 30.72 1,481,226 $ 18,921 4.48 84,766 1,183 35.20 41,642 December 31,2018
		Foreign currency amount (In thousands) 56,936 $ 14,235 1,025 48,217 $ 18,921 1,183	Exchange rate 30.72 4.48 35.20 30.72 4.48 35.20
				1,749,074 $ 63,773 36,080 1,481,226 $ 84,766 41,642

~56~

December 31, 2017

(Foreign currency： functional currency) Financial assets Monetary items USD:NTD RMB:NTD EUR:NTD Financial liabilities Monetary items USD:NTD RMB:NTD EUR:NTD	currency amount (In thousands) 59,877 $ 28,201 975 39,073 $ 70,053 1,005	Exchange rate 29.76 4.55 35.57 29.76 4.55 35.57	Book value (NTD)
			1,781,940 $ 128,315 34,681 1,162,812 $ 318,741 35,748

• v. The total exchange gain (loss), including realised and unrealised arising from significant foreign exchange variation on the monetary items held by the Company for the years ended December 31, 2018 and 2017, amounted to $11,189 and ($36,091), respectively.

• vi. Analysis of foreign currency market risk arising from significant foreign exchange variation:

. Analysis of foreign currency market risk arising from significant foreign variation:	rency market risk arising from significant foreign	rency market risk arising from significant foreign
Effect on Effect on other comprehensive Degree of variation profit or loss income (Foreign currency： functional currency) Financial assets Monetary items USD:NTD 1% 17,491 $ - $ RMB:NTD 1% 638 EUR:NTD 1% 361 - Financial liabilities Monetary items USD:NTD 1% 14,812) ($ - $ RMB:NTD 1% 848) ( EUR:NTD 1% 416) ( - Year ended December 31,2018 Sensitivityanalysis	Year ended December 31,2018
	Sensitivityanalysis
		Effect on other comprehensive income
		- $ - - $ -

~57~

Year ended December 31, 2017

(Foreign currency： functional currency) Financial assets Monetary items USD:NTD RMB:NTD EUR:NTD Financial liabilities Monetary items USD:NTD RMB:NTD EUR:NTD	Sensitivityanalysis
	Effect on Degree of variation profit or loss 1% 17,819 $ 1% 1,283 1% 347 1% 11,628) ($ 1% 3,187) ( 1% 357) (	Effect on other comprehensive income
		- $ - - - $ - -

Price risk

• i. The Company’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 Company diversifies its portfolio. Diversification of the portfolio is done in accordance with the limits set by the Company.

• ii. The Company’s investments in equity securities comprise shares issued by the overseas and 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 1% with all other variables held constant, post-tax profit for the years ended December 31, 2018 and 2017 would have increased/decreased by $281 and $291, respectively, as a result of other comprehensive income classified as available-forsale equity investment and equity investment at fair value through other comprehensive income.

• (b) Credit risk

• i. Credit risk refers to the risk of financial loss to the Company arising from default by the clients or counterparties of financial instruments on the contract obligations. The main factor is that counterparties could not repay in full the accounts receivable based on the agreed terms, and the contract cash flows of debt instruments stated at amortised cost, at fair value through profit or loss and at fair value through other comprehensive income.

• ii. The Company manages their credit risk taking into consideration the entire group’s concern. For banks and financial institutions, only independently rated parties with a

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optimised credit rating are accepted. According to the Company’s credit policy, each local entity in the Company is responsible for managing and analysing the credit risk for each of their new clients before standard payment and delivery terms and conditions are offered. Internal risk control assesses the credit quality of the customers, taking into account their financial position, past experience and other factors. Individual risk limits are set based on internal or external ratings in accordance with limits set by management. The utilisation of credit limits is regularly monitored

• iii.Impairment assessment of credit risk on financial assets at amortised cost is as follows:

• (a) The Company adopts following assumptions under IFRS 9, 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.

• (b) The Company adopts the assumptions under IFRS 9, the default occurs when the contract payments are past due over 90 days.

• (c) The Company used the forecastability to adjust historical and timely information and considered credit rating of issue banks to assess the default possibility of accounts and notes receivable.

• (d) The Company’s financial assets at amortised cost are including time deposits deposited in banks and restricted time deposits. Such banks all have optimised credit rating, no past due has occurred, and no significant changes in the entire economic environment, therefore no credit loss is expected and the impact to the financial statements is remote.

• iv. Impairment assessment of credit risk on accounts and notes receivable is as follows:

• (a) The Company classifies customers’ accounts and notes receivable in accordance with credit rating of customer. The Company applies the simplified approach using provision matrix to estimate expected credit loss under the provision matrix basis.

• (b) The Company used the forecastability to adjust historical and timely information to assess the default possibility of accounts and notes receivable. On December 31, 2018, the provision matrix is as follows:

December 31, 2018 Expected loss rate Total book value Loss allowance	Notpast due 0%-1% 1,276,560 $ 3 $	90 days past due 0%-1% 147,195 $ 3 $	90-180 days past due 0%-1% 125 $ - $	Over 180 days past due 0%-1% 4,485 $ 1,236 $	Total
					1,428,365 $ 1,242 $

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• (c). Movements in relation to The Company applying the simplified approach to provide

loss allowance for accounts and notes receivable are as follows:

At January 1_IAS 39 Adjustments under new standards At January 1_IFRS 9 Reversal of impairment loss Effect of exchange rate changes At December 31	2018
	1,198 $ -
	1,198 6 38
	1,242 $

• v. The Company used the forecastability to adjust historical and timely information to assess the default possibility of other receivables. On January 1, 2018, the provision matrix is as follows:

follows:
December 31, 2018 Expected loss rate Total book value Loss allowance	Notpast due 0% 13,857 $ - $	90 days past due 0% - $ - $	90-180 days past due 0% - $ - $	Over 180 days past due 0% - $ - $	Total
					13,857 $ - $

• vi. Credit risk information as of December 31, 2017 and for the year ended December 31, 2017 is provided in Note 12(4).

• (c) Liquidity risk

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

• ii. Company 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 Company’s non-derivative financial liabilities and netsettled 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 non-derivative financial liabilities and to the expected maturity date for derivative financial liabilities. The amounts disclosed in the table are the contractual undiscounted cash flows.

~60~

December 31, 2018 Non-derivative financial liabilities Short-term borrowings Accounts payable (including related party) Other payables ( including related party ) Derivative financial liabilities Cross currency swap contracts December 31, 2017 Non-derivative financial liabilities Short-term borrowings Accounts payable (including related party) Other payables (including related party) Derivative financial liabilities Forward exchange contracts	Less than 3 months 447,274 $ 1,070,388 388,349 95 $ Less than 3 months 363,234 $ 812,415 321,054 3,829 $	Between 3 months and 1year - $ 10,006 - - $ Between 3 months and 1year 145,977 $ 3,960 - - $	Between 1 and 2years - $ - - - $ Between 1 and 2years - $ - - - $	Between 2 and 5years - $ - - - $ Between 2 and 5years - $ - - - $	Total
					447,274 $ 1,080,394 388,349 95 $ Total
					509,211 $ 816,375 321,054 3,829 $

(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.

• 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 Company’s derivative instruments and emerging stocks are included in Level 2.

• Level 3: Unobservable inputs for the asset or liability. The fair value of the Company’s investment in equity investment without active market is included in Level 3.

• B. Financial instruments not measured at fair value

• The carrying amounts of cash and cash equivalents, notes receivable, accounts receivable, other receivables, financial assets at amortised cost, other financial assets, short-term borrowings, accounts payable and other payables are approximate to their fair values.

• 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 are as follows:

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• (a) The related information of natures of the assets and liabilities is as follows:

December 31, 2018 Assets Recurring fair value measurements Financial assets at fair value through profit or loss Foreign exchange swap contracts Financial assets at fair value through other comprehensive income Equity securities Liabilities Recurring fair value measurements Financial liabilities at fair value through profit or loss Foreign exchange swap contracts December 31, 2017 Assets Recurring fair value measurements Available-for-sale financial assets Equity securities Financial assets at fair value through profit or loss Foreign exchange swap contracts Liabilities Recurring fair value measurements Financial liabilities at fair value through profit or loss Forward exchange contracts	Level 1 - $ - - $ - $ Level 1 - $ - - $ - $	Level 2 383 $ 5,352 5,735 $ 95 $ Level 2 7,188 $ 1,690 8,878 $ 3,829 $	Level 3 - $ 8,401 8,401 $ - $ Level 3 10,184 $ - 10,184 $ - $	Total
				383 $ 13,753
				14,136 $
				95 $
				Total
				17,372 $ 1,690
				19,062 $
				3,829 $

• (b) The methods and assumptions the Company used to measure fair value are as follows:

• i. When assessing non-standard and low-complexity financial instruments, for example, interest rate swap contracts and foreign exchange swap contracts, the Company adopts valuation technique that is widely used by market participants. The inputs used in the valuation method to measure these financial instruments are normally observable in the market.

• ii. The output of valuation model is an estimated value and the valuation technique may not be able to capture all relevant factors of the Company’s 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 Company’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.

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• D. For the years ended December 31, 2018 and 2017, there was no transfer between Level 1 and Level 2.

• E. The following chart is the movement of Level 3 for the years ended December 31, 2018 and 2017:

					2018
					Derivative
		Equity	securities		instruments		Total
At January 1	$		10,184	$	-	$	10,184
Losses recognised in other comprehensive
income	(		1,783)		-	(	1,783)
At December 31	$		8,401	$	-	$	8,401
					2017
					Derivative
		Equity	securities		instruments		Total
At January 1	$		9,601	$	640	$	10,241
Convertible bonds exercised			-	(	1,485)	(	1,485)
Gains recognised in profit or loss			-		845		845
Gains recognised in other comprehensive
income			583		-		583
At December 31	$		10,184	$	-	$	10,184

• F. Professional appraisal institution and treasury department are in charge of valuation procedures for fair value measurements being categorised within Level 3, which is to verify independent fair value of financial instruments. Such assessment is to ensure the valuation results are reasonable by applying independent information to make results close to current market conditions, confirming the resource of information is independent, reliable and in line with other resources and represented as the exercisable price, and frequently calibrating valuation model, updating inputs used to the valuation model and making any other necessary adjustments to the fair value.

• 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:

Unlisted shares Non-derivative equity instrument:	Fair value at Valuation Significant unobservable December 31,2018 technique input $ 8,401 Market comparable companies Discount for lack of marketability P/B ratio	Range Relationship of (weighted average) inputs to fair value 30% 100% The higher the discount for lack of marketability, the lower the fair value	Relationship of inputs to fair value

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Unlisted shares Non-derivative equity instrument:	Fair value at Valuation Significant unobservable December 31,2017 technique input $ 10,184 Market comparable companies Discount for lack of marketability P/B ratio	Range Relationship of (weighted average) inputs to fair value 30% 100% The higher the net asset value, the higher the fair value	Relationship of inputs to fair value

• H. The Company 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 categorised within Level 3 if the inputs used to valuation models have changed:

Financial assets Equity instruments Financial assets Equity instruments	Input P/B ratio Input P/B ratio	Change ±10% Change ±10%		December	31,2018	31,2018
			Recognised in	Unfavourable change - $ profit or loss December	Recognised in other comprehensive income
			Favourable change - $		Favourable Unfavourable change change 840 $ 840) ($ 31,2017	Unfavourable change
			Recognised in	Unfavourable change - $ profit or loss	Recognised in other comprehensive income
			Favourable change - $		Favourable Unfavourable change change 1,018 $ 1,018) ($	Unfavourable change

(4) Effects on initial application of IFRS 9 and information on application of IAS 39 in 2017

• A. Summary of significant accounting policies adopted in 2017:

• (a)Financial assets measured at fair value

  • i. Financial assets at fair value through profit or loss are financial assets held for trading. Financial assets are classified in this category of held for trading if acquired principally for the purpose of selling in the short-term. Derivatives are also categorized as financial assets held for trading unless they are designated as hedges.

  • ii. On a regular way purchase or sale basis, available-for-sale financial assets are recognised and derecognised using trade date accounting.

  • iii. Financial assets at fair value through profit or loss are initially recognised at fair value. Related transaction costs are expensed in profit or loss. These financial liabilities are subsequently remeasured and stated at fair value, and any changes in the fair value

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of these financial liabilities are recognised in profit or loss.

• (b)Available-for-sale financial assets

• i. Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories.

• ii. On a regular way purchase or sale basis, available-for-sale financial assets are recognised and derecognised using trade date accounting.

• iii. Available-for-sale financial assets are initially recognised at fair value plus transaction costs. These financial assets are subsequently remeasured and stated at fair value, and any changes in the fair value of these financial assets are recognised in other comprehensive income. Investments in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured are presented in ‘financial assets measured at cost’.

• (c) Loans and accounts receivable

• Accounts receivable are loans and receivables originated by the entity. They are created by the entity by selling goods or providing services to customers in the ordinary course of business. They are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. However, short-term accounts receivable without bearing interest are subsequently measured at initial invoice amount as the effect of discounting is immaterial.

• (d)Impairment of financial assets

• i. The Company assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.

• ii. The criteria that the Company uses to determine whether there is objective evidence of an impairment loss is as follows:

  • (i)Significant financial difficulty of the issuer or debtor;

  • (ii)A breach of contract, such as a default or delinquency in interest or principal payments;

  • (iii) The Company, for economic or legal reasons relating to the borrower’s financial difficulty, granted the borrower a concession that a lender would not otherwise consider;

  • (iv)It becomes probable that the borrower will enter bankruptcy or other financial reorganisation;

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

  • (vi) Observable data indicating that there is a measurable decrease in the estimated

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future cash flows from a group of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial asset in the Company, including adverse changes in the payment status of borrowers in the Company or national or local economic conditions that correlate with defaults on the assets in the Company;

• (vii) Information about significant changes with an adverse effect that have taken place in the technology, market, economic or legal environment in which the issuer operates, and indicates that the cost of the investment in the equity instrument may not be recovered;

• (viii) A significant or prolonged decline in the fair value of an investment in an equity instrument below its cost.

iii. When the Company assesses that there has been objective evidence of impairment and an impairment loss has occurred, accounting for impairment is made as follows according to the category of financial assets:

• (i)Financial assets measured at amortised cost

The amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate, and is recognised in profit or loss. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment loss was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the asset does not exceed its amortised cost that would have been at the date of reversal had the impairment loss not been recognised previously. Impairment loss is recognised and reversed by adjusting the carrying amount of the asset through the use of an impairment allowance account.

• (ii) Financial assets at cost

The amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at current market return rate of similar financial asset, and is recognised in profit or loss. Impairment loss recognised for this category shall not be reversed subsequently. Impairment loss is recognised by adjusting the carrying amount of the asset directly.

• (iii) Available-for-sale financial assets

The amount of the impairment loss is measured as the difference between the asset’s acquisition cost (less any principal repayment and amortisation) and current fair value, less any impairment loss on that financial asset previously recognised in profit or loss, and is reclassified from ‘other comprehensive

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income’ to ‘profit or loss’. Impairment loss of an investment in an equity instrument recognised in profit or loss shall not be reversed through profit or loss. Impairment loss is recognised and reversed by adjusting the carrying amount of the asset directly.

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

  • i. Financial liabilities at fair value through profit or loss are financial liabilities held for trading or financial liabilities designated as at fair value through profit or loss on initial recognition. Financial liabilities are classified in this category of held for trading if acquired principally for the purpose of repurchasing in the short-term. Derivatives are also categorized as financial liabilities held for trading unless they are designated as hedges.

  • ii. Financial liabilities at fair value through profit or loss are initially recognised at fair value. Related transaction costs are expensed in profit or loss. These financial liabilities are subsequently remeasured and stated at fair value, and any changes in the fair value of these financial liabilities are recognised in profit or loss.

• B. The reconciliations of carrying amount of financial assets transferred from December 31, 2017, IAS 39, to January 1, IFRS 9, were as follows:

IAS 39, to January 1, IFRS 9, were as follows:
Consolidated balance sheet Book value under Adjustment for initial Adjusted amount Affected items previous IAS39 application of IFRS9 after IFRS9adoption January1,2018 Available-for-sale financial assets 17,372 $ 17,372) ($ - $ Financial assets at fair value through other comprehensive income - 17,372 17,372 Financial assets at cost - - - Financial assets at amortised cost - 21,916 21,916 Other current assets 21,916 21,916) ( - Others 4,857,096 - 4,857,096 Total assets 4,896,384 $ - $ 4,896,384 $ Total liabilities 2,126,294 $ - $ 2,126,294 $ Retained earnings 143,892 106,011 249,903 Other equity interest 83,446) ( 106,011) ( 189,457) ( Others 2,709,644 - 2,709,644 Total equity 2,770,090 $ - $ 2,770,090 $ Total liabilities and equity 4,896,384 $ - $ 4,896,384 $	Description
	1、2 1 2 3 3 1 1

Explanation:

• (a) In accordance with IFRS 9, the Company reclassified available-for-sale financial assets in the amount of $17,372, and made an irrevocable election at initial recognition on equity instruments not held for dealing or trading purpose, by increasing financial assets at fair value through other comprehensive income, increasing retained earnings and decreasing other equity interest in the amounts of $17,372, $17,472 and $17,472, respectively. For the information of the Company recognized adjustments by increasing retained earnings $88,539 and decreasing other equity $88,539 due to its subsidiary’s initial recognition of IFRS 9,

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please refer to the note 12 (4) of the Company’s consolidated financial statements of the year 2018.

• (b) In accordance with IFRS 9, the Company reclassified available-for-sale financial assets and financial assets at cost to financial assets at fair value through profit or loss because all those equity investments have been provided impairment loss, therefore, no impact to the Company’s financial assets at fair value through profit or loss, net , retained earnings and other equity.

• (c) In accordance with IFRS 9, the Company reclassified restricted cash by increasing financial assets at amortised cost in the amount of $21,916, and no impact to the Company’s retained earnings and other equity.

• C. The significant accounts as of December 31, 2017 and for the year ended December 31, 2017 are as follows:

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

ollows: inancial assets at fair value through profit or loss
Items Current items: Financial assets held for trading Non-hedging derivatives Valuation adjustments	December 31,2017
	1,690 -
	1,690 $

• i. The Company recognised net gain of $2,535 on financial assets held for trading for the year ended December 31, 2017.

• ii. The non-hedging derivative instruments transaction and contract information are as follows:

ended December 31, 2017. The non-hedging derivative instruments follows:	transaction and contract information are as	transaction and contract information are as
Derivative financial assets for hedging Current items: Foreign exchange swap transactions	December 31,2017
	Contract amount (Notionalprincipal) USD 5,000	Contractperiod
		2017.11.13~2018.01.16

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

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• (b) Available-for-sale financial assets

Available-for-sale financial assets
Items	December	31,2017
Non-current items：
Taiwan Aerospace Corporation	$	25,000
Transcom, Inc.		4,104
Subtotal		29,104
Valuation adjustments		5,740
Accumulated impairment	(	17,472)
	$	17,372

The Company recognised net loss of $1,563 in other comprehensive income for fair value change and reclassified $5,604 from equity to profit or loss for the year ended December 31, 2017.

• (c) Restricted cash and cash equivalent (shown as ‘Other current assets’)

Items Current items： Time deposits	December 31,2017
	21,916 $

• D. Credit risk information as of December 31, 2017 and for the year ended December 2017 are as follows:

• (a) Credit risk refers to the risk of financial loss to the Company arising from default by the clients or counterparties of financial instruments on the contract obligations. For credit risk arising from customers, according to the Company’s credit policy, each local entity in the Company is responsible for managing and analysing the credit risk for each of their new clients before standard payment and delivery terms and conditions are offered. Internal risk control assesses the credit quality of the customers, taking into account their financial position, past experience and other factors.

• (b) On December 31, 2017, no credit limits were exceeded during the reporting periods, and management does not expect any significant losses from non-performance by these counterparties.

• (c) The credit quality information of financial assets that are neither past due nor impaired is as follows:

as follows:
Items Group 1 Group 2 Group 3	December 31,2017
	52,647 $ 37,333 843,078
	933,058 $

Group 1: Customers insured with credit insurance. Group 2: Customer used L/C to transact. Group 3: Others.

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(d) The ageing analysis of accounts receivable that were past due but not impaired is as follows:

Up to 90 days 91 to 180 days Over 180 days	December 31,2017
	302,475 $ 145,076 6,129
	453,680 $

The above ageing analysis was based on past due date.

• (e) Movements in the provision for impairment of accounts receivable for the year ended December 31, 2017 are as follows:

Individualprovision At January 1 1,059 $ Provision for uncollectible accounts 223 Effect of exchange rate changes 84) ( At December 31 1,198 $		2017

(5) Effects of initial application of IFRS 15 and information on application of IAS 11 and IAS 18 in 2017

A. The significant accounting policies applied on revenue recognition for the year ended December 31, 2017 are set out below.

• (a) Sales of goods

The Company manufactures and sells satellite and terrestrial microwave communication system products. Revenue is measured at the fair value of the consideration received or receivable taking into account of business tax, returns, rebates and discounts for the sale of goods to external customers in the ordinary course of the Company’s activities. Revenue arising from the sales of goods is recognised when the Company has delivered the goods to the customer, the amount of sales revenue can be measured reliably and it is probable that the future economic benefits associated with the transaction will flow to the entity. The delivery of goods is completed when the significant risks and rewards of ownership have been transferred to the customer, the Company retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold, and the customer has accepted the goods based on the sales contract or there is objective evidence showing that all acceptance provisions have been satisfied.

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• (b) Service revenue

The Company provides technology authorisation and research and development services. Revenue from delivering services is recognised under the percentage-of-completion method when the outcome of services provided can be estimated reliably. The stage of completion of a service contract is measured by the percentage of the actual services performed as of the financial reporting date to the total services to be performed If the outcome of a service contract cannot be estimated reliably, contract revenue should be recognised only to the extent that contract costs incurred are likely to be recoverable.

• B. The revenue recognised by using above accounting policies for the year ended December 31, 2017 are as follows:

017 are as follows:
Operating revenue Service revenue	Year ended December31,2017
	6,336,960 $ 223,847
	6,560,807 $

• C. The effects and description of current balance sheet items if the Company continues adopting above accounting policies for the year ended December 31, 2018 are as follows, and no impact to current comprehensive income. The differences are provided in Note 3(1).

December 31, 2017

Balance sheet items Contract liabilities Sales revenue received in advance	Description	Effects from Balance by using changes in Balance by using Previous accounting accounting IFRS 15 policies policy 7,519 $ - $ 7,519 $ - 7,519 7,519) (

13. SUPPLEMENTARY DISCLOSURES

(1) Significant transactions information

• A. Loans to others: None.

• B. Provision of endorsements and guarantees to others: None.

• C. Holding of marketable securities at the end of the period: Please refer to table 1.

• 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 2.

• H. Receivables from related parties reaching $100 million or 20% of paid-in capital or more: Please refer to table 3.

• I. Trading in derivative financial instruments undertaken during the reporting periods: Please refer

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to Note 6(2) (12).

• J. Significant inter-company transactions during the reporting periods: Please refer to table 4.

• (2) Information on investees

• Names, locations and other information of investee companies (not including investees in Mainland China): Please refer to table 5.

• (3) Information on investments in Mainland China

• A. Basic information: Please refer to table 6.

• B. Significant transactions, either directly or indirectly through a third areas, with investee companies in the Mainland China: Please refer to table 7.

14. SEGMENT INFORMATION

Not applicable.

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Microelectronics Technology, Inc.

Table 1

Expressed in thousands of NTD

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

Year ended December 31, 2018

(Except as otherwise indicated)

Securities held by	Marketable securities	Relationship with the securities issuer	General ledger account		As of December 31,2018	As of December 31,2018		Note
				Number of shares	Book value	Ownership (%)	Fair value
Microelectronics Technology, Inc. Microelectronics Technology, Inc. SASSON INTERNATIONAL HOLDING, INC. SASSON INTERNATIONAL HOLDING, INC. SASSON INTERNATIONAL HOLDING, INC. SASSON INTERNATIONAL HOLDING, INC. SASSON INTERNATIONAL HOLDING, INC.	Stocks - TAIWAN AEROSPACE CORPORATION Stocks - TRANSCOM, INC. Stocks - Optical Scientific, Inc. Stocks - Firetide, Inc. Stocks - Taicom Capital Ltd. Stocks - New Edge Signal Solutions LCC Conversion of convertible bonds - Kymeta Corporation	None None None None None None None	Financial assets at fair value through other comprehensive income Financial assets at fair value through other comprehensive income Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss Financial assets at fair value through other comprehensive income Financial assets at fair value through other comprehensive income Financial assets at fair value through profit or loss	648,576 85,000 16,023 1,333,360 20,000 1,355,663 -	8,401 $ 5,352 - - 167,303 61,430 6,143	0.48 0.24 5.02 2.24 Note 12.5 -	8,401 $ 5,352 - - 167,303 61,430 6,143

Note: Holding of 10,000 ordinary shares and 10,000 preference shares for 11.43% and 16.67% ownership, respectively.

Table 1, Page1

Microelectronics Technology, Inc.

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, 2018

				Year ended December 31, 2018	Year ended December 31, 2018
Table 2 Purchaser/seller	Counterparty	Relationship with the counterparty		Transaction			Differences in transaction terms compared to third party transactions		Balance Percentage of total notes/accounts receivable (payable) Expressed in thousands of NTD (Except as otherwise indicated) Note Notes/accounts receivable(payable)
			Purchases (sales)	Amount	Percentage of total purchases (sales)	Credit term	Unitprice	Credit term	Balance	Percentage of total notes/accounts receivable (payable)
Microelectronics Technology, Inc. JUPITER TECHNOLOGY (WUXI) INC	JUPITER TECHNOLOGY (WUXI) INC Microelectronics Technology, Inc.	Indirect subsidiary of the Company Indirect subsidiary of the Company	Purchases Sales	4,333,797 $ 4,333,797) (	67% (75%)	90 days 90 days	Not applicable Not applicable	Not applicable Not applicable	641,658) ($ 641,658	(60%) 96%

Table 2, Page1

Microelectronics Technology, Inc.

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

Year ended December 31, 2018

Table 3 Creditor	Counterparty	Relationship with the counterparty	Balance as at December31,2018	Turnover rate	Overdue receivables	Overdue receivables	Expressed in thousands of NTD (Except as otherwise indicated) Amount collected subsequent to the balance sheet date Allowance for doubtful accounts	Expressed in thousands of NTD (Except as otherwise indicated) Amount collected subsequent to the balance sheet date Allowance for doubtful accounts
					Amount	Action taken
JUPITER TECHNOLOGY (WUXI) INC	Microelectronics Technology, Inc.	Parent company	641,658 $	4.93	- $	-	599,609 $	- $

Table 3, Page1

Microelectronics Technology, Inc.

Significant inter-company transactions during the reporting periods

Year ended December 31, 2018

Table 4

Expressed in thousands of NTD (Except as otherwise indicated)

Transaction

Number (Note1)	Companyname	Counterparty	Relationship (Note2)	General ledgeraccount	Amount	Transaction terms	Percentage of consolidated total operating revenues or total assets (Note 3)
0 0 0 0 0 0 0 0	Microelectronics Technology, Inc. Microelectronics Technology, Inc. Microelectronics Technology, Inc. Microelectronics Technology, Inc. Microelectronics Technology, Inc. Microelectronics Technology, Inc. Microelectronics Technology, Inc. Microelectronics Technology, Inc.	JUPITER TECHNOLOGY (WUXI) INC. JUPITER TECHNOLOGY (WUXI) INC. JUPITER TECHNOLOGY (WUXI) INC. JUPITER TECHNOLOGY (WUXI) INC. MTI Laboratory, INC. MTI Laboratory, INC. Radiocomp ApS Radiocomp ApS	1 1 1 1 1 1 1 1	Purchases and processing overhead Accounts payable Other receivables Other current liabilities Research and development expenses Other payables Research and development expenses Other payables	4,333,797 $ 641,658 9,748 97,714 196,583 78,297 83,330 40,419	Same as those to the third parties Payment term is 60 days from receipt of goods Credit term is 90 days from delivery Based on the mutual agreement Same as those to the third parties Based on the mutual agreement Same as those to the third parties Based on the mutual agreement	54.38% 10.84% 0.16% 1.65% 2.47% 1.32% 1.05% 0.68%

Note 1: The information of transactions between the Company and the subsidiaries should be noted in “Number” column. Note 2: (1) Number 0 represents the Company. Note 2: (2) The consolidated subsidiaries are numbered in order from number 1. Note 2: The transaction relationship with counterparties are as follows: Note 2: (1) The Company to the consolidated subsidiary. Note 2: (2) The consolidated subsidiaries to the Company. Note 2: (3) The consolidated subsidiaries to other consolidated subsidiaries. Note 3: In calculating the ratio, the transaction amount is divided by consolidated total assets for balance sheet accounts and is divided by consolidated total revenues for income statement accounts. Note 4: Only transaction amounts over $10 million were disclosed and if transactions between parent company and subsidiaries or between subsidiaries refer to the same transaction, it was not required to be disclosed separately.

Table 4, Page1

Microelectronics Technology, Inc.

Information on investees

Year ended December 31, 2018

Table 5

Expressed in thousands of NTD

(Except as otherwise indicated)

Investor	Investee	Location	Main business activities	Initial investment amount	Initial investment amount	Shares held as at December 31,2018	Shares held as at December 31,2018	Shares held as at December 31,2018	Net profit (loss) of the investee for the year ended December 31, 2018	Investment income (loss) recognised by the Company for the year ended December 31, 2018	Note
				Balance as at December 31, 2018	Balance as at December 31, 2017	Number of shares	Ownership (%)	Book value
Microelectronics Technology, Inc. SASSON INTERNATIONAL HOLDING, INC. SASSON INTERNATIONAL HOLDING, INC. Welltop Technology Co.,Ltd. Welltop Technology Co.,Ltd.	SASSON INTERNATIONAL HOLDING, INC. Welltop Technology Co.,Ltd. Jupiter Network Corp. MTI Laboratory, Inc. Radiocomp ApS	British Virgin IS. British Virgin IS. British Virgin IS. U.S.A DENMARK	Investment management Investment management Investment management Communications Communications	908,778 $ 240,621 954,370 46,073 144,422	908,778 $ 233,140 924,697 44,640 139,932	3,920 7,834,000 31,071,800 1,500,000 1,527,944	100 100 100 100 100	1,662,473 $ 316,015 1,020,017 118,905 176,082	48,127 $ 17,239 28,946 13,963 3,208	49,087 $ 17,239 28,946 13,963 3,208	Note 1 Note 2 Note 2 Note 2 Note 2

Note 1: Subsidiary of the Company. Note 2: Indirect subsidiary of the Company.

Table 5, Page1

Microelectronics Technology, Inc.

Information on investees in Mainland China Year ended December 31, 2018

Table 6

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 January1,2018	Amount remitted from Taiwan to Mainland China / Amount remitted back to Taiwan for the year ended December 31,2018	Amount remitted from Taiwan to Mainland China / Amount remitted back to Taiwan for the year ended December 31,2018	Accumulated amount of remittance from Taiwan to Mainland China as of December 31, 2018	Net income of investee for the year ended December 31, 2018	Ownership held by the Company (direct or indirect)	Investment income (loss) recognised by the Company for the year ended December 31, 2018 (Note 3)	Book value of investments in Mainland China as of December 31,2018	Accumulated amount of investment income remitted back to Taiwan as of December 31,2018	Note
					Remitted to Mainland China	Remitted back to Taiwan
JUPITER TECHNOLOGY (WUXI) INC (Note 1) Nanjing Dongda Kuandai Communication Technology Limited Company (Note 2)	Manufacture and sales of satellite and microwave communication system and related technical and consultation services WCDMA technology and base station and radio frequency subsystem	952,165 $ -	Through investing in an existing company in the third area, which then invested in the investee in Mainland China. Through investing in an existing company in the third area, which then invested in the investee in Mainland China.	952,165 $ 121,939	$ - -	$ - -	952,165 $ 121,939	29,028 $ -	100 -	29,028 $ -	1,019,975 $ -	$ - -	- -

Companyname	Accumulated amount of remittance from Taiwan to Mainland China as of December31,2018	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
Microelectronics Technology, Inc.	$ 1,074,104	$ 1,198,131	$ 1,655,734

Note 1: It was indirectly invested through Jupiter Network Corp.

Note 2: It was indirectly invested through SASSON INTERNATIONAL HOLDING, INC. and was liquidated during the year ended December 31, 2018. Note 3: Investment profit or loss was recognised based on the financial statements that were audited by R.O.C. parent company’s CPA.

Table 6, Page1

Microelectronics Technology, Inc.

Significant transactions conducted with investees in Mainland China directly or indirectly through other companies in the third areas

Year ended December 31, 2018

Table 7

Expressed in thousands of NTD (Except as otherwise indicated)

Provision of

							Provision of	Provision of
Investeein Mainland China	Sale (purchase)		Property transaction		Accountsreceivable (payable)		endorsements/guarantees or collaterals			Financing			Others (Note)
	Amount	%	Amount	%	Balance	%	Balance at December 31, 2018	Purpose	Maximum balance during the year ended December31,2018	Balance at December 31, 2018	Interestrate	Interest during the year ended December 31, 2018
JUPITER TECHNOLOGY (WUXI) INC	($ 4,333,797)	-	$ 2,961	-	($ 641,658)	35	$ -	-	$ -	$ -	-	$ -	($ 87,966)

Note: It consisted of other receivables amounting to $9,748 and other current liabilities amounting to $97,714.

Table 7, Page1

MICROELECTRONICS TECHNOLOGY INC. STATEMENT OF CASH AND CASH EQUIVALENTS DECEMBER 31, 2018

Item

Item

Cash on hand and revolving funds -NTD USD 3,250 dollars，exchange rate 30.72 Deposits in transit-USD USD 1,198,643 dollars，exchange rate 30.72 Checking accounts-NTD Demand deposits-NTD 活期存款-RMB CNY 14,184,110 dollars，exchange rate 4.4753 活期存款-EUR EUR 1,003,205 dollars，exchange rate 35.2 活期存款-USD USD 2,074,638 dollars，exchange rate 30.72 活期存款-GBP GBP 95,822 dollars，exchange rate 38.88 活期存款-JPY JPY 14,184,110 dollars，exchange rate 0.2782 Time deposits(Notes) NTD

(Note) Expiration date ： 2019/1/1~2019/3/28, Rate: 0.59%~0.66% 。

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MICROELECTRONICS TECHNOLOGY INC. STATEMENT OF ACCOUNTS RECEIVABLE DECEMBER 31, 2018

(In Thousands of New Taiwan Dollars)

Name of the clients Amount General customers： Company A 474,913 $ Company G 294,824 Company B 236,524 Company D 93,826 Others 245,201 1,345,288 Less: Bad provision 1,242) ( 1,344,046 Related Parties： MTI Laboratory, Inc. 191 CyberTAN Technology Inc. 14,524 1,358,761 $	Note
	None of the individual customer's owing balance exceeding 5% of the ending balance of this account. Aging over one year is amounted to $4,485

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MICROELECTRONICS TECHNOLOGY INC. STATEMENT OF INVENTORIES

DECEMBER 31, 2018

(In Thousands of New Taiwan Dollars)

MICROELECTRONICS TECHNOLOGY INC. STATEMENT OF INVENTORIES DECEMBER 31, 2018 (In Thousands	of New Taiwan
Cost Net realisable value Raw material 363,898 $ 354,741 $ Work in progress 147,269 147,060 Finished goods 330,157 416,582 Inventory in transit 298 298 841,622 918,681 $ Less : allowance for inventory valuation losses 129,476) ( 712,146 $ Item Amount	Note

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MICROELECTRONICS TECHNOLOGY INC. STATEMENT OF CHANGE IN INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD FOR THE YEAR ENDED DECEMBER 31, 2018

(In Thousands of New Taiwan Dollars)

Name		Percentage of ownership Amount Decrease 100.00% 1,616,466 $ 3,275) ($ Balance as of January1,2018		Share of profit of associates accounted for under equity		Currency translation		Percentage of ownership Amount 100.00% 1,662,473 $ Balance as of December 31,2018	Net Equity 1,662,473 $	Valuation Method	Collateral or pledge
		Percentage of ownership 100.00%						Percentage of ownership 100.00%
Sasson International Holding Inc.				49,087 $		195 $				Equity Method	None

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MICROELECTRONICS TECHNOLOGY INC.

SHORT-TERM BANK LOANS DECEMBER 31, 2018

Description	Creditor		Amount	Period	Range of Interest	Loan	(In Collaterial None None
			229,562 $ 216,591 446,153 $	120 days 180 days	3.60% 3.22%	$ 368,580 245,720

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MICROELECTRONICS TECHNOLOGY INC. STATEMENT OF ACCOUNTS PAYABLE DECEMBER 31, 2018

(In Thousands of New Taiwan Dollars)

Supplier General Supplier: Company B Company S Companyr M Company F Company A Others Related parties: Jupiter Technology(Wuxi)Co.,Ltd CyberTAN Technology Inc.?	Amount 69,636 $ 61,856 51,798 46,441 38,463 170,310 438,504 641,661 229 1,080,394 $	Note
		None of the individual supplier's balance exceeding 5% of the ending balance of this account

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MICROELECTRONICS TECHNOLOGY INC. STATEMENT OF OTHER PAYABEL DECEMBER 31, 2018

(In Thousands of New Taiwan Dollars)

Item Other payables： Employee benefit payable Export payment Equipment payable Commission payble Repair payment Others Related parties: Technical service payable	Amount 92,973 $ 78,858 16,307 14,413 13,689 53,393 269,633 118,716 388,349 $	Note
		None of the individual item's balance exceeding 5% of the ending balance of this account

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MICROELECTRONICS TECHNOLOGY INC. STATEMENT OF REVENUE DECEMBER 31, 2018

(In Thousands of New Taiwan Dollars)

Item Satelite communication product Terrestrial microwave product Total operating revenue Less: Sales returns Sales discount and Operating revenue, net	Quantity(in thousands) Amount 11,384 5,875,046 $ 4,413 1,252,704 7,127,750 1,608) ( 2,049) ( 7,124,093 $	Note

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MICROELECTRONICS TECHNOLOGY INC. STATEMENT OF COST OF REVENUE DECEMBER 31, 2018

(In Thousands of New Taiwan Dollars)

Item		Amount
Raw material at January 1, 2018	$	197,892
Add : Raw material purchase		1,246,303
Less : Scrap of raw material	(	3,604)
Raw material overage	(	3)
Raw material sold	(	181)
Raw material at Decmeber 31, 2018 (including inventory in transit)	(	364,196)
Consumption of raw material for the year		1,076,211
Direct labor		31,044
Manufacturing expenses		154,655
Manufacturing costs of the year		1,261,910
Add : Work in progress at January 1, 2018		66,828
Work in progress purchase		116,940
Less : Scrap of work in progress	(	11,568)
Work in process at December 31, 2018	(	147,269)
Cost of finished goods		1,286,841
Add : Finished goods at January 1, 2018		291,959
Finished goods purchase		4,921,458
Transferred from expenses		16,348
Less : Scrap of finished goods	(	5,927)
Transfer o expenses	(	17,054)
Finished goods at December 31, 2018	(	330,157)
Cost of goods sold		6,163,468
Additional provisions		2,369
Loss on decline in market value		55,153
Service cost		24,294
Raw material sold		181
Raw mateiral overage		3
Operating cost	$	6,245,468

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MICROELECTRONICS TECHNOLOGY INC. STATEMENT OF MANUFACTURING EXPENSES DECEMBER 31, 2018

Item Indirect labor cost Rent expenses Other expenses	(In Thousands of New Taiwan Dollars) Amount Note 69,860 $ 15,651 69,144 None of the individual item exceeds 5% of this account 154,655 $

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MICROELECTRONICS TECHNOLOGY INC. STATEMENT OF OPERATING EXPENSES DECEMBER 31, 2018

Item Selling expenses : Shipping expenses Commision Salaries and wages Others General and administrative expenses : Salaries and wages : Services fees Stock services expenses Labor and health insurance Others Research and development expesnes : Technical supporting expenses : Salaries and wages : Others	(In Thousands of New Taiwan Dollars) Amount Note 127,598 $ 41,818 46,457 40,379 None of the individual item exceeds 5% of this account 256,252 $ 34,738 $ 7,179 3,780 2,959 10,961 None of the individual item exceeds 5% of this account 59,617 $ 289,327 $ 207,520 112,810 None of the individual item exceeds 5% of this account 609,657 $

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MICROELECTRONICS TECHNOLOGY INC. LABOR, DEPRECIATION AND AMORTISATION BY FUNCTION FOR THE YEARS ENDED DECEMBER 31, 2018 and 2017

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(In Thousands of New Taiwan Dollars)
By function 2018 2017
Classified as costs Classified as Classified as costs Classified as
Total Total
By nature of revenue operating expenses of revenue operating expenses
Employee benefit expense
Salaries $ 94,088 $ 288,715 $ 382,803 $ 105,781 $ 318,170 $ 423,951
Labor and health 7,912 24,538 32,450 8,175 24,392 32,567
Directors' remuneration - 3,155 3,155 - 4,314 4,314
Pension 5,200 16,130 21,330 5,556 16,578 22,134
Other personnel 2,748 10,129 12,877 2,998 9,368 12,366
Depreciation 7,380 10,180 17,560 14,438 11,182 25,620
Amortisation 3,837 10,920 14,757 3,111 10,970 14,081
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Note : As of December 31, 2018 and 2017, the Company had 354 and 377 employees, including 5 directors, respectively.

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