OSE - Annual Report 2019 | FinancialReports.eu

Stock Code :2329

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Orient Semiconductor Electronics, Ltd. Annual Report 2019

The annual report is available at: http://mops.twse.com.tw/mops/web/t57sb01_q5 Company website: http://www.ose.com.tw

I. Company spokesperson and deputy spokesperson Company spokesperson: Chun-Kuan Lee Title: CFO Tel: (07) 361-3131 Deputy spokesperson: Simon Hung Title: Director of Financial Dept. Tel: (07) 361-3131 E-Mail: [email protected]

II. Company and factory address Company Address: No. 9, Central 3rd St., N.E.P.Z., Kaohsiung City Tel: (07) 361-3131 Factory Semiconductor Group Address: No. 80, Jing 3rd Rd., N.E.P.Z., Kaohsiung City Tel: (07) 361-3131 Electronics Manufacturing Services Group Address: No. 16, East 3rd Rd., N.E.P.Z., Kaohsiung City Tel: (07) 361-3131

III. Stock transfer agency Company: Stock transfer agency of CTBC Bank Co., Ltd Address: 5F., No. 83, Sec. 1, Chongqing S. Rd., Taipei City 100 Tel: (02)6636-5566 Website: http://www.ctbcbank.com.tw IV. CPA of the financial statement of the most recent fiscal year Name of CPA: Chen, Chih-Chung, Chen, Cheng-Chu CPA firm: Ernst and Young Global Limited Address: 17F., No. 2, Zhongzheng 3rd Rd., Kaohsiung City Tel: (07) 238-0011 Website: http://www.ey.com/taiwan

V. Name of any exchanges where the company's securities are listed overseas and the method by which to access information about the overseas securities: none
VI. Company website: http://www.ose.com.tw

Catalogue

	Catalogue
Corporate	Vision...................................................................................................................... 1
One. Message to Shareholders................................................................................................ 2
Two. Company Profile
I.	Date of establishment ............................................................................................. 8
II.	Company history .................................................................................................... 8
Three. Corporate Governance Report
I.	Organization ......................................................................................................... 10
II.	Profile of Directors, Supervisors, Presidents, Vice Presidents, Assistant
	Managers, Department Heads and Branch Heads ................................................ 12
III.	Remuneration for Directors, Supervisors, Presidents and Vice Presidents
	in the most recent fiscal year ................................................................................ 26
IV.	Implementation status of Corporate Governance ................................................. 34
V.	Information of CPA fee ........................................................................................ 80
VI.	Replacement of CPAs ........................................................................................... 80
VII.	The Chairman, President or Managerial Officers in charge of finance or
	accounting served at the firms or affiliates of CPAs in the most recent 1
	year ....................................................................................................................... 80
VIII.	Changes in the transfer or pledge of shares by Directors, Supervisors,
	Managerial Officers, and shareholders holding over 10% of the shares: ............. 81
IX.	Information of relationship between the company’s top ten shareholders
	who are mutually stakeholders, spouses or relatives within the second
	degree of kinship .................................................................................................. 84
X.	The shareholding of the same investee held by the Company, Directors,
	Supervisors, Managerial Officers, and the business entities directly or
	indirectly controlled by the Company, and calculation of the consolidated
	proportion of shareholdings of the above categories ........................................... 87
Four. Capital Overview
I.	Capital and shares ................................................................................................. 88
II.	Status of corporate bonds ..................................................................................... 94
III.	Status of preferred stocks ..................................................................................... 94
IV.	Status of global depository receipts...................................................................... 94
V.	Status of employee stock option plan ................................................................... 94
VI.	The process of new restricted employee shares: ................................................ 95
VII.	Status of new shares issuance in connection with mergers, acquisitions
	and transfer of shares .......................................................................................... 95
VIII.	Implementation status of capital utilization plan ............................................... 97
Five. Operating Overview
I.	Business content ................................................................................................... 98
II.	Market, production and sales overview .............................................................. 105
III.	Profile of employees ............................................................................................ 111
IV.	Environmental protection expenditure ............................................................... 112
V.	Labor relations .................................................................................................... 112
VI.	Important contracts ............................................................................................. 115

Six. Financial Information

I.	Condensed balance sheet and statement of comprehensive income in the
	past 5 years ......................................................................................................... 116
II.	Financial analysis in the past 5 years ................................................................. 120
III.	Audit Committee's Review Report ..................................................................... 124
IV.	The consolidated financial statements for the most recent year ......................... 125
V.	The individual financial statements audited and certified by CPAs for the
	most recent year ................................................................................................. 223
VI.	Financial difficulties of the company and its affiliated enterprises .................... 317

Seven. Review and Analysis of Financial Status and Financial Performance and Risk Matters

I.	Financial status ................................................................................................... 318
II.	Financial performance ........................................................................................ 319
III.	Cash flow ............................................................................................................ 320
IV.	Major capital expenditures in the most recent years and the impact on
	finance and business ........................................................................................... 321
V.	Reinvestment policy in the most recent year, main reasons for profits or
	losses, improvement plans and investment plans for the coming year .............. 322
VI.	Risk matters ........................................................................................................ 322
VII.	Other material information ................................................................................. 324

Eight. Special Disclosure

I.	Information of affiliated enterprises ................................................................... 325
II.	Private placement of securities ........................................................................... 330
III.	Stocks of the company held or disposed by subsidiaries ................................... 332
IV.	Other required supplementary notes .................................................................. 332
V.	Events with material impacts on shareholder equity or stock price as
	specified in Item 2, Paragraph 3, Article 36 of the Securities and
	Exchange Act. ..................................................................................................... 332

【Corporate Vision】

“Sincerity and honesty at all times” is Orient Semiconductor Electronics’ (OSE) entrepreneurial spirit and business philosophy. OSE has dedicated itself to serving customers, caring for employees, managing enterprise, taking responsibilities for shareholders and fulfilling CSR for decades.

Since its founding in 1971, OSE provides IC packaging and testing services as well as electronics manufacturing services (EMS/CEM) for world-class customers and niche-oriented, high-growth customers via its core advantages in innovation of manufacturing process, information technology and business process, OSE has built long-term cooperation relationship with customers by OSE’s superior quality, diversified cost structure, production capacity, rapid order fulfillment, and global logistics support.

By holding the consistent spirit as before, and under the new core value of “sincerity, honesty, active innovation, team work and responsibility,” OSE is constantly committed to R&D, information technologies, production capacity, talents cultivation, global logistics, strengthening the ability of internal management, building its knowledge base, formulation and design of the operation procedure, cost control and management, and internal coordination and communication. OSE acquires world-class satisfaction from the customers via customer-oriented, service-oriented quality and performance.

One. Message to shareholders

2019 Annual Report

The business of OSE’s Semiconductor Group focuses on all the products related to the packaging and testing of memory, we play an important role in the market of flash memory packaging. In the future, we will not only strengthen the development of CSP/ BGA market, improve the production efficiency, continue the further development of memory market (especially LPDDR and DDR), but also expand the development of IoT and automotive electronics-related markets to boost OSE’s business.

The Electronic Manufacturing Services (EMS) Center uses its comprehensive services including mature technology; experience and process to provide customers advanced PCB and finished goods assembly from smaller batch high-mix to high volume of production to satisfy customers’ needs. The Company is publicly recognized as the leader in Taiwan. Aside from the original servers, high-end technology foundry (oil, satellite) and industrial computers, we have also introduced Netcom security, vehicle, high-end display card, FPGA customers that cover industries such as AI, 5G, Machine Learning, Big Data, unmanned vehicle and e-sports markets. In 2019, we were benefited from the reversed orders generated from the US-China trade war, providing productive capacity not only to existing customers but also new customers. The overall effective output has increased remarkably compared to 2018 and the Company has delivered the most satisfactory results for decades. With the generally increasing acceptance of the end market products, the orders have been continuing to increase for the product line of solid state drives (SSD) that we have been focusing on for many years. EMS Group makes advanced deployment to expand productive capacity in order to catch up with customers. We persist in moving forward to automation as a means to welcome bigger challenges in the coming year.

Operating Results

Unit: NTD thousand

Year	2019	2018	Difference	%
Net Revenue	17,515,145	15,188,192	2,326,953	15.32%
Cost ofgoods sold	(15,742,203)	(14,656,055)	(1,086,148)	(7.41%)
Gross Profit	1,772,942	532,137	1,240,805	233.17%
OperatingExpense	(996,827)	(938,200)	(58,627)	(6.25%)
Net other operating income and Expenses	357	－	357	－
OperatingIncome(loss)	776,472	(406,063)	1,182,535	291.22%
Non-operating Income and (Expenses)	(39,879)	43,527	(83,406)	(191.62%)
Other Incomes	50,464	74,246	(23,782)	(32.03%)
Other Gains and Losses	(13,999)	26,770	(40,769)	(152.29%)
Financial Costs	(115,732)	(125,986)	10,254	8.14%

Expected credit loss	(1,148)	－	(1,148)	－
Share of Profit or Loss of Associates under the Equity Method	40,536	68,497	(27,961)	(40.82%)
Profit(Loss)before Tax	736,593	(362,536)	1,099,129	303.18%
Income Tax Benefits (Expenses)	(148,633)	250,988	(399,621)	(159.22%)
Net Income(Loss)	587,960	(111,548)	699,508	627.09%

The Company’s 2019 operating margin, net operating loss, non-operating income and expenses, net income are explained as follows:

Gross Profit, Operating Income:

Due to the increase yield of upstream customer 3D NAND flash wafer, the productive capacity of the semiconductor business center has constantly improved which has met the market supply. With the significant improvement of operations, the demand for modules of solid state drive (SSD), cloud servers and industrial computers have all contributed to the business performances. In terms end markets, laptops, data center and severs use a large amount of SSDs, the penetration rate has grown rapidly. With the help of the demand from various industries, the Company is able to use the advantage of existing production platforms to adjust the setting of production line in order to accommodate the industry trend by making full use of existing resources to enhance production efficiency and constantly develop various application and production services.

Together with the factors of EMS center continuing to increase the orders for OEM consumer electronic products, niche products such as Class 3 becoming more mature, and the increase of mass production models as well as the reduction of the need to purchase materials and high-end server products for OEM, the sales income has increased and the purchase cost for materials has deceased which has allowed the gross margin to grow compared to the same period of the previous year.

Non-operating Income and (expenses):

Reduced by 191.62% compared to the same period of the previous year, due to the effect of net foreign currency exchange loss by the USD (30.72→30.08), resulted in a decrease in other gains and (loss) by 152.29%.

The business strategy in the future will be focusing on lean production, increasing the operating income and reducing the operating expenses in hope to create profit and improve the structure.

Financial Income/Expenses and Profitability Analysis

Year Analysis item	Year Analysis item	Financial analysis for the most recent twoyears	Financial analysis for the most recent twoyears
		2019	2018
Financial structure	Debt ratio%	61.89	67.14
	Long-term Fund toProperty, Plant and Equipment Ratio %	111.28	102.15
Profitability	Return on Total Assets%	4.17	(0.06)
	Return on Equity%	10.16	(2.00)
	Net Income to Sales %	3.36	(0.73)
	Earningsper Share(NTD)	1.06	(0.20)

R&D status

The R&D expenditure of 2019 was NT$278,307 thousand.

In terms of IC: Aside from the continuous introduction of process verification and mass production of various 3D NAND flashes, we also have response measures for the demand of the future high-speed memory (PCIE and DDR5). In 2019, we have completed the process development and establishment of production lines of flip chip package and have started the verification and development for relevant products. Furthermore, to fulfill the environmental protection constantly, the Company will continue focusing on the amendment and addition of the environmental protection regulation all around the world and verify new materials to comply with new environmental protection regulations.

In terms of EMS: With the transfer of customers’ high-end technology, plants are already equipped with the technology standard that exceeds the highest quality standard of class 3. The technology is applicable for fields such as oil exploration, aerospace satellites, military defense, etc. In 2019, we cooperated with the government policies and directors, and smoothly completed the satellite launch. We offer our extended services not only to Taiwan, but also any other country. The subsequent projects have gradually obtained licenses and certifications. We hope that in the future, we will provide high-end technology to customer groups in the niche market.

Summary of the Business Plan for the Current Fiscal Year

The Company’s business strategy will continue the development of flash memory market and select advantageous domestic/foreign proprietors for strategic cooperation. In addition to constant research and development for packaging of IoT, AI-related products and automotive electronics-related products, we will conduct the assessment and development the established product lines of flip chips for high-end wearable products. The Company has relatively strong advantage in terms of semiconductor packages and manufacturing services. Looking forward to 2020, not only will we strengthen the development of CSP/ BGA market, improve the production efficiency, and further enhance the development of memory market (especially LPDDR and DDR), we will also expand the development of IoT and automotive electronics-related markets to boost OSE’s business.

Consequently, the Semiconductor Group (IC packaging and testing) will be devoted to the following operating direction to boost the revenue:

I. Reduce the material costs constantly.
II. Constant development of high-end packaging process to meet the demand of customers’ future products.
III. Continue the further development of memory market and assist customers in the development of new customized products.
IV. Develop LPDDR and standard DDR-related products.
V. Adopt intelligent production management system.

Both SSD and products with quality requirement higher than IPC-610 class 3 in EMS Group has started the mass production stage. The main plans for 2020 include:

I. The ongoing expansion of the SSD production base -build an exclusive production area that serves the world’s top customers with the adjustment plan of the global productive capacity for the main customers to respond the demand of the future productive capacity.
II. With the growing demand for server products, the setting of production line has been adjusted accordingly in order to increase the productive capacity to handle customers’ demand. Aside from the production of the existing products, the products of the new generation will gradually be mass produced in 2020, ensuring the entering of markets for all products.
III. Proactively deploy military defense-related fields - obtain relevant certifications and use welding technology that is higher than class 3 for the application of products in relation to the production of military weapons.
IV. The non-consumable products were introduced due to the US-China trade war. These products are mainly applied in the equipment within buildings which have very long life cycle and are expected to have stable growth after successful introduction.
V. The IATF 16949 certification has been obtained in terms of vehicles. After the trial production, products have gradually entered their mass production stage since 2020.

Company’s Future Development Strategy

Semiconductor Group has put a lot of effort into the further development for the niche market of flash memory packaging. In addition to satisfying the quality, production capacity and cost requested by the packaging market of flash memory via current advantages in the future, we will also use relevant process technology to assist our customers in expanding the product markets of the development of IoT and AI.

I. Technique integration and quality yield rate: It is necessary not only to apply FEOL of packaging to flash memory module and IoT product module, but also to apply SMT manufacturing process to it. The Company has the technique and production capacity of the packaging of semiconductor and the assembly of electronics, we have the absolute advantages in manufacturing services compared with the domestic companies that have the same manufacturing process and scale as us.

II. Complete supply chain lowers the material cost constantly: After the transformation for many years, we have made up a complete supply chain with the related material suppliers, we continue looking for the cost-effective materials and manufacturing process via bilateral cooperation.
III. Complete product development team: Continue strengthening the investment on the software and hardware for developing the products. Currently, in addition to assisting the flash memory-related customers to conduct the electrical and thermal analysis, we continue helping the customers develop the relevant customized products.
IV. Development of the emerging markets: Apart from developing the emerging markets in China and India, we have expanded the development to ASEAN countries recently.
V. Expand memory product line: Aside from continuing expanding the packaging production capacity of flash memory and LPDDR, we are also going to develop the high-speed standard DDR products.

EMC Center has gradually completed the adjustment of different plants. Based on the production methods such as small quantity with variety and mass production, the production lines and management method are carefully planned out, in order to reach the goal of reducing costs and increasing efficiency, ensuring the punctuality and delivery of the development of new products. At the same time, we have to provide our customers with professional knowledge regarding supply chain and essential resources to make them have more competitiveness in the market.

I. SSD products have grown by a large margin as expected in 2019. We expect that the customer demand will still continue to increase in 2020; however, we will have wait and see that whether the subsequent market will be affected by the coronavirus (COVID-19) pandemic.
II. In terms of oil exploration products, testing technologies have been added and the production technology has become more mature. The output will continue to increase to accommodate our customers.
III. In terms of the market of consumer products, the Company has introduced the new product of headphones which are expected to be produced in the second half of this year.
IV. Netcom-related industries have thrived with the arrival of 5G generation. EMS Center is responsible for such type of products and has enhanced the production technology of high-end products by a large margin to accommodate the future growth of customers.

The Effect of External Competition, the Legal Environment, and the Overall Business Environment

The previous research conducted by Topology Research Institute (TRI) has pointed out that the overall revenue performance of the first of 2019 would be affected due to factors including falling memory prices and weakened sales of mobile phones. However, with the

drive of demand arising from the improved US-China conflict, as well as peak sales in the second half, the overall performance has gradually stabilized. However, the overall performance was still in decline due to the performance in the first half of 2019. In 2019, the global IC packaging and testing market revenue amounted to NT$51.76 billion US dollars, down by approximately 4.0% compared to 2018. The research of TRI also suggested that although the packaging output value of products in relation to 5G, automotive electronics, AI and the IoT continue to thrive, with the impact of the US-China conflict continuing to worsen and the coronavirus (COVID-19) pandemic, TRI estimates that the packaging output value in 2020 will reach USD54.46 billion, up by approximately 3.3%.

To follow the development trend of electronic products, the Company will focus on niche-oriented products to avoid price competition and affecting the profit. With the popularity of smartphone devices and the demand increase of AI Big Data management, eMMC and Flash BGA will still be the main products for Flash memory application in the future. The Company will collaborate with the main memory industry chain and channel firms all over the world to continue developing the manufacturing services of all the Flash memory applications via the current advantages in the manufacturing platform.

In terms of external risks, due to the opportunities arising from the US-China trade war, the EMS Center benefited from them in 2019, but given the tariff exemption of some products, customers have returned to China for making production, therefore, the 2020 transfer of order benefit is expected to decrease. Furthermore, with the coronavirus (COVID-19) situation worsening day by day, the recovery rate of workers going back to work in China is poor and it is expected that the subsequent supply of materials from some places will be affected; with the continuous spread of the virus in Europe, USA and Middle East, many countries have imposed various prevention measures such as a lockdown or no flights coming in and out the country. It is anticipated that it will cause a significant degree of impact which will further affect the demand of many customers.

In the past, the Company was affected by the shortage of materials, the adaption period of generation alternation and the revision of the Labor Standards Act and so on, which caused the inability to make profits constantly. The Company has worked tirelessly and kept moving on forward to reach the goal of making a profit in the hard and difficult environment. The Company has reached the goal of making a profit in 2019. In the future, the Company will continue focusing on lean production to expand operating income foundation, enhance the capacity utilization, controlling operating expenses and so on, and actively adopt more efficient and friendly method to create a win-win situation for both operation results and legal compliance.

Two. Company Profile

I. Date of establishment

Incorporation date of company: June 12, 1971

II. Company history

OSE was established by raising capital from Dr. Chun-Yuan Tu and other prestigious domestic industrial individuals. As of the end of 2019, total assets were NT$15.9 billion.

Positioning

OSE is composed of two business departments “EMS Group” and “Semiconductor Group,” it provides professional electronics manufacturing services and IC packaging, testing and manufacturing services. OSE concentrates on providing various electronics manufacturing services with high added value to build long-term partnership with the customers.

Company history

06/1971	OSE was officiallyestablished with thepaid-in capital of NT$11,000,000.
03/1990	The new production facility of the Finished Products Group was completed and
	began theproduction.
04/1994	OSE issued the common stock and it was listed on the Taiwan Stock Exchange on Apr. 20 under Category1.
04/1999	The Enterprise Resource Planning (ERP: SAP/R3) and MES(Manufacturing
	Execution System)was implemented.
06/1999	New Corporate IdentitySystem was officiallylaunched.
06/2000	Construction of the corporate headquarter building was completed The employees
	of the Semiconductor Group and the Finished Products Group and the equipment
	were all readyto start theproduction.
01/2002	The Finished Products Group won “Highest Overall Customer Rating” of Service Excellence Award among middle size EMS providers sponsored by the professional EMS periodical, Circuits Assembly Magazine and the market research company, TechnologyForecasters, Inc.
07/2002	The President Mr. Chien Liang Li handed in his resignation and Mr. Edward
	Shaw-Yau Duh was appointed as new President.
02/2003	The Chairman Ms. Mei Tso Yang handed in her resignation and Mr. Chun Yuan Tu was appointed as new Chairman.
12/2005	OSE passed ISO14001:2004 transition verification of Environment Management
	System.
12/2007	The Semiconductor Group passed TS16949 certification.
12/2008	Construction of the packaging/testing building was completed, the employees of
	the Semiconductor Groupand the equipment were all readyto start theproduction.
09/2010	OSE passed verification of OHSAS 18001 and TOSHMS Taiwan Occupational Safety& Health Management System.
12/2010	OSE passed the “Healthy Workplace Accreditation” by Heath Promotion
	Administration,Ministryof Health and Welfare
07/2011	OSE passed the audit of Taiwan Training Quality System (TTQS), and was awarded the silver medal and nominated for the National TrainQuali Prize.

09/2013	OSE passed CNS15506:2011 transition verification of Taiwan Occupational Safety
	and Health Management System.
09/2013	The Finished Products Group passed ISO13485qualityassurance certification.
04/ 2015	The Finished Products Group established the facility specialized for SSD, and set
	uptheproduction line specialized for automatic testingand automatic assembly.
08/2016	The President Mr. Chun Yuan Tu handed in his resignation and Mr. Yueh-Ming
	Tung was appointed as new President.
	The Chairman Mr. Chun Yuan Tu transferred all of his shareholdings and he was
	discharged from theposition of the Director.
11/2016	The company called a special shareholders’ meeting to hold the by-election, Mr.
	Edward Shaw-Yau Duh and Mr. Yueh-Ming Tung were elected as new Directors,
	and Mr. Shao Yao Tu was elected as new Chairman bythe Board of Directors
09/2017	OSE passed ISO14001: 2015 transition verification of Environment Management System.
10/2018	The Finished Products Group established production line specialized for computer
	peripherals assembly
01/2019	The Finished Products Group was renamed as Electronics Manufacturing Services (EMS)Group.
01/2019	EMS Groupestablished a new facilityfor e-sportsgraphics cards.
03/2019	The EMS Group has passed ISO 13485:2016 medical equipment quality management system certification
06/2019	The EMS Group has passed IATF 16949:2016 quality management system (QMS)
	in the automotive sector.
	The EMS Group has passed RBA Validated Assessment Program and obtained the
	certification.

Three. Corporate Governance Report

I. Organization

(I) Organizational structure

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

Shareholders Meeting
Remuneration Committee
Auditorial Room Board Of Directors
Audit Committee
Chairman
President
Semiconductor Group Electronic Manufacturing Service General Administration Division President Office
(Taiwan) Group
Account Dept. Human Resources Div.
Sales Div. Marketing & BD Div.
Financial Dept. Enterprise Information
NEW PRODUCT Valueplus Tecnolohy Management Dept.
MANAGEMENT
Import & Export
Department
Quality Assurance Div.
Quality Assurance Div.
Legal Affair Department
Packaging Project Management Div.
&Manufacturing
Engineering Group
Supplier logistic Management Facility Department
Div.
Test & Manufacturing
Engineering Div.
Administration Department
Product Engineering Div.
PROCUREMENT Div. Risk Management Dept.
NEW BUSINESS MODEL
DEVELOPMENT DIV.
Production Planning
Div.
MANUFACTURING
ENGINEERING Div.
Logic IC packaging Div.
MANUFACTURING Div.
Memory Product
packaging Div.
Logistic Management Div.
----- End of picture text -----

(II) The responsibilities of all the major departments

Department	Main responsibilities
Electronics Manufacturing Service Group	In charge of electronics manufacturing services and so on.
Semiconductor Group	In charge of foundry and testing of the semiconductorpackagingand so on.
Auditorial Room	Oversees the appropriateness of the design and effectiveness of execution for all control systems, follows up the effectiveness of the promotion for the Company’s management and projects, and whether the legal compliance for corporate governance is applied for internal audits.
Human Resources Div.	In charge of recruit and appointment of personnel, organization development,remuneration and so on.
Accounting Dept.	In charge of the entire Company’s accounting, costs, stock affairs, performance follow-up and planning and executingspecificprojects.
Administration Department	In charge of general affairs, transportation of the Companyand so on.
Financial Dept.	In charge of financial investment and management of the entire Companyand so on.
Facility Department	In charge of management and maintenance of plant, machine and other hardware equipment of the Companyand so on.
Import and Export Dept.	In charge of import and export affairs, bonding operation of the Companyand so on.
Risk Management Dept.	In charge of the entire Company’s environmental protection, safety and health, and applicable laws and so on.
Legal Affairs Office	In charge of all of the legal affairs of the Company.
Corporate Information Service Center	In charge of the Company’s computer software and hardware,internet maintenance and so on.

II. Profile of Directors, Supervisors, Presidents, Vice Presidents, Assistant Managers, Department Heads and Branch Heads (1) Information on Board of Directors

																	April 20,2020	April 20,2020	April 20,2020
Title	Nationality or place of incorporation	Name	Gender	Date of assumption of office	Term	The commencement date of the first term	Shareholdings in commencement date of the term		Current shareholdings		Current shareholdings of spouse and minor children		Shareholdings by nominee arrangement		Major education(experience)	Other concurrent position in the Company or other companies	Executives, Directors, or Supervisors who are spouses or relatives within the second degree of kinship
							Share	Shareholding percentage	Share	Shareholding percentage	Share	Shareholding percentage	Share	Shareholding percentage			Title	Name	Relationship
Chairman	America	Edward Shaw-Yau Duh	Male	June 18, 2019	3	Jan. 18, 1995 (Note 1)	479,680	0.09%	479,680	0.09%	5,083	0.00%	0	0.00%	Master Degree of Industrial Management of Carnegie Mellon University Master Degree of Computer Science of University of Southern California President of Orient Semiconductor Electronics,Ltd.	Chairman of InfoFab, Inc. Chairman of OSE PHILIPPINES, Inc. Director of OSE USA, Inc. Independent Director of Merry Electronics Co., Ltd. Chairman of COREPLUS(HK)Ltd.	Administra tion Supervisor	Shu-L ing Kung	Spouse
Director	The Republic of China	Yueh-Ming Tung	Male	June 18, 2019	3	Nov. 8, 2016	34,739	0.01%	34,739	0.01%	57	0.00%	0	0.00%	Master Degree of EMBA of National Sun Yat-sen University Vice President of Orient Semiconductor Electronics, Ltd.	President of Orient Semiconductor Electronics, Ltd. Representative of juristic-person director, Coreplus (HK) LTD. VALUE-PLUS TECHNOLOGY(SuZ hou) CO. Director	None	None	None
	Hong Kong	Hok-Ngang Chui	Fema le	June 18, 2019	3	June 18, 2019	10,711,94 8	1.94%	10,711,948	1.92%	0	0.00%	0	0.00%	St. Margaret’s Girls’ College (ST. MARGARET’S GIRLS’ COLLEGE)	Director, Netcom Tech (HK) LTD. Director, Longsys Electronic (HK) Co.Ltd.	None	None	None
	The Republic of China	Phison Electronics Corporation (Note 2)	－	June 18, 2019	3	May 6, 2015	7,336,369	1.33%	7,336,369	1.32%	0	0.00%	0	0.00%	None	None	None	None	None
	Malaysia	Representative: Khein-Seng Pua	Male	June 18, 2019	3	May 6, 2015	0	0.00%	0	0.00%	0	0.00%	0	0.00%	Master Degree of Institute of Electrical and Control Engineering of National Chiao Tung University	Chairman and CEO of Phison Electronics Corporation Representative of Director of Kingston Technology Company, Inc.	None	None	None

Title	Nationality or place of incorporation	Name	Gender	Date of assumption of office	Term	The commencement date of the first term	Shareholdings in commencement date of the term	Shareholdings in commencement date of the term	Current shareholdings	Current shareholdings	Current shareholdings of spouse and minor children	Current shareholdings of spouse and minor children	Shareholdings by nominee arrangement	Shareholdings by nominee arrangement	Major education(experience)	Other concurrent position in the Company or other companies	Executives, Directors, or Supervisors who are spouses or relatives within the second degree of kinship	Executives, Directors, or Supervisors who are spouses or relatives within the second degree of kinship	Executives, Directors, or Supervisors who are spouses or relatives within the second degree of kinship
							Share	Shareholding percentage	Share	Shareholding percentage	Share	Shareholding percentage	Share	Shareholding percentage			Title	Name	Relationship
Independent Director	The Republic of China	Philip Wei		June 18, 2019	3	June 26, 2014	0	0.00%	0	0.00%	0	0.00%	0	0.00%	Master of Public Finance Institute, National Chengchi University Department of Transportation management, NCKU Master of Tax Law Institute, Northrop University, USA	Chairman, Fortune Information Systems Corp. Independent Director, Powertech Technology Inc. Director, CyberSoft Digital Services Corp. Supervisor, Taishin Insurance Agency charityfoundation	None	None	None
	The Republic of China	Ching-Tien Tsai	Male	June 18, 2019	3	Jun. 22, 2016	0	0.00%	0	0.00%	0	0.00%	0	0.00%	CPA of Ernst and Young Global Limited	O-TA Precision Industry Co., Ltd. Independent Director	None	None	None
	The Republic of China	Jerry Chiu	Male	June 18, 2019	3	Jun. 22, 2016	0	0.00%	0	0.00%	0	0.00%	0	0.00%	Professor of Department of Accounting of National Cheng Kung University CEO of the NCKU Endowment Fund Management Committee	Independent director, JUNG SHING WIRE Independent Director of StrongLED Lighting Systems (Suzhou) Co., Ltd. Yung Chi Paint and Varnish Mfg., (Taiwan) Co., Ltd. Representative of juristic-person supervisor Supervisor of WAH HONG INDUSTRIAL CORP.	None	None	None

(Note 1): Not elected as Director or Supervisor during the period from Jun. 21, 2007 to Nov. 7, 2016.

(Note 2): For directors and supervisors acting as the representatives of juristic-person shareholders, specify the names of the juristic-person shareholders as the following Table 1:

Table 1: Major shareholders of the juristic-person shareholders

Name of juristic-person shareholders	Major shareholders of the juristic-person shareholders
Phison Electronics Corporation	First Bank in custody for investment account of Kioxia Corporation (10.06%), CTBC Bank in custody for investment account of Kingston Technology Inc. (3.73%), HSBC Bank (Taiwan) Limited is entrusted with the custody of the employee accumulation fund investment account (3.69%), Khein-Seng Pua (2.31%), Yang Jiunn Yeong (2.31%), the 2nd-tier new labor pension plan (2.17%), Mercuries Life Insurance (1.91%), Aw Yong Chee Kong (1.73%), CITI Bank in custody for investment account of NOREGS BANK(1.70%),old laborpension fund(1.54%)
(Note 1): When a director or supervisor is the representative of an juristic-person shareholder, specify the name of such juristic-person shareholder. (Note2): Specify the name and the percentage of the shareholding of the major shareholders of the juristic-person shareholders (their percentage of the shareholding is among top 10). When the major shareholders of an juristic-person shareholder are juristic-person investors, continue with Table 2 below. Table 2: Major shareholders ofjuristic-person investors in Table 1 Name ofjuristic-person investor Major shareholders ofjuristic-person shareholder Kioxia Corporation (Former Toshiba MemoryCorporation) Kioxia Holdings Corporation (100%)

Name of juristic-person shareholders

Major shareholders of the juristic-person shareholders

Phison Electronics Corporation

First Bank in custody for investment account of Kioxia Corporation (10.06%), CTBC Bank in custody for investment account of Kingston Technology Inc. (3.73%), HSBC
Bank (Taiwan) Limited is entrusted with the custody of the employee accumulation fund investment account (3.69%), Khein-Seng Pua (2.31%), Yang Jiunn Yeong (2.31%),
the 2nd-tier new labor pension plan (2.17%), Mercuries Life Insurance (1.91%), Aw Yong Chee Kong (1.73%), CITI Bank in custody for investment account of NOREGS
BANK(1.70%),old laborpension fund(1.54%)

(Note 1): When a director or supervisor is the representative of an juristic-person shareholder, specify the name of such juristic-person shareholder.
(Note2): Specify the name and the percentage of the shareholding of the major shareholders of the juristic-person shareholders (their percentage of the shareholding is among top 10). When the major
shareholders of an juristic-person shareholder are juristic-person investors, continue with Table 2 below.
Table 2: Major shareholders ofjuristic-person investors in Table 1
Name ofjuristic-person investor
Major shareholders ofjuristic-person shareholder
Kioxia Corporation
(Former Toshiba MemoryCorporation)
Kioxia Holdings Corporation (100%)

Professional qualifications and independence status of Directors and Supervisors

Criteria Name	Meet one of the following	professional qualification requirements and at least five years’ work experience	professional qualification requirements and at least five years’ work experience				Independence status	Independence status	Independence status	Independence status				Number of other public companies in which the individual is concurrently serving as an independent director
	An instructor or higher position in a department of commerce, law, finance, accounting, or other academic department related to the business needs of the Company in a public or private junior college, college or university.	A judge, public prosecutor, attorney, CPA, or other professional or technical specialist necessary for the business of the Company who has passed the national examination and been awarded the certificate	Have work experience in the fields of commerce, law, finance, or accounting, or other work experience necessary for the business of the Company	1	2	3	4	5	6	7	8	9	10
Edward Shaw-Yau Duh														0
Yueh-MingTung														0
Hok-NgangChui														0
Phison Electronics Corporation Representative: Khein-SengPua														0
PhilipWei														1
Ching-Tien Tsai														1
JerryChiou														2

Note: Please check “  ” in the corresponding boxes if the qualification applies to the directors or supervisors during the two years prior to being elected or during the term of office.

(1) Not an employee of the Company or any of its affiliates.

(2) Not a Director or Supervisor of the Company’s affiliates. (Except for Independent Directors of the Company or its parent company or a subsidiary established in accordance with this Act or the local laws).

(3) Not holding 1% or more than 1% of the total outstanding shares issued by the Company or among the top 10 natural person shareholders by the person or his spouse or minor children, or in the name of a third party.

(4) Not a spouse, relatives within the second degree of kinship, or lineal relatives within the third degree of kinship of any of the persons in the preceding three subparagraphs.

(5) Not a Director, Supervisor or employee of an juristic-person shareholder holding 5% or more than 5% of the total outstanding shares issued by the Company, or a Director, Supervisor or employee of an juristic-person shareholder who is among the top 5 shareholders.

(6) Not a Director, Supervisor, Managerial Officer of a specified company or institution which has a financial or operational relationship with the Company or a shareholder holding 5% or more than 5% of the total outstanding shares issued by the Company.

(7) Not a professional individual, owner, partner, director, supervisor, manager of proprietorship, partnership, company or institution that provides commercial, legal, financial and accounting services to the Company or its affiliates, or a spouse to the aforementioned persons. Except for members of the Remuneration Committee exercising their duties in accordance with Article 7 of the “Regulations Governing the Establishment and Exercise of Powers of Remuneration Committees of Companies whose Stock is Listed on the TWSE or Traded on the GTSM.”

(8) Not having a marital relationship, or not a relative within the second degree of kinship to any other director of the Company.

(9) Not been a person of any conditions defined in Article 30 of the Company Act.

(10) Not a governmental, juristic-person investor or its representative as defined in Article 27 of the Company Act.

(II) Profile of Presidents, Vice Presidents, Assistant Managers, Department Heads and Branches Heads

													April 20,2020	April 20,2020	April 20,2020
Title	Nationality	Name	Gender	Date of assumption of office	Shareholding		Current shareholdings of spouse and minor children		Shareholdings by nominee arrangement		Major education(experience)	Other concurrent position in the Company or other companies	Executives, Directors, or Supervisors who are spouses or relatives within the second degree of kinship
					Share	Shareholding percentage	Share	Shareholding percentage	Share	Shareholding percentage			Title	Name	Relationship
President	The Republic of China	Yueh-Ming Tung	Male	Aug. 26, 2016	34,739	0.01%	57	0.00%	0	0.00%	Master Degree of EMBA of National Sun Yat-sen University Vice President of Orient Semiconductor Electronics, Ltd.	President of Orient Semiconductor Electronics, Ltd. Drector of OSE PHILIPPINES, INC. Representative of juristic-person director, OSE USA,INC、Coreplus (HK) LTD.、VALUE-PLUS TECHNOLOGY(SuZhou)CO.	None	None	None
CFO	The Republic of China	Chun-Kuan Lee	Male	Mar. 14, 2002	53,997	0.01%	0	0.00%	0	0.00%	Master Degree of Department of Business Administration of National Chung Hsing University	Chairman of OSE International Limited、VALUE-PLUS TECHNOLOGY(SuZhou) CO. Representative of juristic-person director , COREPLUS(HK)LTD. Representative of juristic-person Supervisors, InfoFab, Inc.	None	None	None

Title	Nationality	Name	Gender	Date of assumption of office	Shareholding	Shareholding	Current shareholdings of spouse and minor children	Current shareholdings of spouse and minor children	Shareholdings by nominee arrangement	Shareholdings by nominee arrangement	Major education(experience)	Other concurrent position in the Company or other companies	Executives, Directors, or Supervisors who are spouses or relatives within the second degree of kinship	Executives, Directors, or Supervisors who are spouses or relatives within the second degree of kinship	Executives, Directors, or Supervisors who are spouses or relatives within the second degree of kinship
					Share	Shareholding percentage	Share	Shareholding percentage	Share	Shareholding percentage			Title	Name	Relationship
Senior Vice President	The Republic of China	Tzu-Ming Liu	Male	Feb. 28, 2003	56,304	0.01%	11,720	0.00%	0	0.00%	Department of Electronic Engineering of National Chin-Yi University of Technology(renamed from National Chin-Yi Institute of Technology)	Juristic-person director, VALUE-PLUS TECHNOLOGY(SuZhou) CO.	None	None	None
Vice President	The Republic of China	Liang-Chun g Wu	Male	Jul. 20, 2015	112,381	0.02%	0	0.00%	0	0.00%	Institute of Electronics of National Chiao Tung University President of Kai Yu Technology, Engineering Inc. (renamed from TAIWAN MEMORY TECHNOLOGY INC.) Section Director of HualongMicroelectronics	None	None	None	None

Title	Nationality	Name	Gender	Date of assumption of office	Shareholding	Shareholding	Current shareholdings of spouse and minor children	Current shareholdings of spouse and minor children	Shareholdings by nominee arrangement	Shareholdings by nominee arrangement	Major education(experience)	Other concurrent position in the Company or other companies	Executives, Directors, or Supervisors who are spouses or relatives within the second degree of kinship	Executives, Directors, or Supervisors who are spouses or relatives within the second degree of kinship	Executives, Directors, or Supervisors who are spouses or relatives within the second degree of kinship
					Share	Shareholding percentage	Share	Shareholding percentage	Share	Shareholding percentage			Title	Name	Relationship
Vice President	The Republic of China	Kuan-Tien Shen	Male	Nov. 19, 2018	96	0.00%	0	0.00%	0	0.00%	Master Degree of Business Administration of I-SHOU University Vice President of SMIKE International President and COO of Taiwan IC Packaging Corporation Vice President of SIGURD MICROELECTRONICS CO.	None	None	None	None

Title	Nationality	Name	Gender	Date of assumption of office	Shareholding	Shareholding	Current shareholdings of spouse and minor children	Current shareholdings of spouse and minor children	Shareholdings by nominee arrangement	Shareholdings by nominee arrangement	Major education(experience)	Other concurrent position in the Company or other companies	Executives, Directors, or Supervisors who are spouses or relatives within the second degree of kinship	Executives, Directors, or Supervisors who are spouses or relatives within the second degree of kinship	Executives, Directors, or Supervisors who are spouses or relatives within the second degree of kinship
					Share	Shareholding percentage	Share	Shareholding percentage	Share	Shareholding percentage			Title	Name	Relationship
Vice President	The Republic of China	Shih-Chuan Chen	Male	Mar. 5, 2019	0	0.00%	0	0.00%	0	0.00%	Department of Electrical Engineering of Tatung University Foreign Affairs Supervisor of Quick Test Corporation Sandlacus Technology Director of Intelligent Equipment and Product Vice President of Department of automotive electronics R&D of Wieson Technologies MICRO-STAR INTERNATIONAL CO., LTD.	None	None	None	None

Title	Nationality	Name	Gender	Date of assumption of office	Shareholding	Shareholding	Current shareholdings of spouse and minor children	Current shareholdings of spouse and minor children	Shareholdings by nominee arrangement	Shareholdings by nominee arrangement	Major education(experience)	Other concurrent position in the Company or other companies	Executives, Directors, or Supervisors who are spouses or relatives within the second degree of kinship	Executives, Directors, or Supervisors who are spouses or relatives within the second degree of kinship	Executives, Directors, or Supervisors who are spouses or relatives within the second degree of kinship
					Share	Shareholding percentage	Share	Shareholding percentage	Share	Shareholding percentage			Title	Name	Relationship
Chief Information Officer	The Republic of China	Chin-Chiu Wang	Male	September 4, 2019	6,004	0.00%	152	0.00%	0	0.00%	Executive Master of Business Administration of National Sun Yat-sen University IBM System Engineer/Business Specialist Manager of corporate information management, Orient Semiconductor Electronics President, InfoFab, Inc.	None	None	None	None
Assistant Manager	The Republic of China	Tse-Wen Li	Male	May 1, 2008	0	0.00%	0	0.00%	0	0.00%	Department of Materials Science and Engineering of National Cheng Kung University	None	None	None	None

Title	Nationality	Name	Gender	Date of assumption of office	Shareholding	Shareholding	Current shareholdings of spouse and minor children	Current shareholdings of spouse and minor children	Shareholdings by nominee arrangement	Shareholdings by nominee arrangement	Major education(experience)	Other concurrent position in the Company or other companies	Executives, Directors, or Supervisors who are spouses or relatives within the second degree of kinship	Executives, Directors, or Supervisors who are spouses or relatives within the second degree of kinship	Executives, Directors, or Supervisors who are spouses or relatives within the second degree of kinship
					Share	Shareholding percentage	Share	Shareholding percentage	Share	Shareholding percentage			Title	Name	Relationship
Assistant Manager	The Republic of China	Wen-Pin Yang	Male	Sep. 7, 2016	594	0.00%	99	0.00%	0	0.00%	Department of Electronic Engineering of Kun Shan University Department of Plant Industry of National Pingtung University of Science and technology	None	None	None	None
Assistant Manager	The Republic of China	Che-Kuang Liu	Male	Sep. 7, 2016	10,278	0.00%	10,302	0.00%	0	0.00%	Department of Industrial and Systems Engineering of Chung Yuan University	None	None	None	None

Title	Nationality	Name	Gender	Date of assumption of office	Shareholding	Shareholding	Current shareholdings of spouse and minor children	Current shareholdings of spouse and minor children	Shareholdings by nominee arrangement	Shareholdings by nominee arrangement	Major education(experience)	Other concurrent position in the Company or other companies	Executives, Directors, or Supervisors who are spouses or relatives within the second degree of kinship	Executives, Directors, or Supervisors who are spouses or relatives within the second degree of kinship	Executives, Directors, or Supervisors who are spouses or relatives within the second degree of kinship
					Share	Shareholding percentage	Share	Shareholding percentage	Share	Shareholding percentage			Title	Name	Relationship
Assistant Manager	The Republic of China	Min-Lang Tsai	Male	Jul. 19, 2017	6,852	0.00%	0	0.00%	0	0.00%	Master Degree of Industrial Engineering and Management of National Kaohsiung University of Science and Technology(renamed from National Kaohsiung University of Applied Sciences) Assistant Manager of Dept. of RD and Manufacturing Process Engineering of Taiwan IC Packaging Corporation Senior Manager of Dept. of Flash packaging/testing R&D of ADATA TechnologyCo., Ltd.	None	None	None	None

Title	Nationality	Name	Gender	Date of assumption of office	Shareholding	Shareholding	Current shareholdings of spouse and minor children	Current shareholdings of spouse and minor children	Shareholdings by nominee arrangement	Shareholdings by nominee arrangement	Major education(experience)	Other concurrent position in the Company or other companies	Executives, Directors, or Supervisors who are spouses or relatives within the second degree of kinship	Executives, Directors, or Supervisors who are spouses or relatives within the second degree of kinship	Executives, Directors, or Supervisors who are spouses or relatives within the second degree of kinship
					Share	Shareholding percentage	Share	Shareholding percentage	Share	Shareholding percentage			Title	Name	Relationship
Assistant Manager	The Republic of China	Chen-Chun g Sun	Male	Aug. 10, 2017	636	0.00%	0	0.00%	0	0.00%	Department of Business Administration of Tunghai University	None	None	None	None
Assistant Manager	The Republic of China	Tseng-Chih Chi	Male	Aug. 20, 2018	3,426	0.00%	0	0.00%	0	0.00%	Master Degree of Institute of Applied Mechanics of National Taiwan University Director of ADATA TechnologyCo., Ltd.	None	None	None	None
Assistant Manager	The Republic of China	Hung-Tai Mai	Male	May 1, 2019	29	0.00%	35,302	0.01%	0	0.00%	Department of Industrial Management, Shu-Te University	None	None	None	None

Title	Nationality	Name	Gender	Date of assumption of office	Shareholding	Shareholding	Current shareholdings of spouse and minor children	Current shareholdings of spouse and minor children	Shareholdings by nominee arrangement	Shareholdings by nominee arrangement	Major education(experience)	Other concurrent position in the Company or other companies	Executives, Directors, or Supervisors who are spouses or relatives within the second degree of kinship	Executives, Directors, or Supervisors who are spouses or relatives within the second degree of kinship	Executives, Directors, or Supervisors who are spouses or relatives within the second degree of kinship
					Share	Shareholding percentage	Share	Shareholding percentage	Share	Shareholding percentage			Title	Name	Relationship
CHRO	The Republic of China	Chen-Ling Lai	Female	Mar. 6, 2018	102,788	0.02%	0	0.00%	0	0.00%	National Kaohsiung University of Science and Technology(renamed from National Kaohsiung University of Applied Sciences) Master Degree of Graduate Institute of Human Resource Management	None	None	None	None
Administration Supervisor	The Republic of China	Shu-Ling Kung	Female	Nov. 19, 2018	5,083	0.00%	479,680	0.00%	0	0.00%	Master Degree of Science in Telecommunications of University of Pittsburgh System Engineer of Wang Laboratories Project Manager of IBM	None	Chairman	Edward Shaw-Yau Duh	Spouse

Title	Nationality	Name	Gender	Date of assumption of office	Shareholding	Shareholding	Current shareholdings of spouse and minor children	Current shareholdings of spouse and minor children	Shareholdings by nominee arrangement	Shareholdings by nominee arrangement	Major education(experience)	Other concurrent position in the Company or other companies	Executives, Directors, or Supervisors who are spouses or relatives within the second degree of kinship	Executives, Directors, or Supervisors who are spouses or relatives within the second degree of kinship	Executives, Directors, or Supervisors who are spouses or relatives within the second degree of kinship
					Share	Shareholding percentage	Share	Shareholding percentage	Share	Shareholding percentage			Title	Name	Relationship
Accounting Supervisor	The Republic of China	Shu Yung Chu	Female	Dec. 1, 2018	9,758	0.00%	0	0.00%	0	0.00%	Master Degree of Graduate Institute of Finance of National Sun Yat-sen University	None	None	None	None

III. Remuneration for Directors, Supervisors, Presidents and Vice Presidents in the most recent fiscal year

(1) Remuneration of general directors and independent directors

																Dec. 31, 2019 Unit: NTD thousand	Dec. 31, 2019 Unit: NTD thousand	Dec. 31, 2019 Unit: NTD thousand	Dec. 31, 2019 Unit: NTD thousand	Dec. 31, 2019 Unit: NTD thousand	Dec. 31, 2019 Unit: NTD thousand	Dec. 31, 2019 Unit: NTD thousand
		Directors remuneration										Relevant remuneration received byDirectors				who are also employees				Ratio of total
										Ratio of total remuneration										remuneration		Remuneration
		Remuneration(A)		Severance pay and pensions(B)		Directors’ remuneration (C)		Allowances(D)		A+B+C+D to net income after tax		Salary, bonuses, and allowances (E)		Severance pay and pensions(F)		Employees’ remuneration (G)				A+B+C+D+E+F+G to net income after tax		paid to Directors from an
Title	Name		Companies		Companies		Companies		Companies		Companies		Companies		Companies			Companies			Companies	invested
		The company	in the consolidated financial statements	The company	in the consolidated financial statements	The company	in the consolidated financial statements	The company	in the consolidated financial statements	The company	in the consolidated financial statements	The company	in the consolidated financial statements	The company	in the consolidated financial statements	The company		in the consolidated financial statements		The company	in the consolidated financial statements	company other than the Company’s subsidiary
																Cash	Stock	Cash	Stock
Chairman	Edward Shaw-Yau Duh	0	0	0	0	11,423	11,423	2,460	2,460	2.36%	2.36%	12,137	12,137	108	108	0	0	0	0	4.44%	4.44%	None
Director	Yueh-Ming Tung
Director	Hok-Ngang Chui (Note 3)
Director	Phison Electronics Corporation
Director	Xi-Ren Tseng (Note 4)
Director	Longsys Electronics (Taiwan) Co., Ltd. (Note 4)
Independent Director	Philip Wei	0	0	0	0	0	0	900	900	900	0.15%	0	0	0	0	0	0	0	0	0.15%	0.15%	None
Independent Director	Ching-Tien Tsai
Independent Director	Jerry Chiu
(Note) 1. The independent directors’ remuneration policy, system, standards, and structure, and explain the factors including the independent directors’ duties, risks, and invested time connecting to the remuneration amount: Remuneration to the all directors (including independent directors) is determined based on their participation and contribution to the Company’s operations, with reference to local and foreign peers, which is subject to review by the Remuneration Committee and the Board of Directors. 2. Remuneration received by directors for providing service to any company included in the financial statements (e.g. consultancy service without the title of an employee) in the last year: None. 3. After the election of the general shareholders meeting on June 18, 2019, the new term started on June 18, 2019. 4. After the election of thegeneral shareholders meetingon June 18,2019,theprevious term ended on June 18,2019.

Table of remuneration range

					Table of remuneration range	Table of remuneration range	Table of remuneration range	Table of remuneration range	Table of remuneration range	Table of remuneration range	Table of remuneration range	Table of remuneration range	Table of remuneration range	Table of remuneration range	Table of remuneration range
Remunerations to individual directors in respective brackets along the remuneration scale					Name of director
					Total remuneration(A+B+C+D)						Total remuneration(A+B+C+D+E+F+G)
					The Company (Note 8)			All companies included in the financial reports(Note9)			The Company (Note 8)			All companies included in the financial reports(Note9)
Under NT$ 1,000,000					Xi-Ren Tseng, Longsys Electronics (Taiwan) Co., Ltd., Philip Wei, Ching-Tien Tsai,JerryChiou			Xi-Ren Tseng, Longsys Electronics (Taiwan) Co., Ltd., Philip Wei, Ching-Tien Tsai,JerryChiou			Xi-Ren Tseng, Longsys Electronics (Taiwan) Co., Ltd., Philip Wei, Ching-Tien Tsai,JerryChiou			Xi-Ren Tseng, Longsys Electronics (Taiwan) Co., Ltd., Philip Wei, Ching-Tien Tsai,JerryChiou
NT$1,000,000 (inclusive) - NT$2,000,000 (exclusive)					Yueh-Ming Tung, Hok-Ngang Chui, Phison Electronics Corporation			Yueh-Ming Tung, Hok-Ngang Chui, Phison Electronics Corporation			Hok-Ngang Chui, Phison Electronics Corporation			0
NT$2,000,000(inclusive)- NT$3,500,000(exclusive)					Edward Shaw-Yau Duh			Edward Shaw-Yau Duh			0			0
NT$3,500,000(inclusive)- NT$5,000,000(exclusive)					0			0			0			0
NT$5,000,000(inclusive)- NT$10,000,000(excluded)					0			0			Edward Shaw-Yau Duh			Edward Shaw-Yau Duh
NT$10,000,000 (inclusive) - NT$15,000,000 (excluded)					0			0			Yueh-Ming Tung			Yueh-Ming Tung
NT$15,000,000 (inclusive) - NT$30,000,000 (excluded)					0			0			0			0
NT$30,000,000 (inclusive) - NT$50,000,000 (excluded)					0			0			0			0
NT$50,000,000 (inclusive) - NT$100,000,000 (excluded)					0			0			0			0
Over NT$100,000,000					0			0			0			0
Total					9			9			9			9
(II) Supervisors remuneration Title Name Supervisors DS Fund LLC (Note) After the election of the
	Title	Name			Supervisors remuneration							Ratio of total remuneration A+B+C to net income after tax(%)			Remuneration paid to Directors from an invested company other than the Company’s subsidiary
			remuneration(A)			Remuneration(B)			Allowances(C)
			The company	Companies in the consolidated financial statements		The company	Companies in the consolidated financial statements		The company	Companies in the consolidated financial statements		The company	Companies in the consolidated financial statements
	Supervisors	DS Fund LLC	0	0		0	0		180	180		0.03%	0.03%		None
	(Note) After the election of the		general shareholders meeting on June 18, 2019, Audit Committee was established to replace supervisors who were then retired on June 18, 2019.

(III) Remuneration of President and Vice President

Remuneration of President and Vice President	Remuneration of President and Vice President
		Dec. 31,2019 Unit: NTD thousand
Title	Name	Salary(A)		Severance pay and pensions(B) (Note 1)		Bonus and allowances(C)		Employee remuneration (D) (Note 5)				Ratio of total remuneration A + B + C + D to net income after tax(%)		Remuneration paid to Directors from an invested company other than the Company’s subsidiary
		The company	Companies in the consolidated financial statements	The company	Companies in the consolidated financial statements	The company	Companies in the consolidated financial statements	The company		Companies in the consolidated financial statements		The company	Companies in the consolidated financial statements
								Cash	Stock	Cash	Stock
President	Yueh-MingTung	26,874	26,874	771	771	10,166	10,166	76	0	76	0	6.44%	6.44%	None
CFO	Chun-Kuan Lee
Senior Vice President	Tzu-MingLiu
Vice President	Liang-ChungWu
Vice President	Chun-Chieh Wang
Vice President	Kuan-Tien Shen
Vice President(Noe 2)	Shih-Chuan Chen
Chief Information Officer(Note 3)	Chin-Chiu Wang
(Note) 1. Severance pay and pensions are the Company’s contribution to employee’s pension account, not actual amount paid. 2. Vice President Shih-Chuan Chen’s new term came into force on March 5, 2019. 3. Chief Information Officer Chin-Chiu Wang’s new term came into force on September 4, 2019. 4. Starting from November 25, 2019, the Company has distributed employee restricted stocks and salary expenses are recognize in accordance with IFRS 2 “Share-based Payment”. As of December 31, 2019, the recognized amount for vice presidents or above was NT$710 thousand. 5. It has been suggested that the total amount of 2019 remuneration for employees should be NT$ 60,921 thousand, however the actual distribution has not yet been established, it is calculated using the estimation.

Table of remuneration range

	Table of remuneration range
Range of remunerations to the President and Vice Presidents	Name of Presidents	and Vice Presidents
	The company	Companies in the consolidated financial statements
Under NT$1,000,000	0	0
NT$1,000,000 (inclusive) - NT$2,000,000(exclusive)	Shih-Chuan Chen	Shih-Chuan Chen
NT$2,000,000 (inclusive) - NT$3,500,000(exclusive)	Chun-Chieh Wang, Chin-Chiu Wang	Chun-Chieh Wang, Chin-Chiu Wang
NT$3,500,000 (inclusive) - NT$5,000,000(exclusive)	0	0
NT$5,000,000 (inclusive) - NT$10,000,000 (exclusive)	Yueh-Ming Tung, Chun-Kuan Lee, Tzu-Ming Liu, Liang-Chung Wu, Kuan-Tien Shen	Yueh-Ming Tung, Chun-Kuan Lee, Tzu-Ming Liu, Liang-Chung Wu, Kuan-Tien Shen
NT$10,000,000 (inclusive) ~ NT$15,000,000(exclusive)	0	0
NT$15,000,000 (inclusive) ~ NT$30,000,000(exclusive)	0	0
NT$30,000,000 (inclusive) ~ NT$50,000,000(exclusive)	0	0
NT$50,000,000 (inclusive) ~ NT$100,000,000(exclusive)	0	0
Over NT$100,000,000	0	0
Total	8	8

(IV)Name of Managerial Officer in charge of bonus distribution and distribution status:

					December 31,2019 As a percentage of net income(%) 0.03%
Title	Name	Stock	Cash	Total	As a percentage of net income(%)
President	Yueh-Ming Tung	0	153	153	0.03%
CFO	Chun-Kuan Lee
Senior Vice President	Tzu-Ming Liu

Vice President	Liang-Chung Wu
Vice President	Chun-Chieh Wang
Vice President	Kuan-Tien Shen
Vice President	Shih-Chuan Chen
Chief Information Officer	Chin-Chiu Wang
Assistant Manager	Tse-Wen Li
Assistant Manager	Che-Kuang Liu
Assistant Manager	Wen-Pin Yang
Assistant Manager	Min-Lang Tsai
Assistant Manager	Chen-Chung Sun
Assistant Manager	Tseng-Chih Chi
Assistant Manager	Hung-Tai Mai
CHRO	Chen-Ling Lai
Administration Supervisor	Shu-Ling Kung

Note 1: Names and titles have been disclosed separately, whereas the amount of

remuneration has been disclosed in aggregate.

Note 2: Represents the amount of employee remuneration provided for the managerial

officers (in cash or in shares), which the Board of Directors has proposed as part of the most recent earnings appropriation (where the amount could not be estimated, a calculation was made based on last year’s payout ratio). Net income refers to the amount of profit shown in the latest financial reports of the consolidated/standalone entity.

Note 3: The definition of manager, as governed by the letter of the SFC on March 27, 2003 with a reference no. of Tai-Tsai-Cheng (3) 0920001301, is as follows:
(1) President or equivalent position.
(2) Vice president and equivalent position.
(3) Assistant vice president and equivalent position.
(4) Chief financial officer.
(5) Chief accounting officer.
(6) Others with the right to manage affairs and sign for the Company.

Note 4: Directors, president and vice presidents who receive employee remuneration (in cash or in shares) shall have details disclosed in this table in addition to Table 1-2.

(5) Describe the ratio of remuneration for Directors, Supervisors, Presidents and Vice Presidents paid by the Company and all the companies in the consolidated financial statement in the most recent two fiscal years to net income after tax of financial statements and illustration of remuneration policy, standard and combination, remuneration resolution process, the relevance between operation performance and future risks.

Analysis of total remuneration for Directors, Supervisors, Presidents and Vice Presidents paid by the Company in the most recent two fiscal years to net income(loss) after tax:

Year	2018	2018	2019	2019
Title	The ratio of total remuneration for Directors, Supervisors, Presidents and Vice Presidents paid by the Company to net income(loss) after tax	The ratio of total remuneration for Directors, Supervisors, Presidents and Vice Presidents paid by all the companies in the consolidated financial statement to net income(loss) after tax of individual financial statements	The ratio of total remuneration for Directors, Supervisors, Presidents and Vice Presidents paid by the Company to net income(loss) after tax	The ratio of total remuneration for Directors, Supervisors, Presidents and Vice Presidents paid by all the companies in the consolidated financial statement to net income(loss) after tax of individual financial statements
Director	(11.23%)	(11.23%)	4.60%	4.60%
Supervisors	(0.32%)	(0.32%)	0.03%	0.03%
President and Vice President	(23.45%)	(23.45%)	6.44%	6.44%

Remuneration policy, standard and combination, remuneration resolution process, the relevance between operation performance and future risks of the Company:
(1) Remuneration for Directors, Supervisors paid by the Company is in accordance with their contribution to the Company’s operation, and reference to domestic/foreign companies’ standard and their remuneration will be decided by the Board of Directors.
(2) Remuneration for Managerial Officers paid by the Company is composed of base salary, duty allowance and bonus, which will be decided by the Chairman authorized by the Board of Directors according to their job responsibilities, education, experience, skill and potential.
(3) The distribution ratios for the remuneration of the employees and the remuneration of the directors as well as the distribution form by stock or cash shall be determined by the board of director with the attendance of two-thirds or more of the directors and resolution of one-half or more of the attending directors. And it shall be reported to the shareholders’ meeting.

IV. Implementation status of Corporate Governance

(1) Practices of the Board of Directors: From 2019 to May 31, 2020, a total of 7 meetings of the 16th/17th Board of Directors were held. The attendance status of Directors are as follows:

Title	Name	Attendance inperson	By proxy	Rate of attendance inperson(%)	Note
Chairman	Edward Shaw-Yau Duh	7	0	100%	Appointed on the election on June 18, 2019; attendance time is 7
Director	Yueh-Ming Tung	7	0	100%	Appointed on the election on June 18, 2019; attendance time is 7
Director	Hok-Ngang Chui	4	1	80%	Appointed on the election on June 18, 2019; attendance time is 5
Director	Phison Electronics Corporation (Representative: Khein-SengPua)	1	6	14%	Appointed on the election on June 18, 2019; attendance time is 7
Director	Xi-Ren Tseng	2	0	100%	Term of appointment ended after the election on June 18, 2019; attendance time is 2
Director	Longsys Electronics (Taiwan) Co., Ltd. Representative: Dai-GangZhang	1	1	50%	Term of appointment ended after the election on June 18, 2019; attendance time is 2
Independent Director (note)	Philip Wei	5	0	100%	Appointed on the election on June 18, 2019; attendance time is 5
Independent Director (note)	Ching-Tien Tsai	7	0	100%	Appointed on the election on June 18, 2019; attendance time is 7
Independent Director (note)	Jerry Chiu	7	0	100%	Appointed on the election on June 18, 2019; attendance time is 7

(Note): The attendance of independent directors of the Board of Directors in 2019 and as of
May 31, 2020:
◎: Inperson☆: By proxy ＊: Absent
2019/2020
March
29
May 8
June 18
August
13
Novemb
er 12
March
27,2020
May 7,
2020
PhilipWei
X
X
◎
◎
◎
◎
◎
Ching-Tien
Tsai
◎
◎
◎
◎
◎
◎
◎
JerryChiou
◎
◎
◎
◎
◎
◎
◎
Other matters that require reporting:
I.
If any of the following situations occur, please expressly state the dates and sessions of the
Board Meetings, motion contents, all independent directors’ opinions and the Company’s
response to independent directors’ opinions:
(I)
Matters referred to in the Article 14-3 of the Securities and Exchange Act:
1. The Company has established the Audit Committee on June 18, 2019. After all
matters specified in the Article 14-3 of the Securities and Exchange Act have been
submitted to the Board of Directors. For relevant explanation, please refer to other
matters 1 that require reporting for the Audit Committee’s practices 1. (page 37 in the
annual report).
2. Prior to the establishment of the Audit Committee, opinions of independent
directors responded by the Company in 2019 is as follows:
(1)The 17th session of the 16th board(March 29,2019)
Motion content
Opinions
of the
Independe
nt
Directors
Company’s
response to
opinions of the
Independent
Directors
1. Revision of the “Articles of Incorporation”.
2. Revision of the “Operating Procedure for
Assets Acquisition and Disposal”.
3. Revision of the “Operating Procedure for
Endorsements and Guarantees”.
4. Revision of the “Operational Procedure for
Loaning to Others”.
5. Revision of the “Rules for Director and
Supervisor Elections”.
6. Formulation of the “Audit Committee
Charter”.
7. Loaning to OSE Phil.
8. Performance bonus for the Company’s
Executive Officers.
9. Remuneration for managerial officers.
No
objections
or
qualified
opinions
Not applicable

(2) The 18th session of the 16th board (May 8, 2019)

Motion content	Opinions of the Independent Directors	Company’s response to opinions of the Independent Directors
1. Loaning to OSE Phil. 2. Evaluation of the CPA’s independence and appropriateness. 3. Revision of the accounting system. 4. Revision of the “Operational Procedure for the Internal Control System” and “Auditing Procedure for the Internal Audit”.	No objections or qualified opinions	Not applicable

(II) Other resolutions of the Board Meetings for which the independent directors express adverse opinions or qualified opinion with records or with written statements: None.

II. The implementation and state of directors’ recusal for conflicts of interests: Directors recused themselves for the discussion and voting of their remuneration.

III. The implementation and state of the Company’s self-assessment on Board of Directors: The Company has passed the board’s self-assessment measures on March 27, 2020 and it is expected the measures for performance evaluation will come into force in 2020.

IV. Objectives to strengthen the functionality of the Board (e.g. establish Audit Committee, enhance information transparency) and execution status:

(I) The Company’s Chairman does not concurrently hold managerial positions.

(II) After the election of the directors and supervisors on June 18, 2019, the Audit Committee was established to replace supervisors to strengthen the board’s functions.
Note1: For juristic-person directors, disclose juristic-person shareholders’ names and the name of their representatives.
Note2: (1) If a Director resigns before the end of a fiscal year, state the service termination date in the remarks section, and the rate of attendance in person (%) is calculated with the number of the Board Meetings and his attendance in person during his service period.
- (2) If the re-election of the Board of Directors is held before the end of the fiscal year, the name of former and newly-elected Directors should all be listed, and also state the status of the Director: former, newly-elected or re-elected, and the re-election date in the remarks section. The rate of attendance in person (%) is calculated with the number of the Board Meetings and the attendance in person during his service period.

(II) Practices of the Audit Committee or participation of Supervisors in the Board of Directors:
Practices of the Audit Committee: From 2019 to May 31, 2020, a total of 4 meetings of the first Audit Committee were held. The attendance status of the independent directors is as follows:

Title	Name	Attendance in person	By proxy	Attendance Rate(%)	Note
Independent Director (Convener)	Philip Wei	4	0	100%	The first Audit Committee has been established on June 18, 2019
Independent Director	Ching-Tien Tsai	4	0	100%
Independent Director	Jerry Chiu	4	0	100%
Other matters that require reporting: I. For Audit Committee meetings that meet any of the following descriptions, state the date and session of Board of Directors meeting held, motion contents, the Audit Committee’s resolution, and how the company has responded to the Audit Committee’s opinions: (I) Matters specified in Article 14-5 of the Securities and Exchange Act: After being approved by the Audit Committee, they have been submitted to the Board of Directors. Date Term Motion content August 13, 2019 1st session of the first Audit Committee 1. The consolidated financial report for second quarter of 2019. 2. Loaning to OSE Phil. 3. Discussion of “the change of the chief auditor” November 12, 2019 2nd session of the first Audit Committee 1. Loaning to OSE Phil. 2. Issuance of new restricted employee shares for 2018. March 27, 2020 3rd session of the first Audit Committee 1. 2019 individual and consolidated financial statements 2. The effectiveness of the internal control system and provision of “Internal Control System System” for 2019 3. 2019 remuneration distribution for employees and directors 4. Loaningto OSE Phil.

		5. Provision of endorsements and guarantees to OSE Phil 6. Amendment to the Article of Incorporation. 7. Amendment to the Audit Committee Charter. 8. Establishment of the Ethical Corporate Management Best Practice Principles
May 7, 2020	4th session of the first Audit Committee	1. Amendments to operational procedures of the internal control system 2. Loaning to OSE Phil. 3. Evaluation of 2020 CPA’s independence and appropriateness. 4. Disposal of the plant. 5. Establishment of the Ethical Corporate Management Best Practice Principles. 6. Privateplacement of ordinaryshares.

(II) Aside form the previous motions, other matters adopted by the approval of two-thirds or more of all directors, without having been passed by the Audit Committee of the Company: None.
II. For the implementation of independent directors’ recusal for conflicts of interests, the independent directors’ name, motion contents, reasons for the required recusal and participation in the voting process: None
III. State of communication between independent directors, internal audit supervisor and CPA (such as significant items, methods and results of communications on the Company’s finances and business status):
(I) The Company’s chief internal auditor communicates the report result with members of the Audit Committee on a regular basis and makes an internal audit report at the Audit Committee meeting on a quarterly basis. If any special circumstance arises, the chief internal auditor also reports to members of the Audit Committee without delay. In 2019, the communication between the Company’s Audit Committee and chief internal auditor remained sound.
(II) The Company’s CPAs regularly reports the audit of the most recent financial statements, or review results and communication items required by the law and regulation in the Audit Committee meeting. If any special circumstance arises, the CPAs also report to the members of the Audit Committee without delay. In 2019, the communication between the Company’s Audit Committee and CPAs remained sound.

Participation of Supervisors in the Board of Directors: From 2018 to May 31, 2019, a total of 2 meetings of the 16th Board of Directors were held. The attendance status of Supervisors are as follows:

Title	Name(note 1)	Attendance in person	Attendance Rate (%) (Note 2)	Note
Supervisors	DS Fund LLC (Representative: Daphane Wu)	2	100%	Attendance time is 2
Other matters that require reporting: I. Composition and responsibilities of Supervisors: (I) Communications between Supervisors and the Company’s employees and shareholders: The Supervisor can understand the actual operations of the Company through monthly and irregular audit reports, project audit reports to achieve corporate governance. Meanwhile, the employees can express their opinions to the Supervisor directly. Consequently, the Supervisor can perform the function of supervision and guidance. (II) Communications between Supervisors and the Internal Chief Auditor and CPA: The Internal Chief Auditor not only attends every Board Meeting and submits the audit reports in time, but also appoints other auditors to attend the Company’s review meeting between CPA, accounting dept. and financial dept. To ensure the operation of accounting dept. and financial dept. complies with the requirement of internal control system. II. If the supervisors stated any opinions while attending board meetings, please expressly state the dates and sessions of the Board Meetings, motion contents, and resolution of the directors’ Meeting as well as The Company’s disposition of opinions stated by the supervisors shall be described: The Company’s management team and chief auditor report the important matters regarding finance and operation to Supervisor often, and they explain and report to the Supervisor before holding a Board Meeting so that he can well understand the content of motion for the Board Meeting. Consequently, when the Company’s Supervisor attends the Board Meeting, he just makes a slight reminder rather than expressing any adverse opinions. The management dept. places considerable value on the instructions from the Supervisor and take it into consideration for planning and implementation of all the operations. III. After the election of the directors and supervisors on June 18, 2019, the Audit Committee was established to replace supervisors to strengthen the board’s functions.

(III) Implementation status of corporate governance and the variations and causes of variations from the Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies.

Evaluation item	Operation status	Operation status	Operation status	The variations and causes of variations from the Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies
	Yes	No	Summary Description
I. Has the Company defined and disclosed its corporate governance best practice principles in accordance with the “Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies?”		V	The Company has not established “Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies.” But it has defined Rules of Procedure for Shareholders Meeting, Rules of Procedure for Board Meeting and Rules of Ethical Management and internal control system, the corporate governance spirit is included in the internal control system and related management regulation to achieve the operation of corporate governance.	In compliance with Corporate Governance Best Practice Principles.
II. Structure of shareholdings and shareholder’s equity (I) Has the company established the internal procedures for handling shareholder suggestions, questions, disputes and litigation and implement according to the procedures?	V		(I) The Company has established a spokesperson system and we provide service personnel for shareholders’ affairs in the accounting dept. to deal with shareholders’ suggestions and related affairs. In addition to providing the investors with contact windows, we have also appointed a professional stock transfer agency to provide professional consulting services.	In compliance with Corporate Governance Best Practice Principles.

Evaluation item	Operation status	Operation status	Operation status	The variations and causes of variations from the Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies
	Yes	No	Summary Description
(II) Has the company kept an up-to-date list of its dominant shareholders and the parties with ultimate control over its dominant shareholders? (III) Has the company established and implemented a risk control and firewall mechanism among its affiliates? (IV) Has the Company established internal rules to prevent the insiders from trading marketable securities through undisclosed information in the market?	V V V		(II) We can understand and control the major structure of shareholders from the regular report of changes in shareholding of Directors, Supervisors and Managerial Officers by the stock transfer agency and insiders (III) The management responsibilities between the Company and its affiliates are divided clearly, “management regulation of stakeholders transaction” and “supervision and management regulations for subsidiary” are also defined and the finance, business, accounting of affiliates operates independently under the control and audit of the Company. (IV) The Company has defined “Code of Ethics” and “Internal Material Information Processing Operating Procedure” which is applicable to Directors, Supervisors, Managerial Officers, employees of the Company and the update and promotion of the relevant information is implemented on an irregular basis.

Evaluation item	Operation status	Operation status	Operation status	The variations and causes of variations from the Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies
	Yes	No	Summary Description
III. Composition and duties of the Board of Directors (I) Has the Board of Directors established and implemented a defined policy to diversify board membership? (II) In addition to the Remuneration Committee and the Audit Committee required by law, has the company voluntarily established other functional committees?	V	V	(I) The Board of Directors of the Company has 7 Directors including 3 Independent Directors and 1 female director; the directors specialize in different professional qualifications, skills and knowledge. They are prestigious individuals in the academic field and the industry with rich experience of the industry and academic background, and they are greatly beneficial to increase of business performance and management efficiency for the Company. (II) The Company has established the Remuneration Committee according to law, and other corporate governance operation is responsible by each department based on its duties. The Company has not established other functional committees and it will be established in the future according to the requirement.	Compliance with Corporate Governance Best Practice Principles. May be established according to requirements

Evaluation item (III) Has the company established the Board of Directors’ performance evaluation and its evaluation methods, and does the company perform regular performance evaluation each year and submit the results of performance evaluations to the Board of Directors and use them as reference in determining remuneration for individual directors, their nomination and additional office term?	Operation status	Operation status	Operation status	The variations and causes of variations from the Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies Compliance with Corporate Governance Best Practice Principles. Compliance with Corporate Governance Best Practice Principles.
	Yes V	No	Summary Description (III) The members of the Board of Directors of the Company are all loyal to execution of operation and fulfill the care of good administrators, exercise the authority with high self-discipline and caution, review the effect of the Board of Directors regularly. The Company has formulated Board of Directors’ performance evaluation on March 27, 2020. The performance evaluation results will be used in the future as a reference base to determine each director’s remuneration and nomination of reappointment. (IV) The Company’s CPAs do not serve as the Company’s Director and Supervisor and are not the Company’s shareholders, and abides by Certified Public Accountant Act and the Bulletin of Norm of Professional Ethics for Certified Public Accountant of the Republic of China No. 10 The Company implements regular evaluation (once a year) of the CPAs’ independence and appropriateness. After the Audit Committee evaluated the CPAs’ independence and appropriateness on May 7, 2020, it was delivered to the Board of Directors for resolution and the independence statement wasprovided.
(IV) Does the company regularly evaluate the independence of certified public accountants?	V

Evaluation item	Operation status	Operation status	Operation status	The variations and causes of variations from the Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies
	Yes	No	Summary Description
IV. Where the company is a TWSE/TPEX listed company, has the company designated an appropriate number of personnel that specializes (or is involved) in corporate governance affairs (including but not limited to providing directors/supervisors with the information needed and assist directors and supervisors in complying with the laws and regulations to perform their duties, convention of board meetings and shareholder meetings, preparation of board meeting and shareholder meetingminutes etc.)?	V		The Company has set up concurrent personnel in the accounting department for stock affairs who is responsible for the Company’s relevant affairs in connection to corporate governance. In 2021, the Company will start to establish a chief corporate governance who will assist in relevant matters such as making regular reports of company legal affairs and legal compliance including: (1) Handling of matters relating to Board of Directors’ meetings, Audit Committee meetings, Remuneration Committee meetings and shareholders’ meetings as required by the law. (2) Assisting in appointment and continuous development of directors. (3) Providing information needed for directors to perform duties. (4) Assisting directors with legal compliance.	Compliance with Corporate Governance Best Practice Principles.
V. Has the company established the channels for communication with the stakeholders (includingbut not limited to the	V		(I) The Company has a spokesperson and deputy spokesperson, the related contact information is disclosed on Market Observation Post System and the Company’s website accordingto the regulation. Meanwhile,we also disclose	Compliance with Corporate Governance Best Practice Principles.

Evaluation item	Operation status	Operation status	Operation status	The variations and causes of variations from the Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies
	Yes	No	Summary Description
shareholders, employees, customers and suppliers), set up the stakeholder section in the company website, and respond appropriately to important CSR issues concerned by the stakeholders?			financial and shareholders affairs-related information on Market Observation Post System and our company’s website to establish great communication channels with investors. (II) The Company has established the stakeholder section (including but not limited to relations with departments of jurist persons, public relations, stock affairs, HR, customer service and procurement) under CSR on the Company’s website, and specified the contact channels with stakeholders to make the Company understand the issues concerned by stakeholders and respond to them appropriately.
VI. Has the company appointed a professional stock transfer agency to deal with Shareholders’ Meetings affairs?	V		The Company has appointed a professional stock transfer agency- stock transfer agency of CTBC Bank Co., Ltd to assist in stock affairs for the Company.	Compliance with Corporate Governance Best Practice Principles.
VII. Information disclosure (I) Has the company set up a website to disclose its financial and corporate governance information?	V		(I) The Company has set up a website(www.ose.com.tw) to introduce company situation and relevant operations, and also disclosed and reported all the financial, business operations and corporate governance information on Market Observation Post System according to the regulations of the competent authority.	Compliance with Corporate Governance Best Practice Principles.

Evaluation item	Operation status	Operation status	Operation status	The variations and causes of variations from the Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies
	Yes	No	Summary Description
(II) Has the company adopted other methods to disclose information (such as setting up an English website, designating dedicated personnel to gather and disclose company information, implementing the spokesperson system, and posting investor conferences on video in the company website)? (III) Has the company published and reported its annual financial report within two months after the end of a fiscal year, and published and reported its financial reports for the first, second, and third quarters, as well as its operating status for each month before the specified deadline?	V	V	(II) The Company has set up a Chinese/English website, established the spokesperson and deputy spokesperson systems to take charge of the external communication, and designated the dedicated personnel to disclose the Company information on Market Observation Post System website according to the regulation. (III) The Company has published and reported its annual financial report within the required period (within 3 months) and financial reports of the first, second and third quarters (within 45 days), and the monthly operating status (within 10th day each month) in accordance with Article 36 of the Securities and Exchange Act.

Evaluation item	Operation status	Operation status	Operation status	The variations and causes of variations from the Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies
	Yes	No	Summary Description
VIII. Is there any other material information that will help the stakeholders understand the implementation status of corporate governance in the company (including but not limited to employee rights, employee care, investor relations, supplier relations, stakeholder rights, further study status of Directors and Supervisors, the implementation status of the risk management policy and risk measurement standard, the implementation status of the customer policy, and the company’s purchase of liability insurance for Directors and	V		(I) Employee rights, employee care: The Company has assigned the HR as the dedicated unit for handling employee rights. In addition, the Company has also set up the Employee Welfare Committee to take care of the employees, and all of them work smoothly. (II) Investor relations: The Company has established communication channels like spokesperson and deputy spokesperson system to answer the relevant questions asked by the shareholders. (III) Supplier relations: The Company has kept a good relationship with the suppliers and also set up the contact window under the stakeholder section on the Company’s website. (IV) Stakeholders’ rights: The Company respects and protects stakeholders’ legal rights, keeps good communication channels with customers, employees and suppliers, and discloses the related information and provides all the real-time company information according to the regulation of competent authority.	Compliance with Corporate Governance Best Practice Principles.

Evaluation item	Operation status	Operation status	Operation status	The variations and causes of variations from the Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies
	Yes	No	Summary Description
Supervisors)?			(V) Further study status of Directors and Supervisors: All of the Directors and Supervisors have relevant operational experiences and professions, please refer to annex 1 for further education status of 2019. (VI) The implementation status of the risk management policy and risk measurement standard: The Company’s material motions such as material operation policies, investments, endorsements and guarantees, loaning and bank loans are evaluated and analyzed by the appropriate competent authority and executed according to the resolution of the Board Meeting, the Auditing Office also establishes and effectively implements its annual audit plan according to the risk evaluation result to fulfill supervision mechanism and control all the risks. (VII) The implementation status of the customer policy: The Company has established dedicated unit to handle the implementation of the customer policy, and the implementation status goes smoothly. (VIII) The company’spurchase of liabilityinsurance for

Evaluation item	Evaluation item	Operation status	Operation status	Operation status	Operation status
		Yes	No	Summary Description
				Directors and Supervisors: The Company has purchased liability insurance of Directors, Supervisors and Managerial Officers for Directors and Supervisors in 2019, and the report has been submitted to the Board Meeting on November 12, 2019 after the renewal.
IX. Please specify the status of improvements which have been made and propose the prioritized improvements for other matters which have not been improved yet according to the Corporate Governance Evaluation results announced by the Corporate Governance Center of Taiwan Stock Exchange Corporation in the most recentyear.
Number	Evaluation indicator				Improvements which have been made/ proposal of the prioritized improvements for other matters which have not been improvedyet
2.11	Does the company truthfully disclose the reason of discussions and resolutions of the Remuneration Committee and the company’s response to members’ opinionsinthe annual report?				The Company has disclosed the meeting date, session, motion contents, resolution result and the Company’s response to the Remuneration Committee’s opinions of the 2019 Remuneration Committee.
3.5	Does the MOPS upload the annual report disclosed in English 7 days prior to a general meting of shareholders?				The Company uploads its annual financial reports disclosed in English within the required time.
4.10	Does the company website and the annual report disclose the personal safety of workers and protective measures in workplace as well as their actual implementationstatus?				The Company has specified the personal safety and protective measures in workplace as well as their actual implementation status in the annual report; it has also been disclosed that the Company has obtained the OHSAS18001or TOSHMS certification.

Evaluation item	Evaluation item	Operation status	Operation status	Operation status
		Yes	No	Summary Description
4.11	Has the company disclosed annual emissions of carbon dioxide or othergreenhousegases over thepast 2years?			The Company has disclosed annual emissions of carbon dioxide or other greenhousegases for 2017 and 2018.
4.13	Has the company obtained ISO 14001, ISO50001 or similar environmental or energy management system certification?			The Company has disclosed the date and validity of the certification in the annual report, company website and the CSR report.

Annex 1

Title	Name	Date of assumption of office	Date of further study	Date of further study	Organizer	Name of course	Hours
			From	To
Juristic-person director Representative	Khein-Seng Pua	June 18, 2019	June 12, 2019	June 12, 2019	Taiwan Corporate Governance Association	The newest revision and analysis of the Company Act	3
						Corporate M&A Practice	3
Independent Director	Philip Wei	June 18, 2019	June 25, 2019	June 25, 2019	Securities and Futures Institute	Techniques for Interpreting Financial Information for Directors and Supervisors	3
			October 29,2019	October 29,2019		How to Perform Duties for Directors and Supervisors of TWSE/TPEx Companies	3
Independent Director	Ching-Tien Tsai	June 18, 2019	January 24, 2019	November 5, 2019	The National Federation of CPA Associations of the R.O.C.	Plans of Risk-Oriented Audit Method: Consideration of Materiality and Risk of Material Misrepresentation	3
			March 24, 2019	March 24, 2019		Through APG Evaluations - New Challenge for Accountants	3
			November 1,2019	November 1,2019	TWSE	Seminar of Effective Use of Directors’ Functions	3
			November 5, 2019	November 5, 2019	Taiwan Corporate Governance Association	Company’s Legal Compliance and Obligation of Directors’ Supervision	3
Independent Director	Jerry Chiu	June 18, 2019	August 4, 2019	August 4, 2019	Taiwan Corporate Governance Association	Corporate Governance and Laws and Regulations of Securities	3
			August 4, 2019	August 4, 2019		Group Governance	3

Title	Name	Date of assumption of office	Date of further study	Date of further study	Organizer	Name of course	Hours
			From	To
Accounting Supervisor	Shu-Yung Chu	December 1, 2018	January 28,2019	January 29,2019	Accounting Research and Development Foundation	Continuous Further Education of the Accounting Manager Course of Issuers, Securities Firms, and Securities Exchanges	12
			July 11, 2019	July 12, 2019			12
			January 21,2020	January 21,2020		Latest Financial and Taxation Policy and Practical Analysis of “Businesses to Return to Taiwan”	3
			January 21,2020	January 21,2020		Analysis of the Effectiveness and Legal Responsibilityof "Evidence" in Economic Crimes	3
Chief auditor	Chia-Jung Wu	August 13, 2019	July 15, 2019	July 17, 2019	The Institute of Internal Auditors-Chinese Taiwan	Pre-Employment Training Upon Initial Appointment for Auditors	18
			August 16,2019	August 16,2019		Practical Techniques of Audit	6
			November 15, 2019	November 15, 2019		Function and Mission of Corporate Governance Personnel Under the Corporate Governance Blueprint	6
			November 22, 2019	November 22, 2019		Strengthen the Analysis of the 3 Lines of Defense and Operating Mechanism of the Board of Directors (Includingthe ReportingSystem)	6

(IV) If the company has established the Remuneration Committee, the composition, duties and operation status should be disclosed:

Information of members of the Remuneration Committee

Identity category (note 1)	Criteria Name	Meet one of the following professional qualification requirements and at least five years’ work experience	Meet one of the following professional qualification requirements and at least five years’ work experience	Meet one of the following professional qualification requirements and at least five years’ work experience		Status of independence	Status of independence	Status of independence	Status of independence	(note 2)	(note 2)		Number of other public companies in which the individual is concurrently serving as a member of the Remuneration Committee	Note
		An instructor or higher position in a department of commerce, law, finance, accounting, or other academic department related to the business needs of the company in a public or private junior college, college or university.	A judge, public prosecutor, attorney, CPA or Other professional or technical specialist necessary for the business of the company who has passed a national examination and been awarded a certificate.	Have work experience in the fields of commerce, law, finance, accounting, or other work experience necessary for the business of the company.	1	2	3	4	5	6	7	8
Independent Director	Ching-Tien Tsai												1	None
Independent Director	Jerry Chiu												2	None
Independent Director	Philip Wei												1	None

Note 1: Please fill in Director, Independent Director or others in the identity category column.
Note 2: Please check “  ” in the corresponding boxes if the qualification applies to each member during the two years prior to being elected or during the term of office.
(1) Not an employee of the Company or any of its affiliates.
(2) Not a Director or Supervisor of the Company or any of its affiliates. Except for Independent Directors of the company or its parent company or a subsidiary established in accordance with this Act or the local laws.
(3) Not holding 1% or more than 1% of the total outstanding shares issued by the company or among the top 10 natural person shareholders by the person or his spouse or minor children, or in the name of a third party.
(4) Not a spouse, relative within the second degree of kinship, or lineal relative within the third degree of kinship, of any of the persons in the preceding three subparagraphs.
(5) Not a Director, Supervisor or employee of an juristic-person shareholder holding 5% or more than 5% of the total outstanding shares issued by the Company, or Director, Supervisor or employee of an juristic-person shareholder who is among the top 5 shareholders.
(6) Not a Director, Supervisor, Managerial Officer of a specified company or institution which has a financial or operational relationship with the Company or a shareholder holding 5% or more than 5% of the total outstanding shares issued by the Company.
(7) Not a professional individual, owner, partner, Director, Supervisor, Manager of proprietorship, partnership, company or institution that provides commercial, legal, financial and accounting services to the company or its affiliates, or a spouse to the aforementioned persons.
(8) Not under any of the categories stated in Article 30 of the Company Act.

Operating status of the Remuneration Committee
(1) The Company’s Remuneration Committee consists of three members.
(2) The Company’s Board of Directors had an election on June 18, 2019. The term of office of this board (4th board) is August 13, 2019 to June 17, 2022.
(3) The Remuneration Committee held 3 meetings (A) in the most recent year
- (2019). The qualification of members and the status of attendance are as follows:

Title	Name	Attendance in person (B)	By proxy	Rate of attendance in person (%) (B/A) (Note)	Note
Convener	Ching-Tien Tsai	3	0	100%	Elected on the 4th board; Attendance time is 3
Member of the Committee	Jerry Chiou	3	0	100%	Elected on the 4th board; Attendance time is 3
Member of the Committee	Philip Wei	2	0	100%	Elected on the 4th board; Attendance time is 2
Member of the Committee	Chung-Shan Kao	1	0	100%	Elected on the 4th board; Attendance time is 1
Other matters that require reporting: I. When the Board of Directors rejects or modifies the recommendations made by the Remuneration Committee, please expressly state the date and session of the Board Meeting, motion contents, the resolutions results by the Board of Directors, and settlement on the opinions of the Remuneration Committee: none. II. When there are any of members expressing adverse opinion or qualified opinion with records or with written statements for resolutions by the Remuneration Committee, state the date and session of the Remuneration Committee meeting, motion contents, all the members’ opinions and the settlement on their opinions: Remuneration Committee Motion contents and further handling Resolution result The Company’s response to the Audit Committee’s opinions The 3rd board 6th meeting (March 29,2019) 1. Reconfirmation of the performance bonus for the Company’s executive All attending members Was submitted to the Board of Directors’ meetingand all

		officers in 2018. 2. Reconfirmation of the remuneration for the Company’s managerial officers in 2018 and 2019.	approved the motion without any dissenting opinion	attending directors have approved
	The 4rd board 1st meeting (August 13, 2019)	1. Please proceed and discuss the transportation allowance for newly elected directors and independent directors of the 17th board. 2. Please proceed and discuss the remuneration for the newly elected members of the 4th Remuneration Committee. 3. Please proceed and discuss the remuneration for the members of the 1st Audit Committee. 4. Please proceed and discuss part of the provisions of the “Remuneration Policy and System for Managerial Officers”. 5. Please proceed and discuss the pension of the Company’s chief auditor. 6. Please proceed and discuss the remuneration of the Company’s newly appointed chief auditor. 7. Reconfirmation of the compensation for the Company’s managerial officers in 2019.	All attending members approved the motion without any dissenting opinion	Was submitted to the Board of Directors’ meeting and all attending directors have approved
	The 4rd board 2nd meeting	1. Please proceed and discuss the distribution of new	All attending	Was submitted to the Board of Directors’

	(November 12, 2019)	restricted employee shares for 2018. 2. Please proceed and reconfirm the remuneration for the Company’s managerial officers in 2019.	members approved the motion without any dissenting opinion	meeting and all attending directors have approved

Note:

(1) If a member of the Remuneration Committee resigns before the end of a fiscal year, state the service termination date in the remarks section, and the rate of attendance in person is calculated by the number of the Remuneration Committee meetings and his attendance in person during his service period.
(2) If a Remuneration Committee re-election is held before the end of a fiscal year, the name of former and newly-elected members should all be listed, and also state the status of the members: former, newly-elected or re-elected, and the re-election date in the remarks section. The rate of attendance in person (%) is calculated by the number of the Remuneration Committee meetings and the attendance in person during his service period.

(V) CSR performance:

Evaluation item			Operation status (Note 1)	The variations and the causes of variations from the) Corporate Social Responsibility Best Practice Principles for TWSE/TPEx Listed Companies
	Yes	No	SummaryDescription(Note 2)
I. Has the company performed risk assessments on environmental, social, and corporate issues in relation to the company’s operations according to material principles, and formulated relevant risk management policies or strategies?(Note 3)	V		The Company follows the requirements of the GRI (Global Reporting Initiative) when planning for CSR strategies as well as their implementation. Material assessment is determined by the degree of concern of stakeholder groups and the degree of impact on the Company’s operation. The Company manages and responds according to the order of the material degree. The top management has signed social responsibility declaration in combination with the existing ESH policy to clearly declare his dedication to following CSR-related regulation, and the implementation effectiveness is submitted to the top management regularly.	None
II. Has the company established a dedicated (concurrent) unit to implement corporate social responsibility? Has the Board of Directors delegated a senior management team to handle CSR affairs and report its implementation status back to the Board?	V		General Admin. Dept., President Office and each group jointly promote various tasks of the Company’s CSR. The CSR management system is audited annually by internal and external personnel to ensure the management system is continuous improving; the result of audits are reviewed by the management to ensure its continuous efficiency.	None

Evaluation item			Operation status (Note 1)	The variations and the causes of variations from the) Corporate Social Responsibility Best Practice Principles for TWSE/TPEx Listed Companies
	Yes	No	SummaryDescription(Note 2)
III. Environmental Issues (I) Has the company established an appropriate environmental management system based on the characteristics of its industry?	V		We have established management system of environment, safety and health and acquired ISO 14001 (effective until 2022), OHSAS 18001 (effective until 2021) and CNS15506 (effective until 20221) certifications. Formulate measurable goals and management programs, regularly review the goals and the effectiveness of the management programs.	None
(II) Is the company dedicated to improving the utilization efficiency of all the resources and using the recycled materials with low impact on the environment?	V		We have established energy management standard operating procedure to regularly review the utilization status of water, electricity and other energy, implement the projects of energy conservation and carbon reduction in the factories to improve the utilization efficiency of energy.	None
(III) Does the company assess potential risks and opportunities associated with climate change, and undertake measures in response to climate issues?	V		We have established GHG inventories-related operation standard according to ISO 14064-1 standard, and implemented all the projects of energy conservation and carbon reduction according to ISO 14001 standard.	None

Evaluation item			Operation status (Note 1)	Operation status (Note 1)	Operation status (Note 1)	Operation status (Note 1)	Operation status (Note 1)	The variations and the causes of variations from the) Corporate Social Responsibility Best Practice Principles for TWSE/TPEx Listed Companies
	Yes	No	SummaryDescription(Note 2)
(IV) Does the company maintain statistics on greenhouse gas emission, water usage and total waste volume in the last two years, and implement policies aimed at reducing energy, carbon, greenhouse gas, water and waste?	V		We have established GHG inventories-related operation standard according to ISO 14064-1 standard, and implemented all the projects of energy conservation and carbon reduction according to ISO 14001 standard. Information for thepast 2years:					None
			Metric tons/CO2e	2018		2019
			Scope 1	1,112.925	1.17%	1,355.450	1.48%
			Scope 2	93,616.914	98.83%	89,933.713	98.52%
			Total	94,729.839	100.00%	91,289.163	100.00%

IV. Social Issues (I) Has the company established related management policies and procedures in accordance with relevant laws and international conventions on human rights?	V		The formulation of all the management regulations of the company follows and conforms with the related laws of the government, clearly declares its dedication to following international CSR-related regulation to ensure employee’s rights and interests.					None
(II) Has the company developed and implemented reasonable employee welfare measures (including compensation, leave of absence and other benefits), and appropriately reflected business performance or outcome in	V		The Company has established and enforced reasonable employee welfare measures - please refer to V. Labor Relations (Page 112 in the annual report); and the Company has appropriately reflected business performance in employees’ remuneration - please refer to (VIII) Remuneration of Employees and Directors (Page 93 in the annual report).					None

Evaluation item			Operation status (Note 1)	The variations and the causes of variations from the) Corporate Social Responsibility Best Practice Principles for TWSE/TPEx Listed Companies
	Yes	No	SummaryDescription(Note 2)
employees’ remuneration?
(III) Has the company provided the employees with a safe and healthy work environment and arranged regular safety and health education for employees?	V		(1) The Company has established the occupational safety and health management system and acquired OHSAS 18001 and CNS15506 certifications. The Safety and Health Working Code of Conduct has also been formulated and publicly announced after the approval of the competent authority. (2) The fire equipment of the entire plant is maintained on a regular basis; a fire maintenance report form is submitted and an inspection is carried out in accordance with the regulation of the competent authority each year. (3) Security, control access, monitoring and alarm system have been put in place at various important entrances and exits, environmental safety and health patrol is enforced and self-inspection is carried out as required by the law to strengthen the safety within the plant. (4) Participating in occupational safety and health weekly events and performing various safety and health educational and training in accordance with the government’s occupational safety and health education and traininglaws and regulations.	None
(IV) Has the company established an effective career development plan for employees?	V		Our employees enter the training development system from the first day they work in our company. The system includes the newcomer guidance training, and three major parts containing the offline training, the online trainingand the self-development training	None

Evaluation item			Operation status (Note 1)	The variations and the causes of variations from the) Corporate Social Responsibility Best Practice Principles for TWSE/TPEx Listed Companies
	Yes	No	SummaryDescription(Note 2)
			according to the Learning Map (engineering technique staff, administration staff). An inventory check for the ability gap of employees is performed in the aspect of organizational needs, departmental needs and individual needs in order to plan, arrange the ability of personnel or formulate training plans for personnel development and provide a comprehensive training blueprint to employees, ensuring the consistency of talent development and Company’s operationgoals.
(V) Has the company complied with laws and international standards with respect to customers’ health, safety and privacy, marketing and labeling in all products and services offered, and implemented consumer protection policies and complaint procedures?	V		We mainly specialize in OEM and don’t have our own brand, so we don’t conduct the related marketing and labeling. We have set up a communication channel for stakeholders, and a complaint is handled according to the procedures if there is a need for compliant.	None
(VI) Has the company implemented a supplier management policy that regulates suppliers’ conducts with respect to environmental protection,	V		We include the clauses for immediate termination or rescission in contracts when the supplier violates the CSR policy. Besides, we request the suppliers to abide by related environmental laws, issue the related letter of guarantee and conduct on-site inspection at any time, if the suppliers violate the laws, we can terminate or rescind the contracts immediately.	None

Evaluation item	Operation status (Note 1)	Operation status (Note 1)	Operation status (Note 1)	The variations and the causes of variations from the) Corporate Social Responsibility Best Practice Principles for TWSE/TPEx Listed Companies
	Yes	No	SummaryDescription(Note 2)
occupational safety and health or work rights/human rights issues, and tracked suppliers’ performance?
V. Has the company taken reference from the internationally accepted reporting standards or guidance when compiling CSR reports to disclose non-financial information? Have the reports mentioned previously obtained the assurance of third party verification?	V		The Company compiles CSR reports each year according to the GRI requirements. It has been evaluated that there is no need to obtain the assurance of third party verification as of now. The Company may require a third party verification in the future according to needs.	None
VI. If the company has established its own CSR guidelines according to the “Corporate Social Responsibility Best Practice Principles for TWSE/TPEx-Listed Companies,” please specify the operating status and the variations between them: We have formulated the CSR-related regulations in all the operation standards of human resources,environmentalprotection,safe and health to complywith the laws.

Evaluation item	Operation status (Note 1)	Operation status (Note 1)	Operation status (Note 1)	The variations and the causes of variations from the) Corporate Social Responsibility Best Practice Principles for TWSE/TPEx Listed Companies
	Yes	No	SummaryDescription(Note 2)
VII. Other important information that helps understand CSR operations: (I) Environmental protection, safety and health: 1. We have established the air pollution control and wastewater treatment equipment according to the laws, we assigned the qualified companies to dispose of or recycle the industrial waste, we have set up the wastewater recycling system. In response to the government’s policy, we launched activities such as the energy conservation and carbon reduction, the garbage classification and recycling and the green procurement, we have been awarded “the First Place of the 2008 Building Renovation and Maintenance Rating,” “2013 Excellent Water-Saving/Energy-Saving Company,” “2016 Resources Recycling Quality Award” by the Export Processing Zone of the Ministry of Economic Affairs and awarded“2011 Kaohsiung City Enterprise Energy-saving Rating Competition Excellent Award,” “Green Restaurant” by the Kaohsiung City Government. 2. We have launched healthy workplace activity, promoted to quit smoking, encouraged the employees to participate in the hiking activities held by the government that can improve the health, and we have been awarded “Healthy Workplace Accreditation” by the Heath Promotion Administration, Ministry of Health and Welfare in 2010, 2012,2016 and 2019, respectively. 3. We participated in the evaluation of the series activities in the occupational safety and health week and were awarded “Judges’ list award,” “participation certificate” in 2012/2013/2014/2015/2016, respectively, by the Ministry of Labor of the Executive Yuan. (II) The community participation, social contribution, social services and so on: 1. We assisted and provided the police with materials recorded by monitoring equipment around our factories to conduct the investigation of the cases, participated in the Zone Defense Organization of the Kaohsiung Export Processing Zone to actively maintain the community order and was awarded “2015/2017 Accident Prevention Measures Quality Award” by the Export Processing Zone. 2. We have regularly launched the internship opportunities during the school year and the summer vacation to make the students who are going to enter the workforce adapt to the life in the work place in advance and know about the company, job responsibilities for the preparation for the future. 3. Our company has diverse clubs, so the employees can participate in the community activities or take part in the activities in the official nonprofit organization to relieve the stress for them. (III) Social welfare: 1. We buy the Shareholders’ Meeting souvenir from the public welfare groups and underprivileged groups each year; in 2019, the Company spent approximately NT$1,890 thousand. 2. We invite the public welfare groups and underprivileged groups to put on performances in our year-end banquet and take their seats every year.

The variations and the causes of variations from the) Corporate Social Operation status (Note 1) Responsibility Evaluation item Best Practice Principles for TWSE/TPEx Listed Companies Yes No Summary Description (Note 2)

We are a member of the Alliance Association of the Export Processing Zone Administration, periodically hold public welfare activities for the blood donation in the company, invite the underprivileged groups to set up booths and procure the relevant souvenirs from them.
(IV) Human rights:
We uphold the philosophy of looking after the disadvantaged groups and hire a certain number of people who are disabled mentally or physically. From 2017 and 2018, the number of people the Company recruited remained the same as required by the law; in 2019, the Company exceeded in a total of 62 persons hiring slightly disabled: 34 people, moderately disabled: 17 people, and severely disabled: 11 people. The Company effectively helps the workers with disabilities to overcome work barriers through designing appropriate duties while working together with professional agencies, groups and applicable units in order to improve their work suitability and further encourage more disadvantaged groups to join in the the workplace.
In response to the government’s policy on the employment promotion in combination with the manpower requirement and the recruit mode of our company, we recruited the local labors and the underprivileged groups.
As a means to strengthen the work ability for students after they graduate from schools in line with the government’s policy, OSE has teamed up with 6 schools, providing internship opportunities and drawn up plans such as “Dual System of Vocational Training Project, “Industry-Academe Collaboration Program” and 33 Overseas Chinese, Industry College Program”. Students are able to adapt the industrial and work environment through the internship the Company offers. A total of 488 students were offered the internship in 2019 which is an increase from 367 in 2018.
In 2019, the Company organized 9 university research institute visit in southern Taiwan and 13 school seminars and courses, with 799 interns taking part. The interns were able to learn about the workplace through visits and lectures in advance.

(VI) Implementation status of the ethical corporate management and the adoption of related measures:

	Implementation status of the ethical corporate management	Implementation status of the ethical corporate management	Implementation status of the ethical corporate management	Implementation status of the ethical corporate management	Implementation status of the ethical corporate management
Evaluation item			Operation status		The variations and causes of variations from the Ethical Corporate Management Best Practice Principles for TWSE/TPEx Listed Companies
	Yes	No		Summary Description
I. The establishment of the ethical management policies and plans (I) Has the company demonstrated its ethical management policies in its regulations and external documents, and stated in its Memorandum or external correspondence about the policies and practices it has to maintain business integrity? Are the board of directors and the management committed in fulfilling this commitment?	V		(I) “Sincerity, honesty” is the Company’s most crucial core value, and the Company engages in all business activities with the principle of ethical standards. In light of this, the Company has formulated its “Ethical Corporate Management Best Practice Principles” according to the “Ethical Corporate Management Best Practice Principles for TWSE/TPEx Listed Companies” and their applicable enforcement rules. The principles will come into force after being resolved and approved by the Board of Directors’ meeting on May 7, 2020.		No significant difference.

Evaluation item			Operation status	Operation status	The variations and causes of variations from the Ethical Corporate Management Best Practice Principles for TWSE/TPEx Listed Companies
	Yes	No		Summary Description
(II) Has the company established a risk assessment mechanism against unethical behavior, analyzed and assessed business activities within their business scope on a regular basis which are at a higher risk of being involved in unethical behavior, and established prevention programs at least covering the preventive measures specified in Paragraph 2, Article 7 “Ethical Corporate Management Best Practice Principles for TWSE/TPEx Listed Companies”?	V		(II) The Company has formulated the “Ethical Corporate Management Best Practice Principles” and Article 7, paragraph 2 has been prescribed in accordance with the preventive measures for various conducts stipulated in Article 7, paragraph 2 in the “Ethical Corporate Management Best Practice Principles for TWSE/TPEx Listed Companies”; suppliers are required to sign the “Code of Conducts Compliance Certificate” as required by the supplier management measures. According to the certificate, suppliers may not conduct any inappropriate business such as bribery, or the Company is entitled to terminate the contract or transaction with the supplier at any time and damage may be compensated.		No significant difference

Evaluation item	Operation status	Operation status	Operation status	Operation status	The variations and causes of variations from the Ethical Corporate Management Best Practice Principles for TWSE/TPEx Listed Companies
	Yes	No		Summary Description
(III) Has the company specified operational procedures, behavioral guidelines, disciplines of violations, as well as an appeal system in the program against unethical behavior, and implemented such programs, and reviewed and revised the previous program on a regular basis?	V		(III) The Company has established the “Ethical Corporate Management Best Practice Principles” which is being promoted upon directors and managerial officers and is listed as the annual performance assessment.		No significant difference
II. The implementation of the ethical management (I) Does the company evaluate the ethical records of its transaction parties and explicitly include clauses on ethical conduct in contracts signed with its transaction parties? (II) Has the company set up a dedicated responsible unit to promote corporate ethical management under the Board of Directors, and	V	V	(I) We have expressly stated the prevention measures for violating the ethical principles and the punishment clauses in our commercial contracts. (II) The Company has not set up a dedicated (concurrent) responsible unit; it has been planned to enforce relevant matters after setting up a corporate governance		No significant difference The Company has planned to set up a corporate governance manager in order to enforce the

Evaluation item	Operation status	Operation status	Operation status	Operation status	The variations and causes of variations from the Ethical Corporate Management Best Practice Principles for TWSE/TPEx Listed Companies
	Yes	No		Summary Description
has such unit reported its execution in terms of ethical management policy and preventive programs against unethical behaviors and the supervision status to the Board of Directors on a regular basis (at least once a year)? (III) Has the company established and implemented the policy to prevent the conflicts of interest and provide the suitable channels for reporting such conflicts?	V		manager in 2021. (III) Our rules of procedure for the Board Meeting expressly state the recusal system for the Directors. If the motions proposed by the Board of Directors have conflict of interest with the Directors or the juristic-person investors they represent, where there is a likelihood that the interests of the company would be prejudiced, they may state their opinions and answer the questions, but they may not participate in the discussion or vote on those motions and shall recuse themselves from any discussion and voting, and may not exercise voting		execution status of the report of ethical management on a regular basis. No significant difference

Evaluation item	Operation status	Operation status	Operation status	Operation status	The variations and causes of variations from the Ethical Corporate Management Best Practice Principles for TWSE/TPEx Listed Companies
	Yes	No		Summary Description
(IV) Has the company established an effective accounting system and internal control system in order to implement ethical management, and propose relevant audit plans according to the assessment results of the risks of unethical behaviors, and review the compliance status of the prevention of unethical behaviors, or entrust an account to carry out the review?	V		rights as proxy on behalf of another Director. (IV) To ensure the fulfillment of the ethical management, we have established effective accounting system and internal control system, the internal auditors also have audited the legal compliance status of these systems. (V) The Company regularly organizes education and training in connection with applicable policy of corporate social responsibility to raise the awareness of employees’ knowledge on corporate social responsibility and regulations. Please refer to annex 1 for the education training results of social responsibilityof 2019.		No significant difference No significant difference.
(V) Does the company regularly organize the internal and external education training activities for the ethical management?	V

Evaluation item	Operation status	Operation status	Operation status	Operation status	The variations and causes of variations from the Ethical Corporate Management Best Practice Principles for TWSE/TPEx Listed Companies
	Yes	No		Summary Description
III. The operating status of the corporate whistleblower system (I) Has the company established the explicit whistleblower system, the incentive scheme and the convenient whistleblowing channels, and assign the appropriate personnel to investigate the target of the whistleblower complaint? (II) Has the company implemented any standard procedures and/or subsequent measures after carrying out an investigation or confidentiality measures for handling reported misconduct?	V V		(I) We have formulated employee grievance processing procedure, if the employees want to submit the grievance or communicate, they can reflect with their direct supervisors, Human Resources or other relevant units. We have also established the oral notification, the staff suggestions box , the grievance hotline and email. (II) The Company has set up employee whistleblowing procedures that specifically state to handle a whistleblowing case with confidentiality without leaking the name of the whistleblower or other relevant information enough to identify the person; the Company is discreet when carrying out an investigation,		No significant difference. No significant difference.

Evaluation item	Operation status	Operation status	Operation status	Operation status	The variations and causes of variations from the Ethical Corporate Management Best Practice Principles for TWSE/TPEx Listed Companies
	Yes	No		Summary Description
(III) Has the company establish the measures to protect the whistleblowers against the retaliation?	V		and the internal of the Company is also very careful when handling relevant matters. (III) We have formulated employee grievance processing procedure, expressly stated any retaliation against the grievant, the whistleblower or who assists with the investigation, the violator will be punished according to the situation.		No significant difference.
IV. Reinforcing the information disclosure (I) Has the company disclosed its ethical management principles and effectiveness on its website and the Market Observation Post System website?	V		(I) The Company has disclosed its “Ethical Corporate Management Best Practice Principles” on MOPS and its website(www.ose.com.tw). (II) There was no violation of the “Ethical Corporate Management Best Practice Principles” in 2019. (III) We have designated dedicated personnel to gather and disclose company information, implement the spokesperson system.		No significant difference.

Evaluation item	Operation status	Operation status	Operation status
	Yes	No	Summary Description
V. If the company has established its own ethical management principles in accordance with the “Ethical Corporate Management Best Practice Principles for TWSE/TPEx-Listed Companies,” please specify the operation status and the variations between them: “Sincerity and honesty at all times” is Orient Semiconductor Electronics’ (OSE) entrepreneurial spirit and business philosophy. OSE has dedicated itself to serving customers, caring for employees, managing enterprise, taking responsibilities for shareholders and fulfillingCSR for decades.
V. Other material information that helps understand the operation of the company’s ethical management: (such as the review and revision of the company’s ethical management principles and other situation): We abide by the Company Act, the Securities and Exchange Act, Business Entity Accounting Act and other relevant laws that the listed companies should follow to fulfill the ethical management.

V. If the company has established its own ethical management principles in accordance with the “Ethical Corporate Management Best Practice Principles for TWSE/TPEx-Listed Companies,” please specify the operation status and the variations between them:
“Sincerity and honesty at all times” is Orient Semiconductor Electronics’ (OSE) entrepreneurial spirit and business philosophy. OSE has dedicated itself to serving customers, caring for employees, managing enterprise, taking responsibilities for shareholders and fulfilling CSR for decades.
V. Other material information that helps understand the operation of the company’s ethical management: (such as the review and revision of the company’s ethical management principles and other situation):

We abide by the Company Act, the Securities and Exchange Act, Business Entity Accounting Act and other relevant laws that the listed companies should follow to fulfill the ethical management.

Annex 1: the results of 2019 CSR education and training is as follows:

Course category	Name of course	Numbers of students
Enterprise operation laws program	Personal Information Protection Act (confidentiality obligation)	3,021
	Trade Secrets Act (non-competition obligation, confidentiality obligation)	9,552
	Code of Business Conduct and Ethics (ethicalpractice)	9,552
	General Education Training for the Newcomers (ConfidentialityObligations)	3,021
Human Rights	RBA introduction	3,021
	Operating program of the labor-management laws, information	218
	securityand Personal Information Protection Act
Program	General Education Training for the Newcomers (RBA code of conduct, personal ethical practice of the employees,the sexual harassmentpreventionguidance)	3,021

(VII) If the company has established corporate governance guidelines and related regulations, please disclose the methods to access them: The Company has established measures including the “Rules of Procedure for Shareholders’ Meetings”, “Rules of Procedure for Board of Directors Meetings”, “"Rules for Director Elections", “Procedures for Ethical Management and Guidelines for Conduct” and the “Ethical Corporate Management Best Practice Principles”. Please see the Company’s website (www.ose.com.tw)→Investor Relations→Corporate Governance→Major Internal Policies.
(VIII) Other material information that helps increase the understanding of the implementation status of corporate governance:
Please refer to “Implementation status of corporate governance and the variations and causes of variations from the Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies- page No. 40.”

(IX) Implementation status of the internal control system
Internal control system statement

Orient Semiconductor Electronics, Ltd.

Internal control system statement

Date: Mar. 29, 2020

According to the results of the 2019 self-evaluation of the internal control system, we hereby declare as follows:

I. We acknowledge and understand that it is the responsibility of our Board of Directors and Managerial Officers to establish, implement and maintain the internal control system and we have established such system. The purpose of such system is to reasonably ensure that the following objectives are achieved: the effectiveness and efficiency of operations (including profits, performance and safeguard of asset security), the reliability, timeliness and transparency of reporting and the compliance with applicable laws, regulations.
II. There are inherent limitations to the internal control system, no matter how it is perfectly designed. An effective internal control system can only reasonably ensure the achievement of the aforementioned 3 objectives. Moreover, the effectiveness of the internal control system may differ according to the different environments and situation. Our internal control system contains self-monitoring mechanisms, we can take immediate corrective actions against any defects once identified.
III. We assess the effectiveness of design and implementation of the internal control system based on the criteria specified in the “Regulations Governing Establishment of Internal Control Systems by Public Companies” (hereinafter referred to below as “the Regulations”). The criteria adopted by “the Regulations” divide the internal control system into five elements according to the process of control management: 1. environment control, 2. risk assessment, 3. control operation, 4. information and communication, and 5. monitoring operation. Each element is composed of several other items. Please refer to “the Regulations” for the aforementioned items
IV. We have assessed the effectiveness of design and implementation of the internal control system according to the aforementioned criteria.
V. Based on the results of the aforementioned assessment, we believe that, on 31 December 2018, the design and implementation of the internal control system (that includes the supervision and management of subsidiaries) were reasonably ensured the objectives were achieved: the effectiveness and efficiency of operations, the reliability, timeliness, and transparency of reporting, and the compliance with applicable laws, regulations, and bylaws.
VI. This statement is an integral part of the annual report and the prospectus, and will be made public. If there is any fraud, concealment, or other illegality in the aforementioned content made public will entail legal liability under Articles 20, 32, 171 and 174 of the Securities and Exchange Act.
VII. This statement was approved unanimously by the Board Meeting of the Company held on Mar, 27 2020, where 0 of the 7 attending Directors expressed dissenting opinions, and the remainder all affirmed the content of this statement.

Orient Semiconductor Electronics, Ltd.

Signature of Chairman: Edward Shaw-Yau Duh

Signature of President: Yueh-Ming Tung

If the company assign a CPA to audit its internal control system it shall disclose the CPA audit report: none.
(X) The punishments for the company and its internal employees by the laws, the punishments for its internal employees violating the internal control system by the company, the major defects, and the improvements in the most recent year and by the date of the annual report publication: none.
(XI) Material resolutions made by the Shareholders’ Meeting and the Board Meeting in the most recent year and by the date of the annual report publication:
The general meeting of shareholders was held on June 18, 2019, the material resolutions and the implementation status in the meeting:

Category	The resolutions of the general meeting of shareholders	The resolutions of the general meeting of shareholders	The resolutions of the general meeting of shareholders	Implementation status
General meeting of the shareholders	Adoption: 1. 2018 Business Report and Financial Statements. 2. 2018 appropriation of making up losses. Discussion: 1. Amendment to parts of clauses of the "Articles of Incorporation". 2. Amendment to parts of clauses of the "Procedure for Acquisition or Disposal of Assets". 3. Amendment to parts of clauses of the "Procedure for Endorsements and Guarantees". 4. Amendment to parts of clauses of the "Lending Funds to Others". 5. Amendment to parts of clauses of the "Rule for Director and Supervisor Elections". Election: Election of the 17th term of Directors (Including 3 Independent Directors). Discussion: 6. Lifting of the competition strife restriction for new directors.			Adoption: 1. Approval by voting. 2. Approval by voting. Discussion: 1. The motion was approved by voting. The change has been registered at the Ministry of Economic Affairs on June 28, 2019. 2. The motion was approved by voting. 3. The motion was approved by voting. 4. The motion was approved by voting. 5. The motion was approved by voting. The change of the elected directors has been registered at the Ministry of Economic Affairs on June 28, 2019. 6. The motion was approved byvoting.
2. Material resolutions in			the Board Meeting:
Meeting Time		Category	Material resolutions
Mar. 29, 2019		Board of Directors	Discussion: 1. Approval of the 2018 “Internal Control System

Meeting Time	Category	Material resolutions
		Statement.” 2. “2018 Individual and Consolidated Financial Statement.” 3. “2018 Appropriation of Making up Losses.” 4. “2019 Business Plan.” 5. Date of 2019 general meeting of shareholders. 6. “Re-election of the Directors (Including the Independent Directors).” 7. Lifting of the competition strife limitation for new directors. 8. Revision of the “Articles of Incorporation”. 9. Revision of the “Operating Procedure for Assets Acquisition and Disposal”. 10. Revision of the “Operating Procedure for Endorsements and Guarantees”. 11. Revision of the “Operational Procedure for Loaning to Others”. 12. Revision of the “Rules for Director and Supervisor Elections”. 13. Formulation of the “Audit Committee Charter”. 14. Loaning to OSE Phil. 15. Bank loan amount. 16. Personnel. 17. Performance bonus for the Company’s Executive Officers. 18. Remuneration for managerial officers.
May 8, 2019	Board of Directors	Discussion: 1. Bank loan amount. 2. Loaning to OSE Phil. 3. Evaluation of the CPA’s independence and appropriateness. 4. Revision of the accounting system. 5. Revision of the “Operational Procedure for the Internal Control System” and “Auditing Procedure for the Internal Audit”.
June 18, 2019	Board of Directors	Discussion: 1. Election of the Chairman.
August 12, 2019	Board of Directors	Discussion: 1. Appointment of the remuneration committee. 2. Amendments to measures of issuance of new restricted employee shares. 3. Amendment to the “Rules of Procedure for Board of Directors Meetings”

Meeting Time	Category	Material resolutions
		4. Amendment to the “Guidelines for the Adoption of Codes of Ethical Conduct”. 5. Amendment to the “Compensation Committee Charter”. 6. Amendment to the “Internal Material Information Processing Operating Procedure”. 7. Amendment to the “Halt and Resumption Applications”. 8. Amendment to the “Rules Governing the Scope of Powers of Independent Directors”. 9. Amendment to the “Standard Operating Procedures for Directors’ Requests”. 10. Loaning to OSE Phil. 11. Bank loan amount. 12. Auditing Executive Change. 13. Personnel.
November 13, 2019	Board of Directors	Discussion: 1. 2020 audit plan. 2. Bank loan amount. 3. Loaning to OSE Phil. 4. New restricted employee shares 5. HR and remuneration
March 27, 2020	Board of Directors	Discussion: 1. “2019 individual and consolidated financial statements”. 2. The effectiveness of the internal control system and provision of “Internal Control System System” for 2019. 3. 2019 remuneration distribution for employees and directors. 4. 2019 earnings distribution. 5. 2020 business plan. 6. Date of 2020 general meeting of shareholders. 7. Bank loan amount. 8. Loaning to OSE Phil. 9. Provision of endorsements and guarantees to OSE Phils. 10. Revision of the “Articles of Incorporation”. 11. Amendment to the “Audit Committee Charter”. 12. Formulation of the “Ethical Corporate Management Best Practice Principles”. 13. Formulation of the “Board of Directors’ Performance Evaluation”.

Meeting Time	Category	Material resolutions
		14. Amendment to the “Calculation Measures for Employees’ Bonus”. 15. Formulation of the “Remuneration Measures for Directors and Members of Functional Committee”. 16. Amendment to the “Rules Governing the Scope of Powers of Independent Directors”. 17. Transportation allowance for directors. 18. Performance bonus for the Company’s Executive Officers.
May 7, 2020	Board of Directors	Discussion: 1. Formulation of the “Operational Procedures of the Internal Control System”. 2. Bank loan amount. 3. Loaning to OSE Phil. 4. Formulation of the “Company’s Self Compiling of Financial Report Plan”. 5. Evaluation of the CPA’s independence and appropriateness. 6. The record date of cancellation of capital reduction for restricted employee shares has been approved. 7. Personnel. 8. Disposal of the plant. 9. Formulation of the “Ethical Corporate Management Best Practice Principles”. 10. Private placement of ordinary shares for cash capital increase. 11. Reasons for the convening of 2020 general meeting of shareholders have been newlyadded.

(XII) In the most recent year and by the date of the annual report publication, the material resolutions approved by the Board Meetings for which the Directors or Supervisors expressed the adverse opinion or qualified opinion with records or with written statements, and its main content: none.
(XIII) In the most recent year and by the date of the annual report publication, the resignation or dismissal of the company’s key individuals including the Chairman, President, and Accounting Supervisor, Financial Supervisor, Chief Internal Auditor and R&D Supervisor

Title	Name	Date of assumption	Date of dismissal	Reasons for the resignation or dismissal
Chief auditor	Shu-Yen,Chang	July1,1992	August 12,2019	Retirement

V. Information of CPA fee

Unit: NTD thousand

V. Information of CPA fee			Unit: NTD	thousand
Name of CPA firm	Name of CPA		Audit eriod	Remarks
			p
Ernst and Young Global Limited	Chen, Chih-Chung	Chen, Cheng-Chu	January 1, 2019 - December 31,2019	－

Note1: If the Company replaces the CPA or CPA firm, state the audit period and specify the reason for the replacement in the remarks section.

Unit: NTD thousand

Audit fee item Price range	Audit fee item Price range	Audit fee	Non-audit fee	Total
1	Under 2,000 thousand		V
2	2,000 thousand(inclusive)- 4,000 thousand
3	4,000 thousand(inclusive)- 6,000 thousand
4	6,000 thousand(inclusive)- 8,000 thousand	V
5	8,000 thousand(inclusive)- 10,000 thousand			V
6	Above 10,000 thousand(inclusive)

(I) Amount of non-audit fee paid to a CPA, a CPA firm, and its affiliates is one quarter or more of the audit fee: none.
(II) Replacement of the CPA firm, and the audit fee is lesser than that of the previous year after the replacement: none.
(III) The audit fee is less than that of the previous year by 15% or more: none.
VI. Replacement of CPAs: In response to internal adjustment of the CPA firm and to maintain the independence of the CPA, we had resolved in the Board Meeting on Nov. 13, 2018 on replacing the CPA starting from the 1st quarter of 2019. The original CPA, Mr. Fang Wen Lee and CPA, Mr. Cheng Chu Chen of Ernst and Young Global Limited were replaced by the CPA, Mr. Chih Chung Chen and the CPA, Mr. Cheng Chu Chen.
VII. The Chairman, President or Managerial Officers in charge of finance or accounting served at the firms or affiliates of CPAs in the most recent 1 year: none

VIII.Changes in the transfer or pledge of shares by Directors, Supervisors, Managerial Officers, and shareholders holding over 10% of the stakes:

Title	Name	Category of stock	2019	2019	As of April 20 of the currentyear	As of April 20 of the currentyear
			Increase (decrease) in shareholdin gs	Increase (decrease) in pledged shares	Increase (decrease) in shareholding s	Increase (decrease) in pledged shares
Chairman	Edward Shaw-Yau Duh	Common stock	0	0	0	0
Director and concurrentl y serves as President	Yueh-Ming Tung	Common stock	0	0	0	0
Director	Phison Electronics Corporation Representative: Khein-SengPua	Common stock	0	0	0	0
Director	Hok-Ngang Chui (Date of assumption of office: June 18,2019)	Common stock	0	0	0	0
Independe nt Director	Ching-Tien Tsai	Common stock	0	0	0	0
Independe nt Director	Jerry Chiu	Common stock	0	0	0	0
Independe nt Director	Philip Wei (Date of assumption of office: June 18,2019)	Common stock	0	0	0	0
Supervisor of financial department	Chun-Kuan Lee	Common stock	100,000 (100,000)	0	0	0
Vice President	Tzu-Ming Liu	Common stock	100,000 (100,000)	0	0	0
Vice President	Liang-Chung Wu	Common stock	60,000 (60,000)	0	0	0
Vice President	Kuan-Tien Shen	Common stock	100,000 (100,000)	0	0	0
Vice President	Shih-Chuan Chen (Date of assumption of office: Mar. 5,2019)	Common stock	0	0	0	0

Title	Name	Category of stock	2019	2019	As of April 20 of the currentyear	As of April 20 of the currentyear
			Increase (decrease) in shareholdin gs	Increase (decrease) in pledged shares	Increase (decrease) in shareholding s	Increase (decrease) in pledged shares
Vice President (Chief Informatio n Officer)	Chin-Chiu Wang (Date of assumption of office: September 5, 2019)	Common stock	0	0	0	0
Assistant Manager	Wen-Pin Yang	Common stock	80,000 (100,000)	0	0	0
Assistant Manager	Che-Kuang Liu	Common stock	80,000 (80,000)	0	0	0
Assistant Manager	Tse-Wen Li	Common stock	50,000 (50,000)	0	0	0
Assistant Manager	Min-Lang Tsai	Common stock	80,000 (80,000)	0	0	0
Assistant Manager	Chen-Chung Sun	Common stock	80,000 (80,000)	0	0	0
Assistant Manager (CHRO)	Chen-Ling Lai	Common stock	80,000 (80,000)	0	0	0
Assistant Manager	Tseng-Chih Chi	Common stock	80,000 (80,000)	0	0	0
Assistant Manager (Administr ation Supervisor )	Shu-Ling Kung	Common stock	80,000 (80,000)	0	0	0
Assistant Manager	Hung-Tai Mai (Date of assumption of office: May1,2019)	Common stock	80,000 (80,000)	0	0	0
Supervisor of accounting department	Shu-Yong Chu	Common stock	40,000 (40,000)	0	0	0
Director	Xi-Ren Tseng (Date of dismissal: June 18, 2019)	Common stock	0	0	0	0

Title	Name	Category of stock	2019	2019	As of April 20 of the currentyear	As of April 20 of the currentyear
			Increase (decrease) in shareholdin gs	Increase (decrease) in pledged shares	Increase (decrease) in shareholding s	Increase (decrease) in pledged shares
Assistant Manager	Longsys Electronics (Taiwan) Co., Ltd. Representative: Dai-Gang Zhang (Date of dismissal: June 18, 2019)	Common stock	0	0	0	0
Supervisor s	DS Fund LLC Representative: Daphane Wu (Date of dismissal: June 18, 2019)	Common stock	0	0	0	0
Vice President	Chun-Chieh Wang (Date of dismissal: April 1, 2020)	Common stock	60,000 (60,000)	0	0	0
Assistant Manager	Shih-Chung Hsiang (Date of dismissal: August 1, 2019)	Common stock	0	0	0	0

IX. Information of relationship between the company’s top 10 shareholders who are mutually

stakeholders, spouses or relatives within the second degree of kinship:

Name	Personal shareholdings	Personal shareholdings	Shareholdings of spouse, minor children	Shareholdings of spouse, minor children	Shareholdings by nominee arrangement	Shareholdings by nominee arrangement	Name and relationship between the company’s top 10 shareholders who are mutually stakeholders, spouses or relatives within the second degree of kinship	Name and relationship between the company’s top 10 shareholders who are mutually stakeholders, spouses or relatives within the second degree of kinship
	Share	Proportion of shareholdings	Share	Proportion of shareholdings	Share	Proportion of shareholdings	Name	Relationship
CTBC Bank in custody for investment account of Kingston Technology Company, Inc.	37,960,831	6.81%	0	0	0	0	Mega Bank in custody for investment account of KTC-SUN CORPORATION	The representative of these 2 companies and the Chairman, the Vice Chairman of the shareholder is the same person.
							CTBC Bank in custody for investment account of KTC-TU CORPORATION
							DS Fund LLC	The representative of the company and the Vice Chairman of the shareholder is the same person.
CTBC Bank in custody for investment account of KTC-TU CORPORATION Representative: John Tu	27,604,459	4.95%	0	0	0	0	CTBC Bank in custody for investment account of Kingston Technology Company, Inc.	The Chairman of the company and the representative of the shareholder is the same person

Name	Personal shareholdings	Personal shareholdings	Shareholdings of spouse, minor children	Shareholdings of spouse, minor children	Shareholdings by nominee arrangement	Shareholdings by nominee arrangement	Name and relationship between the company’s top 10 shareholders who are mutually stakeholders, spouses or relatives within the second degree of kinship	Name and relationship between the company’s top 10 shareholders who are mutually stakeholders, spouses or relatives within the second degree of kinship
	Share	Proportion of shareholdings	Share	Proportion of shareholdings	Share	Proportion of shareholdings	Name	Relationship
Mega Bank in custody for investment account of KTC-SUN CORPORATION Representative: David Sun	27,579,321	4.95%	0	0	0	0	CTBC Bank in custody for investment account of Kingston Technology Company, Inc.	The Vice Chairman of the company and the representative of the shareholder is the same person.
							DS Fund LLC	The representative of the company and the shareholder is the same person.
Chun-Yuan Tu	13,750,000	2.47%	0	0	0	0	None	None
Chang Chun Investment Co. Ltd.	11,956,597	2.15%	0	0	0	0	None	None
CTBC Bank in custody for investment account of Hok-NgangChui	10,711,948	1.92%	0	0	0	0	None	None
JPMorgan Chase Bank in custody for investment account of NOREGS BANK	9,277,931	1.66%	0	0	0	0	None	None
JPMorgan Chase Bank in custody for Vanguard Total International Stock Index Fund	8,321,208	1.49%	0	0	0	0	None	None

Name	Personal shareholdings	Personal shareholdings	Shareholdings of spouse, minor children	Shareholdings of spouse, minor children	Shareholdings by nominee arrangement	Shareholdings by nominee arrangement	Name and relationship between the company’s top 10 shareholders who are mutually stakeholders, spouses or relatives within the second degree of kinship	Name and relationship between the company’s top 10 shareholders who are mutually stakeholders, spouses or relatives within the second degree of kinship
	Share	Proportion of shareholdings	Share	Proportion of shareholdings	Share	Proportion of shareholdings	Name	Relationship
DS Fund LLC Representative: Ta Wei Sun (David Sun)	7,864,990	1.41%	0	0	0	0	Mega Bank in custody for investment account of KTC-SUN CORPORATION	The representative of the company and the shareholder is the same person.
							CTBC Bank in custody for investment account of Kingston Technology Company, Inc.	The Vice Chairman of the company and the representative of the shareholder is the same person.
Phison Electronics Corporation	7,336,369	1.32%	0	0	0	0	None	None

X. The shareholdings of the same investee held by the Company, Directors, Supervisors, Managerial Officers, and the business entities directly or indirectly controlled by the company, and calculation of the consolidated proportion of shareholdings of the above categories:

	Unit: shares,%	Unit: shares,%	Unit: shares,%	Unit: shares,%	Unit: shares,%	Unit: shares,%
Investee (Note)	Shareholdings of the company (1)		Shareholdings of Directors, Supervisors, Managerial Officers, and business entities directly or indirectly controlled by the company (2)		Syndicated shareholdings (1)+(2)
	Share	Proportion of shareholdings	Share	Proportion of shareholdings	Share	Proportion of shareholdings
OSE PHILIPPINES	Common 3,680,365	93.67%	Common 248,760	6.33%	Common 3,929,125	99.99%
OSE PROPERTIES, INC.	Common 7,998	39.99%	Common 0	0	Common 7,998	39.99%
OSE USA, INC.	Common 8,024	100.00%	Common 0	0	Common 8,024	100.00%
OSE INTERNATIONAL LTD.	Common 16,000,000	100.00%	Common 0	0	Common 16,000,000	100.00%
ATP Electronics Taiwan Inc.	Common 7,518,750	9.57%	Common 7,074,335	9.00%	Common 14,593,085	18.57%
InfoFab, Inc.	Common 632,899	13.32%	Common 829,857	16.60%	Common 2,074,529	43.66%
COREPLUS (HK) LTD.	Common 7,500,000	100.00%	Common 0	0	Common 7,500,000	100.00%

(Note): Investments accounted for using the equity method

Four. Capital Overview

I. Capital and shares

(I) Sources of capital

						Apr. 20, 2020	Apr. 20, 2020	Apr. 20, 2020
Year/month	Issuance price	Authorized capital		Paid-in capital		Note
		Share (Thousand shares)	Amount (NTD thousand)	Share (Thousand shares)	Amount (NTD thousand)	Sources of capital	Subscription of capital stock with assets other than cash	Others
1996/Apr.	10	200,000	2,000,000	200,000	2,000,000	Capital increase by cash NT$353,213 thousand.	None	None
1996/Jun.	10	420,000	4,200,000	261,325	2,613,250	Capital increase by the retained earnings NT$ 376,000 thousand, capital increase by the capital reserve NT$ 224,000 thousand, capital increase by the employee bonus NT$ 13,250 thousand.	None	None
1997/Apr.	10	420,000	4,200,000	270,949	2,709,487	Transfer of the convertible bonds to the common stock NT$96,237 thousand.	None	None
1997/Jun.	10	526,000	5,260,000	375,899	3,758,987	Capital increase by the retained earnings NT$593,378 thousand, capital increase by the capital reserve NT$436,227 thousand, capital increase by the employee bonus NT$ 19,895 thousand.	None	None
1997/Jul.	10	526,000	5,260,000	407,987	4,079,867	Transfer of the convertible bonds to the common stock NT$320,880 thousand.	None	None
1998/Jun.	10	1,000,000	10,000,000	586,876	5,868,671	Capital increase by the retained earnings NT$943,387 thousand, capital increase by the employee bonus NT$25,618 thousand, capital increase by the capital reserve NT$ 650,172 thousand, transfer of the convertible bonds to the common stock NT$169,626 thousand.	None	None
1999/Jul.	10	1,000,000	10,000,000	710,532	7,105,324	Capital increase by the retained earnings NT$586,867 thousand, capital increase by the capital reserve NT$586,867 thousand, transfer of the convertible bonds to the common stock NT$10,104 thousand, capital increase by the employee bonus NT$52,815 thousand.	None	None
1999/Oct.	10	1,000,000	10,000,000	810,532	8,105,324	Capital increase by cash NT$ 1,000,000 thousand	None	None

Year/month	Issuance price	Authorized capital	Authorized capital	Paid-in capital	Paid-in capital	Note
		Share (Thousand shares)	Amount (NTD thousand)	Share (Thousand shares)	Amount (NTD thousand)	Sources of capital	Subscription of capital stock with assets other than cash	Others
2000/Aug.	10	1,400,000	14,000,000	993,143	9,931,428	Capital increase by the retained earnings NT$777,828 thousand, capital increase by the capital reserve NT$818,767 thousand, transfer of the convertible bonds to the common stock NT$160,684 thousand, capital increase by the employee bonus NT$68,825 thousand.	None	None
2001/Jun.	10	1,400,000	14,000,000	1,091,383	10,913,826	Capital increase by the capital reserve NT$ 982,398 thousand	None	None
2001/Sep.	10	1,400,000	14,000,000	1,241,383	12,413,826	Issuance of the preferred stock for capital increase totaled NT$1,500,000 thousand.	None	None
2003/Jan.	10	2,000,000	20,000,000	1,391,383	13,913,826	Issuance of the common stock for capital increase totaled NT$1,500,000 thousand at a discount.	None	None
2003/Mar.	10	2,000,000	20,000,000	1,458,259	14,582,589	Transfer of the convertible bonds to the common stock NT$668,763 thousand at a discount.	None	None
2003/Sep.	10	2,000,000	20,000,000	1,601,043	16,010,425	Transfer of the convertible bonds to the common stock NT$1,427,836 thousand at a discount.	None	None
2003/Dec.	10	2,000,000	20,000,000	1,590,298	15,902,975	Retirement of the treasury stock NT$107,450 thousand.	None	None
2003/Dec.	10	2,000,000	20,000,000	1,704,902	17,049,017	Transfer of the convertible bonds to the common stock NT$1,146,042 thousand at a discount.	None	None
2004/Feb.	10	2,000,000	20,000,000	1,734,625	17,346,245	Transfer of the convertible bonds to the common stock NT$297,228 thousand at a discount.	None	None
2004/Aug.	10	2,000,000	20,000,000	861,714	8,617,141	Capital reduction NT$8,729,104 thousand for making up the losses	None	None
2005/Dec.	10	2,000,000	20,000,000	876,016	8,760,158	Transfer of the convertible bonds to the common stock NT$143,017 thousand at a discount.	None	None
2007/May.	10	2,000,000	20,000,000	1,056,016	10,560,158	Issuance of the common stock by the private placement for capital increase totaled NT$1,800,000 thousand at a discount.	None	None
2008/Jun.	10	2,000,000	20,000,000	606,016	6,060,158	Capital reduction NT$4,500,000 thousand for makingupthe	None	None

Year/month	Issuance price	Authorized capital	Authorized capital	Paid-in capital	Paid-in capital	Note
		Share (Thousand shares)	Amount (NTD thousand)	Share (Thousand shares)	Amount (NTD thousand)	Sources of capital	Subscription of capital stock with assets other than cash	Others
						losses
2011/Sep.	10	2,000,000	20,000,000	806,016	8,060,158	Issuance of the common stock for capital increase totaled NT$2,000,000 thousand at a discount.	None	None
2018/Sep.	10	2,000,000	20,000,000	552,329	5,523,285	Capital reduction NT$2,536,872 thousand for making up the losses	None	None
2019/Sept.	10	2,000,000	20,000,000	557,329	5,573,285	NT$50,000 thousand of new restricted employee shares	None	None

Apr. 20, 2020 Unit: shares

Stock Class	Authorized capital (including the convertible shares of the convertible bonds)	Authorized capital (including the convertible shares of the convertible bonds)	Authorized capital (including the convertible shares of the convertible bonds)	Authorized capital (including the convertible shares of the convertible bonds)	Authorized capital (including the convertible shares of the convertible bonds)	Note
	Outstanding shares			Unissued shares	Total
	Listed	Unlisted	Total
Common stock	486,543,618	70,784,915	557,328,533	1,442,671,467	2,000,000,000	None
Total	486,543,618	70,784,915	557,328,533	1,442,671,467	2,000,000,000	None

Relevant information of shelf registration: None.

(II)Structure of shareholders

April 20, 2020

Structure of shareholders Quantity	Government agencies	Financial institutions	Other juristic-person investors	Individuals	Foreign institutions and individuals	Treasury stock	Total
Number of Persons	0	6	174	66,142	97	1	66,420
Shareholding	0	4,905,732	59,276,623	318,511,642	174,520,536	114,000	557,328,533
Proportion of shareholdings	0.00%	0.88%	10.64%	57.15%	31.31%	0.02%	100.00%

(III) Diversity of Ownership:

)Diversityof Ownership:			April 20,2020
Ranking of shareholding	Number of shareholders	Shareholding	Proportion of shareholdings%
1-999	41,230	10,698,756	1.92%
1,000-5,000	17,021	38,934,889	6.99%
5,001-10,000	3,808	29,572,283	5.31%
10,001-15,000	1,235	15,601,909	2.80%
15,001-20,000	798	14,813,518	2.66%
20,001-30,000	739	18,623,362	3.34%
30,001-40,000	361	12,943,257	2.32%
40,001-50,000	270	12,596,703	2.26%
50,001-100,000	506	36,090,603	6.48%
100,001-200,000	234	32,664,912	5.86%
200,001-400,000	105	28,937,893	5.19%
400,001-600,000	42	20,281,398	3.64%
600,001-800,000	15	10,433,364	1.87%
800,001-1,000,000	7	6,006,745	1.08%
1,000,001 shares and more	49	269,128,941	48.28%
Total	66,420	557,328,533	100.00%

The diversification of shareholdings of the preferred stock: None

(IV) List of major shareholders

V)List of major shareholders		April 20,2020 Proportion of shareholdings 6.81% 4.95% 4.95% 2.47% 2.15% 1.92% 1.66% 1.49% 1.41% 1.32%
Shares Name of major shareholders	Shareholding	Proportion of shareholdings
CTBC Bank in custody for investment account of Kingston TechnologyCompany,Inc.	37,960,831	6.81%
CTBC Bank in custody for investment account of KTC-TU CORPORATION	27,604,459	4.95%
Mega Bank in custody for investment account of KTC-SUN CORPORATION	27,579,321	4.95%
Chun-Yuan Tu	13,750,000	2.47%
ChangChun Investment Co. Ltd.	11,956,597	2.15%
CTBC Bank in custody for investment account of Hok-NgangChui	10,711,948	1.92%
JPMorgan Chase Bank in custody for investment account of NOREGS BANK	9,277,931	1.66%
JPMorgan Chase Bank in custody for Vanguard Total International Stock Index Fund	8,321,208	1.49%
DS Fund LLC	7,864,990	1.41%
Standard Chartered is entrusted with the custody of Vanguard Global Market Stock Index Fund	7,336,369	1.32%

(V) The market price, net value, earning, dividends and relevant information in the two most recent years

recent years
Year	Item		2018	2019	Jan. to Mar., 2020
Market price per share	Highest		12.90	19.45	13.60
	Lowest		6.68	11.65	8.01
	Average		9.53	15.34	10.63
Net value per share	Before distribution		9.96	10.88	Not applicable
	After distribution (note 1)		It has been resolved that there is no distribution	(Note 2)
EPS	Weighted average of shares		552,328,533	552,328,533
	EPS		(0.20)	1.06
Dividends per share	Cash dividends		0	0.15
	Stock grant	From retained earnings	0	0
		From capital reserve	0	0
	Accumulated unpaid dividends for the preferred stock		0	0
Analysis on ROI	Price to earnings ratio		(47.65)	14.47
	Price to dividends ratio		0	102.27
	Cash dividends yield		0	0.98%

Note 1: Fill in according to the distribution status in the Shareholders’ Meeting of the next year; there is no earnings distribution 2018.

Note 2: Earnings distribution of 2019 will be resolved upon 2020 general meeting of shareholders.

Note 3: Calculation formula

(1) Price to earnings ratio ＝ Average share price／EPS

＝ (2) Price to dividend ratio Average share price／Cash dividend per share

＝ (3) Cash dividends yield Cash dividends per share／Average share price

*If there is a surplus or additional paid-in capital to increase the capital allotment, the market price and cash dividend information adjusted retrospectively based on the number of shares to be issued shall be disclosed.

(VI) Dividends policy and implementation status

1. Dividends policy

After the Company deducts the remuneration of the employees, the Director and the Supervisors from its income before tax, and also offsets the accumulated deficits , it should set aside the employees bonus at 8% - 12% and the Directors and Supervisors bonus not more than 3% from the remaining income before tax.

The proportion of the remuneration distribution for the employees, the Director and the Supervisors or the bonus distribution by cash or stock should both be decided in the Board Meeting where at least two-thirds or more of all the members of the Board of Directors should attend and 1/2 of the attending members should approve the motion and the resolution should be reported in the Shareholders’ Meeting as well.

The employees of parent or subsidiaries who receive the remuneration in the form of cash or stock should meet certain requirements.

If there are any retained earnings upon the general final accounts at the end of the year, they will be used for the payment of all payable taxes and offsetting the accumulated deficits in the previous years and 10% of the remainder will be contributed as a legal reserve and a special reserve should be provided or reversed according to the laws or as requested by the competent authority, the balance and the undistributed accumulated earnings for the previous years, which are identified as allocatable earnings, and the motion for the distribution should be proposed by the Board of Director and submitted to the Shareholders’ Meeting for the resolution.

As the Company operates in a volatile business environment, the enterprise life cycle is in the growth stage, and to take into consideration the Company’s capital demand in the future, long-term financial plan and to satisfy the shareholders’ cash flow. The distribution of the earnings in the year shall not be less than 10% of the accumulated distributable earnings; however, when the accumulated distributable earnings is less than 1% of paid-in capital, it may not be distributed; in which the cash dividends shall not be less than 10% of the total dividends.

The dividend distribution proposed on the general meeting of shareholders: cash dividends of NT$82,849,280 (NT$0.15 per share).
Any expected material changes in the dividends policy: None
(VII) Impacts of the stock grants proposed by the current Shareholders Meeting on the company’s operations and EPS: Not applicable.
(VIII) Remuneration for employees, Directors and Supervisors:
The percentage or range of remuneration for employees, Directors and Supervisors in the articles of incorporation:

Please refer to the dividends policy in the page No. 93.

Bases for estimating the remuneration for the employees, Directors and Supervisors of the period, bases for calculating the compensation in stock for the employees, and accounting solution for variation between actually distributed amount and estimated amount: 2019 remuneration for employees and directors recognized according to measures stipulated in the Charter were NT$60,921,000 and NT$11,423,000, respectively. The base for disclosed previously is the 2019 current income before tax deducting profit for employee and director remuneration which was reserved for accumulated loss. If there is a difference between estimated and actual payment amount, the amount will be reflected in the Company’s next year’s expense base on accounting estimation treatment.
Information on the adoption of the remuneration distribution by the Board of Directors:
- (1) The amount of the remuneration distributed in cash or stock for the employees, Directors and Supervisors. Any discrepancy between the annual recognized distributed amount and figure, the difference, reason and response should be disclosed: On March 27, 2020, the Board of Directors approved to distribute NT$60,921,000 for employees’ remuneration and NT$11,423,000 for directors’ remuneration in cash.
- (2) The proportion of the amount of the remuneration distributed in stock for the employees in the net income after tax in the individual financial statement of the period and the total amount of the remuneration for the employees: Not applicable.
If there is variation in the actual status of remuneration (including number of shares, amount, and stock price) distributed to the employees, Directors, and Supervisors in the previous year, state the variation amount, causes, and settlement of variation. (1) Remuneration for the employees: No difference.
- (2) Remuneration for the Directors and Supervisors: No difference.
(IX) Status of shares buyback: None.
II. Status of corporate bonds: None.
III. Status of preferred stock: None.
IV. Status of global depositary receipts: None
V. Status of employee stock option: None.

VI. The process of new restricted employee shares:

(I) The process of new restricted employee shares

April 20, 2020

Types of new restricted employee shares	First new restricted employee shares
FilingEffective Date	June 10,2019
GivingDate	November 25,2019
Date of Issuance	December 30,2019
New restricted employee shares issued	5,000,000 shares
Issuance price	NT$10 per share (bonus shares)
New restricted employee shares issued to the total number of shares issued at the time of issuance	0.91%
Vesting conditions for new restricted employee shares	1. The Company will use the standalone financial statements of the most recent year when the vesting term expires as the Company’s performance conditions: (1). First year: EPS reaching NT$0.3 (inclusive) or more (2). Second year: EPS reaching NT$0.8 (inclusive) or more (3). Third year: EPS reaching NT$1 (inclusive) or more (4). If the performance conditions mentioned above are not reached, it is deemed that the vested conditions have not been met 2. After the personal performance and the Company’s performance have been reached at the same time, employees’ share proportion for vesting conditions according to their service terms for the year is as follows: (1). After distribution and the term of service has reached one year, 30% of shares (2). After distribution and the term of service has reached two years, 30% of shares (3). After distribution and the term of service has reached threeyears,40% of shares
Restricted rights for new restricted employee shares	(I) The new restricted employee shares issued by the Company shall be safeguarded by an entrusted trust institution assigned by the Company after employees receive the distribution. Employees may not ask the trustee to return new restricted employee shares for anyreason or method.

Types of new restricted employee shares	First new restricted employee shares
	(II) Before reaching vested conditions, employees may not sell, pledge, transfer, gift to others, set or other method to dispose of their shares. (III) Before reaching vested conditions, the attending, proposals, speeches, voting rights, voting rights, and other matters in connection with shareholders’ rights and interests of the shareholders’ meeting are executed in accordance with custody contract made with the entrusted institution. (IV) Restrictions on shareholder’s rights to (subscribe) shares and dividends: Before reaching the vested conditions prescribed by the measures for new restricted employee shares, employees have no right to participate in the original shareholder’s rights to (subscribe) shares and dividends. (V) Employees reaching vested conditions during the book closure date for issuance of bonus shares, book closure date for cash dividends, the subscription of new shares resulting from a cash capital increase, matters of closure date for shareholders meeting specified in Article 165, paragraph 3 of the Company Act, or other book closure period of the record date for distribution of entitlements, their lifted restricted shares may not enjoy the rights of subscriptions for the shares and dividends.
The custody of new restricted employee shares:	When entrusting a trust for custody, the exercise of shareholders’ rights during the trust period shall be enforced accordingto the custodycontract.
Method for handling with employees who have not reached the vested conditions after being allocated or subscribed for new shares	If the vested conditions for performance before the end of the period are not met, new restricted employee shares received according to the issuance measures will be returned to the Companyand cancelled.
New restricted employee shares returned or bought back	114,000 shares
Number of new restricted employee shares lifted	0
Number of new restricted employee shares cancelled due to participating in the Company’s reduction of capital	0

Types of new restricted employee shares	First new restricted employee shares
Number of new restricted employee shares not lifted	5,000,000 shares
Number of new restricted employee shares not lifted to the total number of shares issued(%)	100%
Impact to the shareholders’ equity	The dilution of earnings per share of the company during the vesting period is still limited and should pose no significant impact on shareholders’ equity.

VII. Status of new share issuance relating to the merger, acquisition, and transfer of shares: none
VIII. Implementation of fund utilization plan: Until the deadline of providing hardcopy of annual report, no unissued shares or private placement of securities have not yet been complete, nor has existing plans within the last three years generated significant changes. It is therefore not applicable.

Five. Operation Overview

I. Business content

(I) Business scope
Business scope of the company includes:
- (1) Integrated circuit and semiconductor parts
- (2) Electronic, computer, communication circuit boards
- (3) Hardware, software, system, and peripheral equipment of computer and communication products.
- (4) R&D, design, manufacturing, assembly, processing, testing and after-sale services for all the aforementioned products.
- (5) Import and export business (except special approval business)
Proportion of operations

operations
Product item	proportion of operations (%)
	2019
Plastic integrated circuit	60.11
EMS	39.89
Total	100.00

The current products(services) of the Company and the new products(services) we plan to develop:
(1) IC packaging and testing services

The items of services include: Packaging and testing services for IC and semiconductor parts.

(2) Electronics manufacturing services (EMS/CEM)

The items of services include: PCB assembly, box build and system integration, and we also provide the customers with the services of prototype and Pilot run to make their products introduced in the market earlier.

(II) Current status of the industry
Current status and development of the industry

Semiconductor Group

(1) For NAND Flash:

First half of 2019, NAND Flash continued to decline by 32% from the decline of 2018. In the second half of 2019, although Samsung reduced capital expenditure and some manufactures increased their price, due to factors including seasonal preparation of materials in the third season and many companies also prepared

materials in advance influenced by the impact of the trade war between China, the US, Japan and Korea, the business growth in second half did not decline due to price increase.

Market of Consumer NAND Flash price trend

Chinese flash memory market www.chinaflashmarket.com as of January 23, 2020

Figure 1(Flash price index trend)

(Source of the data: http://www.chinaflashmarket.com/)

Although NAND Flash prices continued to increase in the second half of 2019, in terms of demands, data center and enterprise-level markets continued remain strong for SSDs. As well as ensuring the demand of the mobile phone and PC markets, the original manufacturer supply strategy focuses on the high-margin market, resulting in tight supply in the consumer market. Also, with the impact of some companies protecting their goods, the market remained promising and would persist till January of 2020. Before the lunar new year, all companies were optimistic for 2020.

However, with the coronavirus outbreak emerging during the lunar new year, resulting in the lockdown in the second biggest economic body in the world. Each country was cautious for the pandemic. As companies and factories returned to work after the lunar new year, the resuming of work, transportation and logistics have all met with problems, posing some uncertain factors for the market.

According to the analysis of the Chinese flash memory market,the impact of the pandemic would only the in the first quarter. With the slowdown of the outbreak and increase of workers returned to work, online services, big data and gaming machines have increased due to 5G and the pandemic; therefore the demand for DRAMs and SSDs will continue to increase. Overall, we are still positive about the overall 2020.

There is a golden cross between the price of NANA Flash and traditional hard drive. Besides, NAND Flash enjoys the advantages of small volume, light weight and low power consumption, which causes some products such as notebooks to adopt SSD as the storage device. With the new increase in demand in the 2019 data, according to IEK statistics (as shown in Figure 2), SSD accounts for 43.9% of the overall ratio, up 3.2% from 2018. In 2020, driven by the demand for AI systems and big data management, the demand for Flash BGA will persist its growth.

Mobile memory (eMMC / eMCP / eUFS) will bring benefits from the effects of the launch of 5G mobile phones. We can clearly see that from the IEK statistics, the entire mobile phone memory for the proportion of NAND Flash applications accounted for 36.9% in 2019, compared to 34.9% in 2018. With the main mobile supplier continuing to launch 5G mobiles, aside from the demand increase of eMMC and eMCP, we can also look forward to the demand for eUFS in 2020.

In terms of memory cards, although the supply for flash die was sufficient in 2019, the price of NAND Flash continued to decline with the market price; therefore, the supply of the high-profit SSD was the main focus in the second half, making the entire memory card account for the proportion of NAND Flash applications decrease from 7.0% in 2018 to 4.5% in 2019.

Self-driving is the key point for the automobile development. The sensor, radar, AI, navigation, traffic performance analysis, multimedia entertainment and computing platform have transformed the automobile into a mobile data center. The NAND Flash enjoys the advantages of high efficiency, reliability, stability, and durability, it will become the best choice for the storage in the automobile industry. Affected by the US China trade war in 2019, car sales were not as expected, resulting in a slight decline in automotive memory to only 0.9%. We anticipate that it will become the top 3 applications among the NAND Flash applications in the coming 10 years.

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==> picture [419 x 260] intentionally omitted <==

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

USB Flash Drives,
3.5% Solid-State Drives,
Flash Cards, 4.5%
43.9%
Electronic Data
Processing, 5.4%
Industrial
Electronics, 0.6%
Automotive
Electronics, 0.9%
Military/Civil
Aerospace
Electronics, 0.2%
ADAS, 0.1%
Consumer
Electronics, 4.2%
Communicarion
Electronics, 36.9%
----- End of picture text -----

Figure 2 (proportion of Flash applications )

(2) For other IC:

According to TRI’s analysis, with factors of being effected by the conflict between China and the US in 2019, the demand for mobile phone terminals declined. With the decline in the price of memory, the packaging and testing industry has encountered a decreased revenue. But in the beginning of the 3rd quarter of 2019, benefiting from the increase in memory prices and the growth momentum of mobile phone sales due to the 5G mobile phone market, the overall packaging and testing market gradually rebounded. The overall package production value in 2019 totaled NT$51.76 billion. In 2020, packaging demands such as chips in 5G mobiles, establishment of masts and NB IoT are going to be the driving force for growth in 2020. According to TRI’s analysis, the production value of packaging in 2020 will grow by approximately 2%, reaching USD52.8 billion. The Company will not only focus on IoT-related, memory products, and provide the resources and manpower to develop them, but also will devote itself to the development and evaluation of the newly established Flip chip technology to boost AI and 5G-related products this year.

Electronics manufacturing services (EMS) Group

(1) For SSD cards:

As order demand from our customers increased, the shipment of SSDs in 2019 increased by 88%; it is expected that the demand will increase in 2020 than in 2019. (2) For petroleum exploration:

With oil prices continuing to decline, negotiation between Saudi Arabia and Russia on production cuts have failed, affecting the oil and natural gas market.

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Moreover, the coronavirus pandemic still tops the chart for being the most impactful. Due to the disease, the energy demand has declined by a wide margin and it is expected that in 2020, the overall energy demand will continue to fall. The business performance on that part will be estimated with reservation.

(3) For servers:

The digitalization is one of the indispensable components for the enterprise to enhance its competitiveness, AIoT and 5G contribute to expanding the demand for processing the data, which results in the growing demand for computing servers year by year, the order demand by customers is also growing constantly.

Relationship of upstream, midstream, and downstream in the Industry

The key parts of flash memory cards include flash memory and memory controller. The Company can support all the products produced by the top 5 global flash memory suppliers currently, we also have built the direct communication channels with some flash memory suppliers, we can understand the current situation of the flash memory in the market and its technology development in the future by communicating with them directly.

In 2019, the Company has successfully mass produced the chips of Yangtze Memory Technology Corp. through working with its major customers. In terms of the memory controller, the Company have cooperated closely with the domestic/foreign memory controller companies with cost advantage and strong functionalities, so we enjoy certain advantages in the quality, cost and customer support.

Trends and competition situation of products

We will continue to focus on adjusting its marketing position and restructuring internal organizations, creating the Company’s core value. We have also started to focus on the niche market of flash memory packaging which requires more management and production resources. By far, the shipment volume has been more than 50-60 million pieces each month. For future prospect, the Company will continue utilizing the following competitive advantages to satisfy the quality, capacity, and cost necessary for the packaging market of flash memory.

(1) Technique integration and quality yield rate:
It is necessary not only to apply FEOL of packaging to memory cards, but also to apply SMT manufacturing process to them. The Company has the technique and production capacity of the packaging for semiconductor and the assembly for the electronics, we can finish manufacturing the products rapidly. Furthermore, our company adopts one-stop production, so we enjoy advantage on controlling of the quality yield rate relatively.

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(2) Complete supply chain lowers the material cost constantly:
- We continue looking for the cost-effective materials and manufacturing process via bilateral cooperation by working together with suppliers of related materials to form a comprehensive supply chain.
(3)Complete flash memory supply chain:
- In terms of flash memory cards, the key parts of flash memory cards include flash memory and memory controller. The Company irregularly discusses with the top 5 global flash memory suppliers and memory controller suppliers about the future trends of the products, and we also regularly discuss with the related memory controller suppliers about the relevant techniques.
(4)Complete products development team:
- We will continue to investment on software and hardware of product development, while at the same time assisting in flash memory-related customers to conduct the electrical and thermal analysis and help them develop the relevant customized products.
(III) Current status of technology and R&D
R&D expenses invested

			Unit: NTD thousand The 1st quarter of 2020 69,056 3,642,533 1.89%
Year Item	2018	2019	The 1st quarter of 2020
R&D expenses	270,528	278,307	69,056
Operatingrevenue	15,188,192	17,515,145	3,642,533
R&D expenses as a percentage of revenue	1.78%	1.59%	1.89%

Technologies or products developed successfully
Semiconductor Group
- (1) Successfully mass produced NAND Flash for Yangtze Memory Technology Corp.
- (2) Completed the Flip chip production line.
◆Electronics manufacturing services (EMS) Group
- (1) Introduction of the high-end Netcom, the yield rate of BGA (> 5000 pins) can fulfill the demand successfully.
- (2) The technique of manufacturing process over IPC class 3 for manufacturing standard regulation enters the mass production stage, and is applied to the petroleum exploration, aerospace and military defense and so on.

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  - (3) Automation for SSD production line, the development of the robot technology and its application.

(IV) Long-term and short-term business plans
Short-term business plan:

Semiconductor Group: The short-term business plan will mainly focus on constant further development for the customer relationship, creating strategic partners, utilizing the current resources completely, strengthening the reduction of cost and select the niche market with caution. Our main competitive products are lead frame products (QFN), CSP products, Flash, and LPDDR-related products. EMS Group: 3 areas of focus. SSD cards, special electronic products whose manufacturing standard regulation is over IPC-610 Class 3, which is applied to the medical, aerospace and other special fields, servers and instruments and other niche-oriented products or future star products like Netcom, AIoT and e-sports.

Long-term business plan:

Our long-term business plan will focus on continuing developing the niche-oriented products (like photoelectric and wireless communication products) in combination with the technique of the semiconductor packaging, testing and electronic assembly, and strengthening the relationship with the customers to bring more profits.

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II. Market, production, and sales overview

(I) Market analysis

Sales regions of major products (services)

Unit: NTD thousand

				Unit: NTD thousand	Unit: NTD thousand
Year Area		2018		2019
		Sales amount	%	Sales amount	%
Foreign sales	America	4,186,016	27.56	3,766,910	21.51
	China	1,676,305	11.04	2,254,742	12.87
	Others	4,258,396	28.04	5,493,230	31.36
Sub-total		10,120,717	66.64	11,514,882	65.74
Domestic sales		5,067,475	33.36	6,000,263	34.26
Total		15,188,192	100.00	17,515,145	100.00

2. Market share

Unit: NTD 100 million

Industry category	Year	OSE packaging revenue	Output value of packaging industry in Taiwan	Market share
IC packaging	2017	73.18	3,330	2.20%
	2018	77.48	3,445	2.25%
	2019	98.00	3,463	2.83%

Source: TSIA; Institute of Industrial Technology Research Institute IEK (2020/02).

Demand, supply, and growth status in the future
Semiconductor Group

The future growth of the semiconductor will still be driven by the mobile communication. In addition, the automotive electronics, 5G and AI will also blow up continually. OSE began to adjust its market and products a few years ago in addition to the active development for IoT-related products and markets in 2016, which resulted in the successful transformation and constant growth for OSE. We also introduced LPDDR-related products in 2018 successfully, and we will continue the further development in IoT and LPDDR-related products and markets. Aside from the constant development in China and ASEAN emerging countries, we will expand our business scope to the photoelectric, AI, wireless communication industries via OSE’s ability of rapid integration and R&D.

◆ Electronics manufacturing services (EMS) Group

The major growth in the future for the Company’s Electronics Manufacturing Services Group mainly comes from 3 major product lines:

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  - (1) Continuous demand of SSD cards.

  - (2) Increase of the high-end class 3 technology, allowing extensive production application range.

  - (3) The enterprise digitalization causes the increase of data or materials. In addition, the increase of data is also driven by IoT, 5G mobile broadband services, improvement of AI technique and application, the accumulated data will become bigger and bigger, which results in the growing demand for computing  servers year by year.

Niche for competition:
(1) Rapid integration and complete R&D team.
(2) Combine with packaging, testing and SMT technology to create the synergy.
(3) Construct the highly integrated MIS to become the customer’s “virtual factory.”
(4) The excellent NPI services optimize the design complying with the production to lower the cost for the customers in the early stage of the product development.
(5) The strict and careful management for the materials and work-in-process inventory lowers the inventory risk for the customers.
Advantages, disadvantages, and responsive strategy in the long-term development
Advantages
- (1) The big companies of device integration will increase the proportion of outsourcing constantly to drive the demand for the packaging and testing.
- (2) The international packaging companies conduct the merger continually, so the customers look for other packaging companies for the cooperation.
- (3) The global original equipment manufacturers focus on the core abilities like the brand and R&D, and outsource the manufacturing for the products.
- (4) The demand for mobile communication products continue increasing, which cause the demand for the related key parts to also grow.
- (5) The strong demand for the server motherboard, SIP module, PDA, smartphone assembly board and the products for the leading companies in the niche market will drive the demand for packaging, testing and EMS in the market.
- (6) The introduction of OLPC will drive the demand for flash memory.
- (7) The development of IoT and smart home causes the related products to become the mainstream in the coming 5 years, driving the growth of the entire semiconductor industry.
- (8) The construction of 5G communication is about to be finished, so there will be a machine-replacing current and the demand for semiconductor will

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increase day by day.

  - Disadvantages

     - (1) The products life cycle becomes shorter and the functions get more complicated day by day, it is not easy to get back the return on investment on the machines and equipment.

     - (2) The competition of the price and the increase of the materials cost cause the margin pressure.

     - (3) In response to the rapid drop for the price of the electronic products, many customers find the low manufacturing cost solutions in China, so many Taiwanese products in the mid and low price range are no longer competitive because of the manufacturing cost

  - Responsive strategy

     - (1) Controlling the cost strictly and decreasing the expenditures.

     - (2) Taking advantage of R&D ability to enter the niche market and build the threshold for new technologies.

     - (3) Making good use of the decision-making for the investments in manufacturing equipment and fixed assets to maximize the marginal effect.

     - (4) Utilizing the effect of flextime to provide the accurate real-time production information, services for products technologies and knowledge.

     - (5) Using the technology for multiple layer stacking, so the customers can acquire the memory cards with low cost and high price.

     - (6) Bringing out the functionality and the flexibility of the logistics management for the supply chain and strengthen the partnership with the suppliers.

     - (7) The strict and careful management for the material inventory to lower the materials inventory risk.

     - (8) Using the local materials in Taiwan or look for the alternative materials for spreading the risks.

     - (9) For the parts in short supply in the market, forecasting the production quantity in advance, and we are devoted to maintaining our relationship with the suppliers as well.

(II) Important uses and production process of major products
Important uses of major products
- Semiconductor Group

The major product is IC device packaging which is applied to the computer, communication, network, consumer electronics, telecommunication internet, industrial controller, digital camera, and so on.

Electronics manufacturing services (EMS) Group

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It provides the professional electronics manufacturing services (EMS), the OEM products is mainly applied to the servers, SIP modules, instruments and large industrial equipment, storage systems, petroleum exploration, and satellite-related uses.

2. Production process of major products

(1) Production process of packaging products

Die sawing→ Die bonding→ Wire bonding→ Molding→ Marking→ Trimming→ Testing→ Packaging

(2) Production process of electronic products

Parts processing→ SMT assembly → Parts insertion → Auto-soldering→ Auto-cleaning and drying→ Testing→ Case assembly→ Testing→ Packaging→ Shipping

(III) Supply status of major materials

tus of major materials
Major material’s details	Supplysource
PCB	Taiwan
Connector	China
AU wire	Korea
Compound	China,Japan,Taiwan
Lead frame	Taiwan
Substrate	China,Taiwan

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(IV) Major purchases and sales customer lists in the last two years
The supplier code, sales amount, and proportion of sales which accounted for at least 10% of the total sales amount in any of the past two years and the reasons for the increase or decrease:

				Unit: NTD thousand	Unit: NTD thousand	Unit: NTD thousand	Unit: NTD thousand	Unit: NTD thousand	Unit: NTD thousand	Unit: NTD thousand	Unit: NTD thousand
2018				2019				The 1stquarter of 2020
Name	Amount	Proportio n in annual net sales 〔%〕	Relationship with the issuer	Name	Amount	Proportion in annual net sales 〔%〕	Relationship with the issuer	Name	Amount	Proportion in current year’s net sales up to the last quarter〔%〕	Relationship with the issuer
Company A	4,469,670	29.43	None	Company A	4,535,396	25.89	None	Company A	1,027,375	28.20	None
Company B	3,242,267	21.35	None	Company B	4,288,955	24.49	None	Company B	817,726	22.45	None
Company C	1,521,905	10.02	Juristic-pers on director of the issuer	Company C	2,332,055	13.32	Juristic-pers on director of the issuer	Company C	495,670	13.61	Juristic-pers on director of the issuer
Others	5,954,350	50.09		Others	6,358,739	36.30		Others	1,301,762	35.74
Net sales	15,188,19 2	100.00		Net sales	17,515,145	100.00		Net sales	3,642,533	100.00

According to the analysis of the sales materials for the major customer in the past 2 years, there is no significant change in the proportion of sales, which indicates that the relationship between the Company and the customers is very stable. Overall, the sales customers of the Company are scattered, so there is no risk for the sales concentration and other abnormal situations.

The vendor code, purchase amount, and proportion of purchase which accounted for at least 10% of the total net purchase amount in any of the past two years and the reasons for the increase or decrease:

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Unit: NTD thousand

								Unit: NTD thousand	Unit: NTD thousand	Unit: NTD thousand	Unit: NTD thousand
2018				2019				The 1stquarter of 2020
Name	Amount	Proportion in annual net purchase 〔%〕	Relationship with the issuer	Name	Amount	Proportion in annual net purchase 〔%〕	Relationship with the issuer	Name	Amount	Proportion in current year’s net purchase up to the last quarter〔%〕	Relations hip with the issuer
Company A	2,852,597	32.22	None	Company A	2,834,420	31.26	None	Company A	709,142	33.28	None
Others	6,001,317	67.78	None	Others	6,233,498	68.74	None	Others	1,421,915	66.72	None
Net purchase	8,853,914	100.00		Net purchase	9,067,918	100.00		Net purchase	2,131,057	100.00

Both of the Company’s Semiconductor Group and EMS Group belong to the foundry without the own brands, the raw materials are mostly standardized products and we have many suppliers for the raw materials so we don’t need to concern about the shortage. We will consider the quality and the price first when purchasing unless the customers designate the suppliers. According to the overall purchase proportion, there is no risk for the excessive concentration. Besides, we keep close relationship for the strategic cooperation with the major suppliers and the source of supply is more than 2 companies at any time. In general, the supply status is stable and there is no abnormal situation.

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(V) Production volume and value in the past 2 years

Unit: thousand pieces / NTD thousand

Year	2018	2018			2019	2019
Production volume and value Majorproduct	Capacity	Volume	Value	Capacity	Volume	Value
Plastic integrated circuit	1,557,594	1,145,665	7,609,945	1,581,322	1,081,855	8,314,763
EMS	109,725	79,908	6,150,492	130,372	101,590	6,633,780
Others	794,392	501,984	582,648	794,392	439,057	563,998
Total	2,440,563	1,727,557	14,343,085	2,493,128	1,622,502	15,512,541

(VI) Sales volume and value in the past 2 years

Unit: thousand pieces / NTD thousand

					Unit: thousandpieces / NTD thousand	Unit: thousandpieces / NTD thousand	Unit: thousandpieces / NTD thousand	Unit: thousandpieces / NTD thousand
Year	2018				2019
Sales volume and value Major product	Domestic sales		Foreign sales		Domestic sales		Foreign sales
	Volume	Value	Volume	Value	Volume	Value	Volume	Value
Plastic integrated circuit	728,984	4,382,956	413,624	3,364,890	4,382,956	5,067,398	3,364,890	4,732,251
EMS	582	65,987	63,894	4,461,527	65,987	376,949	56,655	4,719,497
Others	319,149	678,673	181,084	2,234,159	678,673	636,939	152,142	1,982,111
Total	1,048,715	5,127,616	658,602	10,060,576	5,127,616	6,081,286	3,573,687	11,433,859

III. Profile of employees

Employee	Year	2018	2019	Up to March 31 of the currentyear
Number of employees	Direct	4,214	4,420	4,240
	Indirect	2,315	2,337	2,281
	Total	6,529	6,757	6,521
Average age		34.37	34.58	35.66
Average	seniority	6.53	6.80	7.87
Education distribution %	Doctor	0.00	0.00	0.00
	Master	3.54	3.58	3.64
	University/ College	60.23	59.88	59.87
	Senior high school	28.49	29.16	29.22
	Less than Senior high school	7.74	7.38	7.31

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IV. Environmental protection expenditure

(I) The losses (including compensation) and penalty due to the environment pollution in the most recent 2 years and by the date of the annual report publication: none, the Company didn’t encounter any losses or penalties in these 2 years due to the environmental pollution.
(II) Future countermeasures (including improvement actions) and possible expenditure: The investment on the maintenance and renewal for the pollution treatment equipment in each factory is about NT$4.5 million.
(III) Countermeasures for RoHS 2.0 of EU:
In response to the implementation for RoHS 2.0 of EU, the Company have actively conducted all the transformation works since several years. We currently have finished constructing the management system for RoHS 2.0 and gained the certification from the international famous enterprises, so we can fully provide the customers with the products complying with RoHS 2.0.

V. Labor relations

(I) The measures of employee welfare, retirement system and its implementation status, and labor-management agreements:
The measures of employee welfare:
- OSE considers the talents to be the most valuable assets for the enterprises, we will review the supply/demand status for the talents market and remuneration to provide the remuneration appropriate to the value of the talents, and we will also distribute the incentive bonus and performance bonus based on company’s operating performance to achieve the purpose of encouragement and talents retention.
- (1) Establish the Employee Welfare Committee to implement all the welfare measures for the employees.
- (2) If the employee is dead, disabled, injured or sick due to the occupational accidents, he will be compensated according to the regulation regarding the compensation for accidents in the Labor Standards Act.
- (3) Establish the Occupational Safety and Health Committee and management unit to be in charge of the matters of the occupational safety, health and the employee medical checkup.
- (4) Implement the employee education training to increase the professional knowledge for the employees so they can be devoted to their works.
- (5) Provide all kinds of subsidies for the marriage, death, hospitalization, child birth.
- (6) Employee restaurant provides the meals with convenience, health, nutrition and

112

low price.

(7) Provide the work environment with safety, comfort and clean.
(8) The employees can apply for an unpaid military leave or an unpaid parental leave.
(9) The Company implements the group medical insurance and accident insurance for the whole employees.
(10) Establish the nursery room in the Company to provide the postpartum employees with the excellent environment for nursing.
(11) Hold domestic and overseas travels, family days, speeches and year end banquets for the employees every year.
(12) Encourage and assist the employees to set up the clubs and hold relevant activities.
(13) Provide the vouchers for three important Chinese holidays, scholarships, and vouchers for employee birthdays.
(14) Provide the leaves that are better than the regulations of the Labor Standards Act such as leaves for helping deal with wedding affairs.
(15) Give gifts to the senior employees for their hard work.
(16) Hold labor-management meetings regularly to harmonize labor relations.
(17) Hold Coffee Sessions and other activities to help the newcomers to become more involved in the Company’s atmosphere faster.
Further study and educational training for employees:
(1) The Company plans the annual educational training program for the employees according to the organizational development and the annual strategic targets and selects the development focus of the year.
(2) Establish standardized newcomer guidance training and orientation training to help the newcomers involve in the team quickly.
(3) Provide the current employees with the application for the external training courses and expense subsidy.
(4) Establish the internal trainer system to cultivate the employees to serve as the internal trainers for the Company to pass down the professional knowledge and capability.
(5) Cooperate with the Trade Unions to irregularly implement the labor education training every year.
(6) Implement the dual-career project to provide technical training and multiple general education courses for the students who participate in Industry-Academe Collaboration Program.

113

		Total number
Course Category	Course		Total hours	Total expense
		ofpeople

Technology	53	887	300.5	1,535,347
Systems	4	45	55
Legal	6	223	44
Financial Accounting	7	65	90
Organization Management	9	96	117.5
Training of New Employees	13	415	102
Management	2	42	51
Language	21	639	693
Environmental Safety	46	2516	749
Total	161	4,928	2,202

3. Retirement system:

OSE has contributed monthly to the workers’ retirement reserve fund since Nov. 1986 according to the Labor Standards Act and deposited the fund in the Central Trust of China and established the supervisory committee of workers’ retirement reserve fund. In response to SFAS No.18 “Accounting for Pensions” which was implemented in 1995, the contribution proportion was increased to 4% after the submission to the competent authority for business objectives in July, 1993, and was adopted by the Export Processing Zone Administration of the Ministry of Economy on Aug. 9, 1993 and letter No. 006702 was issued. In July 2005, the Labor Pension Act was announced and implemented, we conducted the opinion investigation to know the willingness of the employees for choosing the old pension system or the new one according to the “Labor Pension Act” and reported the list of the employees who chose the new pension system, and we also contributed 6% of monthly salary to the employee’s personal account in the Bureau of Labor Insurance based on the regulation. In Aug. 2005, we submitted the proposal of decreasing the pension contribution proportion from 4% to 3% to the concerned authority, it was adopted on Aug. 26, 2005 and letter No. 09400072390 was issued. In Jan. 2016, we submitted the proposal to increase the pension contribution proportion from 3% to 6% to the concerned authority, it was adopted on Jan. 21, 2016 and letter No. 10500008670 was issued. In March 2017, we submitted the proposal of increasing the pension contribution proportion from 6% to 10% to the concerned authority, it was adopted on March 23, 2017 and letter No. 10600029540 was issued.

114

Other important agreements:
(1) Formulated the employee reporting system to provide the employees with the reporting channels.
(2) The Company can communicate with the cadres of the industrial labor union at any time and it has established the employee suggestion box, grievance hot line, grievance e-mail, so the employees can express their opinions completely.
(3) In order to encourage employees, we regularly organize events to select excellent employees and publicly praise them. By encouraging our employees who meet the core value of the Company, they will also further inspire other employees.
(3) We continue to promote the internal engineering improvement meetings as a means to encourage our employees to show their best. We also encourage them to continue to improve their performance and quality and pass down what they know onto other employee.
(5) Provide the newcomers and the model employees with the opportunities of communication and interaction with the middle and top management in the Coffee Sessions.
(II) The losses due to the labor disputes in the most recent year and by the date of the annual report publication: none
(III) The estimated amount at present and possibly occurring in the future and countermeasures:

It is estimated that no losses occurred due to the labor disputes under the

implementation of all the welfare measures by the Company in the future.

VI. Important contracts

Type of contract	Counterparty	Contract period	Major contents	Restriction
Distributor agreement	OSE INC.	October 29, 2009 - October 28, 2029	1. Contract period 2. The details for the responsible items of the agent
Land lease	Export Processing Zone Administration of the Ministry of Economy	March 1, 2010 - October 31, 2029	1. 10 land leases in Export Processing Zone(based on the lease), the actual lease area is 72,231m2 2. Rental andpayment
Long-term debtpayable	First Bank	July 28, 2016~July 28, 2021	Credit granting contract	Note 1

Note 1: We signed the long-term debt contract with First Bank totaling NT$1,000,000

thousand on July 28, 2016, starting from Feb. 28, 2018, we will pay for the debt in monthly installment, 42 months in total, NT$24,000 thousand per month, NT$16,000 thousand for the last month.

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Six. Financial Information

I. Condensed balance sheet and statement of comprehensive income in the past 5 years (I) Condensed balance sheet and statement of comprehensive income—consolidated financial statements 1. Condensed balance sheet—consolidated financial statements

Unit: NTD thousand

Year Item	Year Item		Financial information	Financial information	in thepast 5years(note 1)	in thepast 5years(note 1)
		2015	2016	2017	2018	2019	Financial information in the current year by Mar. 31, 2020
Current assets		6,384,662	5,819,947	6,027,501	6,276,273	6,258,470	5,656,662
Property, plant and equipment		8,092,570	9,174,961	7,646,666	7,063,908	6,264,246	6,097,685
Intangible assets		27,060	95,977	79,680	89,633	58,445	56,622
Other assets		3,204,256	2,981,745	2,957,461	3,316,629	3,337,589	3,368,062
Total assets		17,708,548	18,072,630	16,711,308	16,746,443	15,918,750	15,179,031
Current liabilities	Before distribution	9,913,263	8,115,378	8,339,294	9,031,180	8,263,388	7,515,963
	After distribution	9,913,263	8,115,378	8,339,294	9,031,180	8,263,388	7,515,963
Non-current liabilities		1,631,248	3,280,752	2,712,168	2,212,663	1,589,207	1,575,791
Total liabilities	Before distribution	11,544,511	11,396,130	11,051,462	11,243,843	9,852,595	9,091,754
	After distribution	11,544,511	11,396,130	11,051,462	11,243,843	9,852,595	9,091,754
Equity attributed to owners of the parent company		6,019,826	6,484,292	5,659,846	5,502,600	6,066,155	6,087,277
Capital		8,060,158	8,060,158	8,060,158	5,523,285	5,573,285	5,573,285
Capital reserve		2,137	21,868	21,420	20,104	45,711	45,711
Retained earnings	Before distribution	(2,285,922)	(1,796,040)	(2,536,872)	(44,832)	537,191	545,608
	After distribution	(2,285,922)	(1,796,040)	(2,536,872)	(44,832)	537,191	545,608
Other equity		243,453	198,306	115,140	4,043	(90,032)	(77,327)
Treasurystock		-	-	-	-	-	-
Non-controllinginterest		144,211	192,208	-	-	-	-
Total equity	Before distribution	6,164,037	6,676,500	5,659,846	5,502,600	6,066,155	6,087,277
	After distribution	6,164,037	6,676,500	5,659,846	5,502,600	6,066,155	6,087,277

(Note1): The financial information in the aforementioned years (quarters) has been audited and certified by CPA.

116

Condensed statement of comprehensive income—consolidated financial statements

Unit: NTD thousand

Year Item		Financial information in	Financial information in	thepast 5years(Note 1)	thepast 5years(Note 1)
	2015	2016	2017	2018	2019	Financial information in the current year by Mar. 31, 2019
Operatingrevenue	16,100,450	15,786,333	13,886,312	15,188,192	17,515,145	3,642,533
Operatingmargin	2,467,879	1,796,924	181,636	532,137	1,772,942	222,190
Operating profit(loss)	1,370,008	683,612	(724,373)	(406,063)	776,472	(6,493)
Non-operating income and expenses	(45,247)	(46,959)	(27,152)	43,527	(39,879)	17,001
Net income (loss) before tax	1,324,761	636,653	(751,525)	(362,536)	736,593	10,508
Net income (loss) from continuingoperations	1,068,105	503,839	(714,804)	(111,548)	587,960	8,417
Loss of discontinued operations	-	-	-	-	-	-
Net income(loss)	1,068,105	503,839	(714,804)	(111,548)	587,960	8,417
Other comprehensive income/loss(net of tax)	(47,203)	(53,154)	(112,314)	(45,907)	(28,711)	1,929
Total comprehensive income(loss)	1,020,902	450,685	(827,118)	(157,455)	559,249	10,346
Net income attributed to the owner of parent company	1,051,499	504,371	(713,577)	(111,548)	587,960	8,417
Net income attributed to non-controlling interest	16,606	(532)	(1,227)	-	-	-
Total comprehensive income attributed to the owner of parent company	999,118	444,735	(823,998)	(157,455)	559,249	10,346
Total comprehensive income attributed to non-controllinginterest	21,784	5,950	(3,120)	-	-	-
EPS	1.30	0.63	(0.89)	(0.20)	1.06	0.02

(Note1): The financial information in the aforementioned years (quarters) has been audited and certified by CPA.

117

(II) Condensed balance sheet and statement of comprehensive income—individual financial statements
Condensed balance sheet—individual financial statements

Unit: NTD thousand

Year Item	Year Item		Financial information in thepast 5years(Note 1)	Financial information in thepast 5years(Note 1)	Financial information in thepast 5years(Note 1)	Financial information in thepast 5years(Note 1)
		2015	2016	2017	2018	2019	Financial information in the current year by Mar. 31, 2020
Current assets		5,812,882	4,965,509	5,423,002	5,676,071	5,755,448	(N/A)
Property, plant and equipment		7,847,154	8,939,936	7,600,104	7,012,652	6,220,127
Intangible assets		25,402	95,048	78,985	89,266	58,192
Other assets		3,689,014	3,428,286	3,431,835	3,843,431	3,838,398
Total assets		17,374,452	17,428,779	16,533,926	16,621,420	15,872,165
Current liabilities	Before distribution	9,740,317	7,774,492	8,162,012	8,906,255	8,273,415
	After distribution	9,740,317	7,774,492	8,162,012	8,906,255	8,273,415
Non-current liabilities		1,614,309	3,169,995	2,712,068	2,212,565	1,532,595
Total liabilities	Before distribution	11,354,626	10,944,487	10,874,080	11,118,820	9,806,010
	After distribution	11,354,626	10,944,487	10,874,080	11,118,820	9,806,010
Equity attributed to owners of the parent company		6,019,826	6,484,292	5,659,846	5,502,600	6,066,155
Capital		8,060,158	8,060,158	8,060,158	5,523,285	5,573,285
Capital reserve		2,137	21,868	21,420	20,104	45,711
Retained earnings	Before distribution	(2,285,922)	(1,796,040)	(2,536,872)	(44,832)	537,191
	After distribution	(2,285,922)	(1,796,040)	(2,536,872)	(44,832)	537,191
Other equity		243,453	198,306	115,140	4,043	(90,032)
Treasurystock		0	0	0	0	0
Non-controllinginterest		0	0	0	0	0
Total equity	Before distribution	6,019,826	6,484,292	5,659,846	5,502,600	6,066,155
	After distribution	6,019,826	6,484,292	5,659,846	5,502,600	6,066,155

(Note1): The financial information in the aforementioned years has been audited and certified by CPA.

118

Condensed statement of comprehensive income—individual financial statements

Unit: NTD thousand

Year Item		Financial information	Financial information	in thepast 5years(note 1)	in thepast 5years(note 1)
	2015	2016	2017	2018	2019	Financial information in the current year by Mar. 31, 2019
Operatingrevenue	15,171,746	15,130,357	13,468,695	14,924,371	17,235,914	(N/A)
Operatingmargin	2,153,458	1,511,833	5,811	443,813	1,697,504
Operating profit(loss)	1,318,853	645,638	(776,154)	(397,969)	763,309
Non-operating income and expenses	(20,168)	(14,463)	6,127	28,349	(29,308)
Net income before tax	1,298,685	631,175	(770,027)	(369,620)	734,001
Net income from continuingoperations	1,051,499	504,371	(713,577)	(111,548)	587,960
Loss of discontinued operations	0	0	0	0	0
Net income(loss)	1,051,499	504,371	(713,577)	(111,548)	587,960
Other comprehensive income /loss (net of tax)	(52,381)	(59,636)	(110,421)	(45,907)	(28,711)
Total comprehensive income(loss)	999,118	444,735	(823,998)	(157,455)	559,249
Net income attributed to the owner of parent company	1,051,499	504,371	(713,577)	(111,548)	587,960
Net income attributed to non-controlling interest		0	0	0	0
Total comprehensive income attributed to the owner of parent company	999,118	444,735	(823,998)	(157,455)	559,249
Total comprehensive income attributed to non-controllinginterest		0	0	0	0
EPS	1.30	0.63	(0.89)	(0.20)

(Note1): The financial information in the aforementioned years has been audited and certified by CPA.

(III) CPA’s audited opinion in the past 5 years

Year	Name of CPA	Name of CPA	audited opinion
2015	Fang Wen Lee	Shih Chieh Huang	Modified unqualified opinion
2016	FangWen Lee	Shih Chieh Huang	Unqualified opinion
2017	FangWen Lee	ChengChu Chen	Unqualified opinion
2018	FangWen Lee	ChengChu Chen	Unqualified opinion
2019	Chih ChungChen	ChengChu Chen	Unqualified opinion

119

II. Financial analysis in the past 5 years (I) Financial analysis in the past 5 years—consolidated financial statements:

Year (Note 1) Analysis item(Note 3)	Year (Note 1) Analysis item(Note 3)	Financial analysis inthepast 5years	Financial analysis inthepast 5years	Financial analysis inthepast 5years	Financial analysis inthepast 5years	Financial analysis inthepast 5years	In the current year by Mar. 31, 2020
		2015	2016	2017	2018	2019
Financial structure (%)	Liabilities to assets ratio	65.19	63.06	66.13	67.14	61.89	59.90
	Long-term capital to property, plant and equipment ratio	85.05	99.90	102.41	102.15	111.28	118.78
Solvency %	Current ratio	64.41	71.72	72.28	69.50	75.74	75.26
	Quick ratio	47.68	51.99	54.48	51.57	59.96	55.04
	Interest coverage ratio	7.82	5.22	(4.39)	(1.88)	7.36	1.48
Operating performance	Account receivable turnover(time)	5.47	5.48	5.37	5.36	6.06	5.38
	Average collection days	67	67	68	68	60	68
	Inventory turnover (time)	9.24	9.38	9.40	9.79	11.17	10.07
	Account payable turnover(time)	4.06	4.09	4.23	4.43	4.84	4.39
	Average days for sales	40	39	39	37	33	36
	Property, plant and equipment turnover (time)	2.15	1.83	1.65	2.06	2.63	2.36
	Total assets turnover (time)	0.94	0.88	0.80	0.91	1.07	0.94
Profitability	Return on assets(%)	7.10	3.52	(3.44)	(0.06)	4.17	0.17
	Return on equity (%)	19.05	8.07	(11.75)	(2.00)	10.16	0.14
	Net income before tax to paid-in capital ratio(%)	16.44	7.90	(9.32)	(6.56)	13.22	0.19
	Netprofit margin(%)	6.53	3.19	(5.14)	(0.73)	3.36	0.23
	EPS(NT$)	1.30	0.63	(0.89)	(0.20)	1.05	0.02
Cash flow	Cash flow ratio(%)	28.99	26.78	12.18	2.61	36.73	(3.52)
	Cash flow adequacy ratio(%)	87.71	82.10	92.02	83.56	114.61	75.84
	Cash re-investment ratio (%)	10.07	7.86	4.19	0.95	13.09	(1.13)
Leverage	Operation leverage	4.52	8.24	(5.61)	(11.59)	8.07	(183.12)
	Financial leverage	1.16	1.28	0.84	0.76	1.18	0.23
Profitability/ Cash flow: Thanks to the improved yield rate of the upstream 3D NAND flash wafer; with the production capacity gradually increased, the supply prices were able to decline, driving the terminal demand. Under the increasing demand from various sectors, Semiconductor Group carefully plans and uses the existing production platform advantage to adjust the production setting in order to correspond with the industrial trend. By utilizing the existing resources, production efficiency can be enhanced and various application manufacturing services can continue to be developed; with the niche products of the EMS Group gradually continuing to mature, the increase of mass production machines, and the decrease of high-end server products which required purchasing of materials and foundry, resulting in an increase of the profitability in 2019. However, the first quarter of 2020 was impacted by the coronavirus pandemic and as a result, the shipment of end products decreased considerably, affecting both profitability and cash flows Operating leverage: With the change of product structure and effective inventory control, operating costs and expenses of the period have shown a significant increase in 2019. However, due to the damage caused by the pandemic of COVID-19 in the first quarter of 2020, the ratio change is slightly larger compared to the same period of thepreviousyear.

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Note 1: The financial information in the aforementioned years (quarters) has been audited and certified by CPA.

Note 2: The calculation formula for the financial analysis:

Financial structure
(1) Liabilities to assets ratio = total liabilities/ total assets.
(2) Long-term capital to property, plant and equipment ratio = (total equity + non-current liabilities)/ net worth of property, plant and equipment.
Solvency
(1) Current ratio = current assets/current liabilities.
(2) Quick ratio = (current assets – inventory – pre-payments)/current liabilities
(3) Interest coverage ratio= net income before income tax and interest expenses /interest expense for current period.
Operating performance
(1) Receivables (including account receivable and note receivable from operation) turnover = net sales/balance of average receivables (including account receivable and note receivable from operation).
(2) Average collection days = 365/ receivables turnover.
(3) Inventory turnover = cost of sales /average inventory.
(4) Payables (including account payable and note payable from operation) turnover = cost of sales /balance of average payables (including account payable and note payable from operation).
(5) Average days for sales = 365/inventory turnover
(6) Property, plant and equipment turnover = net sales /average net worth of property, plant and equipment.
(7) Total assets turnover = net sales/average total assets.
Profitability
(1) Return on assets = [profit/loss after tax + interest expenses x (1-tax rate)]/average total assets.
(2) Return on equity = profit/loss after tax / average total equity.
(3) Net profit ratio = profit, loss after tax /net sales
(4) EPS = (Profit and loss attributable to owners of the parent company – dividends from preferred stocks)/weighted average number of outstanding shares
Cash flow
(1) Cash flow ratio = net cash flow from operating activities/ current liabilities
(2) Net cash flow adequacy ratio = net cash flow from operating activities in the past 5 years/(capital expenditures + inventory increase + cash dividends) in the past 5 years.
(3) Cash re-investment ratio = (net cash flow from operation activities – cash dividends)/ (gross property, plant and equipment + long-term investment + other non-current assets + working capital)
Leverage:
(1) Operation leverage = (net operating revenue – variable operating costs and expenses)/operating profit
(2) Financial leverage = operating profit/(operating profit-interest expenses).

121

(II) Financial analysis in the past 5 years — individual financial statements:

Year (Note 1) Analysis item(Note 3)	Year (Note 1) Analysis item(Note 3)	Financial analysis inthepast 5years	Financial analysis inthepast 5years	Financial analysis inthepast 5years	Financial analysis inthepast 5years	Financial analysis inthepast 5years	In the current year by Mar. 31, 2020
		2015	2016	2017	2018	2019
Financial structure (%)	Liabilities to assets ratio	65.35	62.80	65.77	66.89	61.78	(N/A)
	Long-term capital to property, plant and equipment ratio	87.49	101.29	103.03	102.90	112.07
Solvency %	Current ratio	59.68	63.87	66.44	63.73	69.57
	Quick ratio	45.38	49.18	51.40	49.17	56.33
	Interest coverage ratio	7.85	5.25	(4.58)	(1.93)	7.45
Operating performance	Account receivable turnover(time)	5.37	5.38	5.31	5.34	6.03
	Average collection days	68	68	69	68	61
	Inventory turnover (time)	10.60	11.58	11.80	11.83	13.49
	Account payable turnover(time)	4.02	4.19	4.41	4.54	4.83
	Average days for sales	34	32	31	31	27
	Property, plant and equipment turnover (time)	2.09	1.80	1.63	2.04	2.61
	Total assets turnover (time)	0.91	0.87	0.79	0.90	1.06
Profitability	Return on assets(%)	7.26	3.61	(3.53)	(0.04)	4.18
	Return on equity (%)	19.05	8.07	(11.75)	(2.00)	10.16
	Net income before tax to paid-in capital ratio(%)	16.11	7.83	(9.55)	(6.69)	13.17
	Netprofit margin(%)	6.93	3.33	(5.30)	(0.75)	3.41
	EPS(NT$)	1.30	0.63	(0.89)	(0.20)	1.05
Cash flow	Cash flow ratio(%)	28.11	29.15	11.47	2.93	36.55
	Cash flow adequacy ratio(%)	103.41	94.46	78.68	84.05	105.68
	Cash re-investment ratio (%)	9.93	8.53	3.92	1.07	13.21
Leverage	Operation leverage	4.44	8.35	(5.02)	(11.62)	8.07
	Financial leverage	1.17	1.30	0.85	0.76	1.18
Profitability/ Cash flow: Thanks to the improved yield rate of the upstream 3D NAND flash wafer; with the production capacity gradually increased, the supply prices were able to decline, driving the terminal demand. Under the increasing demand from various sectors, Semiconductor Group carefully plans and uses the existing production platform advantage to adjust the production setting in order to correspond with the industrial trend. By utilizing the existing resources, production efficiency can be enhanced and various application manufacturing services can continue to be developed; with the niche products of the EMS Group gradually continuing to mature, the increase of mass production machines, and the decrease of high-end server products which required purchasing of materials and foundry, resulting in an increase of the profitability in 2019. Operating leverage: With the change of product structure and effective inventory control, operating costs and expenses of the period have shown a significant increase in 2019.

122

Note 1: The financial information in the aforementioned years has been audited and certified by CPA.
Note 2: The calculation formula for the financial analysis:
Financial structure
- (1) Liabilities to assets ratio = total liabilities/ total assets.
- (2) Long-term capital to property, plant and equipment ratio= (total equity + non-current liabilities)/ net worth of property, plant and equipment.
Solvency
- (1) Current ratio = current assets/current liabilities.
- (2) Quick ratio = (current assets – inventory – pre-payments)/current liabilities
- (3) Interest coverage ratio= net income before income tax and interest expenses /interest expense for current period.
Operating performance
- (1) Receivables (including account receivable and note receivable from operation) turnover = net sales/balance of average receivables (including account receivable and note receivable from operation).
- (2) Average collection days = 365/ receivables turnover.
- (3) Inventory turnover = cost of sales /average inventory.
- (4) Payables (including account payable and note payable from operation) turnover = cost of sales / balance of average payables (including account payable and note payable from operation).
- (5) Average days for sales = 365/inventory turnover
- (6) Property, plant and equipment turnover = net sales /average net worth of property, plant and equipment.
- (7) Total assets turnover = net sales/average total assets.
Profitability
- (1) Return on assets = [profit/loss after tax + interest expenses x (1-tax rate)]/average total assets.
- (2) Return on equity = profit/loss after tax / average total equity.
- (3) Net profit ratio = profit, loss after tax /net sales
- (4) EPS = (Profit and loss attributable to owners of the parent company – dividends from preferred stocks)/weighted average number of outstanding shares
Cash flow
- (1) Cash flow ratio = net cash flow from operating activities/ current liabilities
- (2) Net cash flow adequacy ratio = net cash flow from operating activities in the past 5 years/(capital expenditures + inventory increase + cash dividends) in the past 5 years.
- (3) Cash re-investment ratio = (net cash flow from operation activities – cash dividends)/ (gross property, plant and equipment + long-term investment + other non-current assets + working capital)
Leverage:
- (1) Operation leverage = (net operating revenue – variable operating costs and expenses)/operating profit
- (2) Financial leverage = operating profit/(operating profit-interest expenses).

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III. Audit Committee’s Review Report

Audit Committee’s Review Report

The board of directors has prepared the 2019 standalone and consolidated financial statements and retained the CPAs, Chen, Chih-Chung and Chen, Cheng-Chu of CPA firm of Ernst and Young Global Limited to audit the Company’s individual and consolidated financial statements and issue an audit report relating to the individual and consolidated financial statements. The financial statements, business report, and the statement of along with the business report and earnings appropriation proposal. The Audit Committee finds no inappropriate disclosures with respect to the above, and hereby issues this report in accordance with Article 14-4 of the Securities and Exchange Act and Article 219 of the Company Act.

2020 Shareholders’ General Meeting of Orient Semiconductor Electronics, Ltd.

Orient Semiconductor Electronics, Ltd. Convener of the audit committee: Philip H. H. Wei

Mar. 27, 2020

124

IV. The consolidated financial statements for the most recent year

Independent Auditors’ Report

English Translation of a Report Originally Issued in Chinese

To Orient Semiconductor Electronics Limited

Opinion

We have audited the accompanying consolidated balance sheets of Orient Semiconductor Electronics Limited (the “Company”) and its subsidiaries as of December 31, 2019 and 2018, and the related consolidated statements of comprehensive income, changes in equity and cash flows for the years ended December 31, 2019 and 2018, and notes to the consolidated financial statements, including the summary of significant accounting policies (collectively referred to as “the consolidated financial statements”).

In our opinion, based on our audits and the reports of other auditors (please refer to the Other Matter – Making Reference to the Audits of Component Auditors section of our report), the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company and its subsidiaries as of December 31, 2019 and 2018, and their consolidated financial performance and cash flows for the years ended December 31, 2019 and 2018, in conformity with the requirements of the Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Financial Reporting Standards, International Accounting Standards, interpretations developed by the International Financial Reporting Interpretations Committee or the former Standing Interpretations Committee as endorsed by the Financial Supervisory Commission of the Republic of China.

Basis for Opinion

We conducted our audits in accordance with the Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants and auditing standards generally accepted in the Republic of China. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Company and its subsidiaries in accordance with the Norm of Professional Ethics for Certified Public Accountant of the Republic of China (the “Norm”), and we have fulfilled our other ethical responsibilities in accordance with the Norm. Based on our audits and the reports of other auditors, we believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

125

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of 2019 consolidated financial statements. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matter.

1. Validity of occurrence of sales revenue from main customers

Net sales recognized by the Group amounted to $17,515,145 thousand for the year ended December 31, 2019. This is 15% increase in comparison with net sales of 2018. Among this value, approximately 83% comes from the main customers of the Group. Hence, validity of occurrence of sales revenue from main customers have significant influence on the consolidated financial statement. Therefore, we considered this a key audit matter.

Our audit procedures included, but not limited to, assessing the appropriateness of the accounting policy of revenue recognition; evaluating and testing the design and operating effectiveness of internal controls around revenue recognition; performing cut-off tests by selecting samples of transactions from either side of the balance sheet date and vouching related certificates to verify correctness of the timing of recognizing transaction; obtaining the list of main customers for 2019 and assessing if their backgrounds, transaction amounts were consistent with their scale ; selecting samples to perform test of details and reviewing significant contact terms and conditions to verify the accuracy of sales revenue.

We also considered the appropriateness of the disclosures of sales. Please refer to Notes 4 and 6 to the Company’s consolidated financial statements.

2. Deferred tax assets

The Group recognized deferred tax assets in the amount of $1,547,937 thousand, for the year ended December 31, 2019. The recognition of deferred tax assets for the related unused tax losses, unused tax credits, and deductible temporary differences arising from operating entities located in other areas was based on management estimates of its future available taxable profits and the probability that the related deferred tax assets will be realized. As a result, we determined the matter to be a key audit matter.

Our audit procedures include (but are not limited to) understanding and testing the controls surrounding the Company’s assessment process for recognition of deferred tax assets; understanding the Company’s significant operating entities for which deferred tax assets were recognized and assessing the management estimates for assumptions used in the future cash flow projection and future taxable profits calculation; retrospectively reviewing the accuracy of assumptions used in prior-period estimates of future cash flow projection and assessing whether there were any other matters that will affect the recognition of deferred tax assets; and assessing the adequacy of the Company’s disclosures regarding its deferred tax asset recognition policy and other related disclosures.

We also considered the appropriateness of the income tax disclosures. Please refer to Notes 5 and 6 to the Company’s consolidated financial statements.

126

Other Matter – Making Reference to the Audits of Component Auditors

We did not audit the financial statements of certain consolidated subsidiaries, whose statements reflected total assets of $800,395 thousand and $767,296 thousand accounting for 5.03% and 4.58% of consolidated total assets as of December 31, 2019 and 2018, respectively; total operating revenues amounted to $59,130 thousand and $53,080 thousand, constituting 0.34% and 0.35% of consolidated operating revenues for the years ended December 31, 2019 and 2018, respectively. Those financial statements were audited by other auditors, whose reports thereon have been furnished to us, and our opinions expressed herein are based solely on the audit reports of the other auditors.

Emphasis of Matter – Applying New Accounting Standards

Note 3 to the consolidated financial statements stated, that the Company and its subsidiaries applied the International Financial Reporting Standard 16, “Leases” starting from January 1, 2019, and elected not to restate the consolidated financial statements for prior periods. Our conclusion is not modified in respect of this matter.

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

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

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

Those charged with governance, including audit committee or supervisors, are responsible for overseeing the financial reporting process of the Company and its subsidiaries.

127

Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements

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

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

Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the internal control of the Company and its subsidiaries.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the ability to continue as a going concern of the Company and its subsidiaries. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company and its subsidiaries to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the consolidated financial statements, including the accompanying notes, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company and its subsidiaries to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

128

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

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

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of 2019 consolidated financial statements and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

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

Chen, Chih-Chung

Chen, Cheng-Chu

Ernst & Young, Taiwan

March 27, 2020

Notice to Readers

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

Accordingly, the accompanying financial statements and report of independent accountants are not intended for use by those who are not informed about the accounting principles or auditing standards generally accepted in the Republic of China, and their applications in practice. As the financial statements are the responsibility of the management, Ernst & Young cannot accept any liability for the use of, or reliance on, the English translation or for any errors or misunderstandings that may derive from the translation.

129

English Translation of Financial Statements Originally Issued in Chinese

ORIENT SEMICONDUCTOR ELECTRONICS LIMITED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

As of December 31, 2019 and 2018

(Amounts expressed in Thousands of New Taiwan Dollars)

Items	Notes	December 31,2019	December 31,2019	December 31,2018	December 31,2018
		Amount	%	Amount	%
Current assets Cash and cash equivalents Contract assets-Current Notes receivable Accounts receivable-Non Affiliates Accounts receivable-Affiliates Other receivable-Non Affiliates Other receivable-Affiliates Inventories Prepayments Other current assets Other financial assets-Current Total current assets Non-current assets Financial assets at fair value through other comprehensive income-Non current Investments accounted for using the equity method Property, plant, and equipment Right-of-use assets Investment Property Intangible assets Deferred income tax assets Prepayment for equipment Refundable deposits Long-term receivables-Affiliates Other non-current assets Total non-current assets Total assets	4, 6.(1) 4, 6.(19) 4, 6.(2) 4, 6.(3), 8 4, 6.(3), 7 4 4,7 4, 6.(4) 4, 6.(10) 8 4, 6.(5) 4, 6.(6),8 4, 6.(7), 8 4, 6.(21) 4, 6.(8) 4, 6.(9) 4, 6.(25) 4, 6.(10) 8 4, 6.(11), 7 4	$1,701,412 302,982 1,770 2,455,324 229,557 31,044 50,435 1,250,419 53,122 28,179 154,226 6,258,470 226,860 459,383 6,264,246 253,847 440,433 58,445 1,547,937 151,901 157,615 93,315 6,298 9,660,280 $15,918,750	11 2 － 16 1 －－ 8 －－ 1 39 1 3 39 2 3 － 10 1 1 1 － 61 100	$762,311 425,684 10,510 2,385,100 694,148 44,844 54,767 1,567,469 51,448 36,377 243,615 6,276,273 234,878 458,078 7,063,908 － 481,619 89,633 1,688,163 180,354 201,903 95,300 9,973 10,503,809 $16,780,082	5 3 － 14 4 － 1 9 －－ 1 37 1 3 42 － 3 1 10 1 1 1 － 63 100

(The accompanying notes are an integral part of the financial statements.)

130

English Translation of Financial Statements Originally Issued in Chinese ORIENT SEMICONDUCTOR ELECTRONICS LIMITED AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

As of December 31, 2019 and 2018

(Amounts expressed in Thousands of New Taiwan Dollars)

Items	Notes	December 31,2019	December 31,2019	December 31,2018	December 31,2018
		Amount	%	Amount	%
Current liabilities Short-term loans Short-term notes payable Contract Liabilities-Current Notes payable Other notes payable Accounts payable-Non Affiliates Accounts payable-Affiliates Accrued expenses Payables on equipment Current income tax liabilities Lease liabilities-Current Current portion of long-term loans Lease payable-Current Other current liabilities Total current liabilities Non-current liabilities Long-term loans Deferred tax liabilities Lease liabilities-Non current Net defined benefit liability-Non current Other non-current liabilities-Others Total non-current liabilities Total liabilities Equity attributable to the parent company Capital Common stock Additional paid-in capital Retained earnings Undistributed earings ( Retained deficits ) Other Components of Equity Equity attributable to stockholders of the parent Total stockholders' equity Total liabilities and stockholders' equity	6.(12), 7 6.(13) 4, 6.(19) 4 4 4 4,7 4, 6.(25) 4, 6.(21) 6.(14) 4, 6.(15) 6.(14) 4, 6.(25) 4, 6.(21) 4, 6.(16) 4 4, 6.(17) 4, 6.(18)	$2,373,766 379,210 29,439 14,197 40,306 3,057,906 38,483 875,613 147,286 － 25,725 1,190,490 － 90,967 8,263,388 904,836 31,272 218,681 430,850 3,568 1,589,207 9,852,595 5,573,285 45,711 537,191 (90,032) 6,066,155 6,066,155 $15,918,750	15 2 －－－ 19 － 6 1 －－ 8 － 1 52 6 － 1 3 － 10 62 35 － 3 － 38 38 100	$2,806,857 349,610 15,821 49,126 13,072 3,295,988 49,210 751,041 239,748 2,175 － 1,340,270 2,610 115,652 9,031,180 1,713,245 33,639 － 495,896 3,522 2,246,302 11,277,482 5,523,285 20,104 (44,832) 4,043 5,502,600 5,502,600 $16,780,082	17 2 1 －－ 20 － 4 1 －－ 8 － 1 54 10 －－ 3 － 13 67 33 －－－ 33 33 100

(The accompanying notes are an integral part of the financial statements.)

131

English Translation of Financial Statements Originally Issued in Chinese

ORIENT SEMICONDUCTOR ELECTRONICS LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the years ended December 31, 2019 and 2018

(Amounts expressed in Thousands of New Taiwan Dollars)

		806015782
Items	Notes	2019		2018
		Amount	%	Amount	%
Net revenue Cost of goods sold Gross profit Operating expenses Selling and administration expenses Research and development expenses Expected credit losses Subtotal Net other operating income and expenses Operating income(loss) Non-operating income and expenses Other income Other gains and losses Financial costs Expected credit loss Share of profit of associates under equity method Subtotal Pretax income (loss) Income tax (expense) benefit Consolidated net income (loss) Other comprehensive income (loss) Items that will not be reclassified subsequently to profit or loss : Remeasurements of defined benefit plans Unrealized gains or losses on financial assets at fair value through other comprehensive income Income tax related to items that will not be reclassified Items that may be reclassified subsequently to profit or loss : Exchange differences on translation of foreign operations Share of other comprehensive income of associates and joint ventures Income tax related to items that may be reclassified Total other comprehensive income (loss), net of tax Total comprehensive income (loss) Consolidated net income (loss) attributable to: Common stockholders of the parent Non controlling interests Consolidated comprehensive income attributable to: Common stockholders of the parent Non-controlling interests Basic earnings (losses) per share (Expressed in NTD) Diluted earnings (losses) per share (Expressed in NTD)	4, 6.(19), 7 4, 6.(4), 6.(22) 4, 6.(22) 4, 6.(20) 6.(23) 4, 6.(20) 4, 6.(6) 4, 6.(25) 4, 6.(24) 4, 6.(26) 4, 6.(26)	$17,515,145 (15,742,203) 1,772,942 (710,778) (278,307) (7,742) (996,827) 357 776,472 50,464 (13,999) (115,732) (1,148) 40,536 (39,879) 736,593 (148,633) 587,960 (8,772) (8,018) 2,170 (18,965) 1,081 3,793 (28,711) $559,249 $587,960 － $587,960 $559,249 － $559,249 $1.06 $1.06	100 (90) 10 (4) (2) － (6) － 4 －－－－－－ 4 (1) 3 －－－－－－－ 3 3 － 3 3 － 3	$15,188,192 (14,656,055)	100 (96)
				532,137	4
				(652,527) (270,528) (15,145)	(4) (2) －
				(938,200)	(6)
				`－`	－
				(406,063)	(2)
				74,246 26,770 (125,986) `－` 68,497	－－ (1) －－
				43,527	(1)
				(362,536) 250,988	(3) 2
				(111,548)	(1)
				(42,568) (22,180) 8,780 17,469 － (7,408)	－－－－－－
				(45,907)	－
				($157,455)	(1)
				($111,548) －	(1) －
				($111,548)	(1)
				($157,455) －	(1) －
				($157,455)	(1)
				($0.20)
				($0.20)

(The accompanying notes are an integral part of the financial statements.)

132

English Translation of Financial Statements Originally Issued in Chinese

ORIENT SEMICONDUCTOR ELECTRONICS LIMITED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY For the years ended December 31, 2019 and 2018

(Amounts expressed in Thousands of New Taiwan Dollars)

Items				Equity attributable to	stockholders of the parent	stockholders of the parent			Total Equity
	Common stock	Capital surplus	Retained earnings		Other equity			Total
			Undistributed earnings (Retained deficits)	Exchange differences on translation of foreign operations	Unrealized gains or losses on financial assets measured at fair value through other comprehensive income	Unrealized gains from available-for- sale financial assets	Employee Unearned Benefit
Balance as of January 1, 2018 Impact of retroactive applications Adjusted balance as of January 1, 2018 Share of changes in net assets of associates and joint ventures accounted for using equity method Loss for the years ended December 31, 2018 Other comprehensive income (loss) for the years ended December 31, 2018 Total comprehensive income (loss) Captial reduction for cover accumulated deficits Proceeds from disposal of equity instruments at fair value through other comprehensive income Balance as of December 31, 2018 Balance as of January 1, 2019 Share of changes in net assets of associates and joint ventures accounted for using equity method Income for the years ended December 31, 2019 Other comprehensive income (loss) for the years ended December 31, 2019 Total comprehensive income (loss) Share-based payment transaction Balance as of December 31, 2019	$8,060,158 －	$21,420 －	($2,536,872) 260,065	($30,156) －	－ ($113,244)	$145,296 (145,296)	－－	$5,659,846 1,525 5,661,371 (1,316) (111,548) (45,907) (157,455) －－ $5,502,600 $5,502,600 (122) 587,960 (28,711) 559,249 4,428 $6,066,155	$5,659,846 1,525 5,661,371 (1,316) (111,548) (45,907) (157,455) －－ $5,502,600 $5,502,600 (122) 587,960 (28,711)
	8,060,158 －－－	21,420 (1,316) －－	(2,276,807) － (111,548) (31,860)	(30,156) －－ 10,061	(113,244) －－ (24,108)	－－－－	－－－－
	－	－	(143,408)	10,061	(24,108)	－	－
	(2,536,873) －	－－	2,536,873 (161,490)	－－	－ 161,490	－－	－－
	$5,523,285	$20,104	($44,832)	($20,095)	$24,138	`－`	－
	$5,523,285 －－－	$20,104 (122) －－	($44,832) － 587,960 (5,937)	($20,095) －－ (15,172)	$24,138 `－` `－` (7,602)	－－－－	－－－－
	－	－	582,023	(15,172)	(7,602)	－	－		559,249
	50,000	25,729	－	－	－	－	($71,301)		4,428
	$5,573,285	$45,711	$537,191	($35,267)	$16,536	－	($71,301)		$6,066,155

(The accompanying notes are an integral part of the financial statements.)

133

English Translation of Financial Statements Originally Issued in Chinese ORIENT SEMICONDUCTOR ELECTRONICS LIMITED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS

For the years ended December 31, 2019 and 2018

(Amounts expressed in Thousands of New Taiwan Dollars)

Items	2019	2018	Items	2019	2018
	Amount	Amount		Amount	Amount
Cash flows from operating activities: Pretax income (loss) Adjustments to reconcile net income (loss) before tax to net The profit or loss items which did not affect cash flows: Depreciation Amortization Expected credit loss Net (gain) of financial assets and liabilities at fair value through profit or loss Interest expense Interest revenue Compensation costs of share-based payment Share of (profit) of associates accounted for using the equity method (Gain) on disposal of property, plant and equipment Others Changes in operating assets and liabilities: Decrease (Increase) in contract assets Decrease in notes receivable-non affiliates (Increase) in accounts receivable-non affiliates Decrease (Increase) in accounts receivable-affiliates Decrease in other receivable-non affiliates Decrease in other receivable-affiliates Decrease (Increase) in inventories Decrease in prepayments Decrease (Increase) in other current assets Decrease in other non-current assets Increase (Decrease) in contract liabilities (Decrease) Increase in notes payable-non affiliates (Decrease) Increase in accounts payable-non affiliates (Decrease) Increase in accounts payable-affiliates Increase (Decrease) in other payable Increase in other current liabilities (Decrease) in net defined liabilities Cash generated from operations Interest received Income tax (paid) Net cash provided by operating activities	$736,593 1,491,025 65,339 8,890 － 115,732 (5,951) 4,428 (40,536) (36,367) 105,471 122,702 8,740 (79,162) 465,791 10,447 41,019 211,432 11,759 8,228 2,166 13,618 (7,695) (238,082) (10,727) 2,696 99,887 (73,818) 3,033,625 5,966 (4,811) 3,034,780	($362,536) 1,414,983 61,792 15,145 (7,371) 125,986 (8,754) － (68,497) (6,187) 48,841 (213,080) 1,440 (73,314) (457,608) 7,483 23,538 (404,134) 11,325 (5,567) 2,426 (35,931) 35,833 118,636 30,763 (2,092) 65,746 (84,455) 234,411 8,761 (7,185) 235,987	Cash flows from investing activities: Disposal of financial assets at fair value through profit or loss Acqusition of property, plant and equipment Disposal of property, plant and equipment Decrease in refundable deposits Acqusition of intangible assets Decrease (Increase) in long-term receivables Other investing activities Net cash (used in) investing activities Cash flows from financing activities: Increase in short-term loans (Decrease) in short-term loans Increase in short-term notes payable (Decrease) in short-term notes payable Increase in long-term loans Repayment of long-term loans Increase in guarantee deposits received (Decrease) in guarantee deposits received Increase in lease payable (Decrease) in lease payable Repayment of lease liabilities Interest paid Other financing activities Net cash (used in) financing activities Effect of exchange rate changes on cash and cash equivalents Net Increase (Decrease) in cash and cash equivalents Cash and cash equivalents, beginning of period Cash and cash equivalents, end of period	－ (728,482) 48,897 44,288 (32,657) 1,985 － (665,969) － (433,155) 379,210 (349,610) 1,300,000 (2,262,010) 46 －－－ (30,050) (118,428) 89,389 (1,424,608) (5,102) 939,101 762,311 $1,701,412	38,184 (772,963) 41,696 7,066 (63,714) (2,916) (879) (753,526) 614,356 － 349,610 (398,938) 1,010,584 (1,711,897) － (52) 30,380 (52,321) － (123,894) 267,345 (14,827) 430 (531,936) 1,294,247 $762,311

(The accompanying notes are an integral part of the financial statements.)

134

English Translation of Financial Statements Originally Issued in Chinese ORIENT SEMICONDUCTOR ELECTRONICS LIMITED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

(Unless otherwise stated, all amounts expressed are in thousands of New Taiwan Dollars)

1. ORGANIZATION AND OPERATION

Orient Semiconductor Electronics Limited (the Company) was incorporated as a company limited by shares under the provisions of the Company Law of the Republic of China in June 1971. The Company was registered in Kaohsiung City and the registered address is 9 Central 3Rd St. N.E.P.Z., Kaohsiung, Taiwan, 11, R.O.C. The principal activity of the Company is to engage in the manufacture, assembly, processing and sale of integrated circuits, parts for semiconductors, computer motherboards and related products. The Company’s shares commenced trading in the Taiwan stock exchange market in April 1994.

As of the years ended December 31, 2019, the Company and its subsidiaries current liabilities and current assets amounted to $8,263,388 thousand and $6,258,470 thousand, respectively. The current ratio was 75.74%. The Company has devoted to adjusting its product structure. The Company keeps making a profit and improving financial structure.

2. DATE AND PROCEDURES OF AUTHORIZATION OF FINANCIAL STATEMENTS FOR ISSUE

The consolidated financial statements of the Company and its subsidiaries (“the Group”) for the years ended December 31, 2019 and 2018 were authorized for issue by the Board of Directors on March 27, 2020.

3. NEWLY ISSUED OR REVISED STANDARDS AND INTERPRETATIONS

(1) Changes in accounting policies resulting from applying for the first time certain standards and amendments.

The Group applied for the first time International Financial Reporting Standards, International Accounting Standards, and Interpretations issued, revised or amended which are recognized by Financial Supervisory Commission (“FSC”) and become effective for annual periods beginning on or after January 1, 2019. The nature and the impact of each new standard and amendment that has a material effect on the Group is described below:

A. IFRS 16“Leases”

IFRS 16 “Leases” replaces 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”.

135

The Group followed the transition provision in IFRS 16 and the date of initial application was January 1, 2019. The impacts arising from the adoption of IFRS 16 are summarized as follows:

(a) Please refer to Note 4 for the accounting policies before or after January 1, 2019.
(b) For the definition of a lease, the Group elected not to reassess whether a contract was, or contained, a lease on 1 January 2019. The Group was permitted to apply IFRS 16 to contracts that were previously identified as leases applying IAS 17 and IFRIC 4 but not to apply IFRS 16 to contracts that were not previously identified as containing a lease applying IAS 17 and IFRIC 4. That is, for contracts entered into (or changed) on or after 1 January 2019, the Group need to assess whether contacts are, or contain, leases applying IFRS 16. In comparing to IAS 17, IFRS 16 provides that 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. The Group assessed most of the contracts are, or contain, leases and has no significant impact arised.
(c) The Group is a lessee and elects not to restate comparative information in accordance with the transition provision in IFRS 16. Instead, the Group recognized the cumulative effect of initially applying IFRS 16 as an adjustment to the opening balance of retained earnings (or other component of equity, as appropriate) at the date of initial application.
I. Leases previously classified as operating leases

For leases that were previously classified as operating leases applying IAS 17, the Group measured and recognized those leases as lease liability on January 1, 2019 at the present value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate on January 1, 2019, and; the Group chose, on a lease-by-lease basis, to measure the right-of-use asset at either:

i. its carrying amount as if IFRS 16 had been applied since the commencement date, but discounted using the lessee’s incremental borrowing rate on January 1, 2019; or
ii. an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments relating to that lease recognized in the balance sheet immediately before January 1, 2019.

On January 1, 2019, the Group’s right-of-use asset and lease liability increased by $238,764 thousand and $238,764 thousand, respectively.

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In accordance with the transition provision in IFRS 16, the Group used the following practical expedients on a lease-by-lease basis to leases previously classified as operating leases:

i. Apply a single discount rate to a portfolio of leases with reasonably similar characteristics.
ii. Rely on its assessment of whether leases are onerous immediately before January 1, 2019 as an alternative to performing an impairment review.
iii. Elect to account in the same way as short-term leases to leases for which the lease term ends within 12 months of January 1, 2019.
iv. Exclude initial direct costs from the measurement of the right-of-use asset on January 1, 2019.
v. Use hindsight, such as in determining the lease term if the contract contains options to extend or terminate the lease.

II. Leases previously classified as finance leases

For leases that were previously classified as finance leases applying IAS 17, the Group reclassified the lease asset of $25,845 thousand and the lease payable of $2,610 thousand as measured by IAS 17 to the right-of-use asset of $25,845 thousand and the lease liability of $2,610 thousand, respectively, on January 1, 2019.

III.Please refer to Note 4 and Note 6 for additional disclosure of lessee and lessor which required by IFRS 16.

IV.As at January 1, 2019, the impacts arising from the adoption of IFRS 16 are summarized as follows:

i. The weighted average lessee’s incremental borrowing rate applied to lease liabilities recognized in the balance sheet on January 1, 2019 was 2.24%.
ii. The explanation for the difference of $174,196 thousand between: 1) operating lease commitments disclosed applying IAS 17 as of December 31, 2019, discounted using the incremental borrowing rate on January 1, 2019; and 2) lease liabilities recognized in the balance sheet as at January 1, 2019 is summarized as follows:

Operating lease commitments disclosed applying IAS 17 as of December 31, 2018 Discounted using the incremental borrowing rate on January 1, 2019 Add: the carrying value of lease payables as of December 31, 2018 Add: adjustments to the options to extend or terminate the lease that is reasonably certain to exercise The carrying value of lease liabilities recognized as of January 1, 2019	$74,699
	$67,230 2,610 171,586
	$241,426

(d) The Group is a lessor and has not made any adjustments. Please refer to Note 4 and Note 6 for the information relating to the lessor.

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(2) Standards or interpretations issued, revised or amended, by International Accounting Standards Board (“IASB”) which are endorsed by FSC, but not yet adopted by the Group as at the end of the reporting period are listed below:

Items	New,Revised or Amended Standards and Interpretations	Effective Date issued byIASB
a	Definition of a Business - Amendments to IFRS 3	January1,2020
b	Definition of Material - Amendments to IAS 1 and 8	January1,2020
c	Interest Rate Benchmark Reform - Amendments to IFRS 9, IAS 39 and IFRS 7	January 1, 2020

A. Definition of a Business - Amendments to IFRS 3

The amendments clarify the definition of a business in IFRS 3 Business Combinations. The amendments are intended to assist entities to determine whether a transaction should be accounted for as a business combination or as an asset acquisition.

IFRS 3 continues to adopt a market participant’s perspective to determine whether an acquired set of activities and assets is a business. The amendments clarify the minimum requirements for a business; add guidance to help entities assess whether an acquired process is substantive; and narrow the definitions of a business and of outputs; etc.

B. Definition of a Material - Amendments to IAS 1 and 8

The main amendment is to clarify new definition of material. It states that “information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity.” The amendments clarify that materiality will depend on the nature or magnitude of information. An entity will need to assess whether the information, either individually or in combination with other information, is material in the context of the financial statements.

C. Interest Rate Benchmark Reform - Amendments to IFRS 9, IAS 39 and IFRS 7

The amendments include a number of exceptions, which apply to all hedging relationships that are directly affected by interest rate benchmark reform. A hedging relationship is directly affected if the interest rate benchmark reform gives rise to uncertainties about the timing and or amount of benchmark-based cash flows of the hedged item or the hedging instrument. Hence, the entity shall apply the exceptions to all hedging relationships directly affected by the interest rate benchmark reform.

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The amendments include:

(1) highly probable requirement

When determining whether a forecast transaction is highly probable, an entity shall assume that the interest rate benchmark on which the hedged cash flows are based is not altered as a result of the interest rate benchmark reform.

(2)prospective assessments

When performing prospective assessments, an entity shall assume that the interest rate benchmark on which the hedged item, hedged risk and/or hedging instrument are based is not altered as a result of the interest rate benchmark reform.

(3)IAS 39 retrospective assessment

An entity is not required to undertake the IAS 39 retrospective assessment (i.e. the actual results of the hedge are within a range of 80–125%) for hedging relationships directly affected by the interest rate benchmark reform.

(4)separately identifiable risk components

For hedges of a non-contractually specified benchmark component of interest rate risk, an entity shall apply the separately identifiable requirement only at the inception of such hedging relationships.

The amendments also include the end of application of the exceptions requirements and the related disclosures requirements of the amendments.

The abovementioned standards and interpretations were issued by International Accounting Standards Board (“IASB”) and endorsed by FSC so that they are applicable for annual periods beginning on or after January 1, 2020. All other standards and interpretations have no material impact on the Group.

(3) Standards or interpretations issued, revised or amended, by International Accounting Standards Board (“IASB”) which are not endorsed by FSC, but not yet adopted by the Group as at the end of the reporting period are listed below.:

Items	New,Revised or Amended Standards and Interpretations	Effective Date issued byIASB
a	IFRS 10 “Consolidated Financial Statements” and IAS 28 “Investments in Associates and Joint Ventures” — Sale or Contribution of Assets between an Investor and its Associate or Joint Ventures	To be determined by IASB
b	IFRS 17 “Insurance Contracts”	January1,2021
c	Classification of Liabilities as Current or Non-current – Amendments to IAS 1	January 1, 2022

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A. IFRS 10“Consolidated Financial Statements” and IAS 28“Investments in Associates and Joint Ventures” — Sale or Contribution of Assets between an Investor and its Associate or Joint Ventures

The amendments address the inconsistency between the requirements in IFRS 10 Consolidated Financial Statements and IAS 28 Investments in Associates and Joint Ventures, in dealing with the loss of control of a subsidiary that is contributed to an associate or a joint venture. IAS 28 restricts gains and losses arising from contributions of non-monetary assets to an associate or a joint venture to the extent of the interest attributable to the other equity holders in the associate or joint ventures. IFRS 10 requires full profit or loss recognition on the loss of control of the subsidiary. IAS 28 was amended so that the gain or loss resulting from the sale or contribution of assets that constitute a business as defined in IFRS 3 between an investor and its associate or joint venture is recognized in full. IFRS 10 was also amended so that the gains or loss resulting from the sale or contribution of a subsidiary that does not constitute a business as defined in IFRS 3 between an investor and its associate or joint venture is recognized only to the extent of the unrelated investors’ interests in the associate or joint venture. The effective date of the amendments has been postponed indefinitely, but early adoption is allowed.

B. IFRS 17 “Insurance Contracts”

IFRS 17 provides a comprehensive model for insurance contracts, covering all relevant accounting aspects (including recognition, measurement, presentation and disclosure requirements). The core of IFRS 17 is the General (building block) Model, under this model, on initial recognition, an entity shall measure a group of insurance contracts at the total of the fulfilment cash flows and the contractual service margin. The fulfilment cash flows comprise of the following:

(a) estimates of future cash flows;

(b) Discount rate: an adjustment to reflect the time value of money and the financial risks related to the future cash flows, to the extent that the financial risks are not included in the estimates of the future cash flows; and

The carrying amount of a group of insurance contracts at the end of each reporting period shall be the sum of the liability for remaining coverage and the liability for incurred claims. Other than the General Model, the standard also provides a specific adaptation for contracts with direct participation features (the Variable Fee Approach) and a simplified approach (Premium Allocation Approach) mainly for short-duration contracts.

C. Classification of Liabilities as Current or Non-current – Amendments to IAS 1

These are the amendments to paragraphs 69-76 of IAS 1 Presentation of Financial statements and the amended paragraphs related to the classification of liabilities as current or non-current.

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The abovementioned standards and interpretations issued by IASB have not yet endorsed by FSC at the date when the Group’s financial statements were authorized for issue, the local effective dates are to be determined by FSC. All other standards and interpretations have no material impact on the Group.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(1)Statement of compliance

The consolidated financial statements of the Group for the years ended December 31, 2019 and 2018 have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers (“the Regulations”) and International Financial Reporting Standards (IFRS), International Accounting Standards, Interpretations developed by the International Financial Reporting Interpretations Committee which are endorsed by Financial Supervisory Commission of the Republic of China.

(2)Basis of preparation

The consolidated financial statements have been prepared on a historical cost basis, except for financial instruments that have been measured at fair value. The consolidated financial statements are expressed in thousands of New Taiwan Dollars (“NT$”) unless otherwise stated.

(3)Basis of consolidation

Preparation principle of consolidated financial statement

Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if and only if the Group has:

(a) power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee)

(b) exposure, or rights, to variable returns from its involvement with the investee, and

When the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:

(a) the contractual arrangement with the other vote holders of the investee
(b) rights arising from other contractual arrangements
(c) the Group’s voting rights and potential voting rights

The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control.

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Subsidiaries are fully consolidated from the acquisition date, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases. The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using uniform accounting policies. All intra-group balances, income and expenses, unrealized gains and losses and dividends resulting from intra-group transactions are eliminated in full.

A change in the ownership interest of a subsidiary, without a change of control, is accounted for as an equity transaction.

Total comprehensive income of the subsidiaries is attributed to the owners of the parent and to the noncontrolling interests even if this results in the non-controlling interests having a deficit balance.

If the Group loses control of a subsidiary, it:

(a) derecognizes the assets (including goodwill) and liabilities of the subsidiary;
(b) derecognizes the carrying amount of any non-controlling interest;
(c) recognizes the fair value of the consideration received;
(d) recognizes the fair value of any investment retained;
(e) recognizes any surplus or deficit in profit or loss; and
(f) reclassifies the parent’s share of components previously recognized in other comprehensive income to profit or loss.

A. The consolidated entities are listed as follows:

Investor	Name of subsidiaries	Business nature	Percentage of ownership	Percentage of ownership	Remarks
			December 31, 2019	December 31, 2018
The Company	Orient Semiconductor Electronics Philippines, Inc. (OSE PHILIPPINES , INC.；OSEP)	Manufacture and export of integrated circuits and computers	99.99%	99.99%	1. As of December 31, 2019, the Company owned 93.67% and OSE B.V.I. owned 6.33% of the shares of OSEP, which represented the aggregate a 99.99% ownership of OSEP. 2. OSEP ceased its operation in fourth quarter of 2011.
The Company	OSE INTERNATIONAL, LTD. (OSE B.V.I.)	Investments of various manufacturing businesses	100.00%	100.00%	`－`

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Investor	Name of subsidiaries	Business nature	Percentage of ownership	Percentage of ownership	Remarks
			December 31, 2019	December 31, 2018
The Company	OSE USA, INC. (OSEU)	Investments of various manufacturing businesses	100.00%	100.00%	OSEA merged with OSEU on February 14, 2006 and assumed OSEU’s assets, liabilities and preferred stocks. OSEA changed its name as OSE USA, Inc. after the merger.
The Company	COREPLUS (HK) LIMITED (COREPLUS)	Manufacture of electronics product	100.00%	100.00%	—
COREPLUS (HK) LIMITED (COREPLUS)	VALUE–PLUS TECHNOLOGY (SUZHOU) CO. (VALUE–PLUS (SUZHOU))	Manufacture of electronics product	100.00%	100.00%	—

B. The consolidated financial statements of part of the subsidiaries listed above had not been reviewed by auditors. As of December 31, 2019 and 2018, the related assets of the subsidiaries which were unaudited by auditors amount to $800,395 thousand and $767,296 thousand respectively, and the related liabilities amount to $705,073 thousand and $642,220 thousand, respectively. The comprehensive income of these subsidiaries amount to ($27,743) thousand and ($36,611) thousand for the years ended December 31, 2019 and 2018, respectively.

(4) Foreign currency transactions

The Group’s consolidated financial statements are presented in NT$, which is also the Company’s functional currency. Each entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency.

Transactions in foreign currencies are initially recorded by the Group entities at their respective functional currency rates prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency closing rate of exchange ruling at the reporting date. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined. Non-monetary items that are measured at historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions.

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All exchange differences arising on the settlement of monetary items or on translating monetary items are taken to profit or loss in the period in which they arise except for the following:

(a) Exchange differences arising from foreign currency borrowings for an acquisition of a qualifying asset to the extent that they are regarded as an adjustment to interest costs are included in the borrowing costs that are eligible for capitalization.
(b) Foreign currency items within the scope of IAS 39 Financial Instruments: Recognition and Measurement are accounted for based on the accounting policy for financial instruments.
(c) Exchange differences arising on a monetary item that forms part of a reporting entity’s net investment in a foreign operation is recognized initially in other comprehensive income and reclassified from equity to profit or loss on disposal of the net investment.

When a gain or loss on a non-monetary item is recognized in other comprehensive income, any exchange component of that gain or loss is recognized in other comprehensive income. When a gain or loss on a non-monetary item is recognized in profit or loss, any exchange component of that gain or loss is recognized in profit or loss.

(5) Translation of financial statements in foreign currency

The assets and liabilities of foreign operations are translated into NT$ at the closing rate of exchange prevailing at the reporting date and their income and expenses are translated at an average rate for the period. The exchange differences arising on the translation are recognized in other comprehensive income. On the disposal of a foreign operation, the cumulative amount of the exchange differences relating to that foreign operation, recognized in other comprehensive income and accumulated in the separate component of equity, is reclassified from equity to profit or loss when the gain or loss on disposal is recognized. The following partial disposals are accounted for as disposals:

(a) when the partial disposal involves the loss of control of a subsidiary that includes a foreign operation; and
(b) when the retained interest after the partial disposal of an interest in a joint arrangement or a partial disposal of an interest in an associate that includes a foreign operation is a financial asset that includes a foreign operation.

On the partial disposal of a subsidiary that includes a foreign operation that does not result in a loss of control, the proportionate share of the cumulative amount of the exchange differences recognized in other comprehensive income is re-attributed to the non-controlling interests in that foreign operation. In partial disposal of an associate or joint arrangement that includes a foreign operation that does not result in a loss of significant influence or joint control, only the proportionate share of the cumulative amount of the exchange differences recognized in other comprehensive income is reclassified to profit or loss.

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Any goodwill and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and expressed in its functional currency.

(6) Current and non-current distinction

An asset is classified as current when:

(a) The Group expects to realize the asset, or intends to sell or consume it, in its normal operating cycle.
(b) The Group holds the asset primarily for the purpose of trading.
(c) The Group expects to realize the asset within twelve months after the reporting period.
(d) The asset is cash or cash equivalent unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.

All other assets are classified as non-current.

A liability is classified as current when:

(a) The Group expects to settle the liability in its normal operating cycle.
(b) The Group holds the liability primarily for the purpose of trading.
(c) The liability is due to be settled within twelve months after the reporting period.
(d) The Group does not have an unconditional right to defer settlement of the liability for at least twelve months after the reporting period. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.

(7) Cash and cash equivalents

Cash and cash equivalents comprises cash on hand, demand deposits and short-term, highly liquid time deposits (including ones that have maturity within three months) or investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

(8) Financial instruments

Financial assets and financial liabilities are recognized when the Group becomes a party to the contractual provisions of the instrument.

Financial assets and financial liabilities within the scope of IFRS 9 Financial Instruments are recognized initially at fair value plus or minus, in the case of investments not at fair value through profit or loss, directly attributable transaction costs.

A. Financial instruments: Recognition and Measurement

The Group accounts for regular way purchase or sales of financial assets on the trade date.

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The Group classified financial assets as subsequently measured at amortized cost, fair value through other comprehensive income or fair value through profit or loss considering both factors below:

(a) the Group’s business model for managing the financial assets and

(b) the contractual cash flow characteristics of the financial asset.

Financial assets measured at amortized cost

A financial asset is measured at amortized cost if both of the following conditions are met and presented as note receivables, trade receivables financial assets measured at amortized cost and other receivables etc., on balance sheet as at the reporting date:

(a) the financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows and
(b) the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Such financial assets are subsequently measured at amortized cost (the amount at which the financial asset is measured at initial recognition minus the principal repayments, plus or minus the cumulative amortization using the effective interest method of any difference between the initial amount and the maturity amount and adjusted for any loss allowance) and is not part of a hedging relationship. A gain or loss is recognized in profit or loss when the financial asset is derecognized, through the amortization process or in order to recognize the impairment gains or losses.

Interest revenue is calculated by using the effective interest method. This is calculated by applying the effective interest rate to the gross carrying amount of a financial asset except for:

(a) purchased or originated credit-impaired financial assets. For those financial assets, the Group applies the credit-adjusted effective interest rate to the amortized cost of the financial asset from initial recognition.
(b) financial assets that are not purchased or originated credit-impaired financial assets but subsequently have become credit-impaired financial assets. For those financial assets, the Group applies the effective interest rate to the amortized cost of the financial asset in subsequent reporting periods.

Financial asset measured at fair value through other comprehensive income

A financial asset is measured at fair value through other comprehensive income if both of the following conditions are met:

(a) the financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and

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(b) the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Recognition of gain or loss on a financial asset measured at fair value through other comprehensive income are described as below:

(a)A gain or loss on a financial asset measured at fair value through other comprehensive income recognized in other comprehensive income, except for impairment gains or losses and foreign exchange gains and losses, until the financial asset is derecognized or reclassified.
(b)When the financial asset is derecognized the cumulative gain or loss previously recognized in other comprehensive income is reclassified from equity to profit or loss as a reclassification adjustment.
(c)Interest revenue is calculated by using the effective interest method. This is calculated by applying the effective interest rate to the gross carrying amount of a financial asset except for:
i. Purchased or originated credit-impaired financial assets. For those financial assets, the Group applies the credit-adjusted effective interest rate to the amortized cost of the financial asset from initial recognition.
ii. Financial assets that are not purchased or originated credit-impaired financial assets but subsequently have become credit-impaired financial assets. For those financial assets, the Group applies the effective interest rate to the amortized cost of the financial asset in subsequent reporting periods.

Besides, at initial recognition, the Company makes an irrevocable election to present in other comprehensive income subsequent changes in the fair value of an investment in an equity instrument within the scope of IFRS 9 that is neither held for trading nor contingent consideration recognized by an acquirer in a business combination to which IFRS 3 applies. Amounts presented in other comprehensive income are not subsequently transferred to profit or loss (when disposal of such equity instrument, its cumulated amount included in other components of equity is transferred directly to the retained earnings) and should be recorded as financial assets measured at fair value through other comprehensive income on balance sheet. Dividends on such investment are recognized in profit or loss unless the dividends clearly represents a recovery of part of the cost of investment.

Financial asset measured at fair value through profit or loss

Financial assets were measured at amortized cost or measured at fair value through other comprehensive income only if they met particular conditions. All other financial assets were measured at fair value through profit or loss and presented on the balance sheet as financial assets measured at fair value through profit or loss and trade receivables.

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Financial assets at fair value through profit or loss are measured at fair value with changes in fair value recognized in profit or loss. Dividends or interests on financial assets at fair value through profit or loss are recognized in profit or loss (including those received during the period of initial investment).

B. Impairment of financial assets

The Group recognizes a loss allowance for expected credit losses on debt instrument investments measured at fair value through other comprehensive income and financial asset measured at amortized cost. The loss allowance on debt instrument investments measured at fair value through other comprehensive income is recognized in other comprehensive income and not reduce the carrying amount in the statement of financial position.

The Group measures expected credit losses of a financial instrument in a way that reflects:

(a) an unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes;
(b) the time value of money; and
(c) reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current conditions and forecasts of future economic conditions.

The loss allowance is measures as follow:

(a) At an amount equal to 12-month expected credit losses: the credit risk on a financial asset has not increased significantly since initial recognition or the financial asset is determined to have low credit risk at the reporting date. In addition, the Group measures the loss allowance at an amount equal to lifetime expected credit losses in the previous reporting period, but determines at the current reporting date that the credit risk on a financial asset has increased significantly since initial recognition is no longer met.
(b) At an amount equal to the lifetime expected credit losses: the credit risk on a financial asset has increased significantly since initial recognition or financial asset that is purchased or originated credit-impaired financial asset.
(c) For trade receivables or contract assets arising from transactions within the scope of IFRS 15, the Group measures the loss allowance at an amount equal to lifetime expected credit losses.
(d) For lease receivables arising from transactions within the scope of IFRS 16 (before January 1, 2019: IAS 17), the Group measures the loss allowance at an amount equal to lifetime expected credit losses.

At each reporting date, the Group needs to assess whether the credit risk on a financial asset has increased significantly since initial recognition by comparing the risk of a default occurring at the reporting date and the risk of default occurring at initial recognition. Please refer to Note 12 for further details on credit risk.

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C. Derecognition of financial assets

A financial asset is derecognized when:

(a) The rights to receive cash flows from the asset have expired.
(b) The Group has transferred the asset and substantially all the risks and rewards of the asset have been transferred.
(c) The Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

On derecognition of a financial asset in its entirety, the difference between the carrying amount and the consideration received or receivable including any cumulative gain or loss that had been recognized in other comprehensive income, is recognized in profit or loss.

D. Financial liabilities and equity

Classification between liabilities or equity

The Group classifies the instrument issued as a financial liability or an equity instrument in accordance with the substance of the contractual arrangement and the definitions of a financial liability, and an equity instrument.

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. The transaction costs of an equity transaction are accounted for as a deduction from equity (net of any related income tax benefit) to the extent they are incremental costs directly attributable to the equity transaction that otherwise would have been avoided.

Financial liabilities

Financial liabilities within the scope of IFRS 9 Financial Instruments are classified as financial liabilities at fair value through profit or loss or financial liabilities measured at amortized cost upon initial recognition.

Financial liabilities at fair value through profit or loss

Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss. A financial liability is classified as held for trading if:

(a) it is acquired or incurred principally for the purpose of selling or repurchasing it in the near term;

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(b) on initial recognition it is part of a portfolio of identified financial instruments that are managed together and for which there is evidence of a recent actual pattern of short-term profit-taking; or
(c) it is a derivative (except for a derivative that is a financial guarantee contract or a designated and effective hedging instrument).

If a contract contains one or more embedded derivatives, the entire hybrid (combined) contract may be designated as a financial liability at fair value through profit or loss; or a financial liability may be designated as at fair value through profit or loss when doing so results in more relevant information, because either:

(a) it eliminates or significantly reduces a measurement or recognition inconsistency; or
(b) group of financial assets, financial liabilities or both is managed and its performance is evaluated on a fair value basis, in accordance with a documented risk management or investment strategy, and information about the group is provided internally on that basis to the key management personnel.

Gains or losses on the subsequent measurement of liabilities at fair value through profit or loss including interest paid are recognized in profit or loss.

Financial liabilities at amortized cost

Financial liabilities measured at amortized cost include interest bearing loans and borrowings that are subsequently measured using the effective interest rate method after initial recognition. Gains and losses are recognized in profit or loss when the liabilities are derecognized as well as through the effective interest rate method amortization process.

Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or transaction costs.

Derecognition of financial liabilities

A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires.

When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified (whether or not attributable to the financial difficulty of the debtor), such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognized in profit or loss.

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E. Offsetting of financial instruments

Financial assets and financial liabilities are offset and the net amount reported in the balance sheet if, and only if, there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, or to realize the assets and settle the liabilities simultaneously.

(9) Fair value measurement

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

(a) In the principal market for the asset or liability, or

(b) In the absence of a principal market, in the most advantageous market for the asset or liability

The principal or the most advantageous market must be accessible to by the Group.

The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants in their economic best interest.

A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.

(10) Inventories

Inventories are valued at the lower of cost and net realizable value item by item.

Cost incurred in bringing each product to its present location and condition are accounted for as follows:

Raw materials – Purchase cost on an average basis.

Finished goods and work in progress – Cost of direct materials and labor and a proportion of manufacturing overheads based on normal operating capacity but excluding borrowing costs, on a average basis.

Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.

Rendering of services is accounted in accordance with IFRS 15 and not within the scope of inventories.

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(11) Non-current assets held for sale and discontinued operations

Non-current assets and disposal groups are classified as held for sale if their carrying amounts will be recovered through a sale transaction that is highly probable within one year from the date of classification and the asset or disposal group is available for immediate sale in its present condition. Non-current assets and disposal groups classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell.

In the consolidated statement of comprehensive income of the reporting period, and of the comparable period of the previous year, income and expenses from discontinued operations are reported separately from income and expenses from continuing operations, down to the level of profit after taxes, even when the Group retains a non-controlling interest in the subsidiary after the sale. The resulting profit or loss (after taxes) is reported separately in the statement of comprehensive income.

Property, plant and equipment and intangible assets once classified as held for sale are not depreciated or amortized.

(12) Investment accounted for using the equity method

The Group’s investment in its associate is accounted for using the equity method other than those that meet the criteria to be classified as held for sale. An associate is an entity over which the Group has significant influence. A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint venture.

Under the equity method, the investment in the associate or an investment in a joint venture is carried in the balance sheet at cost and adjusted thereafter for the post-acquisition change in the Group’s share of net assets of the associate or joint venture. After the interest in the associate or joint venture is reduced to zero, additional losses are provided for, and a liability is recognized, only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate or joint venture. Unrealized gains and losses resulting from transactions between the Group and the associate or joint venture are eliminated to the extent of the Group’s related interest in the associate or joint venture.

When changes in the net assets of an associate or a joint venture occur and not those that are recognized in profit or loss or other comprehensive income and do not affects the Group’s percentage of ownership interests in the associate or joint venture, the Group recognizes such changes in equity based on its percentage of ownership interests. The resulting capital surplus recognized will be reclassified to profit or loss at the time of disposing the associate or joint venture on a prorata basis.

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When the associate or joint venture issues new stock, and the Group’s interest in an associate or a joint venture is reduced or increased as the Group fails to acquire shares newly issued in the associate or joint venture proportionately to its original ownership interest, the increase or decrease in the interest in the associate or joint venture is recognized in Additional Paid in Capital and Investment accounted for using the equity method. When the interest in the associate or joint venture is reduced, the cumulative amounts previously recognized in other comprehensive income are reclassified to profit or loss or other appropriate items. The aforementioned capital surplus recognized is reclassified to profit or loss on a pro rata basis when the Group disposes the associate or joint venture.

The financial statements of the associate or joint venture are prepared for the same reporting period as the Group. Where necessary, adjustments are made to bring the accounting policies in line with those of the Group.

The Group determines at each reporting date whether there is any objective evidence that the investment in the associate or an investment in a joint venture is impaired in accordance with IAS 28 Investments in Associates and Joint Ventures. If this is the case the Group calculates the amount of impairment as the difference between the recoverable amount of the associate or joint venture and its carrying value and recognizes the amount in the ‘share of profit or loss of an associate’ in the statement of comprehensive income in accordance with IAS 36 Impairment of Assets. In determining the value in use of the investment, the Group estimates:

(a) Its share of the present value of the estimated future cash flows expected to be generated by the associate or joint venture, including the cash flows from the operations of the associate and the proceeds on the ultimate disposal of the investment; or
(b) The present value of the estimated future cash flows expected to arise from dividends to be received from the investment and from its ultimate disposal.

Because goodwill that forms part of the carrying amount of an investment in an associate or an investment in a joint venture is not separately recognized, it is not tested for impairment separately by applying the requirements for impairment testing goodwill in IAS 36 Impairment of Assets.

Upon loss of significant influence over the associate or joint venture, the Group measures and recognizes any retaining investment at its fair value. Any difference between the carrying amount of the associate or joint venture upon loss of significant influence and the fair value of the retaining investment and proceeds from disposal is recognized in profit or loss. Furthermore, if an investment in an associate becomes an investment in a joint venture or an investment in a joint venture becomes an investment in an associate, the entity continues to apply the equity method and does not remeasure the retained interest.

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(13) Property, plant and equipment

Property, plant and equipment is stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. Such cost includes the cost of dismantling and removing the item and restoring the site on which it is located and borrowing costs for construction in progress if the recognition criteria are met. Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item is depreciated separately. When significant parts of property, plant and equipment are required to be replaced in intervals, the Group recognized such parts as individual assets with specific useful lives and depreciation, respectively. The carrying amount of those parts that are replaced is derecognized in accordance with the derecognition provisions of IAS 16 Property, plant and equipment. When a major inspection is performed, its cost is recognized in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognized in profit or loss as incurred.

Depreciation is calculated on a straight-line basis over the estimated economic lives of the following assets:

Buildings	10`～`51 years
Machinery and equipment	3`～`12 years
Transportation equipment	5 years
Office equipment	5 years
Right-of-use assets/leased assets (Note)	2`～`51 years
Leasehold improvements	5`～`15 years
Other equipment	5 years

(Note): The Group reclassified the lease assets to right-of-use assets after the adoption of IFRS 16 from January 1, 2019.

An item of property, plant and equipment and any significant part initially recognized is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset is recognized in profit or loss.

The assets’ residual values, useful lives and methods of depreciation are reviewed at each financial year end and adjusted prospectively, if appropriate.

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(14) Investment property

The accounting policy from January 1, 2019 as follow:

The Group’s owned investment properties are measured initially at cost, including transaction costs. The carrying amount includes the cost of replacing part of an existing investment property at the time that cost is incurred if the recognition criteria are met and excludes the costs of day-to-day servicing of an investment property. Subsequent to initial recognition, other than those that meet the criteria to be classified as held for sale (or are included in a disposal group that is classified as held for sale) in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, investment properties are measured using the cost model in accordance with the requirements of IAS 16 Property, plant and equipment for that model. If investment properties are held by a lessee as right-of-use assets and is not held for sale in accordance with IFRS 5, investment properties are measured in accordance with the requirements of IFRS 16.

Depreciation is calculated on a straight-line basis over the estimated economic lives of the following assets:

Buildings 40 years

Investment properties are derecognized when either they have been disposed of or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. The difference between the net disposal proceeds and the carrying amount of the asset is recognized in profit or loss in the period of derecognition.

The Group transfers to or from investment properties when there is a change in use for these assets.

Properties are transferred to or from investment properties when the properties meet, or cease to meet, the definition of investment property and there is evidence of the change in use.

The accounting policy before January 1, 2019 as follow:

The Group’s investment properties are measured initially at cost, including transaction costs. The carrying amount includes the cost of replacing part of an existing investment property at the time that cost is incurred if the recognition criteria are met and excludes the costs of day-to-day servicing of an investment property. Subsequent to initial recognition, investment properties are measured using the cost model in accordance with the requirements of IAS 16 Property, plant and equipment for that model, other than those that meet the criteria to be classified as held for sale (or are included in a disposal group that is classified as held for sale) in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations.

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The Group transfers to or from investment properties when there is a change in use for these assets.

Properties are transferred to or from investment properties when the properties meet, or cease to meet, the definition of investment property and there is evidence of the change in use.

(15) Leases

The accounting policy from January 1, 2019 as follow:

For contracts entered on or after January 1, 2019, the Group assesses whether the 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 for a period of time, the Group assesses whether, throughout the period of use, has both of the following:

(a) the right to obtain substantially all of the economic benefits from use of the identified asset; and (b) the right to direct the use of the identified asset.

The Group elected not to reassess whether a contract is, or contains, a lease on January 1, 2019. The Group is permitted to apply IFRS 16 to contracts that were previously identified as leases applying IAS 17 and IFRIC 4 but not to apply IFRS 16 to contracts that were not previously identified as containing a lease applying IAS 17 and IFRIC 4.

For a contract that is, or contains, a lease, the Group accounts for each lease component within the contract as a lease separately from non-lease components of the contract. For a contract that contains a lease component and one or more additional lease or non-lease components, the Group allocates the consideration in the contract to each lease component on the basis of the relative stand-alone price of the lease component and the aggregate stand-alone price of the non-lease components. The relative stand-alone price of lease and non-lease components shall be determined on the basis of the price the lessor, or a similar supplier, would charge the Group for that component, or a similar component, separately. If an observable stand-alone price is not readily available, the Group estimates the standalone price, maximising the use of observable information.

Group as a lessee

Except for leases that meet and elect short-term leases or leases of low-value assets, the Group recognizes right-of-use asset and lease liability for all leases which the Group is the lessee of those lease contracts.

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At the commencement date, the Group measures the lease liability at the present value of the lease payments that are not paid at that date. The lease payments are discounted using the interest rate implicit in the lease, if that rate can be readily determined. If that rate cannot be readily determined, the Group uses its incremental borrowing rate. At the commencement date, the lease payments included in the measurement of the lease liability comprise the following payments for the right to use the underlying asset during the lease term that are not paid at the commencement date:

(a) fixed payments (including in-substance fixed payments), less any lease incentives receivable;
(b) variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;
(c) amounts expected to be payable by the lessee under residual value guarantees;
(d) the exercise price of a purchase option if the Group is reasonably certain to exercise that option; and
(e) payments of penalties for terminating the lease, if the lease term reflects the lessee exercising an option to terminate the lease.

After the commencement date, the Group measures the lease liability on an amortised cost basis, which increases the carrying amount to reflect interest on the lease liability by using an effective interest method; and reduces the carrying amount to reflect the lease payments made.

At the commencement date, the Group measures the right-of-use asset at cost. The cost of the right-ofuse asset comprises:

(a) the amount of the initial measurement of the lease liability;
(b) any lease payments made at or before the commencement date, less any lease incentives received;
(c) any initial direct costs incurred by the lessee; and
(d) an estimate of costs to be incurred by the lessee in dismantling and removing the underlying asset, restoring the site on which it is located or restoring the underlying asset to the condition required by the terms and conditions of the lease.

For subsequent measurement of the right-of-use asset, the Group measures the right-of-use asset at cost less any accumulated depreciation and any accumulated impairment losses. That is, the Group measures the right-of-use applying a cost model.

If the lease transfers ownership of the underlying asset to the Group by the end of the lease term or if the cost of the right-of-use asset reflects that the Group will exercise a purchase option, the Group depreciates the right-of-use asset from the commencement date to the end of the useful life of the underlying asset. Otherwise, the Group depreciates the right-of-use asset 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.

The Group applies IAS 36 “Impairment of Assets” to determine whether the right-of-use asset is impaired and to account for any impairment loss identified.

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Except for those leases that the Group accounted for as short-term leases or leases of low-value assets, the Group presents right-of-use assets and lease liabilities in the balance sheet and separately presents lease-related interest expense and depreciation charge in the statements comprehensive income.

For short-term leases or leases of low-value assets, the Group elects to recognize the lease payments associated with those leases as an expense on either a straight-line basis over the lease term or another systematic basis.

Group as a lessor

At inception of a contract, the Group classifies each of its leases as either an operating lease or a finance lease. A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership of an underlying asset. A lease is classified as an operating lease if it does not transfer substantially all the risks and rewards incidental to ownership of an underlying asset. At the commencement date, the Group recognizes assets held under a finance lease in its balance sheet and present them as a receivable at an amount equal to the net investment in the lease.

For a contract that contains lease components and non-lease components, the Group allocates the consideration in the contract applying IFRS 15.

The Group recognizes lease payments from operating leases as rental income on either a straight-line basis or another systematic basis. Variable lease payments for operating leases that do not depend on an index or a rate are recognized as rental income when incurred.

The accounting policy before January 1, 2019 as follow:

Group as a lessee

Finance leases which transfer to the Group substantially all the risks and benefits incidental to ownership of the leased item, are capitalized at the commencement of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognized in profit or loss.

A leased asset is depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the lease term.

Operating lease payments are recognized as an expense on a straight-line basis over the lease term.

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Group as a lessor

Leases in which the Group does not transfer substantially all the risks and benefits of ownership of the asset are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognized over the lease term on the same basis as rental income. Contingent rents are recognized as revenue in the period in which they are earned.

(16) Intangible assets

Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is its fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortization and accumulated impairment losses, if any. Internally generated intangible assets, excluding capitalized development costs, are not capitalized and expenditure is reflected in profit or loss for the year in which the expenditure is incurred.

The useful lives of intangible assets are assessed as either finite or indefinite.

Intangible assets with finite lives are amortized over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortization period and the amortization method for an intangible asset with a finite useful life are reviewed at least at the end of each financial year. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortization period or method, as appropriate, and are treated as changes in accounting estimates.

Intangible assets with indefinite useful lives are not amortized, but are tested for impairment annually, either individually or at the cash-generating unit level. The assessment of indefinite life is reviewed annually to determine whether the indefinite life continues to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective basis.

Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in profit or loss when the asset is derecognized.

Research and development costs

Research costs are expensed as incurred. Development expenditures on an individual project are recognized as an intangible asset when the Group can demonstrate:

(a) The technical feasibility of completing the intangible asset so that it will be available for use or sale (b) Its intention to complete and its ability to use or sell the asset

(d) The availability of resources to complete the asset

(e) The ability to measure reliably the expenditure during development.

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Following initial recognition of the development expenditure as an asset, the cost model is applied requiring the asset to be carried at cost less any accumulated amortisation and accumulated impairment losses. Amortisation of the asset begins when development is complete and the asset is available for use. It is amortised over the period of expected future benefit.

A summary of the policies applied to the Group’s intangible assets is as follows:

Cost of computer software Useful lives 1 ～ 3 years Amortization method used Amortized on a straight-line basis Internally generated or acquired Acquired

(17) Impairment of non-financial assets

The Group assesses at the end of each reporting period whether there is any indication that an asset in the scope of IAS 36 Impairment of Assets may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Group estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s (“CGU”) fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.

For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such indication exists, the Group estimates the asset’s or cash-generating unit’s recoverable amount. A previously recognized impairment loss is reversed only if there has been an increase in the estimated service potential of an asset which in turn increases the recoverable amount. However, the reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years.

An impairment loss of continuing operations or a reversal of such impairment loss is recognized in profit or loss.

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(18) Revenue recognition

The Group’s revenue arising from contracts with customers are primarily related to sale of goods and rendering of services. The accounting policies are explained as follow:

Sale of goods

The Group manufactures and sells machinery. Sales are recognized when control of the goods is transferred to the customer and the goods are delivered to the customers. The main products of the Group are integrated circuits, semiconductor devices and computer motherboards, etc and revenue is recognized based on the consideration stated in the contract. For certain sales of goods transactions, they are usually accompanied by volume discounts (based on the accumulated total sales amount for a specified period). Therefore, revenue from these sales is recognized based on the price specified in the contract, net of the estimated volume discounts.

Products manufactured according to customer's agreed specifications if the customer controls the product at the time of creation or enhancement of the product, the Group will gradually recognize revenue over time.

The Group provides its customer with a warranty with the purchase of the products. The warranty provides assurance that the product will operate as expected by the customers. And the warranty is accounted in accordance with IAS 37.

The credit period of the Group 's sale of goods is from 30 to 150 days. For most of the contracts, when the Group transfers the goods to customers and has a right to an amount of consideration that is unconditional, these contracts are recognized as trade receivables. The Group usually collects the payments shortly after transfer of goods to customers; therefore, there is no significant financing component to the contract. For some of the contracts, the Group has transferred the goods to customers but does not has a right to an amount of consideration that is unconditional, these contacts should be presented as contract assets. Besides, in accordance with IFRS 9, the Group measures the loss allowance for a contract asset at an amount equal to the lifetime expected credit losses. However, for some contracts, part of the consideration was received from customers upon signing the contract, then the Group has the obligation to transfer the goods to customers subsequently; accordingly, these amounts are recognized as contract liabilities.

Rendering of services

Revenue is recognized when the Group finishes the processing services.

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(19) Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of the respective assets. All other borrowing costs are expensed in the period they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.

(20) Post-employment benefits

All regular employees of the Company and its domestic subsidiaries are entitled to a pension plan that is managed by an independently administered pension fund committee. Fund assets are deposited under the committee’s name in the specific bank account and hence, not associated with the Company and its domestic subsidiaries. Therefore fund assets are not included in the Group’s consolidated financial statements. Pension benefits for employees of the overseas subsidiaries and the branches are provided in accordance with the respective local regulations.

For the defined contribution plan, the Company and its domestic subsidiaries will make a monthly contribution of no less than 6% of the monthly wages of the employees subject to the plan. The Company recognizes expenses for the defined contribution plan in the period in which the contribution becomes due. Overseas subsidiaries and branches make contribution to the plan based on the requirements of local regulations.

Post-employment benefit plan that is classified as a defined benefit plan uses the Projected Unit Credit Method to measure its obligations and costs based on actuarial assumptions. Re-measurements, comprising of the effect of the actuarial gains and losses, the effect of the asset ceiling (excluding net interest) and the return on plan assets, excluding net interest, are recognized as other comprehensive income with a corresponding debit or credit to retained earnings in the period in which they occur. Past service costs are recognized in profit or loss on the earlier of:

(a) the date of the plan amendment or curtailment, and
(b) the date that the Group recognizes restructuring-related costs

Net interest is calculated by applying the discount rate to the net defined benefit liability or asset, both as determined at the start of the annual reporting period, taking account of any changes in the net defined benefit liability (asset) during the period as a result of contribution and benefit payment.

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(21) Share-Based Payment Transactions

The cost of equity-settled transactions between the Group and its subsidiaries is recognized based on the fair value of the equity instruments granted. The fair value of the equity instruments is determined by using an appropriate pricing model.

The cost of equity-settled transactions is recognized, together with a corresponding increase in other capital reserves in equity, over the period in which the performance and/or service conditions are fulfilled. The cumulative expense recognized for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Group’s best estimate of the number of equity instruments that will ultimately vest. The income statement expense or credit for a period represents the movement in cumulative expense recognized as at the beginning and end of that period.

No expense is recognized for awards that do not ultimately vest, except for equity-settled transactions where vesting is conditional upon a market or non-vesting condition, which are treated as vesting irrespective of whether or not the market or non-vesting condition is satisfied, provided that all other performance and/or service conditions are satisfied.

Where the terms of an equity-settled transaction award are modified, the minimum expense recognized is the expense as if the terms had not been modified, if the original terms of the award are met. An additional expense is recognized for any modification that increases the total fair value of the sharebased payment transaction, or is otherwise beneficial to the employee as measured at the date of modification.

Where an equity-settled award is cancelled, it is treated as if it vested on the date of cancellation, and any expense not yet recognized for the award is recognized immediately. This includes any award where non-vesting conditions within the control of either the entity or the employee are not met. However, if a new award is substituted for the cancelled award, and designated as a replacement award on the date that it is granted, the cancelled and new awards are treated as if they were a modification of the original award, as described in the previous paragraph.

The dilutive effect of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share.

The cost of restricted stocks issued is recognized as salary expense based on the fair value of the equity instruments on the grant date, together with a corresponding increase in other capital reserves in equity, over the vesting period. The Group recognized unearned employee salary which is a transitional contra equity account; the balance in the account will be recognized as salary expense over the passage of vesting period.

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(22) Income taxes

Income tax expense (income) is the aggregate amount included in the determination of profit or loss for the period in respect of current tax and deferred tax.

Current income tax

Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities, using the tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period. Current income tax relating to items recognized in other comprehensive income or directly in equity is recognized in other comprehensive income or equity and not in profit or loss.

The income tax for undistributed earnings is recognized as income tax expense in the subsequent year when the distribution proposal is approved by the Shareholders’ meeting.

Deferred tax

Deferred tax is provided on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred tax liabilities are recognized for all taxable temporary differences, except:

(a) Where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss
(b) In respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint arrangements, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred tax assets are recognized for all deductible temporary differences, carry forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilized, except:

(a) Where the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss.
(b) In respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint arrangements, deferred tax assets are recognized only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilized.

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Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realized or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted at the reporting date. The measurement of deferred tax assets and deferred tax liabilities reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

Deferred tax relating to items recognized outside profit or loss is recognized outside profit or loss. Deferred tax items are recognized in correlation to the underlying transaction either in other comprehensive income or directly in equity. Deferred tax assets are reassessed at each reporting date and are recognized accordingly.

Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current income tax assets against current income tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

(23) Business combinations and goodwill

Business combinations are accounted for using the acquisition method. The consideration transferred, the identifiable assets acquired and liabilities assumed are measured at acquisition date fair value. For each business combination, the acquirer measures any non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s identifiable net assets. Acquisition-related costs are accounted for as expenses in the periods in which the costs are incurred and are classified under administrative expenses.

When the Group acquires a business, it assesses the assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree.

If the business combination is achieved in stages, the acquisition date fair value of the acquirer’s previously held equity interest in the acquiree is remeasured to fair value at the acquisition date through profit or loss.

Any contingent consideration to be transferred by the acquirer will be recognized at the acquisition-date fair value. Subsequent changes to the fair value of the contingent consideration which is deemed to be an asset or liability, will be recognized in accordance with IAS 39 Financial Instruments: Recognition and Measurement either in profit or loss or as a change to other comprehensive income. However, if the contingent consideration is classified as equity, it should not be remeasured until it is finally settled within equity.

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Goodwill is initially measured as the amount of the excess of the aggregate of the consideration transferred and the non-controlling interest over the net fair value of the identifiable assets acquired and the liabilities assumed. If this aggregate is lower than the fair value of the net assets acquired, the difference is recognized in profit or loss.

After initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-generating units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units. Each unit or group of units to which the goodwill is so allocated represents the lowest level within the Group at which the goodwill is monitored for internal management purpose and is not larger than an operating segment before aggregation.

Where goodwill forms part of a cash-generating unit and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation. Goodwill disposed of in this circumstance is measured based on the relative recoverable amounts of the operation disposed of and the portion of the cash-generating unit retained.

5. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTMATES AND ASSUMPTIONS

The preparation of the Group’s consolidated financial statements require management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities, at the end of the reporting period. However, uncertainty about these assumption and estimate could result in outcomes that require a material adjustment to the carrying amount of the asset or liability affected in future periods.

Judgement

In the process of applying the Group’s accounting policies, management has made the following judgements, which have the most significant effect on the amounts recognized in the consolidated financial statements:

Revenue recognition

The Group based on trading patterns and whether the economic substance were expose to the sale of goods or services related to the significant risks and rewards, to determine whether the Group should be classified as the principal of the transaction or agent. When expose to the sale of goods or services related to the significant risks and rewards, the principal of the transaction should recognize the total receivables or received economic benefit as revenue; if determine as the agent, recognize the net transaction as revenue.

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The Group provides electronic manufacturing services and integrated circuit packaging and testing manufacturing services, determined as to conform to the following indicators; it is recognized as total revenue collected:

(a) has the primary responsibility to the provision of goods or services provided

(b) assumed inventory risk
(c) assumed customer’s credit risk

Estimates and assumptions

The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

(1) Fair value of financial instruments

Where the fair value of financial assets and financial liabilities recorded in the balance sheet cannot be derived from active markets, they are determined using valuation techniques including income approach (for example the discounted cash flows model) or market approach. Changes in assumptions about these factors could affect the reported fair value of the financial instruments. Please refer to Note 12 for more details.

(2) Pension benefits

The cost of post-employment benefit and the present value of the pension obligation under defined benefit pension plans are determined using actuarial valuations. An actuarial valuation involves making various assumptions. These include the determination of the discount rate and changes of the future salary etc. Please refer to Note 6 more details.

(3) Income tax

Uncertainties exist with respect to the interpretation of complex tax regulations and the amount and timing of future taxable income. Given the wide range of international business relationships and the long-term nature and complexity of existing contractual agreements, differences arising between the actual results and the assumptions made, or future changes to such assumptions, could necessitate future adjustments to tax income and expense already recorded. The Group establishes provisions, based on reasonable estimates, for possible consequences of audits by the tax authorities of the respective counties in which it operates. The amount of such provisions is based on various factors, such as experience of previous tax audits and differing interpretations of tax regulations by the taxable entity and the responsible tax authority. Such differences of interpretation may arise on a wide variety of issues depending on the conditions prevailing in the respective Group company's domicile.

167

Deferred tax assets are recognized for all carryforward of unused tax losses and unused tax credits and deductible temporary differences to the extent that it is probable that taxable profit will be available or there are sufficient taxable temporary differences against which the unused tax losses, unused tax credits or deductible temporary differences can be utilized. The amount of deferred tax assets determined to be recognized is based upon the likely timing and the level of future taxable profits and taxable temporary differences together with future tax planning strategies.

(4) Accounts receivables—estimation of impairment loss

The Group estimates the impairment loss of accounts receivables at an amount equal to lifetime expected credit losses. The credit loss is the present value of the difference between the contractual cash flows that are due under the contract (carrying amount) and the cash flows that expects to receive (evaluate forward looking information). However, as the impact from the discounting of short-term receivables is not material, the credit loss is measured by the undiscounted cash flows. Where the actual future cash flows are lower than expected, a material impairment loss may arise. Please refer to Note 6 for more details

(5) Inventories

Estimates of net realisable value of inventories take into consideration that inventories may be damaged, become wholly or partially obsolete, or their selling prices have declined. The estimates are based on the most reliable evidence available at the time the estimates are made. Please refer to Note 6 for more details.

6. CONTENTS OF SIGNIFICANT ACCOUNTS

(1) CASH AND CASH EQUIVALENTS

Cash on hand Demand deposits Total	Dec. 31,2019 $207 1,701,205 $1,701,412	Dec. 31,2018
		$226 762,085
		$762,311

(2) NOTES RECEIVABLES

NOTES RECEIVABLES
Notes receivables Less : loss allowance Total	Dec. 31,2019 $1,770 (`－`) $1,770	Dec. 31,2018
		$10,510 (`－`)
		$10,510

Notes receivables were not pledged.

The Group follows the requirement of IFRS 9 to assess the impairment. Please refer to Note 6.(20) for more details on loss allowance and Note 12 for details on credit risk.

168

`－` (3) ACCOUNTS RECEIVABLES AND ACCOUNTS RECEIVABLES AFFILIATES

(a) Details are as follows:

Accounts receivables Add : Pledged accounts receivables Less : loss allowance Subtotal Accounts receivables -affiliates Less : loss allowance Subtotal Total	Dec. 31,2019 Dec. 31,2018 $2,481,591 $2,177,906 `－` 224,523 (26,267) (17,329) 2,455,324 2,385,100 229,557 695,348 (`－`) (1,200) 229,557 694,148 $2,684,881 $3,079,248

(b) Accounts receivables are generally on 30-150 day terms. The total carrying amount as of December 31, 2019 and 2018 were $2,712,918 thousand and $3,108,287 thousand, respectively. Please refer to Note 6.(20) for more details on loss allowance of accounts receivables for the years ended December 31, 2019 and 2018. Please refer to Note 12 for more details on credit risk management.
(c) The Group signed loan agreements with the following banks and used its accounts receivable as securities for the loans. Certain of the Group’s accounts receivable were under pledge to the banks.

The details of the loan agreements are as follows:

Dec. 31, 2019

None.

Dec. 31, 2018

Dec. 31, 2018
Bank	Contractperiod August 20, 2018 ~August 20, 2019	Bankingfacility $135,000	Loan amount	Factored amount
Far Eastern Bank			$135,000	$224,523

(4) INVENTORIES, NET

(a) Details are as follows:

Raw materials Supplies Work in progress Finished goods Total	Dec. 31,2019 Dec. 31,2018 $921,885 $1,280,124 76,261 102,425 230,407 130,325 21,866 54,595 $1,250,419 $1,567,469

169

(b)

)
Cost of inventories sold Loss on a realizable value and obsolescence of inventories Loss in inventory write-off Inventory loss Cost of Goods Sold	For theyears ended December 31
	2019 2018 $15,635,374 $14,606,096 54,177 `－` 51,651 48,841 1,001 1,118 $15,742,203 $14,656,055

(c) As of December 31, 2019 and 2018, inventories were insured for $13,182,384 thousand and $12,372,050 thousand, respectively.

(d) No inventories were pledged.

(5) FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME-NON

CURRENT

Equity instrument investments measured at fair value through other comprehensive income-Non-current`：` Unlisted companies stocks	Dec. 31,2019 $226,860	Dec. 31,2018
		$234,878

The Group classified certain of its financial assets as financial assets at fair value through other comprehensive income. Financial assets at fair value through other comprehensive income were not pledged.

(6) INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD

(a) The group investments accounted for using the equity method are as follows:

Investee Company Investments in associates: OSE PROPERTIES, INC. ATP ELECTRONICS, TAIWAN INC. INFOFAB, INC. SCS HIGHTECH INC. Total	Type of stock	Dec. 31,	2019 Ownership 39.99`％` 18.31`％` 13.32`％` 18.17`％`	Dec. 31,2018	Dec. 31,2018
		Amount `－` $448,503 10,880 `－` $459,383		Amount `－` $449,790 8,288 `－` $458,078	Ownership
	Common stock Common stock Common stock Common stock				39.99`％` 18.31`％` 13.52`％` 18.17`％`

170

(b) Owing to the continue loss of OSE PROPERTIES, INC., the accumulated investment loss has made the book value of long-term investment declining to zero, the company will no longer recognize the investment loss.
(c) In September 2006, shares of the investee company ATP were exchanged with ATP TAIWAN so that the Company would hold 15.13% ownership of ATP TAIWAN after the exchange. The Group had purchased 1,929 thousand shares of treasury stocks in February 2008. So the Group held 18.31% ownership of ATP TAIWAN.
(d) SCS HIGHTECH INC. was written off as losses in 2004, and the company was rescinded based on the approval granted by Science Park Bureau on March 8, 2007 by Doc No.0960006126.
(e) Part of the shares in long-term equity investments has been pledged to the banks as securities for bank loans granted to the Group. Please refer to Note 8 for the more details.
(f) For the years ended December 31, 2019 and 2018, the related shares of investment income from the associates were $40,536 thousand and $68,497 thousand, respectively. For the years ended December 31, 2019 and 2018, the related shares of other comprehensive income from the associates were $1,081 thousand and $0, respectively.
(g) In year 2019 and 2018, the Group obtained cash dividend from ATP TAIWAN and InfoFab Co.,Ltd., for $35,422 thousand and $1,265 thousand, $33,210 thousand and $0, respectively. They are recorded as credit to “Investments accounted for using the equity method”.
(h)The Group’s investments by using the equity method are not published price quotations, which are not individually material .The aggregate financial information of the Group’s investments is as follows：.

Total assets Total liabilities Revenue Profit Other comprehensive income (loss) Total comprehensive income	Dec. 31,2019	Dec. 31,2019
	2019
	$911,179 40,536 (2,177) 38,359	$956,895 68,497 2,661 71,158

171

(7) PROPERTY, PLANT AND EQUIPMENT

Owner occupied property, plant and equipment Property, plant and equipment leased out under operating leases Total	Dec. 31,2019	Dec. 31,2018
	$6,123,791 140,455	$7,063,908 (Note)
	$6,264,246	$7,063,908

(Note)：The Group adopted IFRS 16 since January 1, 2019. The Group elected not to restate prior periods in accordance with the transition provision in IFRS 16.

172

(a) Owner occupied property, plant and equipment (applicable under IFRS 16 requirements)

Land and land Improvements	Buildings	Machinery and equipment	Transportation equipment	Office equipment $67,158 75 (590) 595 (326) $66,912	Total $23,910,318 290,741 (2,564,245) 424,988 (12,809) $22,048,993
`－` `－` `－` `－` `－`	$6,989,653 `－` `－` 68,897 `－`	$16,323,320 4,522 (2,563,330) 687,154 (11,699)	$4,446 `－` `－` `－` (121)
`－`	$7,058,550	$14,439,967	$4,325
	$4,327,874 222,154 `－` `－` `－`	$12,302,527 1,179,429 (2,550,837) 40,739 (10,613)	$3,659 247 `－` `－` (101)	$64,932 965 (585) 505 (298)	$17,019,394 1,427,708 (2,551,715) 41,244 (11,429) $15,925,202 $6,890,924 $6,123,791
`－`	$4,550,028	$10,961,245	$3,805	$65,519
`－`	$2,661,779	$4,020,793	$787	$2,226
`－`	$2,508,522	$3,478,722	$520	$1,393

(Note)：The Group adopted IFRS 16 since January 1, 2019. The Group elected not to restate prior periods in accordance with the transition provision in IFRS 16.

173

(b) Property, plant and equipment leased out under operating leases (applicable under IFRS 16 requirements)

Cost: As of Jan. 1, 2019 Additions Disposals Transfers Exchange differences As of Dec. 31, 2019 Depreciation and impairment: As of Jan. 1, 2019 Depreciation Disposals Transfers Exchange differences As of Dec. 31, 2019 Net carrying amounts as at: As of Jan. 1, 2019 As of Dec. 31, 2019	Buildings
	$279,342 `－` `－` `－` `－`
	$279,342
	$132,203 6,684 `－` `－` `－`
	$138,887
	$147,139
	$140,455

174

Land and land Improvements	Buildings	Machinery and equipment	Transportation equipment	Office equipment	Rental assets	Leased assets	Other equipment	Construction in progress and equipment awaiting examination	Total
`－` `－` `－` `－` `－`	$6,951,055 `－` (14,399) 52,997 `－`	$15,716,783 3,692 (165,357) 764,269 3,933	$5,216 `－` (717) `－` (53)	$67,024 105 (129) `－` 158	$279,342 `－` `－` `－` `－`	$158,211 `－` `－` (124,350) `－`	$368,331 3,178 (947) 11,377 (395)	$17,108 408,298 `－` (281,187) (22)	$23,563,070 415,273 (181,549) 423,106 3,621
`－`	$6,989,653	$16,323,320	$4,446	$67,158	$279,342	$33,861	$381,544	$144,197	$24,223,521
	$4,125,549 216,703 (14,378) `－` `－`	$11,250,823 1,122,583 (130,594) 54,815 4,900	$3,914 501 (717) `－` (39)	$63,913 962 (114) `－` 171	$125,518 6,685 `－` `－` `－`	$51,565 16,189 `－` (59,738) `－`	$295,122 26,321 (875) `－` (166)	`－` `－` `－` `－` `－`	$15,916,404 1,389,944 (146,678) (4,923) 4,866
`－`	$4,327,874	$12,302,527	$3,659	$64,932	$132,203	$8,016	$320,402	`－`	$17,159,613
`－`	$2,825,506	$4,465,960	$1,302	$3,111	$153,824	$106,646	$73,209	$17,108	$7,646,666
`－`	$2,661,779	$4,020,793	$787	$2,226	$147,139	$25,845	$61,142	$144,197	$7,063,908

175

(d) Affects both the cash and non-cash items of investing activities ：

Item	For theyears end December 31	For theyears end December 31
	2019	2018
Acquisition of property, plant, and equipment expenditure: Increase of property, plant and equipment Transfer to right-of-use assets Increase of prepayment for equipment (Increase) Decrease of payables on equipment Cash expenditure	$675,819 (33,861) (5,938) 92,462	$838,379 `－` 118,667 (184,083)
	$728,482	$772,963

(e) Details of capitalized borrowing costs are as follows:

Item	For theyears ended December 31	For theyears ended December 31
	2019	2018
Prepayments for equipment Capitalisation rate of borrowing costs	$4,980 3.04`％～`3.95`％`	$4,308 2.89`％～`3.78`％`

(f) As of December 31, 2019 and 2018, fixed assets were insured for $10,399,936 thousand and $11,607,638 thousand, respectively.
(g) Please refer to Note 8 for more details on property, plant and equipment under pledge.

(8) INVESTMENT PROPERTY

Cost`：` As of Jan. 1, 2019 Transfer to property, plant and equipment Exchange difference As of Dec. 31, 2019 As of Jan.1, 2018 Exchange difference As of Dec.31, 2018 Depreciation and impairment: As of Jan. 1, 2019 Depreciation	Buildings
	$670,447 (39,911) (13,967)
	$616,569
	$649,932 20,515
	$670,447
	$188,828 24,304

176

Transfer to property, plant and equipment Exchange difference As of Dec. 31, 2019 As of Jan.1, 2018 Depreciation Additions from other non-current assets Exchange difference As of Dec.31, 2018 Net carrying amount`：` As of Dec.31, 2019 As of Dec.31, 2018	Buildings
	(32,542) (4,454)
	$176,136
	$155,083 23,819 4,923 5,003
	$188,828
	$440,433
	$481,619

No investment properties were pledged.

The fair value of investment property is $486,819 thousand and $503,470 thousand as of December 31, 2019 and 2018, respectively. The fair value has been determined based on valuations performed by an independent appraiser and on transactions observable in the market. The investment property has no rent revenue.

(9) INTANGIBLE ASSETS

(a) As of December 31, 2019 and 2018, the cost of the computer software, original cost, accumulated amortization and amount of amortization in the book of the Group is listed as below:

Cost: As of Jan. 1, 2019 Addition Transfer Other changes Exchange differences As of Dec. 31, 2019 As of Jan. 1, 2018 Addition Transfer Other changes Exchange differences As of Dec. 31, 2018	Computer software
	$343,374 32,657 1,519 (15) `－`
	$377,535
	$271,625 63,714 `－` 8,035 `－`
	$343,374

177

Amortization and impairment: As of Jan. 1, 2019 Amortization Exchange differences As of Dec. 31, 2019 As of Jan. 1, 2018 Amortization Exchange differences As of Dec. 31, 2018 Net carrying amount as of: Dec. 31, 2019 Dec. 31, 2018	Computer software
	$253,741 65,339 10
	$319,090
	$191,945 61,792 4
	$253,741
	$58,445
	$89,633

(b) Amortization expense of intangible assets under the statement of comprehensive income:

Operating costs Operating expenses	For theyears ended December 31	For theyears ended December 31
	2019	2018
	$38,575	$38,371
	$26,764	$23,421

(10) PREPAYMENTS

Detail are as follows :

Detail are as follows :
Dec. 31,2019 Current assets`－`prepayments Prepaid expenses $46,696 Other prepayments 6,426 Total $53,122 Non-current assets`－`prepayments for equipment`：` Prepayment for equipment $151,901	Dec. 31,2018
	$46,817 4,631
	$51,448
	$180,354

(11) LONG-TERM RECEIVABLES-AFFILIATES

(a) Details are as follows:

Details are as follows:
Loan receivable -PROPERTIES Less :loss allowance Net	Dec. 31,2019 $93,315 (`－`) $93,315	Dec. 31,2018
		$95,300 (`－`)
		$95,300

178

(c) OSE PHILIPPINES, INC. lent USD 4,387 thousand to OSE PROPERTIES Inc. in July 31, 1996. OSE PROPERTIES Inc. disposed of part of the land and returned USD 1,285 thousand in the first quarter of 2015. The principal was USD 3,102 thousand as of December 31, 2019. The interest rates for the years ended December 31, 2019 and 2018 were both 2.50%. The contract periods were 10 years and may be extended to another 10 years, if necessary.

(12) SHORT-TERM LOANS

(a) Details are as follows:

Items L/C Unsecured bank loans Mortgage loan on machine and equipment Total	Dec. 31,2019 $315,900 2,057,866 `－` $2,373,766	Dec. 31,2018
		$798,069 1,924,803 83,985
		$2,806,857

(b) The ranges of interest rates and the due dates:

	Dec. 31,2019	Dec. 31,2018
Ranges of interest rates	1.55%～3.17%	1.06%～4.25%
Due dates	January 9, 2020～	January 14, 2019～
	December 17, 2020	November 30, 2019

(c) As of December 31, 2019 and 2018, the Group’s unused short-term lines of credits amount to $1,394,036 thousand and $614,906 thousand, respectively.
(d) Part of property, plant and equipment, stocks, time deposits, and deposits reserved for repayment are pledged as security for the Group’s short-term borrowings. Please refer to Note 8 for more details.

(13) SHORT-TERM NOTES PAYABLE

(a) Details are as follows:

Details are as follows:
Par value of commercial papers Less : Discount for short-term notes payable Net	Dec. 31,2019 $380,000 (790) $379,210	Dec. 31,2018
		$350,000 (390)
		$349,610

179

(b) The ranges of interest rates and the due dates:

Ranges of interest rates Due dates	Dec. 31,2019 1.788%～1.858% January 9, 2020～ February 27, 2020	Dec. 31,2018
		1.938%～2.088% January 3, 2019～ March 7, 2019

(14) LONG-TERM LOANS

(a) Details are as follows:

Items Mortgage loan Less: Due within one year Net	Dec. 31,2019 $2,095,326 (1,190,490) $904,836	Dec. 31,2018
		$3,053,515 (1,340,270)
		$1,713,245

(b) The ranges of interest rates and the due dates:

Ranges of interest rates Due dates	Dec. 31,2019 1.80％～3.30％ October 31, 2020～ August 15, 2023	Dec. 31,2018
		1.80%～4.65% January 26, 2019～ August 15, 2023

(c) Part of property, plant and equipment, and deposits reserved for repayment are pledged as security for the Group’s long-term borrowings. Please refer to Note 8 for more details.

(15) LONG-TERM LEASE PAYABLE

The Group has finance leases contracts for various items of machinery. These leases contain purchase options. Future minimum lease payments under finance leases together with the present value of the net minimum lease payments are as follows:

Dec. 31,2019	Dec. 31,2019	Dec. 31,2018	Dec. 31,2018
Minimum payments	Present value ofpayments	Minimum payments	Present value ofpayments
		$2,617 `－`	$2,610 `－`
		2,617 (7)	2,610 `－`
		$2,610	$2,610
			$2,610
			`－`

180

(16) POST-EMPLOYMENT BENEFITS

(a) Defined contribution plan

The Company and its domestic subsidiaries adopt a defined contribution plan in accordance with the Labor Pension Act of the R.O.C. Under the Labor Pension Act, the Company and its domestic subsidiaries will make monthly contributions of no less than 6% of the employees’ monthly wages to the employees’ individual pension accounts. The Company and its domestic subsidiaries have made monthly contributions of 6% of each individual employee’s salaries or wages to employees’ pension accounts.

Subsidiaries located in the People’s Republic of China will contribute social welfare benefits based on a certain percentage of employees’ salaries or wages to the employees’ individual pension accounts.

Pension benefits for employees of overseas subsidiaries and branches are provided in accordance with the local regulations.

Expenses under the defined contribution plan for the years ended December 31, 2019 and 2018 are $113,103 thousand and $102,285 thousand, respectively.

(b) Defined benefits plan

The Company and its domestic subsidiaries adopt a defined benefit plan in accordance with the Labor Standards Act of the R.O.C. The pension benefits are disbursed based on the units of service years and the average salaries in the last month of the service year. Two units per year are awarded for the first 15 years of services while one unit per year is awarded after the completion of the 15th year. The total units shall not exceed 45 units. Under the Labor Standards Act, the Company and its domestic subsidiaries contribute an amount equivalent to 2% of the employees’ total salaries and wages on a monthly basis to the pension fund deposited at the Bank of Taiwan in the name of the administered pension fund committee. Before the end of each year, the Company and its domestic subsidiaries assess the balance in the designated labor pension fund. If the amount is inadequate to pay pensions calculated for workers retiring in the same year, the Company and its domestic subsidiaries will make up the difference in one appropriation before the end of March the following year.

Expenses under the defined benefit obligation for the years ended December 31, 2019 and 2018 are $59,735 thousand and $59,828 thousand, respectively.

181

The Ministry of Labor is in charge of establishing and implementing the fund utilization plan in accordance with the Regulations for Revenues, Expenditures, Safeguard and Utilization of the Labor Retirement Fund. The pension fund is invested in-house or under mandation, based on a passiveaggressive investment strategy for long-term profitability. The Ministry of Labor establishes checks and risk management mechanism based on the assessment of risk factors including market risk, credit risk and liquidity risk, in order to maintain adequate manager flexibility to achieve targeted return without over-exposure of risk. With regard to utilization of the pension fund, the minimum earnings in the annual distributions on the final financial statement shall not be less than the earnings attainable from the amounts accrued from two-year time deposits with the interest rates offered by local banks. Treasury Funds can be used to cover the deficits after the approval of the competent authority. As the Company does not participate in the operation and management of the pension fund, no disclosure on the fair value of the plan assets categorized in different classes could be made in accordance with paragraph 142 of IAS 19. The Group expects to contribute $85,943 thousand to its defined benefit plan during the 12 months beginning after December 31, 2019.

The average duration of the defined benefits plan obligation as of December 31, 2019 and 2018, is the end of the year of 2029 and 2028, respectively.

Pension costs recognized in profit or loss for the years ended December 31, 2019 and 2018:

Current period service costs Net interest expense of net defined benefit liability (asset) Expected return on plan assets Total	For theyears ended December 31	For theyears ended December 31
	2019	2018
	$7,116 5,009 `－`	$7,814 7,475 `－`
	$12,125	$15,289

Changes in the defined benefit obligation and fair value of plan assets are as follows:

Present value of the defined benefit obligation Plan assets at fair value Other non-current liabilities - Accrued pension liabilities recognized on the consolidated balance sheets	Dec. 31,2019	Dec. 31,2018	Jan. 1,2018
	$1,007,077 (576,227)	$1,019,883 (523,987)	$1,022,458 (484,675)
	$430,850	$495,896	$537,783

182

Reconciliation of liability (asset) of the defined benefit plan is as follows:

Present value of the defined benefit obligation	Fair value of plan assets	Net defined benefit liability (asset)
$1,022,458 7,814 14,211	($484,675) `－` (6,737)	$537,783 7,814 7,474
22,025	(6,737)	15,288
2,674 38,784 12,752 `－`	`－` `－` `－` (11,642)	2,674 38,784 12,752 (11,642)
54,210	(11,642)	42,568
(78,810) `－`	78,810 (99,743)	`－` (99,743)
1,019,883 7,116 10,301	(523,987) `－` (5,292)	495,896 7,116 5,009
17,417	(5,292)	12,125
(2,761) 29,224 992 `－`	`－` `－` `－` (18,683)	(2,761) 29,224 992 (18,683)
27,455	(18,683)	8,772
(57,678) `－`	57,678 (85,943)	`－` (85,943)
$1,007,077	($576,227)	$430,850

The following significant actuarial assumptions are used to determine the present value of the defined benefit obligation:

benefit obligation:
Discount rate Expected rate of salary increases	Dec. 31,2019	Dec. 31,2018
	0.76% 1.40%	1.01`％` 1.40`％`

183

Sensitivity analysis for significant assumption:

For theyears ended December 31	For theyears ended December 31	For theyears ended December 31	For theyears ended December 31
2019		2018
Increase in defined benefit obligation	Decrease in defined benefit obligation	Increase in defined benefit obligation	Decrease in defined benefit obligation
`－` $80,888 $79,937 `－`	$50,693 `－` `－` $50,633	`－` $76,629 $75,851 `－`	$50,647 `－` `－` $50,699

The sensitivity analyses above are based on a change in a significant assumption (for example: change in discount rate or future salary), keeping all other assumptions constant. The sensitivity analyses may not be representative of an actual change in the defined benefit obligation as it is unlikely that changes in assumptions would occur in isolation of one another. There was no change in the methods and assumptions used in preparing the sensitivity analyses compared to the previous period.

(17) EQUITY

(a) Common stock

i. The Company had increased capital by cash by $1,800,000 thousand with par value $10 per share and issued price $9.2 on May 30, 2007. The rights and obligations of new shares by private placement are the same as those of common shares. Ownership of shares by private placement cannot be transferred to others within three years since issuance per Security and Exchange regulations.
ii. The board of directors of the Company agreed on June 21, 2011 to increase capital by issuing common stocks for cash in order to repay loan and improve the Company financial structure. A total of 200,000 thousand shares of common stocks, with face value of $10 per share, will be issued for a total of $2,000,000 thousand. Approval has been granted by Financial Supervisory Commission on July 22, 2011 by Doc No. 1000030977. In the event of existing shareholders or employees forfeiting purchasing rights or the event of shortage of subscription of share, the board of directors will authorize the chair of directors to contact a designated person for purchases. As of August 2, 2011, the board of directors agreed stocks will be issued with the issuance price of NTD 6.4 per share with the official issuance date of September 5, 2011. As of September 19, 2011, registration for the issuance of new stocks is complete.
iii. The Board of shareholders’ meeting of the Company agreed on June 29, 2018 to reduce capital $2,536,872 thousand for cover accumulated deficits in order to improve the Company’s financial structure. The ratio of reduction capital was 31.4742285%, and it was declared effective by Financial Supervisory Commission on August 8, 2018. The record date for reverse split was at September 30, 2018, and the amendment of registration was completed at October 8, 2018.

184

iv. To reward employees, the Board of shareholders’ meeting of the Company agreed on June 29 ,2018 to issue restricted stocks for employees by $50,000 thousand of common stock with par value $10 per share , and it was declared effective by Financial Supervisory Commission on June 10 , 2019.The record date for capital increase was at November 25, 2019, and the amendment of registration was completed at December 10, 2019.
v. As of December 31, 2019, and 2018, the authorized capitals were $20,000,000 thousand. Issued capital were $5,573,285 thousand and $5,523,285 thousand, with 557,328,533 shares and 552,328,533 shares respectively. Each share is at a par value of NT$10.

(b) Additional paid-in capital Form shares of changes in equities of subsidiaries The differences between the fair value of consideration paid or received from acquiring or disposing subsidiaries and the carrying amounts of the subsidiaries Share of changes in net assets of associates and joint ventures accounted for using the equity method Restricted stocks for employees Total	Dec. 31,2019	Dec. 31,2018
	$5,717 16,940 (2,675) 25,729	$5,833 16,940 (2,669) `－`
	$45,711	$20,104

i. According to the Company Act, the capital reserve shall not be used except for making good the deficit of the company. When a company incurs no loss, it may distribute the capital reserves related to the income derived from the issuance of new shares at a premium or income from endowments received by the company. The distribution could be made in cash or in the form of dividend shares to its shareholders in proportion to the number of shares being held by each of them. Additional paidin capital arising from long-term equity investment can not be used for any purpose.
ii. According to the prevailing laws and regulations, each year, the amount of capital increase transferred from capital reserve arising from premiums on issuance of capital stock and donations cannot exceed 10% of the Company’s total issued capital.
(c) Retained earnings and dividend policies

According to the Company’s original Articles of Incorporation, current year’s earnings, if any, shall be distributed in the following order:

i. Payment of all taxes and dues;
ii. Offset prior years’ operation losses;
iii. Set aside 10% of the remaining amount as legal reserve;
iv. Set aside or reverse special reserve in accordance with the requirements for operating and law and regulations;

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v. The remaining balance combined with the undistributed earnings accumulated during previous years shall be distributed to the shareholders as dividends.

The Company shall take into account the changing environment of the industry and development stage of the Company in meeting the needs of capital in the future and in establishing long-term financial planning together with satisfying the shareholders’ demand for cash. The earnings distributed for the current year shall not be lower than 10% of accumulated distributable earnings and shall not be distributed if the accumulated distributable earnings is lower than 1% of contributed capital. Cash dividends distributed shall not be lower than 10% of the dividends distributed.

According to the Company Act, the Company needs to set aside amount to legal reserve unless where such legal reserve amounts to the total authorized capital. The legal reserve can be used to make good the deficit of the Company. When the Company incurs no loss, it may distribute the portion of legal serve which exceeds 25% of the paid-in capital by issuing new shares or by cash in proportion to the number of shares being held by each of the shareholders.

Following the adoption of TIFRS, the FSC on April 6, 2012 issued Order No. Financial-SupervisorySecurities-Corporate-1010012865, which sets out the following provisions for compliance:

On a public company's first-time adoption of the TIFRS, for any unrealized revaluation gains and cumulative translation adjustments (gains) recorded to shareholders’ equity that the company elects to transfer to retained earnings by application of the exemption under IFRS 1, the company shall set aside an equal amount of special reserve. Following a company’s adoption of the TIFRS for the preparation of its financial reports, when distributing distributable earnings, it shall set aside to special reserve, from the profit/loss of the current period and the undistributed earnings from the previous period, an amount equal to “other net deductions from shareholders’ equity for the current fiscal year, provided that if the company has already set aside special reserve according to the requirements in the preceding point, it shall set aside supplemental special reserve based on the difference between the amount already set aside and other net deductions from shareholders’ equity. For any subsequent reversal of other net deductions from shareholders’ equity, the amount reversed may be distributed.

Details of 2019 and 2018 earnings distribution and dividends per share as approved and resolved by the board of directors’ meeting and shareholders’ meeting on March 27, 2020 and June 18, 2019, respectively, are as follows :

Legal reserve Special reserve Cash dividends	Appropriation of earnings	Appropriation of earnings	Dividendper share(NT$)	Dividendper share(NT$)
	2019	2018(Note)	2019	2018(Note)
	$53,719 $18,729 $82,849	`－` `－` `－`	$0.15	`－`

(Note) ： The Company still had accumulated deficit in 2018. As a result, the Company did not distribute earnings.

Please refer to Note 6.(22) for further details on employees’ compensation and remuneration to directors.

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(18) SHARE-BASED PAYMENT PLANS

Restricted stocks plan for employees

The Company issued restricted stocks for employees on November 25, 2019 at $0 per share in the amount of $50,000 thousand, totaling 5,000 thousand shares. The share price at grant date was $15.8 per share.

Restriction on the rights and vesting conditions of restricted stocks for employees is as follows:

a. The restricted stock awards the employees will obtain was kept by the designated trust institution as trustee, which the employee cannot request to return the restricted stock awards for any reasons or ways.
b. Before accomplishing the vesting conditions, the employee cannot sell, pledge, transfer, gift, set or dispose in other ways, and they have no right to be allotted or obtaining dividends. Other rights are similar with the capital that has been issued.
c. Before the employee accomplish the vesting conditions, the attendance, proposal, speaking, right of voting, and other matters associated with shareholders meeting were executed based on the trust custody contracts.
d. From the book closure date of issuance of bonus shares, cash dividends, issuance of common stock for cash, shareholders meeting regulated by Article 165-3 of company law, or other facts that has occurred to the date of rights allocation. The unrestricted stocks of the employees that have accomplished the vesting conditions during the aforementioned period still have no rights to obtain dividends or allotment.

For the years ended December 31, 2019, the Company incurred expenses of $4,428 thousand for the sharebased payment transactions.

(19) OPERATING REVENUE

The detail are as follow:

For the years ended December 31

Revenue from contracts with customers Sales of IC packaging and testing service Sales of electronics manufacturing service Other operating revenue Total	2019	2018
	$10,101,028 6,882,860 531,257	$8,452,652 6,096,146 639,394
	$17,515,145	$15,188,192

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(a) Disaggregation of revenue

For theyear ended December 31,2019 Sales of IC packaging and testing service Sales of electronics manufacturing service Other operating revenue Total Timing of revenue recognition: Over time At a point in time Total For theyear ended December 31,2018 Sales of IC packaging and testing service Sales of electronics manufacturing service Other operating revenue Total Timing of revenue recognition: Over time At a point in time Total (b) Contract balances	Semiconductor Group $10,101,028 `－` 426,456 $10,527,484 $10,101,028 426,456 $10,527,484 Semiconductor Group $8,533,978 `－` 481,795 $9,015,773 $8,533,978 481,795 $9,015,773	EMS Group	Total
		`－` $6,882,860 104,801	$10,101,028 6,882,860 531,257
		$6,987,661	$17,515,145
		`－` $6,987,661	$10,101,028 7,414,117
		$6,987,661	$17,515,145
		EMS Group	Total
		`－` $6,096,146 76,273	$8,533,978 6,096,146 558,068
		$6,172,419	$15,188,192
		`－` $6,172,419	$8,533,978 6,654,214
		$6,172,419	$15,188,192

i. Contract assets-current Sales of IC packaging and testing service	Dec. 31,2019	Dec. 31,2018	Jan. 1,2018
	$302,982	$425,684	$212,604

As of December 31, 2019 and 2018, the Group does not have an unconditional right to receive the consideration in the contract and transferred to accounts receivables at the reporting date were $302,982 thousand and $425,684 thousand, respectively.

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ii. Contract liabilities-current

Sales of goods	Dec. 31,2019	Dec. 31,2018	Jan. 1,2018
	$29,439	$15,821	$51,752

As of December 31, 2019 and 2018, the Group recognized $3,989 thousand and $16,583 thousand, respectively, in revenues from the contract liabilities balance at the beginning of the period.

iii. Transaction price allocated to unsatisfied performance obligations

None.

iv. Assets recognized from costs to fulfil a contract

None.

(20) EXPECTED CREDIT LOSSES

	For theyears ended December 31	For theyears ended December 31
	2019	2018
Operating expenses-expected credit losses	$7,742 1,148	$15,145 `－`
Accounts receivable and contract assets
Non-operating income and expenses -expected
credit losses
Other receivable Total
	$8,890	$15,145

Please refer to Note 12 for more details on credit risk.

The Group measures the loss allowance of its contract assets and accounts receivables at an amount equal to lifetime expected credit losses. The assessment of the Group’s loss allowance as of December 31, 2019 and 2018 are as follow:

The Group considers the grouping of contract assets and accounts receivables by counterparties’ credit rating, by geographical region and by industry sector and its loss allowance is measured by using a provision matrix, details are as follow:

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As of December 31, 2019

Not yet due (Note)			Overdue	Overdue		Total
	Within 30 days	31-60 days	61-90 days	91-180 days	After 181days
$1,613,762 0%~0.35%	$131,993 0%~2.13%	$11,053 0%~19.86%	$11,059 0%~50.03%	$5,995 0%~69.01%	$4,139 100%	$1,778,001 21,698
3,121	2,608	2,160	5,533	4,137	4,139
$1,610,641	$129,385	$8,893	$5,526	$1,858	`－`	$1,756,303
Not yet due (Note)			Overdue			Total $1,237,899 4,569 $1,233,330
	Within 30 days	31-60 days	61-90 days	91-180 days	After 181days
$1,151,163 0%~0.04%	$50,356 0%~1.55%	$24,111 0%~4.01%	$8,818 0%~14.05%	$2,009 0%~25%	$1,442 100%
458	714	769	804	382	1,442
$1,150,705	$49,642	$23,342	$8,014	$1,627	`－`

As of December 31, 2018

Not yet due (Note)			Overdue	Overdue		Total
	Within 30 days	31-60 days	61-90 days	91-180 days	After 181days
$2,103,807 0%~0.19%	$188,799 0%~2.76%	$13,441 0%~15.21%	$1,379 0%~50.26%	$8,172 0.01%~85.63%	$4,483 100%	$2,320,081 17,162
1,847	1,902	1,306	660	6,964	4,483
$2,101,960	$186,897	$12,135	$719	$1,208	`－`	$2,302,919
Not yet due (Note)			Overdue			Total
	Within 30 days	31-60 days	61-90 days	91-180 days	After 181days
$1,152,403 0%~0.01%	$55,746 0%~0.13%	$1,690 0%~10.05%	$3,282 0%~16.12%	$128 0%~46.39%	$641 100%	$1,213,890 1,367
114	65	`－`	521	26	641
$1,152,289	$55,681	$1,690	$2,761	$102	`－`	$1,212,523

(Note): The Group’s note receivables are not overdue.

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The movement in the provision for impairment of contract assets, note receivables and trade receivables for the years ended December 31, 2019 and 2018 is as follows:

Contract assets	Notes receivables	Accounts receivables
`－` `－` `－`	`－` `－` `－`	$18,529 7,742 (4)
`－`	`－`	$26,267
`－` `－`	`－` `－`	$3,373 `－`
`－` `－` `－`	`－` `－` `－`	3,373 15,145 11
`－`	`－`	$18,529

(21) LEASES

A. Group as a lessee (applicable to the disclosure requirement under IFRS 16)

The Group leases various properties, including real estate such as land and buildings, transportation equipment and other equipment. The lease terms range from 2 to 51 years.

The Group’s leases effect on the financial position, financial performance and cash flows are as follow:

(a) Amounts recognized in the balance sheet

I. Right-of-use assets

The carrying amount of right-of-use assets

The carrying amount of right-of-use assets
Land Buildings Transportation equipment Other equipment Total	Dec. 31,2019	Dec. 31,2018(Note)
	$217,504 27,550 8,793 `－`
	$253,847

(Note): The Group adopted IFRS 16 since January 1, 2019. The Group elected not to restate prior periods in accordance with the transition provision in IFRS 16.

For the years ended December 31, 2019, the Group’s additions to right-of-use assets amounting to $86,031 thousand.

191

II. Lease liabilities

Current Non-current Lease liabilities	Dec. 31, 2019 $25,725 218,681 $244,406	Dec. 31, 2018 (Note)

Please refer to Note 6.(23)(c) for the interest on lease liabilities recognized for the years ended December 31, 2019 and refer to Note 12.(5) Liquidity Risk Management for the maturity analysis for lease liabilities as of December 31, 2019.

(Note): The Group adopted IFRS 16 since January 1, 2019. The Group elected not to restate prior periods in accordance with the transition provision in IFRS 16.

(b) Amounts recognized in the statement of profit or loss

Depreciation charge for right-of-use assets

Land Buildings Transportation equipment Other equipment Total	For the years ended December 31	For the years ended December 31
	2019	2018 (Note)
	$15,255 10,199 4,679 687
	$30,820

(Note): The Group adopted IFRS 16 since January 1, 2019. The Group elected not to restate prior periods in accordance with the transition provision in IFRS 16.

The expenses relating to short-term leases The expenses relating to leases of low-value assets (Not including the expenses relating to short-term leases of low- value assets)	For the years ended December 31	For the years ended December 31
	2019	2018 (Note)
	$10,587 3,396

(Note): The Group adopted IFRS 16 since January 1, 2019. The Group elected not to restate prior periods in accordance with the transition provision in IFRS 16.

192

(d) Cash outflow relating to leasing activities

For the years ended December 31, 2019, the Group’s total cash outflows for leases amounting to $44,033 thousand.

B. Operating lease commitments - Group as a lessee (applicable to the disclosure requirement in IAS 17)

The Group has entered into a series of land rental agreements with the government which will expire between January 31, 2020 and April 30, 2025. The Company could apply for lease renewal three months prior to the expiry date. If the Company fails to do so, the land shall be returned to the government and the building on the land shall be sold to another approved exporting enterprise within six months after the expiry date. If the Company fails to complete all the above-mentioned procedures within the prescribed six months, the government has the right to dispose the property on the land on the behalf of the Company. The government has the right to adjust the rent based on the publicly announced land value. The government also has the right to terminate the contract if the Company breaches the contract or fails to pay the rent over four months or violates the civil law or the land law.

According to the non-cancellable operating leases, the future minimum rentals payable as of December 31, 2018 are as follows:

Within one year After one year but not more than five years More than five years Total	Dec. 31,2019(Note)	Dec. 31,2018
		$13,135 35,425 26,139
		$74,699

Operating lease expenses recognized are as follows:

Minimum lease payments	For theyears ended December 31	For theyears ended December 31
	2019(Note)	2018
		$13,135

(Note): The Group adopted IFRS 16 since January 1, 2019. The Group elected not to restate prior periods in accordance with the transition provision in IFRS 16.

C. Group as a lessor (applicable to the disclosure requirement in IFRS 16)

Leases of owned investment properties are classified as operating leases as they do not transfer substantially all the risks and rewards incidental to ownership of underlying assets.

193

Lease income for operating leases Income relating to fixed lease payments and variable lease payments that depend on an index or a rate	For the years ended December 31	For the years ended December 31
	2019	2018 (Note)
	$24,625

(Note): The Group adopted IFRS 16 since January 1, 2019. The Group elected not to restate prior periods in accordance with the transition provision in IFRS 16.

Please refer to Note 6.(7) for relevant disclosure of property, plant and equipment for operating leases under IFRS 16. For operating leases entered by the Group, the undiscounted lease payments to be received and a total of the amounts for the remaining years as of December 31, 2019 are as follow:

Not later than one year Later than one year but not later than two years Later than two years but not later than three years Later than three years but not later than four years Later than four years but not later than five years Later than five years Total	Dec. 31, 2019	Dec. 31, 2018 (Note)
	$24,092 21,610 14,296 4,254 3,191 `－`
	$67,443

(Note): The Group adopted IFRS 16 since January 1, 2019. The Group elected not to restate prior periods in accordance with the transition provision in IFRS 16.

D. Operating lease commitments - Group as a lessor (applicable to the disclosure requirement in IAS 17)

The Group has signed non-cancellable operating leases. There are no restrictions placed upon the Group by entering into these leases. Future minimum rentals payable as at December 31, 2018 are as follows:

Not later than one year Later than one year and not later than five years Later than five years Total	Dec. 31, 2019 (Note)	Dec. 31, 2018
		$24,557 64,077 3,190
		$91,824

(Note): The Group adopted IFRS 16 since January 1, 2019. The Group elected not to restate prior periods in accordance with the transition provision in IFRS 16.

194

(22) SUMMARY STATEMENTS OF EMPLOYEE BENEFITS, DEPRECIATION AND AMORTIZATION EXPENSES BY FUNCTION

		For	theyears ended December 31	theyears ended December 31	theyears ended December 31
		2019			2018
	Operating costs	Operating expenses	Total amount	Operating costs	Operating expenses	Total amount
Employee benefits expense
Salaries	$2,694,262	$493,854	$3,188,116	$2,296,555	$380,040	$2,676,595
Pension	145,355	27,662	173,017	136,089	26,024	162,113
Labor and health insurance	300,198	46,493	346,691	259,697	42,585	302,282
Other employee benefits expense	166,970	55,098	222,068	152,534	50,582	203,116
Depreciation	1,398,951	92,074	1,491,025	1,353,914	61,069	1,414,983
Amortization	38,575	26,764	65,339	38,371	23,421	61,792

According to the resolution, the employee’s compensation and remuneration to directors is based on the current year’s earnings, which should be used first to cover accumulated deficit, if any, and then the remaining balance shall be distributed: 8%~12% as employees’ compensation, and no more than 3% as remuneration to directors.

The distribution ratio of employee’s compensation and remuneration to directors and employee’s compensation may be made in the form of stocks or cash, which shall be determined by a resolution adopted by a majority vote at a board of directors meeting attended by two-thirds or more of the directors and be reported at a shareholders’ meeting. Cash or stock dividends as bonus to employees shall only be given to employees who satisfy certain conditions.

Based on the profit of the years ended December 31, 2019, the Company estimated the employees’ compensation and remuneration to directors amounts to $60,921 thousand and $11,423 thousand, respectively, which are accounted for as salary expense.

As of December 31, 2018, the Company still had accumulated deficit. As a result the Company did not estimate the amounts of the employees’ compensation and remuneration to directors.

As of December 31, 2019 and 2018, the total number of employees of the Group were 6,757 and 6,529 respectively.

Information on the Board of Directors’ resolution regarding the employees’ compensation and remuneration to directors can be obtained from the “Market Observation Post System” on the website of the TWSE.

195

(23) NON-OPERATING INCOME AND EXPENSES

(a) Other income

Rental income Interest income Other income Total	For theyears ended December 31	For theyears ended December 31
	2019	2018
	$24,626 5,951 19,887	$25,167 8,754 40,325
	$50,464	$74,246

(b) Other gains and losses

Gains on disposal of property, plant and equipment Foreign exchange (losses) gains, net Gains on financial assets at fair value through profit or loss Other losses Total	For theyears ended December 31	For theyears ended December 31
	2019	2018
	$36,367 (48,117) `－` (2,249)	$6,187 14,222 7,371 (1,010)
	($13,999)	$26,770

Interest on borrowings from bank Interest on borrowings from others Interest on lease liabilities Total	For theyears ended December 31	For theyears ended December 31
	2019	2018
	($110,459) (41) (5,232)	($125,034) (952) (Note)
	($115,732)	($125,986)

(Note): The Group adopted IFRS 16 since January 1, 2019. The Group elected not to restate prior periods in accordance with the transition provision in IFRS 16.

196

(24) COMPONENTS OF OTHER COMPREHENSIVE INCOME

For the years ended December. 31, 2019

Items that will not be reclassified subsequently to profit or loss: Remeasurements of defined benefit plans Unrealized gains (losses) from equity instruments investment measured at fair value through other comprehensive income Items that may be reclassified subsequently to profit or loss: Exchange differences arising on translating of foreign operation Share of other comprehensive income of associates and joint ventures accounted for using the equity method Total of other comprehensive income For the years ended December 31, 2018	Arising during the period	Reclassification adjustments during the period	Other comprehensive income, before tax	Income tax relating to components of other comprehensive income	Other comprehensive income, net of tax
	($8,772) (8,018) (18,965) 1,081	`－` `－` `－` `－`	($8,772) (8,018) (18,965) 1,081	$1,754 416 3,793 `－`	($7,018) (7,602) (15,172) 1,081
	($34,674)	`－`	($34,674)	$5,963	($28,711)

197

For the years ended December. 31, 2018

For the years ended December. 31,	2018
Items that will not be reclassified subsequently to profit or loss: Remeasurements of defined benefit plans Unrealized gains (losses) from equity instruments investment measured at fair value through other comprehensive income Items that may be reclassified subsequently to profit or loss: Exchange differences arising on translating of foreign operation Total of other comprehensive income	Arising during the period	Reclassification adjustments during the period	Other comprehensive income, before tax	Income tax relating to components of other comprehensive income	Other comprehensive income, net of tax
	($42,568) (22,180) 17,469	`－` `－` `－`	($42,568) (22,180) 17,469	$10,708 (1,928) (7,408)	($31,860) (24,108) 10,061
	($47,279)	`－`	($47,279)	$1,372	($45,907)

(25) INCOME TAX

Based on the amendments to the Income Tax Act announced on February 7, 2018, the Company’s applicable corporate income tax rate for the years ended December 31, 2018 has changed from 17% to 20%. The corporate income surtax on undistributed retained earnings has changed from 10% to 5%.

A. The major components of income tax (expense) income are as follows:

(a). Income tax (expense) income recognized in profit or loss

Current income tax (expense) benefit: Current income tax charge Adjustments in respect of current income tax of prior periods	For theyears ended December 31	For theyears ended December 31
	2019 ($1,617) (1,017)	2018
		($7,306) 280

198

Deferred tax income (expense): Deferred tax (expense) relating to origination and reversal of temporary differences Deferred tax (expense) income relating to origination and reversal of tax loss and tax credit Deferred tax income relating to change in tax rate Others Total income tax (expense) benefit	For theyears ended December 31	For theyears ended December 31
	2019 (3,764) (141,936) `－` (299) ($148,633)	2018
		(80,207) 85,235 253,144 (158)
		$250,988

(b). Income tax relating to components of other comprehensive income

For theyears ended December 31	For theyears ended December 31	For theyears ended December 31
2019		2018
$1,754 416 3,793 `－`		$8,514 3,324 (3,494) (6,972)
$5,963		$1,372
2019	2018
$736,593	($362,536)

199

At parent company statutory income tax rate Effect of different tax rates applicable to OSE and its subsidiaries Tax effect of revenues exempt from taxation Tax effect of deferred tax assets/liabilities Other adjustment due to taxation Adjustments in respect of current income tax of prior periods Deferred tax income relating to change in tax rate Exchange adjustments Total income tax (expense) benefit recognized in profit or loss	For theyears ended December 31	For theyears ended December 31
	2019	2018
	(147,319) (1,099) 4,013 3,042 (6,123) (1,017) `－` (130)	72,507 (5,889) 3,833 (70,267) (2,472) 280 253,144 (148)
	($148,633)	$250,988

C. Deferred tax assets (liabilities) relate to the following:

For the years ended December 31, 2019

Temporary differences Unrealized exchange gains and losses Loss on inventory obsolescence Investments accounted for using the equity method Unrealized (gains) losses from financial assests measured at fair value through other comprehensive income	Beginning balance as of Jan. 1,2019	Deferred tax income (expense) recognized in profit or loss	Deferred tax income (expense) recognized in other comprehensive income	Exchange adjustments	Ending balance as of Dec. 31, 2019
	($1,951) 49,774 1,139,737 (31,688)	$2,985 11,187 (5,107) `－`	`－` `－` $3,793 416	`－` `－` `－` `－`	$1,034 60,961 1,138,423 (31,272)

200

Beginning balance as of Jan. 1,2019	Deferred tax income (expense) recognized in profit or loss 230 `－` (13,105) 585 (539) (139,998)	Deferred tax income (expense) recognized in other comprehensive income	Exchange adjustments	Ending balance as of Dec. 31, 2019
`－` 2,109 99,180 4,651 17,929 374,783		`－` `－` 1,754 `－` `－` `－` $5,963	`－` `－` `－` `－` `－` ($60)	230 2,109 87,829 5,236 17,390 234,725
$1,654,524	($143,762)		($60)	$1,516,665

$1,688,163				$1,547,937
$33,639				$31,272

For the years ended December 31, 2018

Temporary differences Unrealized exchange gains and losses Loss on inventory obsolescence Investments accounted for using the equity method	Beginning balance as of Jan. 1,2018	Deferred tax income (expense) recognized in profit or loss	Deferred tax income (expense) recognized in other comprehensive income	Exchange adjustments	Ending balance as of Dec. 31, 2018
	$1,220 39,298 995,821	($3,171) 10,476 151,324	`－` `－` ($7,408)	`－` `－` `－`	($1,951) 49,774 1,139,737

201

Beginning balance as of Jan. 1,2018	Deferred tax income (expense) recognized in other comprehensive income	Exchange adjustments	Ending balance as of Dec. 31, 2018
(29,760) 56 1,793 91,424 5,859 43,152 246,116	(1,928) `－` `－` 10,708 `－` `－` `－`	`－` `－` `－` `－` `－` `－` `－`	(31,688) `－` 2,109 99,180 4,651 17,929 374,783
$1,394,979	$1,372	`－`	$1,654,524

$1,424,739			$1,688,163
$29,760			$33,639

D. The following table contains information of the unused tax losses of the Group:

Year	Tax losses for the period	Unused tax losses as of	Unused tax losses as of	Note
		Dec. 31,2019	Dec. 31,2018
2009 2011 2013 2017 2018 2019	$377,207 155,641 52,387 1,155,026 498,015 7,756 Total	`－` `－` `－` $958,742 498,015 7,756	$305,367 155,641 52,387 862,507 498,015 `－`	Assessed Assessed Assessed Assessed Non-assessed Non-assessed
		$1,464,513	$1,873,917

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E. Unrecognized deferred tax assets

As of December 31, 2019 and 2018, deferred tax assets that have not been recognized as they may not be used to offset taxable profits are $58,732 and $67 thousand respectively.

F. The assessment of income tax returns

As of December 31, 2019 the assessment of the income tax returns of the Company is as follows: The assessment of income tax returns The Company Assessed and approved up to 2017

(26) EARNINGS PER SHARE

Basic earnings per share amounts are calculated by dividing net profit for the year attributable to ordinary equity holders of the parent entity by the weighted average number of ordinary shares outstanding during the year.

Diluted earnings per share amounts are calculated by dividing the net profit attributable to ordinary equity holders of the parent (after adjusting for interest on the convertible bonds payable) by the weighted average number of ordinary shares outstanding during the period plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares.

(a) Basic earnings (losses) per share Profit (Loss) attributable to ordinary equity holders of the Company (in thousand NT$) Weighted average number of ordinary shares outstanding for basic earnings per share (in thousands) Basic earnings (losses) per share (NT$)	For theyears ended December 31	For theyears ended December 31
	2019	2018
	$587,960 552,329	($111,548) 552,329
	$1.06	($0.20)

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(b) Diluted earnings (losses) per share Profit (Loss) attributable to ordinary equity holders of the Company (in thousand NT$) Weighted average number of ordinary shares outstanding for basic earnings per share (in thousands) Effect of dilution: Employee compensation`－`stock (in thousands) Weighted average number of ordinary shares outstanding after dilution (in thousands) Diluted earnings (losses) per share (NT$)	For theyears ended December 31 2019 2018 $587,960 ($111,548) 552,329 552,329 4,102 `－` 556,431 552,329 $1.06 ($0.20)	For theyears ended December 31 2019 2018 $587,960 ($111,548) 552,329 552,329 4,102 `－` 556,431 552,329 $1.06 ($0.20)
	2019
	$587,960 552,329 4,102	($111,548) 552,329 `－` 552,329 ($0.20)
	556,431
	$1.06

There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date and the date of completion of the financial statements.

7. RELATED PARTY TRANSACTIONS

Information of the related parties that had transactions with the Group during the financial reporting period is as follows:

Name and nature of relationship of the related parties

Name of the related parties Nature of relationship of the related parties ATP Electronics Taiwan Inc.(ATP) Associate INFOFAB, INC.(INFOFAB) Associate OSE PROPERTIES, INC.(PROPERTIES) Associate ACTIONTEC ELECTRONICS,INC.(ACTIONTEC) Other related party SCREENBEAM ,INC.(SCREENBEAM) Other related party InfoAction Technology,Inc.(INFOACTION) Other related party GOLFWARE INC.(GOLFWARE) Other related party Phison Electronics Corporation(PHISON) Legal Director of the Company Longsys Electronics (TAIWAN) Co.,Ltd.(LONGSYS) Legal Director of the Company(No longer listed as a related party in the third quarter in 2019) Longsys Electronics (HK) Co., Ltd. (LONGSYS) Associate of Legal Director of the Company(No longer listed as a related party in the third quarter in 2019)

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(1)Significant transactions with related parties:

(a) Sales

Associates PHISON LONGSYS(Note) Other related parties Total	For theyears ended December 31	For theyears ended December 31
	2019	2018
	$216,110 2,332,055 748,726 16,616	$187,869 1,521,906 946,231 7
	$3,313,507	$2,656,013

(Note) : No longer listed as a related party in the third quarter in 2019.

The sales price to the above related parties was determined through mutual agreement based on the ～ market rates. The details of credit period are 30 60 days. The outstanding balance at December 31, 2019 and 2018was unsecured, non-interest bearing and must be settled in cash. The receivables from the related parties were not guaranteed.

(b) Purchase

ATP Key management personal of the group INFOACTION Total	For theyears ended December 31	For theyears ended December 31
	2019	2018
	$1,162 74 8,817	$892 `－` 3,799
	$10,053	$4,691

The purchase price to the above related parties was determined through mutual agreement based on the market rates. The payment terms from the related party suppliers are comparable with third party suppliers.

(c) Accounts Receivable

ATP PHISON LONGSYS(Note) Other related parties Less : loss allowance Total	Dec. 31,2019	Dec. 31,2018
	$32,904 194,116 `－` 2,537 (`－`)	$45,024 343,356 306,961 7 (1,200)
	$229,557	$694,148

(Note) : No longer listed as a related party in the third quarter in 2019.

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(d) Other Receivable

)Other Receivable
Associates Key management personnel of the Group LONGSYS(Note) PROPERTIES Other related parties Total	Dec. 31,2019	Dec. 31,2018
	$2,778 `－` `－` 47,657 `－`	$1,773 79 6,389 46,288 238
	$50,435	$54,767

(Note) : No longer listed as a related party in the third quarter in 2019.

(e) Accounts Payable

)Accounts Payable
INFOFAB (Note) Key management personnel of the Group Other related parties Total	Dec. 31,2019	Dec. 31,2018
	$36,587 70 1,826	$48,889 50 271
	$38,483	$49,210

(Note): The payments are the purchase of computer software and information system maintenance.

(f) Lease - related parties

Rental income ATP INFOFAB Other related parties Total	For theyears ended December 31	For theyears ended December 31
	2019	2018
	$4,258 2,940 42	$4,258 2,940 42
	$7,240	$7,240

(g) Transaction of properties

For the years ended December 31, 2019 :

Counterparty Purchase INFOFAB INFOFAB	Property Other equipment Computer software Total	Amount $2,224 15,887 $18,111	Gain (loss) on sales of assets Not applicable Not applicable	The basis of transactionprice
				Negotiate Negotiate

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For the years ended December 31, 2018 :

Counterparty	Property Amount Gain (loss) on sales of assets Other equipment $3,595 Not applicable Computer software 51,168 Not applicable Total $54,763 Property Unreduced balance Saleprice Gain (loss) on sales of assets Machinery and equipment $1,448 $3,364 $1,916	Property Amount Gain (loss) on sales of assets Other equipment $3,595 Not applicable Computer software 51,168 Not applicable Total $54,763 Property Unreduced balance Saleprice Gain (loss) on sales of assets Machinery and equipment $1,448 $3,364 $1,916	Property Amount Gain (loss) on sales of assets Other equipment $3,595 Not applicable Computer software 51,168 Not applicable Total $54,763 Property Unreduced balance Saleprice Gain (loss) on sales of assets Machinery and equipment $1,448 $3,364 $1,916	The basis of transactionprice
Purchase				Negotiate Negotiate The Reference of TradingPrice
INFOFAB INFOFAB Counterparties
Sales	Machinery and equipment	$1,448	$3,364	Negotiate
LONGSYS

(h) Intercompany borrowing

Dec. 31, 2019

Relatedparties	Maximum amount	Amount	Interest rates	Interest income (expense)
				$2,384
			Interest rates	Interest income (expense)
				$2,336

(i) Compensation of key management personnel

	For theyears ended December 31	For theyears ended December 31
	2019	2018
Short-term employee benefits	$64,055	$38,044
Post-employment benefits	879	661
Share-Based Payment	710	`－`
Total	$65,644	$38,705

For details of total compensation paid to the Company’s key management personnel, please refer to the annual report for the Company.

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(j) Other disclosures

i. As of December 31, 2019 and 2018, interest receivables from PROPERTIES amounted to $47,657 thousand and $46,288 thousand, respectively, which were included in other receivableaffiliates accounts.
ii. PROPERTIES had borrowed USD$3,102 thousand from subsidiary and provided all of real estates to trust as the mortgage for financing bank.
iii. For the years ended December 31, 2019 and 2018, the Group paid $40,428 thousand and $89,288 thousand, $71,306 thousand and $7,605 thousand service fees to maintain information system of INFOFAB, respectively, which are accounted for as maintenance expenses and computer operating expenses. As of December 31, 2019 and 2018, the unpaid maintenance expenses amounted to $36,587 thousand and $48,889 thousand, respectively, which were recorded under accounts payable – affiliates-account.

8. ASSETS PLEDGED AS SECURITY

The following table lists assets of the Group pledged as security:

Assetspledged for security	Carryingamount	Carryingamount	Secured liabilities details
	Dec. 31,2019	Dec. 31,2018
Accounts Receivables–Short-term Other financial assets–current–time deposits Other financial assets–current–deposits reserved for repayment Investments accounted for using the equity method –ATP Property, plant and equipment–Buildings Property, plant and equipment–Machinery and equipment Property, plant and equipment–Leased assets Property, plant and equipment–Assets leased to others Buildings Refundable deposits-time deposits Total	`－` $46,214 108,012 388,360 860,389 2,096,755 `－` 139,225 131,500	$224,523 107,944 135,671 389,474 890,776 2,623,647 25,845 145,777 163,704	Short-term borrowings Short & Long-term borrowings Short & Long-term borrowings Short-term borrowings Short & Long-term borrowings Short & Long-term borrowings Short & Long-term borrowings Long-term borrowings Customs Guarantee or others
	$3,770,455	$4,707,361

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9.COMMITMENTS AND CONTINGENCIES

(1) Guarantee given by the bank for the payment of input tax imposed for sales from a tax free zone to nontax free zone amounted to $800,000 thousand.
(2) The Company issued promissory notes of $8,973,768 thousand as guarantees for bank loans.
(3) The Company issued promissory notes of $16,955 thousand as guarantees for payments of raw materials and machineries purchased.
(4) The Company issued promissory notes of $1,428 thousand as guarantee for project.
(5) The Company has acted as a subcontractor for processing electronic products and provided storage services for outsiders. As of December 31, 2019, the Company kept the processed electronic products of $10,736,546 thousand and raw materials of $560,111 thousand on custodian.
(6) As of December 31, 2019, the Company had opened an unused letter of credit amounting to USD 115 thousand.

10. LOSSES DUE TO MAJOR DISASTERS

None.

11. SIGNIFICANT SUBSEQUENT EVENTS

None.

12. FINANCIAL INSTRUMENTS

(1) Categories of financial instruments

Financial assets Financial assets at fair value through other comprehensive income Financial assets measured at amortized cost: Cash and cash equivalents (exclude cash on hand) Notes, accounts and other receivables Other financial assets Long-term receivables-Affiliates Subtotal Total	Dec. 31,2019 $226,860 1,701,205 2,768,130 154,226 93,315 4,716,876 $4,943,736	Dec. 31,2018
		$234,878 762,085 3,189,369 243,615 95,300
		4,290,369
		$4,525,247

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Financial liabilities

Financial liabilities
Financial liabilities at amortized cost: Short-term borrowings Short-term notes payable Notes, accounts and other payable Long-term loans (including of current portion) Lease payable (including of current portion) Lease liabilities Total	Dec. 31,2019 $2,373,766 379,210 4,173,791 2,095,326 (Note) 244,406 $9,266,499	Dec. 31,2018
		$2,806,857 349,610 4,398,185 3,053,515 2,610 (Note)
		$10,610,777

(Note): The Group adopted IFRS 16 since January 1, 2019. The Group elected not to restate prior periods in accordance with the transition provision in IFRS 16.

(2) Financial risk management objectives and policies

The Group’s principal financial risk management objective is to manage the market risk, credit risk and liquidity risk related to its operating activates. The Group identifies measures and manages the aforementioned risks based on the Group’s policy and risk appetite.

The Group has established appropriate policies, procedures and internal controls for financial risk management. Before entering into significant transactions, due approval process by the Board of Directors and Audit Committee must be carried out based on related protocols and internal control procedures. The Group complies with its financial risk management policies at all times.

(3) Market risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of the changes in market prices. Market prices comprise currency risk, interest rate risk and other price risk (such as equity risk).

In practice, it is rarely the case that a single risk variable will change independently from other risk variable, there is usually interdependencies between risk variables. However the sensitivity analysis disclosed below does not take into account the interdependencies between risk variables.

(a)Foreign currency risk

The Group’s exposure to the risk of changes in foreign exchange rates relates primarily to the Group’s operating activities (when revenue or expense are denominated in a different currency from the Group’s functional currency) and the Group’s net investments in foreign subsidiaries.

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The Group has certain foreign currency receivables to be denominated in the same foreign currency with certain foreign currency payables, therefore natural hedge is received. The Group also uses forward contracts to hedge the foreign currency risk on certain items denominated in foreign currencies. Hedge accounting is not applied as they did not qualify for hedge accounting criteria. Furthermore, as net investments in foreign subsidiaries are for strategic purposes, they are not hedged by the Group.

The foreign currency sensitivity analysis of the possible change in foreign exchange rates on the Group’s profit is performed on significant monetary items denominated in foreign currencies as at the end of the reporting period. The Group’s foreign currency risk is mainly related to the volatility in the exchange rates for foreign currency USD and foreign currency JPY.

(b)Interest rate risk

Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group’s exposure to the risk of changes in market interest rates relates primarily to the Group’s loans and receivables at variable interest rates, bank borrowings with fixed interest rates and variable interest rates.

The Group manages its interest rate risk by having a balanced portfolio of fixed and variable loans and borrowings and entering into interest rate swaps. Hedge accounting does not apply to these swaps as they do not qualify for it.

(c)Equity price risk

The Group’s listed and unlisted equity securities are susceptible to market price risk arising from uncertainties about future values of the investment securities. The Group’s listed equity securities are classified under held for trading financial assets or available-for-sale financial assets, while unlisted equity securities are classified as available-for-sale. The Group manages the equity price risk through diversification and placing limits on individual and total equity instruments. Reports on the equity portfolio are submitted to the Group’s senior management on a regular basis. The Group’s Board of Directors reviews and approves all equity investment decisions.

211

- (d)Risks of pre tax Sensitivity analysis are as follows:

For the years ended December 31, 2019

Keyrisk	Keyrisk	Variation	Variation	Sensitivityofprofit and loss	Sensitivityofprofit and loss	Sensitivityof equity
						`－` `－` `－` `＋`/`－` 2,269thousand Sensitivityof equity
Foreign currency risk Interest rate risk Equity price risk	NTD/USD Foreign currency `＋`/`－`1`％` NTD/JPY Foreign currency `＋`/`－`1`％` Market rate`＋`/`－`10 fundamental proposition Market price`＋`/`－`10 fundamental proposition		`＋`/`－` 8,462thousand `－`/`＋` 855thousand `＋`/`－` 5,860thousand `－`			`－` `－` `－` `＋`/`－` 2,349thousand

Please refer to Note 12.(7) for sensitivity analysis information of other equity instruments or derivatives that are linked to such equity instruments whose fair value measurement is categorized under Level 3.

(4) Credit risk management

Credit risk is the risk that a counterparty will not meet its obligations under a contract, leading to a financial loss. The Group is exposed to credit risk from operating activities (primarily for accounts receivables and notes receivables) and from its financing activities, including bank deposits and other financial instruments.

Customer credit risk is managed by each business unit subject to the Group’s established policy, procedures and control relating to customer credit risk management. Credit limits are established for all customers based on their financial position, rating from credit rating agencies, historical experience, prevailing economic condition and the Group’s internal rating criteria etc. Certain customer’s credit risk will also be managed by taking credit enhancing procedures, such as requesting for prepayment or insurance.

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As of December 31, 2019 and 2018, amounts receivables from top ten customers represent 83.69% and 84.88% of the total accounts receivables of the Group, respectively. The credit concentration risk of other accounts receivables is insignificant.

Credit risk from balances with banks, fixed income securities and other financial instruments is managed by the Group’s treasury in accordance with the Group’s policy. The Group only transacts with counterparties approved by the internal control procedures, which are banks and financial institutions, companies and government entities with good credit rating and with no significant default risk. Consequently, there is no significant credit risk for these counter parties.

(5) Liquidity risk management

The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of cash and cash equivalents, highly liquid equity investments, bank borrowings, convertible bonds and finance leases. The table below summarizes the maturity profile of the Group’s financial liabilities based on the contractual undiscounted payments and contractual maturity. The payment amount includes the contractual interest. The undiscounted payment relating to borrowings with variable interest rates is extrapolated based on the estimated interest rate yield curve as of the end of the reporting period.

Non-derivative financial instruments

As of Dec. 31, 2019 Borrowings Short-term notes payable Lease liabilities As of Dec. 31, 2018 Borrowings Short-term notes payable Lease payable	Less than 1year	2 to 3years	4 to 5years	> 5years	Total
	$3,567,916 379,210 31,050 $4,153,483 $349,610 $2,617	$867,994 `－` 53,997 $1,650,614 `－` `－`	$36,842 `－` 31,299 $62,631 `－` `－`	`－` `－` 189,011 `－` `－` `－`	$4,472,752 379,210 305,357 $5,866,728 349,610 2,617

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(6) Reconciliation of liabilities arising from financing activities

Reconciliation of liabilities for the years ended December 31, 2019:

Short-term borrowings Long-term borrowings Lease liabilities (Note) Refundable deposits Short-term notes payable	As of Jan. 1,2019	Cash flows	Foreign exchange movement	Others	As of Dec. 31,2019
	$2,806,857 3,053,515 241,426 3,522 349,610	($433,155) (962,010) (30,050) 46 29,600	`－` `－` ($1,929) `－` `－`	$64 3,821 34,959 `－` `－`	$2,373,766 2,095,326 244,406 3,568 379,210

(Note): The beginning balance that the Group adopted IFRS 16 since January 1, 2019.

Reconciliation of liabilities for the years ended December 31, 2018:

Short-term borrowings Long-term borrowings Lease payables Refundable deposits Short-term notes payable	As of Jan. 1,2018	Cash flows	Foreign exchange movement	Others	As of Dec. 31,2018
	$2,192,678 3,757,706 24,551 3,574 398,938	$613,297 (707,191) (21,941) (52) (49,328)	$1,059 6,670 `－` `－` `－`	($177) (3,670) `－` `－` `－`	$2,806,857 3,053,515 2,610 3,522 349,610

(7)Fair values of financial instruments
(a) The methods and assumptions applied in determining the fair value of financial instruments:

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The following methods and assumptions were used by the Group to measure or disclose the fair values of financial assets and financial liabilities:

i. The carrying amount of cash and cash equivalents, accounts receivables, accounts payable and other current liabilities approximate their fair value due to their short maturities.
ii. For financial assets and liabilities traded in an active market with standard terms and conditions, their fair value is determined based on market quotation price (including listed equity securities, beneficiary certificates, bonds and futures etc.) at the reporting date.

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iii. Fair value of equity instruments without market quotations (including private placement of listed equity securities, unquoted public company and private company equity securities) are estimated using the market method valuation techniques based on parameters such as prices based on market transactions of equity instruments of identical or comparable entities and other relevant information (for example, inputs such as discount for lack of marketability, P/E ratio of similar entities and Price-Book ratio of similar entities).
iv. Fair value of debt instruments without market quotations, bank loans, bonds payable and other non-current liabilities are determined based on the counterparty prices or valuation method. The valuation method uses DCF method as a basis, and the assumptions such as the interest rate and discount rate are primarily based on relevant information of similar instrument (such as yield curves published by the GreTai Securities Market, average prices for Fixed Rate Commercial Paper published by Reuters and credit risk, etc.)
v. The fair value of derivatives which are not options and without market quotations, is determined based on the counterparty prices or discounted cash flow analysis using interest rate yield curve for the contract period. Fair value of option-based derivative financial instruments is obtained using on the counterparty prices or appropriate option pricing model (for example, Black-Scholes model) or other valuation method (for example, Monte Carlo Simulation).
(b) Fair value of financial instruments measured at amortized cost

Other than cash and cash equivalents, accounts receivables, accounts payable and other current liabilities whose carrying amount approximate their fair value, the fair value of the Group’s financial assets and financial liabilities measured at amortized cost is listed in the table below:

Financial Assets Long-term receivables-affiliates Financial liabilities Long-term borrowings Lease payable Lease Liabilities	Carryingamount	Carryingamount
	Dec. 31,2019	Dec. 31,2018
	$93,315 $2,095,326 (Note) $244,406	$95,300 $3,053,515 $2,610 (Note)

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Financial Assets Long-term receivables-affiliates Financial liabilities Long-term borrowings Lease payable Lease Liabilities	Fair Value	Fair Value
	Dec. 31,2019	Dec. 31,2018
	$93,315 $2,095,326 (Note) $244,406	$95,300 $3,053,515 $2,610 (Note)

(Note): The Group adopted IFRS 16 since January 1, 2019. The Group elected not to restate prior periods in accordance with the transition provision in IFRS 16.
(c) Fair value measurement hierarchy for financial instruments

Please refer to Note 12.(8) for fair value measurement hierarchy for financial instruments of the Group.

(8) Fair value measurement hierarchy
(a) Fair value measurement hierarchy:

All asset and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, based on the lowest level input that is significant to the fair value measurement as a whole. Level 1, 2 and 3 inputs are described as follows:

Level 1: Quoted (unadjusted) market prices in active markets for identical assets or liabilities that the entity can access at the measurement date
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly
Level 3: Unobservable inputs for the asset or liability

For assets and liabilities that are recognized in the financial statements on a recurring basis, the Company determines whether transfers have occurred between Levels in the hierarchy by reassessing categorization at the end of each reporting period.

216

(b) Fair value measurement hierarchy of the Group’s assets and liabilities:

The Group does not have assets that are measured at fair value on a non-recurring basis. Fair value measurement hierarchy of the Group’s assets and liabilities measured at fair value on a recurring basis is as follows:

December 31, 2019 Financial assets: Financial assets at fair value through other comprehensive income Equity instrument December 31, 2018 Financial assets: Financial assets at fair value through other comprehensive income Equity instrument	Level 1	Level 2	Level 3	Total
	`－` Level 1	`－` Level 2	$226,860 Level 3	$226,860 Total
	`－`	`－`	$234,878	$234,878

Transfers between Level 1 and Level 2 during the period

During the years ended December 31, 2019 and 2018, there were no transfers between Level 1 and Level 2 fair value measurements.

Reconciliation for fair value measurements in Level 3 of the fair value hierarchy for movements

during the period is as follows:

Beginning balance as of Jan. 1, 2019 Recognized in other comprehensive income Transfer out of Level 3 Ending balance as of Dec. 31, 2019 Beginning balance as of Jan. 1, 2018 Recognized in other comprehensive income Transfer out of Level 3 Ending balance as of Dec. 31, 2018	At fair value through other comprehensive income
	Stock
	$234,878 (8,018) `－`
	$226,860
	At fair value through other comprehensive income
	Stock
	$252,505 (17,627) `－`
	$234,878

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Information on significant unobservable inputs to valuation

Description of significant unobservable inputs to valuation of recurring fair value measurements categorized within Level 3 of the fair value hierarchy is as follows:

December 31, 2019

December 31, 2019
Financial assets : Financial assets at fair value through other comprehensive income Stocks	Valuation techniques	Significant unobservable inputs	Quantitative information	Relationship between inputs and fair value	Sensitivity of the input to fair value
	(1)Market approach `－`P/E (2)Market approach `－`P/S (3)Option	(1)Discount rate (2)Discount for lack of marketability	11.59`％` ~25.06`％`	(1) The higher the discount rate, the lower the fair value of the stocks (2)The higher the discount for lack of marketability , the lower the fair value of the stocks	1% increase (decrease) in the discount for lack of marketability would result in (decrease) increase in the Company’s equity by $2,376 thousand.

December 31, 2018

December 31, 2018
Financial assets: Financial assets at fair value through other comprehensive income	Valuation techniques	Significant unobservable inputs	Quantitative information	Relationship between inputs and fair value	Sensitivity of the input to fair value
	Option- Pricing Model	(1)Discount rate (2)Discount for lack of marketability	13%~19%	(1) The higher the discount rate, the lower the fair value of the stocks (2)The higher the discount for lack of marketability, the lower the fair value of the stocks	1% increase (decrease) in the discount for lack of marketability would result in (decrease) increase in the Company’s equity by $2,365 thousand.

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(c) Fair value measurement hierarchy of the Group’s assets and liabilities not measured at fair value but for which the fair value is disclosed

December 31, 2019 Financial assets not measured at fair value but for which the fair value is disclosed: Investment properties Financial liabilities not measured at fair value but for which the fair value is disclosed: Long-term loans Lease liabilities December 31, 2018 Financial assets not measured at fair value but for which the fair value is disclosed: Investment properties Financial liabilities not measured at fair value but for which the fair value is disclosed: Long-term loans Lease payable	Level 1	Level 2	Level 3	Total
	`－` `－` `－` Level 1	`－` $2,095,326 244,406 Level 2	$486,819 `－` `－` Level 3	$486,819 2,095,326 244,406 Total
	`－` `－` `－`	`－` $3,053,515 2,610	$503,470 `－` `－`	$503,470 3,053,515 2,610

(9) Significant assets and liabilities denominated in foreign currencies

Information regarding the significant assets and liabilities denominated in foreign currencies is listed below:

Financial assets		Dec. 31,2019
	Foreign currencies	Foreign exchange rate	NTD
	$132,199 386,287 7,542 77,754 251,559	30.08 0.2771 30.08 30.08 0.2771	$3,976,546 107,040 226,863 2,338,840 69,707
Monetary items: USD JPY Non-monetary items: USD Financial liabilities
Monetary items: USD JPY

219

Financial assets		Dec. 31,2018
	Foreign currencies	Foreign exchange rate	NTD
	$119,977 220,238 7,652 92,433 527,327	30.72 0.2784 30.72 30.72 0.2784	$3,685,693 61,314 235,069 2,839,542 146,808
Monetary items: USD JPY Non-monetary items: USD Financial liabilities
Monetary items: USD JPY

The above information is disclosed based on the carrying amount of foreign currency (after conversion to functional currency).

The Group’s entities functional currencies are various, and hence are not able to disclose the information of exchange gains and losses of monetary financial assets and liabilities by each significant asset and liability denominated in foreign currencies. The foreign exchange gains (losses) were ($48,117) thousand and $14,222 thousand for the years ended December 31, 2019 and 2018, respectively.

(10) Capital management

The primary objective of the Group’s capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximize shareholder value. The Group manages its capital structure and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the Group may adjust dividend payment to shareholders, return capital to shareholders or issue new shares.

13. SEGMENT INFORMATION

For management purposes, the Company is organized into business units based on its products and services and has two reportable segments as follows:

Semiconductor Group: Mainly provides IC packaging and testing services.
EMS Group: Provides professional electronics manufacturing services.

No operating segments have been aggregated to form the above reportable operating segments.

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Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profit or loss and is measured consistently with operating profit or loss in the consolidated financial statements. However, group finance costs, finance income and income taxes are managed on a group basis and are not allocated to operating segments.

The transfer prices between operating segments are on an arm’s length basis in a manner similar to transactions with third parties.

For the years ended December 31, 2019

Revenue External customer Inter-Segment Total Revenue Segment Profit	Semiconductor Group $10,527,484 82,455 $10,609,939 $404,048	EMS Group $6,987,661 831,641 $7,819,302 $325,144	Other `－` `－` `－` $15,855	Adjustment and Eliminations (Note 1 and Note 2) `－` ($914,096) ($914,096) ($8,454)	Consolidated
					$17,515,145 `－`
					$17,515,145
					$736,593

(Note 1) ： Inter-segment revenues are eliminated on consolidation. (Note 2) ： The profit for each operating segment does not include income tax expense.

For the years ended December 31, 2018

Revenue External customer Inter-Segment Total Revenue Segment Profit	Semiconductor Group $9,015,773 53,077 $9,068,850 ($531,564)	EMS Group $6,172,419 736,579 $6,908,998 $203,271	Other `－` `－` `－` $249,318	Adjustment and Eliminations (Note 1 and Note 2) `－` ($789,656) ($789,656) ($283,561)	Consolidated
					$15,188,192 `－`
					$15,188,192
					($362,536)

(Note 1) ： Inter-segment revenues are eliminated on consolidation. (Note 2) ： The profit for each operating segment does not include income tax expense.

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(1) Geographical information:

A. Sales to other than consolidated entities (Sales are presented by customers’ country)

Taiwan U.S.A. China Others Total	For theyears ended December 31	For theyears ended December 31
	2019 $6,000,263 3,766,910 2,254,742 5,493,230 $17,515,145	2018
		$5,067,475 4,186,016 1,676,305 4,258,396
		$15,188,192

B. Non-current assets

Non-current assets
Taiwan Philippines U.S.A. China Total	Dec. 31,2019 $7,061,852 508,450 226,783 64,328 $7,861,413	Dec. 31,2018
		$7,762,808 478,943 219,359 57,333
		$8,518,443

(2) Major customers

Sales to customers representing over 10% of the Company’s consolidated net sales are as follows:

For the years ended December 31

Customers A B C	2019 Amounts % $4,535,396 25.89`％` $4,288,955 24.49`％` $2,332,055 13.31`％`	2018	2018
	Amounts $4,535,396 $4,288,955 $2,332,055	Amounts	%
		$4,469,670 $3,242,267 $1,521,905	29.43% 21.35% 10.02%

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228

English Translation of Financial Statements Originally Issued in Chinese ORIENT SEMICONDUCTOR ELECTRONICS LIMITED

PARENT COMPANY ONLY BALANCE SHEETS

As of December 31, 2019 and 2018

(Amounts expressed in Thousands of New Taiwan Dollars)

Items	Notes	December 31,2019	December 31,2019	December 31,2018	December 31,2018
		Amount	%	Amount	%
Current assets Cash and cash equivalents Contract assets-Current Notes receivable Accounts receivable-Non Affiliates Accounts receivable-Affiliates Other receivable-Non Affiliates Other receivable-Affiliates Inventories Prepayments Other current assets Other financial assets-Current Total current assets Non-current assets Financial assets at fair value through other comprehensive income-Non current Investments accounted for using the equity method Property, plant, and equipment Right-of-use asset Intangible assets Deferred income tax assets Prepayment for equipment Refundable deposits Long-term receivables-Affiliates Other non-current assets Total non-current assets Total assets	4, 6.(1) 4, 6.(18) 4, 6.(2) 4, 6.(3), 8 4, 6.(3), 7 4 4, 7 4, 6.(4) 4, 6.(9) 8 4, 6.(5) 4, 6.(6), 8 4, 6.(7), 8 4, 6.(20) 4, 6.(8) 4, 6.(24) 4, 6.(9) 8 4, 6.(10), 7 4	$1,491,029 302,982 1,770 2,421,804 229,557 28,562 5,811 1,049,757 45,339 24,611 154,226 5,755,448 226,860 1,117,589 6,220,127 159,535 58,192 1,546,059 151,424 136,251 496,399 4,281 10,116,717 $15,872,165	9 2 `－` 15 2 `－` `－` 7 `－` `－` 1 36 2 7 39 1 `－` 10 1 1 3 `－` 64 100	$555,480 425,684 10,510 2,355,244 694,335 41,993 14,376 1,254,084 42,887 37,863 243,615 5,676,071 234,878 1,099,290 7,012,652 `－` 89,266 1,688,163 180,354 168,428 499,401 6,556 10,978,988 $16,655,059	3 3 `－` 14 4 `－` `－` 8 `－` `－` 2 34 1 7 42 `－` 1 10 1 1 3 `－` 66 100

(The accompanying notes are an integral part of the financial statements.

229

English Translation of Financial Statements Originally Issued in Chinese ORIENT SEMICONDUCTOR ELECTRONICS LIMITED

PARENT COMPANY ONLY BALANCE SHEETS

As of December 31, 2019 and 2018

(Amounts expressed in Thousands of New Taiwan Dollars)

Items	Notes	December 31,2019	December 31,2019	December 31,2018	December 31,2018
		Amount	%	Amount	%
Current liabilities Short-term loans Short-term notes payable Contract Liabilities-Current Notes payable Other notes payable Accounts payable-Non Affiliates Accounts payable-Affiliates Accrued expenses Payables on equipment Lease liabilities-Current Current portion of long-term loans Lease payable-Current Other current liabilities Total current liabilities Non-current liabilities Long-term loans Deferred tax liabilities Lease liabilities-Non current Net defined benefit liabilities-Non current Credit balance for investments accounted for using equity method Other non-current liabilities-Others Total non-current liabilities Total liabilities Equity Capital Common stock Additional paid-in capital Retained earnings Undistributed earnings (Retained deficits) Other Components of Equity Total stockholders' equity Total liabilities and stockholders' equity	6.(11) 6.(12) 4, 6.(18) 7 4, 6.(20) 6.(13) 4, 6.(14) 6.(13) 4, 6.(24) 4, 6.(20) 4, 6.(15) 4, 6.(6) 4 4, 6.(16) 4, 6.(17)	$2,373,766 379,210 27,845 14,197 40,306 2,923,081 209,377 836,486 147,286 13,864 1,190,490 `－` 117,507 8,273,415 904,836 31,272 146,759 430,850 15,404 3,474 1,532,595 9,806,010 5,573,285 45,711 537,191 (90,032) 6,066,155 $15,872,165	15 2 `－` `－` `－` 19 1 5 1 `－` 8 `－` 1 52 6 `－` 1 3 `－` `－` 10 62 35 `－` 3 `－` 38 100	$2,806,857 349,610 15,150 49,126 13,072 3,097,264 142,171 702,482 239,748 `－` 1,340,270 2,610 147,895 8,906,255 1,713,245 33,639 `－` 495,896 `－` 3,424 2,246,204 11,152,459 5,523,285 20,104 (44,832) 4,043 5,502,600 $16,655,059	17 2 `－` `－` `－` 19 1 4 2 `－` 8 `－` 1 53 10 `－` `－` 3 `－` `－` 13 67 33 `－` `－` `－` 33 100

(The accompanying notes are an integral part of the financial statements.)

230

English Translation of Financial Statements Originally Issued in Chinese

ORIENT SEMICONDUCTOR ELECTRONICS LIMITED

PARENT COMPANY ONLY STATEMENTS OF COMPREHENSIVE INCOME

For the Years Ended December 31, 2019 and 2018

(Amounts expressed in Thousands of New Taiwan Dollars)

		806015782	806015782
Items	Notes	2019		2018
		Amount	%	Amount	%
Net revenue Cost of goods sold Gross profit Operating expenses Selling and administration expenses Research and development expenses Expected credit losses Subtotal Net other operating income and expenses Operating income (loss) Non-operating income and expenses Other income Other gains and losses Financial costs Expected credit loss Share of profits of associates and joint ventures under equity method Subtotal Pretax income (loss) Income tax (expense) benefit Net income (loss) Other comprehensive income (loss) Items that will not be reclassified subsequently to profit or loss: Remeasurements of defined benefit plans Unrealized gains or losses on financial assets measured at fair value through other comprehensive income Unrealized gains or losses from equity instruments investments measured at far value through other comprehensive income of subsidiaries, associates and joint ventures accounting for using the equity method Income tax related to items that will not be reclassified Items that may be reclassified subsequently to profit or loss: Exchange differences on translation of foreign operations Share of other comprehensive income of associates and joint ventures Income tax related to items that may be reclassified Total other comprehensive income (loss), net of tax Total comprehensive income (loss) Basic earnings (losses) per share (Expressed in NTD) Diluted earnings (losses) per share (Expressed in NTD)	4, 6.(18), 7 4, 6.(4), 6.(21) 4, 6.(21) 4, 6.(19) 6.(22) 4, 6.(19) 4, 6.(6) 4, 6.(24) 4, 6.(23) 4, 6.(25) 4, 6.(25)	$17,235,914 (15,538,410) 1,697,504 (648,531) (278,307) (7,714) (934,552) 357 763,309 52,669 (7,771) (113,801) (1,148) 40,743 (29,308) 734,001 (146,041) 587,960 (8,772) (8,018) － 2,170 (18,965) 1,081 3,793 (28,711) $559,249 $1.06 $1.06	100 (90) 10 (4) (2) － (6) `－` 4 －－－－－－ 4 (1) 3 －－－－－－－－ 3	$14,924,371 (14,480,558) 443,813 (555,916) (270,528) (15,338) (841,782) `－` (397,969) 64,328 21,241 (125,986) － 68,766 28,349 (369,620) 258,072 (111,548) (42,568) (17,627) (4,553) 8,780 17,469 － (7,408) (45,907) ($157,455) ($0.20) ($0.20)	100 (97) 3 (4) (2) － (6) `－` (3) －－－－－－ (3) 2 (1) －－－－－－－－ (1)

(The accompanying notes are an integral part of the financial statements.)

231

English Translation of Financial Statements Originally Issued in Chinese

ORIENT SEMICONDUCTOR ELECTRONICS LIMITED

PARENT COMPANY ONLY STATEMENTS OF CHANGES IN EQUITY

For the Years Ended December 31, 2019 and 2018

(Amounts expressed in Thousands of New Taiwan Dollars)

Items	Common stock	Capitla Surplus	Retained earnings		Other equity			Total Equity
			Undistributed earnings (Retained deficits)	Exchange differences on translation of foreign operations	Unrealized gains or losses on financial assets measured at fair value through other comprehensive income	Unrealized gains or losses from available-for-sale financial assets	Employee Unearned Benefit
Balance as of January 1, 2018 Impact of retroactive applications Adjusted balance as of January 1, 2018 Share of changes in net assets of associates and joint ventures accounted for using the equity method Loss for the years ended December 31, 2018 Other comprehensive income (loss) for the years ended December 31, 2018 Total comprehensive income (loss) Captial reduction for cover accumulated deficits Proceeds from disposal of equity instruments at fair value through other comprehensive income Balance as of December 31, 2018 Balance as of January 1, 2019 Share of changes in net assets of associates and joint ventures accounted for using the equity method Income for the years ended December 31, 2019 Other comprehensive income (loss) for the years ended December 31, 2019 Total comprehensive income (loss) Share-based payment transaction Balance as of December 31, 2019	$8,060,158	$21,420	($2,536,872) 260,065	($30,156) －	－ ($113,244) (113,244) － `－` (24,108) (24,108) － 161,490 $24,138 $24,138 `－` － (7,602) (7,602) － $16,536	$145,296 (145,296) －－ `－` －－－－－ `－` `－` －－－－－	`－` `－`	$5,659,846 1,525
	8,060,158 －－－	21,420 (1,316) －－	(2,276,807) － (111,548) (31,860)	(30,156) － `－` 10,061			－－ `－` －	5,661,371 (1,316) (111,548) (45,907)
	－	－	(143,408)	10,061			－	(157,455)
	(2,536,873) `－`	－－	2,536,873 (161,490)	－－			－－	－－
	$5,523,285	$20,104	($44,832)	($20,095)			－	$5,502,600
	$5,523,285 `－` `－` `－`	$20,104 (122) `－` `－`	($44,832) `－` 587,960 (5,937)	($20,095) `－` － (15,172)			`－` `－` －－	$5,829,280 (122) 587,960 (28,711)
	`－`	`－`	582,023	(15,172)			－	559,249
	50,000	25,729	－	－			($71,301)	4,428
	$5,573,285	$45,711	$537,191	($35,267)			($71,301)	$6,066,155

(The accompanying notes are an integral part of the financial statements.)

232

English Translation of Financial Statements Originally Issued in Chinese

ORIENT SEMICONDUCTOR ELECTRONICS LIMITED

PARENT COMPANY ONLY STATEMENTS OF CASH FLOWS

For the Years Ended December 31, 2019 and 2018

(Amounts expressed in Thousands of New Taiwan Dollars)

Items	2019	2018	Items	2019	2018
	Amount	Amount		Amount	Amount
Cash flows from operating activities: Pretax income (loss) Adjustments to reconcile net loss before tax to net The profit or loss items which did not affect cash flows: Depreciation Amortization Expected credit loss Net (gain) of financial assets and liabilities at fair value through profit or loss Interest expense Interest revenue Compensation costs of shared-based payment Share of (profit) of associates accounted for using the equity method (Gain) on disposal of property, plant and equipment Others Changes in operating assets and liabilities: Decrease (Increase) in contract assets Decrease in notes receivable (Increase) in accounts receivable-non affiliates Decrease (Increase) in accounts receivable-affiliates Decrease (Increase) in other receivable-non affiliates Decrease in other receivable-affiliates Decrease (Increase) in inventories Decrease (Increase) in prepayments Decrease (Increase) in other current assets Decrease in other non-current assets Increase (Decrease) in contract liabilities (Decrease) Increase in notes payable-non affiliates (Decrease) Increase in accounts payable-non affiliates Increase in accounts payable-affiliates Increase (Decrease) in other payable Increase in other current liabilities (Decrease) in net defined benefit liabilities Cash generated from operation Interest received Income tax paid Net cash provided by operating activities	$734,001 1,446,034 65,235 8,862 － 113,801 (10,833) 4,428 (40,743) (41,191) 109,757 122,702 8,740 (75,474) 465,978 18,698 28,627 94,214 22,429 13,267 766 12,695 (7,695) (174,183) 67,206 2,696 103,616 (73,818) 3,019,815 4,418 (341) 3,023,892	($369,620) 1,382,760 61,468 15,338 (7,371) 125,986 (13,386) － (68,766) (6,464) 43,705 (213,080) 1,440 (86,679) (457,354) (5,439) 12,668 (319,835) (1,902) (14,970) 1,040 (30,632) 35,833 142,956 24,034 (2,092) 91,674 (84,455)	Cash flows from investing activities: Disposal of financial asset at fair value through profit or loss Acqusition of property, plant and equipment Disposal of property, plant and equipment Decrease in refundable deposits Acqusition of intangible assets Decrease (Increase) in long-term receivables Net cash (used in) investing activities Cash flows from financing activities: Increase in short-term loans (Decrease) in short-term loans Increase in short-term notes payable (Decrease) in short-term notes payable Increase in long-term loans Repayment of long-term loans Increase in guarantee deposits received (Decrease) in guarantee deposits received Increase in lease payable (Decrease) in lease payable Repayment of lease liabilities Interset paid Other financing activities Net cash (used in) financing activities Net Increase (Decrease) in cash and cash equivalents Cash and cash equivalents, beginning of period Cash and cash equivalents, end of period	－ (723,348) 43,900 32,177 (32,657) 3,002 (676,926) － (433,155) 379,210 (349,610) 1,300,000 (2,262,010) 50 －－－ (18,794) (116,497) 89,389 (1,411,417) 935,549 555,480 $1,491,029	38,184 (762,947) 41,029 18,134 (63,714) (22,610) (751,924) 614,356 － 349,610 (398,938) 1,011,376 (1,711,897) － (50) 30,380 (52,321) － (123,894) 267,345 (14,033) (504,563) 1,060,043 $555,480
		256,857
		4,637 (100)
		261,394

(The accompanying notes are an integral part of the financial statements.)

233

English Translation of Financial Statements Originally Issued in Chinese

ORIENT SEMICONDUCTOR ELECTRONICS LIMITED

NOTES TO PARENT COMPANY ONLY FINANCIAL STATEMENTS December 31, 2019 and 2018

(Unless otherwise stated, all amounts are expressed in thousands of New Taiwan Dollars)

1. ORGANIZATION AND OPERATION

As of December 31, 2019, the Company’s current liabilities and current assets were $8,273,415 thousand and $5,755,448 thousand, respectively. The current ratio was 69.57%. The Company has devoted to adjusting its product structure. The Company keeps making a profit and improving financial structure.

2. DATE AND PROCEDURES OF AUTHORIZATION OF FINANCIAL STATEMENTS FOR ISSUE

The parent company only financial statements of the Company for the years ended December 31, 2019 and 2018 were authorized for issue by the Board of Directors on March 27, 2020.

3. NEWLY ISSUED OR REVISED STANDARDS AND INTERPRETATIONS

(1) Changes in accounting policies resulting from applying for the first time certain standards and amendments.

The Company applied for the first time International Financial Reporting Standards, International Accounting Standards, and Interpretations issued, revised or amended which are endorsed by Financial Supervisory Commission (“FSC”) and become effective for annual periods beginning on or after January 1, 2019. The nature and the impact of each new standard and amendment that has a material effect on the Company is described below:

A. IFRS 16“Leases”

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The Company followed the transition provision in IFRS 16 and the date of initial application was January 1, 2019. The impacts arising from the adoption of IFRS 16 are summarized as follows:

(a) Please refer to Note 4 for the accounting policies before or after January 1, 2019.
(b) For the definition of a lease, the Company elected not to reassess whether a contract was, or contained, a lease on 1 January 2019. The Company was permitted to apply IFRS 16 to contracts that were previously identified as leases applying IAS 17 and IFRIC 4 but not to apply IFRS 16 to contracts that were not previously identified as containing a lease applying IAS 17 and IFRIC 4. That is, for contracts entered into (or changed) on or after 1 January 2019, the Company need to assess whether contacts are, or contain, leases applying IFRS 16. In comparing to IAS 17, IFRS 16 provides that 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. The Company assessed most of the contracts are, or contain, leases and has no significant impact arised.
(c) The Company is a lessee and elects not to restate comparative information in accordance with the transition provision in IFRS 16. Instead, the Company recognized the cumulative effect of initially applying IFRS 16 as an adjustment to the opening balance of retained earnings (or other component of equity, as appropriate) at the date of initial application.
I. Leases previously classified as operating leases

For leases that were previously classified as operating leases applying IAS 17, the Company measured and recognized those leases as lease liability on January 1, 2019 at the present value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate on January 1, 2019, and; the Company chose, on a lease-by-lease basis, to measure the right-ofuse asset at either:

i. its carrying amount as if IFRS 16 had been applied since the commencement date, but discounted using the lessee’s incremental borrowing rate on January 1, 2019; or
ii. an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments relating to that lease recognized in the balance sheet immediately before January 1, 2019.

On January 1, 2019, the Company’s right-of-use asset and lease liability increased by $150,349 thousand and $150,349 thousand, respectively.

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In accordance with the transition provision in IFRS 16, the Company used the following practical expedients on a lease-by-lease basis to leases previously classified as operating leases:

i. Apply a single discount rate to a portfolio of leases with reasonably similar characteristics.
ii. Rely on its assessment of whether leases are onerous immediately before January 1, 2019 as an alternative to performing an impairment review.
iii. Elect to account in the same way as short-term leases to leases for which the lease term ends within 12 months of January 1, 2019.
iv. Exclude initial direct costs from the measurement of the right-of-use asset on January 1, 2019.
v. Use hindsight, such as in determining the lease term if the contract contains options to extend or terminate the lease.

II. Leases previously classified as finance leases

For leases that were previously classified as finance leases applying IAS 17, the Company reclassified the lease asset of $25,844 thousand and the lease payable of $2,610 thousand as measured by IAS 17 to the right-of-use asset of $25,844 thousand and the lease liability of $2,610 thousand, respectively, on January 1, 2019.

III.Please refer to Note 4 and Note 6 for additional disclosure of lessee and lessor which required by IFRS 16.
IV.As at January 1, 2019, the impacts arising from the adoption of IFRS 16 are summarized as follows:
i. The weighted average lessee’s incremental borrowing rate applied to lease liabilities recognized in the balance sheet on January 1, 2019 was 2.24%.
ii. The explanation for the difference of $85,729 thousand between: 1) operating lease commitments disclosed applying IAS 17 as of December 31, 2019, discounted using the incremental borrowing rate on January 1, 2019; and 2) lease liabilities recognized in the balance sheet as at January 1, 2019 is summarized as follows:

Operating lease commitments disclosed applying IAS 17 as of December 31, 2018 Discounted using the incremental borrowing rate on January 1, 2019 Add: the carrying value of lease payables as of December 31, 2018 Add: adjustments to the options to extend or terminate the lease that is reasonably certain to exercise The carrying value of lease liabilities recognized as of January 1, 2019	$74,699
	$67,230 2,610 83,119
	$152,959

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(d) The Company is a lessor and has not made any adjustments. Please refer to Note 4 and Note 6 for the information relating to the lessor.
(2) Standards or interpretations issued, revised or amended, by International Accounting Standards Board (“IASB”) which are endorsed by FSC, but not yet adopted by the Company as at the end of the reporting period are listed below:

Items	New,Revised or Amended Standards and Interpretations	Effective Date issued byIASB
a	Definition of a Business Amendments to IFRS 3	January1,2020
b	Definition of Material Amendments to IAS 1 and 8	January1,2020
c	Interest Rate Benchmark Reform - Amendments to IFRS 9, IAS 39 and IFRS 7	January 1, 2020

`－` A. Definition of a Business Amendments to IFRS 3

`－` B. Definition of a Material Amendments to IAS 1 and 8

C. Interest Rate Benchmark Reform - Amendments to IFRS 9, IAS 39 and IFRS 7

.hedging instrument. Hence, the entity shall apply the exceptions to all hedging relationships directly affected by the interest rate benchmark reform.

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The amendments include:

(1) highly probable requirement

(2) prospective assessments

(3) IAS 39 retrospective assessment

An entity is not required to undertake the IAS 39 retrospective assessment (i.e. the actual results

– of the hedge are within a range of 80 125%) for hedging relationships directly affected by the interest rate benchmark reform.

(4) separately identifiable risk components

For hedges of a non-contractually specified benchmark component of interest rate risk, an entity

shall apply the separately identifiable requirement only at the inception of such hedging relationships.

The amendments also include the end of application of the exceptions requirements and the related disclosures requirements of the amendments.

(3) Standards or interpretations issued, revised or amended, by International Accounting Standards Board (“IASB”) which are not endorsed by FSC, but not yet adopted by the Company as at the end of the reporting period are listed below.:

Items	New,Revised or Amended Standards and Interpretations	Effective Date issued byIASB
a	IFRS 10 “Consolidated Financial Statements” and IAS 28 “Investments in Associates and Joint Ventures” — Sale or Contribution of Assets between an Investor and its Associate or Joint Ventures	To be determined by IASB
b	IFRS 17 “Insurance Contracts”	January1,2021
c	Classification of Liabilities as Current or Non-current – Amendments to IAS 1	January 1, 2022

238～

A. IFRS 10“Consolidated Financial Statements” and IAS 28“Investments in Associates and Joint Ventures” — Sale or Contribution of Assets between an Investor and its Associate or Joint Ventures

B. IFRS 17 “Insurance Contracts”

IFRS 17 provides a comprehensive model for insurance contracts, covering all relevant accounting aspects (including recognition, measurement, presentation and disclosure requirements). The core of IFRS 17 is the General (building block) Model, under this model, on initial recognition, an entity shall measure a Company of insurance contracts at the total of the fulfilment cash flows and the contractual service margin. The fulfilment cash flows comprise of the following:

(a) estimates of future cash flows;

(b) Discount rate: an adjustment to reflect the time value of money and the financial risks related to the future cash flows, to the extent that the financial risks are not included in the estimates of the future cash flows; and
(c) a risk adjustment for non-financial risk.

The carrying amount of a Company of insurance contracts at the end of each reporting period shall be the sum of the liability for remaining coverage and the liability for incurred claims. Other than the General Model, the standard also provides a specific adaptation for contracts with direct participation features (the Variable Fee Approach) and a simplified approach (Premium Allocation Approach) mainly for short-duration contracts.

C. Classification of Liabilities as Current or Non-current – Amendments to IAS 1

These are the amendments to paragraphs 69-76 of IAS 1 Presentation of Financial statements and the amended paragraphs related to the classification of liabilities as current or non-current.

The abovementioned standards and interpretations issued by IASB have not yet endorsed by FSC at the date when the Company’s financial statements were authorized for issue, the local effective dates are to be determined by FSC. All other standards and interpretations have no material impact on the Company.

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4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(1) Statement of compliance

The parent company only financial statements for the years ended December 31, 2019 and 2018 have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers (“the Regulations”).

(2) Basis of preparation

When preparing the parent company only financial statements, the Company account for subsidiaries and associates by using the equity method. In order to agree with the amount of net income, other comprehensive income and equity attributable to shareholders of the parent in the consolidated financial statements, the differences of the accounting treatment between the parent company only basis and the consolidated basis are adjusted under the heading of investments accounted for using equity method, share of profits of subsidiaries and associates and share of other comprehensive income of subsidiaries and associates in the parent company only financial statements.

The parent company only financial statements have been prepared on a historical cost basis, except for financial instruments that have been measured at fair value. The PARENT COMPANY ONLY financial statements are expressed in thousands of New Taiwan Dollars (“NT$”) unless otherwise stated.

(3) Foreign currency transactions

The parent company only financial statements are presented in NT$, which is also the Company’s functional currency. Each entity in The Company determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency.

Transactions in foreign currencies are initially recorded by The Company entities at their respective functional currency rates prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency closing rate of exchange ruling at the reporting date. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined. Non-monetary items that are measured at historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions.

All exchange differences arising on the settlement of monetary items or on translating monetary items are taken to profit or loss in the period in which they arise except for the following:

(a) Exchange differences arising from foreign currency borrowings for an acquisition of a qualifying asset to the extent that they are regarded as an adjustment to interest costs are included in the borrowing costs that are eligible for capitalization.
(b) Foreign currency items within the scope of IAS 39 Financial Instruments: Recognition and Measurement are accounted for based on the accounting policy for financial instruments.
(c) Exchange differences arising on a monetary item that forms part of a reporting entity’s net investment in a foreign operation is recognized initially in other comprehensive income and reclassified from equity to profit or loss on disposal of the net investment.

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(4) Translation of financial statements in foreign currency

(5) Current and non-current distinction

An asset is classified as current when:

(a) The Company expects to realize the asset, or intends to sell or consume it, in its normal operating cycle.
(b) The Company holds the asset primarily for the purpose of trading.
(c) The Company expects to realize the asset within twelve months after the reporting period.
(d) The asset is cash or cash equivalent unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.

All other assets are classified as non-current.

A liability is classified as current when:

(a) The Company expects to settle the liability in its normal operating cycle.
(b) The Company holds the liability primarily for the purpose of trading.
(c) The liability is due to be settled within twelve months after the reporting period.
(d) The Company does not have an unconditional right to defer settlement of the liability for at least twelve months after the reporting period. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.

All other liabilities are classified as non-current.

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(6) Cash and cash equivalents

(7) Financial instruments

Financial assets and financial liabilities are recognized when the Company becomes a party to the contractual provisions of the instrument.

A. Financial instruments: Recognition and Measurement

The Company accounts for regular way purchase or sales of financial assets on the trade date.

The Company classified financial assets as subsequently measured at amortized cost, fair value through other comprehensive income or fair value through profit or loss considering both factors below:

(a) the Company’s business model for managing the financial assets and
(b) the contractual cash flow characteristics of the financial asset.

Financial assets measured at amortized cost

(a) the financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows and
(b) the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

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Interest revenue is calculated by using the effective interest method. This is calculated by applying the effective interest rate to the gross carrying amount of a financial asset except for:

(a) purchased or originated credit-impaired financial assets. For those financial assets, the Company applies the credit-adjusted effective interest rate to the amortized cost of the financial asset from initial recognition.
(b) financial assets that are not purchased or originated credit-impaired financial assets but subsequently have become credit-impaired financial assets. For those financial assets, the Company applies the effective interest rate to the amortized cost of the financial asset in subsequent reporting periods.

Financial asset measured at fair value through other comprehensive income

A financial asset is measured at fair value through other comprehensive income if both of the following conditions are met:

(a) the financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and
(b) the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Recognition of gain or loss on a financial asset measured at fair value through other comprehensive income are described as below:

(a) A gain or loss on a financial asset measured at fair value through other comprehensive income recognized in other comprehensive income, except for impairment gains or losses and foreign exchange gains and losses, until the financial asset is derecognized or reclassified.
(b) When the financial asset is derecognized the cumulative gain or loss previously recognized in other comprehensive income is reclassified from equity to profit or loss as a reclassification adjustment.
(c) Interest revenue is calculated by using the effective interest method. This is calculated by applying the effective interest rate to the gross carrying amount of a financial asset except for:
i. Purchased or originated credit-impaired financial assets. For those financial assets, the Company applies the credit-adjusted effective interest rate to the amortized cost of the financial asset from initial recognition.
ii. Financial assets that are not purchased or originated credit-impaired financial assets but subsequently have become credit-impaired financial assets. For those financial assets, the Company applies the effective interest rate to the amortized cost of the financial asset in subsequent reporting periods.

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Financial asset measured at fair value through profit or loss

B. Impairment of financial assets

The Company recognizes a loss allowance for expected credit losses on debt instrument investments measured at fair value through other comprehensive income and financial asset measured at amortized cost. The loss allowance on debt instrument investments measured at fair value through other comprehensive income is recognized in other comprehensive income and not reduce the carrying amount in the statement of financial position.

The Company measures expected credit losses of a financial instrument in a way that reflects:

(a) an unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes;
(b) the time value of money; and
(c) reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current conditions and forecasts of future economic conditions.

The loss allowance is measures as follow:

(a) At an amount equal to 12-month expected credit losses: the credit risk on a financial asset has not increased significantly since initial recognition or the financial asset is determined to have low credit risk at the reporting date. In addition, the Company measures the loss allowance at an amount equal to lifetime expected credit losses in the previous reporting period, but determines at the current reporting date that the credit risk on a financial asset has increased significantly since initial recognition is no longer met.

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(b) At an amount equal to the lifetime expected credit losses: the credit risk on a financial asset has increased significantly since initial recognition or financial asset that is purchased or originated credit-impaired financial asset.
(c) For trade receivables or contract assets arising from transactions within the scope of IFRS 15, the Company measures the loss allowance at an amount equal to lifetime expected credit losses.
(d) For lease receivables arising from transactions within the scope of IFRS 16 (before January 1, 2019: IAS 17), the Company measures the loss allowance at an amount equal to lifetime expected credit losses.

At each reporting date, the Company needs to assess whether the credit risk on a financial asset has increased significantly since initial recognition by comparing the risk of a default occurring at the reporting date and the risk of default occurring at initial recognition. Please refer to Note 12 for further details on credit risk.

C. Derecognition of financial assets

A financial asset is derecognized when:

(a) The rights to receive cash flows from the asset have expired.
(b) The Company has transferred the asset and substantially all the risks and rewards of the asset have been transferred.
(c) The Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

D. Financial liabilities and equity

Classification between liabilities or equity

The Company classifies the instrument issued as a financial liability or an equity instrument in accordance with the substance of the contractual arrangement and the definitions of a financial liability, and an equity instrument.

Equity instruments

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Financial liabilities

Financial liabilities at fair value through profit or loss

(a) it is acquired or incurred principally for the purpose of selling or repurchasing it in the near term;

(b) on initial recognition it is part of a portfolio of identified financial instruments that are managed

together and for which there is evidence of a recent actual pattern of short-term profit-taking; or

(c) it is a derivative (except for a derivative that is a financial guarantee contract or a designated and effective hedging instrument).

(a) it eliminates or significantly reduces a measurement or recognition inconsistency; or (b) Company of financial assets, financial liabilities or both is managed and its performance is evaluated on a fair value basis, in accordance with a documented risk management or investment strategy, and information about the Company is provided internally on that basis to the key management personnel.

Gains or losses on the subsequent measurement of liabilities at fair value through profit or loss including interest paid are recognized in profit or loss.

Financial liabilities at amortized cost

Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or transaction costs.

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Derecognition of financial liabilities

A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires.

E. Offsetting of financial instruments

(8) Fair value measurement

(a) In the principal market for the asset or liability, or

(b) In the absence of a principal market, in the most advantageous market for the asset or liability

The principal or the most advantageous market must be accessible to by The Company.

The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.

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(9) Inventories

Inventories are valued at the lower of cost and net realizable value item by item. Cost incurred in bringing each product to its present location and condition are accounted for as follows:

－ Raw materials Purchase cost on an average basis － Finished goods and work in Cost of direct materials and labor and a proportion of Progress manufacturing overheads based on normal operating capacity on weighted average cost basis

Net realizable value is the estimated selling price in the ordinary course of business less estimated costs of completion and the estimated costs necessary to make the sale.

Rendering of services is accounted in accordance with IFRS 15 and not within the scope of inventories.

(10) Non-current assets held for sale and discontinued operations

Non-current assets and disposal Company s are classi ed as held for sale if their carrying amounts will be recovered through a sale transaction that is highly probable within one year from the date of classification and the asset or disposal Company is available for immediate sale in its present condition. Non-current assets and disposal Company s classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell.

In the consolidated income statement of the reporting period, and of the comparable period of the previous year, income and expenses from discontinued operations are reported separate from income and expenses from continuing activities, down to the level of profit after taxes, even when the Company retains a non-controlling interest in the subsidiary after the sale. The resulting profit or loss (after taxes) is reported separately in the income statement.

Property, plant and equipment and intangible assets once classi ed as held for sale are not depreciated or amortized.

(11) Investments accounted for using the equity method

The Company’s investment in its associate is accounted for using the equity method. An associate is an entity in which the Company has significant influence.

Under the equity method, the investment in the associate is carried in the balance sheet at cost and adjusted thereafter for the post-acquisition change in the Company’s share of net assets of the associate. After the interest in the associate is reduced to zero, additional losses are provided for, and a liability is recognized, only to the extent that the Company has incurred legal or constructive obligations or made payments on behalf of the associate. Unrealized gains and losses resulting from transactions between the Company and the associate are eliminated to the extent of the Company’s related interest in the associate.

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When changes in the net assets of an associate occur and not those that are recognized in profit or loss or other comprehensive income and do not affects the Company’s percentage of ownership interests in the associate, the Company recognizes such changes in equity based on its percentage of ownership interests. The resulting capital surplus recognized will be reclassified to profit or loss at the time of disposing the associate on a prorata basis.

When the associate issues new stock, and the Company’s interest in an associate is reduced or increased as the Company fails to acquire shares newly issued in the associate proportionately to its original ownership interest, the increase or decrease in the interest in the associate is recognized in Additional Paid in Capital and Investment in associate. When the interest in the associate is reduced, the cumulative amounts previously recognized in other comprehensive income are reclassified to profit or loss or other appropriate items. The aforementioned capital surplus recognized is reclassified to profit or loss on a pro rata basis when the Company disposes the associate.

The financial statements of the associate are prepared for the same reporting period as the parent company. Where necessary, adjustments are made to bring the accounting policies in line with those of the Company.

The Company determines at each reporting date whether there is any objective evidence that the investment in the associate is impaired in accordance with IFRS 9 Financial Instruments. If this is the case the Company calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value and recognizes the amount in the ‘share of profit or loss of an associate’ in the statement of comprehensive income in accordance with IAS 36 Impairment of Assets . In determining the value in use of the investment, the company estimates :

(a) Its share of the present value of the estimated future cash flows expected to be generated by the associate or joint venture, including the cash flows from the operations of the associate and the proceeds on the ultimate disposal of the investment; or
(b) The present value of the estimated future cash flows expected to arise from dividends to be received from the investment and from its ultimate disposal.

Upon loss of significant influence over the associate, the Company measures and recognises any retaining investment at its fair value. Any difference between the carrying amount of the associate upon loss of significant influence and the fair value of the retaining investment and proceeds from disposal are recognized in profit or loss.

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The Company recognizes its interest in the jointly controlled entities using the equity method other than those that meet the criteria to be classified as held for sale. A jointly controlled entity is a joint venture that involves the establishment of a corporation, partnership or other entity.

(12) Property, plant and equipment

Property, plant and equipment is stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. Such cost includes the cost of dismantling and removing the item and restoring the site on which it is located and borrowing costs for construction in progress if the recognition criteria are met. Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item is depreciated separately. When significant parts of property, plant and equipment are required to be replaced in intervals, the Company recognized such parts as individual assets with specific useful lives and depreciation, respectively. The carrying amount of those parts that are replaced is derecognized in accordance with the derecognition provisions of IAS 16 Property, plant and equipment. When a major inspection is performed, its cost is recognized in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognized in profit or loss as incurred.

Depreciation is calculated on a straight-line basis over the estimated economic lives of the following assets:

assets:
Buildings	10`～`51 years
Machinery and equipment	3`～`12 years
Transportation equipment	5 years
Office equipment	5 years
Right-of use assets/Leased assets (Note)	2`～`51 years
Leasehold improvements	5`～`15 years
Other equipment	5 years

(Note): The Company reclassified the lease assets to right-of-use assets after the adoption of IFRS 16 from January 1, 2019.

The assets’ residual values, useful lives and methods of depreciation are reviewed at each financial year end and adjusted prospectively, if appropriate.

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(13) Investment property

The accounting policy from January 1, 2019 as follow:

The Company’s owned investment properties are measured initially at cost, including transaction costs. The carrying amount includes the cost of replacing part of an existing investment property at the time that cost is incurred if the recognition criteria are met and excludes the costs of day-to-day servicing of an investment property. Subsequent to initial recognition, other than those that meet the criteria to be classified as held for sale (or are included in a disposal Company that is classified as held for sale) in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, investment properties are measured using the cost model in accordance with the requirements of IAS 16 Property, plant and equipment for that model. If investment properties are held by a lessee as right-of-use assets and is not held for sale in accordance with IFRS 5, investment properties are measured in accordance with the requirements of IFRS 16.

The Company transfers to or from investment properties when there is a change in use for these assets.

Properties are transferred to or from investment properties when the properties meet, or cease to meet, the definition of investment property and there is evidence of the change in use.

The accounting policy before January 1, 2019 as follow:

The Company’s investment properties are measured initially at cost, including transaction costs. The carrying amount includes the cost of replacing part of an existing investment property at the time that cost is incurred if the recognition criteria are met and excludes the costs of day-to-day servicing of an investment property. Subsequent to initial recognition, investment properties are measured using the cost model in accordance with the requirements of IAS 16 Property, plant and equipment for that model, other than those that meet the criteria to be classified as held for sale (or are included in a disposal Company that is classified as held for sale) in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations.

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The Company transfers to or from investment properties when there is a change in use for these assets.

Properties are transferred to or from investment properties when the properties meet, or cease to meet, the definition of investment property and there is evidence of the change in use.

(14) Leases

The accounting policy from January 1, 2019 as follow:

For contracts entered on or after January 1, 2019, the Company assesses whether the 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 for a period of time, the Company assesses whether, throughout the period of use, has both of the following:

(a) the right to obtain substantially all of the economic benefits from use of the identified asset; and (b) the right to direct the use of the identified asset.

The Company elected not to reassess whether a contract is, or contains, a lease on January 1, 2019. The Company is permitted to apply IFRS 16 to contracts that were previously identified as leases applying IAS 17 and IFRIC 4 but not to apply IFRS 16 to contracts that were not previously identified as containing a lease applying IAS 17 and IFRIC 4.

For a contract that is, or contains, a lease, the Company accounts for each lease component within the contract as a lease separately from non-lease components of the contract. For a contract that contains a lease component and one or more additional lease or non-lease components, the Company allocates the consideration in the contract to each lease component on the basis of the relative stand-alone price of the lease component and the aggregate stand-alone price of the non-lease components. The relative stand-alone price of lease and non-lease components shall be determined on the basis of the price the lessor, or a similar supplier, would charge the Company for that component, or a similar component, separately. If an observable stand-alone price is not readily available, the Company estimates the standalone price, maximising the use of observable information.

Company as a lessee

Except for leases that meet and elect short-term leases or leases of low-value assets, the Company recognizes right-of-use asset and lease liability for all leases which the Company is the lessee of those lease contracts.

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At the commencement date, the Company measures the lease liability at the present value of the lease payments that are not paid at that date. The lease payments are discounted using the interest rate implicit in the lease, if that rate can be readily determined. If that rate cannot be readily determined, the Company uses its incremental borrowing rate. At the commencement date, the lease payments included in the measurement of the lease liability comprise the following payments for the right to use the underlying asset during the lease term that are not paid at the commencement date:

(a) fixed payments (including in-substance fixed payments), less any lease incentives receivable;
(b) variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;
(c) amounts expected to be payable by the lessee under residual value guarantees;
(d) the exercise price of a purchase option if the Company is reasonably certain to exercise that option; and
(e) payments of penalties for terminating the lease, if the lease term reflects the lessee exercising an option to terminate the lease.

After the commencement date, the Company measures the lease liability on an amortised cost basis, which increases the carrying amount to reflect interest on the lease liability by using an effective interest method; and reduces the carrying amount to reflect the lease payments made.

At the commencement date, the Company measures the right-of-use asset at cost. The cost of the rightof-use asset comprises:

(a) the amount of the initial measurement of the lease liability;
(b) any lease payments made at or before the commencement date, less any lease incentives received;
(c) any initial direct costs incurred by the lessee; and
(d) an estimate of costs to be incurred by the lessee in dismantling and removing the underlying asset, restoring the site on which it is located or restoring the underlying asset to the condition required by the terms and conditions of the lease.

For subsequent measurement of the right-of-use asset, the Company measures the right-of-use asset at cost less any accumulated depreciation and any accumulated impairment losses. That is, the Company measures the right-of-use applying a cost model.

If the lease transfers ownership of the underlying asset to the Company by the end of the lease term or if the cost of the right-of-use asset reflects that the Company will exercise a purchase option, the Company depreciates the right-of-use asset from the commencement date to the end of the useful life of the underlying asset. Otherwise, the Company depreciates the right-of-use asset 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.

The Company applies IAS 36 “Impairment of Assets” to determine whether the right-of-use asset is impaired and to account for any impairment loss identified.

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Except for those leases that the Company accounted for as short-term leases or leases of low-value assets, the Company presents right-of-use assets and lease liabilities in the balance sheet and separately presents lease-related interest expense and depreciation charge in the statements of comprehensive income.

For short-term leases or leases of low-value assets, the Company elects to recognize the lease payments associated with those leases as an expense on either a straight-line basis over the lease term or another systematic basis.

Company as a lessor

At inception of a contract, the Company classifies each of its leases as either an operating lease or a finance lease. A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership of an underlying asset. A lease is classified as an operating lease if it does not transfer substantially all the risks and rewards incidental to ownership of an underlying asset. At the commencement date, the Company recognizes assets held under a finance lease in its balance sheet and present them as a receivable at an amount equal to the net investment in the lease.

For a contract that contains lease components and non-lease components, the Company allocates the consideration in the contract applying IFRS 15.

The Company recognizes lease payments from operating leases as rental income on either a straight-line basis or another systematic basis. Variable lease payments for operating leases that do not depend on an index or a rate are recognized as rental income when incurred.

The accounting policy before January 1, 2019 as follow:

Company as a lessee

Finance leases which transfer to the Company substantially all the risks and benefits incidental to ownership of the leased item, are capitalized at the commencement of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognized in profit or loss.

A leased asset is depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Company will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the lease term.

Operating lease payments are recognized as an expense on a straight-line basis over the lease term.

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Company as a lessor

Leases in which the Company does not transfer substantially all the risks and benefits of ownership of the asset are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognized over the lease term on the same basis as rental income. Contingent rents are recognized as revenue in the period in which they are earned.

(15) Intangible assets

The useful lives of intangible assets are assessed as either finite or indefinite.

Research and development costs

Research costs are expensed as incurred. Development expenditures on an individual project are recognized as an intangible asset when the Company can demonstrate:

(a) The technical feasibility of completing the intangible asset so that it will be available for use or sale
(b) Its intention to complete and its ability to use or sell the asset
(c) How the asset will generate future economic benefits
(d) The availability of resources to complete the asset
(e) The ability to measure reliably the expenditure during development.

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Following initial recognition of the development expenditure as an asset, the cost model is applied requiring the asset to be carried at cost less any accumulated amortization and accumulated impairment losses. Amortization of the asset begins when development is complete and the asset is available for use.

It is amortized over the period of expected future benefit.

A summary of the policies applied to the Company’s intangible assets is as follows:

Cost of computer software Useful lives 1 ～ 3 years Amortization method used Amortized on a straight-line basis Internally generated or acquired Acquired

(16) Impairment of non-financial assets

The Company assesses at the end of each reporting period whether there is any indication that an asset in the scope of IAS 36 Impairment of Assets may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Company estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s (“CGU”) fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or companies of assets. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.

An impairment loss of continuing operations or a reversal of such impairment loss is recognized in profit or loss.

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(17) Revenue recognition

The Company’s revenue arising from contracts with customers are primarily related to sale of goods and rendering of services. The accounting policies are explained as follow:

Sale of goods

The Company manufactures and sells machinery. Sales are recognized when control of the goods is transferred to the customer and the goods are delivered to the customers. The main products of the Company are integrated circuits, semiconductor devices and computer motherboards, etc and revenue is recognized based on the consideration stated in the contract. For certain sales of goods transactions, they are usually accompanied by volume discounts (based on the accumulated total sales amount for a specified period). Therefore, revenue from these sales is recognized based on the price specified in the contract, net of the estimated volume discounts.

Products manufactured according to customer's agreed specifications if the customer controls the product at the time of creation or enhancement of the product, the Company will gradually recognize revenue over time.

The Company provides its customer with a warranty with the purchase of the products. The warranty provides assurance that the product will operate as expected by the customers. And the warranty is accounted in accordance with IAS 37.

The credit period of the Company's sale of goods is from 30 to 150 days. For most of the contracts, when the Company transfers the goods to customers and has a right to an amount of consideration that is unconditional, these contracts are recognized as trade receivables. The Company usually collects the payments shortly after transfer of goods to customers; therefore, there is no significant financing component to the contract. For some of the contracts, the Company has transferred the goods to customers but does not has a right to an amount of consideration that is unconditional, these contacts should be presented as contract assets. Besides, in accordance with IFRS 9, the Company measures the loss allowance for a contract asset at an amount equal to the lifetime expected credit losses. However, for some contracts, part of the consideration was received from customers upon signing the contract, then the Company has the obligation to transfer the goods to customers subsequently; accordingly, these amounts are recognized as contract liabilities.

Rendering of services

Revenue is recognized when the Company finishes the processing services.

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(18) Borrowing costs

(19) Post-employment benefits

Therefore, fund assets are not included in the parent company only financial statements. Pension benefits for employees of the overseas subsidiaries and the branches are provided in accordance with the respective local regulations.

(a) the date of the plan amendment or curtailment, and
(b) the date that the Company recognizes restructuring-related costs

(20) Share-Based Payment Transactions

The cost of equity-settled transactions between the Company and its subsidiaries is recognized based on the fair value of the equity instruments granted. The fair value of the equity instruments is determined by using an appropriate pricing model.

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The cost of equity-settled transactions is recognized, together with a corresponding increase in other capital reserves in equity, over the period in which the performance and/or service conditions are fulfilled. The cumulative expense recognized for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Company’s best estimate of the number of equity instruments that will ultimately vest. The income statement expense or credit for a period represents the movement in cumulative expense recognized as at the beginning and end of that period.

The dilutive effect of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share.

The cost of restricted stocks issued is recognized as salary expense based on the fair value of the equity instruments on the grant date, together with a corresponding increase in other capital reserves in equity, over the vesting period. The Company recognized unearned employee salary which is a transitional contra equity account; the balance in the account will be recognized as salary expense over the passage of vesting period.

(21) Income taxes

Income tax expense (income) is the aggregate amount included in the determination of profit or loss for the period in respect of current tax and deferred tax.

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Current income tax

The income tax for undistributed earnings is recognized as income tax expense in the subsequent year when the distribution proposal is approved by the Shareholders’ meeting.

Deferred tax

Deferred tax is provided on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred tax liabilities are recognized for all taxable temporary differences, except:

(a) Where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss.
(b) In respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

(a) Where the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss.
(b) In respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are recognized only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilized.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realized or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted at the reporting date. The measurement of deferred tax assets and deferred tax liabilities reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

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5. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTMATES AND ASSUMPTIONS

Judgement

In the process of applying the Company’s accounting policies, management has made the following judgements, which have the most significant effect on the amounts recognized in the parent company only financial statements:

Revenue recognition

The Company based on trading patterns and whether the economic substance were expose to the sale of goods or services related to the significant risks and rewards, to determine whether the Company should be classified as the principal of the transaction or agent. When expose to the sale of goods or services related to the significant risks and rewards, the principal of the transaction should recognize the total receivables or received economic benefit as revenue; if determine as the agent, recognize the net transaction as revenue.

The Company provides electronic manufacturing services and integrated circuit packaging and testing manufacturing services, determined as to conform to the following indicators; it is recognized as total revenue collected:

(a) Has the primary responsibility to the provision of goods or services provided
(b) Assumed inventory risk
(c) Assumed customer’s credit risk

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Estimates and assumptions

(1) The Fair Value of Financial Instruments

Where the fair value of financial assets and financial liabilities recorded in the balance sheet cannot be derived from active markets, they are determined using valuation techniques including income approach (for example the discounted cash flows model) or the market approach. Changes in assumptions about these factors could affect the reported fair value of the financial instruments. Please refer to Note 12 for more details.

(2) Post-employment benefits

The cost of post-employment benefit and the present value of the pension obligation under defined benefit pension plans are determined using actuarial valuations. An actuarial valuation involves making various assumptions. These include the determination of the discount rate, future salary increases, mortality rates and future pension increases. Please refer to Note 6.(15) for more details.

(3) Income tax

Uncertainties exist with respect to the interpretation of complex tax regulations and the amount and timing of future taxable income. Given the wide range of international business relationships and the long-term nature and complexity of existing contractual agreements, differences arising between the actual results and the assumptions made, or future changes to such assumptions, could necessitate future adjustments to tax income and expense already recorded. The Company establishes provisions, based on reasonable estimates, for possible consequences of audits by the tax authorities of the respective counties in which it operates. The amount of such provisions is based on various factors, such as experience of previous tax audits and differing interpretations of tax regulations by the taxable entity and the responsible tax authority. Such differences of interpretation may arise on a wide variety of issues depending on the conditions prevailing in the respective Group Company’s domicile.

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(4) Accounts receivables—estimation of impairment loss

The Company estimates the impairment loss of accounts receivables at an amount equal to lifetime expected credit losses. The credit loss is the present value of the difference between the contractual cash flows that are due under the contract (carrying amount) and the cash flows that expects to receive (evaluate forward looking information). However, as the impact from the discounting of short-term receivables is not material, the credit loss is measured by the undiscounted cash flows. Where the actual future cash flows are lower than expected, a material impairment loss may arise. Please refer to Note 6 for more details.

(5) Inventories

6. CONTENTS OF SIGNIFICANT ACCOUNTS

(1) CASH AND CASH EQUIVALENTS

Cash on hand Demand deposits Total	Dec. 31,2019	Dec. 31,2018
	$125 1,490,904	$125 555,355
	$1,491,029	$555,480

(2) NOTES RECEIVABLES

Notes receivables Less: loss allowance Total	Dec. 31,2019	Dec. 31,2018 $10,510 (`－`) $10,510
	$1,770 (`－`)
	$1,770

Notes receivables were not pledged.

The Company follows the requirement of IFRS 9 to assess the impairment . Please refer to Note 6.(19) for more details on loss allowance and Note 12 for more details on credit risk.

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－ (3) ACCOUNTS RECEIVABLES AND ACCOUNTS RECEIVABLES AFFILIATES

(A) Details are as follows : Accounts receivables Add : Pledged accounts receivable Less: loss allowance Subtotal Accounts receivables-affiliates Less: loss allowance Subtotal Total	Dec. 31,2019	Dec. 31,2018
	$2,447,900 `－` (26,096)	$2,147,903 224,523 (17,182)
	2,421,804	2,355,244
	229,557 `－`	695,535 (1,200)
	229,557	694,335
	$2,651,361	$3,049,579

(B) Accounts receivables are generally on 30-150 day terms. The total carrying amount as of December 31, 2019 and 2018 were $2,679,227 thousand, $3,078,471 thousand , respectively. Please refer to Note 6.(19) for more details on loss allowance and Note 12 for details on credit risk management.
(C) The Company signed loan agreements with the following banks and used its accounts receivable as securities for the loans. Certain of the Company’s accounts receivable were under pledge to the banks. The details of the loan agreements are as follows:

Dec. 31, 2019

None.

Dec. 31, 2018

Dec. 31, 2018
Bank	Contractperiod	Bankingfacility $135,000	Loan amount	Factored amount
Far Eastern Bank	August 20, 2018~August 20, 2019		$135,000	$224,523

(4) INVENTORIES

(A) Details are as follows :

Details are as follows :	Details are as follows :
) Dec. 31,2019 Raw materials $725,372 Supplies 76,261 Work in progress 228,413 Finished goods 19,711 Total $1,049,757		Dec. 31,2018 )
	$725,372 76,261 228,413 19,711	$973,828 102,425 128,137 49,694
	$1,049,757	$1,254,084

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(B)

Cost of inventories sold Loss on realizable value and obsolescence of inventories Loss in inventory write-off Inventory loss Cost of goods sold	For theyears ended December 31	For theyears ended December 31
	2019	2018
	$15,427,296 54,177 55,936 1,001	$14,435,735 `－` 43,705 1,118
	$15,538,410	$14,480,558

(C) As of December 31, 2019, and 2018, inventories were insured for $12,958,170 thousand and $12,067,679 thousand, respectively.

(D)No inventories were pledged.

(5) FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME - NON CURRENT

Equity instrument investments measured at fair value through other comprehensive income-Non-current`：` Unlisted companies stocks	Dec. 31,2019	Dec. 31,2018
	$226,860	$234,878

The Company classified certain of its financial assets as financial assets at fair value through other comprehensive income. Financial assets at fair value through other comprehensive income were not pledged.

(6) INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD

(A) The company investments accounted for using the equity method are as follows:

Dec. 31,	Dec. 31,2018	Dec. 31,2018
Amount	Amount	Ownership
($15,404) 111,745 304,281 460,130	$23,361 100,115 296,610 440,101	93.67`％` 100.00`％` 100.00`％` 100.00`％`
860,752 15,404	860,187 `－`
876,156	860,187

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Dec. 31,	Dec. 31,2018	Dec. 31,2018
Amount	Amount	Ownership
`－` 230,553 10,880 `－`	`－` 230,815 8,288 `－`	39.99`％` 9.57`％` 13.52`％` 18.17`％`
241,433	239,103
$1,117,589	$1,099,290

(B) In February 2006, for the purpose of a merger, the investee company OSE ACQUISITION CORP. purchased 100% of common shares in OSE USA, Inc. at a price of US$0.006 per share and assumed all of its assets and liabilities. After the merger, OSE ACQUISITION CORP. changed its name to OSE USA, Inc.
(C) In September 2006, shares of the investee company ATP were exchanged with ATP TAIWAN so that the Company would hold 6.79% ownership of ATP TAIWAN after the exchange. The Company had purchased 1,929 thousand treasury shares in February. So the Company held 9.57% ownership of ATP TAIWAN.
(D) Because SCS HIGHTECH INC. was in financial crisis in 2004, the long-term investment amounted to $96,203 thousand was written off as losses in 2004.
(E) Owing to the continue loss of OSE PROPERTIES, INC., the accumulated investment loss has made the book value of long-term investment declining to zero, the company will no longer recognize the investment loss.
(F) In order to improve the financial structure of OSEP, the Company made a financial structure improvement plan as following:
i. On December 12, 2008, the board of directors of the Company approved OSEP to issue first set of new stocks for a total value of US$8 million, consisting of US$5.18 million of cash and US $2.82 million worth of debt to equity swap. This was approved on May 21, 2009 by Investment Commission M.O.E.A.
ii. On December 9, 2009, the board of directors of the Company approved OSEP to issue second set stocks for a total value of US$8 million, consisting of US$1.6 million of cash and US$6.4 million of debt-to-equity swap. This was approved on September 8, 2011 by Investment Commission M.O.E.A.

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iii. On May 5, 2010, the board of the directors of the Company approved OSEP to issue third set of stocks for a total value of US$13.5 million, consisting of US$2.7 million of cash and US$10.8 million of debt-to-equity swap. This was approved on September 8, 2011 by Investment Commission M.O.E.A.
iv. On August 26, 2010, the board of the directors of the Company approved OSEP to issue fourth set of stocks for a total value of US$10.5 million, consisting of US$2.1 million of cash and US$8.4 million of debt-to-equity swap. This was approved on September 8, 2011 by Investment Commission M.O.E.A.
v. On December 28, 2010, the board of the directors of the Company approved OSEP to issue fifth set of stocks for a total value of US$8 million, consisting of US$1.6 million of cash and US$6.4 million of debt-to-equity swap. This was approved on January 16, 2012 by Investment Commission M.O.E.A.
(G) In order to improve the financial structure of OSEU, the Company made financial improvement plan as following:
i. On July 15, 2010, the board of directors of the Company approved to merge OSEI and OSEU in September 2010. OESU is the remaining existing entity while OSEI ceased to operate. Starting from September 2010, all assets, liabilities, rights and obligations of OSEI were transferred to OSEU.
ii. On July 15, 2010 the board of directors of the Company approved OSEU to raise capital by the issuance of new stock for the total value of US$35,762 thousand in debt-to-equity swap. This was approved on January 17, 2011 by Investment Commission M.O.E.A.
(H) On March 24, 2011, the board of the directors of the Company approved COREPLUS (HK) LIMITED to issue stocks, consisting of US$2.7 million of debt-to-equity swap. This was approved on October 3, 2012 by Investment Commission M.O.E.A.
(I) OSE INTERNATIONAL LTD was approved by its Board of Directors to decrease its capital by US$2,800 thousand and US$4,200 thousand on June 25, 2008 and April 20, 2015, respectively. The Company had taken back the investment amount by $84,280 thousand (US$2,800 thousand) and $132,536 thousand (US$4,200 thousand), respectively.
(J) The Company recognized losses in OSEP at its ownership percentage; therefore, the carrying amount of this long-term equity investment present at a credit balance. The Company transferred the relevant credit amount to non-current liabilities.

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(K) The share of the profit or loss of these associates and joint ventures for using the equity method are as follows ：

Investee Companies OSE PHILIPPNES INC. OSE PROPERTIES, INC. OSE USA, INC. OSE INTERNATIONAL LTD. INFOFAB, INC. ATP TAIWAN COREPLUS (HK) LIMITED. Total	For theyears ended December 31
	2019 2018 ($39,115) ($32,158) `－` `－` 14,016 (2,280) 11,516 25,576 2,898 3,651 19,673 33,895 31,755 40,082 $40,743 $68,766

The 2019 and 2018 financial statements were audited by other auditors.

(L) In year 2019 and 2018, the Company obtained cash dividend from ATP Taiwan and INFOFAB in the form of cash dividend for $18,797 thousand and $1,265 thousand, $17,293 thousand and $0, respectively. They are recorded as credit to “Investments accounted for using the equity method”.
(M)The details of translation adjustment from investments accounted for using the equity method are as follows ：

Investee Companies OSE PHILIPPNES INC. OSE USA, INC. OSE INTERNATIONAL LTD. ATP TAIWAN. COREPLUS (HK) LIMITED. Total	For theyears ended December 31	For theyears ended December 31
	2019 $350 (2,386) (3,845) (1,138) (11,946) ($18,965)	2018
		$1,082 3,089 5,379 1,391 6,528
		$17,469

(N) Part of investments accounted for using the equity method has been pledged to the banks as securities for bank loans granted to the Company. Please refer to Note 8 for more details.
(O) Investment in subsidiary was accounted for investment accounted for under equity method when preparing the parent company only financial statements.

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(P) The Company’s investments by using the equity method are not published price quatations which are not individually material. The aggregate financial information of the Group’s investments is as follows:

Total assets Total liabilities Revenue Profit Other comprehensive income (loss) Total Comprehensive Income	Dec. 31,2019	Dec. 31,2018
	2019	2018
	$503,089 22,571 (1,138) 21,433	$530,354 37,546 1,391 38,937

(7) PROPERTY, PLANT AND EQUIPMENT

PROPERTY, PLANT AND EQUIPMENT
Owner occupied property, plant and equipment Property, plant and equipment leased out under operating leases Total	Dec. 31,2019 $6,079,672 140,455 $6,220,127	Dec. 31,2018
		$7,012,652 (Note)
		$7,012,652

(Note): The Company adopted IFRS 16 since January 1, 2019. The Company elected not to restate prior periods in accordance with the transition provision in IFRS 16.

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(A) Owner occupied property, plant and equipment (applicable under IFRS 16 requirements)

Cost: As of Jan. 1, 2019 Additions Disposals Transfers As of Dec. 31, 2019 Depreciation and impairment: As of Jan. 1, 2019 Depreciation Disposals Transfers As of Dec. 31, 2019 Net carrying amount As of Jan. 1, 2019 As of Dec. 31, 2019	Land and land Improvements `－` `－` `－` `－` `－` `－` `－` `－` `－` `－` `－` `－`	Buildings $6,989,653 `－` `－` 68,897 $7,058,550 $4,327,874 222,154 `－` `－` $4,550,028 $2,661,779 $2,508,522	Machinery and equipment $15,923,693 `－` (2,467,325) 647,761 $14,104,129 $11,943,826 1,173,899 (2,464,396) 8,703 $10,662,032 $3,979,867 $3,442,097	Transportation equipment	Office equipment $54,890 `－` `－` `－` $54,890 $53,864 500 `－` `－` $54,364 $1,026 $526	Other equipment $363,893 `－` `－` 4,437 $368,330 $310,537 22,962 `－` `－` $333,499 $53,356 $34,831	Construction in progress and equipment awaiting examination $143,600 285,055 `－` (334,989) $93,666 `－` `－` `－` `－` `－` $143,600 $93,666	Total
				$1,087 `－` `－` `－`				$23,476,816 285,055 (2,467,325) 386,106
				$1,087				$21,680,652
				$1,047 10 `－` `－`				$16,637,148 1,419,525 (2,464,396) 8,703
				$1,057				$15,600,980
				$40				$6,839,668
				$30				$6,079,672

(Note): The Company adopted IFRS 16 since January 1, 2019. The Company elected not to restate prior periods in accordance with the transition provision in IFRS 16.

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(B) Property, plant and equipment leased out under operating leases (applicable under IFRS 16 requirements)

Cost: As of Jan. 1, 2019 Additions Disposals Transfers As of Dec. 31, 2019 Depreciation and impairment: As of Jan. 1, 2019 Depreciation Disposals Transfers As of Dec. 31, 2019 Net carrying amounts as at: As of Jan. 1, 2019 As of Dec. 31, 2019	Buildings
	$279,343 `－` `－` `－`
	$279,343
	$132,203 6,685 `－` `－`
	$138,888
	$147,140
	$140,455

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(C) Property, plant and equipment (prior to the application of IFRS 16)

Land and land Improvements	Buildings	Machinery and equipment	Transportation equipment	Office equipment	Rental assets	Leased assets	Other equipment	Construction in progress and equipment awaiting examination	Total
`－` `－` `－` `－`	$6,951,055 `－` (14,399) 52,997	$15,322,416 `－` (162,992) 764,269	$1,804 `－` (717) `－`	$54,890 `－` `－` `－`	$279,343 `－` `－` `－`	$158,211 `－` `－` (124,351)	$355,290 `－` (354) 8,957	$17,109 402,530 `－` (276,039)	$23,140,118 402,530 (178,462) 425,833
`－`	$6,989,653	$15,923,693	$1,087	$54,890	$279,343	$33,860	$363,893	$143,600	$23,790,019
	$4,125,549 216,704 (14,379) `－`	$10,895,907 1,116,921 (128,740) 59,738	$1,749 14 (716) `－`	$53,364 500 `－` `－`	$125,518 6,685 `－` `－`	$51,565 16,189 `－` (59,738)	$286,362 24,527 (352) `－`	`－` `－` `－` `－`	$15,540,014 1,381,540 (144,187) `－`
`－`	$4,327,874	$11,943,826	$1,047	$53,864	$132,203	$8,016	$310,537	`－`	$16,777,367
`－`	$2,825,506	$4,426,509	$55	$1,526	$153,825	$106,646	$68,928	$17,109	$7,600,104
`－`	$2,661,779	$3,979,867	$40	$1,026	$147,140	$25,844	$53,356	$143,600	$7,012,652

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(D) Affects both the cash and non-cash items of investing activities:

	For theyears ended December 31 2019 2018 $637,301 $823,363 (6,415) 118,667 92,462 (184,083) $723,348 $762,947
	2019
Acquisition of property, plant, and equipment expenditure: Increase of property, plant and equipment (Decrease)Increase of prepayment for equipment Decrease (Increase) of payables on equipment Cash expenditure	$637,301 (6,415) 92,462
	$723,348

(E) Details of capitalized borrowing costs are as follows:

Item	For theyears ended December 31	For theyears ended December 31
	2019	2018
Prepayments for equipment Capitalisation rate of borrowing costs	$4,980 3.04`％～`3.95`％`	$4,308 2.89`％～`3.78`％`

(F) As of December 31, 2019 and 2018, fixed assets were insured for $9,835,562 thousand and $11,031,474 thousand, respectively.

(G) Please refer to Note 8 for more details on property, plant and equipment under pledge.

(8) INTANGIBLE ASSETS

(A) As of December 31, 2019 and 2018, the cost of the computer software, original cost, accumulated amortization and amount of amortization in the book of the Company is listed as below:

Cost： As of Jan. 1, 2019 Addition Transfers As of Dec. 31, 2019 As of Jan. 1, 2018 Addition Transfers As of Dec. 31, 2018	Computer software
	Amount
	$335,612 32,657 1,504
	$369,773
	$263,863 63,714 8,035
	$335,612

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Computer software

	Computer software
Amortization and impairment： As of Jan. 1, 2019 Amortization As of Dec. 31, 2019 As of Jan. 1, 2018 Amortization As of Dec. 31, 2018 Net carrying amount : As of Dec. 31, 2019 As of Dec. 31, 2018	Amount
	$246,346 65,235
	$311,581
	$184,878 61,468
	$246,346
	$58,192
	$89,266

(B) Amortization expense of intangible assets under the statement of comprehensive income:

Operating costs Managing costs Research and development costs	For theyears ended December 31	For theyears ended December 31
	2019	2018
	$38,471	$38,371
	$5,796	$1,978
	$20,968	$21,119

(9) PREPAYMENTS

Current assets`－`prepayments Prepaid expenses Other prepayments Total Non-current assets`－`prepayments for equipment`：` Prepayment for equipment	Dec. 31,2019	Dec. 31,2018
	$42,337 3,002	$40,651 2,236
	$45,339	$42,887
	$151,424	$180,354

(10) LONG-TERM RECEIVABLES-AFFILIATES

Loan receivable (Note) Receivable for sale/rent of machinery and equipment and payment on behalf (Note) Interest receivable from financial activities (Note) Total (Less) : Loss allowance Net	Dec. 31,2019	Dec. 31,2018
	$370,127 73,176 53,096	$378,002 74,733 46,666
	496,399 (`－`)	499,401 (`－`)
	$496,399	$499,401

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(Note):

(1) Long-term receivable – OSE PHILIPPINES INC. and Long-term receivable – OSE USA Inc. amounted to $803,966 thousand and $1,148,668 thousand, respectively. In 2010, they were converted to common stocks of OSEP and common stocks of OSEU through debt-to-equity swap options.
(2) Long-term receivable OSE PHILIPPINES INC. amounted to $183,843 thousand. In May 2011, the receivable was subsequently converted to common stocks of OSE PHILIPPINES INC. through debt-to-equity swap options.
(3) Long-term receivable COREPLUS amounted to $79,893 thousand. In October, 2012, the amount was converted to common stocks of investment of COREPLUS through debt-to-equity swap options.

(11) SHORT-TERM LOANS

(A) Detail are as follows : Items L/C Unsecured bank loans Mortgage loans on machine and equipment Total	(A) Detail are as follows : Items L/C Unsecured bank loans Mortgage loans on machine and equipment Total	Dec. 31,2019	Dec. 31,2018
	L/C Unsecured bank loans Mortgage loans on machine and equipment Total	$315,900 2,057,866 `－`	$798,069 1,924,803 83,985
		$2,373,766	$2,806,857

(B) The ranges of interest rates and the due dates:

Ranges of interest rates Due dates	Dec. 31,2019	Dec. 31,2018
	1.55％～3.17％ January 01, 2020～ December 17, 2020	1.06％～4.25％ January 14, 2019～ November 30, 2019

(C) As of December 31, 2019 and 2018, the Company’s unused short-term lines of credits amount to $1,394,036 thousand and $614,906 thousand, respectively.
(D) Part of property, plant and equipment, stocks, time deposits, and deposits reserved for repayment are pledged as security for the Group’s short-term borrowings. Please refer to Note 8 for the more detail on held for trading financial assets pledged as security for short-term loans.

275

(12) SHORT-TERM NOTES PAYABLE－NET

(A) Detail are as follows :

Detail are as follows :
Par value of commercial papers (Less) : Discount for short-term notes payable Net The ranges of interest rates and the due dates: Ranges of interest rates Due dates	Dec. 31,2019	Dec. 31,2018
	$380,000 (790)	$350,000 (390)
	$379,210	$349,610
	Dec. 31,2019	Dec. 31,2018
	1.788%～1.858% January 9, 2020～ February 27, 2020	1.938%～2.088% January 3, 2019～ March 7, 2019

(B) The ranges of interest rates and the due dates:

(13) LONG-TERM LOANS

(A) Detail are as follows:

Detail are as follows:
Items	Dec. 31,2019	Dec. 31,2018
Mortgage loan Less: Due within one year Net	$2,095,326 (1,190,490)	$3,053,515 (1,340,270)
	$904,836	$1,713,245

(B) The ranges of interest rates and the due dates:

The ranges of interest rates and the due dates:
Ranges of interest rates Due dates	Dec. 31,2019	Dec. 31,2018
	1.80%～3.30% October 31, 2020～ August 15, 2023	1.80%～4.65% January 26, 2019～ August 15, 2023

(C) Part of property, plant and equipment, and deposits reserved for repayment are pledged as security for the Company’s long-term borrowings. Please refer to Note 8 for more details.

(14) LONG-TERM LEASE PAYABLE

The Company has finance leases contracts for various items of machinery. These leases contain purchase options. Future minimum lease payments under finance leases together with the present value of the net minimum lease payments are as follows:

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(A)

)
Within one year After one year but not more than five years Total minimum lease payments Less : finance charges on finance lease Present value of minimum lease payments Current Non-current	Dec. 31,2019		Dec. 31,2018
	Minimum payments	Present value ofpayments	Minimum payments	Present value ofpayments
			$2,617 `－`	$2,610 `－`
			2,617 (7)	2,610 `－`
			$2,610	$2,610
				$2,610
				`－`

(15) POST-EMPLOMENT BENEFITS

(A) Defined contribution plan

The Company adopts a defined contribution plan in accordance with the Labor Pension Act of the R.O.C. Under the Labor Pension Act, the Company will make monthly contributions of no less than 6% of the employees’ monthly wages to the employees’ individual pension accounts. The Company has made monthly contributions of 6% of each individual employee’s salaries or wages to employees’ pension accounts.

Expenses under the defined contribution plan for the years ended December 31, 2019 and 2018 are $113,103 thousand and $102,285 thousand, respectively.

(B) Defined benefits plan

The Company adopts a defined benefit plan in accordance with the Labor Standards Act of the R.O.C. The pension benefits are disbursed based on the units of service years and the average salaries in the last month of the service year. Two units per year are awarded for the first 15 years of services while one unit per year is awarded after the completion of the 15th year. The total units shall not exceed 45 units. Under the Labor Standards Act, the Company contributes an amount equivalent to 2% of the employees’ total salaries and wages on a monthly basis to the pension fund deposited at the Bank of Taiwan in the name of the administered pension fund committee. Before the end of each year, the Company assesses the balance in the designated labor pension fund. If the amount is inadequate to pay pensions calculated for workers retiring in the same year, the Company will make up the difference in one appropriation before the end of March the following year.

Costs under the defined contribution plan for the years ended December 31, 2019 and 2018 are $59,735 thousand and $59,828 thousand, respectively.

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The Ministry of Labor is in charge of establishing and implementing the fund utilization plan in accordance with the Regulations for Revenues, Expenditures, Safeguard and Utilization of the Labor Retirement Fund. The pension fund is invested in-house or under mandate, based on a passive-aggressive investment strategy for long-term profitability. The Ministry of Labor establishes checks and risk management mechanism based on the assessment of risk factors including market risk, credit risk and liquidity risk, in order to maintain adequate manager flexibility to achieve targeted return without over-exposure of risk. With regard to utilization of the pension fund, the minimum earnings in the annual distributions on the final financial statement shall not be less than the earnings attainable from the amounts accrued from two-year time deposits with the interest rates offered by local banks. Treasury Funds can be used to cover the deficits after the approval of the competent authority. As the Company does not participate in the operation and management of the pension fund, no disclosure on the fair value of the plan assets categorized in different classes could be made in accordance with paragraph 142 of IAS 19. The Company expects to contribute $85,943 thousand to its defined benefit plan during the 12 months beginning after December 31, 2019.

The average duration of the defined benefits plan obligation as of December 31, 2019 and 2018, is the end of the year of 2029 and 2028, respectively.

Pension costs recognized in profit or loss for the years ended December 31, 2019 and 2018:

Current period service costs Net interest expense of net defined benefit liability(asset) Expected return on plan assets Total	For theyears ended December 31	For theyears ended December 31
	2019	2018
	$7,116 5,009 `－`	$7,814 7,475 `－`
	$12,125	$15,289

Changes in the defined benefit obligation and fair value of plan assets are as follows:

Present value of the defined benefit obligation Plan assets at fair value Other non-current liabilities - Accrued pension liabilities recognized on the company only balance sheets	Dec. 31,2019	Dec. 31,2018	Jan. 1,2018
	$1,007,077 (576,227)	$1,019,883 (523,987)	$1,022,458 (484,675)
	$430,850	$495,896	$537,783

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Reconciliation of liability (asset) of the defined benefit plan is as follows:

Present value of the defined benefit obligation	Fair value of plan assets	Net defined benefit liability (asset)
$1,022,458 7,814 14,211	($484,675) `－` (6,737)	$537,783 7,814 7,474
22,025	(6,737)	15,288
2,674 38,784 12,752 `－`	`－` `－` `－` (11,642)	2,674 38,784 12,752 (11,642)
54,210	(11,642)	42,568
(78,810) `－`	78,810 (99,743)	`－` (99,743)
1,019,883 7,116 10,301	(523,987) `－` (5,292)	495,896 7,116 5,009
17,417	(5,292)	12,125
(2,761) 29,224 992 `－`	`－` `－` `－` (18,683)	(2,761) 29,224 992 (18,683)
27,455	(18,683)	8,772
(57,678) `－`	57,678 (85,943)	`－` (85,943)
$1,007,077	($576,227)	$430,850

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The following significant actuarial assumptions are used to determine the present value of the defined benefit obligation:

Discount rate Expected rate of salary increases	Dec. 31,2019	Dec. 31,2018
	0.76% 1.40%	1.01% 1.40%

Sensitivity analysis for significant assumption:

For theyears ended December 31	For theyears ended December 31	For theyears ended December 31	For theyears ended December 31
2019		2018
Increase defined benefit obligation	Decrease defined benefit obligation	Increase defined benefit obligation	Decrease defined benefit obligation
`－` $80,888 $79,937 `－`	$50,693 `－` `－` $50,633	`－` $76,629 $75,851 `－`	$50,647 `－` `－` $50,699

(16) EQUITY

(A) Common stock

(a) The Company had increased capital by cash by $1,800,000 thousand with par value $10 per share and issued price $9.2 on May 30, 2007. The rights and obligations of new shares by private placement are the same as those of common shares. Ownership of shares by private placement cannot be transferred to others within three years since issuance per Security and Exchange regulations.

280

(b) The board of directors of the Company agreed on June 21, 2011 to capital injection by issuing common stocks for cash in order to repay loan and improve the Company financial structure. A total of 200,000 thousand shares of common stocks, with face value of $10 per share, will be issued for a total of $2,000,000 thousand. Approval has been granted by Financial Supervisory Commission on July 22, 2011 by Doc No. 1000030977. In the event of existing shareholders or employees forfeiting purchasing rights or the event of shortage of subscription of share, the board of directors will authorize the chair of directors to contact an arranged person for purchases. As of August 2, 2011, the board of directors agreed stocks will be issued with the issuance price of NTD 6.4 per share with the official issuance date of September 5, 2011. As of September 19, 2011, registration for the issuance of new stocks is complete.
(c) To reward employees, the Board of shareholders’ meeting of the Company agreed on June 29, 2018 to reduce capital $2,536,872 thousand for cover accumulated deficits in order to improve the Company’s financial structure. The ratio of reduction capital was 31.4742285%, and it was declared effective by Financial Supervisory Commission on August 8, 2018. The record date for reverse split was at September 30, 2018, and the amendment of registration was completed at October 8, 2018.
(d) To reward employees, the Board of shareholders’ meeting of the Company agreed on June 29 ,2018 to issue restricted stocks for employees by $50,000 thousand of common stock with par value $10 per share, and it was declared effective by Financial Supervisory Commission on June 10, 2019. The record date for capital increase was at November 25, 2019, and the amendment of registration was completed at December 10, 2019.
(e) As of December 31, 2019, and 2018, the authorized capitals were $20,000,000 thousand. Issued capital were $5,573,285 thousand and $5,523,285 thousand, with 557,328,533 shares and 552,328,533 shares respectively. Each share is at a par value of NT$10.
(B) Additional paid-in capital

Form shares of changes in equities of subsidiaries The differences between the fair value of consideration paid or received from acquiring or disposing subsidiaries and the carrying amounts of the subsidiaries Share of changes in net assets of associates and joint ventures accounted for using the equity method Restricted stocks for employees Total	Dec. 31,2019 $5,717 16,940 (2,675) 25,729 $45,711	Dec. 31,2018
		$5,833 16,940 (2,669) `－`
		$20,104

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(a)According to the Company Act, the capital reserve shall not be used except for making good the deficit of the company. When a company incurs no loss, it may distribute the capital reserves related to the income derived from the issuance of new shares at a premium or income from endowments received by the company. The distribution could be made in cash or in the form of dividend shares to its shareholders in proportion to the number of shares being held by each of them.
(b)According to the prevailing laws and regulations, each year, the amount of capital increase transferred from capital reserve arising from premiums on issuance of capital stock and donations cannot exceed 10% of the Company’s total issued capital.
(C) Retained earnings and dividend policies

According to the Company’s original Articles of Incorporation, current year’s earnings, if any, shall be distributed in the following order:

(a) Payment of all taxes and dues;
(b)Offset prior years’ operation losses;
(c) Set aside 10% of the remaining amount as legal reserve;
(d)Set aside or reverse special reserve in accordance with the requirements for operating and law and regulations;
(e) The remaining balance combined with the undistributed earnings accumulated during previous years shall be distributed to the shareholders as dividends.

282

Following the adoption of TIFRS, the FSC on 6 April 2012 issued Order No. FinancialSupervisory-Securities-Corporate-1010012865, which sets out the following provisions for compliance:

Legal reserve Special reserve Cash dividends	Appropriation of earnings	Appropriation of earnings	Dividend per share (NT$)	Dividend per share (NT$)
	2019	2018(Note)	2019	2018(Note)
	$53,719 $18,729 $82,849	`－` `－` `－`	$0.15	`－`

(Note) ： The Company still had accumulated deficit in 2018. As a result, the Company did not distribute earnings.

Please refer to Note 6.(21) for further details on employees’ compensation and remuneration to directors.

(17) SHARE-BASED PAYMENT PLANS

Restricted stocks plan for employees

283

Restriction on the rights and vesting conditions of restricted stocks for employees is as follows:

a. The restricted stock awards the employees will obtain was kept by the designated trust institution as trustee, which the employee cannot request to return the restricted stock awards for any reasons or ways.
b. Before accomplishing the vesting conditions, the employee cannot sell, pledge, transfer, gift, set or dispose in other ways, and they have no right to be allotted or obtaining dividends. Other rights are similar with the capital that has been issued.
c. Before the employee accomplish the vesting conditions, the attendance, proposal, speaking, right of voting, and other matters associated with shareholders meeting were executed based on the trust custody contracts.
d. From the book closure date of issuance of bonus shares, cash dividends, issuance of common stock for cash, shareholders meeting regulated by Article 165-3 of company law, or other facts that has occurred to the date of rights allocation. The unrestricted stocks of the employees that have accomplished the vesting conditions during the aforementioned period still have no rights to obtain dividends or allotment.

For the years ended December 31, 2019, the Company incurred expenses of $4,428 thousand for the share-based payment transactions.

(18) OPERATING REVENUE

The details are as follow:

Revenue from contracts with customers Sales of IC packaging and testing service Sales of electronics manufacturing service Other operating revenue Total	For theyears ended December 31	For theyears ended December 31
	2019	2018
	$10,101,028 6,633,839 501,047	$8,452,652 5,866,760 604,959
	$17,235,914	$14,924,371

(A) Disaggregation of revenue

For the years ended December 31,2019 Sales of IC packaging and testing service Sales of electronics manufacturing service Other operating revenue Total	Semiconductor Group $10,101,028 `－` 426,456 $10,527,484	EMS Group	Total
		`－` $6,633,839 74,591	$10,101,028 6,633,839 501,047
		$6,708,430	$17,235,914

284

For the years ended December 31,2019 Timing of revenue recognition: Over time At a point in time Total For the years ended December 31,2018 Sales of IC packaging and testing service Sales of electronics manufacturing service Other operating revenue Total Timing of revenue recognition: Over time At a point in time Total	Semiconductor Group $10,101,028 426,456 $10,527,484 Semiconductor Group $8,452,652 `－` 563,121 $9,015,773 $8,452,652 563,121 $9,015,773	EMS Group	Total
		`－` $6,708,430	$10,101,028 7,134,886
		$6,708,430	$17,235,914
		EMS Group	Total
		`－` $5,866,760 41,838	$8,452,652 5,866,760 604,959
		$5,908,598	$14,924,371
		`－` $5,908,598	$8,452,652 6,471,719
		$5,908,598	$14,924,371

(B) Contract balances

(a) Contract assets-current

Sales of IC packaging and testing service	Dec. 31,2019 $302,982	Dec. 31,2018	Jan. 1,2018
		$425,684	$212,604

As of December 31, 2019 and 2018, the Company does not have an unconditional right to receive the consideration in the contract and transferred to accounts receivables at the reporting date were $302,982 thousand and $425,684 thousand, respectively.

(b) Contract liabilities-current

Sales of IC packaging and testing service	Dec. 31,2019 $27,845	Dec. 31,2018	Jan. 1,2018
		$15,150	$45,782

285

As of December 31, 2019, and 2018, the Company recognized $3,989 thousand and $16,583 thousand, respectively, in revenues from the contract liabilities balance at the beginning of the period.

None.

(D) Assets recognized from costs to fulfil a contract

None.

(19) EXPECTED CREDIT LOSSES

	For theyears ended December 31	For theyears ended December 31

	2019	2018
Operating expenses-expected credit losses	$7,714 1,148	$15,338 `－`
Accounts receivable and contract assets
Non-operating income and expenses-expected
credit losses
Other receivables
Total	$8,862	$15,338

Please refer to Note 12 for more details on credit risk.

The Company measures the loss allowance of its contract assets and accounts receivables at an amount equal to lifetime expected credit losses. The assessment of the Company’s loss allowance as of December 31, 2019 and 2018 are as follow:

The Company considers the grouping of contract assets and accounts receivables by counterparties’ credit rating, by geographical region and by industry sector and its loss allowance is measured by using a provision matrix, details are as follow:

As of December 31, 2019

As of December 31,	2019
Semiconductor Group Gross carrying amount Loss ratio Lifetime expected credit losses Carrying amount of trade receivables	Not yet due (Note)			Overdue			Total
		Within 30 days	31-60 days	61-90 days	91-180 days	After 181 days
	$1,613,762 0%~0.35%	$131,993 0%~2.13%	$11,053 0%~19.86%	$11,059 0%~50.03%	$5,995 0.01%~69.01%	$4,139 100%	$1,778,001 21,698
	3,121	2,608	2,160	5,533	4,137	4,139
	$1,610,641	$129,385	$8,893	$5,526	$1,858	`－`	$1,756,303

286

EMS Group

Overdue

EMS Group				Overdue
Gross carrying amount Loss ratio Lifetime expected credit losses Carrying amount of trade receivables	Not yet due (Note)	Within 30 days	31-60 days	61-90 days	91-180 days	After 181 days	Total
	$1,130,155 0%~0.04%	$46,084 1.55%	$19,180 4.01%	$5,514 14.05%	$1,962 18.84%	$1,313 100%	$1,204,208 4,398
	458	714	769	774	370	1,313
	$1,129,697	$45,370	$18,411	$4,740	$1,592	`－`	$1,199,810

As of December 31, 2018

Not yet due (Note)			Overdue			Total
	Within 30 days	31-60 days	61-90 days	91-180 days	After 181 days
$2,103,807 0%~0.19%	$188,799 0%~2.76%	$13,441 0%~15.21%	$1,379 0%~50.26%	$8,172 0.01%~85.63%	$4,483 100%	$2,320,081 17,162
1,847	1,902	1,306	660	6,964	4,483
$2,101,960	$186,897	$12,135	$719	$1,208	`－`	$2,302,919
Not yet due (Note)			Overdue			Total
	Within 30 days	31-60 days	61-90 days	91-180 days	After 181 days
$1,130,624 0%~0.01%	$49,631 0%~0.13%	$4 0%~10.05%	$3,282 0%~16.12%	$24 0%~46.39%	$509 100%	$1,184,074 1,220
114	65	`－`	521	11	509
$1,130,510	$49,566	$4	$2,761	$13	`－`	$1,182,854

(Note): The Company’s note receivables are not overdue.

287

The movement in the provision for impairment of contract assets, note receivables and trade receivables for the years ended December 31, 2019 and 2018 is as follows:

Contract assets	Notes receivables	Accounts receivables
`－` `－`	`－` `－`	$18,382 7,714
`－`	`－`	$26,096
`－` `－`	`－` `－`	$3,044 `－`
`－` `－`	`－` `－`	3,044 15,338
`－`	`－`	$18,382

(20) LEASES

A. Group as a lessee (applicable to the disclosure requirement under IFRS 16)

The Company leases various properties, including real estate such as land and buildings, transportation equipment and other equipment. The lease terms range from 2 to 51 years.

The Company’s leases effect on the financial position, financial performance and cash flows are as follow:

(a) Amounts recognized in the balance sheet

I. Right-of-use assets

The carrying amount of right-of-use assets

Land Transportation equipment Other equipment Total	Dec. 31,2019	Dec. 31,2018(Note)
	$150,742 8,793 `－`
	$159,535

(Note): The Company adopted IFRS 16 since January 1, 2019. The Company elected not to restate prior periods in accordance with the transition provision in IFRS 16.

For the years ended December 31, 2019, the Company’s additions to right-of-use assets amounting to $65,949 thousand.

288

II. Lease liabilities

Current Non-current Lease liabilities	Dec. 31,2019	Dec. 31,2018(Note)
	$13,864 146,759
	$160,623

Please refer to Note 6.(22)(c) for the interest on lease liabilities recognized for the years ended December 31, 2019 and refer to Note 12.(5) Liquidity Risk Management for the maturity analysis for lease liabilities as of December 31, 2019.

(Note): The Company adopted IFRS 16 since January 1, 2019. The Company elected not to restate prior periods in accordance with the transition provision in IFRS 16.

(b) Amounts recognized in the statement of profit or loss

Depreciation charge for right-of-use assets

Land Transportation equipment Other equipment Total	For theyears ended December 31	For theyears ended December 31
	2019 $12,949 4,679 687	2018(Note)

	$18,315

(Note): The Company adopted IFRS 16 since January 1, 2019. The Company elected not to restate prior periods in accordance with the transition provision in IFRS 16.

The expenses relating to short-term leases The expenses relating to leases of low-value assets (Not including the expenses relating to short-term leases of low- value assets)	For theyears ended December 31	For theyears ended December 31
	2019	2018(Note)
	$2,304 3,396

(Note): The Company adopted IFRS 16 since January 1, 2019. The Company elected not to restate prior periods in accordance with the transition provision in IFRS 16.

(d) Cash outflow relating to leasing activities

For the years ended December 31, 2019, the Company’s total cash outflows for leases amounting to $24,494 thousand.

289

B. Operating lease commitments - Company as a lessee (applicable to the disclosure requirement in IAS 17)

The Company has entered into a series of land rental agreements with the government which will expire between January 31, 2020 and April 30, 2025. The Company could apply for lease renewal three months prior to the expiry date. If the Company fails to do so, the land shall be returned to the government and the building on the land shall be sold to another approved exporting enterprise within six months after the expiry date. If the Company fails to complete all the above-mentioned procedures within the prescribed six months, the government has the right to dispose the property on the land on the behalf of the Company. The government has the right to adjust the rent based on the publicly announced land value. The government also has the right to terminate the contract if the Company breaches the contract or fails to pay the rent over four months or violates the civil law or the land law.

According to the non-cancellable operating leases, the future minimum rentals payable as of December 31, 2018 are as follows:

Within one year After one year but not more than five years More than five years Total	Dec.31,2019(Note)	Dec. 31,2018
		$13,135 35,425 26,139
		$74,699

Operating lease expenses recognized are as follows:

Minimum lease payments	For theyears ended December 31	For theyears ended December 31
	2019(Note)	2018
		$13,135

(Note): The Company adopted IFRS 16 since January 1, 2019. The Company elected not to restate prior periods in accordance with the transition provision in IFRS 16.

C. Company as a lessor (applicable to the disclosure requirement in IFRS 16)

Leases of owned investment properties are classified as operating leases as they do not transfer substantially all the risks and rewards incidental to ownership of underlying assets.

290

Lease income for operating leases Income relating to fixed lease payments and variable lease payments that depend on an index or a rate	For theyears ended December 31	For theyears ended December 31
	2019	2018(Note)
	$24,625

(Note): The Company adopted IFRS 16 since January 1, 2019. The Company elected not to restate prior periods in accordance with the transition provision in IFRS 16.

Not later than one year Later than one year but not later than two years Later than two years but not later than three years Later than three years but not later than four years Later than four years but not later than five years Later than five years Total	Dec. 31,2019	Dec. 31,2018(Note)
	$24,092 21,610 14,296 4,254 3,191 `－`
	$67,443

(Note): The Company adopted IFRS 16 since January 1, 2019. The Company elected not to restate prior periods in accordance with the transition provision in IFRS 16.

D. Operating lease commitments - Company as a lessor (applicable to the disclosure requirement in IAS 17)

The Company has signed non-cancellable operating leases. There are no restrictions placed upon the Company by entering into these leases. Future minimum rentals payable as at December 31, 2018 are as follows:

Not later than one year Later than one year and not later than five years Later than five years Total	Dec. 31,2019(Note)	Dec. 31,2018
		$24,557 64,077 3,190
		$91,824

(Note): The Company adopted IFRS 16 since January 1, 2019. The Company elected not to restate prior periods in accordance with the transition provision in IFRS 16.

291

(21) SUMMARY STATEMENTS OF EMPLOYEE BENEFITS, DEPRECIATION AND AMORTIZATION EXPENSES BY FUNCTION

	For theyears ended December 31	For theyears ended December 31	For theyears ended December 31	For theyears ended December 31	For theyears ended December 31
	2019				2018
	Operating costs	Operating expenses	Total amount	Operating costs	Operating expenses	Total amount
Employee benefits expense
Salaries	$2,574,666	$436,207	$3,010,873	$2,174,812	$328,869	$2,503,681
Pension	145,355	27,483	172,838	136,089	26,024	162,113
Labor and health insurance	288,237	39,635	327,872	249,843	36,670	286,513
Remuneration to directors	`－`	14,963	14,963	`－`	3,720	3,720
Other employee benefits expense	161,803	51,487	213,290	146,376	46,623	192,999
Depreciation	1,392,451	53,583	1,446,034	1,347,234	35,526	1,382,760
Amortization	38,371	26,764	65,235	38,371	23,097	61,468

As of December 31, 2019 and 2018, the total number of employees of the Company were 6,393 and 6,111, including 5 and 5 non-employee directors, respectively.

The Company’s average employee benefit expenses for the years ended December 31, 2019 and 2018 were $592 thousand and $544 thousand, respectively. The Company’s average salary expenses for the years ended December 31, 2019 and 2018 were $479 thousand and $433 thousand. The Company’s average salary expense adjustment for the years ended December 31, 2019 increased by 21%.

As of December 31, 2018, the Company still had accumulated deficit. As a result, the Company did not estimate the amounts of the employees’ compensation and remuneration to directors.

292

(22) NON-OPERATING INCOME AND EXPENSES

(A) Other income

Rental income Interest income Other income Total	For theyears ended December 31	For theyears ended December 31
	2019 $24,626 10,833 17,210 $52,669	2018
		$24,626 13,386 26,316
		$64,328

(B) Other gains and losses

Gains on disposal of property, plant and equipment Foreign exchange (losses) gains, net Gains on financial assets at fair value through profit or loss Total	For theyears ended December 31	For theyears ended December 31
	2019	2018
	$41,191 (48,962) `－`	$6,464 7,406 7,371
	($7,771)	$21,241

Interest on borrowings from bank Interest on borrowings from others Interest on lease liabilities Total	For theyears ended December 31	For theyears ended December 31
	2019	2018
	($110,459) (41) (3,301)	($125,034) (952) (Note)
	($113,801)	($125,986)

(Note): The Company adopted IFRS 16 since January 1, 2019. The Company elected not to restate prior periods in accordance with the transition provision in IFRS 16.

293

(23) COMPONENTS OF OTHER COMPREHENSIVE INCOME(LOSS)

For the years ended December 31, 2019

Items that will not be reclassified subsequently to profit or loss: Remeasurements of defined benefit plans Unrealized gains (losses) from equity instruments investments measured at fair value through other comprehensive income Items that may be reclassified subsequently to profit or loss: Exchange differences arising on translating of foreign operation Share of other comprehensive income of associates and joint ventures accounted for using the equity method Total of other comprehensive income	Arising during the period	Reclassification adjustments during the period	Other comprehensive income, before tax	Income tax relating to components of other comprehensive income	Other comprehensive income, net of tax
	($8,772) (8,018) (18,965) 1,081	`－` `－` `－` `－`	($8,772) (8,018) (18,965) 1,081	$1,754 416 3,793 `－`	($7,018) (7,602) (15,172) 1,081
	($34,674)	`－`	($34,674)	$5,963	($28,711)

294

For the years ended December 31, 2018

Items that will not be reclassified subsequently to profit or loss: Remeasurements of defined benefit plans Unrealized gains (losses) from equity instruments investments measured at fair value through other comprehensive income Unrealized gains (losses) from equity instruments investments measured at fair value through other comprehensive income of subsidiaries, associates and joint ventures accounted for using the equity method Items that may be reclassified subsequently to profit or loss: Exchange differences arising on translating of foreign operation Total of other comprehensive income	Arising during the period	Reclassification adjustments during the period	Other comprehensive income, before tax	Income tax relating to components of other comprehensive income	Other comprehensive income, net of tax
	($42,568) (17,627) (4,553) 17,469	`－` `－` `－` `－`	($42,568) (17,627) (4,553) 17,469	$10,708 (1,928) `－` (7,408)	($31,860) (19,555) (4,553) 10,061
	($47,279)	`－`	($47,279)	$1,372	($45,907)

295

(24) INCOME TAX

(A) The major components of income tax (expense) income are as follows:

(a) Income tax (expense) income recognized in profit or loss

For theyears ended December 31 2019 2018 Current income tax (expense) benefit income: Current income tax charge `－` `－` Adjustments in respect of current income tax of prior periods ($341) ($100) Deferred tax (expense) income: Deferred tax (expense) relating to origination and reversal of temporary differences (3,764) (80,207) Deferred tax (expense) relating to origination and reversal of tax loss and tax credit (141,936) 85,235 Deferred tax income relating to change in tax rate `－` 253,144 Total income tax (expense) benefit ($146,041) $258,072 Income tax relating to components of other comprehensive income For theyears ended December 31 2019 2018 Deferred tax income: Remeasurements of defined benefit plans $1,754 $8,514 Unrealized (gains) losses from equity instruments investments measured at fair value through other comprehensive income 416 3,324 Exchange differences resulting from translating a foreign operation 3,793 (3,494) Deferred tax income relating to change in tax rate `－` (6,972) Income tax relating to components of other comprehensive income $5,963 $1,372	For theyears ended December 31	For theyears ended December 31
	2019	2018
		`－` ($100) (80,207) 85,235 253,144
	($146,041)	$258,072
Deferred tax income: Remeasurements of defined benefit plans Unrealized (gains) losses from equity instruments investments measured at fair value through other comprehensive income Exchange differences resulting from translating a foreign operation Deferred tax income relating to change in tax rate Income tax relating to components of other comprehensive income
	2019	2018
	$1,754 416 3,793 `－`	$8,514 3,324 (3,494) (6,972)
	$5,963	$1,372

296

(B) Reconciliation between tax expense and the product of accounting profit multiplied by applicable tax rates is as follows:

tax rates is as follows:
Accounting profit (loss) before tax from continuing operations At parent company statutory income tax rate Tax effect of revenues exempt from taxation Tax effect of deferred tax asset/liability Other adjustment due to taxation Adjustments in respect of current income tax of prior periods Deferred tax income relating to change in tax rate Total income tax (expense) benefit recognized in profit or loss	For theyears ended December 31
	2019	2018
	$734,001	($369,620)
	(146,800) 4,013 3,042 (5,955) (341) `－`	73,924 3,833 (70,267) (2,462) (100) 253,144
	($146,041)	$258,072

For the years ended December 31, 2019

Beginning balance as of Jan. 1,2019	Deferred tax income (expense) recognized in profit or loss	Deferred tax income (expense) recognized in other comprehensive income	Ending balance as of Dec. 31,2019
($1,951) 49,774 1,139,737 (31,688) `－` 2,109 99,180 4,651 17,929 374,783 $1,654,524	$2,985 11,187 (5,107) `－` 230 `－` (13,105) 585 (539) (141,936)	`－` `－` $3,793 416 `－` `－` 1,754 `－` `－` `－`	$1,034 60,961 1,138,423 (31,272) 230 2,109 87,829 5,236 17,390 232,847 $1,514,787
	($145,700)	$5,963

$1,688,163			$1,546,059
$33,639			$31,272

297

For the years ended December 31, 2018

Beginning balance as of Jan. 1,2018	Deferred tax income (expense) recognized in profit or loss	Deferred tax income (expense) recognized in other comprehensive income	Ending balance as of Dec. 31,2018
$1,220 39,298 995,821 (29,760) 56 1,793 91,424 5,859 43,152 246,116 $1,394,979	($3,171) 10,476 151,324 `－` (56) 316 (2,952) (1,208) (25,223) 128,667	`－` `－` ($7,408) (1,928) `－` `－` 10,708 `－` `－` `－`	($1,951) 49,774 1,139,737 (31,688) `－` 2,109 99,180 4,651 17,929 374,783 $1,654,524
	$258,173	$1,372

$1,424,739			$1,688,163
$29,760			$33,639

(D) The following table contains information of the unused tax losses of the Company:

Year	Tax losses for theperiod	Unused tax Dec. 31,2019	losses as of	Expiration year	Note
			Dec. 31,2018
2009 2011 2013 2017 2018	$377,207 155,641 52,387 1,155,026 498,015 Total	`－` `－` `－` $958,742 498,015 $1,456,757	$305,367 155,641 52,387 862,507 498,015	2019 2021 2023 2027 2028	Assessed Assessed Assessed Assessed Non-assessed
			$1,873,917

298

(E) Unrecognized deferred tax assets

As of December 31, 2019 and 2018, deferred tax assets that have not been recognized as they may not be used to offset taxable profits were $58,504 thousand and $0, respectively.

(F) The assessment of income tax returns

As of December 31, 2019, the assessment of the income tax returns of the Company is as follows:

The assessment of income tax returns The Company Assessed and approved up to 2017

(25) EARNINGS PER SHARE

(a) Basic earnings (losses) per share Profit (Loss) attributable to ordinary equity holders of the Company (in thousand NT$) Weighted average number of ordinary shares outstanding for basic earnings per share (in thousands) Basic earnings (losses) per share (NT$)	For theyears ended December 31
	2019 2018 $587,960 ($111,548) 552,329 552,329 $1.06 ($0.20)

299

(b) Diluted earnings (losses) per share Profit (Loss) attributable to ordinary equity holders of the Company (in thousand NT$) Weighted average number of ordinary shares outstanding for basic earnings per share (in thousands) Effect of dilution: Employee compensation`－`stock (in thousands) Weighted average number of ordinary shares outstanding after dilution (in thousands) Diluted earnings (losses) per share (NT$)	For the years ended December 31	For the years ended December 31
	2019	2018
	$587,960	($111,548)
	552,329 4,102	552,329 `－`
	556,431	552,329
	$1.06	($0.20)

There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date and the date of completion of the financial statements.

7. RELATED PARTY TRANSACTIONS

Information of the related parties that had transactions with the Company during the financial reporting period is as follows:

Name and nature of relationship of the related parties

Name of the related parties Nature of relationship of the related parties ORIENT SEMICONDUCTOR ELECTRONICS Subsidiary PHILIPPINES, INC. (OSEP) OSE USA, INC. （ OSEU ） Subsidiary ATP Electronics Taiwan Inc.(ATP) Associate INFOFAB, INC.(INFOFAB) Associate OSE PROPERTIES, INC.(PROPERTIES) Associate OSE INTERNATIONAL LTD. (B.V.I) Subsidiary COREPLUS (HK) LIMITED. (COREPLUS) Subsidiary ACTIONTEC ELECTRONICS, INC. (ACTIONTEC) Substantive related party SCREENBEAM,INC (SCREENBEAM) Substantive related party INFOACTION TECHNOLOGY, INC. (INFOACTION) Substantive related party GOLFWARE INC.(GOLFWARE) Substantive related party VALUE PLUS TECHNOLOGY (SUZHOU) CO. Subsidiary (VALUEPLUS) Phison Electronics Corporation (PHISON) Legal Director of the Company Longsys Electronics (TAIWAN) Co., Ltd. (LONGSYS) Legal Director of the Company(No longer listed as a related party in the third quarter in 2019) Longsys (HK) Electronics Co., Ltd. (LONGSYS) Associate of Legal Director of the Company(No longer listed as a related party in the third quarter in 2019)

300

(1) Significant transactions with related parties:

(A) Sales

Subsidiaries Associates PHISON LONGSYS(Note) Other related party Total	For theyears ended December 31	For theyears ended December 31
	2019	2018
	`－` $216,110 2,332,055 748,726 16,616	$189 187,869 1,521,906 946,231 7
	$3,313,507	$2,656,202

(Note) : No longer listed as a related party in the third quarter in 2019.

The sales price to the above related parties was determined through mutual agreement based on the ～ market rates. The details of credit period are 30 60 days. The outstanding balance at December 31, 2019 and 2018 was unsecured, non-interest bearing and must be settled in cash. The receivables from the related parties were not guaranteed.

(B) Purchase

Purchase
COREPLUS Subsidiaries Associates Key management personnel of the Company Other related party Total	For theyears ended December 31
	2019	2018
	$579,968 23,439 1,162 74 8,817	$483,184 8,588 892 `－` 3,799
	$613,460	$496,463

(C) Accounts Receivable

Subsidiaries ATP LONGSYS(Note) PHISON Other related party Less: loss allowance Total	Dec. 31,2019	Dec. 31,2018 $187 45,024 306,961 343,356 7 (1,200) $694,335
	`－` $32,904 `－` 194,116 2,537 (`－`)
	$229,557

(Note) : No longer listed as a related party in the third quarter in 2019.

301

(D) Other Receivable

VALUEPLUS Associates ATP LONGSYS(Note) Key management personnel of the Company Other related party Total	Dec. 31,2019 $3,033 266 2,512 `－` `－` `－` $5,811	Dec. 31,2018
		$5,897 274 1,499 6,389 79 238
		$14,376

(Note) : No longer listed as a related party in the third quarter in 2019.

(E) Accounts Payable

COREPLUS Subsidiaries INFOFAB (Note) Other related party Key management personnel of the Company Total	Dec. 31,2019	Dec. 31,2018
	$169,039 1,855 36,587 1,826 70	$92,706 255 48,889 271 50
	$209,377	$142,171

(Note): The payments are the purchase of computer software and information system maintenance.

(F) Lease-related parties

Rental income

ATP INFOFAB Other related party Total	For theyears ended December 31	For theyears ended December 31
	2019	2018
	$4,258 2,940 42	$4,258 2,940 42
	$7,240	$7,240

302

(G) Transaction of properties

For the years ended December 31, 2019

For the years ended December 31, 2019	For the years ended December 31, 2019	For the years ended December 31, 2019	For the years ended December 31, 2019	For the years ended December 31, 2019
Counterparties Property Amount Gain (loss) on sales of ssets The basis of transactionprice Purchases INFOFAB Other equipment $2,224 Not applicable Negotiate INFOFAB Computer software 15,887 Not applicable Negotiate Total $18,111 Counterparties Property Unreduced balance Saleprice Gain (loss) on sales of assets The basis of transactionprice Sales VALUEPLUS Machinery and equipment `－` $31,178 $31,178 Negotiate
Sales	Machinery and equipment	`－`	$31,178	Negotiate
VALUEPLUS

For the years ended December 31, 2018

Counterparties	Property	Property	Amount
Purchases			$3,595 $51,168
INFOFAB INFOFAB Counterparties Sales LONGSYS
			$54,763
	Machinery and equipment	$1,448

(H) Intercompany borrowing

Dec. 31, 2019

Relatedparties	Maximum amount	Amount	Interest rates	Interest income (expense)
				$7,596

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Dec. 31, 2018

Relatedparties	Maximum amount	Amount	Interest rates	Interest income (expense)
				$7,422

(I) Compensation of key management personnel

Short-term employee benefits Post-employment benefits Share-based payment Total	For theyears ended December 31	For theyears ended December 31
	2019	2018
	$64,055 879 710	$38,044 661 `－`
	$65,644	$38,705

(J) Other disclosures
(a) PROPERTY had borrowed USD$3,102 thousand from subsidiary and provided all of real estates to trust as the mortgage for financing bank.
(b) The Company has engaged with OSEU as its sales and collection agent in America. For the years ended December 31, 2019 and 2018, total commission expenses amounted to $58,312 thousand and $52,799 thousand. The amount unpaid as of December 31, 2019 and 2018 were $11,186 thousand and $10,381 thousand, which were included in accrued expenses account.
(c) As of December 31,2019 and 2018, the Company paid $40,428 thousand and $89,288 thousand、$71,306 thousand and $7,605 thousand service fees to maintain information system of INFOFAB, respectively, which are accounted for as maintenance expenses. As of December 31, 2019 and 2018, the unpaid maintenance expenses amounted to $36,587 thousand and $48,889 thousand, respectively, which were recorded under accounts payable – affiliatesaccount.
(d) The summary of the guaranty/ warranty balance toward the Company’s affiliates is as follows:

COREPLUS	Dec. 31,2019	Dec. 31,2018
	$75,200 (USD2,500 thousand)	$76,800 (USD2,500 thousand)

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8. ASSETS PLEDGED AS SECURITY

The following table lists assets of the Company pledged as security:

Carryingamount	Carryingamount	Secured liabilities details
Dec. 31,2019	Dec. 31,2018
`－` $46,214 108,012 171,403 860,389 2,096,755 `－` 139,225 131,500	$224,523 107,944 135,671 171,597 890,776 2,623,647 25,845 145,777 163,704	Short-term borrowings Short and long-term borrowings Short and long-term borrowings Short-term borrowings Short and long-term borrowings Short and long-term borrowings Short and long-term borrowings Long-term borrowings Customs export guarantee and Other
$3,553,498	$4,489,484

9. COMMITMENTS AND CONTINGENCIES

(1) Guarantee given by the bank for the payment of input tax imposed for sales from a tax free zone to non tax free zone amounted to $800,000 thousand.
(2) The Company issued promissory notes of $8,973,768 thousand as guarantees for bank loans.
(3) The Company issued promissory notes of $16,955 thousand as guarantee for payments of raw materials and machineries purchased.
(4) The Company issued promissory notes of $1,428 thousand as guarantee for project.
(5) The Company has acted as a subcontractor for processing electronic products and provided storage services for outsiders. As of December 31, 2019, the Company kept the processed electronic products of $10,736,546 thousand and raw materials of $560,111 thousand on custodian.
(6) As of December 31, 2019, the Company had opened an unused letter of credit amounting to USD 115 thousand.

10. LOSSES DUE TO MAJOR DISASTERS

None.

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11. SIGNIFICANT SUBSEQUENT EVENTS

None.

12. FINANCIAL INSTRUMENTS

(1) Categories of financial instruments

Financial assets Financial assets at fair value through other comprehensive income Financial assets measured at amortized cost : Cash and cash equivalents (exclude cash on hand) Notes, accounts and other receivables Other financial asset Long-term receivables-Affiliates Subtotal Total Financial liabilities Financial liabilities at amortized cost: Short-term borrowings Short-term notes payable Notes, accounts and other payable Long-term loans (including of current portion) Lease payable (including of current portion) Lease liabilities Total	Dec. 31,2019 $226,860 1,490,904 2,687,504 154,226 496,399 4,829,033 $5,055,893 Dec. 31,2019 $2,373,766 379,210 4,170,733 2,095,326 `－` 160,623 $9,179,658	Dec. 31,2018 $234,878 555,355 3,116,458 243,615 499,401 4,414,829 $4,649,707
		Dec. 31,2018
		$2,806,857 349,610 4,243,863 3,053,515 2,610 (Note)
		$10,456,455

(Note): The Company adopted IFRS 16 since January 1, 2019. The Company elected not to restate prior periods in accordance with the transition provision in IFRS 16.

(2) Financial risk management objectives and policies

The Company’s principal financial risk management objective is to manage the market risk, credit risk and liquidity risk related to its operating activates. The Company identifies measures and manages the aforementioned risks based on the company’s policy and risk appetite.

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The Company has established appropriate policies, procedures and internal controls for financial risk management. Before entering into significant transactions, due approval process by the Board of Directors and Audit Committee must be carried out based on related protocols and internal control procedures. The Company complies with its financial risk management policies at all times.

(3) Market risk

In practice, it is rarely the case that a single risk variable will change independently from other risk variable, there is usually interdependencies between risk variables. However, the sensitivity analysis disclosed below does not take into account the interdependencies between risk variables.

(A)Foreign currency risk

The Company’s exposure to the risk of changes in foreign exchange rates relates primarily to the Company’s operating activities (when revenue or expense are denominated in a different currency from the Company’s functional currency) and the Company’s net investments in foreign subsidiaries.

The Company has certain foreign currency receivables to be denominated in the same foreign currency with certain foreign currency payables, therefore natural hedge is received. The Company also uses forward contracts to hedge the foreign currency risk on certain items denominated in foreign currencies. Hedge accounting is not applied as they did not qualify for hedge accounting criteria. Furthermore, as net investments in foreign subsidiaries are for strategic purposes, they are not hedged by the Company.

The foreign currency sensitivity analysis of the possible change in foreign exchange rates on the company’s profit is performed on significant monetary items denominated in foreign currencies as at the end of the reporting period. The company’s foreign currency risk is mainly related to the volatility in the exchange rates for foreign currency USD and foreign currency JPY.

(B)Interest rate risk

Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company’s exposure to the risk of changes in market interest rates relates primarily to the company’s loans and receivables at variable interest rates, bank borrowings with fixed interest rates and variable interest rates.

The Company manages its interest rate risk by having a balanced portfolio of fixed and variable loans and borrowings and entering into interest rate swaps. Hedge accounting does not apply to these swaps as they do not qualify for it.

307

(C)Equity price risk

The Company’s listed and unlisted equity securities are susceptible to market price risk arising from uncertainties about future values of the investment securities. The Company’s listed equity securities are classified under held for trading financial assets or available-for-sale financial assets, while unlisted equity securities are classified as available-for-sale. The Company manages the equity price risk through diversification and placing limits on individual and total equity instruments. Reports on the equity portfolio are submitted to the Company’s senior management on a regular basis. The Company’s Board of Directors reviews and approves all equity investment decisions.

- (D)Risks of pre tax Sensitivity analysis are as follows:

For the years ended December 31, 2019

		Sensitivityofprofit and loss `＋`/`－`15,337 thousand `＋`/`－`373 thousand `＋`/`－`4,469 thousand `－` Sensitivityofprofit and loss `＋`/`－`7,290 thousand `－`/`＋`855 thousand `＋`/`－`5,861 thousand `－`	Sensitivityof equity
			`－` `－` `－` `＋`/`－`2,269 thousand Sensitivityof equity `－` `－` `－` `＋`/`－`2,349 thousand
Foreign currency risk Interest rate risk Equity price risk	NTD/USD Foreign currency `＋`/`－`1`％` NTD/JPY Foreign currency`＋` /`－`1`％` Market rate`＋`/`－`10 fundamental proposition Market price`＋`/`－`10 fundamental proposition

(4) Credit risk management

Credit risk is the risk that a counterparty will not meet its obligations under a contract, leading to a financial loss. The Company is exposed to credit risk from operating activities (primarily for accounts receivables and notes receivables) and from its financing activities, including bank deposits and other financial instruments.

308

Customer credit risk is managed by each business unit subject to the company’s established policy, procedures and control relating to customer credit risk management. Credit limits are established for all customers based on their financial position, rating from credit rating agencies, historical experience, prevailing economic condition and the company’s internal rating criteria etc. Certain customer’s credit risk will also be managed by taking credit enhancing procedures, such as requesting for prepayment or insurance.

As of December 31, 2019 and 2018, amounts receivables from top ten customers represent 84.74% and 85.70% of the total accounts receivables of the Company, respectively. The credit concentration risk of other accounts receivables is insignificant.

Credit risk from balances with banks, fixed income securities and other financial instruments is managed by the company’s treasury in accordance with the company’s policy. The Company only transacts with counterparties approved by the internal control procedures, which are banks and financial institutions, companies and government entities with good credit rating and with no significant default risk. Consequently, there is no significant credit risk for these counter parties.

(5) Liquidity risk management

The Company’s objective is to maintain a balance between continuity of funding and flexibility through the use of cash and cash equivalents, highly liquid equity investments, bank borrowings, convertible bonds and finance leases. The table below summarizes the maturity profile of the company’s financial liabilities based on the contractual undiscounted payments and contractual maturity. The payment amount includes the contractual interest. The undiscounted payment relating to borrowings with variable interest rates is extrapolated based on the estimated interest rate yield curve as of the end of the reporting period.

Non-derivative financial instruments

As of Dec. 31,2019	Less than 1 year	2 to 3years	4 to 5years	> 5years	Total
	$3,567,916 379,210 17,170 4,153,483 349,610 2,617	$867,994 `－` 29,798 1,650,614 `－` `－`	$36,842 `－` 25,001 62,631 `－` `－`	`－` `－` 123,386 `－` `－` `－`	$4,472,752 379,210 195,355 5,866,728 349,610 2,617
Borrowings Short-term notes payable Lease liabilities As of Dec. 31,2018
Borrowings Short-term notes payable Lease payable

309

(6) Reconciliation of liabilities arising from financing activities

Reconciliation of liabilities for the years ended December 31, 2019:

Short-term borrowings Long-term borrowings Lease liabilities (Note) Refundable deposits Short-term notes payable	As of Jan. 1,2019	Cash flows	Foreign exchange movement	Others	As of Dec. 31,2019
	$2,806,857 3,053,515 152,959 3,424 349,610	($433,155) (962,010) (18,794) 50 29,600	－－－－－	$64 3,821 26,458 －－	$2,373,766 2,095,326 160,623 3,474 379,210

(Note): The beginning balance that the Company adopted IFRS 16 since January 1, 2019.

Reconciliation of liabilities for the years ended December 31, 2018:

Short-term borrowings Long-term borrowings Lease payables Refundable deposits Short-term notes payable	As of Jan. 1,2018	Cash flows	Foreign exchange movement	Others	As of Dec. 30,2018
	$2,192,678 3,757,706 24,551 3,474 398,938	$613,297 (707,191) (21,941) (50) (49,328)	$1,059 6,670 `－` `－` `－`	($177) (3,670) `－` `－` `－`	$2,806,857 3,053,515 2,610 3,424 349,610

(7) Fair values of financial instruments
A. The methods and assumptions applied in determining the fair value of financial instruments:

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The following methods and assumptions were used by the Company to measure or disclose the fair values of financial assets and financial liabilities:

(a) The carrying amount of cash and cash equivalents, accounts receivables, accounts payable and other current liabilities approximate their fair value due to their short maturities.
(b) For financial assets and liabilities traded in an active market with standard terms and conditions, their fair value is determined based on market quotation price (including listed equity securities, beneficiary certificates, bonds and futures etc.) at the reporting date.

310

(c) Fair value of equity instruments without market quotations (including private placement of listed equity securities, unquoted public company and private company equity securities) are estimated using the market method valuation techniques based on parameters such as prices based on market transactions of equity instruments of identical or comparable entities and other relevant information (for example, inputs such as discount for lack of marketability, P/E ratio of similar entities and Price-Book ratio of similar entities).
(d) Fair value of debt instruments without market quotations, bank loans, bonds payable and other non-current liabilities are determined based on the counterparty prices or valuation method. The valuation method uses DCF method as a basis, and the assumptions such as the interest rate and discount rate are primarily based on relevant information of similar instrument (such as yield curves published by the GreTai Securities Market, average prices for Fixed Rate Commercial Paper published by Reuters and credit risk, etc.)
(e) The fair value of derivatives which are not options and without market quotations, is determined based on the counterparty prices or discounted cash flow analysis using interest rate yield curve for the contract period. Fair value of option-based derivative financial instruments is obtained using on the counterparty prices or appropriate option pricing model (for example, Black-Scholes model) or other valuation method (for example, Monte Carlo Simulation).
B. Fair value of financial instruments measured at amortized cost

Other than cash and cash equivalents, accounts receivables, accounts payable and other current liabilities whose carrying amount approximate their fair value, the fair value of the Company’s financial assets and financial liabilities measured at amortized cost is listed in the table below:

Financial Assets Long-term receivables-affiliates Financial liabilities Long-term borrowings Lease payable Lease liabilities	Carryingamount	Carryingamount
	Dec. 31,2019	Dec. 31,2018
	$496,399 $2,095,326 (Note) $160,623	$499,401 $3,053,515 $2,610 (Note)

311

Financial Assets Long-term receivables-affiliates Financial liabilities Long-term borrowings Lease payable Lease liabilities	Fair Value	Fair Value
	Dec. 31,2019	Dec. 31,2018
	$496,399 $2,095,326 (Note) $160,623	$499,401 $3,053,515 $2,610 (Note)

(Note): The Company adopted IFRS 16 since January 1, 2019. The Company elected not to restate prior periods in accordance with the transition provision in IFRS 16.
C. Fair value measurement hierarchy for financial instruments

Please refer to Note 12.(8) for fair value measurement hierarchy for financial instruments of the Company.

(8) Fair value measurement hierarchy
A. Fair value measurement hierarchy:

Level 1: Quoted (unadjusted) market prices in active markets for identical assets or liabilities that the entity can access at the measurement date

Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly

Level 3: Unobservable inputs for the asset or liability

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B. Fair value measurement hierarchy of the Company’s assets and liabilities:

The Company does not have assets that are measured at fair value on a non-recurring basis. Fair value measurement hierarchy of the Company’s assets and liabilities measured at fair value on a recurring basis is as follows:

December 31, 2019 Financial assets: Financial assets at fair value through other comprehensive income Equity instrument December. 31, 2018 Financial assets: Financial assets at fair value through other comprehensive income Equity instrument	Level 1	Level 2	Level 3	Total
	`－` Level 1	`－` Level 2	$226,860 Level 3	$226,860 Total
	`－`	`－`	$234,878	$234,878

Transfers between Level 1 and Level 2 during the period

During the years ended December 31, 2019 and 2018, there were no transfers between Level 1 and Level 2 fair value measurements.

Reconciliation for fair value measurements in Level 3 of the fair value hierarchy for movements during the period is as follows:

Beginning balance as of Jan. 1, 2019 Recognized in other comprehensive income Transfer out of Level 3 Ending balance as of Dec. 31, 2019	At fair value through other comprehensive income
	Stock
	$234,878 (8,018) `－`
	$226,860

313

Beginning balance as of Jan. 1, 2018 Recognized in other comprehensive income Transfer out of Level 3 Ending balance as of Dec. 31, 2018	At fair value through other comprehensive income
	Stock
	$252,505 (17,627) `－`
	$234,878

Information on significant unobservable inputs to valuation

Description of significant unobservable inputs to valuation of recurring fair value measurements categorized within Level 3 of the fair value hierarchy is as follows:

December 31, 2019

Relationship Valuation Significant Quantitative between inputs Sensitivity of the input techniques unobservable inputs information and fair value to fair value Financial assets : Financial assets at fair value through other comprehensive income Stocks (1) Market (1)Discount rate 11.59%~ (1) The higher 1% increase － approach (2)Discount for 25.06% the discount (decrease) in the P/E lack of rate, the discount for lack of (2) Market marketability lower the fair marketability would approach value of the result in (decrease) － P/S stocks increase in the (3) Option (2) The higher Company’s equity by the discount $2,376 thousand. for lack of marketability , the lower the fair value of the stocks

314

December 31, 2018

Relationship Valuation Significant Quantitative between inputs Sensitivity of the input techniques unobservable inputs information and fair value to fair value Financial assets : Financial assets at fair value through other comprehensive income Stocks Option(1) Discount rate 13%~19% (1) The higher 1% increase Pricing (2) Discount for the discount (decrease) in the Model lack of rate, the discount for lack of marketability lower the fair marketability would value of the result in (decrease) stocks increase in the (2) The higher Company’s equity by the discount $2,365 thousand. for lack of marketability , the lower the fair value of the stocks

C. Fair value measurement hierarchy of the Company’s assets and liabilities not measured at fair value but for which the fair value is disclosed :

December 31, 2019 Financial assets not measured at fair value but for which the fair value is disclosed: Long-term receivables-affiliates Financial liabilities not measured at fair value but for which the fair value is disclosed: Long-term loans Lease liabilities	Level 1	Level 2	Level 3	Total
	`－` `－` `－`	$496,399 2,095,326 160,623	`－` `－` `－`	$496,399 2,095,326 160,623

315

December 31, 2018 Financial assets not measured at fair value but for which the fair value is disclosed: Long-term receivables-affiliates Financial liabilities not measured at fair value but for which the fair value is disclosed: Long-term loans Lease payable	Level 1	Level 2	Level 3	Total
	`－` `－` `－`	$499,401 3,053,515 2,610	`－` `－` `－`	$499,401 3,053,515 2,610

(9) Significant assets and liabilities denominated in foreign currencies

Information regarding the significant assets and liabilities denominated in foreign currencies is listed below:

Financial assets		Dec. 31,2019
	Foreign currencies	Foreign exchange rate	NTD
	$128,553 386,287 36,188 77,567 251,559	30.08 0.2771 30.08 30.08 0.2771 Dec. 31,2018	$3,866,874 107,040 1,088,535 2,333,215 69,707
Monetary items: USD JPY Non-monetary items: USD Financial liabilities
Monetary items: USD JPY Financial assets
	Foreign currencies	Foreign exchange rate	NTD
	$114,733 220,238 35,670 91,003 527,327	30.72 0.2784 30.72 30.72 0.2784	$3,524,598 61,314 1,095,782 2,795,612 146,808
Monetary items: USD JPY Non-monetary items: USD Financial liabilities
Monetary items: USD JPY

316

The above information is disclosed based on the carrying amount of foreign currency (after conversion to functional currency).

The Company’s entities functional currencies are various, and hence are not able to disclose the information of exchange gains and losses of monetary financial assets and liabilities by each significant asset and liability denominated in foreign currencies. The foreign exchange gains (losses) were ($48,962) thousand and $7,406 thousand for the years ended December 31, 2019 and 2018, respectively.

(10) Capital management

The primary objective of the Company’s capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximize shareholder value. The Company manages its capital structure and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the Company may adjust dividend payment to shareholders, return capital to shareholders or issue new shares.

VI. Financial difficulties of the company and its affiliated enterprises:None.

317

Seven. Review and analysis of financial status and financial performance and risk matters

I. Financial status

Unit: NTD thousand

Year Item	2019	2018	Increase (decrease) amount	Proportion of change	Analysis of change (Note)
Current assets	6,258,470	6,276,273	(17,803)	(0.28%)
Property, plant and equipment	6,264,246	7,063,908	(799,662)	(11.32%)
Intangible assets	58,445	89,633	(31,188)	(34.80%)	(I)
Other assets	3,337,589	3,350,268	(12,679)	(0.38%)
Total assets	15,918,750	16,780,082	(861,332)	(5.13%)
Current liabilities	8,263,388	9,031,180	(767,792)	(8.50%)
Non-current liabilities	1,589,207	2,246,302	(657,095)	(29.25%)	(II)
Total liabilities	9,852,595	11,277,482	(1,424,887)	(12.63%)
Equity attributed to owners of theparent company	6,066,155	5,502,600	563,555	10.24%
Capital	5,573,285	5,523,285	50,000	0.91%
Capital reserve	45,711	20,104	25,607	127.37%	(III)
Retained earnings(loss)	537,191	(44,832)	582,023	1,298.36%	(IV)
Other equity	(90,032)	4,043	(94,075)	(2,326.86%)	(V)
Total equity	6,066,155	5,502,600	563,555	10.24%

(Note): Analysis for proportion of change between the current and the previous period which reaches 20% and the amount is considerable

Analysis for proportion of change:

(I) Intangible assets decreased by NT$31,188 thousand compared to the same period last year mainly due to the parent company activating the project program during 2018, resulting in an increase in computer software costs by NT$35,000 thousand; there is no such situation this period.
(II) Non-current liabilities decreased by NT$657,095 thousand compared to the same period last year mainly due to the repayment of long-term loan of NT$808,409 thousand and the increase of noncurrent lease liabilities of NT$218,681 thousand arising from initial adoption of IFRS16.
(III) Capital reserve increased by NT$25,607 thousand compared to the same period last year mainly due to the issuance of bonus new restricted employee shares in November in 2019.
(IV) The retained earnings increase by NT$582,023 thousand compared with the same period of the last year, and the main reason is the decrease of re-measurements of the defined benefit plans by NT$5,937 thousand, and increase of net income by 587,960 thousand.
(V) Other equity reduced by NT$94,075 thousand mainly due to the decrease rate in foreign currency exchange differences of financial statements for foreign operating agencies, the effect of net foreign currency exchange loss by the USD (30.72 → 30.08), reduced by NT$15,172 thousand, unrealized gains and losses for available-for-sale decreased by NT$7,602 thousand as a result of evaluation, and the issuance of new restricted employee shares of NT$71,301 thousand recognized as employees’ earning of remuneration.

318

II. Financial performance

Unit: NTD thousand

Item	2019	2018	Increase (decrease) amount	Proportion of change	Analysis of change (Note)
Operating revenue Operating margin Operating income (loss) Non-operating income and expenses Net income (loss) before tax Net income(loss) from continuing operations Loss of discontinued operations Net income (loss) Other comprehensive income /loss (net of tax) of current period Total comprehensive income (loss) Net income attributed to the owner of parent company Net income attributed to non-controlling interest Total comprehensive income attributed to the owner of parent company Total comprehensive income attributed to non-controlling interest EPS(note)	17,515,145 1,772,942 776,472 (39,879) 736,593 587,960 ─ 587,960 (28,711) 559,249 587,960 − 559,249 − 1.06	15,188,192 532,137 (406,063) 43,527 (362,536) (111,548) − (111,548) (45,907) (157,455) (111,548) − (157,455) − (0.20)	2,326,953 1,240,805 1,182,535 (83,406) 1,099,129 699,508 ─ 699,508 17,196 716,704 699,508 － 716,704 －	15.32% 233.17% 291.22% (191.62%) 303.18% 627.09% ─ 627.09% 37.46% 455.18% 627.09% － (455.18%) －	(I) (I) (II)

Note: Analysis for proportion of change between the current and the previous period which reaches 20% and the amount is considerable

Analysis for proportion of change:

(I) Gross profit, operating loss:
Due to the increase yield of upstream customer 3D NAND flash wafer, the productive capacity of the semiconductor business center has constantly improved which has met the market supply. With the significant improvement of operations, the demand for modules of solid state drive (SSD), cloud servers and industrial computers have all contributed to the business performances. In terms end markets, laptops, data center and severs use a large amount of SSDs, the penetration rate has grown rapidly. With the help of the demand from various industries, the Company is able to use the advantage of existing production platforms to adjust the setting of production line in order to accommodate the industry trend by making full use of existing resources to enhance production efficiency and constantly develop various application and production services.

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III. Cash flow

(I) The analysis of the liquidity for the past two years

Year Item	Dec. 31, 2019	Dec. 31, 2018	Proportion of change
Cash flow ratio	36.73%	2.61%	34.12%
Cash flow adequacyratio	114.61%	83.56%	31.05%
Cash reinvestment ratio	13.09%	0.95%	12.14%

Analysis for proportion of change:

Compared with the previous period, cash flow ratio, cash allowance ratio and cash investment ratio increased by 34.12%, 31.05% and 12.14%, respectively, mainly due to an increase in net cash flow from operating activities of NT$2,798,793 thousand compared to the previous year.

(II) Analysis of cash liquidity for the coming year

Unit: NTD thousand

			Unit: NTD thousand
Cash balance A in the beginning of the year	Projected net cash flow provided by operating activities in the wholeyear B	Projected cash outflow in the whole year C	Projected cash balance A+B-C
1,701,412	1,147,611	1,416,874	1,432,149

Analysis interpretation:

We project that the cash flow from the operating activities in the coming year is about NT$1,147,611 thousand, cash outflow in the whole coming year is about NT$1,416,874 thousand, cash balance in the end of the year is about NT$1,432,149 thousand.

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IV. Major capital expenditures in the recent years and the impact on finance and business (I)Use status of major capital expenditures and source of the capital 1.Semiconductor Group

Plan	Actual or planned source of capital	Actual or planned source of capital	Actual or planned date of completion	Total capital amount	Actual or planned use status of capital	Actual or planned use status of capital	Actual or planned use status of capital	Actual or planned use status of capital
					2018	2019		2020
Crystallization Machine	Own funds, long-term debt payable		April 2019 December 2019 December 2019 February2019 May2019 May2019 December 2019 June 2019 April 2019 September 2019	80,131	47,162	32,969		－
Forming machine				60,635	20,871	39,413		351
Sealing machine and dies				79,879	5,097	74,704		78
Die saw machine				20,856	15,574	5,282		－
Microscope				17,920	10,940	6,980		－
Flipchipmachine				17,000	－	17,000		－
Laser printer				16,843	10,558	4,867		1,418
Wafer grinding machine				13,396	2,311	11,085		－
Wafer cutting machine				12,152	9,114	3,038		－
Tester				11,681	5,993	4,826		862
			Group
Plan		Actual or planned source of capital	Actual or planned date of completion	Total capital amount	Actual or planned use status of capital
					2019		2020
Mounter		Own funds, long-term debt payable	July2019	100,747	100,747		－
Solder paste inspection machine			December 2019	18,703	18,703		－
Solder joint inspection machine			June 2019	8,658	8,658		－
Reflow oven			July2019	8,576	8,576		－
Plant 5 Building 3 Plant Engineering			May 2019	7,882	7,882		－
Solderpasteprinter			August 2019	7,661	7,661		－
X-RAY inspection machine			June 2019	7,484	7,484		－
IC Building 3 Plant Engineering			January 2019	7,471	7,471		－
Dual sided automated optical inspection machine			January 2019	3,581	3,581		－
N2 reflow oven			December 2019	9,596	－		9,596
Facilities around MST machine			October 2019	4,450	－		4,450

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(II) The impact on finance and business:
1. Expand the capacity of flash memory-related products to increase the products' added level.
2. Increase the automatic production equipment to lower the dependence on the manpower, reduce the production procedure and improve the production quality.
V. Reinvestment policy in the most recent year, main reasons for profits or losses, improvement plans and investment plans for the coming year:
(I) The subsidiary in the Philippines OSEP shut down in Oct. 31, 2011 and the disposal of the machines was completed in 2013
(II) In 1st quarter of 2015, OSE PROPERTIES, INC. had completed the disposal of idle land whose area is 18,380 m[2] , the proceeds were used to repay OSEP after deducting the relevant payment.
(III) The Company continues implementing the selling/ lease plan of land and plant for the subsidiary in the Philippines OSEP. We appointed the professional real estate agent to assist in the selling and lease of land and plant.
VI. Risk matters
(I) The influence of changes in Interest rates, foreign exchange rates and inflation on corporate losses of profits, and future countermeasures:
1. In response to the change of international political and economic situation, we keep in touch with banks to acquire the latest relevant information and take the countermeasures such as conversion of the liabilities currency, expediting the re-payment for the foreign currency liabilities to achieve the effect of hedging.
2. The receiving and paying of the foreign currency resulting from the sales and purchases transactions will offset mutually to lower the risks of foreign currency exchange losses.
(II) Policies, main reasons for profits or losses and future countermeasures with respect to engaging in high-risk, high-leverage investments, loaning to others, endorsements and guarantees and derivatives transactions:
1. To control the financial risks with caution, the Company doesn't engage in the high-risk, high-leverage investments.
2. The Company has formulated the "Operational Procedure for Loaning to Others,” “Operational Procedure for Endorsements and Guarantees” and “Operating Procedure for Assets Acquisition and Disposal” to manage the related operations.
3. Please refer to the Company's loaning amount to others, and the amount for endorsements and guarantees.
(III) Future R&D plans and projected R&D expenses: Please refer to the page No. 103 of the annual report.
(IV) The influence of change for important domestic or foreign policies and laws on finance and business and the countermeasures:
1. The Company pays close attention at any time to any policies and laws that will possibly affect the business and operations of the company to adjust the company's internal system. There is no occurrence on the change for the important domestic/ foreign policies and laws and their effects on finance and business in the most recent year and by the date of the annual report publication

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EU environmental directive (RoHS): Please refer to the page No. 112 of the annual report.
(V) The influence of changes in technology and industry on corporate finance and business and countermeasures:
The Company's business mainly focuses on semiconductor packaging and testing services, electronic manufacturing services, we continue collecting the business information regarding the changes of technology industry and strengthen our management and R&D teams to keep our technical lead in the industry and grasp the effect of this part on our business and finance.
With the constant improvement of the techniques in the semiconductor industry, the Company is devoted to R&D of products and market development in response to the changes of technology and industry to assist the company's finance and business in a positive way.
(VI) The influence of changes in corporate image on corporate risk management and countermeasures:
The Company has established the extensive countermeasures for corporate risk management including the procedure for establishing project response team when it is necessary. If the Company encounters crisis may cause the change in corporate image, it will immediately establish the response team and take the necessary countermeasure to minimize the personal injury, business interruption and finance impact and maintain the operation smoothly.
(VII) The expected benefits and potential risks of mergers and acquisitions and countermeasures: none.
(VIII) The expected benefits and potential risks of plant expansion and countermeasures:
Continue improving the production conditions in the old plant and increase the production quality to satisfy the customers, so there is no relevant risks
(IX) The risks of purchase or sales concentration and countermeasures:
(X) The influence and risk of the massive transaction or conversion of shares of the Directors, Supervisors or dominant shareholders holding over 10% of the stakes and countermeasures: none.
(XI) The influence and potential risks of management right change and countermeasures: none.
(XII) For litigious or non-litigious events, list the major litigious events, non-litigious events or administrative remedies with confirmed verdicts or in progress of the company and its Directors, Supervisors, Presidents, actual person-in-charge, and shareholders holding over 10% of the stakes, subsidiaries and affiliates. When the results of such events and remedies may have potential influence on the shareholder’s equity or stock price, disclose the fact in dispute, the amount in dispute, the start date of event, principal parties involving in the event, and the handling status by the date of annual report publication.
Major litigious events, non-litigious events, or administrative remedies for the Company: none
Major litigious events, non-litigious events, or administrative remedies for Directors, Supervisors, Presidents, actual person-in-charge and shareholders holding over 10% of the stakes, subsidiaries: none.
(XIII) Other important risks and countermeasures:
The influence of unexpected abnormality for information system on the company operation and protection and control measures:

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(1) In constructing the basic structure of information system, we establish the remote communication and connection, host remote backup and integrate with cloud services providers after taking high availability and backup loading into consideration and we try hard to lower the service interruption resulting from equipment abnormality. In addition to the protection of the basic construction, we also conduct the data backup for all the major systems and materials. Aside from strengthening the protection of media backup, we also reinforce the materials preservation. We can activate the recovery when the abnormality occurs to maintain the materials.
(2) We have the specialized teams of the development and maintenance for company's major systems, production systems, ERP systems. In addition to the protection of all the major procedures from operating smoothly, the information system can adjust according to the change of the company to ensure the constant operation and the flexible extension for the company. Moreover, the system interruption resulting from abnormality of human or system development vendor can be reduced because of the protection and management of major information system by specialized teams.
(3) Because of the annual regular audit by international famous enterprises, including business secrets, laws and regulations, manufacturing process, information system and so on, we can adjust the system, management and control measures to comply with their requirement and the operation requirement. Currently, we continue auditing and improving the information system to lower the operating impacts and recover the operations rapidly when the risk occurs and reduce the losses of the customers and maintain the operations of the company.
VII. Other material information: none.

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Eight. Special Disclosure

==> picture [713 x 365] intentionally omitted <==

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

I. Information of affiliated enterprises
Consolidated business reports of affiliated enterprises
(I) Organization chart of affiliated enterprises
Orient Semiconductor
Electronics, Ltd.
100% 93.66% 100% 100%
OSE USA, INC. OSE OSE International, COREPLUS
Philippines, Ltd. (HK) LTD.
INC.
6.33%
100%
VALUE-PLUS
TECHNOLOGY
(SuZhou) CO.
----- End of picture text -----

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(II) Basic information of all the affiliated enterprises

Unit: NTD thousand

				Unit: NTDthousand
Name of affiliate	Date of establishment	Address	Paid- in capital.	Major items of operation or production
OSE PHILIPPINES, INC.	1996. 6.11	6 Ring Road, Light Industry & Science Park II, Brgy. Lamesa, Calamba, Laguna 4027, Philippines	4,127,308 (USD134,352,476)	(1) IC and all kinds of semiconductor parts (2) The research, design, production, assembly, processing, testing and after-sale services of the aforementioned products.
OSE USA, INC.	2005.10.17	1737 N. 1stStreet, Suite 350, San Jose,Ca 95112,USA	392,251 (USD12,768,594)	Services for the customers of the Northern America
OSE INTERNATIONAL LTD.	1999.11.19	P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola,British Virgin Islands.	491,520 (USD16,000,000)	Investment on all kinds of production business
COREPLUS (HK) LTD.	2008.11.10	1501 Capital Centre,151 Gloucester Road,Wan Chai,HongKong	230,400 (USD7,500,000)	Operations of raw material purchase and processing,assemblyoutsourcing.
VALUE-PLUS TECHNOLOGY (SuZhou) CO.	2005.9.14	A-7 Factory Building, Export Processing Zone, No. 19, Datong Road, SND-EPZ, Suzhou, China	337,920 (USD11,000,000)	Substrate SMT of electronic parts, parts insertion and welding, relevant testing, assembly processing, self-manufactured products sales, corresponding technical maintenance and after-sale services.

Note: If the affiliated enterprises are foreign companies, list the relevant numbers in NTD according to the exchange rate in the report date. (NTD : USD = 1 : 30.08)
(III) For companies presumed to have a relationship of control and subordination, disclose the information of identical shareholders: N/A. (IV) Operating relationship interpretation
The industries covered by the business operated by all the affiliated enterprises: Please refer to (2) basic information of all the affiliated enterprises.
The connections exist among the businesses operated by the affiliated enterprises, and the situation of the mutual dealings and division of work among them: All the affiliated enterprises of the Company build to order and operate individually.

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(V) The information of Directors, Supervisors and Presidents of all the affiliated enterprises

Name of affiliate	Title	Name or representative	Shareholdings	Shareholdings
			Share	Proportion of shareholdings (Votingright)
OSE PHILIPPINES, INC.	Chairman/President	Edward Shaw-Yau Duh	97	0.00%
	Director	Yueh-MingTung	1	0.00%
	Director	Chun-Kuan Lee	1	0.00%
	Director	Edmond Tseng	5	0.00%
	Director	Simon Hung	1	0.00%
OSE INTERNATIONAL LTD.	Chairman	OSE Institutional representative: Chun-Kuan Lee	16,000,000	100.00%
	President	Chun-Kuan Lee	—	—
OSE USA, INC.	Chairman/President	Edmond Tseng	—	—
	Director	Edward Shaw-Yau Duh	—	—
	Director	OSE Institutional representative: Yueh-MingTung	8,024	100.00%
COREPLUS (HK) LTD.	Chairman	OSE(Institutional representative: Chun-Kuan Lee)	7,500,000	100.00%
	Director	OSE(Institutional representative: Edward Shaw-Yau Duh)	7,500,000	100.00%
	Director	OSE(Institutional representative: Yueh-MingTung)	7,500,000	100.00%
VALUE-PLUS TECHNOLOGY(SuZhou) CO.	Chairman	COREPLUS (HK) LTD. (Institutional representative: Chun-Kuan Lee)	—	100.00%
	Director	COREPLUS (HK) LTD. (Institutional representative: Yueh-MingTung)	—	100.00%
	Director	COREPLUS (HK) LTD. (Institutional representative: Tzu MingLiu)	—	100.00%

327

(VI) Operating status of all the affiliated enterprises

Unit: NTD thousand

Name of affiliate	Capital amount	Total assets	Total liabilities	Net worth	Operating revenue	Operating income (loss)	Net income or loss for current period (after tax)	Earnings per share (NTD) (after tax)
OSE PHILIPPINES, INC.	4,041,322 (USD134,352,476)	675,943 (USD22,471,511)	692,367 (USD23,017,526)	(16,424) (-USD546,015)	`－`	(36,008) (-USD1,171,436)	(41,759) (-USD1,358,543)	(10.63)
OSE USA, INC.	384,079 (USD12,768,594)	124,452 (USD4,137,356)	12,706 (USD422,414)	111,745 (USD3,714,942)	59,130 (USD 1,923,691)	14,270 (USD464,261)	14,016 (USD455,984)	1,746.77
OSE INTERNATIONAL LTD.	481,280 (USD16,000,000)	304,282 (USD10,115,742)	`－`	304,282 (USD10,115,742)	`－`	(104) (-USD3,377)	11,517 (USD374,669)	0.72
COREPLUS (HK) LTD.	225,600 (USD7,500,000)	732,510 (USD24,352,064)	272,079 (USD9,045,174)	460,431 (USD15,306,890)	1,904,442 (USD61,957,251)	37,189 (USD1,209,867)	31,755 (USD1,033,101)	4.23
VALUE-PLUS TECHNOLOGY (SuZhou) CO.	330,880 (USD11,000,000)	196,046 (RMB45,465,207)	72,254 (RMB16,756,513)	123,792 (RMB28,708,694)	238,254 (RMB53,540,189)	(6,916) (-RMB1,554,045)	(7,688) (-RMB1,727,645)	(0.70) (Note 2)

Note: If the affiliated enterprises are foreign companies, list the relevant numbers in NTD according to the exchange rate in the report date.

(Exchange rate in the end of the period NTD : USD = 30.08 : 1, NTD : RMB = 4.312 : 1; average exchange rate NTD : USD = 30.738 : 1, NTD: RMB = 4.450 : 1)

Note2: The type of the invested company is a limited liability company, there is no number of shares issued and denomination, and the calculated earnings per share are not comparable, so it is not applicable.

328

Consolidated financial statements of Affiliated Enterprises

In the fiscal year 2019 (from Jan. 1, 2019 to Dec. 31, 2019), the consolidated entities within the consolidated financial statement of affiliated enterprises in accordance with the “Criteria Governing Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises” are identical to the entities within the consolidated financial statement in accordance with Statement of Financial Accounting Standard(SFAS)No. 27. All information should be disclosed in the consolidated financial statements of affiliated enterprises is disclosed in the consolidated financial statement in accordance with SFAS No. 27. Consequently, the Company would not prepare the consolidated financial statement of affiliated enterprises separately.

Affiliation Report

The Company is not subordinate company stated in the Chapter Affiliated Enterprises of the Company Act, so we are free from preparing the affiliation report to state the affiliation between the controlling company.

329

II. Private placements of securities in the most recent year and by the date of annual report publication:

reportpublication:
Item	Issuance date: Notyet issued (Note)
Private placement of securities type	Common stock
The date and quantity approved by the shareholders meeting	Not yet resolved by the shareholders meeting
The basis and reasonableness of the pricing	1. The private placement pricing of the Company should be based on 20% of the following 2 calculations whichever is higher prior to the Company’s date of pricing: (1) The simple average closing price of the common shares of the Company for either the 1, 3, or 5 business days before the price determination date, after adjustment for any distribution of stock dividends, cash dividends or capital reduction. (2) The simple average closing price of the common shares of the Company for the 30 business days before the price determination date, after adjustment for any distribution of stock dividends, cash dividends, or capital reduction. 2. The actual pricing date and the actual place placement price may not be lower than the scope of percentage resolved by the shareholders’ meeting. The board of directors have been authorized to make decisions according to the situation of specific persons and market conditions in the future. However, the pricing shall be reasonable, therefore, there is no material impact on the shareholders’ rights and interests.
The method for selecting the specific persons	The objects of this private placements of ordinary shares are limited to specific persons who meet the requirements stipulated in Article 6 of Article 43 of the Securities Exchange Act and Order No. Tai-Cai-Zhen-1 0910003455 issued by the Financial Supervisory Commission on June 13, 2002.
The reasons for the necessity for conducting theprivateplacement	1. The reasons for not using a public offering: In consideration of market conditions, timeliness, feasibility, issuance costs of capital raisingand/or the

330

	introduction of strategic investors to correspond with the Company’s development and the transfer limit can ensure that the long-term cooperative relationship between Company and strategic investors which strengthens the stability of the Company’s management, therefore the Company uses place placements for raising funds. Depending on the actual needs of the Company's operations, by authorizing the board of directors, the Company also effectively improves the mobility and flexibility reasons for the necessity for conducting the private placement. 2. The limit on the private placement: Within the limit of 120,000,000 shares, the Company conducts the private placement once within a year from the resolution date by the shareholders meeting 3. The use of the funds raised by the private placement and the anticipated benefits: The funds raised this time are expected to be used to strength the financial structure, seek business and technical cooperation or strategic alliance opportunities with domestic and foreign manufactures, invest in advanced packaging and testing manufacturing equipment and research and development of high-end technology to improve the operating funds and other fund needs to correspond with the Company's long term developments which pose one or multiple uses. It is expect to improve the financial structure, reduce debt ratio, improve current ratio and quick ratio which poses positive benefits for the stability of the Company’s management as well as the rights and interests of shareholders. Also, by introducing strategic investors, it helps the Company to expand the market and technical cooperation so that the Company can profit which poses positive benefit to shareholders.
Subscription paid up in full	Not yet issued
Information on the candidates	No determined candidates yet
Actual subscription (or	Notyet issued

331

transfer)price
Difference between actual subscription (or transfer) price and reference price (Note 7)	Not yet issued
Any effect of the private placement on shareholder equity (i.e. causes accumulated loss)	Not yet issued
Status of utilization of the funds raised in the private placement and the plan implementationprogress	Not yet issued
The realization of plan benefit in the private placement	Not yet issued

Note 1: The number of columns is adjusted according to the actual private placements; private placement of securities shall be separately indicated if there are multiple closings.
Note 2: For filling in private placement of securities for common stock stocks, preferred shares, convertible preferred shares, the subscription price of preferred shares with warrants, corporate bonds, convertible corporate bonds, corporate bonds with warrants, overseas convertible corporate bonds, depository receipts, and employee stock warrants.
Note 3: For private placement of corporate bonds without being passed by the shareholders meeting, the date and quantity approved by the board of directors’ meeting shall be indicated.
Note 4: In the case of private placements, if a candidate has been determined, the title, or name and relation to the Company shall be indicated.
Note 5: The number of columns are adjusted according to the actual number.
Note 6: For filling in Article 43-6, paragraph 1, subparagraph 1, 2, or 3 of the Securities and Exchange Act.
Note 7: Actual subscription (or transfer) price refers to the actual subscription (or transfer) price at the time of conducting the private placement of securities.
III. Stocks of the Company held or disposed by subsidiaries in the most recent year and by the date of annual report publication: Note.
IV. Other required supplementary notes: None.
V. Events with material impacts on shareholder equity or stock price as specified in Item 2, Paragraph 3, Article 36 of the Securities and Exchange Act in the recent year and by the date of annual report publication: None.

332

AI assistant

OSE — Annual Report 2019

52010_rns_2020-12-11_1865a9bf-47b7-4eaf-b1cd-6162d3e7c274.pdf

Orient Semiconductor Electronics, Ltd. Annual Report 2019

Catalogue

Six. Financial Information

Seven. Review and Analysis of Financial Status and Financial Performance and Risk Matters

Eight. Special Disclosure

【Corporate Vision】

One. Message to shareholders

2019 Annual Report

Operating Results

Financial Income/Expenses and Profitability Analysis

R&D status

Summary of the Business Plan for the Current Fiscal Year

Company’s Future Development Strategy

The Effect of External Competition, the Legal Environment, and the Overall Business Environment

Two. Company Profile

Positioning

Company history

Three. Corporate Governance Report

I. Organization

(II) The responsibilities of all the major departments

Professional qualifications and independence status of Directors and Supervisors

(II) Profile of Presidents, Vice Presidents, Assistant Managers, Department Heads and Branches Heads

III. Remuneration for Directors, Supervisors, Presidents and Vice Presidents in the most recent fiscal year

(III) Remuneration of President and Vice President

IV. Implementation status of Corporate Governance

(V) CSR performance:

Orient Semiconductor Electronics, Ltd.

Internal control system statement

Four. Capital Overview

I. Capital and shares

(I) Sources of capital

(VI) Dividends policy and implementation status

1. Dividends policy

Five. Operation Overview

I. Business content

Semiconductor Group

(2) For other IC:

Electronics manufacturing services (EMS) Group

(1) For SSD cards:

II. Market, production, and sales overview

(I) Market analysis

2. Market share

◆ Electronics manufacturing services (EMS) Group

2. Production process of major products

(III) Supply status of major materials

(V) Production volume and value in the past 2 years

III. Profile of employees

IV. Environmental protection expenditure

V. Labor relations

3. Retirement system:

VI. Important contracts

Six. Financial Information

Audit Committee’s Review Report

Independent Auditors’ Report

English Translation of a Report Originally Issued in Chinese

Opinion

Basis for Opinion

Key Audit Matters

1. Validity of occurrence of sales revenue from main customers

2. Deferred tax assets

Other Matter – Making Reference to the Audits of Component Auditors

Emphasis of Matter – Applying New Accounting Standards

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

Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements

Notice to Readers

English Translation of Financial Statements Originally Issued in Chinese

ORIENT SEMICONDUCTOR ELECTRONICS LIMITED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

As of December 31, 2019 and 2018

English Translation of Financial Statements Originally Issued in Chinese ORIENT SEMICONDUCTOR ELECTRONICS LIMITED AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

As of December 31, 2019 and 2018

English Translation of Financial Statements Originally Issued in Chinese

ORIENT SEMICONDUCTOR ELECTRONICS LIMITED AND SUBSIDIARIES

English Translation of Financial Statements Originally Issued in Chinese

English Translation of Financial Statements Originally Issued in Chinese ORIENT SEMICONDUCTOR ELECTRONICS LIMITED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS

For the years ended December 31, 2019 and 2018

1. ORGANIZATION AND OPERATION

OSE Annual Report 2019

`－` (3) ACCOUNTS RECEIVABLES AND ACCOUNTS RECEIVABLES AFFILIATES