MTI — Audit Report / Information 2019

Nov 13, 2019

MICROELECTRONICS TECHNOLOGY,

INC.

PARENT COMPANY ONLY FINANCIAL

STATEMENTS AND REPORT OF INDEPENDENT

ACCOUNTANTS

DECEMBER 31, 2019 AND 2018

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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.

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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, 2019 and 2018, 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, 2019 and 2018, 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, 2019 are stated as follows:

Intangible assets - assessment of goodwill impairment

Description

As of December 31, 2019, goodwill amounted to NT$ 143,637 thousand. For information on evaluation of goodwill impairment, please refer to Note 6(11), 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, 2020 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, 2019, the balances of inventories and allowance for inventory valuation losses amounted to NT$639,960 thousand and NT$60,208 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 December 31, 2019 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 17, 2020

------------------------------------------------------------------------------------------------------------------------------------------------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 DECEMBER 31, 2019 AND 2018

(Expressed in thousands of New Taiwan dollars)

Assets	Notes 6(1) 6(2) 6(4) 6(5) 6(5) 6(5) and 7 7 6(6) 6(3) 6(7) 6(8) 6(9) 6(10) 6(28)	December31,2019 AMOUNT % $ 710,701 15 2,671 - - - 9,024 - 860,915 19 6,844 - 702 - 4,703 - 579,752 12 25,391 1 2,200,703 47 9,276 - 1,622,226 35 93,334 2 219,392 5 163,085 3 365,989 8 3,009 - 2,476,311 53 $ 4,677,014 100	December31,2018	December31,2018
		AMOUNT $ 710,701 2,671 - 9,024 860,915 6,844 702 4,703 579,752 25,391 2,200,703 9,276 1,622,226 93,334 219,392 163,085 365,989 3,009 2,476,311 $ 4,677,014	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	%
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 11XX Total current assets Non-current assets 1517 Financial assets at fair value through other comprehensive income - non- current 1550 Investments accounted for under equity method 1600 Property, plant and equipment 1755 Right-of-use assets 1780 Intangible assets 1840 Deferred income tax assets 1900 Other non-current assets 15XX Total non-current assets 1XXX Total assets				12 - 1 2 26 - - - 14 1
				56
				- 32 2 - 3 7 -
				44
				100

(Continued)

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MICROELECTRONICS TECHNOLOGY, INC. PARENT COMPANY ONLY BALANCE SHEETS DECEMBER 31, 2019 AND 2018

(Expressed in thousands of New Taiwan dollars)

Liabilities and Equity

December31,2019 December31,2018 Notes AMOUNT % AMOUNT % 6(12) $ 396,748 8 $ 446,153 9 6(13) 273 - 95 - 6(22) 55,771 1 7,519 - 427,940 9 438,504 9 7 289,741 6 641,890 13 6(14) 209,074 4 269,633 5 7 76,020 2 118,716 2 6(17) 2,017 - 16,166 - 6(32) 22,708 1 - - 7 33,166 1 109,111 2 1,513,458 32 2,047,787 40 6(15) 125 - - - 6(17) 500 - 1,622 - 6(28) 102,055 2 106,562 2 6(32) 198,799 4 - - 6(16) 206,622 5 212,739 4 508,101 11 320,923 6 2,021,559 43 2,368,710 46 6(18) 2,280,283 49 2,280,283 45 6(19) 402,937 9 402,937 8 6(20) 24,972 - 19,761 - 193,426 4 83,446 2 2,413 - 166,556 3 6(21) ( 248,576) ( 5) ( 193,426) ( 4 ) 2,655,455 57 2,759,557 54 8 10 $ 4,677,014 100 $ 5,128,267 100

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 2280 Current lease liabilities 2300 Other current liabilities 21XX Total current liabilities Non-current liabilities 2540 Long-term borrowings 2550 Provisions for liabilities - non-current 2570 Deferred income tax liabilities 2580 Non-current lease 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 YEARS ENDED DECEMBER 31, 2019 AND 2018

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

Items

YearendedDecember31 2019 2018 Notes AMOUNT % AMOUNT % 6(22) and 7 $ 4,922,305 100 $ 7,124,093 100 6(6) and 7 ( 4,144,412 ) ( 84) ( 6,245,468) ( 88 ) 777,893 16 878,625 12 6(26)(27) and 7 ( 282,752 ) ( 6) ( 256,252) ( 4 ) ( 62,520 ) ( 1) ( 59,617) ( 1 ) ( 480,676 ) ( 10) ( 609,657) ( 8 ) ( 40 ) - ( 6) - ( 825,988 ) ( 17) ( 925,532) ( 13 ) ( 48,095 ) ( 1) ( 46,907) ( 1 ) 6(23) 41,240 1 56,339 1 6(24) and 7 4,288 - 18,329 - 6(25) ( 17,285 ) - ( 16,139) - 6(7) 21,536 - 49,087 - 49,779 1 107,616 1 1,684 - 60,709 - 6(28) - - ( 8,600) - $ 1,684 - $ 52,109 - 6(16) ( $ 7,925 ) - ($ 13,957) - 6(3) 1,477 - ( 1,685) - 6(7) ( 8,596 ) - ( 1,553) - 6(7) ( 56,420 ) ( 1) 195 - 6(28) 11,284 - ( 36) - ( $ 60,180 ) ( 1) ($ 17,036) - ( $ 58,496 ) ( 1) $ 35,073 - 6(29) $ 0.01 $ 0.23 6(29) $ 0.01 $ 0.23

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 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 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 YEARS ENDED DECEMBER 31, 2019 AND 2018

(Expressed in thousands of New Taiwan dollars)

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 (loss) 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 2019 Balance at January 1, 2019 Profit for the year Other comprehensive loss for the year Total comprehensive loss Appropriation of 2018 earnings Legal reserve Special reserve Cash dividends Disposal of financial assets at fair value through other comprehensive income (loss) Balance at December 31, 2019	Notes		Share capital - commonstock	Capital surplus, additional paid- incapital	Capital surplus, additional paid- incapital		RetainedEarnings	RetainedEarnings	RetainedEarnings	RetainedEarnings	Otherequityinterest	Otherequityinterest	Otherequityinterest		Totalequity
							Legal reserve	Special reserve		Unappropriated retained earnings	Financial statements translation differences of foreign operations	Unrealised gains (losses) from financial assets measured at fair value through other comprehensive income	Unrealized gain or loss on available-for- sale financial assets
	3(1) 6(3) 6(20) 6(3) 6(3) 6(20) 6(3)		$ 2,280,283 - 2,280,283 - - - - - - - $ 2,280,283 $ 2,280,283 - - - - - - - $ 2,280,283		$ 402,937 - 402,937 - - - - - - - $ 402,937 $ 402,937 - - - - - - - $ 402,937		$ 5,372 - 5,372 - - - 14,389 - - - $ 19,761 $ 19,761 - - - 5,211 - - - $ 24,972		$ 21,052 - 21,052 - - - - 62,394 - - $ 83,446 $ 83,446 - - - - 109,980 - - $ 193,426	$ 143,892 106,011 249,903 52,109 ( 13,957 ) 38,152 ( 14,389 ) ( 62,394 ) ( 45,606 ) 890 $ 166,556 $ 166,556 1,684 ( 7,925 ) ( 6,241 ) ( 5,211 ) ( 109,980 ) ( 45,606 ) 2,895 $ 2,413	($ 59,093 ) - ( 59,093 ) - 159 159 - - - - ($ 58,934 ) ($ 58,934 ) - ( 45,136 ) ( 45,136 ) - - - - ($ 104,070 )	$ - ( 130,364 ) ( 130,364 ) - ( 3,238 ) ( 3,238 ) - - - ( 890 ) ($ 134,492 ) ($ 134,492 ) - ( 7,119 ) ( 7,119 ) - - - ( 2,895 ) ($ 144,506 )	($ 24,353 ) 24,353 - - - - - - - - $ - $ - - - - - - - - $ -	$ 2,770,090 - 2,770,090 52,109 ( 17,036 ) 35,073 - - ( 45,606 ) - $ 2,759,557 $ 2,759,557 1,684 ( 60,180 ) ( 58,496 ) - - ( 45,606 ) - $ 2,655,455

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 YEARS ENDED DECEMBER 31, 2019 AND 2018

(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 Depreciation Amortization Net (gain) loss on financial assets at fair value through profit or loss Net loss (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 Changes in operating assets and liabilities Changes in operating assets Notes receivable Accounts receivable Accounts payable－related parties Other payables 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 Other current liabilities Accrued pension liabilities Cash inflow generated from operations Interest received Dividend received Interest paid Income taxes paid Net cash flows from operating activities

Notes Year ended December 31 2019 2018 $ 1,684 $ 60,709 40 6 6(8)(26) 47,282 17,560 6(10)(26) 15,473 14,757 6(2)(24) ( 2,288 ) 1,307 6(24) 178 ( 3,734 ) 6(23) ( 3,974 ) ( 4,083 ) 6(23) ( 342 ) ( 556 ) 6(25) 17,285 16,139 6(24) ( 7,039 ) ( 4,889 ) 6(7) ( 21,536 ) ( 49,087 ) 59,338 ( 59,082 ) 483,091 42,644 7,871 ( 14,673 ) 2,634 103,527 5,834 60,172 132,394 ( 250,891 ) 20,817 ( 32,659 ) ( 10,564 ) ( 490 ) ( 352,149 ) 264,509 ( 64,135 ) 27,174 ( 35,249 ) 28,040 ( 15,271 ) ( 4,301 ) 48,252 4,012 ( 75,945 ) ( 44,996 ) ( 14,042 ) ( 16,779 ) 239,639 154,336 3,958 4,146 342 556 ( 12,123 ) ( 15,929 ) ( 1,353 ) ( 143 ) 230,463 142,966

(Continued)

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MICROELECTRONICS TECHNOLOGY, INC. PARENT COMPANY ONLY STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2019 AND 2018

(Expressed in thousands of New Taiwan dollars)

CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from disposal of 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 Acquisition of intangible assets Increase in guarantee deposits paid Decrease in guarantee deposits paid 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 Proceeds ofrom long-term borrowings Repayments of principal portion of lease liabilities Cash dividends paid Net cash flows used in financing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year

Notes Year ended December 31 2019 2018 6(4) $ 20,930 ($ 20,930 ) 6(31) ( 39,834 ) ( 44,404 ) 3,819 6,675 6(3) 5,953 1,934 6(10) ( 21,006 ) ( 7,556 ) - ( 2,109 ) 2,810 - - 21,916 ( 27,328 ) ( 44,474 ) 1,958,921 2,980,964 ( 2,008,326 ) ( 3,041,783 ) 125 - ( 27,138 ) - 6(20) ( 45,606 ) ( 45,606 ) ( 122,024 ) ( 106,425 ) 81,111 ( 7,933 ) 629,590 637,523 $ 710,701 $ 629,590

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 2019 AND 2018

(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 CONSOLIDATED FINANCIAL STATEMENTS AND PROCEDURES FOR AUTHORISATION

These financial statements were authorised for issuance by the Board of Directors on March 17, 2020.

3. APPLICATION OF NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS

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

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

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

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

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• B. The Company has elected to apply IFRS 16 by not restating the comparative information (referred herein as the ‘modified retrospective approach’) when applying “IFRSs” effective in 2019 as endorsed by the FSC. Accordingly, the Company increased ‘right-of-use asset’ by $248,243, and increased ‘lease liability’ by $248,243 on January 1, 2019.

• C. The Company has used the following practical expedients permitted by the standard at the date of initial application of IFRS 16:

• (a) Reassessment as to whether a contract is, or contains, a lease is not required, instead, the application of IFRS 16 depends on whether or not the contracts were previously identified as leases applying IAS 17.

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

• (c) The accounting for operating leases whose period will end before December 31, 2019 as shortterm leases and accordingly, rent expense of $9,037 was recognised in 2019.

• D. The Company calculated the present value of lease liabilities by using the weighted average incremental borrowing interest rate range from 2%.

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

==> picture [447 x 132] intentionally omitted <==

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

Operating lease commitments disclosed by applying IAS 17 as at
December 31, 2018 $ 41,454
Add: Adjustments as a result of a different treatment of
extension options 234,906
Total lease contracts amount recognised as lease liabilities by applying
IFRS 16 on January 1, 2019 276,360
Incremental borrowing interest rate at the date of
initial application 2%
Lease liabilities recognised as at January 1, 2019 by applying IFRS 16 $ 248,243
----- End of picture text -----

(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 2020 are follows:

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Effective date by International Accounting New Standards, Interpretations and Amendments Standards Board Amendment to IAS 1 and IAS 8, ‘Disclosure Initiative-Definition January 1, 2020 of Material’ Amendments to IFRS 3, ‘Definition of a business’ January 1, 2020 Amendments to IFRS 9, IAS 39 and IFRS7 ,‘Interest rate January 1, 2020 benchmark reform’

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.

(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:

	Effective date by
	International Accounting
New Standards,Interpretations and Amendments	Standards Board
Amendments to IFRS 10 and IAS 28, ‘Sale or contribution of assets	To be determined by
between an investor and its associate or joint venture’	International Accounting
	Standards Board
IFRS 17, ‘Insurance contracts’	January 1, 2021
Amendments to IAS 1, ‘Classification of liabilities as current or non-	January 1, 2022
current’

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 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.

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

• (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 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

~17~

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 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

~18~

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.

• (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

~19~

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 labour, 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 / associates

• 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.

• 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

~20~

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:

are as follows:
Machinery and equipment	3 ~ 6 years
Office equipment	2 ~ 6 years
Transportation equipment	5 years
Leasehold improvements	3 years

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

Effective 2019

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

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

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

• C. At the commencement date, the right-of-use asset is stated at cost comprising including the amount of the initial measurement of lease liability and any initial direct costs incurred by the lessee.

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

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(16) Operating leases (lessee)

Prior to 2019

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

(17) Intangible assets

• A. Computer software 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.

• (18) 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.

• 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.

• (19) Borrowings

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

(20) 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

~22~

as the effect of discounting is immaterial.

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

• A. Financial liabilities are classified in this category of held for trading if acquired principally for the purpose of repurchasing in the short-term. 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.

(22) Derecognition of financial liabilities

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

(23) 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.

• (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.

• (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

~23~

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.

• (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

~24~

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 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 customized 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

~25~

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.

• 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.

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• (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(10) (11) for the information on goodwill impairment.

As of December 31, 2019, the Company’s property, plant and equipment and intangible assets (including goodwill) amounted to $93,334 and $163,085, 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, 2019, the Company recognised deferred tax assets amounting to $365,989.

• C. Evaluation of inventories

• As inventories are stated at the lower of cost and net realisable value, the Company must determine 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, 2019, the carrying amount of inventories was $579,752.

• 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, 2019, the carrying amount of net defined benefit liabilities was $206,622.

• 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

~27~

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 11(3) for the financial instruments fair value information.

As of December 31, 2019, the carrying amount of unlisted stocks without active market was $9,276.

6. DETAILS OF SIGNIFICANT ACCOUNTS

(1) Cash and cash equivalents

Cash on hand and revolving funds Deposits in transit Checking accounts and demand deposits Time deposits	December 31, 2019 December 31, 2018 234 $ 130 $ - 36,816 357,367 341,444 353,100 251,200 710,701 $ 629,590 $

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.

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

Financial assets at fair value through profit or loss
Items Current items: Financial assets mandatorily measured at fair value through profit or loss Derivative instruments	December 31,2019 2,671 $	December 31,2018
		383 $

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

Financial assets mandatorily measured at fair value through profit or loss Derivative instruments	Year ended December31,2019 Year ended December31,2018 2,288 $ 1,307) ($	Year ended December31,2018

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

~28~

					Unit:	In thousands
		December 31,	2019		December 31,	2018
	Contract amount		Contract	Contract amount		Contract
Derivative instruments	(Notional principal)		period	(Notional principal)		period
Current items:
Foreign exchange swap transactions	USD	5,000	2019.12.11~ 2020.01.15	USD	5,000	2018.12.12~ 2019.02.15
Forward foreign	USD	2,000	2019.12.13~		-	-
exchange contracts			2020.01.22

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 is provided in Note 11(2).

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

Items	December	31,2019	December	31,2018
Non-current items：
Equity instruments
Emerging stocks	$	-	$	3,060
Unlisted stocks		25,000		25,000
Valuation adjustments	(	15,724)	(	14,307)
	$	9,276	$	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 $9,276 and $13,753 as at December 31, 2019 and 2018, respectively.

• B. For the years ended December 31, 2019 and 2018, the Company sold emerging stocks with carrying amounts of $3,058 and $1,044, respectively, and the accumulated gain on disposal of investments amounted to $2,895 and $890, respectively.

• 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:

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Year ended December 31, 2019 Year ended December 31, 2018

==> picture [486 x 241] intentionally omitted <==

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

Equity instruments at fair
value through other
comprehensive income
Fair value change recognised
in other comprehensive
(loss) income
$ 1,477 ($ 1,685)
Cumulative gains
reclassified to retained
earnings due to
derecognition $ 2,895 $ 890
Financial assets at amortised cost
Items December 31, 2019 December 31, 2018
Current items:
-
Time deposits $ $ 20,930
----- End of picture text -----

(4) Financial assets at amortised cost

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

Interest income	Year ended December31,2019 Year ended December 31, 2018 18 $ 309 $

B. As at December 31, 2019 and 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 $0 and $20,930, respectively.

• C. Information relating to credit risk of financial assets at amortised cost is provided in Note 11(2).

• (5) Notes and accounts receivable

Notes and accounts receivable
	December	31,2019	December	31,2018
Notes receivable	$	9,024	$	68,362
Less: Allowance for uncollectible accounts		-		-
	$	9,024	$	68,362
Accounts receivable	$	862,168	$	1,345,288
Accounts receivable - related party		6,844		14,715
Less: Allowance for uncollectible accounts	(	1,253)	(	1,242)
	$	867,759	$	1,358,761

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

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Not past due Up to 90 days 91 to 180 days Over 180 days	Accounts receivable Notes receivable 650,739 $ 9,024 $ 145,858 - 20,937 - 51,478 - 869,012 $ 9,024 $ December 31,2019	December 31,2018	December 31,2018
	Accounts receivable 650,739 $ 145,858 20,937 51,478 869,012 $	Accounts receivable 1,208,198 $ 147,195 125 4,485 1,360,003 $	Notes receivable
			68,362 $ - - -
			68,362 $

The above ageing analysis was based on past due date, overdue receivable of $197,447 in 2019 has been recovered after the end of December 31, 2019.

• B. As of December 31, 2019 and 2018, accounts receivable and notes receivable were all from contracts with customers. And as of January 1, 2018, the balance of receivables from contracts with customers amounted to $1,396,018.

• C. As of December 31, 2019 and 2018, 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 $9,024 and $68,362, respectively. As of December 31, 2019 and 2018, the maximum exposure to credit risk in respect of the amount that best represents the Company’s accounts receivable were $867,759 and $1,358,761, respectively.

• D. Information relating to credit risk of accounts and notes receivable is provided in Note 11(2).

• (6) Inventories

December 31, 2019

Raw materials Work in progress Finished goods	Cost 374,512 $ 117,134 148,314 639,960 $	Allowance for inventory valuation losses 29,959) ($ 12,421) ( 17,828) ( 60,208) ($	Book value
			344,553 $ 104,713 130,486
			579,752 $

December 31, 2018

Raw materials Work in progress Finished goods Inventory in transit	Cost 363,898 $ 147,269 330,157 298 841,622 $	Allowance for inventory valuation losses 35,970) ($ 40,590) ( 52,916) ( - 129,476) ($	Book value
			327,928 $ 106,679 277,241 298
			712,146 $

The cost of inventories recognised expense for the year:

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(7)

Investments accounted for using equity method 2019 2018 Cost of goods sold 4,144,506 $ 6,190,315 $ Loss on decline in market value 94) ( 55,153 Recognised as selling and R&D expenses 11,888 17,720 4,156,300 $ 6,263,188 $ Years ended December 31, December31,2019 December31,2018 Subsidiary-Sasson International Holding Inc. 1,622,226 $ 1,662,473 $ 2019 2018 At January 1 1,662,473 $ 1,616,466 $ Share of profit or loss of investments accounted for using equity method 21,536 49,087 Unrealized gain (loss) 3,233 1,722) ( Changes in other equity item-unrealized gain (loss) on financial assets 8,596) ( 1,553) ( Currency exchange 56,420) ( 195 At December 31 1,622,226 $ 1,662,473 $

For information on 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, 2019.

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2019

(8) Property, plant and equipment

										Unfinished
										construction and
		Machinery and				Transportation		Leasehold		equipment under
		equipment		Office equipment		equipment		improvements		acceptance			Total
At January 1
Cost	$	777,959	$	53,275	$	389	$	2,942	$	6,190		$	840,755
Accumulated depreciation
and impairment	(	714,719)	(	43,917)	(	389)	(	976)			-	(	760,001)
	$	63,240	$	9,358	$	-	$	1,966	$	6,190		$	80,754
At January 1	$	63,240	$	9,358	$	-	$	1,966	$	6,190		$	80,754
Additions		25,535		2,138		-		6,908			918		35,499
Disposals	(	12)	(	2)		-		-			-	(	14)
Reclassifications		6,190		-		-		-	(	6,190)			-
Depreciation expense	(	14,675)	(	4,948)		-	(	3,282)			-	(	22,905)
At December 31	$	80,278	$	6,546	$	-	$	5,592	$		918	$	93,334
At December 31
Cost	$	701,975	$	55,411	$	389	$	9,850	$		918	$	768,543
Accumulated depreciation
and impairment	(	621,697)	(	48,865)	(	389)	(	4,258)			-	(	675,209)
	$	80,278	$	6,546	$	-	$	5,592	$		918	$	93,334

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2018

2018
Machinery and Transportation Leasehold equipment Office equipment equipment improvements At January 1 Cost 872,032 $ 47,358 $ 389 $ 1,371 $ Accumulated depreciation and impairment 833,098) ( 40,690) ( 389) ( 343) ( 38,934 $ 6,668 $ - $ 1,028 $ 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 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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－ (9) Leasing arrangements lessee

Effective 2019

• A. The Company leases buildings. Rental contracts are typically made for 10 years. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions.

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

	December 31,2019	Year ended December 31, 2019
	Carryingamount	Depreciation charge
Buildings	$ 219,392	$24,377

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

Items affecting profit or loss Interest expense on lease liabilities Expense on short-term lease contracts Expense on leases of low-value assets	Year ended December 31,2019
	$ 4,875 9,037 3,122

• D. For the year ended December 31, 2019, the Company’s total cash outflow for leases was $44,172.

• E. Extension and termination options

• In determining the lease term, the Group takes into consideration all facts and circumstances that create an economic incentive to exercise an extension option or not to exercise a termination option. The assessment of lease period is reviewed if a significant event occurs which affects the assessment.

(10) Intangible assets

2019

	2019
At January 1 Cost Accumulated amortisation At January 1 Additions Amortisation charge At December 31 At December 31 Cost Accumulated amortisation	Acquired special Goodwill technology Computer sofware Total 143,637 $ 404,895 $ 329,185 $ 877,717 $ - 404,895) ( 315,270) ( 720,165) ( 143,637 $ - $ 13,915 $ 157,552 $ 143,637 $ - $ 13,915 $ 157,552 $ - - 21,006 21,006 - - 15,473) ( 15,473) ( 143,637 $ - $ 19,448 $ 163,085 $ 143,637 $ 404,895 $ 349,674 $ 898,206 $ - 404,895) ( 330,226) ( 735,121) ( 143,637 $ - $ 19,448 $ 163,085 $	Total
		163,085 $

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At January 1 Cost Accumulated amortisation At January 1 Additions Amortisation charge At December 31 At December 31 Cost Accumulated amortisation	Acquired special Goodwill technology Computer sofware Total 143,637 $ 404,895 $ 321,682 $ 870,214 $ - 404,895) ( 300,566) ( 705,461) ( 143,637 $ - $ 21,116 $ 164,753 $ 143,637 $ - $ 21,116 $ 164,753 $ - - 7,556 7,556 - - 14,757) ( 14,757) ( 143,637 $ - $ 13,915 $ 157,552 $ 143,637 $ 404,895 $ 329,185 $ 877,717 $ - 404,895) ( 315,270) ( 720,165) ( 143,637 $ - $ 13,915 $ 157,552 $ 2018

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

		Years ended	December31,	December31,
		2019		2018
Operating costs	$	4,531	$	3,837
Research and development expenses		10,942		10,920
	$	15,473	$	14,757

(11) 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	Up to 1 year 2 ~ 5 years 14% 15% 15% 15% 14.41% 14.41% 2019	Over 6 years 0% 15% 14.41%		2018
			Up to 1 year	2~5 years	Over 6 years
			9% 14% 15.71%	9% 14% 15.71%	0% 14% 15.71%

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

• B. Gross margin: calculated based on the historical data and took 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.

(12) Short-term borrowings

Type of borrowings Bank borrowings Borrowings for material purchase Type of borrowings Bank borrowings Borrowings for material purchase	December 31,2019 396,748 $ December 31,2018 446,153 $	Interest rate range Collateral 2.39%~2.74% None Interest rate range Collateral 3.22%~3.60% None

For the years ended December 31, 2019 and 2018, the Company recognised interest expense in profit or loss amounting to $12,410 and $16,139, respectively.

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

Items	December31,2019	December31,2018
Current items:
Financial liabilities held for trading
Non-hedging derivatives	273 $	95 $

• A. For the years ended December 31, 2019 and 2018, the Company recognised net gain on finanical liabilities held for trading amounting to ($178) and $3,734, respectively.

• 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

		December	31,2019		December	31,2018
Non-derivative financial	Contract amount			Contract amount
liabilities for hedging	(Notional principal)		Contractperiod	(Notional principal)		Contract period
Current items:
Foreign exchange swap	USD	800	2019.12.11~	USD	2,500	2018.12.13~
transactions			2020.01.15			2019.01.17

• 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.

(14) Other payables

under hedge accounting. Other payables
Employee bonus payable Accrued export expenses Payables for machinery and equipment Accrued repairs and maintenance expense Payables for consulting service fees Others	December 31,2019 94,489 $ 30,746 12,150 13,565 10,372 47,752 209,074 $	December 31, 2018
		92,973 $ 78,858 16,307 13,689 7,397 60,409
		269,633 $

- (15) Long term borrowings

Borrowing period Type of borrowings and repayment term Interest rate range Collateral December 31, 2019 Long-term bank borrowings Mega bank Borrowing period is 1.20% None. $ 125 from December 23, 2019 to December 25, 2025; interest is repayable monthly. - Less: Current portion $ 125

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On December 31, 2018: None.

(16) 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. 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 be 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	31,2019	December 31, 2018
Present value of defined benefit obligations	$	295,022	304,736 $
Fair value of plan assets	(	88,400)	91,997) (
Net defined benefit liability	$	206,622	212,739 $

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

At January 1 Current service cost Interest (expense) income Remeasurements: Return on plan assets (excluding amounts included in interest income or expense) Change in financial assumptions Experience adjustments Pension fund contribution Paid pension At December 31			2019
	Present value of define Fair value of Net defined benefit obligations plan assets benefit liability 304,736) ($ 91,997 $ 212,739) ($ 1,279) ( - 1,279) ( 2,743) ( 828 1,915) ( 308,758) ( 92,825 215,933) ( - 3,440 3,440 5,623) ( - 5,623) ( 5,742) ( - 5,742) ( 11,365) ( 3,440 7,925) ( - 8,899 8,899 25,101 16,764) ( 8,337 295,022) ($ 88,400 $ 206,622) ($

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	Present value of define	Present value of define		Fair value of 2018		Net defined
		benefit obligations		plan assets		benefit liability
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)

(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, 2019 and 2018 is given in the Annual Labor Retirement Fund Utilisation Report announced by the government.

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

Discount rate Future salary increases	Years ended December 31,	Years ended December 31,
	2019 0.70% 2.00%	2018
		0.90%
		2.00%

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

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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, 2019 Effect on present value of defined benefit 28,024) ($ 29,000 $ December 31, 2018 Effect on present value of defined benefit 29,548) ($ 30,616 $ Discount rate	Increase 1% Decrease 1% 25,736 $ 25,044) ($ 27,380 $ 26,612) ($ Future salary increases

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, 2020 amount to $3,516.

• (g) As of December 31, 2019, 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, 2019 and 2018 were $16,985 and $17,429 respectively.

(17) Provisions

Provisions
		2019			2018
Balance at January 1	$		17,788	$		22,089
Additional provisions			2,183			2,369
Used during the year	(		4,106)	(		6,670)
Unused amounts reversed	(		13,348)			-
Balance at December 31	$		2,517	$		17,788
Analysis of total provisions:

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Current Non-current	December 31,2019 2,017 $ 500 $	December 31,2018
		16,166 $
		1,622 $

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.

(18) Share capital

• A. As of December 31, 2019, 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:

At January 1 (At December 31)	2019 2018 228,028 228,028 (Unit: In thousand shares)

• 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.

(19) 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.

(20) 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

~42~

• 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, considered entire environment and nature of industry as well as future capital needs and long-term financial plans in order to 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 appropriations of earnings of years 2018 and 2017 as resolved by the shareholders at their meetings on June 19, 2019 and June 21, 2018 are as follows:

Legal reserve Special reserve Cash dividends	Years ended December 31,	Years ended December 31,	Years ended December 31,
	Dividend per share Amount (in dollars) 5,211 $ - $ 109,980 - 45,606 0.20 160,797 $ 0.20 $ 2018	2017
	Amount 5,211 $ 109,980 45,606 160,797 $	Amount 14,389 $ 62,394 45,606 122,389 $	Dividend per share (in dollars)
			- $ - 0.20
			0.20 $

• F. On March 17, 2020, the Board of Directors during their meeting had not proposed for the distribution of dividends from 2019 earnings, which is still pending for approval from the shareholders.

• G. For the information relating to employees’ compensation and directors’ remuneration please refer to Note 6(27).

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(21) Other equity items

Other equity items	Other equity items	Other equity items	Other equity items	Other equity items
Operating revenue Unrealised gains (losses) from financial assets measured at fair value through other comprehensive income Financial statements translation differences of foreign operations Total At January 1 134,492) ($ 58,934) ($ 193,426) ($ The Company's effect 1,477 - 1,477 Revaluation transferred to retained earnings 2,895) ( - 2,895) ( Effects of associate accounted for under equity method 8,596) ( 56,420) ( 65,016) ( Tax effects of associate accounted for under equity method - 11,284 11,284 At December 31 144,506) ($ 104,070) ($ 248,576) ($ 2019 Unrealised gains (losses) from financial assets measured at fair value through other comprehensive income Financial statements translation differences of foreign operations Currency translation Total At January 1 - $ 24,353) ($ 59,093) ($ 83,446) ($ Effects of retrospective application 130,364) ( 24,353 - 106,011) ( At January 1, after adjustments 130,364) ( - 59,093) ( 189,457) ( The Company's effect 1,685) ( - - 1,685) ( Revaluation transferred to retained earnings 890) ( - - 890) ( Effects of associate accounted for under equity method 1,553) ( - 195 1,358) ( Effects of associate accounted for under equity method - - 36) ( 36) ( At December 31 134,492) ($ - $ 58,934) ($ 193,426) ($ 2018 Year ended December 31,2019 Year ended December 31, 2018 Revenue from contracts with customers 4,922,305 $ 7,124,093 $
		Unrealised gains (losses) from financial assets measured at fair value through other comprehensive income		Financial statements translation differences of foreign operations Currency translation Total 24,353) ($ 59,093) ($ 83,446) ($ 24,353 - 106,011) ( - 59,093) ( 189,457) ( - - 1,685) ( - - 890) ( - 195 1,358) ( - 36) ( 36) ( - $ 58,934) ($ 193,426) ($ Year ended December 31, 2018 7,124,093 $

(22) Operating revenue

A. Disaggregation of revenue from contracts with customers

The Company derives revenue in the following major product lines and geographical regions:

Revenue from external customer contracts	USA 3,147,582 $	Mainland China 765,461 $	Other 1,009,262 $	Total
				4,922,305 $

2019

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Revenue from external customer contracts	USA 5,214,929 $	Mainland China Other 1,043,582 $ 865,582 $ 2018	Total
			7,124,093 $

B. Contract liabilities from customers

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

December 31, 2019 December 31, 2018 January 1, 2018 Contract liabilities: Contract liabilitiesProducts sales contracts $ 55,771 $ 7,519 $ 3,603

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

Year ended December 31, 2019 Year ended December 31, 2018

Revenue recognised that was included in the contract liability balance at the beginning of the period $ 4,053 $ 1,839

(23) Other income

Other income
		Years ended	December 31,
		2019	2018
Interest income:
Interest income from bank deposits	$	3,974	$	4,083
Dividend income		342		556
Other income, others		36,924		51,700
	$	41,240	$	56,339
Other gains and losses
		Years ended	December 31,
		2019	2018
Gains on disposals of property, plant and	$	7,039	$	4,889
equipment
Gains on financial assets (liabilities) at fair value		2,110		2,427
through profit or loss
Currency exchange gains (losses)		18,551		11,189
Other gains and losses	(	23,412)	(	176)
	$	4,288	$	18,329

(24) Other gains and losses

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(25) Finance costs

Finance costs
Expenses by nature Interest expense Interest expense on borrowings Interest expense on lease liabilities Employee benefit expense Depreciation charges on property, plant and equipment Depreciation charges on right-of use asset Amortisation (including amortisation on the land use right)	2019 2018 12,410 $ 16,139 $ 4,875 - 17,285 $ 16,139 $ Years ended December 31, 2019 2018 429,575 $ 452,615 $ 22,905 17,560 24,377 - 15,473 14,757 492,330 $ 484,932 $ Years ended December 31,
		452,615 $ 17,560 - 14,757
		484,932 $

(26) Expenses by nature

(27) Employee benefit expense

Employee benefit expense
Salary expenses Labour and health insurance fees Pension costs Other personnel expenses	Years ended December 31,
	2019 365,453 $ 31,038 20,179 12,905 429,575 $	2018
		382,803 $ 32,450 21,330 16,032
		452,615 $

• 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, 2019 and 2018, employees’ compensation was accrued at $128 and $4,619, respectively; while directors’ remuneration was accrued at $18 and $660, respectively. The aforementioned amounts were recognised in salary expenses.

• The employees’ compensation and directors’ remuneration were estimated and accrued based on 7% and 1% of distributable profit for the year ended December 31, 2019. The employees’ compensation and directors’ and supervisors’ remuneration resolved by the Board of Directors

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were $128 and $0, respectively, and the employees’ compensation will be distributed in the form of cash.

For 2018, the employees’ compensation and directors’ remuneration resolved by the Board of Directors amounted to $4,619 and $658, respectively. The difference of $2 between the amounts resolved by the Board of Directors and the amounts recognised in the 2018 financial statements, mainly resulting from estimation, had been adjusted in the profit or loss of 2019.

• 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.

(28) Tax

• A. Income tax expense

• (a) Components of income tax expense:

ome tax expense Components of income tax expense:
		Years ended	December 31,
		2019		2018
Current tax:
Tax of foreign source income withheld at
source	$	143	$	143
Tax on undistributed surplus earnings		1,211		-
Total current tax		1,354		143
Deferred tax:
Origination and reversal of temporary		19,481		9,258
differences
Impact of tax losses	(	20,835)		45,044
Impact of change in tax rate		-	(	45,845)
Total deferred tax	(	1,354)		8,457
Income tax expense	$	-	$	8,600

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

is as follows:
		Years ended	December 31,
		2019	2018
Currency translation differences of foreign operations	($	11,284)	$	36

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

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		Years ended	December 31,	December 31,
		2019		2018
Tax calculated based on profit before tax and	$	337	$	12,142
statutory tax rate (note)
Change in assessment of realization of deferred tax assets	(	1,691)		42,160
Tax of foreign source income withheld at		143		143
source
Tax on undistributed surplus earnings		1,211		-
Impact of change in tax rate		-	(	45,845)
Income tax expense	$	-	$	8,600

Note: For the years ended December 31, 2019 and 2018, the applicable tax rate was based on the parent company’s applicable tax rate of 20% and 17%, respectively.

C. Amounts of deferred tax assets or liabilities as a result of temporary differences and tax losses 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 25,895 $ 13,853) ($ - $ 12,042 $ Unrealised warranty cost of after-sale service 3,558 3,054) ( - 504 Unrealised pension 42,548 1,224) ( - 41,324 Exchange differences on foreign financial statements - - 5,420 5,420 Others 1 7 - 8 -Tax losses 285,856 20,835 - 306,691 Subtotal 357,858 $ 2,711 $ 5,420 $ 365,989 $ Deferred income tax liabilities: Unrealised gain on long-term investments 87,582) ($ 4,307) ($ - $ 91,889) ($ Unrealised exchange gain 12,049) ( 2,019 - 10,030) ( Exchange differences on foreign financial statements 5,864) ( - 5,864 - Others 1,067) ( 931 - 136) ( Subtotal 106,562) ($ 1,357) ($ 5,864 $ 102,055) ($ Total 251,296 $ 1,354 $ 11,284 $ 263,934 $ 2019		2019	2019
			Recognised in other comprehensive income At December31 - $ 12,042 $ - 504 - 41,324 5,420 5,420 - 8 - 306,691 5,420 $ 365,989 $ - $ 91,889) ($ - 10,030) ( 5,864 - - 136) ( 5,864 $ 102,055) ($ 11,284 $ 263,934 $	At December31
				12,042 $ 504 41,324 5,420 8 306,691
				365,989 $
				102,055) ($
				263,934 $

~48~

							2018	2018
								Recognised
								in other
					Recognised in		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

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

	December 31,2019	December 31,2019
Year incurred 2011 (Microelectronics) 2012 (Microelectronics) 2013 (Microelectronics) 2014 (Microelectronics) 2015 (Microelectronics) 2019 (Microelectronics)	Amount filed/ Assessed Unused amount 1,121,209 $ 802,269 $ 1,356,066 1,356,066 1,086,632 1,086,632 407,486 407,486 240,322 210,609 102,489 102,489 . 3,965,551 $ December 31,2018		Unrecognised deferred tax assets 802,269 $ 1,356,066 273,761 - - - 2,432,096 $	Expiry year
				2021 2022 2023 2024 2025 2029
Year incurred 2011 (Microelectronics) 2012 (Microelectronics) 2013 (Microelectronics) 2014 (Microelectronics) 2015 (Microelectronics)	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

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

~49~

• 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.

(29) Earnings per share

from 17% to 20% effective from change in income tax rate. Earnings per share	January 1, 2018. The Company has assessed the impact of the	January 1, 2018. The Company has assessed the impact of the	January 1, 2018. The Company has assessed the impact of the
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	Weighted average number of ordinary shares outstanding Earnings per share Amount after tax (share in thousands) (in dollars) 1,684 $ 228,028 0.01 $ 1,684 228,028 - 7 1,684 $ 228,035 0.01 $ Year ended December 31,2019 Year ended December 31, 2018
	Amount after tax 52,109 $ 52,109 - 52,109 $	Weighted average number of ordinary shares outstanding (share in thousands) 228,028 228,028 226 228,254	Earnings per share (in dollars)
			0.23 $
			0.23 $

(30) Operating leases

Prior to 2019

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 expense of $25,856 for theses leases in profit or loss for the year ended December 31, 2018.

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

Not later than one year Later than one year but not later than five years	December 31,2018
	27,636 $ 13,818
	41,454 $

(31) Supplemental cash flow information

A. Investing activities with partial cash payments:

pplemental cash flow information Investing activities with partial cash payments:
	Years ended		December 31,
	2019			2018
Purchase of property, plant and equipment	$	35,499	$	56,048
Add: Opening balance of payable on equipment		16,307		4,436
Ending balance of prepayment for equipment		405		227
Less: Ending balance of payable on equipment	(	12,150)	(	16,307)
Operating balance of prepayment for
equipment	(	227)		-
Cash paid during the year	$	39,834	$	44,404

(32) Changes in liabilities from financing activities

January 1, 2019 Changes in cash flow from financing activities Changes in other non-cash items Interest expense December 31, 2019 January 1, 2018 Changes in cash flow from financing activities December 31, 2018	Payments of lease liabilities	Payments of lease liabilities	Short-term borrowings		Long-term borrowings Total - $ 694,396 $ 125 76,418) ( - 4,473) ( - 4,875 125 $ 618,380 $ Long-term borrowings Total - $ 506,972 $ - 60,819) ( - $ 446,153 $
	248,243 $ 27,138) ( 4,473) ( 4,875 221,507 $ Payments of lease liabilities		446,153 $ 49,405) ( - - 396,748 $ Short-term borrowings
		- $ - - $	506,972 $ 60,819) ( 446,153 $

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7. 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 Cybertan Technology Inc. Entities with significant influence to the Group IQE Taiwan Corporation Substantial related party

(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	2019 2018 882 $ 1,290 $ 68,217 17,367 69,099 $ 18,657 $ Years ended December 31,
		1,290 $ 17,367
		18,657 $

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,
	2019 2,269,877 $ 1,828 2,271,705 $	2018
		4,333,797 $ 263
		4,334,060 $

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

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C. Receivables from related parties

			Years ended	December 31,	December 31,
			2019		2018
Accounts receivable:
Subsidiaries		$	361	$	191
Entities with significant influence to the Group			6,483		14,524
Other receivables:			6,844		14,715
Subsidiaries			4,318		9,748
Entities with significant influence to the Group			385		789
Subtotal			4,703		10,537
Total		$	11,547	$	25,252
D. Payables to related parties
			Years ended	December 31,
			2019		2018
Accounts payable:
Jupiter Technology (Wuxi) Inc.		$	289,741	$	641,658
Entities with significant influence to the Group			-		232
			289,741		641,890
Other payables:
MTI Laboratory, Inc.			38,096		78,297
Radiocamp Aps			29,526		40,419
Jupiter Technology (Wuxi) Inc.			8,398		-
Subtotal			76,020		118,716
Total		$	365,761	$	760,606
E. Other current liabilities:
		December 31, 2019		December31,2018
Jupiter Technology (Wuxi) Inc.		$	27,374	$	97,714
F. Research and development expenses:
	Year ended December 31,2019		Year ended December		31,2018
MTI Laboratory, Inc.	$	136,022	$		196,583
Radiocamp Aps		76,063			83,330
	$	212,085	$		279,913

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F. Property transactions:

Property transactions:
Disposal of equipment Subsidiaries Purchase of equipment Subsidiaries	Disposal proceeds Gain (loss) on disposal Disposal proceeds Gain (loss) on disposal - $ - $ 2,977 $ 14 $ 10,406 $ - $ 660 $ - $ Year ended December 31,2019 Year ended December 31,2018
		14 $ - $

• －

• G. Lease transactions lessee

• (a) The Company leases buildings from Cybertan Technology Inc.. Rental contracts are typically made for periods of 10 years. Rents are paid at the end of year.

• (b) Acquisition of right-of-use assets:

Year ended December 31, 2019 Cybertan Technology Inc. $ 219,392

On January 1, 2019 (the date of initial application of IFRS 16), the Company increased rightof-use assets by $248,243.

• (c) Lease liabilities

• (i) Outstanding balance:

of-use assets by $248,243. Lease liabilities (i) Outstanding balance:
(ii) Interest expense Cybertan Technology Inc. Cybertan Technology Inc.	December31,2019
	221,507 $
	Year ended December31,2019
	4,875 $

• H. Operating lease transactions

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

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

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

• (d) For the year ended December 31, 2018, other income to entities with significant influence to the Company amounted to $26.

(3) Key management compensation

the Company amounted to $26. Key management compensation
Salaries and other short-term employee benefits Post-employment benefits	Years ended December 31,
	2019 27,535 $ 1,905 29,440 $	2018
		28,586 $ 2,201
		30,787 $

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8. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNISED CONTRACT COMMITMENTS

None.

9. SIGNIFICANT DISASTER LOSS

None.

10. SIGNIFICANT EVENTS AFTER THE BALANCE SHEET DATE

• (1) Information on the appropriation of 2019 earnings approved by the Board of Directors is provided in Note 6(20).

• (2) The Company reallocated Group resources to minimize the effects of the shortage of raw materials and supplies from Mainland China suppliers as a result of the spread of COVID-19 virus in 2020.

11. 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

ancial instruments Financial instruments by category
Financial assets Financial assets at fair value through profit or loss Financial assets mandatorily measured at fair value through profit or loss Designation of equity instrument 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	December 31,2019 2,671 $ 9,276 710,701 - 9,024 867,759 5,405 2,604 1,607,440 $	December 31,2018
		383 $ 13,753 629,590 20,930 68,362 1,358,761 13,857 5,413
		2,111,049 $

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December 31,2019 Financial liabilities Financial liabilities at fair value through profit or loss Financial liabilities held for trading 273 $ Financial liabilities at amortised cost Short-term borrowings 396,748 Accounts payable 717,680 Other payables 285,094 125 1,399,920 $ Lease liability 221,507 $	December 31,2018 95 $ 446,153 1,080,394 388,349 -
	1,914,991 $
	- $

• 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(13)).

• (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.

• 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 uses 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.

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Details of financial assets or liabilities at fair value through profit or loss are provided in Notes 6(2) and (13).

• 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:

December 31, 2019

(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： 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 Exchange rate Book value (In thousands) (NTD) 55,834 $ 29.98 1,673,903 $ 44 4.30 189 1,070 33.59 35,941 49,578 $ 29.98 1,486,348 $ 5,200 4.30 22,360 1,125 33.59 37,789 Foreign currency amount Exchange rate Book value (In thousands) (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 Exchange rate Book value (In thousands) (NTD) 55,834 $ 29.98 1,673,903 $ 44 4.30 189 1,070 33.59 35,941 49,578 $ 29.98 1,486,348 $ 5,200 4.30 22,360 1,125 33.59 37,789 Foreign currency amount Exchange rate Book value (In thousands) (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 Exchange rate Book value (In thousands) (NTD) 55,834 $ 29.98 1,673,903 $ 44 4.30 189 1,070 33.59 35,941 49,578 $ 29.98 1,486,348 $ 5,200 4.30 22,360 1,125 33.59 37,789 Foreign currency amount Exchange rate Book value (In thousands) (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
		Exchange rate 30.72 4.48 35.20 30.72 4.48 35.20	Book value
			(NTD)
			1,749,074 $ 63,773 36,080 1,481,226 $ 84,766 41,642

~57~

• 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, 2019 and 2018 amounted to $18,551 and $11,189, respectively.

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

variation:
(Foreign currency： functional currency) Financial assets Monetary items USD:NTD RMB:NTD EUR:NTD Financial liabilities Monetary items USD:NTD RMB:NTD EUR:NTD	Year ended December 31,2019
	Sensitivityanalysis
	Effect on Degree of variation profit or loss 1% 16,739 $ 1% 2 1% 359 1% 14,862) ($ 1% 224) ( 1% 378) (	Effect on other comprehensive income
		- $ - - $ -

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

Price risk

~58~

• i. The Company’s equity securities, which are exposed to price risk, are the held financial assets at fair value through profit or loss and financial assets at fair value through other comprehensive income. 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, 2019 and 2018 would have increased/decreased by $93 and $138, respectively, as a result of 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 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. Such banks all have optimised credit rating, no past due has

~59~

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.

• viii. The Company used the forecastability to adjust historical and timely information to assess the default possibility of accounts and notes receivable. As of December 31, 2019 and 2018, the provision matrix is as follows:

December 31, 2019 Expected loss rate Total book value Loss allowance December 31, 2018 Expected loss rate Total book value Loss allowance	Notpast due 0%-1% 659,763 $ - $ Notpast due 0%-1% 1,276,560 $ 3 $	90 days past due 0%-1% 145,858 $ 1 $ 90 days past due 0%-1% 147,195 $ 3 $	90-180 days past due 0%-1% 20,937 $ 5 $ 90-180 days past due 0%-1% 125 $ - $	Over 180 days past due 0%-1% 51,478 $ 1,247 $ Over 180 days past due 0%-1% 4,485 $ 1,236 $	Total
					878,036 $ 1,253 $ Total
					1,428,365 $ 1,242 $

• C. Movements in relation to the Company applying the simplified approach to provide loss allowance for accounts and notes receivable are as follows:

		2019
At January 1	$	1,242
Reversal of impairment loss		40
Effect of exchange rate changes	(	29)
At December 31	$	1,253
		2018
At January 1_IAS 39	$	1,198
Adjustments under new standards		-
At January 1_IFRS 9		1,198
Reversal of impairment loss		6
Effect of exchange rate changes		38
At December 31	$	1,242

• v. The Company used the forecastability to adjust historical and timely information to assess the default possibility of other receivables. As of December 31, 2019 and 2018, the provision matrix is as follows:

~60~

December 31, 2019 Expected loss rate Total book value Loss allowance December 31, 2018 Expected loss rate Total book value Loss allowance	Notpast due 0% 5,041 $ - $ Notpast due 0% 13,857 $ - $	90 days past due 0% 364 $ - $ 90 days past due 0% - $ - $	90-180 days past due 0% - $ - $ 90-180 days past due 0% - $ - $	Over 180 days past due 0% - $ - $ Over 180 days past due 0% - $ - $	Total 5,405 $ - $ Total
					13,857 $ - $

(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.

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

Less than 3 Between 3 months Between 1 Between 2 Over
December 31, 2019 months and 1 year and 2 years and 5 years 5 years Total
Non-derivative financial
liabilities
Short-term borrowings $ 397,282 $ - $ - $ - $ - $ 397,282
- - -
Accounts payable 657,242 60,439 717,681
(including related party)
- - - -
Other payables 285,094 285,094
(including related party)
Long-term borrowings - 2 2 127 - 131
Lease liabilites 6,785 20,354 27,138 81,414 108,552 244,243
Derivative financial Less than 3 Between 3 months Between 1 Between 2 Over
liabilities months and 1 year and 2 years and 5 years 5 years Total
Cross currency swap $ 273 $ - $ - $ - $ 273
contracts
Less than 3 Between 3 months Between 1 Between 2
December 31, 2018 months and 1 year and 2 years and 5 years Total
Non-derivative financial
liabilities
Short-term borrowings $ 447,274 $ - $ - $ - $ 447,274
- -
Accounts payable 1,070,388 10,006 1,080,394
(including related party)
- - -
Other payables 388,349 388,349
(including related party)
Derivative financial Less than 3 Between 3 months Between 1 Between 2
liabilities months and 1 year and 2 years and 5 years Total
Cross currency swap $ 95 $ - $ - $ - $ 95
contracts
----- End of picture text -----

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(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:

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

December 31, 2019 Assets Recurring fair value measurements Financial assets at fair value through profit or loss Foreign exchange swap contracts Foreard foreign exchange 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	Level 1 - $ - - - $ - $	Level 2 2,370 $ 301 - 2,671 $ 273 $	Level 3 - $ - 9,276 9,276 $ - $	Total
				2,370 $ 301 9,276
				11,947 $
				273 $

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

Level 1 Level 2 Level 3 Total
December 31, 2018
Assets
Recurring fair value measurements
Financial assets at fair value through
profit or loss
Foreign exchange swap contracts $ - $ 383 $ - $ 383
Financial assets at fair value through
other comprehensive income
Equity securities - 5,352 8,401 13,753
$ - $ 5,735 $ 8,401 $ 14,136
Liabilities
Recurring fair value measurements
Financial liabilities at fair value through
profit or loss
Forward exchange contracts $ - $ 95 $ - $ 95
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• (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.

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

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

Equity securities At January 1 8,401 $ Losses recognised in other comprehensive income 875 At December 31 9,276 $ Equity securities At January 1 10,184 $ Losses recognised in other comprehensive income 1,783) ( At December 31 8,401 $	Derivative instruments Total - $ 8,401 $ - 875 - $ 9,276 $ 2019 Derivative instruments Total - $ 10,184 $ - 1,783) ( - $ 8,401 $ 2018

• 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 31,2019 technique input $ 9,276 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

~65~

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

changed:
Input Financial assets Discount for lack of marketability Equity instruments P/B ratio Input Financial assets Discount for lack of marketability Equity instruments P/B ratio	Change ±10% ±10% Change ±10% ±10%		December	31, 2019
		Recognised in	Unfavourable change - $ - - $ profit or loss December	Recognised in other comprehensive income
		Favourable change - $ - - $		Favourable Unfavourable change change 398 $ 398) ($ 928 928) ( 1,326 $ 1,326) ($ 31,2019	Unfavourable change
		Recognised in	Unfavourable change - $ - - $ profit or loss	Recognised in other comprehensive income
		Favourable change - $ - - $		Favourable Unfavourable change change 360 $ 360) ($ 840 840) ( 1,200 $ 1,200) ($	Unfavourable change

12. 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.

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• 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 to Note 6(2) (13).

• 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.

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

13. SEGMENT INFORMATION

Not applicable.

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Table 1

Expressed in thousands of NTD

Microelectronics Technology, Inc. and Subsidiaries

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

Year ended December 31, 2019

(Except as otherwise indicated)

Securities held by Marketable securities Relationship with the securities issuer General ledger account		As of December 31, 2019	As of December 31, 2019	Note
	Number of shares	Book value	Ownership (%) Fair value
Microelectronics Technology, Inc. Stocks - TAIWAN AEROSPACE CORPORATION None Financial assets at fair value through other comprehensive income SASSON INTERNATIONAL HOLDING, INC. Stocks - Optical Scientific, Inc. None Financial assets at fair value through profit or loss SASSON INTERNATIONAL HOLDING, INC. Stocks - Firetide, Inc. None Financial assets at fair value through profit or loss SASSON INTERNATIONAL HOLDING, INC. Stocks - Taicom Capital Ltd. None Financial assets at fair value through other comprehensive income SASSON INTERNATIONAL HOLDING, INC. Stocks - New Edge Signal Solutions LCC None Financial assets at fair value through other comprehensive income SASSON INTERNATIONAL HOLDING, INC. Conversion of convertible bonds - Kymeta Corporation None Financial assets at fair value through profit or loss	648,576 16,023 1,333,360 20,000 1,355,663 -	9,276 $ - - 160,120 54,811 5,996	0.48 9,276 $ 5.02 - 2.24 - Note 160,120 12.5 54,811 - 5,996

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

Table 1, Page1

Table 2

Microelectronics Technology, Inc. and Subsidiaries

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

Year ended December 31, 2019

Expressed in thousands of NTD (Except as otherwise indicated)

Purchaser/seller	Counterparty	Relationship with the counterparty		Transaction	Transaction		Differences in transaction terms compared to third party transactions	Differences in transaction terms compared to third party transactions	Notes/accounts receivable(payable)	Notes/accounts receivable(payable)	Note
			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 Microelectronics Technology, Inc. JUPITER TECHNOLOGY (WUXI) INC	JUPITER TECHNOLOGY (WUXI) INC Microelectronics Technology, Inc. Cybertan Technology Inc. Cybertan Technology Inc.	Indirect subsidiary of the Company Indirect subsidiary of the Company Entities with significant influence to the Group Entities with significant influence to the Group	Purchases Sales Sales Sales	2,269,877 $ 2,269,877) ( 68,127) ( 327,837) (	60% (62%) (1%) (6%)	90 days 90 days 30 days 30 days	Not applicable Not applicable Not applicable Not applicable	Not applicable Not applicable Not applicable Not applicable	289,740) ($ 289,740 6,483 67,726	(40%) 33% 1% 6%

Table 2, Page1

Microelectronics Technology, Inc. and Subsidiaries

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

Year ended December 31, 2019

Table 3 Creditor	Counterparty	Relationship with the counterparty	Balance as at December 31,2019	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	289,740 $	4.87	- $	-	289,740 $	- $

Table 3, Page1

Microelectronics Technology, Inc. and Subsidiaries

Table 4

Expressed in thousands of NTD (Except as otherwise indicated)

Significant inter-company transactions during the reporting periods

Year ended December 31, 2019

Transaction

						Transaction
Number (Note 1)	Companyname	Counterparty	Relationship (Note 2)	General ledgeraccount	Amount	Transaction terms	Percentage of consolidated total operating revenues ortotalassets
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.	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	Purchases and processing overhead Accounts payable Other current liabilities Research and development expenses Other receivables Research and development expenses Other receivables	2,269,877 $ 289,740 27,374 136,022 38,096 76,063 29,526	Same as those to the third parties Payment term is 60 days from receipt of goods 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	39.14% 5.77% 0.54% 2.35% 0.76% 1.31% 0.59%

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.

• (2) The consolidated subsidiaries are numbered in order from number 1.

• Note 2: The transaction relationship with counterparties are as follows:

• (1) The Company to the consolidated subsidiary.

• (2) The consolidated subsidiaries to the Company.

• (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. and Subsidiaries

Information on investees

Year ended December 31, 2019

Table 5

Expressed in thousands of NTD

(Except as otherwise indicated)

Investor	Investee	Location	Main business activities	Initial invest	ment amount	Shares hel	d as at Decembe	r 31,2019	Net profit (loss) of the investee for the year ended December 31, 2019	Investment income (loss) recognised by the Company for the year ended December 31, 2019	Note
				Balance as at December 31, 2019	Balance as at December 31, 2018	Number of shares	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 $ 234,863 931,533 44,970 140,966	908,778 $ 240,621 954,370 46,073 144,422	3,920 7,834,000 31,071,800 1,500,000 1,527,944	100 100 100 100 100	1,662,226 $ 317,459 978,520 122,200 174,374	10,992 $ 9,231 1,006) ( 6,337 2,521	21,536 $ 9,231 1,006) ( 6,337 2,521	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. and Subsidiaries

Information on investees in Mainland China

Year ended December 31, 2019

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Table 6
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Expressed in thousands of NTD (Except as otherwise indicated)

Investee in Mainland China	Main business activities	Paid-in capital	Investment method	Accumulated amount of remittance from Taiwan to Mainland China as of January1,2019	Amount remitt to Mainland C remitted back t year Decembe	ed from Taiwan hina / Amount o Taiwan for the ended r 31,2019	amount of remittance from Taiwan to Mainland China as of December 31, 2019	Net income of investee for the year ended December 31, 2019	Ownership held by the Company (direct or indirect)	Investment income (loss) recognised by the Company for the year ended December 31, 2010 (Note 3)	Book value of investments in Mainland China as of December 31,2019	Accumulated amount of investment income remitted back to Taiwan as of December 31,2019	Note
					Remitted to Mainland China	Remitted back to Taiwan
JUPITER TECHNOLOGY (WUXI) INC (Note 1)	The manufactures and sales of satellite and microwave communication system and related technical and consultation services	929,380 $	Through investing in an existing company in the third area, which then invested in the investee in Mainland China.	929,380 $	$ -	$ -	929,380 $	1,006) ($	100	1,006) ($	978,479 $	$ -	-

Companyname	Accumulated amount of remittance from Taiwan to Mainland China as of December 31,2019	Investment amount approved by the Investment Commission of the Ministry of Economic Affairs (MOEA)	Ceiling on investments in Mainland China imposed by the Investment Commission of MOEA
Microelectronics Technology, Inc.	$ 1,048,401	$ 1,169,460	$ 1,593,273

Note 1: It was indirectly invested through Jupiter Network Corp. Note 2: 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. and Subsidiaries

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

Year ended December 31, 2019

Table 7

Expressed in thousands of NTD (Except as otherwise indicated)

Investee in Mainland China	Sale(purchase)	Sale(purchase)	Propertytransaction	Propertytransaction	Accounts receivable(payable)	Accounts receivable(payable)	Provision of endorsements/guarantees or collaterals	Provision of endorsements/guarantees or collaterals		Financing	Financing		Others(Note)
	Amount	%	Amount	%	Balance	%	Balance at December 31, 2018	Purpose	Maximum balance during the year ended December31,2019	Balance at December 31, 2019	Interestrate	Interest during the year ended December 31, 2019
JUPITER TECHNOLOGY (WUXI) INC	$ 2,269,877	-	($ 10,406)	-	($ 289,740)	32	$ -	-	$ -	$ -	-	$ -	($ 23,056)

Note: It consisted of other receivables amounting to $4,318 and other current liabilities amounting to $27,374.

Table 7, Page1

MICROELECTRONICS TECHNOLOGY, INC. STATEMENT OF CASH AND CASH EQUIVALENTS DECEMBER 31, 2019

(In Thousands of New Taiwan Dollars)

Item Cash on hand and revolving funds -NTD NTD 6,800 dollars，exchange rate 29.98 Cash on hand and revolving funds-USD USD Checking accounts-NTD Demand deposits -NTD Demand deposits -CNY CNY 43,832 dollars，exchange rate 4.3 Demand deposits -EUR EUR 1,069,822 dollars，exchange rate 33.59 Demand deposits -USD USD 9,437,111 dollars，exchange rate 29.98 Demand deposits -GBP GBP 56,042 dollars，exchange rate 39.36 Demand deposits - JPY JPY 1,847,868 dollars，exchange rate 0.276 Time deposits(Notes) Description	Amount
	30 $ 204
	8,847
	26,756 188 35,935 282,925 2,206 510
	348,520 353,100
	710,701 $

(Note) Expiration date ： 2020/1/2~2020/3/31, Rate: 0.59%~0.66%.

Table 1, Page1

MICROELECTRONICS TECHNOLOGY, INC. STATEMENT OF ACCOUNTS RECEIVABLE DECEMBER 31, 2019

(In Thousands of New Taiwan Dollars)

Customer name Normal customers: Customer B Customer V Customer D Customer G Customer A Customer C Others Less: Bad provision Related parties: MTI Laboratory, Inc. CyberTAN Technology Inc. Total	Description Amount Note 258,974 $ 121,672 96,866 92,123 83,542 63,247 145,744 None of the individual customer's owing balance exceeding 5% of the ending balance of this account. Aging over one year amounted to $1,206 - 862,168 1,253) ( 860,915 361 6,483 867,759 $	Note

Table 2, Page1

MICROELECTRONICS TECHNOLOGY, INC. STATEMENT OF INVENTORIES DECEMBER 31, 2019

(In Thousands of New Taiwan dollars)

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Amount
Item Cost Net Realizable Value Note
Raw material $ 340,508 $ 330,808
Work in progress 117,134 129,310
Finished goods 104,540 133,380
Inventory in transit 77,778 77,778
639,960 $ 671,276
Less : allowance for inventory
valuation losses ( 60,208)
$ 579,752
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Table 3, Page1

MICROELECTRONICS TECHNOLOGY, INC. STATEMENT OF CHANGES IN INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD FOR THE YEAR ENDED DECEMBER 31, 2019

(In Thousands of New Taiwan Dollars)

Share of profit Balance at January 1, 2019 of associates Balance at December 31, 2019 Percentage of accounted for Currency Percentage of Valuation Investee ownership Amount Increase under equity translation ownership Amount Net Equity Method Collateral Footnote Sasson International Equity Holding Inc. 100.00% $ 1,662,473 $ 3,233 $ 21,536 ($ 65,016) 100.00% $ 1,622,226 $ 1,622,226 Method None

Table 4, Page1

MICROELECTRONICS TECHNOLOGY, INC. STATEMENT OF SHORT-TERM BANK LOANS DECEMBER 31, 2019

(In Thousands of New Taiwan dollars)

Description Creditor Purchasing The Shanghai Commercial Purchasing Land Bank of Taiwan Purchasing Mega Bank	Ending Balance	Period	Range of Interest Loan 2.39%~2.4% 239,840 $ 2.68%~2.74% 300,000 2.57%~2.59% 449,700	Collateral	Note
	204,363 $ 103,526 88,859 396,748 $	210 days 120 days 90 days		None None None

Table 5, Page1

MICROELECTRONICS TECHNOLOGY, INC. STATEMENT OF ACCOUNTS PAYABLE DECEMBER 31, 2019

(In Thousands of New Taiwan dollars)

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Supplier Amount Note
General Supplier:
Company N $ 68,019
Company M 42,045
Company A 41,133
Company S 33,920
Company C 25,308
Company R 18,912
Other 198,603 None of the individual
supplier's balance exceeding
5% of the ending balance of
this account
427,940
Related parties:
Jupiter Technology(Wuxi)Co.,Ltd 289,741
$ 717,681
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Table 6, Page1

MICROELECTRONICS TECHNOLOGY, INC. STATEMENT OF OTHER PAYABLES DECEMBER 31, 2019

(In Thousands of New Taiwan dollars)

Item Other payables： Employee benefit payable Export payment Equipment payable Repair payment Payables for consulting service fees Other Related parties: Technical service payable Equipment payable Other	Amount 94,489 $ 30,746 12,150 13,565 10,372 47,752 209,074 67,541 7,446 1,033 285,094 $	Note
		None of the individual item's balance exceeding 5% of the ending balance of this account None of the individual item's balance exceeding 5% of the ending balance of this account

Table 7, Page1

MICROELECTRONICS TECHNOLOGY, INC. STATEMENT OF REVENUE FOR THE YEAR ENDED DECEMBER 31, 2019

(In Thousands of New Taiwan Dollars)

Item	Quantity(in thousands)		Amount Note
Satelite communication product	34,722	$	3,740,421
Terrestrial microwave product	161,240		1,188,353
Total operating revenue			4,928,774
Less: Sales returns		(	6,464)
Sales discount and allowance		(	5)
operating revenue, net		$	4,922,305

Table 8, Page1

MICROELECTRONICS TECHNOLOGY, INC. STATEMENT OF COSTS OF REVENUE FOR THE YEAR ENDED DECEMBER 31, 2019

(In Thousands of New Taiwan dollars)

Item		Amount
Raw material at January 1, 2019 (including inventory in transit)	$	364,196
Add : Raw material purchase		902,967
Inventory overage		2,293
Less : Scrap of raw material	(	30,638)
Raw material sold	(	1,110)
Raw material at Decmeber 31, 2019	(	374,512)
Consumption of raw material for the year		863,196
Direct labor		40,847
Manufacturing expenses		155,019
Manufacturing costs of the year		1,059,062
Add : Work in progress at January 1, 2019		147,269
Work in progress purchase		55,652
Less : Scrap of work in progress	(	21,445)
Work in process at December 31, 2019	(	117,134)
Cost of finished goods		1,123,404
Add : Finished goods at January 1, 2019		330,157
Finished goods purchase		2,815,417
Transferred from expenses		5,117
Less : Scrap of finished goods	(	17,048)
Transfer to expenses amd others	(	3,686)
Finished goods at December 31, 2019	(	148,314)
Cost of goods sold		4,105,047
Reversal of provisions	(	11,164)
Gain on decline in market value	(	94)
Service cost		51,806
Raw material sold		1,110
Raw material overage	(	2,293)
Operating cost	$	4,144,412

Table 8, Page1

MICROELECTRONICS TECHNOLOGY, INC. STATEMENT OF MANUFACTURING EXPENSES FOR THE YEAR ENDED DECEMBER 31, 2019

(In Thousands of New Taiwan Dollars)

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Item Description Amount Note
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Indirect labor cost Depreciation charges Utilities expense Rent expenses Other expenses	64,162 $ 29,183 10,109 8,155 43,410 None of the individual item exceeds 5% of this account 155,019 $

Table 9, Page1

MICROELECTRONICS TECHNOLOGY, INC. STATEMENT OF OPERATING EXPENSES FOR THE YEAR ENDED DECEMBER 31, 2019

(In Thousands of New Taiwan Dollars)

Selling expenses: Shipping expenses Salaries and wages Commission Others General and administrative expenses: Salaries and wages Services fees Labor and health insurance Stock services expenses Others Research and development expense: Technical supporting expenses Salaries and wages Others Item		Amount Note 175,529 $ 40,321 26,381 40,521 None of the individual item exceeds 5% of this account 282,752 $ 35,787 $ 11,316 3,100 3,087 9,230 None of the individual item exceeds 5% of this account 62,520 $ 226,288 $ 192,980 61,408 None of the individual item exceeds 5% of this account 480,676 $	Note

Table 10, Page1

MICROELECTRONICS TECHNOLOGY, INC. LABOR, DEPRECIATION AND AMORTISATION BY FUNCTION FOR THE YEAR ENDED DECEMBER 31, 2019

(In Thousands of New Taiwan Dollars)

By nature By function	Year ended December 31,2019	Year ended December 31,2019	Year ended December 31,2019	Year ended December 31,2018	Year ended December 31,2018	Year ended December 31,2018
	Classified as operating costs	Classified as operating expenses	Total	Classified as operating costs	Classified as operating expenses	Total
Employee benefit expense
Wages and salaries	$ 96,364	$ 269,089	$ 365,453	$ 94,088	$ 288,715	$ 382,803
Labor and health insurance fees	8,370	22,668	31,038	7,912	24,538	32,450
Directors’ compensation	5	2,230	2,235	-	3,155	3,155
Pension costs	5,441	14,738	20,179	5,200	16,130	21,330
Others employee benefit expense	2,650	8,020	10,670	2,748	10,129	12,877
Depreciation	29,183	18,099	47,282	7,380	10,180	17,560
Amortization	4,531	10,942	15,473	3,837	10,920	14,757

Note:

• A. As of December 31, 2019 and 2018, the Company had 374 and 366 employees, respectively excluding 5 and 5 directors, respectively.

• B. For companies whose shares were listed on the Taiwan Stock Exchange or listed on the Taiwan Over-The-Counter Securities Exchange, following information should be disclosed:

• (a) The average employee benefit expense of current year was $1,158 thousand ((Total employee benefit expense of current year-Total directors’

• compensation of current year)/ (Number of employees of current year-Number of non-employee directors of current year)).

• The average employee benefit expense of prior year was $1,245 thousand ((Total employee benefit expense of prior year -Total directors’ compensation of prior year)/ (Number of employees of prior year-Number of non-employee directors of prior year)).

• (b) The average wages and salaries of current year was $990 thousand (Total wages and salaries of current year/ (Number of employees of current yearNumber of non-employee directors of current year)).

• The average wages and salaries of prior year was $1,060 thousand (Total wages and salaries of prior year/ (Number of employees of prior year-Number of non-employee directors of prior year)).

• (c) Changes on average wages and salaries adjustment (7%) ((Average wages and salaries of current year - Average wages and salaries of prior year)/ Average wages and salaries of prior year).

Table 11, Page1