NTC — Annual Report 2019

Nov 22, 2019

Stock Code:2408

$\mathbf{1}$

(English Translation of Financial Statements and Report Originally Issued in Chinese) NANYA TECHNOLOGY CORPORATION

Financial Statements

With Independent Auditors' Report For the Years Ended December 31, 2019 and 2018

Address: No.98, Nanlin Rd., Dake Vil., Taishan Dist., New Taipei City, Taiwan (R.O.C.) Telephone: (02)2904-5858

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

Table of contents

Contents	Page
1. Cover Page	1
2. Table of Contents	$\overline{2}$
3. Independent Auditors' Report	3
4. Balance Sheets	4
5. Statements of Comprehensive Income	5
6. Statements of Changes in Equity	6
7. Statements of Cash Flows	7
8. Notes to the Financial Statements
Company history (1)	8
(2) Approval date and procedures of the financial statements	8
(3) New standards, amendments and interpretations adopted	$8 \sim 11$
(4) Summary of significant accounting policies	$11 - 25$
(5) Significant accounting assumptions and judgments, and major sources of estimation uncertainty	25
Explanation of significant accounts (6)	$25 - 54$
(7) Related-party transactions	$54 - 57$
Pledged assets (8)	57
(9) Commitments and contingencies	$58 - 59$
(10) Losses Due to Major Disasters	59
(11) Subsequent Events	59
$(12)$ Other	59
(13) Other disclosures
(a) Information on significant transactions	$60 - 61$
(b) Information on investees	61
(c) Information on investment in mainland China	$61 - 62$
(14) Segment information	62
List of major account titles	$63 - 72$

$\sim$

KPMG

台北市11049信義路5段7號68樓(台北101大樓) Telephone 電話 + 886 (2) 8101 6666 68F., TAIPEI 101 TOWER, No. 7, Sec. 5, Xinyi Road, Taipei City 11049, Taiwan (R.O.C.)

Fax 傳真 + 886 (2) 8101 6667 Internet 網址 kpmg.com/tw

Key Audit Matters

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

Valuation of inventories

Please refer to Notes $4(g)$ , $5(a)$ , and $6(c)$ for details on accounting policy, judgments, and major sources of estimation uncertainty and disclosure information about inventory valuation, respectively.

The Company recognizes a loss from the devaluation of inventories on a quarterly basis based on the lower of cost or net realizable value method. The international market price of DRAM has significantly affected the net realizable value of inventories. Therefore, the evaluation of inventory has been identified as a key audit matter in the financial statements.

The principal audit procedures performed to address the aforementioned key audit matter included understanding the basis adopted by the management in the estimate of net realizable value, and sampling to test the reasonableness of the net realizable value.

Responsibilities of Management and Those Charged with Governance for the Financial Statements

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

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

Those charged with governance (including the audit committee) are responsible for overseeing the Company's financial reporting process.

Auditors' Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors' report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the auditing standards generally accepted in the Republic of China will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with auditing standards generally accepted in the Republic of China, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

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

• 1. 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.
• 1. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
• 1. Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors' report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our 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 financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
• 1. Obtain sufficient and appropriate audit evidence regarding the financial information of the entities of the investments in other entities accounted for using the equity method. We are responsible for the direction, supervision and performance of our audit. Furthermore, we remain solely responsible for our audit opinion.

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

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

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

The engagement partners on the audit resulting in this independent auditors' report are Hui-Chih Ko and Hsin-Yi Kuo.

KPMG

Taipei, Taiwan (Republic of China) February 26, 2020

Notes to Readers

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

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

		December 31, 2019		December 31, 2018				December 31, 2019	December 31, 2018
Assets	Amount		℅	Amount	కి		Liabilities and Equity	≿ Amount	Amount	℅
Current assets:							Current liabilities:
Cash and cash equivalents (Note 6(a))	S	6,497,820		46,338,574	23	2170	Accounts payable	Z 2,573,759	4,247,638	N
Notes receivable due from related parties, net (Note 6(b)(p) and 7)		41,545				2180	Accounts payable to related parties (Note 7)	133,199	332,064
Notes and accounts receivable, net (Notes 6(b)(p))		5,074,912		6,405,098		2200	Other payables	6,605,917	8,741,863
Accounts receivable due from related parties, net (Notes 6(b)(p) and 7)		2,391,150		3,812,440		2220	Other payables to related parties (Note 7)	1,258,964	21,567,689
Other receivables (Notes 6(h))		1,565,121		1,303,960		2230	Current tax liabilities	1,514,804	2,455,253	2
Inventories (Note 6(c))		18,072,308		12,148,352		2280	Current lease liabilities (Notes 6(j) and 7)	99,924
Prepayments		1,633,984		1,757,547		2399	Other current liabilities	80,957	1,568
Total current assets		35,276,840	$\bar{\mathbf{c}}$	71,765,971	35		Total current liabilities	12,267,524	37,346,075	$\frac{1}{2}$
Non-current assets:							Non-Current liabilities:
Investments accounted for using equity method (Note 6(d))		42,627,209	26	34,242,508	$\overline{18}$	2640	Net defined benefit liability, non-current (Note 6(k))	575,896	537,303
Property, plant and equipment (Note 6(f))		85,513,880	52	95,339,823	47	2670	Other non-current liabilities	238,467	375,362
Right-of-use assets (Notes 6(g))		99,222					Total non-current liabilities	814,363	912,665
Intangible assets		296,710		45,881			Total liabilities	∾∣ 13,081,887	38,258,740	$\overline{a}$
Deferred tax assets (Notes 6(1))		550,033		860,761			Equity (Note 6(m)):
Long-term lease payments receivable (Note 6(h))				875,900		3110	Ordinary share	$\overline{1}$ 30,733,649	31,032,389	$\overline{15}$
Long-term financial lease payments receivable (Note 6(h))		689,886				3140	Advance receipts for share capital	3,475	6,488
Other non-current assets		39,660		35,194	$\blacksquare$	3200	Capital surplus	$\overline{9}$ 32,005,339	33,557,005	$\geq$
Total non-current assets		129,816,600	79	131,400,067	$\mathcal{S}$	3310	Legal reserve	∞ 13,128,412	9,192,249
						3320	Special reserve	273,834	39,163
						3350	Unappropriated retained earnings	48 78,054,876	94,136,513	46
						3400	Other equity interest	Ξ (1,041,100)	(273, 834)
						3500	Treasury shares	Ξ (1,146,932)	(2.782.675)	$\ominus$
							Total equity	92 152,011,553	164,907,298	$\overline{8}$
Total assets	\$165,093,440		릐	203,166,038	휇		Total liabilities and equity	휇 \$165,093,440	203,166,038	휇

1550
1600
1755
1780
1981
1981
1990

$\begin{array}{c} 1100 \ 1160 \ 1170 \ 1180 \ 1200 \ 1310 \ 1410 \ \hline \end{array}$

(English Translation of Financial Statements and Report Originally Issued in Chinese)
Nanya Technology Corporation

Balance Sheets

December 31, 2019 and 2018

(Expressed in Thousands of New Taiwan Dollars)

See accompanying notes to financial statements.

$\hat{\mathcal{A}}$

$\overline{a}$

(English Translation of Financial Statements and Report Originally Issued in Chinese)
NANYA TECHNOLOGY CORPORATION

Statements of Comprehensive Income

For the years ended December 31, 2019 and 2018

(Expressed in Thousands of New Taiwan Dollars, Except Earnings Per Share)

$\frac{0}{2}$ Amount Amount 4000 Operating revenue (Note $6(p)$ and 7) \$51,475,494 100 84,269,952 5000 Operating costs (Notes $6(c)(f)(g)(k)(l)(q)$ and 7) 35,251,755 68 38,049,640 Gross profit from operations 16,223,739 46,220,312 32 5910 Add: Unrealized profit (loss) from sales (15, 749) (25,381) $\overline{a}$ 5920 Realized profit (loss) on from sales 97,212 25,381 $\blacksquare$ Gross profit from operations 32 16,233,371 46,292,143 Operating expenses (Notes $6(f)(g)(k)(n)(q)$ and 7): 6100 Selling expenses 536,767 -1 643,649 6200 Administrative expenses 3 1,320,266 1,525,170 6300 Research and development expenses 9 4,926,428 4,875,217 Total operating expenses 13 6,783,461 7,044,036 Net operating income 9,449,910 19 39,248,107 Non-operating income and expenses (Notes $6(e)(f)(h)(i)(k)(n)(q)(r)$ ): 7010 Other income 343,548 1,018,622 -1 7020 Other gains and losses, net 229,827 1,203,540 $\blacksquare$ 7050 Finance costs (3, 124) (5,325) $\blacksquare$ 7060 Share of profit of associates accounted for using equity method 1,188,213 $\overline{2}$ 101,594 $\overline{\mathbf{3}}$ Total non-operating income and expenses 2,318,431 1,758,464 7900 Profit before tax 11,208,374 22 41,566,538 Less: Tax expenses (Notes $6(1)$ ) (1,383,775) (3) (2,204,913) Profit 9,824,599 19 39,361,625 8300 Other comprehensive income (Notes $6(l)(m)$ ): 8310 Components of other comprehensive income that will not be reclassified to profit or loss 8311 Remeasurements of the net defined benefit (42,096) (18,096) 8330 Share of other comprehensive income of subsidiaries, and associates for using equity method, components of (10,688) (95, 101) other comprehensive income that will not be reclassified to profit or loss 8349 Income tax related to components of other comprehensive income that will not be reclassified to profit or loss (8, 419) (6,190) $\blacksquare$ Components of other comprehensive income that will not be reclassified to profit or loss (44, 365) (107,007) $\blacksquare$ 8360 Components of other comprehensive income that will be reclassified to profit or loss 8361 Exchange differences on translation of foreign financial statements (1) (758, 303) (140, 573) 8399 Income tax related to components of other comprehensive income that will be reclassified to profit or loss Components of other comprehensive income that will be reclassified to profit or loss (758, 303) (1) (140, 573) 8300 Other comprehensive loss, net (802, 668) (1) (247, 580) Comprehensive income 9,021,931 18 39,114,045 Earnings per share (Note $6(0)$ ) 9750 Basic earnings per share		2019		2018
					℅
					100
					45
					55
					$\blacksquare$
					55
					$\overline{2}$
					6
					8
					47
					$\mathbf{1}$
					-1
					$\overline{2}$
					49
					(2)
					47
					47
			3.23		12.80
9850 Diluted earnings per share 3.19					12.38

(English Translation of Financial Statements and Report Originally Issued in Chinese)
Nanya Technology Corporation

Statements of Changes in Equity

$\hat{\mathcal{A}}$

For the years ended December 31, 2019 and 2018

(Expressed in Thousands of New Taiwan Dollars)

									Other equity interest
		entitlement to Certificate of new shares from	Advance				Unappropriate	differences on translation of Exchange foreign	Unrealized gains financial assets through other measured at (losses) on fair value
	Ordinary shares	convertible bond	share capital receipts for	surplus Capital	reserve Legal	reserve Special	d retained carnings	statements financial	comprehensive income	equity interest Total other	Treasury shares	equity Total
Balance at January 1, 2018	29,639,38	223,958		27,277,191	5,164,057		69.734.440	(39, 163)		(39,163		131,999,865
Net profit for the year ended December 31, 2018							39,361,625					39,361,625
Other comprehensive income for the year ended December 31, 2018							(12,909)	(140,573)	(94,098)	(234, 671)		(247, 580)
otal comprehensive income (loss) for the year ended December 31, 2018							39,348,716	(140, 573)	(94,098)	(234, 671)		39,114,045
Appropriation and distribution of retained earnings:
Legal reserve appropriated					4,028,192		(4,028,192)
Special reserve appropriated						39,163	(39, 163)
Cash dividends of ordinary share							(10, 879.288)					(10, 879, 288)
Other changes in capital surplus:
Changes in equity of associates accounted for using equity method
Recognized compensation costs on employee stock options				717,656								717,656
Conversion of certificates of bonds-to-share	223,958	(223,958)
Conversion of convertible bonds	732,839			4,504,323								5,237,162
Exercise of employee share options	436,210		6,488	1,057,830								1,500,528
Repurchase of treasury share											(2,782,675)	(2,782,675)
Balance at December 31, 2018	31,032,389		6,488	33,557,005	9,192,249	39,163	94,136,513	(179, 736)	(94.098)	(273, 834)	(2,782,675)	164,907,298
Net profit for the year ended December 31, 2019							9,824,599					9,824,599
Other comprehensive income for the year ended December 31, 2019							(35, 402)	(758, 303)	(8,963)	(767, 266)		(802, 668)
otal comprehensive income (loss) for the year ended December 31, 2019							9,789,197	(758, 303)	(8.963)	(767, 266)		9,021,931
Appropriation and distribution of retained earnings:
Legal reserve appropriated					3.936,163		(3,936,163)
Special reserve appropriated						234,671	(234, 671)
Cash dividends of ordinary share							(21,700,000)					(21,700,000)
Other changes in capital surplus
Changes in equity of associates accounted for using equity method				$\tilde{=}$								$\hat{=}$
Recognized compensation costs on employee stock options				150,116								150,116
Repurchase of treasury share											(1,029,878)	(1,029,878)
Retirement of treasury share	(501, 360)			(2,164,261)							2,665,621
Exercise of employee share options	202,620		(3.013)	462,460								662,067
Balance at December 31, 2019	30,733,649	$\mid$	3,475	32,005,339	13,128,412	273,834	78,054,876	(938, 039)	(103,061)	(1,041,100)	(1,146,932)	152,011,553 $\mathbf{I}$

$\bullet$

(English Translation of Financial Statements and Report Originally Issued in Chinese)
Nanya Technology Corporation

Statements of Cash Flows

For the years ended December 31, 2019 and 2018

(Expressed in Thousands of New Taiwan Dollars)

	2019	2018
Cash flows from (used in) operating activities:
Profit before tax	11,208,374 S	41,566,538
Adjustments:
Adjustments to reconcile profit (loss):
Depreciation expense	14,318,031	11,975,216
Amortization expense	91,126	97,298
Net loss on financial liabilities at fair value through profit or loss		281,107
Interest expense	3,124	5,325
Interest income	(343, 548)	(1,018,622)
Share-based payments	150,116	717,656
Share of profit of subsidiaries and associates accounted for using equity method	(1,188,213)	(101, 594)
Gain on disposal of property, plant and equipment	(4, 723)	(16, 859)
Gain on disposal of a subsidiary		(497)
Reversal of impairment loss on non-financial assets	(213, 282)	(109, 745)
Unrealized gains on sales	15,749	25,381
Realized profit from sales	(25,381)	(97,212)
Foreign exchange gain or loss	124,536	(46, 120)
Total adjustments to reconcile profit (loss)	12,927,535	11,711,334
Changes in operating assets and liabilities:
Accounts receivable	2,642,414	(1, 173, 832)
Other receivables	(391,993)	(348, 165)
Inventories	(5,923,956)	(5,400,126)
Prepayments	123,620	(139, 921)
Financial liabilities held for trading		(523, 136)
Accounts payable (including related parties)	(429, 964)	677,569
Other payable (including related parties)	(1,859,005)	2,420,267
Other current liabilities	79,389	(386)
Net defined benefit liability	(3,503)	(6, 590)
Other non-current liabilities	9,606 (5,753,392)	(1, 935) (4,496,255)
Total changes in operating assets and liabilities Cash inflow generated from operations	18,382,517	48,781,617
Interest received	396,063	774,111
Interest paid	(191)	(220)
Income taxes paid	(2,005,134)	(1,463,411)
Net cash flows from operating activities	16,773,255	48,092,097
Cash flows used in investing activities:
Acquisition of investments accounted for using equity method	(28, 787, 503)	(13, 221, 259)
Proceeds from disposal of a subsidiary		176,868
Acquisition of property, plant and equipment	(5,490,289)	(20, 418, 433)
Proceeds from disposal of property, plant and equipment	4,723	25,743
Increase in refundable deposits	(3,504)	(11,378)
Acquisition of intangible assets	(164, 666)	10,616,574
Decrease in lease and installment receivables	264,331	429,330
Increase in other non-current assets	(9,295)	(5, 569)
Dividends received	210,056
Net cash flows (used in) from investing activities	(33, 976, 147)	(22, 408, 124)
Cash flows used in financing activities:
(Decrease) increase in guarantee deposits received	(297, 469)	317,376
Payment of lease liabilities	(184, 115)
Cash dividends paid	(21,700,000)	(10, 879, 288)
Exercise of employee share options	662,067	1,500,528
Payments to acquire treasury shares	(1,029,878)	(2, 782, 675)
Net cash flows used in financing activities	(22, 549, 395)	(11, 844, 059)
Effect of exchange rate changes on cash and cash equivalents	(88, 467)	(127, 381)
Net (decrease) increase in cash and cash equivalents	(39, 840, 754)	13,712,533
Cash and cash equivalents at beginning of period	46,338,574	32,626,041
Cash and cash equivalents at end of period	6,497,820 \$	46,338,574

(English Translation of Financial Statements and Report Originally Issued in Chinese) NANYA TECHNOLOGY CORPORATION

Notes to the Financial Statements

For the vears ended December 31, 2019 and 2018

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

(1) Company history

Nanya Technology Corporation (the "Company") was legally established with the approval of the Ministry of Economic Affairs on March 4, 1995, with registered address at No.98, Nanlin Road, Dake Vil., Taishan District, New Taipei City, Taiwan. The main operating activities of the Company are researching, developing, manufacturing and selling semiconductor products, and the import and export of its machinery, equipment and raw materials.

(2) Approval date and procedures of the financial statements:

The financial statements were authorized for issuance by the Board of Directors on February 26, 2020.

(3) New standards, amendments and interpretations adopted:

The impact of the International Financial Reporting Standards ("IFRSs") endorsed by the Financial $(a)$ Supervisory Commission, R.O.C. ("FSC") which have already been adopted.

The following new standards, interpretations and amendments have been endorsed by the FSC and are effective for annual periods beginning on or after January 1, 2019.

New, Revised or Amended Standards and Interpretations	Effective date per IASB
IFRS 16 "Leases"	January 1, 2019
IFRIC 23 "Uncertainty over Income Tax Treatments"	January 1, 2019
Amendments to IFRS 9 "Prepayment features with negative compensation"	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
Annual Improvements to IFRS Standards 2015-2017 Cycle	January 1, 2019

Except for the following items, the Company believes that the adoption of the above IFRSs would not have any material impact on its financial statements. The extent and impact of signification changes are as follows:

$(i)$ IFRS 16"Leases"

IFRS 16 replaces the existing leases guidance, including IAS 17 Leases, IFRIC 4 Determining whether an Arrangement contains a Lease, SIC-15 Operating Leases – Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease.

The Company applied IFRS 16 using the modified retrospective approach. The details of the changes in accounting policies are disclosed below,

Definition of a lease $1)$

Previously, the Company determined at contract inception whether an arrangement is or contains a lease under IFRIC 4. Under IFRS 16, the Company assesses whether a contract is or contains a lease based on the definition of a lease, as explained in Note $4(k)$ .

On transition to IFRS 16, the Company elected to apply the practical expedient to grandfather the assessment of which transactions are leases. The Company applied IFRS 16 only to contracts that were previously identified as leases. Contracts that were not identified as leases under IAS 17 and IFRIC 4 were not reassessed for whether there is a lease. Therefore, the definition of a lease under IFRS 16 was applied only to contracts entered into or changed on or after January 1, 2019.

$2)$ As a lessee

As a lessee, the Company previously classified its leases as operating or finance leases based on its assessment of whether the lease transferred significantly all of the risks and rewards incidental to ownership of the underlying asset to the Company. Under IFRS 16, the Company recognizes its right-of-use assets and lease liabilities for most leases.

The Company decided to apply the recognition exemptions to the short-term and lowvalue leases of its dormitory, plants, parking lots and office spaces.

Leases classified as operating leases under IAS 17

At transition, lease liabilities were measured at the present value of the remaining lease payments, discounted at the Company's incremental borrowing rate as at January 1, 2019. Right-of-use assets are measured below:

their carrying amount as if IFRS 16 had been applied since the commencement date, discounted using the lessee's incremental borrowing rate at the date of initial application $-$ the Company applied this approach to its land leases.

In addition, the Company used the following practical expedients when applying IFRS 16 to leases.

• Applied a single discount rate to a portfolio of leases with similar characteristics.
• Used hindsight when determining the lease term if the contract contains options to extend or terminate the lease.

$3)$ As a lessor

The Company is not required to make any adjustments on transition to IFRS 16 for leases in which it acts as a lessor. The Company accounted for its leases in accordance with IFRS 16 from the date of initial application.

$4)$ Impacts on financial statements

On transition to IFRS 16, the Company recognized both additional \$300,605 of right-ofuse assets and lease liabilities at the date of initial application. When measuring lease liabilities, the Company discounted lease payments using its incremental borrowing rate at January 1, 2019. The interest rate applied is 1.41%.

The explanation of differences between operating lease commitments disclosed at the end of the annual reporting period immediately preceding the date of initial application. and lease liabilities recognized in the statement of financial position at the date of initial application disclosed as follows:

		January 1, 2019
Operating lease commitment at December 31, 2018 as disclosed in the Company's financial statements	£.	350,955
Recognition exemption for:
leases of low-value assets		(46,975)
		303,980
Discounted using the incremental borrowing rate at January 1, 2019	S	300,605

$(b)$ The impact of IFRS endorsed by FSC but not yet effective

The following new standards, interpretations and amendments have been endorsed by the FSC and are effective for annual periods beginning on or after January 1, 2020 in accordance with Rule No. 1080323028 issued by the FSC on July 29, 2019:

	Effective date
New, Revised or Amended Standards and Interpretations	per IASB
Amendments to IFRS 3 "Definition of a Business"	January 1, 2020
Amendments to IFRS 9, IAS39 and IFRS7 "Interest Rate Benchmark Reform"	January 1, 2020
Amendments to IAS 1 and IAS 8 "Definition of Material"	January 1, 2020

The Company assesses that the adoption of the abovementioned standards would not have any material impact on its financial statements.

The impact of IFRS issued by IASB but not yet endorsed by the FSC $(c)$

As of the date, the following IFRSs that have been issued by the International Accounting Standards Board (IASB), but have yet to be endorsed by the FSC:

	Effective date
New, Revised or Amended Standards and Interpretations	per IASB
Amendments to IFRS 10 and IAS 28 "Sale or Contribution of Assets Between an Investor and Its Associate or Joint Venture"	Effective date to be determined by IASB
IFRS 17 "Insurance Contracts"	January 1, 2021
Amendments to IAS 1 "Classification of Liabilities as Current or Non-current"	January 1, 2022

The Company is evaluating the impact of its initial adoption of the abovementioned standards or interpretations on its financial position and financial performance. The results thereof will be disclosed when the Company completes its evaluation.

Summary of significant accounting policies: $(4)$

The significant accounting policies presented in the financial statements are summarized below. The following accounting policies were applied consistently throughout the periods presented in the financial statements.

Statement of compliance $(a)$

The accompanying financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers (hereinafter referred to as the "Regulations").

• Basis of preparation $(b)$
• $(i)$ Basis of measurement

The financial statements have been prepared on a historical cost basis except the net defined benefit liabilities are measured at fair value of the plan assets less the present value of the defined benefit obligation.

(ii) Functional and presentation currency

The functional currency of the Company is determined based on the primary economic environment in which the entities operate. The financial statements are presented in New Taiwan Dollar, which is the Company's functional currency. All financial information presented in New Taiwan Dollar has been rounded to the nearest thousand.

(c) Foreign currency

Foreign currency transactions $(i)$

Transactions in foreign currencies are translated into the respective functional currencies of Group entities at the exchange rates at the dates of the transactions. At the end of each subsequent reporting period, monetary items denominated in foreign currencies are translated into the functional currencies using the exchange rate at that date. Non-monetary items denominated in foreign currencies that are measured at fair value are translated into the functional currency at the exchange rate at the date that the fair value was determined. Nonmonetary items denominated in foreign currencies that are measured based on historical cost are translated using the exchange rate at the date of the transaction.

Exchange differences are generally recognized in profit or loss.

(ii) Foreign operations

The assets and liabilities of foreign operations are translated to the Company's functional currency at exchange rates at the reporting date. The income and expenses of foreign operations, excluding foreign operations in hyperinflationary economies, are translated to the Company's functional currency at average rate. Foreign currency differences are recognized in other comprehensive income.

When a foreign operation is disposed of such that control, significant influence or joint control is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal. When the Company disposes of any part of its interest in a subsidiary that includes a foreign operation while retaining control, the relevant proportion of the cumulative amount is reattributed to noncontrolling interest. When the Company disposes of only part of investment in an associate or joint venture that includes a foreign operation while retaining significant or joint control, the relevant proportion of the cumulative amount is reclassified to profit or loss.

When the settlement of a monetary item receivable from or payable to a foreign operation is neither planed nor likely in the foreseeable future, foreign currency gains and losses arising from such items are considered to form part of a net investment in the foreign operation and are recognized in other comprehensive income.

(d) Classification of current and non-current assets and liabilities

An asset is classified as current under any one of the following conditions. All other assets are classified as non-current.

• The asset is expected to be realized, or intended to be sold or consumed, in the Company's $(i)$ normal operating cycle;
• (ii) The asset is held primarily for the purpose of trading;
• (iii) The asset is expected to be realized within twelve months after the reporting period; or
• (iv) The asset is cash or a cash equivalent unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.

A liability is classified as current under any one of the following conditions. All other liabilities are classified as non-current.

• The liability is expected to be settled in the normal operating cycle; $(i)$
• $(ii)$ The liability is held primarily for the purpose of trading;
• (iii) The liability is due to be settled within twelve months after the reporting period; or
• (iv) The liability does not have any unconditional right to defer settlement of the liability for at least twelve months after the reporting period. Terms of a liability that could, at the option of the counterparty, result in its settlement by issuing equity instruments do not affect its classification.
• Cash and cash equivalents $(e)$

Cash comprises cash on hand, checks and cash in bank. Cash equivalents are 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 which meet the above definition and are held for the purpose of meeting short-term cash commitments rather than for investment or other purposes are classified under cash equivalents.

$(f)$ Financial instruments

Trade receivables are initially recognized when they are originated. All other financial assets and financial liabilities are initially recognized when the Company becomes a party to the contractual provisions of the instrument. A financial asset (unless it is a trade receivable without a significant financing component) or financial liability is initially measured at fair value plus, for an item not at fair value through profit or loss (FVTPL), transaction costs that are directly attributable to its acquisition or issue. A trade receivable without a significant financing component is initially measured at the transaction price.

• $(i)$ Financial assets
• $1)$ Impairment of financial assets

The Company recognizes loss allowances for expected credit losses (ECL) on financial assets measured at amortized cost (including cash and cash equivalents, notes and trade receivables (including related parties), other receivable, leases receivable, and guarantee deposit paid).

The Company measures loss allowances at an amount equal to lifetime expected credit loss (ECL), except for the following which are measured as 12-month ECL:

Bank balances for which credit risk (i.e. the risk of default occurring over the expected life of the financial instrument) has not increased significantly since initial recognition.

Loss allowance for note and trade receivables due from related parties are always measured at an amount equal to lifetime ECL.

Lifetime ECLs are the ECLs that result from all possible default events over the expected life of a financial instrument.

12-month ECLs are the portion of ECLs that result from default events that are possible within the 12 months after the reporting date (or a shorter period if the expected life of the instrument is less than 12 months).

The maximum period considered when estimating ECLs is the maximum contractual period over which the Company is exposed to credit risk.

When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECL, the Company considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis based on the Company's historical experience and informed credit assessment as well as forwardlooking information.

The Company assumes that the credit risk on a financial asset has increased significantly if it is more than 30 days past due.

The Company considers a financial asset to be in default when the financial asset is more than 60 days past due.

ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the Company in accordance with the contract and the cash flows that the Company expects to receive). ECLs are discounted at the effective interest rate of the financial asset.

At each reporting date, the Company assesses whether financial assets carried at amortized cost and debt securities at FVOCI are credit-impaired. A financial asset is ' credit-impaired' when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. Evidence that a financial assets is credit-impaired includes the following observable data:

a breach of contract such as a default or being more than 60 days past due;

the disappearance of an active market for a security because of financial difficulties.

Loss allowances for financial assets measured at amortized cost are deducted from the gross carrying amount of the assets.

The gross carrying amount of a financial asset is written off when the Company has no reasonable expectations of recovering a financial asset in its entirety or a portion thereof. The Company individually makes an assessment with respect to the timing and amount of write-off based on whether there is a reasonable expectation of recovery. The Company expects no significant recovery from the amount written off. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Company's procedures for recovery of amounts due.

$2)$ Derecognition of financial assets

The Company derecognizes a financial asset when the contractual rights to the cash flows from the financial asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred or in which the Company neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset.

• $(ii)$ Financial liabilities and equity instruments
• $1)$ Classification of debt or equity

Debt and equity instruments issued by the Company are classified as financial liabilities or equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

$2)$ Treasury shares

When shares recognized as equity are repurchased, the amount of the consideration paid. which includes directly attributable costs, is recognized as a deduction from equity. Repurchased shares are classified as treasury shares. When treasury shares are sold or reissued subsequently, the amount received is recognized as an increase in equity, and the resulting surplus or deficit on the transaction is recognized in capital surplus or retained earnings (if the capital surplus is not sufficient to be written down).

$3)$ Compound financial instruments

Compound financial instruments issued by the Company comprise convertible bonds denominated in NTD that can be converted to ordinary shares at the option of the holder, when the number of shares to be issued is fixed and does not vary with changes in fair value.

The liability component of compound financial instruments is initially recognized at the fair value of a similar liability that does not have an equity conversion option. The equity component is initially recognized at the difference between the fair value of the compound financial instrument as a whole and the fair value of the liability component. Any directly attributable transaction costs are allocated to the liability and equity components in proportion to their initial carrying amounts.

Subsequent to initial recognition, the liability component of a compound financial instrument is measured at amortized cost using the effective interest method. The equity component of a compound financial instrument is not remeasured.

Interest related to the financial liability is recognized in profit or loss. On conversion at maturity, the financial liability is reclassified to equity and no gain or loss is recognized.

Financial liabilities $4)$

Financial liabilities are classified as FVTPL. A financial liability is classified as at FVTPL if it is derivative. Financial liabilities at FVTPL are measured at fair value and net gains and losses are recognized in profit or loss.

Derecognition of financial liabilities $5)$

The Company derecognizes a financial liability when its contractual obligations are discharged or cancelled, or expire. The Company also derecognizes a financial liability when its terms are modified and the cash flows of the modified liability are substantially different, in which case a new financial liability based on the modified terms is recognized at fair value.

On derecognition of a financial liability, the difference between the carrying amount of a financial liability extinguished and the consideration paid is recognized in profit or loss.

Offsetting of financial assets and liabilities $6)$

Financial assets and financial liabilities are offset and the net amount presented in the statement of balance sheet when, and only when, the Company currently has a legally enforceable right to set off the amounts and it intends either to settle them on a net basis or to realize the asset and settle the liability simultaneously.

(iii) Derivative financial instruments and hedge accounting

The Company holds derivative financial instruments to hedge its foreign currency and interest rate exposures. Embedded derivatives are separated from the host contract and accounted for separately if the host contract is not a financial asset and certain criteria are met.

Derivatives are initially measured at fair value. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are generally recognized in profit or loss.

Inventories $(g)$

Inventories are measured at the lower of cost and net realizable value. The cost of inventories includes expenditure incurred in acquiring the inventories, production costs and other costs incurred in bringing them to their present location and condition. The cost of inventories is calculated using the weighted-average method. In the case of manufactured inventories and work in progress, cost includes an appropriate share of production overheads based on normal operating capacity.

Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

Investment in associates $(h)$

Associates are those entities in which the Company has significant influence, but not control, over the financial and operating policies.

Investments in associates are accounted for using the equity method and are recognized initially at cost. The cost of the investment includes transaction costs. The carrying amount of the investment in associates includes goodwill arising from the acquisition less any accumulated impairment losses.

The financial statements include the Company's share of the profit or loss and other comprehensive income of those associates, after adjustments to align their accounting policies with those of the Company, from the date on which significant influence commences until the date on which significant influence ceases. The Company recognizes any changes of its proportionate share in the investee within capital surplus, when an associate's equity changes due to reasons other than profit and loss or comprehensive income, which did not result in changes in actual significant influence.

Gains and losses resulting from transactions between the Company and an associate are recognized only to the extent of unrelated Company's interests in the associate.

When the Company's share of losses of an associate equals or exceeds its interests in an associate, it discontinues recognizing its share of further losses. After the recognized interest is reduced to zero, additional losses are provided for, and a liability is recognized, only to the extent that the Company has incurred legal or constructive obligations or made payments on behalf of the associate.

When the Company subscribes to additional shares in an associate at a percentage different from its existing ownership percentage, the resulting carrying amount of the investment will differ from the amount of the Company's proportionate interest in the net assets of the associate. The Company records such a difference as an adjustment to investments, with the corresponding amount charged or credited to capital surplus. The aforesaid adjustment should first be adjusted under capital surplus. If the capital surplus resulting from changes in ownership interest is not sufficient, the remaining difference is debited to retained earnings. If the Company's ownership interest is reduced due to the additional subscription to the shares of the associate by other investors, the proportionate amount of the gains or losses previously recognized in other comprehensive income in relation to that associate will be reclassified to profit or loss on the same basis as would be required if the associate had directly disposed of the related assets or liabilities.

$(i)$ Subsidiaries

The Company accounts for investee companies in which it has a controlling interest using the equity method. The net income, other comprehensive income, and shareholders' equity in the financial reports of the Company and the net income, other comprehensive income, and shareholder's equity that belongs to the Company in the consolidated financial reports should be the same.

The Company accounts for changes in owners' equity of subsidiaries as equity transactions between the two parties of the transaction, provided that control is still exists.

• Property, plant and equipment $(i)$
• Recognition and measurement $(i)$

Items of property, plant and equipment are measured at cost, less accumulated depreciation and any accumulated impairment losses.

Any gain or loss on disposal of an item of property, plant and equipment is recognized in profit or loss.

(ii) Subsequent expenditure

Subsequent expenditure is capitalized only if it is probable that the future economic benefits associated with the expenditure will flow to the Company.

(iii) Depreciation

Depreciation is calculated on the cost of an asset less its residual value and is recognized in profit or loss on a straight-line basis over the estimated useful lives.

If there is reasonable certainty that the lessee will obtain ownership by the end of the lease term, the period of expected use is the useful life of the asset; otherwise, the asset is depreciated over the shorter of the lease term and its useful life.

Land is not depreciated.

The estimated useful lives of significant items of property, plant and equipment has an unlimited useful life and therefore are as follows:

• $1)$ Buildings: 25 years.
• $2)$ Machinery and equipment: 5 to 16 years.
• $3)$ Other equipment: 3 to 15 years.

Depreciation methods, useful lives, and residual values are reviewed at each reporting date and adjusted if appropriate, the change is accounted for as a change in accounting estimate.

$(k)$ Leases

Leases (Policy applicable from January 1, 2019)

Identifying a lease $(i)$

At inception of a contract, the Company assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Company assesses whether:

• the contract involves the use of an identified asset $-$ this may be specified explicitly or $1)$ implicitly, and should be physically distinct or represent substantially all of the capacity of a physically distinct asset. If the supplier has a substantive substitution right, then the asset is not identified; and

• the customer has the right to obtain substantially all of the economic benefits from use of $2)$ the asset throughout the period of use; and

• the customer has the right to direct the use of the asset throughout the period of use only 3) if either:

• the customer has the right to direct how and for what purpose the asset is used $\bullet$ throughout the period of use; or
• the relevant decisions about how and for what purpose the asset is used are predetermined and:
  • the customer has the right to operate the asset throughout the period of use, without the supplier having the right to change those operating instructions; $\alpha r$
  • the customer designed the asset in a way that predetermines how and for what purpose it will be used throughout the period of use.
• $(ii)$ As a lessor

The Company recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability.

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be reliably determined, the Company's incremental borrowing rate. Generally, the Company uses its incremental borrowing rate as the discount rate.

Lease payments included in the measurement of the lease liability comprise the following:

• fixed payments, including in-substance fixed payments;
• variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;

The lease liability is measured at amortized cost using the effective interest method. It is remeasured when:

• there is a change in future lease payments arising from the change in an index or rate; or
• there is a change in the lease term resulting from a change of its assessment on whether it will exercise an option to purchase the underlying asset, or
• there is a change of its assessment on whether it will exercise a purchase, extension or termination option; or
• there is any lease modifications

When the lease liability is remeasured, other than lease modifications, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or in profit and loss if the carrying amount of the right-of-use asset has been reduced to zero.

When the lease liability is remeasured to reflect the partial or full termination of the lease for lease modifications that decrease the scope of the lease, the Company accounts for the remeasurement of the lease liability by decreasing the carrying amount of the right-of-use asset to reflect the partial or full termination of the lease, and recognize in profit or loss any gain or loss relating to the partial or full termination of the lease.

The Company has elected not to recognize right-of-use assets and lease liabilities for shortterm leases of dormitory, parking lots and offices that have a lease term of 12 months or less and lease of low-value assets. The Company recognizes the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

(iii) As a lessor

When the Company acts as a lessor, it determines at lease commencement whether each lease is a finance lease or an operating lease. To classify each lease, the Company makes an overall assessment of whether the lease transfers to the lessee substantially all of the risks and rewards of ownership incidental to ownership of the underlying asset. If this is the case, then the lease is a finance lease; if not, then the lease is an operating lease. As part of this assessment, the Company considers certain indicators such as whether the lease is for the major part of the economic life of the asset.

The Company recognizes a finance lease receivable at an amount equal to its net investment in the lease. Initial direct costs, such as lessors to negotiate and arrange a lease, are included in the measurement of the net investment. The lessor recognizes the interest income over the lease term based on a pattern reflecting a constant periodic rate of return on the lessor's net investment in the lease. The Company recognizes lease payments received under operating leases as income on a straight-line basis over the lease term as part of 'other income'.

Applicable before January 1, 2019

$(i)$ Lessor

Asset under financing lease is recognized on a net basis as lease receivable. Initial direct costs incurred in negotiating and arranging an operating lease are added to the net investment in the leased asset. The finance income is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the receivable.

Lease income from an operating lease is recognized in income on a straight-line basis over the lease term. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset, and recognized as an expense over the lease term on the same basis as the lease income. Incentives granted to the lessee to enter into the operating lease are spread over the lease term on a straight-line basis so that the lease income received is reduced accordingly.

Contingent rents are recognized as income in the period when the lease adjustments are confirmed.

(ii) Lessee

Leases in which the Company assumes substantially all of the risks and rewards of ownership are classified as finance leases. On initial recognition, the lease asset is measured at an amount equal to the lower of its fair value or the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to the asset.

Minimum lease payments made under finance leases are apportioned between the finance cost and the reduction of the outstanding liability. The finance cost is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability

Other leases are operating leases and are not recognized in the Company's balance sheets.

Payments made under operating leases (excluding insurance and maintenance expenses) are recognized in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognized as an integral part of the total lease expense, over the term of the lease.

• Intangible assets $(1)$
• Recognition and measurement $(i)$

Intangible assets ,(patents) that are acquired by the Company and have finite useful lives are measured at cost less accumulated amortization and any accumulated impairment losses.

Subsequent expenditure $(ii)$

Subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure is recognized in profit or loss as incurred.

(iii) Amortization

Amortization is calculated over the cost of the asset, less its residual value, and is recognized in profit or loss on a straight-line basis over the estimated useful lives of intangible assets, from the date that they are available for use.

The estimated useful lives of patent for current and comparative periods are both $5 \sim 10$ years.

Amortization methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.

(m) Impairment of non-derivative financial assets

At each reporting date, the Company reviews the carrying amounts of its non-financial assets (other than inventories and deferred tax assets) to determine whether there is any indication of impairment. If any such indication exists, then the asset's recoverable amount is estimated. Goodwill is tested annually for impairment.

For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGUs. Goodwill arising from an acquisition about an investment accounted for using the equity method is allocated to CGUs or groups of CGUs that are expected to benefit from the synergies of the combination.

The recoverable amount of an asset or CGU is value in use fair value less costs to sell.

An impairment loss is recognized if the carrying amount of an asset or CGU exceeds its recoverable amount.

Impairment losses are recognized in profit or loss. They are allocated first to reduce the carrying amount of any goodwill allocated to the CGU, and then to reduce the carrying amounts of the other assets in the CGU on a pro rata basis.

An impairment loss in respect of goodwill is not reversed. For other assets, an impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.

Revenue recognition $(n)$

Revenue form contracts with customers is measured based on the consideration to which the Company expects to be entitled in exchange for transferring goods or services to a customer. The Company recognizes revenue when it satisfies a performance obligation by transferring control of a good or a service to a customer.

The Company manufactures and sells semi-conductor products on the market. The Company recognizes revenue 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, the acceptance provisions have lapsed, or the Company has objective evidence that all criteria for acceptance have been satisfied.

A receivable is recognized when the goods are delivered as this is the point in time that the Company has a right to an amount of consideration that is unconditional.

Employee benefits $(0)$

Defined contribution plan $(i)$

Obligations for contributions to defined contribution plans are expensed as the related service is provided.

$(ii)$ Defined benefit plan

The Company's net obligation in respect of defined benefit plans is calculated separately for each the plan by estimating the amount of future benefit that employees have earned in the current and prior periods, discounting that amount and deducting the fair value of any plan assets

The calculation of defined benefit obligations is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a potential asset for the Company, the recognized asset is limited to the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. To calculate the present value of economic benefits, consideration is given to any applicable minimum funding requirements.

Remeasurements of the net defined benefit liability, which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognized immediately in other comprehensive income, and accumulated in retained earnings. The Company determines the net interest expense (income) on the net defined benefit liability (asset) for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the then-net defined benefit liability (asset). Net interest expense and other expenses related to defined benefit plans are recognized in profit or loss.

When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service or the gain or loss on curtailment is recognized immediately in profit or loss. The Company recognizes gains and losses on the settlement of a defined benefit plan when the settlement occurs.

(iii) Short-term employee benefits

Short-term employee benefits are expensed as the related service is provided. A liability is recognized for the amount expected to be paid if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

Share-based payment $(p)$

The grant-date fair value of equity-settled share-based payment arrangements granted to employees is generally recognized as an expense, with a corresponding increase in equity, over the vesting period of the awards. The amount recognized as an expense is adjusted to reflect the number of awards for which the related service and non-market performance conditions are expected to be met, such that the amount ultimately recognized is based on the number of awards that meet the related service and non-market performance conditions at the vesting date. For share-based payment awards with non-vesting conditions, the grant-date fair value of the share-based payment is measured to reflect such conditions and there is no true-up for differences between expected and actual outcomes.

The grant date of a share-based payment is the date which the Board of Directors authorized the price and number of a share based payment.

(q) Income taxes

Income taxes comprise current taxes and deferred taxes. Except for expenses related to business combinations or recognized directly in equity or other comprehensive income, all current and deferred taxes are recognized in profit or loss.

Current taxes comprise the expected tax payables or receivables on the taxable profits (losses) for the year and any adjustment to the tax payable or receivable in respect of previous years. The amount of current tax payables or receivables are the best estimate of the tax amount expected to be paid or received that reflects uncertainty related to income taxes, if any. It is measured using tax rates enacted or substantively enacted at the reporting date.

Deferred taxes arise due to temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and their respective tax bases. Deferred taxes are recognized except for the following:

• Temporary differences on the initial recognition of assets and liabilities in a transaction that is $(i)$ not a business combination and that affects neither accounting nor taxable profits (losses) at the time of the transaction.
• Temporary differences related to investments in subsidiaries that the Company is able to $(i)$ control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future.

Deferred taxes are measured at tax rates that are expected to be applied to temporary differences when they reserve, using tax rates enacted or substantively enacted at the reporting date.

Deferred tax assets and liabilities are offset if the following criteria are met:

• the Company has a legally enforceable right to set off current tax assets against current tax $(i)$ liabilities; and
• the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same $(ii)$ taxation authority on either:
• The same taxable entity; or $\left| \right|$
• Different taxable entities which intend to settle current tax assets and liabilities on a net $2)$ basis, or to realize the assets and liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered.

Deferred tax assets are recognized for the carry forward of unused tax losses, unused tax credits, and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefits will be realized; such reductions are reversed when the probability of future taxable profits improve.

Earnings per share $(r)$

The Company discloses the Company's basic and diluted earnings per share attributable to ordinary shareholders of the Company. Basic earnings per share is calculated as the profit attributable to ordinary shareholders of the Company divided by the weighted average number of ordinary shares outstanding. Diluted earnings per share is calculated as the profit attributable to ordinary shareholders of the Company divided by the weighted average number of ordinary shares outstanding after adjustment for the effects of all potentially dilutive ordinary shares, such as employee stock options and employee compensation.

$(s)$ Operating segments

The Company discloses its information on operating segments in its consolidated financial statements, so it need not disclose such information in its financial statements.

$(5)$ Significant accounting assumptions and judgments, and major sources of estimation uncertainty:

The preparation of the financial statements, in conformity with the Regulation Governing the Preparation of Financial Reports by Securities Issuers, requires management to make judgments, estimates, and assumptions that affect the application of the accounting policies and the reported amount of assets, liabilities, income, and expenses. Actual results may differ from these estimates.

The management continues to monitor its accounting estimates and assumptions. It recognizes any changes in accounting estimates during the period and the impact of those changes in accounting estimates in the next period.

Information about judgments made in applying accounting policies that have the most significant effects on the amounts recognized in the financial statements is as follows:

Valuation of inventories $(a)$

As inventories are stated at the lower of cost or net realizable value, the Company estimates the net realizable value of inventories for obsolescence and unmarketable items at the end of the reporting period and then writes down the cost of inventories to net realizable value. The net realizable value of the inventory is mainly determined based on assumptions as to future demand within a specific time horizon. Due to the rapid industrial transformation, there may be significant changes in the net realizable value of inventories.

(6) Explanation of significant accounts:

(a) Cash and cash equivalents

	December 31, 2019	December 31, 2018
Cash on hand – pretty cash
Demand deposit and checking accounts	3,553,628	5,550,624
Cash equivalents:
Time deposits	2,130,351	40,382,900
Commercial paper	454,300	404,150
Repurchase agreements collateralized by corporate bonds	359,540	900
	6,497,820	46,338,574

(Continued)

Refer to Note 6(s) for the interest rate risk and sensitivity analysis of the financial assets and liabilities of the Company.

(b) Notes and accounts receivable

	December 31, 2019	December 31, 2018
Notes receivable from operating activities		481
Notes receivable-related parties from non-operating activities	41.545
Accounts receivable (including related parties)-measured at amortized
cost	7.466.062	10,217,057
	7,507,607	10,217,538

The Company applies the simplified approach to provide for its expected credit losses, i.e. the use of lifetime expected loss provision for notes and accounts receivables (including related parties) on December 31, 2019 and 2018. To measure the expected credit losses, notes and accounts receivables (including related parties) have been grouped based on shared credit risk characteristics and the days past due, as well as incorporated forward looking information, including macroeconomic and relevant industry information.

The loss allowance provision as of December 31, 2019 and 2018 was determined as follows:

			December 31, 2019
	Due days	Notes and accounts receivables (including) related parties) gross carrying amount	Weighted average loss rate	Loss allowance provision
Current		7,507,607
			December 31, 2018
	Due days	Notes and accounts receivables gross carrying amount	Weighted average loss rate	Loss allowance provision
Current		10,217,538

As of December 31, 2019 and 2018, no allowance for impairment was provided because all of the accounts comprising notes and accounts receivable (including related parties) were still within the normal credits terms and were evaluated to be collectable.

Please refer to Note 6(s) for other information of credit risk.

(c) Inventories

	December 31, 2019	December 31, 2018
Raw materials	\$ 381,848	590,036
Work in progress	7,329,074	5,870,118
Finished goods	10,361,386	5,688,198
	18,072,308	12,148,352

The Company recognized cost of goods sold amounting to \$34,734,620 and \$37,256,103 for the years ended December 31, 2019 and 2018, respectively.

The Company did not recognize any loss or gain from devaluation of inventories as there was no indication of impairment or net realizable value of inventories has increased because the circumstance that caused the inventory devaluation in prior period has improved on inventories for the years ended December 31, 2019 and 2018.

Investments accounted for using equity method $(d)$

The components of the investments accounted for using equity method were as follows:

	December 31, 2019	December 31, 2018
Subsidiaries	37,607,973	31,235,905
Associates	5,019,236	3,006,603
	42,627,209	34,242,508

Subsidiaries $(i)$

Please refer to the consolidated financial statements as of and for the year ended December 31, 2019 for further information.

(ii) Associates

The related information of the major associate to the Company was as follows:

				Percentage of ownership
Name of Associates	Nature of Relationship to the Group	Registration Country	December 31, 2019	December 31. 2018
Formosa Advanced Technologies Co., Ltd.(FATC)	It mainly engages in assembling and testing of module products, as well as in the research and development of integrated circuits.	Taiwan	$32.00 \%$	19.00 $%$

The fair value of major associates listed on the Stock Exchange was as follows:

		December 31, December 31,
	2019	-2018
Formosa Advanced Technologies Co., Ltd.	\$16,494,889	14,062,667

The aggregated financial information of the major associate was as follows:

The financial information of FATC was as follows:

		December 31, 2019	December 31, 2018
Current assets	\$	6,631,748	6,792,443
Non-current assets		6,643,175	5,882,131
Current liabilities		(1,250,357)	(1,231,815)
Non-current liabilities		(594, 493)	(86,280)
Net asset		11,430,073	11,356,479
Net asset contributed to FATC	S	11,430,073	11,356,479
		For the year ended December 31, 2019	2018
Operating revenue	\$	9,457,849	8,785,525
Profit	\$	1,262,496	1,420,293
Other comprehensive (loss) income		(83, 445)	(138, 670)
Total comprehensive (loss) income		1,179,051	1,281,623
Comprehensive income contributed to FATC		1,179,051	1,281,623
		For the year ended December 31,
Share of net assets of the major associate at January 1	\$	2019 2,157,732	2018
Acquisition of share of net assets of the major associate allocated to the Company		1,474,005	2,162,315
Total comprehensive income contributed to the Company		235,924	(4,588)
Uncollected dividends beyond the collection period which are reclassified to capital surplus		19	5
Cash dividends contributed to the Company		(210, 056)
Share of net assets of major associate at December 31		3,657,624	2,157,732
Add: Goodwill		1,463,162	887,684
Less: Unrealized profits on upstream sales net assets of the associates		(101, 550)	(38, 813)
Total carrying amount of the major associate	S	5,019,236	3,006,603

$\bar{\psi}$

Loss control over subsidiaries $(e)$

$(i)$ The Company had disposed 53.56% of its shares in Piece Makers, with a selling price of \$132,584; therefore, it lost control over Piece Makers on February 26, 2018. The Company recognized a gain on disposal of \$497 in profit or loss, which was included in other gains and losses.

The carrying amount of assets and liabilities of Piece Makers Technology Corp on February 26, 2018 were as follow:

	February 26, 2018
Cash and cash equivalents	218,521 \$
Accounts receivable and other receivables	54,228
Inventories	136,906
Other current assets	3,160
Property, plant, and equipment	3,892
Other non-current assets	666
Accounts payable and other payables	(170, 752)
Other non-current liabilities	(6)
Carrying amount of net assets	246,615

Pei Jen Co., Ltd (hereinafter referred to as "Pei Jen"), a subsidiary of the Company, had $(ii)$ applied for the completion of its liquidation to the court on December 10, 2018, resulting in the Company's loss of control over Pei Jen. The Company included the distribution of the remaining properties from Pei Jen in its balance sheet, which consisted of cash and cash equivalents amounting to \$44,284, and other tax refund receivable amounting to \$12.

$(f)$ Property, plant and equipment

		Land	Building	Machinery and equipment	Other equipment	Under construction	Total
Cost:
Balance as of January 1, 2019	\$	1,013,924	7,738,701	180,675,614	1,126,512	13,886,444	204,441,195
Additions				2,048,367	42,851	1,988,980	4,080,198
Disposals				(98, 844)	(258, 379)		(357, 223)
Reclassification			416,922	13,209,013	365	(13,626,300)
Balance as of December 31, 2019		1,013,924	8,155,623	195,834,150	911,349	2,249,124	208, 164, 170
Balance as of January 1, 2018	S	1,013,924	7,500,788	172,652,020	1,107,626	1,778,293	184,052,651
Additions				2,479,705	73,510	18,442,418	20,995,633
Disposals				(541, 738)	(65,351)		(607, 089)
Reclassification			237,913	6,085,627	10,727	(6,334,267)
Balance as of December 31, 2018		1,013,924	7,738,701	180,675,614	1,126,512	13,886,444	204,441,195

$\mathbb{Z}^{\mathbb{Z}}$

$=$ $-$

		Land	Building	Machinery and equipment	Other equipment	Under construction	Total
Accumulated depreciation / impairment:
Balance as of January 1, 2019	S		1,976,959	106,139,332	985,081		109, 101, 372
Depreciation for the period			316,902	13,765,707	36,815		14,119,424
Reversal of impairment loss				(213, 282)			(213, 282)
Disposals				(98, 844)	(258, 379)		(357, 223)
Reclassification				(180)	180
Balance as of December 31, 2019			2,293,861	119,592,733	763,697		122,650,291
Balance as of January 1, 2018	S		1,675,736	95,129,619	1,028,751		97,834,106
Depreciation for the period			301,223	11,652,496	21,497		11,975,216
Impairment loss				(109, 745)	$\blacksquare$		(109, 745)
Disposals				(532, 853)	(65, 352)		(598, 205)
Reclassification				(185)	185
Balance as of December 31, 2018			1,976,959	106,139,332	985,081		109,101,372
Carrying amounts:
Balance as of December 31, 2019		1,013,924	5,861,762	76,241,417	147,652	2,249,124	85,513,879
Balance as of December 31, 2018		1,013,924	5,761,742	74,536,282	141,431	13,886,444	95,339,823

$(i)$ Reversal of impairment loss and impairment loss

The estimated future recoverable amount of equipment, which had been identified to be no longer useful for its operation, is higher than the book value. In 2019 and 2018, the Company reassessed its estimates, wherein the amount of \$213,282 and \$109,745 of the initially recognized impairment has been reversed.

(g) Right-of-use assets

	Land
Cost:
Balance at January 1,2019	\$
Effect of retrospective application	300,605
Change in an index of lease payment	(2,776)
Balance at December 31, 2019	297,829
Accumulated depreciation:
Balance at January 1, 2019	\$
Effect of retrospective application
Depreciation for the period	198,607
Balance at December 31, 2019	198,607
Carrying Amount:
Balance at December 31, 2019	99.222

Lease receivables $(h)$

• On June 18, 2009, the Company signed an amended long-term lease agreement with Inotera $(i)$ Memories, Inc. (its name was changed to Micron Technology Taiwan in March, 2017, referred to as "MTTW") on the lease of building, facilities and land located on 348, 348-1 and 348-3, Hwa Ya Section, Kueishan District, Taoyuan City. This amended lease agreement, which took effect retroactively from January 1, 2009, includes the renewal term. Initial lease term is from January 1, 2009 to December 31, 2018. However, MTTW is entitled to renew this amended lease agreement for an unlimited number of consecutive additional terms of five years each, by providing a written notice with the intention to renew the lease term commencing from January 1, 2019. MTTW has completed the renewal of its lease agreement, with a written notice on December 13, 2018. In addition, MTTW has an exclusive option to purchase the leased assets for a total purchase price of USD50,000 thousand on and after January 1, 2024. Also, the rental receivable for the entire year of 2009 has been waived. Initial yearly rentals for the leased building (including facilities and land) were USD13,010 thousand and USD1,990 thousand, respectively from January 1, 2010 to December 31, 2018; the first yearly renewal rentals for the leased building (including facilities and land) will be USD8,010 thousand and USD1,990 thousand, respectively, from January 1, 2019 to December 31, 2023; the subsequent yearly renewal rentals for the leased building (including facilities and land) will be USD10 thousand and USD1.990 thousand commencing from January 1, 2024. The amended lease agreement for the building (including facilities) is treated as a capital lease because (a) the present value of the periodic rental payments made since the inception date is at least 90% of the market value of the leased assets and (b) the lease term is equal to 75% or more of the total estimated economic life of the leased assets. The land is treated as an operating lease.
• (ii) The total lease receivable from the capital lease of the building (including facilities) was \$5,185,620; the implicit interest rate was 10.56%. The cost of the leased assets at the beginning of the lease period was \$2,656,223. The difference was recognized as unrealized interest revenue of \$2,529,397. For the years ended December 31, 2019 and 2018, the Company recognized the interest revenue of \$96,730 and \$119,578, respectively, from the amortization of unrealized interest revenue.

The details of lease receivables were as follows:

	December 31, 2019				December 31, 2018
		Gross investment in the lease	Unearned finance income	Present value of minimum lease payments receivable	Gross investment in the lease	Unearned finance income	Present value of minimum lease payments receivable
Less than one year	S	264,331	78,317	186,014	264,331	96.730	167,601
Between one and five years		792,989	103,103	689.886	1.057.320	181,420	875,900
Subtotal		1,057,320	181,420	875.900	1,321,651	278,150	1,043,501
Current				\$ 186,014			167,601
Non-current				689,886			875,900
				875,900			1,043,501

Please refer to Note 6(s) for information of credit risk.

(i) Bonds Payable

	December 31, 2018
Issuance of unsecured overseas convertible bonds	14,267,000
Conversion of convertible bonds to ordinary shares	(14,267,000)
Balance at end of period	$\overline{\phantom{a}}$

	For the years ended December 31, 2018
Embedded derivatives-call and put options and conversion rights remeasured at fair value through loss (included other gains and losses)	140,266

Item	The first unsecured overseas convertible bond
1. Issue amount	USD500,000 thousand
2. Issue par value	USD200 thousand
3. Issue period	$2017.1.24 \sim 2022.1.24$
4. Bond expiration	5 years
5. Coupon rate	$0\%$
6. Conversion price	TWD52.47 dollars
7. Conversion period 8. Put option of bond holders	The bondholder has the right to convert any bonds into shares that are subject to the terms set forth in the contract. The bonds are convertible anytime after 40 days from the issuance date (excluding the issuance date itself). (A) Each bondholder may require the Company to redeem, in whole
	or in part, the convertible bonds at an amount, hereinafter referred to as "Early Redemption Amount" (ERA), calculated at par value, plus, interest compensation, which is calculated semi- annually at the rate of 1.75% per annum, after 3 years from the issuance date (excluding the issuance date itself).
	(B) Each bondholder may redeem in advance, in whole or in part, the convertible bond if the Company is delisted from the Taiwan stock exchange.
	(C) Each bondholder may redeem in advance, in whole or in part, the convertible bonds if the Company meets all the conditions on the changes in its rights of control in the contract.

Item	The first unsecured overseas convertible bond
9. Call option of issuer	(A) The issuer may redeem, in whole or in part, the convertible bonds at the ERA if the closing price of the Company's shares which translated into US dollars at the prevailing rate for a period of 20 trading days in any period of 30 consecutive trading days is above 130 percent of the ERA multiplied the conversion ratio and divided by par value.
	(B) The issuer may redeem its outstanding convertible bonds at their Early Redemption Amount if more than 90 per cent, in principal, of the amount of the bonds have already been converted, redeemed, repurchased or cancelled.
	(C) The issuer may redeem, in whole or in part, or the convertible bonds at their Early Redemption Amount if the Company has become obliged to pay the additional interests and costs as a result of any changes in, or amendment to, the laws or regulations of the ROC.

The host contract debt instruments and derivative conversion rights instruments were included in convertible bond, the host contract are measured at an effective annual rate equal to 1.6593%; the derivative conversion rights instruments are measured at fair value recognized in profit or loss.

The Company approved to distribute its cash dividends for 2016 in the general meeting of stockholders held on May 26, 2017. As a result, the conversion price decreased to \$50.94 dollars since June 26, 2017 (ex-dividend date).

Because the bondholders had exercised the entire conversion rights, the first unsecured overseas convertible bond issued by the Company had been fully converted in the first quarter of 2018.

Lease liabilities $(i)$

	December 31, 2019
Current	99,924
For the maturity analysis, please refer to Note $6(s)$ .
The amount recognized in profit or loss were as follows:
	For the year ended
	December 31, 2019
Interest on lease liabilities	2,933
Expense relating to short-term and low-value lease assets	49,426

The amount recognized in the statement of cash flows of the Group was as follows:

	For the year
	ended
	December 31,
	2019
Total cash outflow for leases	231,901

$(i)$ Land lease

As of December 31, 2019, the Company leases its land with a period of 3 years. The lease included an option to terminate, which are exercisable only by the Company and not by the lessors. The lease payment changes annually based on a local price index.

Other lease $(ii)$

The Company leases parking lots and office spaces with contract terms ranging from one to five years. These leases are short-term or with low-value items. The Company applied the recognition exemptions and elected not to recognize its right-of-use assets and lease liabilities for these leases.

$(k)$ Employee benefits

Defined benefit plan $(i)$

The movements in the present value of the defined benefit obligations and fair value of plan assets were as follows:

		December 31, 2019	December 31, 2018
Present value of defined benefit obligations	S.	1.098.174	1,025,794
Fair value of plan assets		(522.278)	(488, 491)
Net defined benefit liabilities		575.896	537,303

The Company has established an employee defined benefit retirement plan covering full-time employees. Under this plan, contributions are made to an independent fund that is deposited with Bank of Taiwan. Employees are eligible for retirement and payments of retirement benefits are based on years of service and the average salary for the last six months before the employee's retirement according to the R.O.C. Labor Standards Law.

$1)$ Composition of plan assets

The Labor Pension Fund Supervisory Committee manages the Company's pension fund which is being funded according to the Labor Standards Law. Under the Regulations for Revenues, Expenditures, Safeguard and Utilization of the Labor Retirement Fund, this fund is required to distribute minimum income, but such minimum income shall not be less than the interest income derived from two-year time deposit with the local banks.

As of December 31, 2019, the Company's pension fund with Bank of Taiwan amounted to \$522,278. Please refer to the related information published on the website of the Labor Pension Supervisory Committee concerning the utilization of the labor pension fund, related yield rate and its allocation.

$2)$ Movements in present value of the defined benefit obligations

	For the years ended December 31,
		2019	2018
Defined benefit obligation as of January 1,	\$	1,025,794	984,774
Current service and interest costs		18.052	17,675
Remeasurement of net defined benefit liabilities
-actuarial losses arising from change in financial assumptions		64.451	30,568
Benefits paid		(10, 123)	(7,223)
Defined benefit obligation as of December 31,		1,098,174	1,025,794

Movements in fair value of defined benefit plan assets $3)$

	For the years ended December 31,
		2019	2018
Fair value of plan assets as of January 1,	S	488,491	458,977
Interest income		6.192	5,822
Remeasurement of net defined liabilities
- return on plan assets (excluding interest income)		22,355	12,472
Contributions from employer		14,357	13,998
Benefits already paid by the plan		(9,117)	(2,778)
Fair value of plan assets as of December 31,		522,278	488,491

$4)$ Expenses recognized in profit or loss

Current service costs

Cost of goods sold Operating expenses $\bar{\alpha}$

Net interest income of net defined benefit liabilities Operating expected rate of return for the plan asset

For the years ended December 31,
2019	2018
\$ 5,230	5,365
12,822	12,310
(6,192)	(5, 822)
11,860	11,853
\$ 7.662	7,799
4,198	4,054
11,860	11,853

Remeasurement of net defined benefit liabilities recognized in other comprehensive $5)$ income

	For the years ended December 31,
	2019	2018
Balance as of January 1,	S	11,729 23,635
Recognized during the period		14.477 33,677
Adjustment in tax rate		(2,571)
Balance as of December 31,		23,635 57,312
Actuarial assumptions

December 31, December 31, 2019 Discount rate $1.00 \%$

Based on the actuarial report, the Company is expected to make contributions of \$15,098 to the defined benefit plans in 2019.

The weighted average duration of the defined benefit plan is 17.6 years.

$7)$ Sensitivity analysis

Future salary increases

$6)$

	Effect of defined benefit obligations
	Increase amount	Decrease amount
December 31, 2019
Discount rate (change $0.25\%$ )	\$ 41,656	(39,743)
Future salaries (change 1%)	176,405	(149, 197)
December 31, 2018
Discount rate (change $0.25\%$ )	41,904	(39, 885)
Future salaries (change 1%)	178,420	(149, 450)

The sensitivity analysis presented above may not be representative of the actual change in the present value of the defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated. The sensitivity analysis adopts the same methods for determining the defined benefit assets at balance sheet date.

The same methods and assumptions are adopted in the two-year sensitivity analysis.

2018

2.85 %

1.25 %

2.85 %

(ii) Defined contribution plan

The Company contributes an amount equal to 6% of the employee's monthly wages to the Labor Pension personal account of the Bureau of the Labor Insurance in accordance with the provisions of the Labor Pension Act, under which, the Company is not required to bear the regulated or putative obligation subsequent to the payment of fixed-rate contribution.

The Company's pension costs under the contribution pension plan amounted to \$141,403 and \$128,883 for the years ended 2019 and 2018, respectively.

$(1)$ Income tax

$(i)$ The Company's income tax expense recognized for the years ended December 31, 2019 and 2018 were as follows:

	For the years ended December 31,
		2019	2018
Current tax expense
Current period	S	876,663	2,209
Surtax on undistributed earnings		187,965	2,187,695
Adjustment for prior periods		$\rightarrow$	15,009
Deferred tax expense		319,147
Tax expense		1,383,775	2,204,913

The Company's tax income recognized in other comprehensive income for the years ended December 31, 2019 and 2018 were as follows:

	For the years ended December 31,
		2019	2018
Items that could not be reclassified subsequently to profit or loss:
Remeasurement of net defined benefit plan		8.419	3,619
Adjustment in tax rate		-	2,571
		8.419	6.190

The Company's tax expense calculated at the statutory income tax rate on the financial reporting income before income taxes was reconciled to the tax expense as follows:

	For the years ended December 31,
		2019	2018
Income tax calculated based on local tax rate	S	2,241,675	8,313,308
Tax effect of permanent differences		(168,317)	(86, 173)
Change in unrecognized temporary differences		(48, 133)	178,361
Tax effect of unrecognized current-year loss carryforward		(829, 415)	(8,405,496)
Adjustment for prior periods			15,009
Surtax on undistributed earnings		187,965	2,187,695
Income basic tax			2,209
Total		1,383,775	2,204,913

• (ii) Deferred tax assets and liabilities
• $1)$ Unrecognized deferred income tax assets

Net operating loss carry forwards

December 31,	December 31,
2019	2018
۳D	843,280

The ROC Income Tax Act allows tax losses, as assessed by the tax authorities, to offset taxable income over a period of ten years for local tax reporting purposes. The aforementioned tax losses are not recognized as deferred tax assets as the Company estimates that the taxable income in the future will not be sufficient for covering temporary differences.

$2)$ Recognized deferred tax liabilities and assets

Deferred tax assets:

		Operating loss carry forwards	Impairment loss of assets	Improvements costs of environmental safety and factory facilities	Others	Total
Balance as of January 1, 2019	z		234,579	168,625	457,557	860,761
Recognized in loss			(79, 477)	(3, 593)	(236,077)	(319, 147)
Recognized in other comprehensive income					8,419	8,419
Balance as of December 31, 2019			155,102	165,032	229,899	550,033
Balance as of January 1, 2018	s	297,195	255,113	143,332	222,063	917,703
Recognized in profit or loss		(201, 406)	(65, 554)		192,687	(74, 273)
Recognized in other comprehensive income					3,619	3,619
Adjustment in tax rate recognized in profit or loss		(95, 789)	45,020	25,293	36,617	11,141
Adjustment in tax rate recognized in other comprehensive income					2,571	2,571
Balance as of December 31, 2018			234,579	168,625	457,557	860,761

Deferred tax liabilities:

		Unrealized foreign exchange gain (loss)
Balance as of January 1, 2018	S	63,132
Recognized in profit or loss		(74, 273)
Adjustment in tax rate recognized in profit or loss		11.141
Balance as of December 31, 2018

• $3)$ The Company's income tax returns have been examined by the ROC tax authority through 2016.
• (m) Capital and other equity

As of December 31, 2019 and 2018, the Company's government registered total authorized capital both amounted to \$300,000,000 with \$10 par value per share, the number of ordinary shares both were 30,000,000 thousand shares and total paid-up ordinary share amounted to \$30,733,649, and \$31,032,389 respectively. All issued shares were paid up upon issuance.

The movements of shares outstanding for the years ended December 31, 2019 and 2018 were as follows:

(in thousand shares)

	Ordinary Shares
	2019	2018
Balance as of January 1,	3,103,239	2,963,938
Conversion of convertible bonds		73,284
Conversion of certificates of bonds-to-share		22,396
Exercise of employees share options	20,262	43,621
Retirement of treasury shares	(50, 136)
Balance as of December 31,	3,073,365	3,103,239

Ordinary share $(i)$

On February 27, May 10, August 12 and November 8, 2019, the Company's Board of Directors approved to issue the Company's ordinary shares deriving from the exercise of employee share options. The Company had issued 313 thousand, 89 thousand, 19,056 thousand and 804 thousand ordinary shares at par value, respectively, with the issuing prices of \$33.1, \$33.1, \$29.2 to \$33.1 and \$29.2 to \$30.3 per share, which totaled \$202,620. All issued shares were paid up upon issuance and the related process for registration had been completed.

For the fourth quarter of 2019, the Company's ordinary shares were derived from the exercise of employee share options. Accordingly, the Company had issued 119 thousand ordinary shares, at issuing prices of \$29.2 per share, which totaled \$3,475, which was recognized as advance receipts for share capital as of December 31, 2019.

In addition, 22,396 thousand shares of certificates of entitlement had been issued as of December 31,2017; all certificates of entitlement had been transferred to ordinary shares, and the related process for the registration had been completed in the first quarter of 2018.

For the years ended December 31, 2018, the overseas convertible bondholders exercised some of their conversion rights and the Company issued 73,284 thousand ordinary shares at a par value which totaled \$732,839, respectively. The process for the registration had been completed.

On November 12 and August 10, 2018, the Company's Board of Directors approved to issue the Company's ordinary shares deriving from the exercise of employee share options. The Company had issued 1.819 thousand and 41.802 thousand ordinary shares at par value, with the issuing prices of \$34.3 and \$33.1 per share, which totaled \$436.210. All issued shares were paid up upon issuance and the related process for registration had been completed.

For the fourth quarter of 2018, the Company's ordinary shares were derived from the exercise of employee share options. Accordingly, the Company had issued 196 thousand ordinary shares, at issuing prices of \$33.1 per share, which totaled \$6,488, which was recognized as advance receipts for share capital as of December 31, 2018.

$\sim$

$(ii)$ Capital surplus

	December 31, 2019	December 31, 2018
Premium from the issuance of stock	\$ 29,010,509	30,712,310
Employee stock option plans	2,732,307	2,844,690
Expired employee share option plans	262,499
Employee stock option plans
Change in equity of associates accounted for using equity method	24
	32,005,339	33,557,005

In accordance with the R.O.C. Company Act, realized capital reserves can only be reclassified as share capital or distributed as cash dividends after offsetting losses. The aforementioned capital reserves include share premiums and donation gains. In accordance with the Securities Offering and Issuance Guidelines, the capitalization of capital reserves every year shall not exceed 10 percent of the paid-up capital.

(iii) Retain earning

According to the Company's Articles of Incorporation, the Company's annual net profit, after providing for income tax and covering the losses of previous years, is first set aside for legal reserve at the rate of 10% thereof until the accumulated balance of legal reserve equals the total issued capital and any special reserves pursuant to relevant laws and regulations. The remainder, plus the undistributed earnings of the previous years, are distributed or left undistributed for business purposes according to the resolution of the stockholders' dividend distribution plan, which are initially proposed by the Board of Directors and adopted by the shareholders in the annual stockholders' meeting.

As it belongs to a highly capital-intensive industry with strong growth potential, the Company adopts a dividend distribution policy which is in line with its plans for product line expansion and the demand of fund. This policy requires that the distribution of cash dividends shall be equal to at least fifty percent (50%) of the Company's total dividend distribution every year.

$1)$ Legal reserve

When the Company incurs no loss, it may, in pursuant to a resolution to be adopted by a shareholders' meeting, distribute its legal reserve by issuing new shares or by cash. Only the portion of legal reserve which exceeds 25 percent of the paid-in capital may be distributed.

Special reserve $2)$

In accordance with Ruling No. 1010012865 issued by the FSC on April 6, 2012, a portion of current-period earnings and undistributed prior-period earnings shall be reclassified as special earnings reserve during earnings distribution. The amount to be reclassified should equal the current-period total net reduction of other shareholders' equity. Similarly, a portion of undistributed prior-period earnings shall be reclassified as special earnings reserve (and does not qualify for earnings distribution) to account for cumulative changes to other shareholders' equity pertaining to prior periods. Amounts of subsequent reversals pertaining to the net reduction of other shareholders' equity shall qualify for additional distributions.

$3)$ Earnings distribution

Earnings distribution for 2018 and 2017 was approved in the general meeting of shareholders held on May 30, 2019 and May 24, 2018, respectively. The relevant dividend distributions to shareholders were as follows:

	For the year ended December 31, 2018
Dividends attributable to ordinary shareholders:		Dividends per share	Amount
Cash dividends	\$	7.11	21,700,000
		2017	For the year ended December 31,
		Dividends per share	Amount
Dividends attributable to ordinary shareholders: Cash dividends	\$	3.56	10,879,288

(iv) Treasury shares

The Company repurchased shares from the securities exchange market based on section 28(2) of the Securities and Exchange Act and the movement in treasury shares were as follows:

		Reasons for repurchase of shares
	Transferring to employees		Protecting the Company's integrity and stockholders equity		Total
	Thousand shares	Amount	Thousand shares	Amount	Thousand shares	Amount
Balance as of January 1, 2019	20,000 \$	1,146,932	30,445	1,635,743	50,445	2,782,675
Repurchase during 2019			19,691	1,029,878	19,691	1,029,878
Retirement for the period			(50, 136)	(2,665,621)	(50,136)	(2,665,621)
Balance as of December 31, 2019	20,000 S	1,146.932			20,000	1,146,932
		Reasons for repurchase of shares
	Transferring to employees		Protecting the Company's integrity and stockholders		Total
	Thousand		equity Thousand		Thousand
	shares	Amount	shares	Amount	shares	Amount
Balance as of January 1, 2018	S
Repurchase during 2018	20,000	1,146,932	30,445	1,635,743	50,445	2,782,675
Balance as of December 31, 2018	20,000 S	1,146,932	30,445	1,635,743	50,445	2,782,675

On February 27, 2019, the Company's Board of Directors approved to retire 501,360 thousand treasury shares, resulting in a decrease in ordinary shares amounting to \$501,360. The Company recognized the decrease in capital surplus of \$2,164,261, with the same record date as the capital reduction, due to the book value being higher than the par value of the treasury shares. The related process for registration had been completed.

In accordance with Securities and Exchange Act requirements, the number of shares repurchased should not exceed 10 percent of all shares outstanding. Also, the value of the repurchased shares should not exceed the sum of the Company's retained earnings, share premium, and realized capital reserves. As of September 30, 2018, the Company could repurchase no more than 310,142 thousand shares, with a total value of no more than \$127,955,392. As of the same date, the Company had not yet repurchased any shares.

In accordance with the requirements of Securities and Exchange Act, treasury shares held by the Company should not be pledged, and do not hold any shareholder rights before their transfer.

(v) Other equity (net of tax)

	Exchange differences on translation of foreign financial statements	Unrealized losses from financial assets measured at fair value through other comprehensive income	Total
Balance as of January 1, 2019	(179.736)	(94.098)	(273, 834)
Exchange differences on translation of foreign financial statements	(758, 303)		(758, 303)
Unrealized losses from financial of assets measured at fair value through other comprehensive income, associates accounted for using equity
method		(8,963)	(8,963)
Balance as of December 31, 2019	(938, 039)	(103, 061)	(1,041,100)

	Exchange differences on translation of foreign financial statements	Unrealized losses from financial assets measured at fair value through other comprehensive income	Total
Balance as of January 1, 2018	(39,163)		(39, 163)
Exchange differences on translation of foreign financial statements	(140, 573)		(140, 573)
Unrealized losses from financial of assets measured at fair value through other comprehensive income, associates accounted for using equity method		(94,098)	(94,098)
Balance as of December 31, 2018	(179, 736)	(94, 098)	(273, 834)

$(n)$ Share-based payment transactions

The Company has issued stock options under the employee stock option plan (ESOP) as follows:

	The $7th$ batch of Employee Stock Option Plan	The 8 th batch of Employee Stock Option Plan	The 9 th batch of Employee Stock Option Plan
Grant date	2011.3.21	2016.5.10	2016.8.11
Grant unit	70,000	97,500	2,500
Exercise price (Notes $1-8$ )	14.6	38.0	36.6
Deal period	8 years (Expires on March 20,2019)	8 years	8 years
Vested Conditions	Duration of two years duration and at certain proportion	Duration of two years duration and at certain proportion	Duration of two years duration and at certain proportion

• Note 1: The Company increased its capital through carrying out a private placement of ordinary shares in 2011, 2012 and 2013. As a result, the exercise price of the 7th batch of the employee stock option plan was adjusted to \$6.0 dollars, \$5.1 dollars and \$4.3 dollars, respectively, in accordance with the offering and exercising terms and conditions of ESOP.
• Note 2: The Company reduced its capital in 2014. As a result, the exercise price of the 7th batch of the employee stock option plan was adjusted to \$43 dollars in accordance with the offering and exercising terms and conditions of ESOP.
• Note 3: The Company approved to distribute its cash dividends in 2015. As a result, the exercise price of the 7th batch of the employee stock option plan was adjusted to \$41.5 dollars in accordance with the offering and exercising terms and conditions of ESOP.
• Note 4: The Company increased its capital through issuing of shares in 2016. As a result, the exercise price of the 7th batch of the employee stock option plan was adjusted to \$40.9 dollars in accordance with the offering and exercising terms and conditions of ESOP.
• Note 5: The Company approved to distribute its cash dividends in 2016. As a result, the exercise price of the 7th and 8th batch of the employee stock option plan were adjusted to \$38 dollars and \$35.3 dollars, respectively, in accordance with the offering and exercising terms and conditions of ESOP.

• Note 6: The Company approved to distribute its cash dividends in 2017. As a result, the exercise price of the 7th, 8th and 9th batch of the employee stock option plan were adjusted to \$36.9 dollars, \$34.3 dollars and \$35.5 dollars, respectively, in accordance with the offering and exercising terms and conditions of ESOP.

• Note 7: The Company approved to distribute its cash dividends in 2018. As a result, the exercise price of the 7th, 8th and 9th batch of the employee stock option plan were adjusted to \$35.6 dollars, \$33.1 dollars and \$34.3 dollars, respectively, in accordance with the offering and exercising terms and conditions of ESOP.

• Note 8: The Company approved to distribute its cash dividends in 2019. As a result, the exercise price of the 8th and 9th batch of the employee stock option plan were adjusted to \$29.2 dollars and \$30.3 dollars, respectively in accordance with the offering and exercising terms and conditions of ESOP.
• $(i)$ Options granted were priced using the Black-Scholes pricing model and the inputs to the model were as follows:

		The 7 th batch of Employee Stock Option Plan	The 8 th batch of Employee Stock Option Plan	The 9 th batch of Employee Stock Option Plan
Dividend rate		$\frac{0}{0}$	$\%$	$\%$
Expected volatility		53.79 %	55.47 %	45.80 %
Risk-free rate		$0.9307\%$	0.5728 %	0.529%
Fair value of unit stock option (dollar)	-S	5.91	18.77	15.30

Expected volatility is based on weighted average of historical volatility, and it is adjusted accordingly when there is additional market information about the volatility. The expected term of stock option is based on each of the Company's issued stock option plans. Expected dividend and risk-free rate is determined based on government bonds.

Relevant information of employee stock option plans $(ii)$

		For the years ended December 31,
	2019		2018
	Weighted- average exercise (price TWD)	Number of options (Units)	Weighted- average exercise (price TWD)	Number of options (Units)
Outstanding as of January 1,	S 34.49	109,382	35.34	155,374
Options exercised	29.22	(20, 185)	33.12	(43, 817)
Options forfeited	29.25	(628)	33.99	(2,175)
Options expired	35.60	(60, 367)
Outstanding as of December 31,	29.22	28,202	34.49	109,382
Options exercisable as of December 31,	29.23	5,617	35.50	62,992

Further details of the stock options of the Company were as follows:

	December 31. December 31.
	2019	2018
Range of exercise price (dollar)	$29.2 \rightarrow 33.1$	$33.1 - 35.6$
Weighted average of remaining option plan period (year)	$4.36 - 4.61$	$0.22 - 5.61$

(iii) Compensation cost

			For the years ended December 31,
			2019	2018
	Compensation cost arising from share options granted to employees	\$	150,116	717,656
$\circ$	Earnings per share
			For the years ended December 31,
			2019	2018
	Basic earnings per share:
	Net income attributable to the Company	S	9,824,599	39,361,625
	Weighted-average number of ordinary shares outstanding (basic)		3,045,219	3,074,181
	Basic earnings per share (dollar)		3.23	12.80
	Diluted earnings per share:
	Net income attributable to the Company		9,824,599	39,361,625
	Effect of potentially dilutive ordinary shares
	Weighted-average number of ordinary shares (basic)		3,045,219	3,074,181
	Effect of employee stock option		22,392	69,935
	Effect of employee remuneration		14,052	34,252
	Weighted-average number of ordinary shares (diluted)		3,081,663	3,178,368
	Diluted earnings per share (dollar)		3.19	12.38

(p) Revenue from contracts with customers

(i) Disaggregation of revenue

	For the years ended December 31, 2019		For the years ended December 31, 2018
		Manufacturing department	Manufacturing department
Primary geographic markets:
Taiwan	\$	19,426,583	37,960,881
Japan		3,849,678	4,299,628
China		18,562,317	25,386,192
USA		5,917,946	10,216,103
Other countries		3,718,971	6,407,148
		51,475,495	84,269,952
Major products line:
Dynamic Random Access Memory (DRAM)	\$	51,266,264	84,128,271
Other		209,231	141,681
	\$	51,475,495	84,269,952

(Continued)

$\bar{\mathcal{A}}$

Contract balances $(i)$

		December 31, 2019	December 31, 2018	January 1, 2018
Notes receivable from operating activities	\$		481	3,577
Notes receivable from non- operating activities		41,545
Accounts receivable (including related parties)		7,466,062	10,217,057	9,047,022
Total	S	7,507,607	10,217,538	9,050,599

For details on notes and accounts receivable, and loss allowance for impairment, please refer to note $6(b)$ .

$(q)$ Remuneration to employees

According to the Company's articles of incorporation, if the Company makes a profit, it should appropriate for employee compensation which is calculated based on 1% to 12% of the Company's net income before tax before deduction of employee compensation, and after offsetting accumulated deficits, if any, should be distributed as employee compensations. Employees who are entitled to receive the above-mentioned employee compensation, in shares or cash, include the employees of the subsidiaries of the Company who meet certain specific requirements.

The estimated employee remuneration which was charged to profit or loss under operating costs or expense amounted to $$800,000$ and $$1,740,000$ for the years ended December 31, 2019 and 2018, respectively. This employee remuneration was estimated based on the Company's net income before tax before deducting any employee compensation, according to the earnings allocation method as stated under the Company's articles of association, the related information would be available at the Market Observation Post System website.

There is no difference between the estimated employee remuneration, which was stated in the financial statements for the year ended December 31, 2019, and the amounts approved by the Company's Board of Directors.

The difference between the estimated employee remuneration, which was stated in the financial statement for the year ended December 31, 2018, and the amount of actual distributions in 2018, amounted to \$1,739,997. The Company recognized the difference of \$3 in profit or loss in 2019.

Non-operating income and expenses $(r)$

$(i)$ Other income

		For the years ended December 31,
		2019	2018
Interest Income
Bank deposits and short-term notes	\$	246,818	899,044
Financial leases		96,730	119,578
	S	343,548	1,018,622

46

(Continued)

$(ii)$ Other gains and losses – net

	For the years ended December 31,
		2019	2018
Gain on disposal of property, plant and equipment	\$	4,723	16,859
Reversal of impairment loss on non-financial assets		213,282	109,745
Foreign exchange gain (loss)		(168, 956)	1,231,734
Net loss on financial assets and liabilities at fair value through profit or loss			(281, 107)
Gain on disposal on a subsidiary			497
Others		180,778	125,812
	S	229,827	1,203,540

(iii) Finance costs

	For the years ended December 31,
	2019	2018
Bank loan	\$	26
Amortization interest of lease liabilities	2,933	$\blacksquare$
Amortization interest of overseas convertible bond		5,105
Others	191	194
	3.124	5,325

$(s)$ Financial instruments

• $(i)$ Credit risk
• $1)$ Exposure to credit risk

The carrying amount of financial assets represents the maximum exposure to credit risk.

$2)$ Concentration of credit risk

The majority of Company's customers are mostly those in the high-tech industry. In order to reduce accounts receivable credit risk, the Company continuously assesses the financial condition of its customers. If it is necessary, the Company will ask for guarantees or warranties. The Company still regularly assesses the likelihood of collectability of accounts receivable and sets aside allowance for bad debts, based on the result of management's evaluation of the overall amounts of bad debts.

As of December 31, 2019 and 2018, the Company's major customers consisted of five and eight customers which accounted for 69.57% and 61.70%, respectively, of accounts receivable so that management believes the concentration of credit risk.

$\overline{1}$

$3)$ Credit risk of receivables

For credit risk exposure of notes and accounts receivables (including related parties), please refer to note 6(b).

Other financial assets measured at amortized cost includes other receivables, time deposits and refundable deposits.

Considering that the Company deals only with other external parties with good credit standing and with the above investment grade financial institutions, all of the above financial assets are considered to have low credit risk.

As of December 31, 2019 and 2018, no allowance for impairment was provided because there was no indication of credit-impaired for the 12-month ECL or lifetime ECL allowance for other financial assets measured at amortized cost.

(ii) Liquidity risk

The following are the remaining contractual maturities at the end of the reporting period of financial liabilities, including estimated interest payments but excluding the impact of netting agreements:

		Carrying amount	Contractual cash flow	Within 6 months	6-12months	1-2years	2-5years	Over 5 years
December 31, 2019
Non-derivative financial liabilities
Accounts payable (including related parties)	S	2,706,958	2,706,958	2,706,958	٠
Other payable (including related parties)		7,864,881	7,864,881	7,864,881
Lease liabilities		99,924	100,336	100,336
	S	10,671,763	10,672,175	10,672,175
December 31, 2018 Non-derivative financial habilities
Accounts payable (including related parties)	S	4,579,702	4,579,702	4.579.702	-
Other payable (including related parties)		30,309,552	30,309,552	30,309,552
Total	s.	34,889,254	34,889,254	34,889,254

It is not expected that the cash flows included in the maturity analysis could occur significantly earlier, or at significantly different amounts.

(iii) Currency risk

$1)$ Exposure to currency risk

The Company's significant exposure to foreign currency risk was as follows:

		December 31, 2019		December 31, 2018
	Foreign currency (in thousands)	Foreign rate (dollars)	New Taiwan Dollars	Foreign currency (in thousands)	Foreign rate (dollars)	New Taiwan Dollars
Financial assets:
Monetary items
USD	\$ 306,649	30.106	9,231,975	1,565,780	30.733	48,121,117
JPY	2,546,135	0.2763	703,497	3.219.721	0.2772	892,507
EUR	144	33.6895	4,851		35.167	246
HKD	227.936	3.8634	880.608		$\rightarrow$

		December 31, 2019	December 31, 2018
	Foreign currency (in thousands)	Foreign rate (dollars)	New Taiwan Dollars	Foreign currency (in thousands)	Foreign rate (dollars)	New Taiwan Dollars
Financial liabilities:
Monetary items
USD	\$ 112,965	30.106	3,400,924	785,778	30.733	24.149.315
JPY	2.014.894	0.2763	556,715	2,644,019	0.2772	732,922
EUR	4.616	33.6895	155.511	4.387	35.167	154,278

$2)$ Sensitivity analysis

The Company's exposure to foreign currency risk arises from the foreign currency exchange fluctuations on cash and cash equivalents, accounts receivable (including related parties), accounts payable, and other payables (including related parties) which are denominated in different foreign currencies. A 1% depreciation of the TWD against the USD, EUR, and JPY as of December 31, 2019 and 2018 would have increased the net income before tax by \$67,077 and \$239,774 for the years ended December 31, 2019 and 2018, respectively. This analysis assumes that all other variables remain constant and ignores any impact of forecasted sales and purchases. The analysis is performed on the same basis.

Since the Company has many kinds of functional currency, the information on foreign exchange loss on monetary items is disclosed by total amount. For the years ended December 31, 2018 and 2017, foreign exchange gain (loss) (including realized and unrealized portions) amounted to \$(168,956) and \$1,231,734, respectively.

(iv) Fair value of financial instruments

$\mathcal{L}$

$1)$ Types and fair value of financial instruments

The fair value of financial liabilities at fair value though profit or loss was measured at recurring fair value. The carrying amount and fair value of the Company's financial assets and liabilities, including the information on fair value hierarchy were as follows; however, except as described in the following paragraphs, for financial instruments not measured at fair value whose carrying amount is reasonably close to the fair value, disclosure of fair value information is not required:

	December 31, 2019
					Fair Value
		Book Value	Level 1	Level 2	Level 3	Total
Financial assets measured at amortized cost
Cash and cash equivalents	S	6,497,820	۰
Notes and accounts receivable (including related parties)		7,507,607
Other receivables		1,379,107
Lease payments receivable (including) current portion)		875,900
Total		16,260,434

	December 31, 2019
			Fair Value
Financial liabilities measured at amortized cost	Book Value	Level 1	Level 2	Level 3	Total
Accounts payable (including related parties)	\$ 2,706,958
Other payables (including related parties)	7,864,881
Lease liabilities-current	99,924
Total	\$10,671,763
	December 31, 2018 Fair Value
	Book Value	Level 1	Level 2	Level 3	Total
Loans and receivables:
Cash and cash equivalents	46,338,574 S
Notes and accounts receivable (including related parties)	10,217,538
Other receivables	1,136,359
Lease payments receivable (including) current portion)	1,043,501
Total	58,735,972 S
Financial liabilities
Financial liabilities measured at amortized cost
Notes and accounts payable (including related parties)	4,579,702
Other payables (including related parties)	30,309,552
Total	34,889,254 S

$2)$ Valuation techniques for financial instruments not measured at fair value

The Company's valuation techniques and assumptions used for financial instruments not measured at fair value are as follows:

a) Financial assets and liabilities measured at amortized cost

If there is quoted price generated by transactions, the recent transaction price and quoted price data is used as the basis for fair value measurement.

However, if no quoted prices are available, the fair value is determined by discounted cash flows, using estimation and assumptions under existing market conditions which are obtainable by the Company.

$3)$ There were no transfers from financial assets for the years ended December 31, 2019 and 2018.

$(t)$ Financial risk management

$(i)$ Nature and extent

The Company has the following exposure risks for holding certain financial instruments:

• $1)$ Credit risk
• $2)$ Liquidity risk
• $3)$ Market risk

The following further discloses detailed information about exposure risk arising from the aforementioned risks and the Company's objectives, policies and processes for measuring and managing the above mentioned risks. For more disclosures about the quantitative effects of these exposure risks, please refer to the respective notes in the financial statements.

$(ii)$ Framework of risk management

The Company's Board of Directors has overall responsibility for the establishment and oversight of the risk management framework.

The Company's risk management policies are established to identify and analyze the risks being faced by the Company, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Company's activities. The Company, through their training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations.

The Company's Board of Directors oversees how management monitors compliance with the Company's risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Company. The Company's Board of Directors is assisted in its oversight role by Internal Audit. Internal Audit undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the Board of Directors.

(iii) Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company's receivables from customers, bank deposits and investments.

$1)$ Accounts receivable

The Company's exposure to credit risk is influenced mainly by the individual characteristics of each customer. However, management also considers the demographics of the Company's customer base, including the default risk of the industry and country in which customers operate, as these factors may have an influence on credit risk.

The Company has established a credit policy under which each new customer is analyzed individually for creditworthiness before the Company's standard payment and delivery terms and conditions are offered. The Company's review includes external ratings, when available, and in some cases, bank references. Purchase limits are established for each customer, which represent the maximum open amount without requiring approval from the Company; these limits are reviewed quarterly. Customers that fail to meet the Company's benchmark creditworthiness may transact with the Company only on a prepayment basis.

The Company established an impairment allowance that represents its estimate of incurred losses in respect of accounts receivable and investments. Major components of this impairment allowance are specific loss component that is related to individually significant exposure and collective loss component where is the loss is incurred but not identified. The collective component is based on historical payment experience of similar financial assets.

$2)$ Investment

The credit risk exposure in the bank deposits and other financial instruments are measured and monitored by the Company's finance department. Considering that the Company deals only with banks and other external parties with good credit standing and with above investment grade financial institutions, corporate organization and government agencies, management is not expecting non-compliance issues and significant credit risk.

(iv) Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. Also, the Company's approach to managing liquidity is to ensure, as much as possible, that it will always have sufficient current funds, such as cash and cash equivalents, securities with high liquidity and sufficient credit line from banks, to meet its liabilities when due, without incurring unacceptable losses or risking damage to the Consolidated Company's reputation.

The Company has unused bank facilities for \$17,479,000 and \$15,337,000 as of December 31, 2019 and 2018.

Market risk $(v)$

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Company's income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return.

The Company buys and sells derivatives in order to reduce market risks. All these transactions are made in accordance with the risk management policy.

$1)$ Currency risk

The Company's exposure to currency risk is on sales, purchases and borrowings that are denominated in a currency other than the respective functional currencies of the Company, primarily the New Taiwan Dollars (NTD). The currencies used in these transactions are denominated in NTD, USD, JPY, EUR and HKD.

Capital management (u)

The Company's policy is to maintain a strong capital base in order to maintain investor, creditor and market confidence and to sustain future development of the business. Capital consists of the Company's equity.

The Company may adjust the payment of dividend to shareholders, return cash to shareholders through capital reduction, issue new shares or sell held for sale assets in order to pay off its liabilities. Likewise, the Company monitors its debt-to-capital ratio which serves as the basis to control capital, the same practice as the other companies in the industry. The Company's debt-tocapital ratio on reporting date was as follows:

	December 31, 2019	December 31, 2018
Total Liabilities	13,081,887	38,258,740
Deduct: cash and cash equivalents	(6,497,820)	(46, 338, 574)
Net liabilities	6,584,067	(8,079,834)
Total equity	152,011,553	164,907,298
Debt-to-capital ratio	4.33 $%$	(4.90)%

The Company has not changed its capital management strategy as of December 31, 2019.

The investing and financing activities on non-cash transactions $(v)$

The Company's investing and financing activities on non-cash transactions for the years ended December 31, 2019 and 2018 were as follows:

(i) Acquisition of right-of-use asses by lease, please refer to Note $6(g)$

	For the years ended
	December 31, 2018
(ii) Conversion of convertible bonds to ordinary shares	3,240,750

	For the years ended
	December 31, 2019
(iii) Retirement of treasury shares	2,665,621

(iv) Reconciliation of liabilities arising from financing activities were as follows:

				Non-Cash changes
			Change in an index	Increased by other
	January 1, 2019	Cash flow	of lease payment	pavables	Interest expense	December 31, 2019
Lease liabilities	300.605	(184.115)	(2.776)	(16.723)	2.933	99.924

(7) Related-party transactions:

$(a)$ Names and relationship with related parties

The following are entities that have had transactions with related party during the periods covered in the financial statements.

Name of related party	Relationship with the Company
Piece Makers Technology, Corp.	The Company's subsidiary (Note)
Nanya Technology Corp. U.S.A.	The Company's subsidiary
Nanya Technology Corp. Delaware	The Company's subsidiary
Nanya Technology Corp. H.K.	The Company's subsidiary
Nanya Technology Corp. Japan	The Company's subsidiary
Nanya Technology International, Ltd.	The Company's subsidiary
Nanya Technology Corp. Europe GmbH	The Company's subsidiary
Nanya Technology Corp. Shenzhen	The Company's subsidiary
Nan Ya Photonics Incorporation	The Company's other related parties
Formosa Sumco Technology Corporation	The Company's other related parties
Formosa Advanced Technologies Co., Ltd.	The Company's associates
Formosa Technologies Corporation	The Company's other related parties
Formosa Biomedical Technology Corp.	The Company's other related parties
Formosa Petrochemical Corporation	The Company's other related parties
Formosa Plastics Corporation	The Company's other related parties
Formosa FCFC Carpet Corporation	The Company's other related parties
Formosa Waters Technology Co., Ltd.	The Company's other related parties
Formosa Taffeta Co., Ltd.	The Company's other related parties
Nan Ya Plastics Corporation	The entity with significant influence over the Company

Note: On February 26, 2018, the Company had fully disposed all of its shares in Piece Makers, resulting in its loss of control over it. Therefore, Piece Makers was no longer a subsidiary of the Company.

Significant related-party transactions $(b)$

$(i)$ Sales to related parties

	Sales	For the years ended December 31,	Accounts receivable to related parties
	2019	2018	December 31, 2019	December 31, 2018
Subsidiaries
Nanya Technology Corp. USA	\$ 5.663.168	9.918.899	1,506,295	2.500,336
Other Subsidiaries	6,622,021	8,376,751	884.855	1,312,104
Total	12,285,189	18,295,650	2,391,150	3,812,440

The selling prices and collection terms for the sales to related parties above are not significantly different from those third-party customers, and the normal credit term with the related parties above is O/A 60 to 180 days and due for collection on the 15th day of the month following the month of delivery of goods sold. There is no collateral received among related parties accounts receivable. However, not expected credit loss is necessary based on the result of management's evaluation.

(ii) Purchase from related parties

		Purchases
		For the years ended December 31,		Accounts payable to related parties
		2019	2018	December 31. 2019	December 31. 2018
Entities with significant influence
over the Company	S	98,740	77.917	6.183	5,626
Associates		1,157	5.390
Other related parties:
Formosa Sumco Technology
Corporation		1,199,180	1,729,352	119,204	322,068
Other related parties		305,673	172,238	7,812	4,370
Total		1,604,750	1,984,897	133,199	332,064

The purchase price and payment terms for the purchase from related parties above are not significantly different from those with third party vendors, and the average payment period for notes and accounts payable pertaining to such purchase transactions ranged from one to two months, which was similar to that of other normal vendors.

(iii) Consigned out for processing

		Amount For the years ended December 31,
				Other payables to related
				parties
				December 31,	December 31,
		2019	2018	2019	2018
Associates		7,088,474	6, 161, 227	1,202,342	931,059

The term of transactions with the related parties above is 60 days after the end of each month when processed consigned goods are received.

(iv) Service received

			For the years ended December 31.		Other pavables to related parties
2019		2018	2019	2018	December 31. 2019	December 31. 2018
\$	305	308		$\blacksquare$
	181	185
			53,344	54.137	6.241	3.923
	153	154	476.401	424,451	50,381	41.493
			2,005	2,528
	639	647	531,750	481,116	56,622	45,416
			Other gains For the years ended December 31.		Administrative expenses

$(v)$ Property transactions

$1)$ Acquisition of equipment:

		Acquisition price For the years ended December 31.		Other payables to related parties
		2019	2018	December 31, 2018
Entities with significant influence over the Company	S	-	391
Other related parties		340	8,017	104
		340	8,408	104

$2)$ Acquisition of Financial Assets

			For the year ended December 31, 2019
Relationship Associates	Account Investments accounted for	Number of shares of transaction (in thousands) 57.489	Item of transaction Shares of Formosa Advanced Technologies Co.,		Acquisition price
	using equity method		Ltd.		2,049,483 ъ
Subsidiary	Investments accounted for using equity method	0.2	Shares of Nanya Technology International, Ltd.		6,116,400
					8,165,883
			For the year ended December 31, 2018		December 31, 2019
Relationship	Account	Number of shares of transaction (in thousands)	Item of transaction	Acquisition price	Other payables to related parties
Associates	Investments accounted for using equity method	84.022	Shares of Formosa Advanced Technologies Co., Ltd. ж	3,049,999
Subsidiary	Investments accounted for using equity method		Shares of Nanya Technology International, Ltd.	30,888,000	20,591,110
				33,937,999	20,591,110

(vi) Lease contracts

	Acquisition price
	For the year ended
	December 31,
Relationship	2019	2018
Entities with significant influence over the Company	49,426	228,800

The rentals charged to the entities with significant influence over the Company are determined based on the local market prices, and rents are paid monthly.

A three-year land lease contract was signed in July 2017. The total value of the contract was \$617,862. For the year ended 2018, the rent expense was amounting to \$202,928.

The Company applied IFRS 16, with a date of initial application on January 1, 2019. This lease transaction recognized the additional amounts of \$300,605 of right-of-use assets and lease liabilities. For the year ended December 31, 2019, the Company recognized the amount of \$2,933, as interest expense. As of December 31, 2019, the balance of lease liabilities amounted to 99,924.

(vii) Other

		Other payables
	Other income	to related parties
	December 31,	December 31,
	2019	2019
Associates	41.545 S	41,545

$(c)$ Key management personnel compensation

Key management personnel compensation comprised:

		For the years ended December 31,
		2019	2018
Short-term employee benefits	S	79.107	55,335
Share-based payment		3.942	18,957
		83,049	74,292

Please refer to Note 6(n) for the details of share-based payment.

(8) Pledged assets: None

(9) Commitments and contingencies:

$(a)$ Significant commitments

	December 31, 2019	December 31. 2018
Guarantees for importation goods provided by bank	1,045,000	1,035,000
Unused letters of credit	39.023	419,639
Total	1,084,023	1,454,639

• Contingent liabilities $(b)$
• In 2000, the Company was charged by Brazil's Ministry of Justice as being involved in the $(i)$ International Monopolies, which influences Brazil's DRAM market. Consequently, the Company, other large international companies and individuals are investigated at the same time. The lawsuit was in a court hearing. The Company has engaged counsels to properly handle it to ensure the Company's rights.
• In October 2016, Lone Star Silicon Innovations LLC (Lone Star) filed a lawsuit against Nanya $(ii)$ Technology Corp. (Nanya) and two of its subsidiaries, Nanya Technology Corp., USA (NTC) USA) and Nanya Technology Corp., Delaware (NTC Delaware), to the US District Court of East Texas for patent infringement. The lawsuit was handed over to the US District Court of Northern California in July 2017, wherein it was denied in January 2018. Therefore, Lone Star appealed to the US Court of Appeals for the Federal Circuit on the said matter. The case is still in progress. The Company has engaged lawyers to handle the case to ensure its rights.
• (iii) In November 2019, Monterey Research LLC (Monterey) filed a lawsuit against Nanya Technology Corp. (Nanya) and two of its subsidiaries, Nanya Technology Corp., USA (NTC USA) and Nanya Technology Corp., Delaware (NTC Delaware), to the US District Court of Delaware for patent infringement. The Company has engaged counsels to properly handle it to ensure the Company's rights.
• The original Joint Venture agreement signed by the Company, Micron Technology, Inc. and its $(iv)$ related parties was terminated after Micron Semiconductor Co. completed its share-swap with Micron Technology Taiwan. Both parties had mutually agreed to sign a cooperation agreement, the details of the agreement were as follows:
  • The estimated cost for improving specific environmental safety and factory facilities in $\left| \right|$ mutually operating period of joint venture agreement amounted to US\$54,030 thousand; the Company agreed to share the 50% portion of the total costs and accrued it as expense of \$850,000 (USD27,015 thousand) to other payable. The Company will share the cost based on the actual amounts at the appointed time. As of December 31, 2019 and 2018, the payment amounting to $$44,150(USD$1,460$ thousand) and $$27,000$ (USD\$900 thousand) had been recognized by the Company, respectively.

$2)$ The Company agreed to share the 50% portion of the total losses for penalty, improving costs and suspending operation before the date of share-swap in the following two to five years due to an existing event of environmental safety and factory facilities which violated the laws.

(10) Losses Due to Major Disasters: None

(11) Subsequent Events: None

$(12)$ Other:

A summary of current-period employee benefits, depreciation, and amortization, by function, is as follows:

	For the year ended December 31, 2019			For the year ended December 31, 2018
	Cost of goods sold	Operating expenses	Total	Cost of goods sold	Operating expenses	Total
Employee benefits
Salaries	3,041,992	1,643,263	4,685,255	3,945,782	1,959,182	5,904,964
Labor and health insurance	192,226	73,687	265,913	175,515	67,033	242,548
Pension expenses	99,008	54,255	153,263	92,607	48,129	140,736
Remuneration of directors		6,660	6,660		6,300	6,300
Other personnel expenses	71,809	23,935	95,744	68,850	22,730	91,580
Depreciation expenses	14,045,030	273,001	14,318,031	11,827,103	148,113	11,975,216
Amortization expenses	91,126		91,126	97,298		97,298

The Company's number of employees and additional information on employee benefits are as follows :

	For the years ended December 31,
	2019	2018
Number of employees	3,208	3,000
Number of non-employee directors		10
Average employee benefit	1,625	2,134
Average employee salaries	1,464	1,975
Adjustment percentage of average employee salaries	$(25.87)\%$

(13) Other disclosures:

$(a)$ Information on significant transactions:

The following is the information on significant transactions required by the "Regulations Governing the Preparation of Financial Reports by Securities Issuers" for the Company:

• Loans to other parties: None $(i)$
• $(ii)$ Guarantees and endorsements for other parties: None
• (iii) Securities held as of December 31, 2019 (excluding investment in subsidiaries, associates and joint ventures):

(In Thousands of New Taiwan Dollars)

	Category and					Ending balance
Name of holder	name of security	Relationship with company	Account title	Shares/Units (thousands)	Carrying value	Percentage of ownership (%)	Fair value	Note
The Company	Memoright (Cayman)		Financial assets measured l
	Co., LTD.		lat amortized cost and fair
			walue through other
			comprehensive income

(iv) Individual securities acquired or disposed of with accumulated amount exceeding the lower of \$300 million or 20% of the Company's paid-in capital:

(In Thousands of New Taiwan Dollars / shares)

	Canceouv and		Name of	Relationship	Beginning Balance		Purchases			Sales				Ending Balance
Name of company	name of security	Account name	counter-party	with the company	Shares (thousand)	Amount	Shares (thousand)	Amount	Shares (thousand)	Price	Cost	Gain on disposa?	Shares (housand)	Amount	Note
Formosa	Stocks	Investment	Formosa Taffeta	Associates	84,022	3,006,603	57,489	2,049,483	COL				141,511	5,019,236	(note)
Advanced		accounted for using Co., Ltd.
Technologies Co.		equity method
Lıd.
Nanya	Stocks	Investment	Nanya	Subsidiary		30,736,892	02	6.116.400	$\overline{\phantom{a}}$			-	۰,	37,056,782
Technology		accounted for using [Technology]
International,		equity method	Enternational.
Lid			Lıd

Note: Refer to details of investments accounted for using equity method to Note 6(d).

• Acquisition of individual real estate with amount exceeding the lower of \$300 million or 20% of the Company's paid-in $(v)$ capital: None
• (vi) Disposal of individual real estate with amount exceeding the lower of \$300 million or 20% of the Company's paid-in capital: None
• (vii) Related-party transaction for purchases and sales for which amounts exceeding the lower of \$100 million or 20% of the Company's paid-in capital:

							Transactions with terms
					Transaction details		different from others			Notes/Accounts receivable (payable)
Name of company	Related party	Nature of relationship	Purchase /Sale	Amount	Percentage of total purchases/sales	Payment terms	Unit price	Payment terms		Percentage of total notes/accounts Ending balance receivable (payable)	Note
	The Company Nanya Technology Corp., U.S.A.	Subsidiary	(Sale)	(5,663,168)	$(11.00)\%$	O/A 60~90Days			1,506,294	20.06%
	The Company Nanya Technology Corp., Japan	Subsidiary	(Sale)	(3,849,678)	(7.48)%	O/A 180Days			457,907	6.10%
	The Company Nanya Technology Corp., Europe GmbH	Subsidiary	(Sale)	(2,586,092)	$(5.02)\%$	O/A 60~90Davs			384,798	5.13%
The company	Nanya Technology Corp., HK	subsidiary	(Sale)	(186, 251)	$(0.36)\%$	O/A 60~90 Days			42.150	0.56%
	The Company Formosa Sumco Technology Corp.	Other related parties	Purchase	1,199,180	9.77%	O/A 60Days			(119, 204)	$(4.40)\%$
	The Company Formosa Biomedical Other related parties Technology Corporation		Purchase	160,629	1.31%	Payment after arrival and inspection of goods			(6,328)	(0.23)%

(In Thousands of New Taiwan Dollars)

					Transaction details		Transactions with terms different from others			Notes/Accounts receivable (pavable)
Name of company	Related party	Nature of relationship	Purchase /Sale	Amount	Percentage of total purchases/sales	Payment terms	Unit price	Payment terms		Percentage of total notes/accounts Ending balance receivable (payable)	Note
Nanya Technology Corp., U.S.A	Nanya Technology Corp	The parent company	Purchase	5,663,168	100.00%	O/A 60-90Days			(1, 506, 294)	$(100.00)\%$
Nanya Technology Corp., Japan	Nanya Technology Corp	The parent company	Purchase	3,849,678	100.00%	O/A 180Davs			(457, 907)	(100.00)%
Nanya Technology Corp., Europe GmbH	Nanya Technology Corp	The parent company	Purchase	2,586,092	100.00%	O/A 60~90Days			(384, 798)	(100.00)%
Nanya Technology Corp., HK	Nanya Technology Corp	The parent company	Purchase	186,251	100.00%	O/A 60~90Davs			(42, 150)	(100.00)%

(viii) Receivables from related parties with amounts exceeding the lower of \$100 million or 20% of the Company's paid-in capital:

(In Thousands of New Taiwan Dollars)
--------------------------------------	--	--	--	--	--	--	--

Name of		Nature of	Account receivable	Turnover		Overdue	Amounts received in	Allowance
company	Counter-party	relationship	from related parties	rate	Amount	Action taken	subsequent period	for bad debts
The Company	Nanya Technology Corp., U.S.A.	Subsidiary	1.506.295	2.83			787,718
The Company	Nanya Technology Corp., Japan	Subsidiary	457.907	6.64			256.186
The Company	Nanya Technology Europe GmbH	Subsidiary	384,798	5.35			240,848

• (ix) Trading in derivative instruments: None
• (b) Information on investees:

The following is the information on investees for the year ended December 31, 2019 (excluding information on investees in Mainland China):

			Main	Original investment amount			Balance as of December 31, 2019		Net income	Share of
Name of investor	Name of investee	Location	businesses and products	December 31. 2019	December 31, 2018	Shares (thousand)	Percentage of ownership	Carrying value	(tosses) of investee	profits/losses of investee	Note
The Company	Nanya Technology Corp., U.S.A.	USA	Sales of semiconductor products	20,392	20,392		100.00 %	146,262	15,114	15,114
The Company	Nanya Technology Corp., Delaware	U.S.A	Design of semiconductor products	36,005	36,005		100.00 %	163,680	17,660	17,660
The Company	Nanya Technology Corp., HK	Hong Kong	ales of semiconductor products	66,271	66,271	201	100,00 %	57,982	8,462	8,462
The Company	Nanya Technology Corp., Japan	Japan	Sales of semiconductor products	20,161	20,161		100 00 %	183,267	12,126	12,126
The Company	Formosa Advanced Technologies Co., Yunlin Ltd		Assembling, testing and producing modules for IC	5,099,482	3,049,999	141,511	32.00 %	5,019,236	1,262,496	183,875
The Company	Nanya Technology International, Ltd	British Virgin Island	General investment business	37 004 400	30,888,000	$\overline{2}$	100.00 %	37.056,782	950,976	950,976
Nanya Technology Corp., HK	Nanya Technology Europe GmbH	Germany	Sales of semiconductor products	30,056	30,056		100.00 %	65,134	5,072	5,072

(In Thousands of New Taiwan Dollars / shares)

Information on investment in mainland China: $(c)$

The names of investees in Mainland China, the main businesses and products, and other information: $(i)$

												(In Thousands of New Taiwan Dollars)
Name of investee	Main businesses and products	Total amount of paid-in capital	Method of investment	Accumulated outflow of investment from Taiwan as of January 1, 2019	Outflow	Investment flows Inflow	Accumulated outflow I Ωſ investment from Taiwan as of December 31, 2019	Net income (losses) of the investee	Percentage Ωf ownership	Investment income (losses)	Book value	Accumulated remittance of earnings in current period
Vanya Technology Corp., Shenzhen	Sales of semiconductor i products	29,654 (USD985 thousand)	(Note)	29,654 (USD985 thousand)			29,654 (USD985 thousand)	1.773	100.00%	1.773	15.279

Note 1: Indirect investment in Nanya Technology Corp., Shenzhen through Nanya Technology Corp., HK.

(ii) Limitation on investment in Mainland China:

Accumulated Investment in Mainland China as l of December 31, 2019 (Note 1)	Investment Amounts Authorized by Investment Commission, MOEA (Note 1)	Upper Limit on Investment (Note 2)
29.654	29.654	91.206.932
(USD985 thousand)	(USD985 thousand)

Note 1: The exchange rate of New Taiwan dollars to US dollars on December 31, 2018 was USD1: TWD 30.106.

$\hat{\boldsymbol{\beta}}$

$\hat{\mathcal{L}}$

Note 2:60% of net equity.

(iii) Significant transactions: None

(14) Segment information:

Please refer to the consolidated financial statements as of and for the year ended December 31, 2019.

STATEMENT OF CASH AND CASH EQUIVALENTS

December 31, 2019

(Expressed in thousands of New Taiwan Dollars)

Items Description Amount Note $\overline{s}$ Cash on hand Pretty cash $\mathbf{1}$ 3,782 Cash in bank Checking Account Demand deposits 2,229,096 Foreign currency deposits 1,320,750 (Notel) Cash Equivalents Time deposits 2,130,351 (Note2) Repurchase bonds 359,540 Commercial paper 454,300 6,497,820 Total S

Note 1		Original currency (in thousand)	Exchange rate
	USD	35,539	30.106
	JPY	888,926	0.2763
	EUR	144	33.6895
	HKD	88	3.8634

Note 2:	Bank		Original currency	Exchange rate	Term
	Bank of China	USD	20,018.00	30.106	$2019.12.13 \sim 2020.1.13$
	Bank of China	USD	15,031.00	30.106	$2019.12.16 \sim 2020.1.13$
	Bank of China	USD	20,000.00	30.106	$2019.12.26 \sim 2020.1.02$
	Bank SinoPac	USD	15,049.00	30.106	$2019.10.21 \rightarrow 2020.1.21$
	Mega International Commercial Bank	TWD	20,000.00	1.000	$2019.11.11 \rightarrow 2020.5.09$

Statement of trade receivables

December 31, 2019

(Expressed in thousands of New Taiwan Dollars)

Clients	Amount
Non-related parties:
KINGSTONE	\$ 1,079,529
MediaTek Inc.	599,649
Huawei	436,530
Techmosa International Inc.	385,029
WPI	382,174
Others	2,192,001
Total	5,074,912

$\mathcal{A}^{\mathcal{A}}$

STATEMENT OF INVENTORIES

December 31, 2019

(Expressed in thousands of New Taiwan Dollars)

		Amount
Items		Cost	Net Realizable value
Raw materials	S	381,848	381,848
Work in process		7,329,074	7,329,074
Finished goods		10,361,386	10,361,386
Total		18,072,308	18,072,308

STATEMENT OF PREPAYMENTS

December 31, 2019

(Expressed in thousands of New Taiwan Dollars)

Items	Description	Amount
Prepayment for supplies	Raw materials	\$ 31,141
	Project maintenance	629,068
	Computer usage charge fee	294,846
	Computer software charge fee	147,251
	Others	531,678
Total		1,633,984

$\mathcal{A}^{\mathcal{A}}$

$\hat{\mathbf{s}}(\cdot,\cdot)$

I
I ı ۱

$\overline{\phantom{a}}$

STATEMENT OF CHANGES IN INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD

For the year ended December 31, 2019

(Expressed in thousands of New Taiwan Dollars)

	Beginning Balance		Additions		Disposals					Ending Balance
	Number of		Number of	Amount (Notel)	Number of			Income from	Number of	Percentage		Guarante
Investee Company	Shares _	Amount	Shares		Shares	Amount	Others (Note2)	investments	Shares	of ownership	Amount
Nanya Technology Corp, USA	$2,400$ \$	123,821					8,645	$\sqrt{15}$		$100.00\%$	$\overline{147,580}$	or pledge Mil
Nanya Technology Corp, Delaware		148,076						17,660		100.00 %	165,73
Nanya Technology Corp, HK	19,699	60,098						8,462	19,699	100.00%	68,560	Ξ
Nanya Technology Corp, Japan	1,000	191,823					988	12,126	00(1)	100.00 %	204,937	Ξ
Formosa Advanceed Technologies Co., Ltd.	84,022,000	3,006,603	57,489,000	2,049,483		210,056	(10, 669)	183,875	141,511,000	32.00 %	5,019,236	Ξ
Nanya Technology International, Ltd	1,000	30,891,823	200	$-6,116,400$		⇃	ا ا	950.97	1,200	100.00%	37,959,195	Ē
Subtoatl		34,422,244		8,165,883		210,05	(036)	1.188.213			43,565,248
Add: Exchange differences on translation of foreign financial statements
Nanya Technology Corp, USA		2,112					(3,430)				(1,318)
Nanya Technology Corp, Delaware		1,463					(3,519)				(2,056)
Nanya Technology Corp, HK		(7,582)					(2,996)				(10,578)
Nanya Technology Corp, Japan		(20,798)					(872)				(21,670)
Nanya Technology International, Ltd		(154, 931)		ŀ			(747, 486)				(902, 417)
Subtoatl		(179, 736)		$\overline{\phantom{0}}$			(758, 303)				(938, 039)
		34,242,508		8.165.883		210,056	(759, 339)				42,627,209

Note1: The amounts consisted of cash dividend.

Note2: The amounts consisted of unrealized net profit or loss from sales amounting to \$9,633, share of profit of associates accounted for using equity of associates accounted for using equity method amounting to \$19.

STATEMENT OF TRADE PAYABLES

December 31, 2019

(Expressed in thousands of New Taiwan Dollars)

Items	Description	Amount
Accounts Payable	Purchase of O/A	922,231
	Purchase of raw material and supplies	1,611,545
	Others	39,983
Total		2,573,759

STATEMENT OF OTHER PAYABLES

Items	Amount
Salaries payable	1,489,425
Royalty Payable	2,573,638
Consigned out for processing	950,534
Others	1,592,320
	6,605,917

$\sim 10^{-10}$

STATEMENT OF OPERATING COSTS

For the year ended December 31, 2019

(Expressed in thousands of New Taiwan Dollars)

Items	Amount
Beginning balance of year for raw materials	\$ 590,036
Add: raw materials purchased	12,250,424
Ending balance of year for raw materials	(381, 848)
Less: Others	467,849
Reclassified to manufacturing and operating expenses	(5,261,023)
Usage material	7,665,437
Direct labor	508,281
Manufacturing expenses	34,405,596
Manufacturing Costs	42,579,314
Beginning balance of year for work in progress	5,870,118
Add: Transferred from finished goods	13,892,855
Less: Reclassified to operating expenses	(1,672,895)
Ending balance of year for work in progress	(7,329,074)
Cost of finished goods	53,340,318
Beginning balance of year for finished goods	5,688,198
Add: Purchase of finished goods	21,051
Less: Reclassified to work in progress	(13,892,855)
Reclassified to operating expenses	(60, 706)
Ending balance of year for finished goods	(10, 361, 386)
Add: Other costs	135,485
Loss on work stoppage	381,650
Operating costs	35,251,755

STATEMENT OF SELLING EXPENSES

For the year ended December 31, 2019

(Expressed in thousands of New Taiwan Dollars)

Items	Amount
Salaries	234,148 \$
Air Freights on export sales	71,443
Commissions on export sales	47,168
Others	184,008
Total	536,767

$\sim 10^{-10}$

$\sim 10^{-1}$

STATEMENT OF ADMINISTRATIVE EXPENSES

For the year ended December 31, 2019

(Expressed in thousands of New Taiwan Dollars)

Items	Amount
Salaries	511,405 \$
Amortization expenses	160,396
Miscellaneous expenses	133,637
Professional service fee	130,084
Utilities	91,850
Maintenance expenses	74,613
Others	218,281
	1,320,266

STATEMENT OF RESEARCH AND DEVELOPMENT EXPENSE

December 31, 2019

(Expressed in thousands of New Taiwan Dollars)

Items	Amount
Testing material expenses	2,714,196 P
Salaries	1,055,058
Computer usage expenses	258,258
Depreciation expenses	256,105
Others	642,811
	4,926,428