Stock Code:2408

$\mathbf{1}$

NANYA TECHNOLOGY CORPORATION AND SUBSIDIARIES

Consolidated Financial Statements

With Independent Auditors' Review Report For the Six Months Ended June 30, 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' review report and the accompanying consolidated financial statements are the English translation of the Chinese version prepared and used in the Republic of China. If there is any conflict between, or any difference in the interpretation of the English and Chinese language independent auditors' review report and consolidated financial statements, the Chinese version shall prevail.

Contents	Page
1. Cover Page	1
2. Table of Contents	$\overline{2}$
3. Independent Auditors' Report	3
4. Consolidated Balance Sheets	4
5. Consolidated Statements of Comprehensive Income	5
6. Consolidated Statements of Changes in Equity	6
7. Consolidated Statements of Cash Flows	7
8. Notes to the Consolidated Financial Statements
(1) Company history	8
Approval date and procedures of the consolidated financial statements (2)	8
New standards, amendments and interpretations adopted (3)	$8\sim11$
Summary of significant accounting policies (4)	$11 - 14$
Significant accounting assumptions and judgments, and major sources (5) of estimation uncertainty	14
(6) Explanation of significant accounts	$14 - 37$
Related-party transactions (7)	$37 - 40$
Pledged assets (8)	40
(9) Commitments and contingencies	41
(10) Losses Due to Major Disasters	42
(11) Subsequent Events	42
$(12)$ Other	42
(13) Other disclosures
(a) Information on significant transactions	$43 - 44$
(b) Information on investees	44
(c) Information on investment in mainland China	45
(14) Segment information	$45 - 46$

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

Qualified Conclusion

Except for the adjustments, if any, as might have been determined to be necessary had the financial statements of certain consolidated subsidiaries described in the Basis for Qualified Conclusion paragraph above been reviewed by independent auditors, based on our reviews and the review report of another auditor (please refer to Other Matter paragraph), nothing has come to our attention that causes us to believe that the accompanying consolidated financial statements do not present fairly, in all material respects, the consolidated financial position of the Group as of June 30, 2019 and 2018, and of its consolidated financial performance for the three months and six months ended June 30, 2019 and 2018, as well as of its consolidated cash flows for the six months ended June 30, 2019 and 2018, in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Accounting Standard 34, "Interim Financial Reporting" endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China.

Other Matter

We did not review the financial statements of Formosa Advanced Technologies Co., Ltd., an investment in other accounted for using the equity method of the Group. The financial statements were reviewed by another auditor, whose review report has been furnished to us, and our conclusion, insofar as it relates to the amounts included for Formosa Advanced Technologies Co., Ltd., is based solely on the review report of another auditor. The aforementioned investment accounted for using the equity method amounted to \$2,909,089 thousand, constituting 1.57% of the consolidated total assets as of June 30, 2019; and the share of profit of associates accounted for using the equity method amounted to \$64,015 thousand and \$101,406 thousand, constituting 1.88% and 1.45% of the consolidated total profit before tax for the three months and six months ended June 30. 2019, respectively.

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

KPMG

Taipei, Taiwan (Republic of China) August 12, 2019

Notes to Readers

The accompanying consolidated financial statements are intended only to present the consolidated statement of 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 review such consolidated financial statements are those generally accepted and applied in the Republic of China.

(English Translator of Consolidated Financial Statements Originally Issued in Chinese)
Reviewed only, not audited in accordance with the generally accepted auditing standards as of June 30, 2019 and 2018

Nanya Technology Corporation and Subsidiaries

Consolidated Balance Sheets

June 30, 2019, December 31 and June 30, 2018

(Expressed in Thousands of New Taiwan Dollars)

		June 30, 2019		December 31, 2018		June 30, 2018				June 30, 2019	December 31, 2018	June 30, 2018
	Assets	Amount	$\frac{1}{\sqrt{2}}$	Amount	℅	Amount	৯		Liabilities and Equity	Ş, Amount	× Amount	Amount	$\aleph$
	Current assets:								Current liabilities:
$\frac{8}{10}$	Cash and cash equivalents (Note 6(a))	60,860,911 ω,	33	57,384,006	5	61,536,556	35	2170	Accounts payable	2,154,466	4,247,638	2,917,421
$\frac{8}{11}$	Notes and accounts receivable, net (Notes 6(b)(p))	7,335,028		9,763,741		14,748,248		2180	Accounts payable to related parties (Note 7)	282,938	332,064	303,138
1200	Other receivables (Note 6(h))	1,841,362		1,313,111		967,246		2200	Other payables	16 30,253,718	8,786,790	19,784,226
1210	Other receivables due from related parties (Note 7)	210,056						2220	Other payables to related parties (Note 7)	1,050,614	938,944	1,028,500
1310	Inventories (Note 6(c))	17,894,754		12,167,737		8,376,818		2280	Current lease liabilities (Notes 6(j) and 7)	199,145
1410	Prepayments	1,456,451		1,758,316		2,008,262		2230	Current tax liabilities	1,065,847	2,456,338	2,498,036
	Total current assets	89,598,562	$\frac{48}{5}$	82.386,911	$\frac{45}{5}$	87,637,130	ရှ	2399	Other current liabilities	1,059	1,568	1,446
	Non-current assets:								Total current liabilities	$\frac{1}{2}$ 35.007.787	16,763,342	26,532.767	$\overline{15}$
1550	Investments accounted for using equity method (Note	2,909,089	2	3,006,603	2				Non-Current liabilities:
	6(d)							2570	Deferred tax liabilities	53	625	580
1600	Property, plant and equipment (Notes 6(f) and 7)	90,742,617	$\frac{4}{9}$	95,358,992	52	84,586,919	49	2640	Net defined benefit liability, non-current	536,129	537,303	522,418
1755	Right-of-use assets (Notes 6(g) and 7)	198,444						2670	Other non-current liabilities	233,125	377,245	231,042
1780	Intangible assets	258,716		45,881		68,219			Total non-current liabilities	769,885	915,173	754,040
1840	Deferred tax assets	817,459		867,311		862,104			Total liabilities	$\overline{a}$ 35,777,672	$\overline{10}$ 17,678,515	27,286,807	$\frac{15}{2}$
1935	Long-term lease payments receivable (Note 6(h))			875,900		961,884			Equity (Note 6(m)):
194D	Long-term financial lease payments receivable (Note 6(h))	785,316						$\frac{1}{2}$	Ordinary share	$\overline{17}$ 30,535,049	31,032,389	30,596,179	œ
1990	Other non-current assets (Note 8)	38,925		44,215		32,707		3140	Advance receipts for share capital	606,392	6,488	1,406,917
	Total non-current assets	95,750,566	$\mathfrak{L}$	100,198,902	55	86,511,833	$\boldsymbol{50}$	\$200	Capital surplus	31,487,280	≊ 33,557,005	32,327,474
								310	Legal reserve	13,128,412	9,192,249	9,192,249
								3320	Special reserve	273,834	39,163	39,163
								3350	Unappropriated retained earnings	ş 74,599,612	25 94,136,513	73,327,129
								3400	Other equity interest	87,809	(273, 834)	(26, 955)
								3500	Treasury shares	(1.146.932)	ලු (2.782, 675)
									Total equity	$\overline{\mathbf{z}}$ 149,571,456	g 164,907,298	146,862,156	$\frac{85}{25}$

$\frac{182,585,813}{\underline{)}\ 100} \ \frac{100}{\underline{)}\ 174,148,963} \ \frac{100}{\underline{)}\ 00}$

$|\mathbf{\hat{y}}|$

S 185,349.128

Total liabilities and equity

$\frac{1}{2}$

$\frac{182,585,813}{\phantom{000}-\phantom{0000}\phantom{0000}}\underline{100}$

8 185,349,128 100

Total assets

See accompanying notes to consolidated financial statements.

(English Translation of Consolidated Financial Statements Originally Issued in Chinese) Reviewed only, not audited in accordance with generally accepted auditing standards

Nanya Technology Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income

For the three months and six months ended June 30, 2019 and 2018

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

			June 30,	For the three months ended			June 30,	For the six months ended
		2019		2018		2019		2018
		Amount	%	Amount	%	Amount	%	Amount	%
4000	Operating revenue (Note $6(p)$ )	12,440,791 S	100	24,592,217	100	23,812,596	100	43,389,656	100
5000	Operating costs (Notes $6(k)(n)(q)$ and 7)	8,092,944	65	11,054,815	45	14,832,185	62	20, 111, 576	46
	Gross profit from operations	4,347,847	35	13,537,402	55	8,980,411	38	23,278,080	54
	Operating expenses (Notes $6(k)(n)(q)$ and 7):
6100	Selling expenses	175,428	-1	253,534	1	322,795	1	449,026	1
6200	Administrative expenses	307,996	2	415,951	$\mathbf{2}$	625,487	3	766,042	2
6300	Research and development expenses	1,059,282	9	1,357.673	5	2,207,450	9	2,233,752
	Total operating expenses	1,542,706	12	2,027,158	8	3,155,732	13	3,448,820	8
	Net operating income	2,805,141	23	11,510,244	47	5,824,679	25	19,829,260	46
	Non-operating income and expenses (Notes $6(d)(e)(h)(i)(r)$ and 7):
7010	Other income	358,515	3	199,659	1 7	752,847	3 $\overline{2}$	435,286	1 -1
7020 7050	Other gains and losses, net Finance costs	177,822 (901)	1	1,790,154 (165)		304,719 (1,991)		468,145 (5, 463)
7060	Share of profit of associates accounted for using equity method, net	64,015				101,406
7055	Expected credit impairment gain	54				9,438
	Total non-operating income and expenses	599,505	$\overline{4}$	1,989,648	8	1,166,419	5	897,968	$\overline{2}$
7900	Profit from continuing operations before tax	3,404,646	27	13,499,892	55	6,991,098	30	20,727,228	48
7950	Income tax expenses(Note 6(l))	656,719	5	2,190,061	9	657,165	3	2,191,242
	Profit	2,747,927	22	11,309,831	46	6,333,933	27	18,535,986	43
8300	Other comprehensive income: (Note 6(l))
8310	Components of other comprehensive (loss) income that will not be reclassified to profit or loss
8311	Remeasurements of the net defined benefit
8320	Share of other comprehensive (loss) income of associates accounted for using equity method, components of other comprehensive (loss) income that will not be reclassified to profit or loss	(22, 196)				11,136
8349	Income tax related to components of other comprehensive (loss) income that will not be reclassified to profit or loss			(2,147)				(2,571)
	Components of other comprehensive income that will not be reclassified to profit or loss	(22, 196)		2,147		11,136		2,571
8360	Components of other comprehensive income that will be reclassified to profit or loss
8361 8399	Exchange differences on translation of foreign financial statements	257,414	2	12,465		350,507	1	12,208
	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	257,414	$\overline{2}$	12,465		350,507		12,208
	reclassified to profit or loss
8300	Other comprehensive income, net	235,218	2	14,612		361,643		14.779
8500	Comprehensive income	2,983,145	24	11,324,443	46	6,695,576	28	18,550,765
	Profit, attributable to:
8610	Profit, attributable to owners of parent	S. 2,747,927	22	11,309,831	46	6,333,933	27	18,536,761	43
8620	Loss, attributable to non-controlling interests							(775)
		2,747,927	22	11,309,831	46	6,333,933	27	18,535,986	43
	Comprehensive income attributable to:
8710	Comprehensive income, attributable to owners of parent	2,983,145 S	24	11,324,443	46	6,695,576	28	18,551,540	43
8720	Comprehensive loss, attributable to non-controlling interests							(775)	$\sim$
		2,983,145	$\overline{24}$	11,324,443	46	6,695,576	28	18,550,765	43
	Earnings per share (Note $6(0)$ )
9750	Basic earnings per share	S	0.90		3.68		2.09		6.07
9850	Diluted earnings per share		0.90		3.56		2.06		5.86

(English Translation of Consolidated Financial Statements Originally Issued in Chinese)
Reviewed only, not audited in accordance with generally accepted auditing standards

Nanya Technology Corporation and Subsidiaries

Consolidated Statements of Changes in Equity

For the six months ended June 30, 2019 and 2018

(Expressed in Thousands of New Taiwan Dollars)

Other equity interest

Equity attributable to owners of parent

									Duried game (losses) on
		entitlement to Certificate of						differences on Exchange	measured at fair financial assets
		new shares from	Advance				Unappropriated	translation of foreign	value through other			attributable to Total equity
	Ordinary shares	convertible bond	share capital receipts for	Capital surplus	reserve Legal	Special reserve	retained earnings	statements financial	comprehensive income	Total other equity interest	Treasury shares	owners of parent	Non-controlling interests	Total equity
Balance at January 1, 2018	29,639,38	223,958		27,277,19	5,164,057		69,734,440	(39, 163)		(39,163)		131,999,865	115,323	132,115,188
Net profit (loss) for the six months ended June 30, 2018							18,536,761					18,536,761	(775)	18,535,986
Other comprehensive income for the six months ended June 30, 2018							2,571	12,208		12,208		14,779		14,779
Total comprehensive income (loss) for the six months ended June 30, 2018							18,539,332	12,208		12,208		18,551,540	(775)	18,550,765
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)		(10, 879, 288)
Other changes in capital surplus:
Recognized compensation costs on employee stock options				545,960								545,960		545,960
Conversion of convertible bonds	732,839			4,504,323								5,237,162		5,237,162
Conversion of certificates of bonds to share	223,958	(223,958)
Exercise of employee share options			1,406,917									1,406,917		1,406,917
Disposal of subsidiaries accounted for using equity method													(114,548)	(114,548)
Balance at June 30, 2018	30,596,179		$rac{5}{3}$ Š	32,327,474	9,192,249	39,163	73,327,129	(26, 95)		(26,955)		146,862,156		146,862,156
Balance at January 1, 2019	31,032,389		5,488	33,557,005	9,192,249	39,163	94,136,513	(179, 736)	(94,098)	(273, 834)	(2,782,675)	164,907,298		164,907,298
Net profit for the six months ended June 30, 2019							6,333,933					6,333,933		6,333,933
Other comprehensive income for the six months ended June 30, 2019								350,507	11,136	361,643		361,643		361,643
Total comprehensive income for the six months ended June 30, 2019							6,333,933	350,507	11,136	361,643		6,695,576		6,695,576
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)		(21,700,000)
Other changes in capital surplus:
Recognized compensation costs on employee stock options				85,250								85,250		85,250
Repurchase of treasury share											(1,029,878)	(1,029,878)		(1,029,878)
Retirement of treasury share	(501,360)			(2,164,261)							2,665,621
Exercise of employee share options	4,020		599,904	9,286								613,210		613,210
Balance at June 30, 2019	30,535,049		606,392	31,487,280	13,128,412	273,834	74,599,612	170,771	(82, 962)	87,809	(1,146,932)	149,571,456	I	149,571,456

(English Translation of Consolidated Financial Statements Originally Issued in Chinese)
Reviewed only, not audited in accordance with generally accepted auditing standards

Nanya Technology Corporation and Subsidiaries

Consolidated Statements of Cash Flows

For the six months ended June 30, 2019 and 2018

(Expressed in Thousands of New Taiwan Dollars)

	For the six months ended
	June 30, 2019	2018
Cash flows from operating activities:
Profit before tax	6.991,098 \$	20,727,228
Adiustments:
Adjustments to reconcile profit:
Depreciation expense	6,943,328	5,831,585
Amortization expense	39,714	71,370
Expected credit impairment gain	(9, 438)
Net loss on financial liabilities at fair value through profit or loss		281,107
Interest expense	1,991	5,463
Interest income	(752, 847)	(435, 286)
Share-based payments	85,250	545,960
Share of profit of associates accounted for using equity method	(101, 406)
Loss (gain) on disposal of property, plant and equipment	287	(46)
Gain on disposal of a subsidiary		(497)
Reversal of impairment loss on non-financial assets	(120, 322)	(100, 861)
Unrealized foreign exchange loss (gain)	108,735	(754, 739)
Total adjustments to reconcile profit	6,195,292	5,444,056
Changes in operating assets and liabilities:
Notes and accounts receivable	2,419,295	(5,961,402)
Other receivables	(308, 616)	(31,307)
Inventories	(5,727,017)	(1,625,194)
Other current assets	301,865	(389, 326)
Other non-current assets	(9,500)
Financial liabilities held for trading		(523, 136)
Accounts payable (including related parties)	(710, 736)	(71, 849)
Other payables (including related parties)	(146, 867)	3,239,988
Other current liabilities	(509)	(508)
Net defined benefit liability	(1, 174)	(3,379)
Other non-current liabilities	9,925	(16, 434)
Total changes in operating assets and liabilities	(4,173,334)	(5,382,547)
Cash inflow generated from operations	9,013,056	20,788,737
Interest received	498,466	349,778
Interest paid	(325)	(478)
Income taxes paid	(2,004,555)	(1,416,646)
Net cash flows from operating activities	7,506,642	19,721,391
Cash flows (used in) from investing activities:
Proceeds from disposal of a subsidiary		(85,937)
Acquisition of property, plant and equipment	(3,549,433)	(4,720,239)
Proceeds from disposal of property, plant and equipment	12	46
Decrease (increase) in refundable deposits	10,747	(2,670)
Decrease in other receivables		10,616,574
Acquisition of intangible assets	(79, 529)
Decrease in lease and installment receivables	132,166	214,665
Increase in other non-current assets	(21)	(5,365)
Net cash flows (used in) from investing activities	(3,486,058)	6,017,074
Cash flows (used in) from financing activities:
(Decrease) increase in guarantee deposits received	(311, 372)	161,015
(Decrease) increase in other payables to related parties	(4,016)	4,052
Payment of lease liabilities	(83,779)
Exercise of employee share options	613,210	1,406,917
Payments to acquire treasury shares	(1,029,878)
Net cash flows (used in) from financing activities	(815, 835)	1,571,984
Effect of exchange rate changes on cash and cash equivalents	272,156	457,430
Net increase in cash and cash equivalents	3,476,905	27,767,879
Cash and cash equivalents at beginning of period	57,384,006	33,768,677
Cash and cash equivalents at end of period	60,860,911 S	61,536,556

(English Translation of Consolidated Financial Statements Originally Issued in Chinese) Reviewed only, not audited in accordance with generally accepted auditing standards

Nanya Technology Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

June 30, 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 and its subsidiary (the "Group") 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 consolidated financial statements:

The consolidated financial statements were authorized for issuance by the Board of Directors on August 12, 2019.

(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 Group believes that the adoption of the above IFRSs would not have any material impact on its consolidated financial statements. The extent and impact of signification changes are as follows:

IFRS 16"Leases" $(i)$

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

On transition to IFRS 16, the Group elected to apply the practical expedient to grandfather the assessment of which transactions are leases. The Group 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 Group 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 Group. Under IFRS 16, the Group recognizes its right-of-use assets and lease liabilities for most leases.

The Group decided to apply the recognition exemptions to the short-term and low-value leases of its 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 Group's incremental borrowing rate as at January 1, 2019. The 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 Group applied this approach to its land leases.

In addition, the Group 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.

As a lessor $3)$

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

Impacts on financial statements $4)$

On transition to IFRS 16, the Group recognized both additional \$300,605 of right-of-use assets and lease liabilities at the date of initial application. When measuring lease liabilities, the Group 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 Group's consolidated financial statements	\$ 385,636
Recognition exemption for:
short-term leases	(8,037)
leases of low-value assets	(73,619)
	303,980
Discounted using the incremental borrowing rate at January 1, 2019	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, or after, January 1, 2020 in accordance with Ruling 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 IAS 1 and IAS 8 "Definition of Material"	January 1, 2020

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

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

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:

New, Revised or Amended Standards and Interpretations	Effective date 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

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

$(4)$ Summary of significant accounting policies:

Statement of compliance $(a)$

These consolidated financial statements have been prepared in accordance with the preparation and guidelines of IAS 34 "Interim Financial Reporting" which are endorsed and issued into effect by FSC and do not include all of the information required by the Regulations and International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations and SIC Interpretations endorsed and issued into effect by the FSC (hereinafter referred to IFRS endorsed by the FSC) for full annual consolidated financial statements.

The significant accounting policies adopted in the consolidated financial statements are the same as those in the consolidated financial statement for the year ended December 31, 2018. For the related information, please refer to note 4 of the consolidated financial statements for the year ended December 31, 2018.

Basis of consolidation $(b)$
List of subsidiaries included in the consolidated financial statements: $(i)$

				Shareholding
Investor	The name of subsidiaries	Business activity	June 30. 2019	December 31. 2018	June 30. 2018	Note
The Company	NANYA TECHNOLOGY CORP. U.S.A.	Sales of semiconductor products	100.00 %	100.00 %	100.00 %	Note 3
The Company	NANYA TECHNOLOGY CORP. Delaware	Design of semiconductor products	100.00%	100.00 %	100.00 %	Note 3
The Company	NANYA TECHNOLOGY CORP. HK.	Sales of semiconductor products	$100.00 \%$	100.00 %	100.00 %	Note 3
The Company	NANYA TECHNOLOGY CORP. Japan	Sales of semiconductor products	100.00 %	100.00 %	100.00 %	Note 3
The Company	PEI JEN Co., Ltd.	General import and export business	%	$\%$		100.00 % Note 1 and note 3
The Company	NANYA TECHNOLOGY INTERNATIONAL LTD.	General investment business	100.00 %	100.00 %	$\frac{6}{6}$ ۰	Note 2
NANYA TECHNOLOGY CORP. H.K.	NANYA TECHNOLOGY CORP Europe GmbH	Sales of semiconductor products	100.00 %	100.00 %	100.00 %	Note 3
NANYA TECHNOLOGY CORP H.K.	NANYA TECHNOLOGY CORP. Shenzen	Sales of semiconductor products	100.00 %	$100.00 \%$	100.00 %	Note 3

Note 1: Pei Jen Co. applied for the completion of its liquidation to the court in December 2018, resulting in the Company's to loss of control over Pei Jen Co..
Note 2: The Company fully invested in its subsidiary, Nanya Technology International Ltd., in which the registration process had been completed in November 2018.
Note 3: Company is a non-significant subsidiary, its financial statement have not been reviewed by independent auditors.
Subsidiaries not included in the consolidated financial statements: None. $(ii)$
Leases (Policy applicable from January 1, 2019) $(c)$
Identifying a lease $(i)$

At inception of a contract, the Group 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 Group assesses whether:

$-$ the contract involves the use of an identified asset this may be specified explicitly or 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 Group has the right to obtain substantially all of the economic benefits from use of the asset throughout the period of use; and
the Group has the right to direct the use of the asset. The Group has the right to direct the use of the asset when it has the decision-making rights that are most relevant to changing how and for what purpose the asset is used. In rare cases where the decision about how and for what purpose the asset is used is predetermined, the Group has the right to direct the use of an asset if either:
the Group has the right to operate the asset; or
the Group designed the asset in a way that predetermines how and for what purpose it will be used.
(ii) As a lessee

The Group 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 Group's incremental borrowing rate. Generally, the Group uses its incremental borrowing rate as the discount rate.

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

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 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 Group 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 Group has elected not to recognize right-of-use assets and lease liabilities for short-term leases and leases of low-value assets. The Group 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 Group 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 Group 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 Group considers certain indicators such as whether the lease is for the major part of the economic life of the asset.

The lessor 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 Group recognizes lease payments received under operating leases as income on a straight-line basis over the lease term as part of 'other income'.

$(d)$ Income taxes

The income tax expenses have been prepared and disclosed in accordance with paragraph B12 of International Financial Reporting Standards 34, Interim Reporting.

Income tax expenses for the period are best estimated by multiplying pre-tax income for the interim reporting period by the effective annual tax rate as forecasted by the management. This should be recognized fully as tax expense for the current period.

For a change in tax rate that is substantively enacted in an interim period, the effect of the change should immediately be recognized in the interim period in which the change occurs.

Employee benefits $(e)$

The pension cost in the interim period was calculated and disclosed on a year-to-date basis by using the actuarially determined pension cost rate at the end of the prior fiscal year.

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

The preparation of the consolidated financial statements in conformity with the Regulations and IFRSs (in accordance with IAS 34 "Interim Financial Reporting" and endorsed by the FSC) 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 preparation of the consolidated interim financial statements, estimates and underlying assumptions are reviewed on an ongoing basis which are in conformity with the consolidated financial statements for the year ended December 31, 2018. For the related information, please refer to note 5 of the consolidated financial statements for the year ended December 31, 2018.

(6) Explanation of significant accounts:

Except for the following disclosures, there is no significant difference as compared with those disclosed in the consolidated financial statements for the year ended December 31, 2018. Please refer to Note 6 of the 2018 annual consolidated financial statements.

(a) Cash and cash equivalents

June 30, 2019	December 31, 2018	June 30, 2018
\$ 154	157	144
10,398,469	6,377,176	16,221,531

44,471,933	50,601,623	27,466,675
4,539,884	404,150	10,316,300
1,450,471	900	7,531,906 61,536,556
\$	60,860,911	57,384,006

(b) Notes and accounts receivable

	June 30, 2019	December 31, 2018	June 30, 2018
Notes receivable from operating activities	\$	481	4,212
Accounts receivable-measured at amortized cost	7,335,028	9,772,558	14,753,310
$Less : Loss$ allowance		(9.298)	(9,274)
	7,335,028	9,763,741	14,748,248

The Group 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. To measure the expected credit losses, notes and accounts receivables 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 provisions for notes and accounts receivable were determined as follows:

		June 30, 2019
Due days	Notes and accounts receivables gross carrying amount	Weighted average loss rate	Loss allowance provision
Current	\$ 7,246,225	-
1 to 30 days past due	85,292		-
31 to 60 days past due	1,398		۰
Over 91 days past due	2,113
	7,335,028

Loss allowance
average loss provision
2,088
6,899
49
15
247
9,298
June 30, 2018
Loss allowance average loss provision
7,994
1,278
$\overline{2}$
9,274

The movement in the allowance for notes and accounts receivable were as follows:

	For the six months ended June 30,
	2019	2018
Balance on January 1,	9.298	8,859
Reversal of impairment losses	(9, 438)
Foreign exchange losses	140	415
Balance on June 30,		9,274

(c) Inventories

	June 30, 2019	December 31, 2018	June 30, 2018
Raw materials	597,973 S	598,067	520,934
Work in progress	7,100,380	5,870,118	5,714,272
Finished goods	10,196,401	5,699,552	2,141,612
	17,894,754	12,167,737	8,376,818

The Group did not recognized any loss from devaluation or gain from recovery in the value of inventories for the three months and six months ended June 30, 2019 and 2018.

Investments accounted for using equity method $(d)$

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

	June 30, 2019	December 31, 2018
Associates	2,909,089	3,006,603

The related information of the major associate to the Group were as follows:

				Percentage of ownership
Name of		Registration	June 30,	December 31,
Associates	Nature of Relationship to the Group	Country	2019	2018
Formosa Advanced	It mainly engages in assembling and testing of	Taiwan	$19.00 \%$	19.00 %
Technologies Co.,	module products, as well as in the research and
Ltd.(FATC)	development of integrated circuits.

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

	June 30, 2019	December 31, 2018
Formosa Advanced Technologies Co., Ltd.	15,743,111	14,062,667

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

The financial information of FATC were as follows:

	June 30, 2019	December 31, 2018
Current assets	\$ 7,081,112	6,792,443
Non-current assets	6,577,214	5,882,131
Current liabilities	(2,141,692)	(1,231,815)
Non-current liabilities	(606,914)	(86, 280)
Net asset	10,909,720	11,356,479
Net asset contributed to FATC	10,909,720	11,356,479

	For the three months ended June 30, 2019		For the six months ended June 30, 2019
Operating revenue	2,269,832		4,442,798
Profit	\$ 343,975		600,189
Other comprehensive income	(116, 823)		58,608
Total comprehensive income	227,152		658,797
Comprehensive income contributed to FATC	227,152		658,797
			For the six months ended June 30, 2019
Share of net assets of the major associate at January 1		$\mathbf S$	2,157,732
Total comprehensive income contributed to the Group			125,171
Cash dividends contributed to the Group			(210, 056)
Share of net assets of major associate at June 30			2,072,847
Add:Goodwill			887,684
Less: Unrealized profits on upsteam sales net assets of the associates			(51, 442)
Total carrying amount of the major associate			2,909,089

(e) Loss control over subsidiaries

The Company had disposed 53.56% of its shares in Piece Makers, with a selling price of $(i)$ \$132,584; therefore, it lost control over Piece Makers on February 26, 2018. The Group 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

(Continued)

$\sim$

(ii) Pei Jen Co., Ltd (hereinafter referred to as " Pei Jen" ), a subsidiary of the Company, had 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

Cost:		Land	Building	Machinery and equipment	Other equipment	Under construction	Total
Balance as of January 1, 2019	s	1,013,924	7,740,635	180,746,435	1,132,778	13,886,443	204,520,215
Additions				981,560	26,902	1,098,757	2,107,219
Disposals				(55, 149)	(4,738)		(59, 887)
Reclassification			416,922	12,357,709	14,395	(12,789,026)
Effect of exchange rate change			73	(2,802)	5,554		2,825
Balance as of June 30, 2019		1,013,924	8,157,630	194,027,753	1,174,891	2,196,174	206,570,372
Balance as of January 1, 2018	\$	1,013,924	7,502,631	172,719,912	1,133,770	1,778,293	184,148,530
Additions				1,628,009	8,460	2,442,668	4,079,137
Disposals				(7,703)	(2, 589)		(10, 292)
Disposal of a subsidiary				(60)	(23, 771)		(23, 831)
Reclassification			237,913	2,857,477	23,052	(3, 118, 328)	114
Effect of exchange rate change			86	1,766	1,560	$\overline{a}$	3,412
Balance as of June 30, 2018	s	1,013,924	7,740,630	177,199,401	1,140,482	1,102,633	188,197,070
Accumulated depreciation / impairment:
Balance as of January 1, 2019	\$		1,978,349	106,196,034	986,840		109, 161, 223
Depreciation for the period			157,018	6,667,600	19,325		6,843,943
Reversal of impairment loss				(120, 322)			(120, 322)
Disposals				(57, 825)	(1,763)		(59, 588)
Reclassification				(10,292)	10,292
Effect of exchange rate change			54	(337)	2,782		2,499
Balance as of June 30, 2019	S		2,135,421	112,674,858	1,017,476		115,827,755
Balance as of January 1, 2018	S		1,676,927	95,179,932	1,049,791		97,906,650
Depreciation for the period			150,274	5,670,497	10,814		5,831,585
Reversal of impairment loss				(100, 861)			(100, 861)
Disposals				(7,703)	(2, 589)		(10, 292)
Disposal of a subsidiary				(60)	(19, 879)		(19, 939)
Reclassification				(10, 135)	10,141		6
Effect of exchange rate change			58	700	2,244		3,002
Balance as of June 30, 2018			1,827,259	100,732,370	1,050,522		103,610,151
Carrying amounts:
Balance as of June 30, 2019		1,013,924	6,022,209	81,352,895	157,415	2,196,174	90,742,617
Balance as of December 31, 2018		1,013,924	5,762,286	74,550,401	145,938	13,886,443	95,358,992
Balance as of June 30, 2018	S	1,013,924	5,913,371	76,467,031	89,960	1,102,633	84,586,919

Right-of-use assets $(g)$

	Land
Cost:
Balance at January 1,2019	\$
Effect of retrospective application	300,605
Change in an index of lease payment	(2,776)
Balance at June 30, 2019	297,829
Accumulated depreciation:
Balance at January 1, 2019	\$
Effect of retrospective application
Depreciation for the period	99,385
Balance at June 30, 2019	99,385
Carrying Amount:
Balance at January 1, 2019
Balance at June 30, 2019	198.444

$(h)$ Lease receivables

On June 18, 2009, the Group 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 three months and six months ended June 30, 2019 and 2018, the Group recognized the interest revenue of \$24,742, \$30,929, \$50,548 and \$63,824, respectively, from the amortization of unrealized interest revenue.

The details of lease receivables were as follows:

	June 30, 2019				December 31, 2018			June 30, 2018
	Gross investment in the lease	Unearned finance income	Present value of minimum lease payments	Gross investment receivable in the lease	Unearned finance income	Present value of minimum lease payments	Gross investment receivable in the lease	Unearned finance income	Present value of minimum lease payments receivable
Less than one year	264,331 S.	87,763	176,568	264,331	96,730	167,601	346,830	106.302	240,528
Between one and five years	925,154	139,838	785,316	1,057,320	181,420	875,900	1,057,320	225,902	831,418
More than five years							132,165	1,699	130,466
Sub-total	\$1,189,485	227,601	961,884	1,321,651	278,150	1,043,501	1,536,315	333,903	1,202,412
Current			176,568 \$			167,601			240,528
Non-current			785,316			875,900			961,884
			961,884			1,043,501			1,202,412
11 $\sim$

$(i)$ Bonds Payable

			June 30, 2019	December 31, 2018	June 30, 2018
Issuance of unsecured overseas convertible bonds		\$		14,267,000	14,267,000
Conversion of convertible bonds to ordinary shares				(14,267,000)	(14,267,000)
		S
	For the three months ended	June 30,		For the six months ended June 30,
	2019		2018	2019	2018
Embedded derivatives-call and put options and conversion rights re- measured at fair value through loss (included
other gain and losses)	S				140,266

Item	The first unsecured overseas convertible bond
1. Issue amount	USD 500,000 thousand
2. Issue par value	USD 200 thousand
3. Issue period	$2017.1.24 \sim 2022.1.24$
4. Bond expiration	5 years
5. Coupon rate	0%
6. Conversion price	TWD 52.47 dollars
7. Conversion period	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 day from the issuance date (excluding the issuance date itself).
8. Put option of bond holders	(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.
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.

23

NANYA TECHNOLOGY CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

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.

$(i)$ Lease liabilities

	June 30, 2019
	Future minimum lease		Present Value of minimum
	payments	Interest	lease payments
Less than one year	200.673	1.528	199,145

The Group recognized its lease liability amounting to $$300,605$ , at the interest rate of 1.41%, upon the date of its initial application adapted on January 1, 2019, with a lease period maturing in June 2020.

The amount recognized in profit or loss were as follows:

		For the three	For the six
	months ended		months ended
		June 30, 2019	June 30, 2019
Interest on lease liabilities		821	1.818
Expense relating to short-term and low-value lease assets		18.581	33,445

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

	For the six
	months ended
	June 30, 2019
Total cash outflow for leases	116.340

Land lease $(i)$

As of June 30, 2019, the Group leases its land with a period of 3 years. The lease included an option to terminate, which are exercisable only by the Group and not by the lessors. The lease payment changes annually based on a local price index.

(ii) Other lease

The Group 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 Group applied the recognition exemptions and elected not to recognize its right-of-use assets and lease liabilities for these leases.

Employee benefits $(k)$

Defined benefit plan $(i)$

Management believes that there was no material volatility of the market, no material reimbursement and settlement or other material one-time events since prior fiscal year. As a result, the pension cost in the accompanying interim period was measured and disclosed according to the actuarial report as of December 31, 2018 and 2017.

The expenses recognized in profit or loss for the Group were as follows:

	For the three months ended June 30,		For the six months ended June 30,
	2019	2018	2019	2018
Operating cost	1.946	1.995	3,864	3,951
Operating expenses	1.021	969	2,067	.974
Total	2.967	2,964	5,931	5,925

$(ii)$ Defined contribution plans

The Group's expenses under the pension plan cost to the Bureau of local government were as follows:

		For the three months ended June 30,		For the six months ended June 30,
		2019	2018	2019	2018
Operating cost	S	23,408	21,408	45,470	42,301
Operating expenses		16,216	13,719	33,806	29,733
Total	ъ	39,624	35,127	79,276	72,034

$\Lambda$ Income tax

The Group's income tax expenses were as follows:

		For the three months ended June 30,		For the six months ended June 30,
		2019	2018	2019	2018
Current tax expense
Current period	S	418,830	2,366	419,276	3,547
Surtax on undistributed earnings		187,965	2,187,695	187,965	2,187,695
Deferred tax expense		49,924		49,924
Tax expense		656,719	2,190,061	657,165	2,191,242

The Group's tax expense recognized in other comprehensive income were as follows: $(i)$

	For the three months ended June 30,		For the six months ended June 30,
	2019	2019	2019	2018
Items that could not be reclassified subsequently to profit or loss:
Remeasurement of net defined benefit
plan		2,147		2,571

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

Except as described below, there was no material change in equity for the six months ended June 30, 2019 and 2018. Please refer to Note 6(o) of the consolidated financial statements as of and for the year ended December 31, 2018 for the related detail disclosures on equity.

Ordinary Share $(i)$

On February 27, and May 10, 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 and 89 thousand ordinary shares at par value, respectively, with an issuing prices of \$33.1 per share, which totaled \$4,020. All issued shares were paid up upon issuance and the related process for registration had been completed.

For the second quarter of 2019, the Company's ordinary shares were derived from the exercise of employee share options. Accordingly, the Company had issued 18,320 thousand ordinary shares, at issuing prices of \$33.1 per share, which totaled \$606,392, which was recognized as advance receipts for share capital as of June 30, 2019.

(ii) Capital surplus

		June 30, 2019	December 31, 2018	June 30, 2018
Premium from the issuance of stock	S	28,557,335	30,712,310	29,654,480
Employee stock option plans		2,667,441	2,844,690	2,672,994
Expired employee stock option plans		262,499
Change in equity of associates accounted
for using equity method
	S	31,487,280	33,557,005	32, 327, 474

(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 vears, 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

In accordance with the ROC Company Act, 10% of net income should be set aside as legal reserve, until it is equal to share capital. When the Group 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.

$2)$ Special Reserve

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.

Earrings distribution $3)$

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

		2018	For the year ended December 31,
		Dividends per share	Amount
Dividends attributable to ordinary shareholders:
Cash dividends	S	7.11	21,700,000

		2017	For the year ended December 31,
Dividends attributable to ordinary shareholders:		Dividends per share	Amount
Cash dividends	S	3.51	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 shareholders' equity		Total
	thousand shares	Amount	thousand shares	Amount	thousand shares	Amount
Balance as of January 1, 2019	20.000S	1,146,932	30,445	1,635,743	50,445	2,782,675
Repurchase for the period			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 June 30, 2019	$20,000$ \$	1,146,932			20,000	1,146,932

On February 27, 2019, the Company's board of directors approved to retire 50,136 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 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	350,507		350,507
Unrealized gains from financial of assets measured at fair value through other comprehensive income, associates
accounted for using equity method		11,136	11,136
Balance as of June 30, 2019	170.771	(82,962)	87,809

(Continued)

	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		12,208		12,208
Balance as of June 30, 2018		(26,955)		(26,955)

$(n)$ Share-based payment

Except as described below, there was no material change on the share-based payment transactions for six months ended June 30, 2019 and 2018. Please refer to Note $6(p)$ of consolidated financial statements as of and for the year ended December 31, 2018 for related disclosures on share-based payment transactions.

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

The Company:

	For the six months ended June 30,
		2019		2018
		Weighted- average exercise (price TWD)	Number of options (Thousand Units)	Weighted- average exercise (price TWD)	Number of options (Thousand Units)
Outstanding at January 1,	\$	34.49	109.382	35.34	155,374
Options granted		33.10	(18, 526)	34.30	(41,018)
Options expired		35.60	(60, 367)	۰
Options forfeited		33.15	(464)	35.23	(1,807)
Outstanding at June 30,		33.14	30,025	35.72	112,549
Options exercisable at June 30,		33.12	6,873	36.72	65,112

(ii) Compensation cost

		For the three months ended June 30,	For the six months ended June 30,
	2019	2018	2019	2018
Compensation cost arising from share options granted to employees	40,663 э	480,091	85,250	545,960

(o) Earnings per share

		June 30,	For the three months ended	For the six months ended June 30,
		2019	2018	2019	2018
Basic earnings per share:
Net profit attributable to the
Company	S	2,747,927	11,309,831	6,333,933	18,536,761
Weighted-average number of ordinary shares outstanding
(basic)		3,039,514	3,075,379	3,037,276	3,051,949
Basic earnings per share (dollar) \$		0.90	3.68	2.09	6.07
Diluted earnings per share:
Net profit attributable to the
Company (basic)	S	2,747,927	11,309,831	6,333,933	18,536,761
Weighted-average number of ordinary shares (basic)		3,039,514	3,075,379	3,037,276	3,051,949
Effect of employee share option		22,767	86,157	25,521	88,249
Effect of employee remuneration		5,753	18,281	14,746	23,562
Weighted-average number of ordinary shares (diluted)		3,068,034	3,179,817	3,077,543	3,163,760
Diluted earnings per share (dollar)	S	0.90	3.56	2.06	5.86

Revenue from contracts with customers $(p)$

$(i)$ Disaggregation of revenue

	For the three months ended June 30, 2019
		Japanese department	USA department	Manufacturing department	Other department	Total
Primary geographic markets:
Taiwan	\$	2,557	88,336	5,405,358	22,246	5,518,497
Turkey					51,749	51,749
Japan		350,672				350,672
Malaysia			193,089	3.280		196,369
Korea		60,780	799	49,985		111,564
China		409,971	662,657	4,042,697	404,772	5,520,097
USA			39,888	31,984		71,872
Thailand		12,767	74,523	47,773		135,063
Other countries		95,601	35,362	87,294	266,651	484,908
	S	932,348	1,094,654	9,668,371	745,418	12,440,791
Major products/services line:
Dynamic Random Access Memory (DRAM)	-\$	932,348	1,094,373	9,628,791	745,418	12,400,930
Other			281	39,580		39,861
	S	932,348	1,094,654	9,668,371	745,418	12,440,791

(Continued)

	For the three months ended June 30, 2018
		Japanese department	USA department	Manufacturing department	Other department	Total
Primary geographic markets:
Taiwan	\$	1,770	58,862	10,960,238	40,048	11,060,918
Turkey					116,572	116,572
Japan		433,992				433,992
Malaysia			145,094	149,524		294,618
Korea		62,177	294	87,090		149,561
China		431,060	2,574,649	8,096,176	519,854	11,621,739
Other countries		86,987	82,606	352,834	392,390	914,817
	S	1,015,986	2,861,505	19,645,862	1,068,864	24,592,217
Major products/services line:
Dynamic Random Access Memory (DRAM)	\$	1,015,986	2,861,505	19,613,346	1,063,744	24,554,581
Other				37,636		37,636
	S	1,015,986	2,861,505	19,650,982	1,063,744	24,592,217
				For the six months ended June 30, 2019
		Japanese department	USA department	Manufacturing department	Other department	Total
Primary geographic markets:
Taiwan	\$	7,106	122,065	10,524,005	48,916	10,702,092
Turkey					117,729	117,729
Japan		955,662				955,662
Malaysia			425,514	14,779		440,293
Korea		189,218	17,331	118,800		325,349
China		779,437	991,615	7,185,182	762,935	9,719,169
USA			96,724	70,037		166,761
Thailand		44,691	211,854	138,215		394,760
Other countries		123,971	96,638	181,328	588,844	990,781
	\$	2,100,085	1,961,741	18,232,346	1,518,424	23,812,596
Major products line:
Dynamic Random Access Memory (DRAM)	\$	2,100,085	1,961,183	18,155,480	1,518,424	23,735,172
Other			558	76,866		77,424
	\$	2,100,085	1,961,741	18,232,346	1,518,424	23,812,596

			For the six months ended June 30, 2018
	Japanese department	USA department	Manufacturing department	Other department	Total
Primary geographic markets:
Taiwan	\$ 4,556	85,965	18,741,595	87,982	18,920,098
Turkey				424,151	424,151
Japan	1,102,647			1,609	1,104,256
Malaysia		422,240	283,395	12,610	718,245
Korea	124,351	294	334.581	1.715	460,941
China	771,982	3,590,977	14,652,357	1,113,187	20,128,503
Other countries	141,571	196,675	604,740	690,476	1,633,462
	2,145,107	4,296,151	34,616,668	2,331,730	43,389,656
Major products line:
Dynamic Random Access \$ Memory (DRAM)	2,145,107	4.296,151	34.547.739	2,331,730	43,320,727
Other			68,929		68,929
	2,145,107	4,296,151	34,616,668	2,331,730	43,389,656

$(i)$ Contract balances

		June 30, 2019	December 31, 2018	June 30, 2018
Notes receivable from operating activities	\$		481	4,212
Accounts receivable		7,335,028	9,772,558	14,753,310
Less: allowance for impairment			(9,298)	(9,274)
Total	S	7,335,028	9,763,741	14,748,248

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

Remuneration to employees $(q)$

According to the Company's articles of incorporation, if the Company makes a profit, it should appropriate for employee remuneration to employees which is calculated based on 1% to 12% of the Company's net income before tax before deduction of employee remuneration to employees and after offsetting accumulated deficits, if any, should be distributed as employee remuneration to employees. Employees who are entitled to receive the above mentioned employee remuneration to employees, 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 $$151,785$ , $$941,104$ , $$371,087$ and $$1,520,949$ for the three months and six months ended June 30, 2019 and 2018, respectively. This employee remuneration to employees was estimated based on the Company's net income before tax before deducting any employee remuneration, according to the earnings allocation method as stated under the Company's articles of association. If there is any difference between the actual amounts and the estimated amounts of employee remuneration to employees after the financial reports are issued, the management of the Company is expecting that the differences will be treated as a changes in accounting estimates and recognized through profit or loss in the following year.

The estimated employee remuneration to employees which was charged to profit or loss under operating costs or expense amounted to \$1,740,000 for the year ended 2018, which is same as the amount 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, 2017, and the amount of actual distributions in 2018, amounted to \$1,362,183. The Company recognized difference of \$1,830 in profit or loss in 2018. The related information can be obtained from the Market Observation Post System website.

Non-operating income and expenses $(r)$
$(i)$ Other incomes

		For the three months ended June 30,		For the six months ended June 30,
		2019	2018	2019	2018
Interest income
Bank deposits and short-term notes	\$	333,773	168,730	702,299	371,462
Financial lease		24,742	30,929	50,548	63,824
	S	358,515	199,659	752,847	435,286

(ii) Other gains and losses

	For the three months ended		For the six months ended
	June 30,		June 30,
	2019	2018	2019	2018
Foreign exchange gains \$	25,315	1,767,705	116,546	589,672
Net loss on financial liabilities at fair value
through profit or loss				(281, 107)
Gain on disposal of a subsidiary				497
Reversal of impairment gain (loss) on non- financial assets	120,322	(4, 542)	120,322	100,861
(Loss) gain on disposals of property, plant and
equipment	(293)		(287)	46
Others	32,478	26,991	68,138	58,176
	177,822 S	1,790,154	304,719	468,145

(iii) Finance costs

	For the three months ended June 30,			For the six months ended June 30,
	2019	2018	2019	2018
Bank loans	\$			26
Amortization interest of overseas convertible bond				5,105
Financing from other related parties	32	116	78	235
Amortization interest of lease liabilities	821		1,818
Others	48	49	95	97
	901	165	1,991	5.463

$(s)$ Financial instruments

Except for the contention mentioned below, there was no significant change in the fair value of the Group's financial instruments and degree of exposure to credit risk, liquidity risk and market risk arising from financial instruments. For the related information, please refer to note $6(w)$ of the consolidated financial statements for the year ended December 31, 2018.

$(i)$ 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
June 30, 2019
Non-derivative financial liabilities
Financing from other related parties	s	3,609	3,738	65	3,673
Accounts payable (including related parties)		2,437,404	2,437,404	2,437,404
Other payables (including related parties)		31,300,723	31,300,723	31,300,723
Lease liabilities		199,145	200,673	100,337	100,336
	S	33,940,881	33,942,538	33,838,529	104,009
December 31, 2018
Non-derivative financial liabilities
Financing from other related parties	\$	7,625	8,046	211	7,835
Accounts payable (including related parties)		4,579,702	4,579,702	4,579,702
Other payable (including related parties)		9,718,109	9,718,109	9,718,109
	s	14,305,436	14,305,857	14,298,022	7,835
June 30, 2018
Non-derivative financial liabilities
Financing from other related parties	\$	12,556	12,990	261	12,729
Accounts payable (including related parties)		3,220,559	3,220,559	3,220,559
Other payables (including related parties)		20,800,170	20,800,170	2,800,170
	s	24,033,285	24,033,719	6,020,990	12,729

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

Currency risk $(ii)$

Exposure to currency risk $\left| \right|$

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

		June 30, 2019		December 31, 2018				June 30, 2018
Financial assets:	Foreign currency (in thousands)	Exchange rate (dollars)	New Taiwan Dollars	Foreign currency (in thousands)	Exchange rate (dollars)	New Taiwan Dollars	Foreign currency (in thousands)	Exchange rate (dollars)	New Taiwan Dollars
Monetary items
USD	\$ 368,433	31,072	11,447,950	1,565,831	30.733	48,122,684	1,228,449	30.500	37,467,695
JPY	553,632	0.2877	159,280	3,219,721	0.2772	892,507	1,765,393	0.2765	488,131
EUR	28	35,2575	987	7	35.167	246	21	35.3440	742
Financial liabilities:
Monetary items
USD	100,280	31.072	3,115,900	135,655	30.733	4,169,085	126,181	30.500	3,848,521
JPY	1,681,530	0.2877	483,776	2,644,019	0.2772	732,922	1,120,416	0.2765	309,795
EUR	502	35,2575	17,699	4,387	35,167	154,278	789	35.3440	27,886

The Group's exposure to foreign currency risk arises from the translation of the foreign currency exchange fluctuations on cash and cash equivalents, accounts receivable, accounts payable and other payable (including related parties) which are denominated in different foreign currencies. A 1% depreciation of the TWD against the USD, EUR, JPY, as of June 30, 2019 and 2018 would have increased the net income before tax by \$79,908 and \$337,704 for the six months ended June 30, 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 as prior year.

Since the Group has many kinds of functional currency, the information on foreign exchange loss on monetary items is disclosed by total amount. For the six months ended June 30, 2019 and 2018, foreign exchange gain (including realized and unrealized portions) amounted to \$116,546 and \$589,672, respectively.

$2)$ interest rate analysis

Please refer to the notes on liquidity risk management and interest rate exposure of the Group's financial liabilities.

The following sensitivity analysis is based on the exposure to the interest rate risk of derivative and non-derivative financial instruments on the reporting date. Regarding liabilities with variable interest rates, the analysis is based on the assumption that the amount of liabilities outstanding at the reporting date was outstanding throughout the year. The rate of change is expressed as the interest rate increases by 1% when reporting to management internally, which also represents the Group management's assessment of the reasonably possible interest rate change.

If the interest rate had increased by 1 basis points, the Group's net income would have increased or decreased by \$36 and \$125 for the six months ended June 30, 2019 and 2018 with all other variable factors remaining constant. This is mainly due to the Group's borrowing at variable rates and investment in variable-rate bills.

(iii) Fair value of financial instruments
$1)$ Types and fair value of financial instruments

The fair value of financial liabilities was measured at recurring fair value. The carrying amount and fair value of the Group'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 :

June 30, 2019

			Fair Value
		Book Value	Level 1	Level 2	Level 3	Total
Financial assets measured at amortized cost
Cash and cash equivalents	S	60,860,911
Notes and accounts Receivable		7,335,028
Other receivables (including related parties)		1,874,850
Lease payments receivable (including current portion)		961,884
Total	s	71,032,673
Financial liabilities measured at amortized cost
Accounts payable (including related parties)	\$	2,437,404
Other payables (including related parties)		31,304,332
Lease liabilities-current		199,145
Total	s	33,940,881
				December 31, 2018

				Fair Value
		Book Value	Level 1	Level ₂	Level 3	Total
Financial assets measured at amortized cost
Cash and cash equivalents	\$	57,384,006
Notes and accounts receivable, net		9,763,741
Other receivables		1,145,510
Lease payments receivable (including current position)		1,043,501
Total		69,336,758
Financial liabilities measured at amortized cost
Accounts payable (including related parties)	\$	4,579,702
Other payables (including related parties)		9,725,734
Total		14,305,436

	June 30, 2018
	Fair Value
		Book Value	Level 1	Level 2	Level 3	Total
Financial assets measured at amortized cost
Cash and cash equivalents	S	61,536,556
Notes and accounts receivable, net		14,748,248
Other receivables		726,718
Lease payments receivable (including current portion)		1,202,412
Total	\$	78,213,934
Financial liabilities measured at amortized cost
Accounts payable (including related parties)	\$	3,220,559
Other payables (including related parties)		20,812,726
Total		24,033,285

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

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

Financial assets and liabilities measured at amortized cost. $a)$

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.

There were no transfers from financial assets for the six months ended June 30, 2019 and $3)$ 2018.
$(t)$ Financial risk management

There were no significant changes in the Group's financial risk management and policies as disclosed in Note $6(y)$ of the consolidated financial statements for the year ended December 31, 2018.

$(u)$ Capital management

Management believes that the objectives, policies and processes of capital management of the Group has been applied consistently with those described in the consolidated financial statements for the year ended December 31, 2018. Also, management believes that there were no significant changes in the Group's capital management information as disclosed for the year ended December 31, 2018. Please refer to Note $6(z)$ of the consolidated financial statements for the year ended December 31, 2018 for further details.

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

The Group's investing and financing activities on non-cash transactions for the three months ended June 30, 2019 and 2018 were as follows:

$(i)$ Acquisition of right-of-use assets by lease, please refer to $Note6(g)$ .
$(ii)$ Financing activities which did not affect the current cash flows:

	For the six months ended June 30,
	2019	2018
Conversion of convertible bonds to ordinary shares	$\blacksquare$	3,240,750
Retirement of treasury shares	2.665.621	-

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

	January 1, 2019	Cash flow	Change in an index of lease payment	Increased by other payables	Interest expense	June 30, 2019
Other payables to related parties	7.625	(4.016)				3,609
Lease liabilities	300.605	(83, 779)	(2.776)	(16.723)	1.818	199.145
	308.230	(87,795)	(2,776)	(16, 723)	1.818	202,754

(7) Related-party transactions:

Names and relationship with related parties $(a)$

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

Name of related party	Relationship with the Group
Nan Ya Photonics Incorporation	The Group's other related parties
Formosa Technologies (Nanjing) Corporation	The Group's other related parties
Formosa Sumco Technology Corporation	The Group's other related parties
Formosa Advanced Technologies Co., Ltd. (referred to as "FATC")	The Group's associates (Note)
Formosa Technologies Corporation	The Group's other related parties
Formosa Biomedical Technology Corp.	The Group's other related parties
Formosa Plastics Corporation	The Group's other related parties
Formosa Heavy Industries Corp. (GZ) Ltd.	The Group's other related parties
Formosa Waters Technology Co., Ltd.	The Group's other related parties
Formosa Chemicals & Fiber Corporation	The Group's other related parties
Formosa Heavy Industries Corporation	The Group's other related parties
Formosa Transportation (Ning bo) Corp.	The Group's other related parties
Formosa Petrochemical Corporation	The Group's other related parties
Nan Ya Plastics Corporation	The entity with significant influence over the Group

Note: FATC was the previous other related party of the Group. However, since the Company has significant influence over FATC, it became the Group's associates beginning July 25, 2018.

Significant transactions with related parties $(b)$

Purchase from related parties $(i)$

			Purchases
		For the three months ended June 30,		For the six months ended June 30,		Accounts payable to related parties
Relationship		2019	2018	2019	2018	June 30. 2019	December 31. 2018	June 30. 2018
Entities with significant influence over the Group	J	16,619	14.646	61.464	29,750	5,286	5,626	5,413
Associates		661		984
Other related parties:
Formosa Sumco Technology Corporation		376,403	429,063	783,354	848,590	270,681	322,068	290,788
Other related parties		113,274	32,144	170,356	54,614	6.971	4,370	6,937
	S	506,957	475,853	1,016,158	932,954	282,938	332,064	303,138

The terms and pricing of purchase transactions with related parties were not significantly different from those offered by other vendors. The payment terms ranged from one to two months, which were no different from the payment terms given by other vendors.

$(ii)$ Consigned out for processing

		Amount
Relationship	For the three months ended June 30,		For the six months ended June 30,		Other payables to related parties
	2019	2018	2019	2018	June 30. 2019	December 31. 2018	June 30, 2018
Associates	1,725,281	-	3,350,601		1.047.001	931,059
Other related parties:
Formosa Advanced Technologies Co., Ltd		1,512,861		2,854,141			1,010,690
	1.725.281	1,512,861	3,350,601	2,854,141	1,047,001	931,059	1,010,690

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

(iii) Financing from related parties

	Financial costs
		For the three months ended June 30,		For the six months ended June 30,
Relationship	2019		2018	2019		2018
Other related parties:
Formosa Heavy Industries Corp. (GZ) Ltd.			8			80
Formosa Transportation (Ningbo) Corp.			45			45
Formosa Technologies (Nanjing) Corporation		32	63		78	89
Formosa Heavy Industries Corporation						21
	\$	32	116		78	235
			Other payables to related parties
		Balance of borrowings			Interest payable
Relationship	June 30, 2019	December 31. 2018	June 30, 2018	June 30. 2019	December 31, 2018	June 30. 2018
Other related parties:
Formosa Technologies (Nanjing) Corporation \$	3,609	7,625	12,468		156	88

(iv) Property transactions

Acquisition of equipment $1)$

		Acquisition price
	June 30.	For the three months ended	For the six months ended June 30.		Other payables to related parties
Relationship	2019	2018	2019	2018	June 30. 2019	December 31, 2018	June 30, 2018
Entities with significant influence over the Group				391			178
Other related parties		1,586	340	3.697		104	5,076
		1,586	340	4.088		104	5,254

Dividends receivables $(v)$

	Other receivables due from related parties
Relationship	June 30, 2019
Associate:
Formosa Advanced Technologies Co., Ltd.	210.056

$\hat{\mathcal{L}}$

(vi) Leases

		Amount
	For the three months ended June 30,		For the six months ended June 30,
	2019	2018	2019	2018
Entities with significant influence over the
Group	13,592	56,270	24,094	112,374

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 three months and six months ended 2018, the rent expense were amounting to $$50,664$ and $$101,602$ , respectively.

The Group 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 three months and six months ended March 31, 2019, the Group recognized the amount of \$821 and \$1,818, as interest expense, respectively. As of June 30, 2019, the balance of lease liabilities amounted to \$199,145.

Key management personnel compensation $(c)$

Key management personnel compensation comprised:

	For the three months ended June 30,		For the six months ended June 30,
	2019	2018	2019	2018
Short-term employee benefits \$	11,206	9,970	23,963	22,232
Share-based payment	1.063	12,739	2.232	14,433
	12.269	22,709	26,195	36,665

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

(8) Pledged assets:

The Group's assets pledged to secure loans are as follows:

Pledged assets	Object	June 30, 2019	December 31, 2018	June 30, 2018
Other non-current assets	Office leasing	5,251	5,137	$\blacksquare$

(9) Commitments and contingencies:

Significant commitments $(a)$

	June 30, 2019	December 31, 2018	June 30, 2018
Guarantees for importation goods provided by bank	1,035,000	1,035,000	1,035,000
Unused letters of credit	142.245	419.639	536,988
Total	1,177,245	1,454,639	1,571,988

(b) Contingent liabilities

$(i)$ In 2000, the Company was charged by Brazil's Ministry of Justice as being involved in the International Monopolies, which influences Brazil's DRAM market. Consequently, the Company, other large international companies and individuals are investigated at the same time. The Company has engaged counsels to properly handle it to ensure the Company's rights.
$(ii)$ In October 2016, Lone Star Silicon Innovations LLC (Lone Star) 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 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 Group has engaged lawyers to handle the case to ensure its rights.
(iii) The original Joint Venture agreement signed by the Company, Micron Technology, Inc. and its 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\$5,403 ten thousands; 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 June 30, 2019, the payment amounting to \$44,150 (USD1,460 thousand) had been recognized by the Company.
$2)$ 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) A summary of current-period employee benefits, depreciation, and amortization, by function, is as follows:

		For the three months ended June 30, 2019			For the three months ended June 30, 2018
	Cost of goods sold	Operating expenses	Total	Cost of goods sold	Operating expenses	Total
Employee benefits
Salaries	730,203	476,364	1,206,567	1,560,807	822,312	2,383,119
Labor and health insurance	48.402	35.231	83,633	43,136	31,158	74,294
Pension expenses	25.354	17,237	42,591	23,403	14,688	38,091
Remuneration of directors		1,890	1.890		1,510	1,510
Other personnel expenses	17.992	5,919	23.911	16,884	5,600	22,484
Depreciation expenses	3,537,551	57,156	3,594,707	2,910,907	38.581	2,949,488
Amortization expenses	26,751	$\blacksquare$	26,751	35,723		35,723

		For the six months ended June 30, 2019			For the six months ended June 30, 2018
	Cost of goods sold	Operating expenses	Total	Cost of goods sold	Operating expenses	Total
Employee benefits
Salaries	1,429,922	938,076	2,367,998	2,578,988	1,412,812	3,991,800
Labor and health insurance	95,264	71,232	166,496	86,366	62,701	149,067
Pension expenses	49.334	35,873	85,207	46,252	31,707	77,959
Remuneration for directors		3,430	3,430		3.040	3,040
Other personnel expenses	35,731	11,762	47,493	33,683	11,093	44,776
Depreciation expenses	6,842,663	100.665	6,943,328	5,753,811	77,774	5,831,585
Amortization expenses	39,714		39,714	71,370		71.370

$(b)$ The Group's operations were not affected by seasonality or cyclicality factors.

(13) Other disclosures:

Information on significant transactions: $(a)$

The followings were the information on significant transactions required by the "Regulations Governing the Preparation of Financial Reports by Securities Issuers" for the Group for the six months ended June 30, 2019:

$(i)$ Loans to other parties: None
Guarantees and endorsements for other parties: None $(ii)$
(iii) Securities held at the reporting date (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 (Cavman)		Financial assets measured l
	Co Ltd.		at amortized cost and fair
			value through other
			comprehensive income

(iv) Information regarding purchase or sale of securities for the period exceeding \$300 million or 20% of the capital stock: None
Acquisition of individual real estate with amount exceeding \$300 million or 20% of the Company's paid-in capital: None $(v)$
(vi) Disposal of individual real estate with amount exceeding \$300 million or 20% of the Company's paid-in capital: None
(vii) Related-party transaction for purchases and sales for which amounts exceeding \$100 million or 20% of the Company's paidin capital:

$\cdots$ . The momentum of $\cdots$ . The $\cdots$
							Transactions with terms			Notes/Accounts receivable (payable)
					Transaction details		different from others
Name of company	Related party	Nature of relationship	Purchase /Sale	Amount	Percentage of total purchases/sales	Payment terms	Unit price	Payment terms	Ending balance	Percentage of total notes/accounts receivable (payable)	Note
The Company	Nanya Technology Corp., U.S.A.	Subsidiary	(Sale)	(1, 915, 309)	$(8.09)\%$	O/A 60~90Days			965,951	12.95%	(Note)
	The Company Nanya Technology Corp., Japan	Subsidiary	(Sale)	(2,039,451)	$(8.61)\%$	O/A 180Days			602,166	8.07%	(Note)
	The Company Nanya Technology Corp., GmbH	Subsidiary	(Sale)	(1, 377, 228)	$(5.82)\%$	O/A 60~90Days			488,756	6.55%	(Note)
The company	Formosa Sumco Technology Corporation	Other related parties	Purchase	783,354	12.61%	O/A 60Days			(270, 681)	(11.10)%
Nanya Technology Corp., U.S.A	Nanya Technology Corp	The parent comapny	Purchase	1,915,309	100,00%	O/A 60~90Days			(965, 951)	$(100.00)\%$	(Note)
Nanya Technology Corp., Japan	Nanva Technology Corp	The parent company	Purchase	2,039,451	100.00%	O/A 180Days			(602, 166)	$(100.00)\%$	(Note)
Nanya Technology Corp., GmbH	Nanya Technology Corp	The parent company	Purchase	1,377,228	100.00%	O/A 60~90Days			(488, 756)	$(100.00)\%$	(Note)

(In Thousands of New Taiwan Dollars)

Note: The transactions were written off in the consolidated financial statements.

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

							(In Thousands of New Taiwan Dollars)
Name of		Nature of	Ending balance of	Turnover	Overdue		Amounts received in	Allowance
company	Counter-party	relationship	accounts receivable	rate	Amount	Action taken	subsequent period	for bad debts
			from related parties
The Company	Nanya Technology Corp., U.S.A.	Subsidiarv	965.951	2.21			442,718
The Company	Nanya Technology Corp., Japan	Subsidiary	602,166	6.26			232,131
The Company	Nanya Technology Europe GmbH	Subsidiary	488.756	5.15			292.606
The Company	Formosa Advanced Technologies Co., Ltd. Associates		210,056	$\overline{\phantom{0}}$			$\overline{\phantom{0}}$

$\alpha$ and

$\overline{1}$ $\overline{0}$

$\sim$ $\sim$

Note: the transactions were written off in the consolidated financial statements.

(ix) Trading in derivative instruments: None

$(x)$ Business relationships and significant intercompany transactions:

(In Thousands of New Taiwan Dollars)
			Nature of			Intercompany transactions
No.	Name of company	Name of counter-party	relationship	Account name	Amount	Trading terms	Percentage of the consolidated
							net revenue or total assets
$\bf{0}$		Nanya Technology Corp. Nanya Technology Corp.,		Sales		1,915,309 On the basis of general	8.04%
		U.S.A				conditions
$\bf{0}$		Nanya Technology Corp. Nanya Technology Corp.,		Sales		1,377,228 On the basis of general	5.78%
		Japan				conditions
0		Nanya Technology Corp. Nanya Technology Europe		Sales		2,039,451 On the basis of general	8.56%
		GmbH				conditions
$\mathbf{0}$		Nanya Technology Corp. Nanya Technology Corp.,		Accounts receivable		965,951 On the basis of general	0.52%
		IU.S.A				conditions
0		Nanya Technology Corp. Nanya Technology Europe		Accounts receivable		602,166 On the basis of general	0.32%
		GmbH				conditions
0		Nanya Technology Corp. Nanya Technology Corp.,		Accounts receivable		488,756 On the basis of general	0.26%
		Uapan				conditions

Note 1: Assigned numbers represent the following:

0 represents the parent company.
The subsidiaries are represented numerically starting from 1.

Note 2: The terms of transactions are defined as follows:

1. Parent company to subsidiary.
1. Subsidiary to parent company.
1. Subsidiary to Subsidiary.

Note 3: The business relationship and significant transactions between the parent company and the subsidiary only disclose the importations of sales and account receivable, didn't repeat about the purchase and account payable.

(b) Information on investees (excluding information on investees in Mainland China):

The following is the information on investees for the six months ended June 30, 2019:

(In Thousands of New Taiwan Dollars / Shares)

			Main		Original investment amount		Balance as of June 30, 2019		Net income	Share of
Name of investor	Name of investee	Location	businesses and products	June 30, 2019	December 31. 2018	Shares (thousands)	Percentage of ownership	Carrying value	of investee	profits of investee	Note
The Company	Nanya Technology Corp., U.S.A.	U.S.A.	Sales of semiconductor products	20,392	20,392	$\sim$	100.00%	150.705	12.489	12,489	(Note I)
The Company	Nanya Technology Corp., Delaware	U.S.A	Design of semiconductor products	36,005	36,005		100.00 %	160,540	9,328	9,328	(Notel)
The Company	Nanya Technology Corp., HK	Hong Kong	Sales of semiconductor products	66,271	66,271	20 ₁	100.00%	56,043	3,503	3,503	(Notel)
The Company	Nanya Technology Corp., Japan	Japan	Sales of semiconductor products	20,161	20,161		100.00%	183,558	9.705	9.705	(Notel)
The Company	Nanya Technology International, Ltd. British		General investment business	30,888,000	30,888,000		100 00 %	31,605,119	527,885	527,885	(Note 1)
		Virgin Island
The Company	Formosa Advanced Technologies Co., Ltd.	Yunlin	Assembling, testing and producing modules for IC	3,049,999	3,049,999	84,022	19.00%	2,909,089	600.189	101,406	(Note 2)
Nanya Technology Corp, HK	Nanya Technology Europe GmbH	Germany	Sales of semiconductor products	30,056	30,056		100.00%	66,056	3,038	3,038	(Notel)

Note: (1)The transactions were written off in the consolidated financial statements.

(2) Investment accounted for using equity method.

(c) Information on investment in mainland China:

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

											(In Thousands of New Taiwan Dollars)
Main	Total		Accumulated outflow of		Investment flows	Accumulated outflow of	Net income				Accumulated
businesses Name of and	amount of paid-in	Method пf	investment from Taiwan as of			investment from Taiwan as of	(losses) of the	Percentage Investment of	income	Book	remittance of earnings in
investee products	capital		investment January 1, 2019.	Outflow	Inflow	June 30, 2019	investee	ownership	(losses)	value	current period
Nanya Technology Corp., Sales of semiconductor Shenzhen products	(USD985, thousand)	30.606 (Note 1)	30,606 USD985 thousand)			30,606 (USD985) thousand)	(485)	100.00%	(485)	13,717

Note 1: Indirect investment in Nanya Technology Corp., Shenzhen through Nanya Technology Corp., HK.
Note 2: The transactions were written off in the consolidated financial statements.

(ii) Limitation on investment in Mainland China:

(In Thousands of New Taiwan Dollars)

Accumulated Investment in Mainland China as of June 30, 2019 (Note 1)	Investment Amounts Authorized by Investment Commission, MOEA (Note 1)	Upper Limit on Investment (Note 2)
30.606	30,606	89,742,874
(USD985 thousand)	(USD985 thousand)

Note 1: The exchange rate of New Taiwan dollars to US dollars on June 30, 2019 was USD1: TWD 31.072.

Note 2:60% of net equity.

(iii) Significant transactions: None

(14) Segment information:

				For the three months ended June 30, 2019
		Japanese division	USA division	Manufacturing divisions	Others divisions	Adiustments and eliminated	Total
Revenue:
From external customers	S	932.348	1.094.187	9,681,489	732,767		12,440,791
From sales among intersegments			467	2,668,039	101,499	(2,770,005)
Total revenue		932,348	1,094,654	12,349,528	834,266	(2,770,005)	12,440,791
Reportable segment profit or loss		(17, 674)	7,009	3,404,284	271,057	(260, 030)	3,404,646
	For the three months ended June 30, 2018
		Japanese division	USA division	Manufacturing divisions	Others divisions	Adiustments and eliminated	Total
Revenue:
From external customers	\$	1,015,986	2,861,059	19,663,798	1,051,374		24,592,217
From sales among intersegments			446	4,857,004	90,643	(4,948,093)
Total revenue		1,015,986	2,861,505	24,520,802	1,142,017	(4,948,093)	24,592,217
Reportable segment profit or loss		65,407	3,585	13,499,193	10,910	(79, 203)	13,499,892
				For the six months ended June 30, 2019
		Japanese division	USA division	Manufacturing divisions	Others divisions	Adjustments and eliminated	Total
Revenue:
From external customers	s	2,100,085	1,960,811	18,256,747	1,494,953		23,812,596
From sales among intersegments			930	5,425,905	202,914	(5,629,749)
Total revenue		2,100,085	1,961,741	23,682,652	1,697,867	(5,629,749)	23,812,596
Reportable segment profit or loss		9,587	12.489	6.990.290	541.642	(562, 910)	6,991,098

			For the six months ended June 30, 2018
	Japanese division	USA division	Manufacturing divisions	Others divisions	Adjustments and eliminated	Total
Revenue:
From external customers	2,145,107 s	4,295,265	34,634,603	2,314,681		43,389,656
From sales among intersegments		886	8,458,320	159,734	(8,618,940)
Total revenue	2,145,107	4,296,151	43,092,923	2,474,415	(8,618,940)	43,389,656
Reportable segment profit or loss	(23, 205)	4,652	20,726,665	25,918	(6, 802)	20,727,228
	Japanese division	USA division	Manufacturing divisions	Others divisions	Adjustments and eliminated	Total
Reportable segment assets
Balance at June 30, 2019	794,455	1,129,961	185,351,237	32,376,774	(34, 303, 299)	185,349,128
Balance at December 31, 2018	882,323	2,654,957	203,166,038	31,591,529	(55,709,034)	182,585,813
Balance at June 30, 2018	845,845	2,210,658	174,149,714	1,124,703	(4, 181, 957)	174,148,963
	Japanese division	USA division	Manufacturing divisions	Others divisions	Adjustments and eliminated	Total
Reportable segment liabilities
Balance at June 30, 2019	604,163	967,249	35,779,781	555,072	(2,128,593)	35,777,672
Balance at December 31, 2018	708,537	2,506,403	38,258,740	652,582	(24, 447, 747)	17,678,515
Balance at June 30, 2018	689,462	2,083,361	27,287,557	881,110	(3,654,683)	27,286,807

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NTC — Interim / Quarterly Report 2019

52061_rns_2019-11-22_5bc39e83-3d7e-400a-8e77-0134ac0e7b0b.pdf

NANYA TECHNOLOGY CORPORATION AND SUBSIDIARIES

Table of contents

Qualified Conclusion

Other Matter

KPMG

Notes to Readers

(English Translation of Consolidated Financial Statements Originally Issued in Chinese) Reviewed only, not audited in accordance with generally accepted auditing standards

Nanya Technology Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income

For the three months and six months ended June 30, 2019 and 2018

Nanya Technology Corporation and Subsidiaries

For the six months ended June 30, 2019 and 2018

(English Translation of Consolidated Financial Statements Originally Issued in Chinese) Reviewed only, not audited in accordance with generally accepted auditing standards

Nanya Technology Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

June 30, 2019 and 2018

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

(1) Company history

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

(3) New standards, amendments and interpretations adopted:

$(4)$ Summary of significant accounting policies:

$(d)$ Income taxes

Employee benefits $(e)$

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

(6) Explanation of significant accounts:

(a) Cash and cash equivalents

(b) Notes and accounts receivable

(c) Inventories

Investments accounted for using equity method $(d)$

(e) Loss control over subsidiaries

Right-of-use assets $(g)$

$(h)$ Lease receivables

23

NANYA TECHNOLOGY CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

Employee benefits $(k)$

$(ii)$ Defined contribution plans

$\Lambda$ Income tax

(iii) Retain earning

(iv) Treasury shares

$(v)$ Other equity (net of tax)

(o) Earnings per share

Revenue from contracts with customers $(p)$

$(i)$ Disaggregation of revenue

$(i)$ Contract balances

Remuneration to employees $(q)$

(ii) Other gains and losses

(iii) Finance costs

$(s)$ Financial instruments

$(i)$ Liquidity risk

Currency risk $(ii)$

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

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

(7) Related-party transactions:

Significant transactions with related parties $(b)$

$(ii)$ Consigned out for processing

(iii) Financing from related parties

(iv) Property transactions

Acquisition of equipment $1)$

Dividends receivables $(v)$

(vi) Leases

Key management personnel compensation $(c)$

(8) Pledged assets:

(9) Commitments and contingencies:

(b) Contingent liabilities

(10) Losses Due to Major Disasters: None

(11) Subsequent Events: None

$(12)$ Other:

(13) Other disclosures:

(c) Information on investment in mainland China:

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

(ii) Limitation on investment in Mainland China:

(iii) Significant transactions: None

(14) Segment information:

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NTC Interim / Quarterly Report 2019