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Stock Code: 3296

POWERTECH INDUSTRIAL CO., LTD.

2018

Annual Report

Notice to readers

This English-version annual report is a summary translation of the Chinese version and is not an official document of the shareholders’ meeting. If there is any discrepancy between the English and Chinese versions, the Chinese version shall prevail.

Taiwan Stock Exchange Market Observation Post System: http://newmops.twse.com.tw

POWERTECH 2018 Annual Report is available at: http://www.power-tech.com.tw Printed on 04 11, 2019

Spokesperson

Name: Kevin Kuo Title: Vice President and CFO Tel: 886-2-8221 5588 E-mail: [email protected]

Deputy Spokesperson

Name: Josh Tsai Title: Vice president Tel: 886-2-8221 5588 E-mail: [email protected]

Registrar Agent

Headquarters, Branches and Plant

Headquarters Address: 10F., No.407, Sec. 2, Zhong Shan Rd., Zhonghe Dist., New Taipei City 23558, Taiwan(R.O.C.)

Tel: +886-2- 8221 5588

Plant

Address: No.168, Yong-Tai Rd., Hou-Chieh Village, Hou-Chieh Town, Dongguan City, Guangdong China Tel: +86-769- 8581 8977

Grand Fortune Securities Co.,Ltd. Address: 5-7F., No.6, Sec. 1, Zhongxiao E. Rd., Zhongzheng Dist., Taipei City 100, Taiwan (R.O.C.) Tel: 886-2-2383 6888 Website: http://www.gfortune.com.tw

Auditors

KPMG Auditors: HSU, YU-FENG , MEI, YUAN-CHEN

Address: 68Fl, Taipei 101 Tower No.7,Sec.5, Xinyi Road, Taipei 11049, Taiwan, R.O.C. Tel.: 886-2-8101 6666 Website: http://www.kpmg.com.tw

DOMESTIC STOCK EXCHANGE LISTING

POWERTECH Common shares Taiwan Stock Exchange Corporation http://www.tse.com.tw/en/

Corporate Website

http://www.power-tech.com.tw

I. Letter to Shareholders ............................................................................................ 1 II. Company Profile 2.1 Date of Incorporation.............................................................................................. 6 2.2 Company History ……… ...................................................................................... 6 III. Corporate Governance Report 3.1 Organization............................................................................................................ 7 3.2 Directors, Supervisors and Management Team………………………………….9 3.3 Implementation of Corporate Governance ........................................................... 23 3.4 Information Regarding the Company’s Audit Fee and Independence.................. 57 3.5 Changes in Shareholding of Directors, Supervisors, Managers and Major Shareholders……………………………………………………………………..59 3.6 Relationship among the Top Ten Shareholders………..……....………...………60 3.7 Ownership of Shares in Affiliated Enterprises ……………………………61 IV. Capital Overview 4.1 Capital and Shares………………………………………………………….……63 4.2 Bonds…………….………………………………………………………….……69 4.3 Global Depository Receipts ….…………………………………………….……70 4.4 Employee Stock Options…………………………………………………………70 4.5 Status of New Shares Issuance in Connection with Mergers and Acquisitions….70 4.6 Financing Plans and Implementation……………………………………...……..70 V. Operational Highlights 5.1 Business Activities……………………………………………………………….71 5.2 Market and Sales Overview…………………………………….………..………74 5.3 Human Resources……….……………………………………………………….78 5.4 Environmental Protection Expenditure………….……………………………….78 5.5 Labor Relations…………………………………………………………………80 5.6 Important Contracts………………………………………………………………80 VI. Financial Information 6.1 Five-Year Financial Summary………………………………………….………..79 6.2 Five-Year Financial Analysis…………………………………………….………80 6.3 Supervisors’ or Audit Committee’s Report in the Most Recent Year……………83 6.4 Financial Statements for the Years Ended December 31, 2015 and 2014, and Independent Auditors’ Report………………………………..………………….83

VII. Review of Financial Conditions, Operating Results, and Risk Management
7.1 Analysis of Financial Status……………………………………………………..84
7.2 Analysis of Operation Results……………………………………………..…….85
7.3 Analysis of Cash Flow………………………………………..…………………86
7.4 Major Capital Expenditure Items………………………………………………87
7.5 Investment Policy in Last Year, Main Causes for Profits or Losses,
Improvement Plans and the Investment Plans for the Coming Year……….……87
7.6 Analysis of Risk Management…………………………………………….……..88
VIII. Special Disclosure
8.1 Summary of Affiliated Companies……………………………………..….……90
8.2 Private Placement Securities in the Most Recent Years………………………….90
8.3 The Shares in the Company Held or Disposed of by Subsidiaries
in the Most Recent Years………………………………………………….…….90
Attachment
Powertech industrial co., ltd and its subsidiaries Consolidated Financial
Statements…………………………………………………………………………91

I. Letter to Shareholders

Dear Shareholders,

In fiscal 2018, the consolidated operating income was $ 3,140,740 (thousand NT), representing a increase of $ 282,111 (thousand NT) or 9.87% for 2017. The consolidated operating margin for the year was $ 475,019 (thousand NT), up by $ 6,580 (thousand NT) or 1.40% over year of 2017. The After –tax profit of year 2018 was 99,160 (thousand NT) ,a increase of 96,795 (thousand NT), a increase of 4092.81% for year 2017.

In the 2018, the overall turmoil in the global economy has changed dramatically. After a period of ups and downs, the global economic growth has turned from steady to weak. The deep-impact factors of the overall economic crisis have not yet been eliminated, and protectionism has returned to the global economy. On the one hand, the world economy has not continued the rapid growth of the past. From the simultaneous recovery of the United States and Europe to the region, the growth rate of major economies is approaching the peak, and some emerging market countries have experienced financial turmoil. On the other hand, the United States has launched several trade disputes globally for photovoltaic, steel, aluminum, and automobiles. The rise of global populism and geopolitical conflicts have caused great disruption to economic operations. Under the influence of global trade friction, the Fed tightening monetary policy, the appreciation of the US dollar, and the tightening of global dollar liquidity, the balance of global economic expansion began to decline. From the perspective of economic growth, only the US economy in the developed countries is “out of the box”, the euro zone economy is weak, and in the emerging economies, Asia maintains high growth, while growth in other regions slows down; from the perspective of financial market performance, The developed countries are generally stable, although the volatility has risen but still below historical levels, emerging economies have risks such as currency depreciation, capital outflows, stock market declines, and rising debt repayment pressure. Among the various impact factors, the trade war between the United States and China has had a major impact on the Company, affecting the relevant market layout and strategy of the Company. In such a difficult and prosperous environment, the company is striving for cost optimization and establishing a competitive market. Niche and new products have gained favor in the market, resulting in 2018 overall operating performance growth compared to year of 2017.

Looking forward to the 2019, observing the recent international economic situation, updated data released by international forecasting institutions such as the World Bank, Global Insight and the International Monetary Fund show that global international trade and manufacturing activities have slowed down in 2019, and the trade situation continues to be tense. Some large emerging market countries have clearly felt financial pressure. The trade war, the slowdown of the Chinese economy, and the risk of Brexit in the UK have led to a slowdown in global trade activity and a drag on manufacturing, which is the main reason for the decline in the global outlook. Although it is widely believed in the global market that 2019 is a conservative and prudent year, the company will continue to actively introduce new products and open up new markets under the unpredictable factors. The company will continue to actively engage in production and sales integration. Strengthening competitiveness. The business side, in line with changes in the external industrial environment, develop competitive strategies and actively develop new products, new customers and new application markets. In the R&D area, in response to energy conservation and carbon reduction requirements, a dedicated energy management unit was established to accelerate the development of related products. In terms of services, in line with customer needs, provide better quality and delivery, and raise the threshold for competition. In terms of social responsibility, in line with the market demand for green environmental protection, energy conservation and carbon reduction and carbon footprint verification, we plan a series of energy management products such as environmental protection, energy conservation and carbon reduction, and strive for social responsibility while pursuing profits.

B. the result of the budget ：

Unit: in thousands

`項目`	Amount(actual)	Amount(budget)	Actual/budget
Surge Protector for IT Peripherals	13,382	14,500	92.29%
Power Noise Filter for Audio and Video Devices	439	120	365.83%
IoT and Smart Home Power SafetySystem	1,251	1,695	73.81%
Others	451	329	137.08%
Total	15,523	16,644	93.26%

Analysis of financial revenue and expenditure and profitability

Unit : in thousand NT

	item	2018	2017	Increase/ decrease
Revenue and Expenditure	Revenue	3,140,740	2,858,629	9.87%
	Operatingmargin	475,019	468,439	1.40%
	Netprofit after tax	99,160	2,365	4092.81%
Profitability	ROA(%)	4.20%	0.12%	3547.34%
	ROE(%)	6.30%	0.14%	4334.42%
	Net return(%)	3.16%	0.08%	3846.52%
	Retrospective EPS(`元`)	1.01	0.02	4950.00%

research and development status

The R&D expenses invested by the Company in 2018 ：

Unit : in thousand NTD

Item	Amount
R&D costs	146,133
Net operatingincome	3,140,740
Accounting for net operating income ratio	4.65%

C. Operating principles:

Good customer service, to develop new customers, new markets and new applications to expand the scale of operation of the company.
Strengthen the core technology research and development, the development of higher value-added new products to increase the competitive threshold to enhance profitability.
Patent layout, strengthen intellectual property protection, to improve the industry barriers to entry.
Strict control of costs, improve management efficiency, enhance international competitiveness.

The expected number of sales and its basis

Based on the industrial environment and the supply and demand of the market, and considering the own capacity and business development, the Company expects sales as follows

Unit : in thousands

	Unit : in thousands
Item	Amout
Surge Protector for IT Peripherals	13,912
Power Noise Filter for Audio and Video Devices	331
IoT and Smart Home Power SafetySystem	1,310
Others	343
Total	15,896

Important production and marketing policies

Continuously invest in innovative research and development, improve product quality and reduce production costs.
Strengthen the process management, improve production efficiency.
To grasp the pulse of raw material prices, strengthen inventory control, play procurement advantages 。 .
To grasp the market trends, the development of new products, develop new applications market, to enhance profitability to 。

expand the breadth and depth of the product

The future development strategy of the company

Continuously attract talented people, with the ability of existing staff to enhance .
With the market trends, and actively develop green products, and strive to product innovation, expand product niche.
Strengthen the marketing channels, enhance the quality, price and delivery competitiveness, to enhance market share.

By the external competitive environment, regulatory environment and the overall operating environment

In the global climate change, the rise of environmental awareness, energy management and energy conservation and carbon reduction issues, has gradually transformed into the pursuit of profit and good corporate social responsibility of the primary goal. The overall community for enterprise products, the tracking and verification of carbon footprint needs continued to heat up, but also to provide the company to broaden

the competitive threshold of the product opportunities. The company will focus on power management technology research and development, through the combination of part of the cloud and software technology, the introduction of a more comprehensive environmental energy solutions to meet customer demand for high efficiency energy management products.

I would like to thank the shareholders for their support of the Company on the report on the business report for the year 2018 and the summary of the 2019 business plan. The company will also make the best efforts of all employees, forging chain is better than the previous operating strength, performance support for shareholders to return. In the future, we hope that the shareholders will continue to give the company support and encouragement to create a bright future. I wish all the shareholders good health, all the best! Sincerely yours,

Chairman & CEO

Jonie Chou

II. Company Profile

2.1 Date of Incorporation : 11 14, 2000

2.2 Company History

Year	Milestones
2000	Founded on Nov. 14, 2000 with NT$50 million capital.
2002	Increased capital to NT$300 million.
2003	POWERTECH Corporation wentpublic.
2007	Listed on Taiwan Stock Exchange(Code-3296).
……	……………………………………………
2017	Dealing with the cancellation of a total of 5,000,000 shares of treasuryshares
2018	The company's product Magic Cube won the 2018 Innovation Award from CES USA. Selected as one of the consumer electronics products with outstanding design and craftsmanship and advanced technology. Officially announced the addition of the Wireless Charging Alliance WPC to provide an easier way to charge mobile phones and related electronic devices.

III. Corporate Governance Report

3.1 Organization

3.1.1 Organizational Chart

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股東會Board of
Shareholder
董事會Board of
Directors
稽核室Auditing office
董事長Chairman
董事長室Chairman office
總經理President
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總管理處電源及智能系統事業單位
ADministration Power & IOE BU
Division
財會處產品產品業務電源產品智能系統詮盛廠富鉅廠
Financial 處驗證處企畫處處開發處產品開發 Q.S. F.J.
Division Product Marketing Sales Power 處 Factory Factory
Verification & Division
Product IOE
Division Planning
R&D Product
Division
R&D
Division
Division
----- End of picture text -----

3.1.2 Major Corporate Functions

Department	Functions
Chairman Office	Strategic planning, business planning authorization and supervision
Auditing Office	To identify deficiencies in the internal control system, assess the effectiveness and efficiency of operations, and provide appropriate improvement suggestions to ensure the effectiveness of the internal control system as well as for continuous improvement.
Administration Dept.	Planning and execution of general affairs, factory affairs, and information systems.
Power & IOE BU	Provide power and IOE products to global market (Including product planning, Marketing, R & D, and sales)
Marketing & Planning Division	Responsible for market analysis, new technology analysis and import, product planning, new product appearance and packaging design, new product case Kick Off and other related matters.
Product Verification Division	Responsible for product design verification and safety certification, and responsible for the company'sproductqualityassurance andguidance.
Q.S. and F.J. Factory	Responsible for product manufacturing and production capacityallocation.
Sales Division	Responsible for corporate image planning, maintaining and enhancing external public relations, corporate marketing activities worldwide, and analyzing industry data and trends. It is also in charge of formulating and implementing corporate marketingandproductplans.
Financial Division	Responsible for the summarization and supply of accounting information, management and operation of finance and investment, annual budgeting, credit control, and stocks services.

3.2 Directors, Supervisors and Management Team

3.2.1 Directors and Supervisors

04 15, 2018

Title	Nationality/ Country of Origin	Name	Date Elected	Term (Years)	Date First Elected	Shareholding when Elected	Shareholding when Elected	Current Shareholding	Current Shareholding	Spouse & Minor Shareholding	Spouse & Minor Shareholding	Shareholding by Nominee Arrangement	Shareholding by Nominee Arrangement	Experience `（`Education`）`	Other Position	Executives, Directors or Supervisors who are spouses or within two degrees of kinship	Executives, Directors or Supervisors who are spouses or within two degrees of kinship	Executives, Directors or Supervisors who are spouses or within two degrees of kinship
						Shares	`％`	Shares	`％`	Shares	`％`	Shares	`％`			Title	Name	Relation
Chairman/ President	R.O.C.	Jonie Chou	06 07, 2016	3	11 09, 2000	7,817,617	7.22%	7,565,702	7.70%	5,611,236	5.71%	–	–	A.S., Lee Ming Junior college Section Manager, Hon Hai Precision Industry Co., Ltd	Chairman, Digital World Inc. Chairman, Best Wisdom Ltd. ~~C~~hairman, Treasure Luck Inc,	Vice president	Lilian Yen	Wife
																Director	Michael Tian-Shyug Lee	Husband of sisters
																Factory Vice Director	Daniel Yeh	Brother of wife
Director	R.O.C	Michael Tian-Shyug Lee	06 07, 2016	3	06 20, 2003	1,336,458	1.23%	1,336,458	1.36%	113,622	0.12%	–	–	Ph.D. Operations Research and Industrial Engineering, University of Texas at Austin	Professor and Vice President of Internation al Affairs at Fu Jen Catholic University	Chairman	Jonie Chou	Husband of sisters
																Vice president	Lilian Yeh	Sister of wife
																Factory Vice Director	Daniel Yeh	Brother of wife

Director	R.O.C	George Lee	06 07, 2016	3	06 15, 2007	1,378,655	1.27%	1,378,655	1.40%	347,345	0.35%	–	–	A.S., Mingshin Junior college Director, Powertech Industrial Co., Ltd
Director	R.O.C	Jennifer Lai	06 07, 2016	3	06 15, 2007	283,141	0.26%	283,141	0.29%	1,840	0.00%	–	–	B.S. Feng Chia University Director, Tremon Enterprise Co., Ltd.
Independent Director	R.O.C	Chun-Chi Yang	06 07, 2016	3	06 18, 2004	`－`	`－`	`－`	`－`	–	–	–	–	Ph.D. in Human Resource, National Taiwan University	Professor, Fu Jen Catholic University
Independent Director	R.O.C	Tsung-Pei Lee	06 07, 2016	3	05 30, 2011	`－`	`－`	`－`	`－`	–	–	–	–	Ph.D. in Economics of National Chengchi University	Associate Professor, Fu Jen Catholic University
Supervisor	R.O.C	Chin-Yang Chen	06 07, 2016	3	11 09, 2000	1,576,559	1.46%	1,576,559	1.71%	354,965	0.36%	–	–	Taipei Municipal Shilin High School of Commerce
Supervisor	R.O.C	Shin-Rong Shiah-Hou	06 07 ,2016	3	06 20, 2003	`－`	`－`	`－`	`－`	–	–	–	–	Ph.D. in Business Management of National Cheng Chi University	Associate Professor, Yuan Ze University
Supervisor	R.O.C	Jun-Yu Huang	06 07 ,2016	3	05 26, 2010	201,000	0.19%	201,000	0.20%	–	–	–	–	B.S. Department of Cooperative Management of National Chung Hsing University

Major shareholders of the institutional shareholders

lders of the institutional shareholders	lders of the institutional shareholders
04 15, 2018
Name of Institutional Shareholders	Major Shareholders
-	-

Major shareholders of the Company’s major institutional shareholders

04 15, 2017	04 15, 2017
Name of Institutional Shareholders	Major Shareholders
-	-

04 15, 2017

Professional qualifications and independence analysis of directors and supervisors

				04	04	04	04	04	04	04	04	04	04	15, 2017
Criteria Name	Meet One of the Following Professional Qualification Requirements, Together with at Least Five Years Work Experience			Independence Criteria(Note)										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, Certified Public Accountant, or Other Professional or Technical Specialist Who has Passed a National Examination and been Awarded a Certificate in a Profession Necessary for the Business of the Company	Have Work Experience in the Areas of Commerce, Law, Finance, or Accounting, or Otherwise Necessary for the Business of the Company	1	2	3	4	5	6	7	8	9	10
Jonie Chou			V					V	V	V		V	V	0
Michael Tian-Shyug Lee	V			V				V	V	V		V	V	0
George Lee			V				V	V	V	V	V	V	V	0
Jennifer Lai			V			V	V	V	V	V	V	V	V	0
Chun-Chi Yang	V			V	V	V	V	V	V	V	V	V	V	2
Tsung-Pei Lee	V			V	V	V	V	V	V	V	V	V	V	2
Chin-Yang Chen			V	V			V	V	V	V	V	V	V	0
Shin-Rong Shiah-Hou	V			V		V	V	V	V	V	V	V	V	0
Jun-Yu Huang			V	V		V	V	V	V	V	V	V	V	0

Note: Please tick the corresponding boxes that apply to the directors or supervisors during the two years prior to being elected or during the term

of office.

Not an employee of the Company or any of its affiliates.
Not a director or supervisor of the Company or any of its affiliates. Not applicable in cases where the person is an independent director of the Company, its parent company, or any subsidiary in which the Company holds, directly or indirectly, more than 50% of the voting shares.
Not a natural-person shareholder who holds shares, together with those held by the person’s spouse, minor children, or held by the person under others’ names, in an aggregate amount of 1% or more of the total number of outstanding shares of the Company or ranking in the top 10 in holdings.
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.
Not a director, supervisor, or employee of a corporate shareholder who directly holds 5% or more of the total number of outstanding shares of the Company or who holds shares ranking in the top five holdings.
Not a director, supervisor, officer, or shareholder holding 5% or more of the shares, of a specified company or institution which has a financial or business relationship with the Company.
Not a professional individual who is an owner, partner, director, supervisor, or officer of a sole proprietorship, partnership, company, or institution that provides commercial, legal, financial, accounting services or consultation to the Company or to any affiliate of the Company, or a spouse thereof. These restrictions do not apply to any member of the remuneration committee who exercises powers pursuant to 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 TPEx“.
Not having a marital relationship, or a relative within the second degree of kinship to any other director of the Company.
Not been a person of any conditions defined in Article 30 of the Company Law.
Not a governmental, juridical person or its representative as defined in Article 27 of the Company Law.

3.2.2 Management Team

04.15.2018

												04.15.2018	04.15.2018	04.15.2018
Title	Nationality/ Country of Origin	Name	Date Effective	Shareholding		Spouse & Minor Shareholding		Shareholding by Nominee Arrangement		Experience `（`Education`）`	Other Position	Managers who are Spouses or Within Two Degrees of Kinship
				Shares	`％`	Shares	`％`	Shares	`％`			Title	Name	Relation
Chairman/ President	R.O.C.	Jonie Chou	01 01,2009	7,565,702	7.70%	5,611,236	5.71%	`－`	`－`	A.S., Lee Ming Junior college Section Manager, Hon Hai Precision Industry Co., Ltd	Chairman, Digital World Inc. Chairman, Best Wisdom Ltd. Chairman, Treasure Luck Inc,	Vice President	Lillian Yeh	wife
												Director	Daniel Yeh	Wife’s brother
Vice President	R.O.C	Lillian Yeh	01 01,2003	5,611,236	5.71%	7,565,702	7.70%	`－`	`－`	B.S. Fu Jen Catholic University	Director, Dong Guan Quan Sheng Electric co.,Ltd.	Chairman	Jonie Chou	Husband
												Director	Daniel Yeh	brother
Director	R.O.C	Jennifer Lai	04 01,2003	283,141	0.29%	1,840	0.00%	`－`	`－`	B.S. Feng Chia University	Director, Tremon Enterprise Co., Ltd.
Director	R.O.C	Frankie Chen	04 30,2015	40,050	0.04%	`－`	`－`	`－`	`－`	B.S. Los Angeles University, CA
Director	R.O.C	George Lee	06 03,2002	1,378,655	1.10%	347,345	0.35%	`－`	`－`	A.S., Mingshin Junior college
Director	R.O.C	C.S. Chiang	04 06,2012	10,000	0.01%	`－`	`－`	`－`	`－`	B.S. National Yunlin University of Science and Technology
Director	R.O.C	Hermione Tsai	12 01,2002	86,621	0.09%	`－`	`－`	`－`	`－`	Tunghai University
Factory Director	R.O.C	Louis Chen	04 18,2017	`－`	`－`	`－`	`－`	`－`	`－`	Department of Electrical, NCU
Factory Vice	R.O.C	Daniel Yeh	09 02,2002	1,059,085	1.03%	142,864	0.15%	`－`	`－`	A.S. Chien Hsin junior college		Chairman	Jonie Chou	Sister’s husband

Director
Chief Finance Officer/Senior Manager	R.O.C	Kevin Kuo	11 21,2012	6,000	0.01%	`－`	`－`	`－`	`－`	B.S. Feng Chia University
IOE Product R&D Division Director	R.O.C.	Winston Lee	08 01 2016	`－`	`－`	－	－	－	－	Stanford University PH.D
Marketing & Planning Division Director	R.O.C.	Eldon Chang	01 02 2018	－	－	－	－	－	－	UBC/BCIT
Chairman Office Special Assistant	R.O.C.	Lisa Shen	03 15 2018	15,476	0.02%	－	－	－	－	DALLAS MBA

3.2.3 Remuneration of Directors, Supervisors, President, and Vice President

Remuneration of Directors

Unit: NT$ thousands

Title	Name	Remuneration	Remuneration	Remuneration	Remuneration	Remuneration	Remuneration	Remuneration	Remuneration	Ratio of Total Remuneration (A+B+C+D) to Net Income (%)	Ratio of Total Remuneration (A+B+C+D) to Net Income (%)	Relevant Remuneration Received by Directors Who are Also Employees	Relevant Remuneration Received by Directors Who are Also Employees	Relevant Remuneration Received by Directors Who are Also Employees	Relevant Remuneration Received by Directors Who are Also Employees	Relevant Remuneration Received by Directors Who are Also Employees	Relevant Remuneration Received by Directors Who are Also Employees	Relevant Remuneration Received by Directors Who are Also Employees	Relevant Remuneration Received by Directors Who are Also Employees	Ratio of Total Compensation (A+B+C+D+E+F+G) to Net Income (%)	Ratio of Total Compensation (A+B+C+D+E+F+G) to Net Income (%)	Compensation Paid to Directors from an Invested Company Other than the Company’s Subsidiar
		Base Compensation (A)		Severance Pay (B		Bonus to Directors (C)		Allowances (D)				Salary, Bonuses, and Allowances (E)		Severance Pay (F)		Profit Sharing- Employee Bonus (G)
		The compan y	All compan ies in the consoli dated financia l stateme nts	The compan y	Compa nies in the consoli dated financia l stateme nts	The compan y	Compan ies in the consolid ated financial statemen ts	The compan y	Compa nies in the consoli dated financia l stateme nts	The company	Compan ies in the consolid ated financial stateme nts	The compan y	Compan ies in the consolid ated financia l stateme nts	The compan y	Compani es in the consolid ated financial statemen ts	The company		Companies in the consolidated financial statements		The company	Companies in the consolidated financial statements
																Cash	Stock	Cash	Stock
Chairman	Jonie Chou	4,358	4,358	215	215	356	356	295	295	5.27%	5.27%	3,535	3,535	352	352	240	`－`	240	`－`	9.43%	9.43%	none
Director	Georage Lee
Director	Jennifer Lai
Director	Michael TS Lee
Director	Chun Chi Ynag
Direcotr	Tsung Pei Lee

Range of Remuneration	Name of Directors	Name of Directors	Name of Directors	Name of Directors
	Total of (A+B+C+D)		Total of (A+B+C+D+E+F+G)
	The company	Companies in the consolidated financial statements	The company	Companies in the consolidated financial statements
Under NT$ 2,000,000	5(others)	5(others)	3 (others)	3 (others)
NT$2,000,001 ~ NT$5,000,000	Jonie chou	Jonie chou	Jonie chou; George Lee; Jennifer Lai	Jonie chou; George Lee; Jennifer Lai
NT$5,000,001~NT$10,000,000
NT$10,000,001~NT$15,000,000
NT$15,000,001~NT$30,000,000
NT$30,000,001~NT$50,000,000
NT$50,000,001~NT$100,000,000
Over NT$100,000,000
Total	6	6	6	6

Remuneration of Supervisors

Unit: NT$ thousands

										Unit: NT$ thousand
Title	Name	Remuneration						Ratio of Total Remuneration (A+B+C)to Net Income(%)		Compensation Paid to Supervisors from an Invested Company Other than the Company’s Subsidiary
		Base Compensation (A)		Bonus to Supervisors (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
Supervisor	Chin Yan Chen	`－`	`－`	144	144	225	225	0.37%	0.37%	none
Superviso	Shin Rong Shiah-Hou
Superviso	Jun Yu Huang

Range of Remuneration	Name of Supervisors	Name of Supervisors
	Total of	(A+B+C)
	The company	Companies in the consolidated financial statements
Under NT$ 2,000,000	All(3)	All(3)
NT$2,000,001 ~ NT$5,000,000
NT$5,000,001 ~ NT$10,000,000
NT$10,000,001 ~ NT$15,000,000
NT$15,000,001 ~ NT$30,000,000
NT$30,000,001 ~ NT$50,000,000
NT$50,000,001 ~ NT$100,000,000
Over NT$100,000,000

Total 3 3

Remuneration of the President and Vice President

Unit: NT$ thousands

Title	Name	Salary(A)	Salary(A)	Severance Pay (B)	Severance Pay (B)	Bonuses and Allowances (C)	Bonuses and Allowances (C)	Profit Sharing- Employee Bonus (D)	Profit Sharing- Employee Bonus (D)	Profit Sharing- Employee Bonus (D)	Profit Sharing- Employee Bonus (D)	Ratio of total compensation (A+B+C+D) to net income (%)	Ratio of total compensation (A+B+C+D) to net income (%)	Compensation paid to the President and Vice President 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	Jonie Chou	1,928	1,928	215	215	268	268	142	-	142	-	2.57%	2.57%	none
Vice President	Lillian Yeh

Range of Remuneration	Name of President and Vice President	Name of President and Vice President
	The company	Companies in the consolidated financial statements
Under NT$ 2,000,000	Jonie Chou	Jonie Chou
NT$2,000,001 ~ NT$5,000,000	Lilian Yeh	Lilian Yeh
NT$5,000,001 ~ NT$10,000,000
NT$10,000,001 ~ NT$15,000,000
NT$15,000,001 ~ NT$30,000,000
NT$30,000,001 ~ NT$50,000,000
NT$50,000,001 ~ NT$100,000,000
Over NT$100,000,000
Total	2	2

Distribution of the manager who distributed	Distribution of the manager who distributed	Distribution of the manager who distributed	staff compensation		Unit: NT$ thousands	Unit: NT$ thousands
	Title	Name	Employee Bonus - in Stock (Fair Market Value)	Employee Bonus - in Cash	Total	Ratio of Total Amount to Net Income (%)
Executive Officers	President	Jonie Chou	-	1,328	1,328	1.34%
	Vice President	Lillian Yeh
	Special Assistant to Chairman	Henry Gong
	Director	Jennifer Lai
	Director	Frankie Chen
	Director	George Lee
	Director	C.S. Chiang
	Director	Hermione Tsai
	Factory Director	Louis Chen(note)
	Factory Vice Director	Daniel Yeh
	R&D thief	Winston Lee
	CFO/ Senior Manager	Kevin Kuo
	Director	Eldon Chang

Special Lisa Shen Assistant

Note: Factory Director Louis Chen was appointed at 4.10 2017; Director Eldon Chang was appointed at 01.02 2018; Special Assistant Lisa Shen was appointed at 03.15 2018

3.2.4 Comparison of Remuneration for Directors, Supervisors, Presidents and Vice Presidents in the Most Recent Two Fiscal Years and Remuneration Policy for Directors, Supervisors, Presidents and Vice Presidents

A. The ratio of total remuneration paid by the Company and by all companies included in the consolidated financial statements for the two most recent fiscal years to directors, supervisors, presidents and vice presidents of the Company, to the net income.

Year	Total remuneration paid to directors, supervisors, presidents and vice presidents	Total remuneration paid to directors, supervisors, presidents and vice presidents	Ratio of total remuneration paid to directors, supervisors, presidents and vice presidents to net income (%)	Ratio of total remuneration paid to directors, supervisors, presidents and vice presidents to net income (%)
	The company	Companies in the consolidated financial statements	The company	Companies in the consolidated financial statements
2017	11,419	482.80%	11,419	482.80％
2018	12,273	12.38%	12,273	12.38％

3.3 Implementation of Corporate Governance

3.3.1 Board of Directors

A total of 8 (A) meetings of the Board of Directors were held in the previous period. The attendance of director and supervisor were as follows:

Title	Name	Attendance in Person(B)	Attendance Rate (%)`【Ｂ`/`Ａ】`
Chairman	Jonie Chou	4	100.00%
Director	Michael T.S. Lee	3	75.00%
Director	George Lee	4	100.00%
Director	Jennifer Lai	4	100.00%
Independent director	Chun Chi Yang	4	100.00%
Independent director	Tsung Pei Lee	4	100.00%
Supervisor	Chin Yan	4	100.00%

	Chen
Supervisor	Shin Rong Shiah-Hou	4	0	100.00%
Supervisor	Jun Yu Huang	4	0	100.00%
Other mentionable items: 1. If there are circumstances referred to in Article 14-3 of the Securities and Exchange Act and resolutions of the directors’ meetings objected to by independent directors or subject to qualified opinion and recorded or declared in writing, the dates of the meetings, sessions, contents of motion, all independent directors’ opinions and the company’s response should be specified: None 2. If there are directors’ avoidance of motions in conflict of interest, the directors’ names, contents of motion, causes for avoidance and voting should be specified: None 3. Measures taken to strengthen the functionality of the board: The Board of Directors has established an Audit Committee and a Remuneration Committee to assist the board in carryingout its various duties.

3.3.2 Attendance of Supervisors at Board Meeting

A. Attendance of Supervisors at Board Meetings

A total of 8 (A) meetings of the Board of Directors were held in the previous period. The attendance of supervisors was as follows:

Title	Name	Attendance in Person(B)	Attendance Rate (%) `【Ｂ`/`Ａ】`
Supervisor	Chin Yan Chen	4	100.00%
Supervisor	Shin Rong Shiah-Hou	4	100.00%
Supervisor	Jun Yu Huang	4	100.00%
Other mentionable items: 1. Composition and responsibilities of supervisors: (1) Communications between supervisors and the Company's employees and shareholders (e.g. communication channels and methods, etc.): The Company has set up a supervisor’s mailbox: [email protected], so that employees and shareholders have adequate access to the supervisors for

communications.

(2) Communications between supervisors and the Company's chief internal auditor and CPA (e.g. items, methods and results of the audits of corporate finance or operations, etc.):
A. Communications with the chief internal auditor: Supervisors hold the supervisors meeting each quarter and maintain minutes of the meetings. The directors, president and the Company's top management are then notified of important discussions and resolutions. All supervisors had attended on each occasion, and the chief internal auditor was also present at the meetings to report on audit operations and major internal auditing matters, including execution, reporting, and monitoring of the supervisors’ instructions. In addition, supervisors obtained audit reports on a monthly basis, which were submitted by the chief internal auditor.
B. Communications with the CPA: Supervisors have held supervisors examination meeting and have obtained the examined reports. There was a meetings, on 03. 22, 2019. All supervisors attended on each occasion, and the CFO, chief internal auditor and CPAs were also present at the meetings to discuss related subjects, including execution, reporting and monitoring of the supervisors’ instructions.
If a supervisor expresses an opinion during a meeting of the Board of Directors, the dates of the meetings, sessions, contents of motion, resolutions of the directors’ meetings and the company’s response to the supervisor’s opinion should be specified: None

3.3.3 Corporate Governance Implementation Status and Deviations from “the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies”

Evaluation Item	Implementation Status1	Implementation Status1	Implementation Status1	Deviations from “the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Abstract Illustration
1. Does the company establish and disclose the Corporate Governance Best-Practice Principles based on “Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies”?	`ˇ`		The Company has established the Corporate Governance Best-Practice Principles based on “Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies” on 3/13/2017. The information has been disclosed on the Company’s website.	None
2. Shareholding structure & shareholders’ rights (1) Does the company establish an internal operating procedure to deal with shareholders’ suggestions, doubts, disputes and litigations, and implement based on the procedure?	`ˇ`		In addition to the existing hotline and email channels, the Company has established an internal operating procedure, and has designated appropriate departments, such as Investor Relations, Public Relations, Legal Department, to handle shareholders’ suggestions, doubts, disputes and litigation.	None

Evaluation Item	Implementation Status1	Implementation Status1	Implementation Status1	Deviations from “the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Abstract Illustration
(2) Does the company possess the list of its major shareholders as well as the ultimate owners of those shares? (3) Does the company establish and execute the risk management and firewall system within its conglomerate structure? (4) Does the company establish internal rules against insiders trading with undisclosed	`ˇ` `ˇ` `ˇ`		The Finance & Shared Services Division is responsible for collecting the updated information of major shareholders and the list of ultimate owners of those shares. Rules are made to strictly regulate the activities of trading, endorsement and loans between the Company and its affiliates. In addition, the “Criteria of Internal Control Mechanism for a Public Company”, outlined by the Financial Supervisory Commission when drafting the guidelines for the “Supervision and Governance of Subsidiaries”, was followed in order to implement total risk control with respect to subsidiaries. To protect shareholders’ rights and fairly treat shareholders, the Company has established the internal rules to forbid insiders tradingon

Evaluation Item	Implementation Status1	Implementation Status1	Implementation Status1	Deviations from “the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Abstract Illustration
information?			undisclosed information. The Company has also strongly advocated these rules in order to prevent anyviolations.
3. Composition and Responsibilities of the Board of Directors (1) Does the Board develop and implement a diversified policy for the composition of its members? (2) Does the company voluntarily establish other functional committees in addition to the Remuneration Committee and the Audit Committee?	`ˇ`	`ˇ`	Member diversification is considered by the Board members. Factors taken into account include, but are not limited to gender, age, cultures, educational background, race, professional experience, skills, knowledge and terms of service. The Board objectively chooses candidates to meet the goal of member diversification. In order for the sound supervision and reinforcement of management, the Company established the Nomination and Risk Management Committee in addition to the	None

Evaluation Item	Implementation Status1	Implementation Status1	Implementation Status1	Deviations from “the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Abstract Illustration
(3) Does the company establish a standard to measure the performance of the Board, and implement it annually?		`ˇ`	Remuneration Committee and the Audit Committee. These functional committees shall be responsibilities for the Board of Directors. The company has formulated rules and procedures for evaluating the Board’s performance and conducts it annually. The Company uses two methods to evaluate the performance of the Board. 1. Self-assessment of Board members Board members fill in the” Self-Assessment Questionnaire for Board Members” at the end of each year. To evaluate the performance of each members effectively, the questionnaire contains the following factors: A. Their grasp of the Company's goals and missions; B. Their recognition of director's duties;

Evaluation Item	Implementation Status1	Implementation Status1	Implementation Status1	Deviations from “the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Abstract Illustration
			C. Their degree of participation in the Company's operations; D. Their management of internal relationships and communications; E. Their professionalism and continuing professional education; F. Internal controls. 2. Assessment of the Board: The Secretary Office of the Board conducts the assessment of the Board’s performance. The following aspects are taken into consideration: A. The degree of participation in the Company's operations; B. Improvement in the quality of decision making by the Board of Directors; C. The composition and structure of the Board

Evaluation Item	Implementation Status1	Implementation Status1	Implementation Status1	Deviations from “the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Abstract Illustration
(4) Does the company regularly evaluate the independence of CPAs?	`ˇ`		of Directors; D. The election of the directors and their continuing professional education. E. Internal controls. The Company evaluates the independence of CPAs annually, ensuring that that they are not stakeholders such as a Board member, supervisor, shareholder or person paid by the Company.
4. Does the company establish a communication channel and build a designated section on its website for stakeholders, as well as handle all the issues they care for in terms of corporate social responsibilities?	`ˇ`		The Company provides detailed contact information, including telephone numbers and email addresses in the “Stakeholder Area” section of the corporate website. In addition, personnel are in place to exclusively deal with issues of social responsibility, ensuringthat	None

Evaluation Item	Implementation Status1	Implementation Status1	Implementation Status1	Deviations from “the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Abstract Illustration
			various interested parties have channels to communicate with the Company.
5. Does the company appoint a professional shareholder service agency to deal with shareholder affairs?	`ˇ`		The Company designates Grand Fortune Securities Co. ,Ltd. to deal with shareholder affairs.	None
6. Information Disclosure (1) Does the company have a corporate website to disclose both financial standings and the status of corporate governance? (2) Does the company have other information disclosure channels (e.g. building an English website, appointing designated people to handle information collection and disclosure, creating a spokesman system, webcasting investor conferences)?	`ˇ` `ˇ`		The Company has set up a Chinese/English website (www.power-tech.com.tw) to disclose information regarding the Company’s financials, business and corporate governance status. The Company has assigned an appropriate person to handle information collection and disclosure. Contact person: Kevin Kuo, TEL: +886-2-8221 5588 The Company has established a spokesman system. Investor conference information is	None

Evaluation Item	Implementation Status1	Implementation Status1	Implementation Status1
	Yes	No	Abstract Illustration
			disclosed on the corporate website.
7. Is there any other important information to facilitate a better understanding of the company’s corporate governance practices (e.g., including but not limited to employee rights, employee wellness, investor relations, supplier relations, rights of stakeholders, directors’ and supervisors’ training records, the implementation of risk management policies and risk evaluation measures, the implementation of customer relations policies, and purchasing insurance for directors and supervisors)? (1) Status of employee rights and employee wellness: Please refer to “http//www.power-tech.com.tw” (2) Status of risk management policies and risk evaluation:Please refer to “http//www.power-tech.com.tw” (3) The Company has purchased Shin Kong insurance for its directors and supervisors since year 2005. (4) Directors’ and supervisors’ training records:

Evaluation Item	Implementation Status1	Implementation Status1	Implementation Status1
	Yes	No	Abstract Illustration

8. Has the company implemented a self-evaluation report2on corporate governance or has it authorized any other professional organization to conduct such evaluation? If so, please describe the opinion from the Board, the result of self or authorized evaluation, the major deficiencies, suggestions, or improvements.The Companyhas notprepared a self-assessment report or commissioned other agencies toprepare.

Note: 1. Regardless of whether the evaluation item is achieved or not, the company shall state an appropriate explanation.

A self-evaluation report is defined as the company assessing its corporate governance evaluation items with appropriate explanations on current corporate operations and implementation.

3.3.4 Composition, Responsibilities and Operations of the Remuneration Committee

The Remuneration Committee assists the Board in discharging its responsibilities relating to the Company’s compensation and benefits policies, plans and programs, and the evaluation of the directors’ and executives’ compensation.

The Chairman of the Remuneration Committee convened four regular meetings in 2017.

A. Professional Qualifications and Independence Analysis of Remuneration Committee Members

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Note: Please tick the corresponding boxes that apply to a member during the two

years prior to being elected or during the term(s) of office.

Not an employee of the Company or any of its affiliates.
Not a director or supervisor of affiliated companies. Not applicable in cases where the person is an independent director of the parent company, or any subsidiary in which the Company holds, directly or indirectly, more than 50% of the voting shares.
Not a natural-person shareholder who holds shares, together with those held by the person’s spouse, minor children, or held by the person under others’ names, in an aggregate amount of 1% or more of the total number of outstanding shares of the Company, or ranking in the top 10 in holdings.
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 sub-paragraphs.

Not a director, supervisor, or employee of a corporate shareholder who directly holds 5% or more of the total number of outstanding shares of the Company, or who holds shares ranking in the top five holdings.
Not a director, supervisor, officer, or shareholder holding 5% or more of the shares of a specified company or institution which has a financial or business relationship with the Company.
Not a professional individual, who is an owner, partner, director, supervisor, or officer of a sole proprietorship, partnership, company, or institution that provides commercial, legal, financial, accounting services or consultation to the Company or to any affiliate of the Company, or a spouse thereof.
Not a person of any conditions defined in Article 30 of the Company Law.

B. Attendance of Members at Remuneration Committee Meetings

There are 3 members in the Remuneration Committee. A total of 4 (A) Remuneration Committee meetings were held in the previous period. The attendance record of the Remuneration Committee members was as follows:

Title	Name	Attendance in Person(B)	By Proxy	Attendance Rate (%)`【Ｂ`/`Ａ】`	Remarks
Convener	Chun Chi Yang	3	0	100%
Committee Member	Tsung Pei Lee	3	0	100%
Committee Member	Corina Lee	3	0	100%	Appointed At 2017.3.13
Other mentionable items: 1. If the board of directors declines to adopt or modifies a recommendation of the remuneration committee, it should specify the date of the meeting, session, content of the motion, resolution by the board of directors, and the Company’s response to the remuneration committee’s opinion (eg., the remuneration passed by the Board of Directors exceeds the recommendation of the remuneration committee, the circumstances and cause for the difference shall be specified): None. 2. Resolutions of the remuneration committee objected to by members or subject to a qualified opinion and recorded or declared in writing, the date of the meeting,

session, content of the motion, all members’ opinions and the response to members’ opinion should be specified: None.

3.3.5 Corporate Social Responsibility

Evaluation Item			Implementation Status1	Deviations from “the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies”andReasons
	Yes	No	Abstract Explanation2
1.Corporate Governance Implementation (1) Does the company declare its corporate social responsibility policy and examine the results of the implementation? (2) Does the company provide educational training on corporate social responsibility on a regularbasis?	`ˇ`	`ˇ`	None The Company carries out regular trainings sessions and propaganda on corporate social responsibility with its employees every year. For new employees, training on personnel rules, management systems, business ethics, morals, and all other CSR-related subjects are carried out on their first working day to clarify their due responsibilities and obligations.	None
(3) Does the company establish exclusively (or concurrently) dedicated first-linemanagers		`ˇ`	None

Evaluation Item			Implementation Status1	Deviations from “the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies”andReasons
	Yes	No	Abstract Explanation2
authorized by the board to be in charge of proposing the corporate social responsibility policies and reporting to the board?
(4) Does the company declare a reasonable salary remuneration policy, and integrate the employee performance appraisal system with its corporate social responsibility policy, as well as establish an effective reward and disciplinary system?	`ˇ`		In order to focus our employees on improving their performance and enhancing the value of Powertech Group, the objective of the remuneration policy is to ensure that a competitive remuneration package is maintained and benchmarked with others. In addition, Powertech Group recently established a new reward and disciplinary system based on the employee performance appraisal system which includes our corporate social responsibility policy as one of the most important criteria for evaluation.
2.Sustainable Environment Development (1) Does the company endeavor to utilize all resources more efficiently and use renewable materials which havelow	`ˇ`		Power-Saving Goal According to the Company’s operating model, the vast majority of our carbon dioxide emissions come from power use. Because of this, we are actively promoting various energy-saving and power-saving programs. Water Saving Goal	None

Evaluation Item			Implementation Status1
	Yes	No	Abstract Explanation2
impact on the environment?			Based on the need to protect water resources and maintain sustainable operations, planning a water-saving program has already been initiated. By improving processes, conserving water, and using water, active steps have been taken to reduce waste water from our production processes.
(2) Does the company establish proper environmental management systems based on the characteristics of their industries?	`ˇ`		Environmental, Safety, and Health (ESH) and Hazardous Substance Management
			System Certificates All manufacturing facilities in China have received ISO 14001 certifications for environmental management systems, OHSAS 18001 for occupational safety and health. New facilities will be certified as well. In line with ISO 9001 and 14001’s concept of continuous improvement.
(3) Does the company monitor the impact of climate change on its operations and conduct greenhouse gas inspections, as well as establish company strategies for energy conservation and carbon reduction?		`ˇ`	None

Evaluation Item			Implementation Status1	Deviations from “the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies”andReasons
	Yes	No	Abstract Explanation2
3. Preserving Public Welfare (1) Does the company formulate appropriate management policies and procedures according to relevant regulations and the International Bill of Human Rights?	`ˇ`		Comply with Relevant Regulations Powertech not only complies with local regulations but also upholds the internationally-recognized human rights of workers and respects the United Nations Universal Declaration on Human Rights, and the International Labor Organization’s fundamental conventions on core labor standards. We hires all employees equally based on his or her job qualifications regardless of gender, religion, race, nationality or political affiliation. Human Resource Policies and Measures The following is an overview of relevant human resource policies and measures: (a)Labor Insurance, National Health Insurance, and group insurance coverage from the first day of work. (b) Wehas specificEmployeeRetirement Guidelines.	None
(2) Has the company set up an employee hotline or grievance mechanism to handle complaints with appropriate solutions?	`ˇ`		Powertech Group offers an Employee Relations Hotline that provides a channel for employees to express their opinions regarding their work and the overall work environment. The employee relations team ensures all cases are handled with care under the supervision of the first-line managers.
(3) Does the company provide a healthy and safe working environment and organize training on health and safetyfor its employees	`ˇ`		Health and Safety Education and Emergency Response Training We also hold regular fire/flood protection exercise and first aid training classes for our employees in order to boost our disaster response and relief skills. man-hours of training to ensure personnel safety and reduce the impact of accidents. Safety and Health Management

Evaluation Item			Implementation Status1
	Yes	No	Abstract Explanation2
on a regular basis?			We not only conforms to regulatory requirements on safety and health but has also introduced the OHSAS 18001 occupational safety & health management system.
(4) Does the company setup a communication channel with employees on a regular basis, as well as reasonably inform employees of any significant changes in operations that may have an impact on them?	`ˇ`		PowerTech Group values two-way communications and is committed to keeping the communication channels between the management level and their subordinates, as well as among peers, open and transparent. To ensure that employees’ opinions and voices are heard, and their issues are addressed effectively, impartial submission mechanisms, including quarterly labor-management communication meetings, are in place to provide timely support. Continuous efforts are made to reinforce mutual and timely employee communications, based on multiple channels and platforms, which, in turn, fosters harmonious labor relations and creates a win-win situation for the Company and its employees. At the same time, efforts are made to ensure that employees areinformed ofcurrent policies.
(5) Does the company provide its employees with career development and training sessions?	`ˇ`		PowerTech Group not only assesses and provides feedback on employees’ skills and interests, but also offers training and development activities that match their career development objectives and job needs.
(6) Does the company establish any consumer protection mechanisms and appealing procedures regardingresearch	`ˇ`		Customer Service Department Establishment of the Customer Service Department allows us to integrate existing customer service resources to respond to and match customers’ various demands in a timely and precise manner and improve customer satisfaction throughassurance ofservice quality.A free servicehotline accepts product

Evaluation Item			Implementation Status1
	Yes	No	Abstract Explanation2
development, purchasing, producing, operating and service?			queries, service consulting, and complaints from customers. Customer Protection We respect and protect all technology, techniques, documents and information provided by our customers, while requiring all of our employees and suppliers to abide by the relevant confidentiality agreements. We also have security controls in place to ensure the safety of the Company’s and our customers’ confidential information.
(7) Does the company advertise and label its goods and services according to relevant regulations and internationalstandards?	`ˇ`		When labeling and advertising its products worldwide, PowerTech Group consistently honors regional and national regulations without misleading its customers by exaggerating the information provided.
(8) Does the company evaluate the records of suppliers’ impact on the environment and society before taking on business partnerships?	`ˇ`		The Company has thousands of suppliers in different regions, and engages in mutual learning for common progress in the areas of social and environmental matters, such as hazardous substance control, environmental protection, labor safety and health, human rights, conflict metals, and carbon footprint. At the same time, suppliers are required to voluntarily inform the Company of any violations against the corporate social responsibility policy.
(9) Do the contracts between the company and its major suppliers include	`ˇ`		When suppliers breach the corporate social responsibility policy and cause appreciable impact on the environment and society, PowerTech Group may terminate any agreements at any time by providing the suppliers with 60 days’

Evaluation Item	Implementation Status1	Implementation Status1	Implementation Status1	Deviations from “the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies”andReasons
	Yes	No	Abstract Explanation2
termination clauses which come into force once the suppliers breach the corporate social responsibility policy and cause appreciable impact on the environment and society?			written notice, or pay in lieu thereof, without any further obligation or compensation.
4.Enhancing Information Disclosure (1) Does the company disclose relevant and reliable information regarding its corporate social responsibility on its website and the Market Observation Post System(MOPS)?	`ˇ`		“http://www.power-tech.com.tw” Can reveal corporate CSR related information	depend on the company's operating conditions and scale settings
5. If the Company has established the corporate social responsibility principles based on “the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies”, please describe any discrepancy between the Principles and their implementation: No major difference. Powertech has established corporate social responsibility principles based on “the Corporate Social Responsibility Best-Practice Principles for TWSE/ TPEx Listed Companies”.

If the Company has established the corporate social responsibility principles based on “the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies”, please describe any discrepancy between the Principles and their implementation: No major difference.

Powertech has established corporate social responsibility principles based on “the Corporate Social Responsibility Best-Practice Principles for TWSE/ TPEx Listed Companies”.

Evaluation Item	Implementation Status1	Implementation Status1	Implementation Status1
	Yes	No	Abstract Explanation2
6. Other important information to facilitate better understanding of the company’s corporate social responsibility practices`：` None
7. A clear statement shall be made below if the corporate social responsibility reports were verified by external certification institutions: None

Note: 1. Regardless of whether the evaluation item is achieved or not, the company shall state an appropriate explanation. 2. Companies who have compiled CSR reports may cite the source from specific pages of their CSR reports instead.

3.3.6 Ethical Corporate Management

Evaluation Item			Implementation Status1	Deviations from “the Ethical Corporate Management Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Abstract Illustration
1. Establishment of ethical corporate management policies and programs (1) Does the company declare its ethical corporate management policies and procedures in its guidelines and external documents, as well as the commitment from its board to implement the policies? (2) Does the company establish policies to prevent unethical conduct with clear statements	`ˇ` `ˇ`		The Company’s Ethical Corporate Management Best-Practice Principles is a guideline to provide high ethical standards for all employees. The principles are disclosed in the annual report and on the company website. The Board of Directors and the management place the greatest importance in adopting the highest standards of integrity and ethics in corporate management and employee work conduct. Bribery, corruption, deception, and all other forms of improper conduct are prohibited. The Company’s Ethical Corporate Management	None

Evaluation Item			Implementation Status1	Deviations from “the Ethical Corporate Management Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Abstract Illustration
regarding relevant procedures, guidelines of conduct, punishment for violation, rules of appeal, and the commitment to implement the policies? (3) Does the company establish appropriate precautions against high-potential unethical conducts or listed activities stated in Article 2, Paragraph 7 of the Ethical Corporate	`ˇ`		Best-Practice Principles have established preventive measures against the following: (a) offering and accepting bribes; (b) illegal political donations; (c) improper charitable donations or sponsorship; (d) offering or accepting unreasonable gifts or hospitality, or other inappropriate benefits. The aforementioned principles and related regulations were announced and disseminated to employees, managers and Board of Directors to enhance integrity and self-discipline. In order to prevent any unethical conduct, all employees must disclose any matters that have or mayhave the appearance of underminingthe

Evaluation Item	Implementation Status1	Implementation Status1	Implementation Status1	Deviations from “the Ethical Corporate Management Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Abstract Illustration
Management Best-Practice Principles for TWSE/TPEx Listed Companies?			Principle, such as any actual or potential conflict of interest. Key employees and senior officers must periodically declare their compliance status with the Principle. PowerTech requires all our suppliers, vendors and partners to declare in writing that they will not engage in any fraud or provide unethical conduct when dealing with the Company or our officers and employees. Internal and external online hotlines have been established for any relevant persons to use in reporting any ethical irregularities for personal investigation by a designated senior management of PowerTech.
2. Fulfill operations integrity policy (1) Does the company evaluate business partners’ ethical records and include ethics-related clauses in business contracts?	`ˇ`		We holds annual business meetings, conveying our integrity requirements to all our business partners. In addition, an ethic-related clause is included in	None

Evaluation Item	Implementation Status1	Implementation Status1	Implementation Status1	Deviations from “the Ethical Corporate Management Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Abstract Illustration
(2) Does the company establish an exclusively (or concurrently) dedicated unit supervised by the Board to be in charge of corporate integrity? (3) Does the company establish policies to prevent conflicts of interest and provide appropriate communication channels, and implement it?	`ˇ` `ˇ`		every business contract. If there is any breach of the clause, the Company may terminate the partnership at any time without any further obligation or compensation. The Company established the “Corporate Integrity Team” on 03/16/2016 under the Board’s supervision and submits quarterly reports to the Board of Directors. The Company follows the Company Act, the Securities and Exchange Act, Business Entity Accounting Act, Political Donations Act, Law Against Accepting Bribes Act, Government Procurement Act, Act on Recusal of Public

Evaluation Item	Implementation Status1	Implementation Status1	Implementation Status1	Deviations from “the Ethical Corporate Management Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Abstract Illustration
(4) Has the company established effective systems for both accounting and internal control to facilitate ethical corporate management, and are they audited by either internal auditors or CPAs on a regular basis?	`ˇ`		Servants Due to Conflicts of Interest and other relevant regulations for listed companies. The Company also conducts due diligence before trading with upstream and downstream companies to minimize the risks. At the same time, the Company has made a hotline available for submissions of regarding conflicts of interest. The Company has established accounting and internal control systems to ensure integrity in our operations. After internal auditors have analyzed and reviewed the annual audit program according to the risk evaluation results, the Company will compiles them into an audit report.

Evaluation Item	Implementation Status1	Implementation Status1	Implementation Status1	Deviations from “the Ethical Corporate Management Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Abstract Illustration
(5) Does the company regularly hold internal and external educational trainings on operational integrity?	`ˇ`		The Company carries out regular training for employees every quarter. For new employees, training on ethical rules, conflicts of interest, business morals, and all other related subjects are carried out during their first week of work. All employees are required to receive integrity training for at least two hours eachyear.
3. Operation of the integrity channel (1) Does the company establish both a reward/punishment system and an integrity hotline? Can the accused be reached by an appropriate person for follow-up?	`ˇ`		The Company establishes various reporting channels so that employees and relevant people can report improper business behaviors through the system. After a confidential investigation, anyone who violates the regulations on operational integrity will be punished according to the Company’s regulations on reward and punishment. In cases of illegal conduct, legal actions will be	None

Evaluation Item	Implementation Status1	Implementation Status1	Implementation Status1	Deviations from “the Ethical Corporate Management Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Abstract Illustration
(2) Does the company establish standard operating procedures for confidential reporting on investigating accusation cases? (3) Does the company provide proper whistleblower protection?	`ˇ` `ˇ`		taken as well. The Company has in place SOPs authorized by the Board which could be applied on any confidential investigations on such cases. The Company takes whistleblower protection seriously since the core purpose is protection from unlawful reprisal for diligent employees who step forward to identify potential wrongdoing. The Company has a dedicated hotline for whistleblower protection whether first-line managers and the Board if necessary, can directly review and determine appropriate actions against reprisal of complaints.

Evaluation Item	Implementation Status1	Implementation Status1	Implementation Status1	Deviations from “the Ethical Corporate Management Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Abstract Illustration

4. Strengthening information disclosure (1) Does the company disclose its ethical corporate management policies and the results of its implementation on the company’s website and MOPS?	`ˇ`		The Company’s Ethical Corporate Management Best-Practice Principles and the results of our implementation have been posted on the Company’s Chinese / English website and MOPS.	None
5. If the company has established the ethical corporate management policies based on the Ethical Corporate Management Best-Practice Principles for TWSE/TPEx Listed Companies, please describe any discrepancy between the policies and their implementation. There have been no differences.
6. Other important information to facilitate a better understanding of the company’s ethical corporate management policies (e.g., review and amend its policies). (a) To implement the basics of ethical corporate management policies, the Company operates under the Company Act, Securities and Exchange Act, Businesses EntityAccountingAct, related regulations for TWSE/TPEx-Listed Companies, and other laws and decrees

Evaluation Item	Implementation Status1	Implementation Status1	Implementation Status1	Deviations from “the Ethical Corporate Management Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Abstract Illustration
concerning business transactions. (b) The Company has set up the "Management Procedures for Preventing Insider Trading", which specifies that directors, supervisors, managers, and employees are not allowed to reveal inside information to others or to inquire non-public information that is irrelevant to his/her business scope. (c) For more detailed information,please refer to Power-tech’s official website: www.power-tech.com.tw

Note: Regardless of whether the evaluation item is achieved or not, the company shall state an appropriate explanation.

3.3.7 Corporate Governance Guidelines and Regulations

Please refer to the Company’s website at www.power-tech.com.com.tw

3.3.8 Other Important Information Regarding Corporate Governance

None.

3.3.9 Internal Control Systems

None.

3.3.10 Major Resolutions of Shareholders’ Meeting and Board Meetings

Item	Date	Major resolutions
Board meeting	03, 19, 2018	1. Approval of the 2017 business report and financial statements. 2. Approval of the distribution of 2017 retained earnings and employee profit sharing.
Board meeting	05,10,2018	1. Approval of the 2018 Q1 financial statements. 2. Approval of amendment to “Articles of Incorporation”.
Board meeting	08,08,2018	1. Approval of the 2018 Q2 financial statements.
Board meeting	11.06,2018	1. Approval of the 2018 Q3 financial statements. 2. The company's revised post-earnings distribution case of 2017
Board meeting	03,22,2018	1. Approval of the 2018 financial statements. 2. Approval of the distribution of 2018 retained earnings and employee profit sharing.
Shareholders’ meeting	06,14,2018	1. Adoption of the 2017 Business Report and Financial Statements 2. Adoption of the Proposal for the Distribution of 2017 Profits Discussion 1. Amendment to the Rules of Shareholders’

Meeting

3.3.11 Major Issues of Record or Written Statements Made by Any Director or Supervisor Dissenting to Important Resolutions Passed by the Board of Directors

None

3.3.12 Resignation or Dismissal of the Company’s Key Individuals, Including the Chairman, CEO, and Heads of Accounting, Finance, Internal Audit and R&D

None

3.4 Information Regarding the Company’s Audit Fee and Independence

3.4.1 Audit Fee

Accounting Firm	Name of CPA	Period Covered by CPA’s Audit	Remarks
KPMG	Hsu, Yu-Feng, Mei, Yuan-Chen	2017.01.01~2017.12.31

Fee Items Fee Range	Fee Items Fee Range	Audit Fee	Non-audit Fee	Total
1	Under NT$ 2,000,000		682	682
2	NT$2,000,001 ~ NT$4,000,000	2,200		2,200
3	NT$4,000,001 ~ NT$6,000,000
4	NT$6,000,001 ~ NT$8,000,000
5	NT$8,000,001 ~ NT$10,000,000
6	Over NT$100,000,000

Unit: NT$ thousands

3.4.2 Replacement of CPA

A. Regarding the former CPA

Replacement Date	_	_	_	_	_
Replacement reasons and explanations	_

Describe whether the Company terminated or the CPA did not accept the appointment	Parties Status			CPA	The Company
	Termination of appointment			-	-
	No longer accepted (continued) appointment			-	-
Other issues (except for unqualified issues) in the audit reports within the last twoyears	None
Differences with the company	Yes	-	Accounting principles or practices
		-	Disclosure of Financial Statements
		-	Audit scope or steps
		-	Others
	None	
	Remarks/specifydetails:
Other Revealed Matters	None

B. Regarding the successor CPA

==> picture [461 x 235] intentionally omitted <==

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

Name of accounting firm -
Name of CPA -
Date of appointment -
Consultation results and opinions on
accounting treatments or principles with
respect to specified transactions and the
None
company's financial reports that the CPA
might issue prior to the engagement.
Succeeding CPA’s written opinion of
disagreement toward the former CPA None
----- End of picture text -----

3.4.3 Audit Independence

The Company’s Chairman, Chief Executive Officer, Chief Financial Officer, and managers

in charge of its finance and accounting operations did not hold any positions in the Company’s independent auditing firm or its affiliates during 2017.

3.5 Changes in Shareholding of Directors, Supervisors, Managers and Major Shareholders

				Unit: Shares	Unit: Shares
Title	Name	2018		As of Apr. 11, 2019
		Holding Increase (Decrease)	Pledged Holding Increase (Decrease)	Holding Increase (Decrease)	Pledged Holding Increase (Decrease)
Chairman/President	Jonie Chou	(183,333)	0	0	0
Director	Michael Tian-Shyug Lee	0	0	0	0
Director	George Lee	0	0	0	0
Director	Jennifer Lai	0	0	0	0
Independent Director	Chun-Chi Yang	0	0	0	0
Independent Director	Tsung-Pei Lee	0	0	0	0

Supervisor	Chin-Yang Chen	0
Supervisor	Shin-Rong Shiah-Hou	0
Supervisor	Jun-Yu Huang	0
V.President	Lillian Yeh	(183,333)
Factory Director	Louis Chen(note)	0
Factory Director	T.C. Wu	0
Factory V. Director	Daniel Yeh	0
Director	Hermione Tsai	0
Director	C.S. Chiang	0
CFO	Kevin Kuo	0
Director	Frankie Chen	0
Special Assistant	Henry Gong	0
R&D thief	Winston Lee	0
Director	Eldon Chang(note)	0
Special Assistant	Lisa Shen(note)	0

Note: Eldon Chang was appointed at 2018.01.02; Lisa Shen was appointed at 2018.3.15

3.5.1 Shares Trading with Related Parties

Name	Reason for Transfer	Date of Transaction	Transferee	Relationship between Transferee and Directors, Supervisors, Managers and Major Shareholders	Shares	Transaction Price (NT$)
Jonie Chou	Gift	2018.11.08	Ya Shang Chou	Parents/son	183,333
Lillian Yeh	Gift	2018.11.08	Pin Jun Chou	Parents/daughter	183,333

3.5.2 Shares Pledge with Related Parties

Name	Reason for Pledge	Date of Transaction	Transferee	Relationship between Transferee and Directors, Supervisors, Managers and Major Shareholders	Shares	Shares holding %	Shares Pledged %	Pledged Amount

3.6 Relationship among the Top Ten Shareholders

As of 04/11/2019

Name	Current Shareholding	Current Shareholding	Spouse’s/minor’s Shareholding	Spouse’s/minor’s Shareholding	Shareholding by Nominee Arrangement	Shareholding by Nominee Arrangement	Name and Relationship Between the Company’s Top Ten Shareholders, or Spouses or Relatives Within Two Degrees	Name and Relationship Between the Company’s Top Ten Shareholders, or Spouses or Relatives Within Two Degrees
	Shares	%	Shares	%	Shares	%	Name	Relationship
Jonie Chou	7,565,702	7.70	5,611,236	5.71	-	-	Lillian Yeh Pin Jun Chou Ya Shang Chou Bai Jun Yeh	Wife Daughter son wife’s sister
Jinghong invest. Co. Ltd.	7,079,048	7.21	-	-	-	-	-	-
Ching Kuo	5,641,000	5.74
Lillian Yeh	5,611,236	5.71	7,565,702	7.70	-	-	Jonie Chou	Husband

							Pin Jun Chou Ya Shang Chou Bai Jun Yeh	Daughter son sister
Ya Shang Chou	4,623,929	4.71	-	-	-	-	Jonie Chou Lillian Yeh Pin Jun Chou	Father Mother Sister
Pin Jun Chou	4,318,930	4.40	-	-	-	-	Jonie Chou Lillian Yeh Ya Shang Chou	Father Mother Brother
FuCheng invest. Co.Ltd	4,100,214	4.17	-	-	-	-	-	-
She yang Lee	3,554,953	3.62	-	-	-	-	-	-
Bai Jun Yeh	3,110,271	3.17	-	-	-	-	Jonie Chou Lillian Yeh	Sister’s husband Sister
Kuo ying Dai	1,956,076	1.99					Jonie Chou Lillian Yeh	Wife’s brother Brother’s wife

3.7 Ownership of Shares in Affiliated Enterprises

Unit:NTD/ shares/ %

Affiliated Enterprises	Ownership by the Company	Ownership by the Company	Direct or Indirect Ownership by Directors, Supervisors,Managers	Direct or Indirect Ownership by Directors, Supervisors,Managers	Total Ownership	Total Ownership
	Shares	%	Shares	%	Shares	%
DIGITAL WORLD INC.	12,293	100%	`－`	`－`	12,293	100%
OPPORTUNIST INT’L CO.,LTD.	3,855	100%	`－`	`－`	3,855	100%
Hurray Cloud Technology Co., LTD	3,125	100%			3,125	100%
De Yan Management Consulting Co., Ltd	200	100%			200	100%
ZERNET LIMITED	570	30%	`－`	`－`	570	30%
BEST WISDOM LIMITED	12,264	100%	`－`	`－`	12,264	100%
TREASURE LUCK INC.	10	100%	`－`	`－`	10	100%
SURGELION LINT’L LTD.	Capital	100%	`－`	`－`	capital	100%
DONGGUAN QUAN SHENG ELECRIC CO.,LTD	Capital	100%	`－`	`－`	Capital	100%
TOTAL PLUS INT’L LTD.	3,855	100%	`－`	`－`	3,855	100%
PERFECT SKY INT’L LTD.	10	100%	`－`	`－`	10	100%

DONGGUAN FU JU ELECTRIC CO.,LTD	Capital	100%	`－`	`－`	capital	100%
DONGGUAN KANG CHI TRADING LTD.	Capital	100%	`－`	`－`	capital	100%

2018.12.31

IV. Capital Overview

4.1 Capital and Shares

4.1.1 Source of Capital

A. Issued Shares

As of 04/30/2015(NTD)

Month/ Year	Par Value (NT$)	Authorized Capital	Authorized Capital	Paid-in Capital	Paid-in Capital	Remark	Remark
		Shares	Amount (NT$ thousands)	Shares	Amount (NT$ thousands)	Sources of Capital	Capital Increased by Assets Other than Cash	Other
2000.11	10	5,000,000	50,000,000	5,000,000	50,000,000	Cash replenishment NTD 50,000,000
2002.04	10	20,000,000	200,000,000	15,000,000	150,000,000	Cash replenishment NTD 100,000,000
2003.01	10	60,000,000	600,000,000	30,000,000	300,000,000	Cash replenishment NTD 150,000,000
2003.05	10	60,000,000	600,000,000	45,000,000	450,000,000	Cash replenishment NTD 50,000,000 Capital reserve to capital increase NTD100,000,000
2003.09	10	60,000,000	600,000,000	50,000,000	500,000,000	Capital reserve to capital increase NTD 45,000,000 and employees bonus to capital increase NTD 5,000,000
2004.10	10	86,000,000	860,000,000	66,500,000	665,000,000	Capital reserve to capital increase NTD 150,000,000 and employees bonus to capital increase NTD 15,000,000
2005.08	10	126,900,000	1,269,000,000	81,600,000	816,000,000	Capital reserve to capital increase NTD 133,000,000 and employees bonus to capital increase NTD 18,000,000
2006.10	10	126,900,000	1,269,000,000	91,450,000	914,500,000	Capital reserve to capital increase NTD 89,600,000 and employees bonus to capital increase NTD 8,900,000
2007.08	10	126,900,000	1,269,000,000	104,095,020	1,040,950,200	Convertible CB to convert common stock NTD 26,000,200
2007.09	10	126,900,000	1,269,000,000	104,095,020	1,040,950,200	Capital reserve to capital increase NTD

						91,450,000 and employees bonus to capital increase NTD 9,000,000
2007.11	10	126,900,00	1,269,000,000	105,493,336	1,054,933,360	Convertible CB to convert common stock NTD 13,983,160
2008.04	10	126,900,000	1,269,000,000	105,617,963	1,056,179,630	Convertible CB to convert common stock NTD 1,246,270
2008.10	10	150,000,000	1,500,000,000	112,098,861	1,120,988,610	Capital reserve to capital increase NTD 52,808,980 and employees bonus to capital increase NTD 12,000,000
2011.06	10	150,000,000	1,500,000,000	112,107,656	1,121,076,560	Convertible CB to convert common stock NTD 300,002011
2011.09	10	150,000,000	1,500,000,000	112,116,450	1,121,164,500	Convertible CB to convert common stock NTD 300,000
2015.12	10	150,000,000	1,500,000,000	109,116,450	1,091,164,500	Cancelled treasury shares NTD 30,000,000
2016.04	10	150,000,000	1,500,000,000	108,224,450	1,082,244,500	Cancelled treasury shares NTD 8,920,000
2016.06	10	150,000,000	1,500,000,000	103,224,450	1,032,244,500	Cancelled treasury shares NTD 50,000,000
2017.01.	10	150,000,000	1,500,000,000	98,224,450	982,244,500	Cancelled treasury shares NTD 50,000,000

B. Type of Stock

2019.4.11

B. Type of Stock	B. Type of Stock								2019.4.11	2019.4.11
Share Type				Authorized Capital					Remarks
		Issued Shares		Un-issued Shares			Total Shares
Registered common stocks		98,225,450			51,775,550		150,000,000
4.1.2 Status of Shareholders								As	of 04/15/2017
Item	Government Agencies		Financial Institutions		Other Juridical Persons	Domestic Natural Persons		Foreign Institutions & Natural Persons		Total
Number of Shareholders	0		1		16	10		3,782		3,809
Shareholding (shares)	0		77,000		11,692,384	1,779,825		84,675,241		98,224,450

Percentage 0.00% 0.08% 11.90% 1.81% 86.21% 100.00%

4.1.3 Shareholding Distribution Status

A. Common Share

A. Common Share
		As of04/11/2019
Class of Shareholding (Unit: Share)	Number of Shareholders	Shareholding (Shares)	Percentage
1 ~ 999	817	147,929	0.15%
1,000 ~ 5,000	2,045	4,484,346	4.58%
5,001 ~ 10,000	402	3,275,273	3.33%
10,001 ~ 15,000	151	1,956,888	1.99%
15,001 ~ 20,000	94	1,731,660	1.76%
20,001 ~ 30,000	98	2,512,634	2.56%
30,001 ~ 40,000	36	1,275,144	1.30%
40,001 ~ 50,000	23	1,063,326	1.08%
50,001 ~ 100,000	55	3,691,339	3.76%
100,001 ~ 200,000	40	5,373,279	5.47%
200,001 ~ 400,000	19	5,245,158	5.34%
400,001 ~ 600,000	1	590,449	0.60%
600,001 ~ 800,000	7	4,794,465	4.88%
800,001 ~ 1,000,000	2	1,800,704	1.83%
1,000,001 or over	19	60,281,856	61.37%
Total	3,809	98,224,450	100.00%

Note: NTD 10/share

4.1.4 List of Major Shareholders

	As of04/11/2019	As of04/11/2019
Shareholder's Name	Shareholding
	Shares	Percentage
Jonie Chou	7,565,702	7.70%
Jinghonginvest. Co., Ltd	7,079,048	7.21%
Ching Kuo	5,641,000	5.74%
Lillian Yeh	5,611,236	5.71%
Ya ShangChou	4,623,929	4.71%
Pin Jun Chou	4,318,930	4.40%
FuChenginvest. Co.,Ltd.	4,100,214	4.17%

SheyangLee	3,554,953	3.62%
Bai Jun Yeh	3,110,271	3.17%
KuoyingDai	1,956,076	1.99%

4.1.5 Market Price, Net Worth, Earnings, and Dividends per Share

			Unit: NT$
Items	2017	2018	01/01/2019-04/11/2019
Market Price per Share
Highest Market Price	24.4	17.40	19.70
Lowest Market Price	12.55	11.15	13.60
Average Market Price	18.69	14.70	17.26
Net Worth per Share
Before Distribution	15.67	16.40	-
After Distribution	15.67	-	-
Earnings per Share
Weighted Average Shares (thousand shares)	98,932	98,224	-
Diluted Earnings Per Share	0.02	1.01	-
Adjusted Diluted Earnings Per Share	0.02	1.01	-
Dividends per Share
Cash Dividends	-	0.57	-
Stock Dividends
 Dividends from Retained Earnings	-	-	-
 Dividends from Capital Surplus	-	-	-
Accumulated Undistributed Dividends	-	-	-
Return on Investment
Price / Earnings Ratio (Note 1)	934.50	14.55
Price / Dividend Ratio (Note 2)	`－`	25.79
Cash Dividend Yield Rate (Note 3)	`－`	3.88

Note 1: Price / Earnings Ratio = Average Market Price / Earnings per Share Note 2: Price / Dividend Ratio = Average Market Price / Cash Dividends per Share Note 3: Cash Dividend Yield Rate = Cash Dividends per Share / Average Market Price

4.1.6 Dividend Policy and Implementation Status

A. Dividend Policy

If earnings are available for distribution at the end of a fiscal year, 10% of net earnings – that is, after offsetting any loss from prior year(s) and paying all taxes and dues – shall be set aside as legal reserve and appropriated in accordance with the Securities Exchange Law. The remaining net earnings can be distributed along with prior accumulated unappropriated retained earnings. The Board of Directors will consider the above-mentioned factors when making the dividend distribution proposal. Dividends will be distributed in accordance with the resolution approved by the Board of Directors and at the annual shareholders’ meeting. The remaining balances will be distributed in the following manner:

2-15 % as a bonus for employees;

Do not exceed 3 % as compensation for directors and supervisors;
The rest as a bonus for shareholders.

In addition, the company’s focus on the distribution of earnings is based on the amount of the distributable earnings. If the total amount of surplus that can be distributed in the current year is calculated based on the outstanding number of shares outstanding, the distribution will be no less than NT$1 and will be no less than the distributable amount. Seventy percent of the surplus is the standard for distribution in the year.

B. Proposed Distribution of Dividend

The proposal for the distribution of 2018 profits was passed at the meeting of the Board of Directors. The proposal for a cash dividend of NT$ 0.57 and capital surplus distribution of NT$0.43 per share will be discussed at the annual shareholders’ meeting.

4.1.7 Employee Bonus and Directors' and Supervisors' Remuneration

A. Information Relating to Employee Bonus and Directors’ and Supervisors’ Remuneration in the Articles of Incorporation

The company charter prescribes the following for the employee bonus and compensation for directors and supervisors:

2-15 % as a bonus for employees;
Do not exceed 3 % as compensation for directors and supervisors;
The rest as a bonus for shareholders.

If the above-mentioned bonus for employees is in the form of a stock bonus, it may also be distributed to employees of subsidiary companies. The Board of Directors is authorized to work out the conditions and procedures of making such distribution.

B. The Estimated Basis for Calculating the Employee Bonus and Directors’ and Supervisors’ Remuneration
C. Profit Distribution for Employee Bonus and Directors’ and Supervisors’ Remuneration for 2018 Approved in Board of Directors Meeting

(1) Recommended Distribution of Employee Bonus and Directors’ and Supervisors’ Remuneration: (NT$ thousands) Employee Bonus – in Cash NTD 6,000,000 Directors' and Supervisors' Remuneration NTD 500,000 Total NTD 6,500,000

(2) Ratio of Recommended Employee Stock Bonus to Capitalization of Earnings: No

4.1.8 Buyback of Treasury Stock

As of 04/15/2017

		As of 04/15/2017
Treasury stocks: Batch Order	5thBatch	6thBatch
Purpose of buy-back	To safeguard the company's credit and shareholders'equity	To safeguard the company's credit and shareholders'equity
Timeframe of buy-back	2016.7.13~2016.8.26	2017.2.2~2017.3.6
Price range	NTD 12.51~15.18	NTD 14.38~19.97
Class, quantity of shares bought back	Common share(5,000,000 shares)	Common share(5,000,000 shares)
Value of shares bought-back (in NT$ thousands)	68,345	89,837
Shares sold/transferred/cancelled	5,000,000 shares	5,000,000 shares
Accumulated number of company shares held	-	-
Percentage of total company shares held(%)	-	-

4.2 Bonds

4.2.1 Corporate Bonds None

4.2.2 Convertible Bonds

Corporate bond type	Corporate bond type	1stUnsecured Convertible Corporate Bond	1stUnsecured Convertible Corporate Bond	1stUnsecured Convertible Corporate Bond
Item	Year	2010	2011	As of 2012.3.12
Market price of the convertible bond	Highest	136.45	48.00	138.60
	Lowest	136.00	138.60	138.60
	Average	136.20	142.12	138.60
Convertible Price				NT$33.38
Issue date and conversion price at issuance				Issue Date: 2007/3/12 NT$55.23/share

Conversion methods Paid by cash

4.2.3 Exchangeable Bonds None

4.2.4 Shelf Registration for Issuing Bonds None

4.2.5 Corporate Bonds with Warrants

None

4.3 Global Depository Receipts

None

4.4 Employee Stock Options

None 4.4.1 Issuance of Employee Stock Options None

4.4.2 List of Executives Receiving Employee Stock Options and the Top Ten Employees with Stock Options

None

4.4.3 Issuance of New Restricted Employee Shares

None

4.4.4 List of Executives Receiving New Restricted Employee Shares and the Top Ten Employees with New Restricted Employee Shares

None

4.5 Status of New Shares Issuance in Connection with Mergers and Acquisitions

None

4.6 Financing Plans and Implementation

None

4.6.1 Finance Plans

None

4.6.2 Implementation

None

V. Operational Highlights

5.1 Business Activities

5.1.1 Business Scope

A. Main areas of business operations
a. electronic circuit power protection manufacturing industry.
b. data storage and processing equipment manufacturing industry.
c. wired communications machinery and equipment manufacturing industry.
d. wireless communications machinery and equipment manufacturing industry.
e. electronic components and manufacturing industry.
f. other electrical and electronic machinery and equipment manufacturing industry.
g. international trade.
h. manufacturing output.
i. business which is not prohibited or restricted except in the case of a permitted business.

B. Revenue distribution

B. Revenue distribution
		Unit`；`NT$ thousands (%) of Total Sales 72.50% 14.09% 11.90% 1.51% 100.00%
Major Divisions	Total Sales in Year 2018	(%) of Total Sales
Surge Protector for IT Peripherals	2,277,217	72.50%
Power Noise Filter for Audio and Video Devices	442,532	14.09%
IoT and Smart Home Power Safety Syster	373,664	11.90%
Others	47,327	1.51%
Total	3,140,740	100.00%

C. Main products

The company is to provide a variety of electronic circuits, advanced, safe, professional power protection technology market leader:

items	products
Surge Protector for IT Peripherals	Line Cord Plug in`、`Wall Plug`、`Power Control Center
IoT and Smart Home Power SafetySyster	Lighting Control`、`Wireless Motion Sensor`、`Security Remote System

D. New products development

(1) power protection socket (Surge Protecter): towards a more flexible new design and lower energy-saving low-power circuit protection device.

(2) high-performance charger (Charger): the development of patented multi-voltage charger to the mobile phone or tablet PC market in a variety of different needs, to

facilitate home or workplace safety.

(3) energy management: from home or go out can be immediately monitored to the high-end cloud-side power management products.

5.1.2 Industry Overview

Please refer to page 40 of the Chinese annual report.

5.1.3 Research and Development

Please refer to page 41 of the Chinese annual report.

A. Research and Development Expenses by the Central Research Institute (CRI) in the Past Two Years

Year	2018	2019(As of March 31)
Total Expenses(NT$ thousands)	146,133	31,835
Operation net income	3,140,740	590,449
%	4.65%	5.39%

B. Research and Development Achievements of the CRI in the Past Two Years

The company in order to maintain the company proud of the advantages of leading technology and strengthen the core competitiveness and enhance service efficiency, research and development of electronic circuit power protection related products research and development and marketing, in recent years the development results are as follows:

Year	R&D successful technologyorproduct	Characteristics or use instructions
2018	Wireless transmission power energy management	Power protection device, with the insertion of sensing function, and the sensor results through wireless transmission, send messages to digital electronic monitoring devices, such as: smart phone (Smart Phone), Tablet PC (Tablet PC), desktop computer (Desktop Computer), Notebook Computer (NoteBook Computer), satellite navigation device (Global Positioning System, GPS) or other wireless devices with wireless communications. Digital electronic monitoring device based on the sensing results, immediately that the power protection device on the use of electricity state, at any time remote control power supply protection device, the effective energy management and saving powerpurposes.
	Intelligent energy - saving cloud network power management system	Omni-directional power management system: energy management system integration architecture, energy management application service development, cloud use service management program, APPS POWER power management, home power management, enterprise power management, industrial power management, APPS TRIGGER wisdom socket.
	Product Strategy and R &D Technology Center	For green energy-saving environmental protection and power protector industry, the development of products covering the family, mobile office, digital network environment, business and industrial equipment, to provide consumers and the industry's most advanced technology and the most complete energy management and power protection solutions The The main products include: a full range of information products power protection, audio and video products power protection, home intelligent power management system, enterprise intelligent power management system, industrial intelligent power management system.

5.1.4 Long-term and Short-term Development

Please refer to page 44 of the Chinese annual report.

A. Long-term Development

Marketing strategy

With the electronic market trends, enhance the core technology research and development, to develop a competitive new products, develop new applications and the use of the market to

enhance profitability, while expanding the breadth and depth of the product; and layout of its own brand to diversify business risk The

‧ production strategy

Continue to invest in the production of innovative technology research and development,

improve production automation, improve production efficiency, product quality and reduce production costs.

‧Product Strategy

With the future market trends, continue to invest in innovation, high value-added product development.

Financial strategy

If necessary, the use of capital markets to raise funds required for business growth, to

strengthen the company's financial structure, as the basis for sustainable development and development.

B. Short-term Development

Marketing strategy

Maintain existing customer relationships and develop new customers to expand the size of the company's operating economy.

‧ production strategy

Strictly control costs, improve the production process, improve the degree of automation, in order to improve the company's international competitiveness.

‧ Product Strategy

The development of environmental protection and energy conservation, higher security, technological innovation of electronic circuit power protection products to meet consumer demand for energy saving, home security, work environment security. Actively participate in the development of green energy products, contribute to the Earth's environmental protection. Financial strategy

Based on the principle of conservatism and conservatism, the Company is mainly based on the net inflow of its own funds and operations. If necessary, it should be financed by the bank's financing amount.

5.2 Market and Sales Overview

5.2.1 Market Analysis

A. Sales (Service) Region

B. Market Share (%) of Major Product Categories in the Last Two Years

year area	2017	2017	2018	2018
	NTD	%	NTD	%
America	2,086,225	72.98	2,409,561	76.72

Europe	0	0	170,494	5.43
Austria	27,095	0.95	19,359	0.62
Others	745,309	26.07	541,326	17.24
Total	2,858,629	100.00	3,140,740	100.00

C. Market Analysis of Major Product Categories

Please refer page 45 of Chinese annual report.

D. Favorable and Unfavorable Factors in the Long Term

Please refer page 47 of Chinese annual report.

5.2.2 Production Procedures of Main Products

A. Major Products and Their Main Uses

Main products	Important use
`Surge` `Protector` `for` `IT` `Peripherals`	Mainly used in the computer, information, communications, consumer electronics and precision electronic equipment products in use, from natural factors or human factors generated by the unstable voltage (lightning surge) or electromagnetic interference designed by the power protection device , Can be for network lines, telephone lines, coaxial cable and satellite data signals to protect, not only can enhance the safety of products, but also significantly extend the product life.
`Power Noise Filter for Audio and` `Video Devices`	Mainly used in advanced audio, digital TV, home theater and other advanced audio and video products in use, from natural factors or human factors generated by the unstable voltage (lightning surge) or electromagnetic interference designed by the power protection device, in addition , By noise filter function, so that audio and video products more clearly, the sound quality is more pure, but also enhance the terminal audio and video products, power consumption and extend product life.
`IoT and Smart Home Power Safety` `System`	The product is the use of RF (radio frequency) wireless remote control to control the home power and security systems, in order to achieve the purpose of home automation information appliances

B. Major Products and Their Production Processes

Please refer P49 of Chinese annual report.

5.2.3 Supply Status of Main Materials

The company is to provide a variety of electronic circuits, advanced, safe, professional power protection technology market leader, the operating model through the Taiwan parent company orders, Sun production. Most of the original materials directly from the Sun to buy their own materials, the main key raw materials through the parent company on behalf of the procurement, the company is the industry's leading manufacturers, in a certain procurement bargaining power, so the supply of raw materials is quite stable.

5.2.4 Major Suppliers and Clients

Please refer to page 50~51 of the Chinese annual report.

A. Major Suppliers in the Last Two Calendar Years

									Unit: NT$ thousands	Unit: NT$ thousands	Unit: NT$ thousands	Unit: NT$ thousands
Item		2017				2018			2019(As of March 31)
	Compa ny Name	Amount	Percent	Relati- on with Issuer	Company Name	Amount	Percent	Rela -tion with Issu er	Company Name	Amount	Percent	Relati -on with Issuer
1	A	174,707	10.33	`無`	A`廠商`	241,632	11.64	`無`	B`廠商`	40,164	10.01	none
	Others	1,516,740	89.67		`其他`	1,834,44 3	88.36		`其他`	361,101	89.99	-
	Net Total Supplies	1,691,447	100.00		`進貨淨額`	2,076,07 5	100.00		`進貨淨額`	401,265	100.00

Note: Major suppliers refer to those commanding 10%-plus share of annual order volume.

B. Major Clients in the Last Two Calendar Years

										Unit: NT$ thousands 2019 (As of March 31) Amount Percent Relation with Issuer 113,943 19.31 None 102,900 17.43 None 86,112 14.58 None - - 287,494 48.69 590,449 100.00 -	Unit: NT$ thousands 2019 (As of March 31) Amount Percent Relation with Issuer 113,943 19.31 None 102,900 17.43 None 86,112 14.58 None - - 287,494 48.69 590,449 100.00 -	Unit: NT$ thousands 2019 (As of March 31) Amount Percent Relation with Issuer 113,943 19.31 None 102,900 17.43 None 86,112 14.58 None - - 287,494 48.69 590,449 100.00 -
Item		2017				2018				2019 (As of March 31)
	Company Name	Amount	Percent	Relation with Issuer	Company Name	Amount	Percent	Relation with Issuer	Company Name	Amount	Percent	Relation with Issuer
1	A	480,662	16.81	None	B	465,543	14.84	None	B	113,943	19.31	None
2	C	326,735	11.43	None	C	389,368	12.41	None	C	102,900	17.43	None
3	-	-	-		D	385,924	12.30	None	A	86,112	14.58	None
4	-	-	-		A	346,440	11.04	none	-	-	-
	others	2,051,232	71.76		others	1,550,465	49.42		others	287,494	48.69
	Net Sales	2,858,629	100.00	-	Net Sales	3,140,740	100.00	-	Net Sales	590,449	100.00	-

Note: Major clients refer to those commanding 10%-plus share of annual order volume.

5.2.5 Production in the Last Two Years

Unit: NT$ thousands

Year Output Major Products (or by department)	2017	2017	2017	2018	2018	2018
	Capacity	Quantity	Amount	Capacity	Quantity	Amount
Surge Protector for IT Peripherals	15,134	629	261,809	14,500	11,242	1,811,753
Power Noise Filter for Audio and Video Devices	530	10,345	1,443,111	120	493	366,951
IoT and Smart Home Power Safety System	1,773	930	278,342	1,695	1,265	325,982
Others	5	636	45,134	329	730	44,140
Total	17,442	12,540	2,028,396	16,644	13,730	2,548,826

5.2.6 Shipments and Sales in the Last Two Years

Unit: NT$ thousands

Year Shipments & Sales Major Products (or by departments)	2017	2017	2017	2017			2018	2018
	Local		Export			Local	Export
	Quantity	Amount	Quantity	Amount	Quantity	Amount	Quantity	Amount
Surge Protector for IT Peripherals	1	30	12,128	2,151,512	—	—	13,384	2,277,217
Power Noise Filter for Audio and Video Devices	—	—	621	344,586	—	—	439	442,532
IoT and Smart Home Power Safety System	—	—	823	308,110	—	—	1243	373,664
Others	—	—	1,058	54,391	—	—	629	47,327
Total	1	30	14,630	2,858,599	—	—	15,695	3,140,740

5.3 Human Resources

5.3 Human Resources	5.3 Human Resources
Year		2017	2018	Data as of 11 Apr. 2019
Number of Employees	Above the Section Manager class	58	46	46
	Specialist	119	100	92
	Total	177	146	138
Average Age		40.0	40.8	41.3
Average Years of Service		6.9	8.3	8.6
Education	Ph.D.	0.56%	0.68%	0.72%
	Masters	14.12%	11.64%	12.32%
	Bachelor’s Degree	82.49%	85.63%	84.79%
	Senior High School	2.82%	2.05%	2.17%
	Below Senior High School	0%	0%	0%

5.4 Environmental Protection Expenditure

5.4.1 Total Losses and Penalties

The loss or penalty caused by environmental pollution during the latest year and up to the printing date of this annual report: None

5.4.2 Countermeasures

The Company has taken into consideration any potential risks or violation of environmental and regulations in formulating its environmental management system. The Company also closely monitors developments in the government’s environmental policies and regulations to be able to design precautionary measures. For the pollution and wastes generated in the production process, the Company takes the following measures to protect the environment:

The Company's production base in mainland China, in addition to waste cleaning and other normal environmental expenditure, the next two years there is no significant environmental capital expenditure. Cleaning of wastes: Works are done in accordance with the Waste Cleaning Plan, the disposal of waste is reported online in a legal way, and wastes are legally cleaned and recycled.

5.5 Labor Relations

Please refer to page 52 of the Chinese annual report.

5.6 Important Contracts

None

VI. Financial Information

6.1 Five-Year Financial Summary

6.1.1 Condensed Balance Sheet

YEAR ITEM	YEAR ITEM		Financial Summary for The Last Five Years	Financial Summary for The Last Five Years	Financial Summary for The Last Five Years	Financial Summary for The Last Five Years	As of Mar. 31,2019
		2014	2015	2016	2017	2018
Current assets		2,336,530	2,189,102	2,293,124	1,928,730	2,153,246	2,030,801
Property, Plant and Equipment		395,412	345,629	250,356	241,079	225,610	237,109
Intangible assets		_	_	_	_	_	_
Other assets		43,805	45,328	71,849	99,232	69,608	138,464
Total assets		2,755,747	2,580,059	2,615,329	2,269,041	2,448,464	2,406,374
Current liabilities	Before distribution	852,729	727,788	799,193	705,914	816,582	714,926
	After distribution	886,096	738,610	917,062	705,914	None	None
Non-current liabilities		28,725	28,407	23,898	23,625	21,174	67,021
Total liabilities	Before dis tribution	881,454	756,195	823,091	729,549	837,756	781,947
	After distribution	914,821	767,017	940,960	729,549	None	None
Equity attributable to shareholders of the parent		1,894,293	1,823,864	1,792,238	1,539,492	1,610,708	1,624,427

Capital stock	Capital stock	1,121,164	1,091,164	1,032,244	982,244	982,244	982,244
Capital surplus		331,318	315,964	291,152	276,981	276,981	276,981
Retained earnings	Before dis tribution	379,727	355,989	475,111	332,508	415,418	402,722
	After distribution	346,360	345,167	357,242	332,508	None	None
Other equity interest		77,471	76,134	(6,269)	(52,241)	(63,935)	-37,520
Treasury stock		(15,387)	(15,387)	_	_	_	_
Non-controlling interest		_	_	_	_	_	_
Total equity	Before dis tribution	1,894,293	1,823,864	1,792,238	1,539,492	1,610,708	1,624,427
	After distribution	1,860,926	1,813,042	1,674,369	1,539,492	None	None

6.1.2 Condensed Statement of Comprehensive Income/Condensed Statement of Income

A. Consolidated Condensed Statement of Comprehensive Income – Based on IFRS

year Item	Financial Summary for The Last Five Years	Financial Summary for The Last Five Years	Financial Summary for The Last Five Years	Financial Summary for The Last Five Years	Financial Summary for The Last Five Years	As of Mar.31, 2019
	2014	2015	2016	2017	2018
Operatingrevenue	2,948,597	2,696,873	2,893,975	2,858,629	3,140,740	590,449
Grossprofit	473,899	453,858	549,463	468,439	475,019	92,501
Income from operations	1,643	1,965	103,827	52,892	62,347	(6,440)
Non-operating income and expenses	54,407	11,570	41,244	(38,740)	48,439	(6,528)
Income before tax	56,050	13,535	145,071	14,152	110,786	(12,968)
Net income(Loss)	41,349	9,359	129,903	2,365	99,160	(12,696)
Other comprehensive income (income aftertax)	62,749	(1,067)	(82,362)	(47,405)	(10,628)	26,415
Total comprehensive income	104,098	8,292	47,541	(45,040)	88,532	13,719

Net income attributable to shareholders of the parent	-	-	-	-	-	-
Net income attributable to non-controlling interest	-	-	-	-	-	-
Comprehensive income attributable to Shareholders of the parent	-	-	-	-	-	-
Comprehensive income attributable to non-controllinginterest	-	-	-	-	-	-
Earningsper share	0.37	0.08	1.22	0.02	1.01	(0.13)

6.1.3 Auditors’ Opinions from 2010 to 2014

Year	AccountingFirm	CPA	Audit Opinion
2014	KPMG	Hsu Yu-Feng, Lu Li Ly	Unqualified opinion
2015	KPMG	Lu Li Ly, WangYungSheng	Unqualified opinion
2016	KPMG	Lu Li Ly, WangYungSheng	Unqualified opinion
2017	KPMG	Hsu, Yu-Feng, Mei, Yuan-Chen	Unqualified opinion
2018	KPMG	Hsu, Yu-Feng, Mei, Yuan-Chen	Unqualified opinion

6.2 Five-Year Financial Analysis

A. Consolidated Financial Analysis – Based on IFRS

Item	Year	Financial Analysis for the Last Five Years	Financial Analysis for the Last Five Years	Financial Analysis for the Last Five Years	Financial Analysis for the Last Five Years	Financial Analysis for the Last Five Years	As of Mar. 31,2019
		2014	2015	2016	2017	2018
Financial structure (%)	Debt Ratio	31.76	29.31	31.47	32.15	34.22	32.49
	Ratio of long-term capital to property, plant and equipment	486.33	535.91	725.42	648.39	723.32	713.36
Solvency (%)	Current ratio	274.01	300.79	286.93	273.22	263.69	284.06
	Quick ratio	218.18	243.71	232.78	224.68	208.20	217.62
	Interest earned ratio (times)	_	_	48,358	27.00	_	_
Operating performance	Accounts receivable turnover (times)	4.47	3.49	3.87	3.59	3.82	3.32
	Average collectionperiod	82	105	94	102	96	110
	Inventory turnover (times)	6.95	6.50	7.31	8.31	9.05	5.36
	Accounts payable turnover (times)	5.16	4.69	5.26	5.2	5.74	4.66
	Average days in sales	53	56	50	44	40	68
	Property, plant and equipment turnover (times)	7.34	7.28	9.71	11.63	13.46	10.21
	Total assets turnover (times)	1.12	1.01	1.11	1.17	1.33	0.97
Profitability	Return on total assets (%)	1.57	0.35	5.00	0.12	4.20	(0.50)
	Return on stockholders' equity (%)	2.25	0.50	7.18	0.14	6.30	(0.78)
	Pre-tax income to paid-in capital (%)	5.00	1.24	14.05	1.44	11.28	(1.32)
	Profitratio (%)	1.40	0.35	4.49	0.08	3.16	(2.15)
	Earnings per share (NT$)	0.37	0.08	1.22	0.02	1.01	(0.13)
Cash flow	Cash flow ratio (%)	(1.48)	19.32	30.9	(0.64)	22.34	8.39
	Cash flow adequacy ratio (%)	95.78	100.21	200.42	83.36	82.27	95.16
	Cash reinvestment ratio (%)	(0.47)	4.01	9.11	(5.16)	7.28	2.38
Leverage	Operating leverage	284.56	223.93	5.11	9.76	9.54	(18.78)
	Financial leverage	1.00	1.00	1.00	1.01	1.00	0.91
Analysis of financial ratio differences for the last two years. (Not required if the difference
does not exceed 20%):
1. Interest protection multiple: Due to the decrease in operating interest in 2018 years
compared to the year of 2017, the interest protection ratio has changed by more than

20% from the previous year

Profitability in the indicators of the ratio: As the profit for the 2018 year decreased compared with the year 2017, the ratios of the profitability index all changed by more than 20% from the previous year.
Ratio of cash flow indicators: As the operating cash flow ratio for the year 2018 decreased compared with the year 2017, the ratios of the cash flow indicators were all changed by more than 20% from the previous year.

6.3 Supervisors’ Review Report for the Most Recent Year

To: The General Meeting of Shareholders as of year 2018

The undersigned has duly audited the Operating Report, Financial Statements and Schedule of Earnings Distribution prepared by the Board of Directors for the year of 2018, and found the same to be true and correct. Therefore, the Supervisors’ Report is hereby issued in accordance with Article 219 of Company Law.

Powertech industrial Co.,Ltd

Supervisors: Chin-Yang Chen Shin-Rong Shiah-Hou Jun-Yu Huang March 25 , 2018

6.4 Financial Statements for the Years Ended December 31, 2018and 2017 and

Independent Auditors’ Report

Please refer P.64 of Chinese annual report.

VII. Review of Financial Conditions, Financial Performance, and Risk

Management

7.1 Analysis of Financial Status

Unit: NT$ thousands

			Unit: NT$ thousands	Unit: NT$ thousands
Year Item	2018	2017	Difference
			Amount	%
Current Assets	2,153,246	1,928,730	224,516	11.64%
Fixed Assets	225,610	241,079	-15,469	-6.42%
Other Assets	69,608	99,232	-29,624	-29.85%
Total Assets	2,448,464	2,269,041	179,423	7.91%
Current Liabilities	816,582	705,914	110,668	15.68%
Long-term Liabilities	21,174	23,635	-2,461	-10.41%
Total Liabilities	837,756	729,549	108,207	14.83%
Capital stock	982,244	982,244	0	0.00%
Capital surplus	276,981	276,981	0	0.00%
Retained Earnings	415,418	332,508	82,910	24.93%
Other Adjustments	-63,935	-52,241	-11,694	22.38%
Total Stockholders' Equity	1,610,708	1,539,492	71,216	4.63%
Analysis of changes in financial ratios: 1. Intangible assets and other assets: Mainly for the year 2017 to strengthen customer relationships and ensure the source of long-term orders, the Board of Directors decided to invest in TrickleStar Limited, one of the company’s main customers, resulting in an increase in the non-current amount of financial assets measured at cost over the current period. This period is not caused by this situation 2. Retained earnings: Due to the post-tax net profit less than the previous period. 3. Other adjustment items: Due to the impact of cumulative conversion adjustments.

 Effect of changes on the company’s financial condition: The Company’s financial

condition has not changed significantly.

Future response actions: Not applicable

7.2 Analysis of Financial Performance

Unit: NT$ thousands

Year Item	2018	2017	Difference	Difference
			Amount	%
Gross Sales	3,153,189	2,868,592	284,597	9.92
Less: Sales Returns and Allowances	12,449	9,963	2,486	24.95
Net Sales	3,140,740	2,858,629	282,111	9.87
Cost of Sales	2,665,721	2,390,190	275,531	11.53
Gross Profit	475,019	468,439	6,580	1.40
OperatingExpenses	412,672	415,547	-2,875	-0.69
OperatingIncome	62,347	52,892	9,455	17.88
Non-operatingIncome and Gains	12,757	9,344	3,413	36.53
Non-operatingExpenses and Losses	38,148	-45,869	84,017	-183.17
Financial costs	0	-542	542	-100.00
The share of the profits and losses of the affiliated enterprises recognized by the equity method	-2,466	-1,673	-793	47.40
Non-operating income and expenditure	48,439	-38,740	87,179	-225.04
Profit before tax	110,786	14,152	96,634	682.83
Tax	11,626	11,787	-161	-1.37
Profit after tax	99,160	2,365	96,795	4,092.81
Analysis of changes in financial ratios: 1. Sales Returns and Allowances: Increase in sales during the period. 2.Non-operating Income and expenditure: Mainly due to increase in the current exchange gains and losses. 3. Continued business unit pre-tax net profit: The increase in exchange gains and losses resulted in a decrease in net profit before tax for continuing business units compared to the same period last year. 4. To continue business unit net profit: Due to changes in business scale and product structure and increase in exchange gains and losses, operating margin, net profit, pre-tax net profit and net profit after tax increased simultaneously.

 Effect of changes on the company’s future business: The Company’s business

scope has not changed significantly.

Future response actions: Not applicable.

7.3 Analysis of Cash Flow

7.3.1 Cash Flow Analysis for the Current Year

Unit: NT$ thousands

Cash and Cash Equivalents, Beginning of Year (1)	Net Cash Flow from Operating Activities (2)	Cash Outflow (3)	Cash Surplus (Deficit) (1)+(2)-(3)	Leverage of Cash Deficit	Leverage of Cash Deficit
				Investment Plans	FinancingPlans
706	290	280	716	-	-
Analysis of change in cash flow in the current year: (1) Business activities: Estimated net cash inflow from operating activities for the whole year is estimated at NTD 290 million. (2) Investment activities: The capital expenditure of the fixed assets to be purchased in the year of 2019 is NTD 60 million. The estimated net cash outflow from investment activities is estimated at NTD 30 million. (3) financing activities: repayment of loans, etc., is expected throughout the year from the financial activities of net cash outflow estimated NTD 30 million .

7.3.2 Remedy for Cash Deficit and Liquidity Analysis

Year Item	2018	2017	Variance (%)
Cash Flow Ratio (%)	22.34%	-0.64%	-3,598.21
Cash Flow AdequacyRatio (%)	82.31%	83.36%	-1.26
Cash Reinvestment Ratio (%)	7.28%	-5.16%	-240.88
Analysis of financial ratio change: None.

7.4 Major Capital Expenditure Items

None.

7.5 Investment Policy in Last Year, Main Causes for Profits or Losses, Improvement Plans and the Investment Plans for the Coming Year

None.

7.6 Analysis of Risk Management

7.6.1 Effects of Changes in Interest Rates, Foreign Exchange Rates and Inflation on Corporate Finance, and Future Response Measures

(1) Interest rate

The Company is still based on the conservative and conservative financial management, idle funds are still stored bank deposits and bonds with buy back (RP) and other security and liquidity products, mainly for interest rates, exchange rate changes continue to focus on international trends and domestic Market changes, in the security-based considerations, the company's profit stability and sustainability.

(2) Foreign exchange rates

Due to the high export ratio of the Company, profit is affected by exchange rate fluctuation. In addition to the Company to take natural hedge, and the necessary derivative financial transactions, in response to the risk of exchange rate changes. In addition, and actively expand the other regional market business, and gradually spread the currency exchange rate fluctuations arising from the risk, with a view to the risk of exchange rate fluctuations to a minimum.

(3) Inflation

On the impact of inflation on the company, the main raw material in the copper price fluctuations, the impact of profit. According to the current business model, can be part of the pass to the customer, so the degree of substantial impact is relatively low, the future will be associated with the risk of scattered goods risk.

7.6.2 Policies, Main Causes of Gain or Loss and Future Response Measures with Respect to High-risk, High-leveraged Investments, Lending or Endorsement Guarantees, and Derivatives Transactions

The Company does not engage in high-risk, highly leveraged investment.
The Company has no funds to lend to others and endorsement and other acts.
The Company's financial strategy is mainly based on the principle of sound, mainly engaged in derivative trade transactions to avoid foreign exchange rate fluctuations in foreign currency, and the responsible staff and internal control procedures, are in accordance with the relevant procedures for the Company.

7.6.3 Future Research & Development Projects and Corresponding Budget

The company for energy-saving carbon products continue to invest, master all the power management technology development. The future will be 2 to 5% of the turnover of the proportion of continuous research and development activities, has mastered the talent, capital, technology and other key factors, the future will continue to niche product development.

7.6.4 Effects of and Response to Changes in Policies and Regulations Relating to Corporate Finance and Sales

The operation of the Company is in accordance with the existing laws and regulations of domestic and foreign countries, and it is collected at all times to grasp the changes in local laws and regulations, and all the effects are in control.

7.6.5 Effects of and Response to Changes in Technology and the Industry Relating to Corporate Finance and Sales

The Company is the leading manufacturer of the industry, and the R & D innovation for technology is an indispensable plan and action. Therefore, the change of technology and industry has a positive effect on the financial business of the Company.

7.6.6 The Impact of Changes in Corporate Image on Corporate Risk Management, and the Company’s Response Measures

The company adopted a stable operating principles, corporate image is good, look forward to the positive corporate image of listed companies to attract more talents into the company's thick management team and the strength of the business results back to the shareholders, for the community to make a effort, this will enable the company's corporate image to new heights.

7.6.7 Expected Benefits from, Risks Relating to and Response to Merger and Acquisition Plans

None.

7.6.8 Expected Benefits from, Risks Relating to and Response to Factory Expansion Plans

None.

7.6.9 Risks Relating to and Response to Excessive Concentration of Purchasing Sources and Excessive Customer Concentration

In the event that the Company has purchased the object for the year 2016, there is no risk that the Company may not be faced with the purchase price, except that the proportion of the Company is better than that of the Company.

7.6.10 Effects of, Risks Relating to and Response to Large Share Transfers or Changes in Shareholdings by Directors, Supervisors, or Shareholders with Shareholdings of over 10%

None.

7.6.11 Effects of, Risks Relating to and Response to the Changes in Management Rights

None.

7.6.12 Litigation or Non-litigation Matters

(1) Major ongoing lawsuits, non-lawsuits or administrative lawsuit: None.

(2) Major ongoing lawsuits, non-lawsuits or administrative lawsuits caused by directors, supervisors or shareholders with over 10% shareholdings: None.

7.6.13 Other Major Risks

None.

VIII. Special Disclosure

8.1 Summary of Affiliated Companies

==> picture [527 x 326] intentionally omitted <==

8.2 Private Placement Securities in the Most Recent Years:

None.

8.3 The Shares in the Company Held or Disposed of by Subsidiaries in the Most Recent Years

None.

Stock Code:3296

Attachment Ⅰ

POWERTECH INDUSTRIAL CO., LTD. AND SUBSIDIARIES

Consolidated Financial Statements

With Independent Auditors ’ Report For the Years Ended December 31, 2018 and 2017

Address: 10F, No. 407, Sec. 2, Chung Shan Rd., Zhonghe District, New Taipei City, Taiwan, R.O.C.

Telephone: (02)8221-5588

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

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Representation Letter

The entities that are required to be included in the combined financial statements of POWERTECH INDUSTRIAL CO., LTD. as of and for the year ended December 31, 2018 under the Criteria Governing the Preparation of Affiliation Reports, Consolidated Business Reports, and Consolidated Financial Statements of Affiliated Enterprises are the same as those included in the consolidated financial statements prepared in conformity with International Financial Reporting Standards No. 10 by the Financial Supervisory Commission, "Consolidated Financial Statements." In addition, the information required to be disclosed in the combined financial statements is included in the consolidated financial statements. Consequently, POWERTECH INDUSTRIAL CO., LTD. and Subsidiaries do not prepare a separate set of combined financial statements.

Company name: POWERTECH INDUSTRIAL CO., LTD. Chairman: ZHOU YI XIONG Date: March 22, 2019

Independent Auditors ’ Report

To the Board of Directors of POWERTECH INDUSTRIAL CO., LTD.: Opinion

We have audited the consolidated financial statements of POWERTECH INDUSTRIAL CO., LTD. (the “Company”) and its subsidiaries together referred to as (“the Group”), which comprise the consolidated statement of financial position as of December 31, 2018 and 2017, the consolidated statements of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the years then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at December 31, 2018 and 2017, and its consolidated financial performance and its consolidated cash flows for the year ended in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and with the International Financial Reporting Standards (“IFRSs”), International Accounting Standards (“IASs”), interpretations as well as related guidance endorsed by the Financial Supervisory Commission of the Republic of China.

Basis for Opinion

We conducted our audit in accordance with the “Regulations Governing Auditing and Certification of Financial Statements by Certified Public Accountants” and the 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 Group in accordance with the Certified Public Accountants Code of Professional Ethics in Republic of China (“the Code”), and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis of our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. 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 matters.

Revenue recognition

Please refer to Note 4(n) for accounting polices of revenue recognition and Note 6(m) for the detailed information of revenue.

Explanation to key audit matter:

Operating revenue of the Group is the major objective which the management was to evaluate the Group's financial performance, and is highly noticed by investors. Therefore, the revenue recognition was considered to be one of the key audit matters in our audit.

4-1

Our principal audit procedures included:

(1) Understanding the Company’s main sources of revenues, transaction models and contract provisions.
(2) Assessing and testing the design, as well as the effectiveness of the operation on the control over revenue recognition.
(3) Performing variance analysis on operating income from each top ten customer to assess the significant exceptions, and further identify and analyze the reasons if any.
(4) Sampling sales transactions to assess the assertions of accuracy, as well as the appropriateness of recognition.
(5) Performing sales cut-off test of a period before and after the financial position date by vouching relevant documents of sales transactions to determine whether sales income has been appropriately recognized.
Subsequent measurements of inventories

Please refer to Note 4(h) for accounting polices of inventories and Note 6(e) for the detailed information of inventories.

Explanation to key audit matter:

Inventories of the Group are measured at the lower of the cost and net realizable value. Since the technology industry changes rapidly, inventories may become obsolescent and its price may fluctuate. In addition, subsequent measurements of inventories are based on the evaluation made by the management of the Group through every internal and external evidence. Therefore, the subsequent measurements of inventories was considered to be one of the key audit matters in our audit.

Our principal audit procedures included:

(1) Assessing whether appropriate provision policies for inventories are applied.
(2) Performing analysis on changes in inventories of the current period to last period.
(3) Sampling relevant documents to verify the accuracy of aging of inventories and calculation of net realizable value.
(4) Assessing whether the disclosure of subsequent measurements of inventories is appropriate.

Other Matter

POWERTECH INDUSTRIAL CO., LTD. has prepared its parent-company-only financial statements as of and for the years ended December 31, 2018 and 2017, on which we have issued an unmodified opinion.

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 Regulations Governing the Preparation of Financial Reports by Securities Issuers and IFRSs, IASs, interpretations as well as related guidance endorsed by the 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 Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

4-2

Those charged with governance are responsible for overseeing the Group’s financial reporting process.

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 the auditing standards generally accepted in the Republic of China will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these 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 Group’s internal control.
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 Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the 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 auditors’ report. However, future events or conditions may cause the Group to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, 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 Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit.

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.

4-3

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

The engagement partners on the audit resulting in this independent auditors’ report are Yu-Feng Hsu and Yuan-Chen Mei .

KPMG

Taipei, Taiwan (Republic of China) March 22, 2019

Notes to Readers

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

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

(English Translation of Consolidated Financial Statements Originally Issued in Chinese) POWERTECH INDUSTRIAL CO., LTD. AND SUBSIDIARIES

Consolidated Statements of Financial Position

December 31, 2018 and 2017

(Expressed in Thousands of New Taiwan Dollars)

December 31, 2018 Amount % $ 816,089 33 60,270 3 1,899 - 808,039 33 12,772 1 349,602 14 98,645 4 440 - 5,490 -	December 31, 2017 Amount % 705,350 31 20,931 1 1,182 - 821,807 36 8,681 - 257,995 11 107,954 5 603 - 4,227 1	December 31, 2017 Amount % 705,350 31 20,931 1 1,182 - 821,807 36 8,681 - 257,995 11 107,954 5 603 - 4,227 1
	Amount
	705,350 20,931 1,182 821,807 8,681 257,995 107,954 603 4,227
2,153,246 88	1,928,730	85
- - 13,491 1 225,610 9 12,078 1 36,323 1 3,582 - 4,134 -	42,408 8,008 241,079 8,144 32,784 756 7,132	2 - 11 - 2 - -
295,218 12	340,311	15
$ 2,448,464 100	2,269,041	100

See accompanying notes to financial statements.

(English Translation of Consolidated Financial Statements Originally Issued in Chinese) POWERTECH INDUSTRIAL CO., LTD. AND SUBSIDIARIES

Consolidated Statements of Financial Position

December 31, 2018 and 2017

(Expressed in Thousands of New Taiwan Dollars)

December 31, 2018	December 31, 2018	December 31, 2018
Amount	%	Amount
816,582 33 705,914 31
21,174 1 23,635 1
21,174 1 23,635 1
837,756 34 729,549 32
982,244 40 982,244 43
276,981 11 276,981 12
312,453 13 312,216 14 24,911 1 24,911 1 78,054 3 (4,619) -
415,418 17 332,508 15
(63,935) (2) (52,241) (2)
1,610,708 66 1,539,492 68
$ 2,448,464 100 2,269,041 100

See accompanying notes to financial statements.

(English Translation of Consolidated Financial Statements Originally Issued in Chinese) POWERTECH INDUSTRIAL CO., LTD. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

For the years ended December 31, 2018 and 2017

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

2018	% 100	2017	% 100
Amount $ 3,140,740		Amount 2,858,629
2,665,721	85	2,390,190	84
475,019	15	468,439	16
105,514 177,601 146,133 (16,576)	3 6 5 (1)	107,943 161,312 146,292 -	4 6 5 -
412,672	13	415,547	15
62,347	2	52,892	1
12,757 38,148 - (2,466)	- 1 - -	9,344 (45,869) (542) (1,673)	- (2) - -
48,439	1	(38,740)	(2)
110,786 11,626	3 -	14,152 11,787	(1) -
99,160	3	2,365	(1)
1,066 -	- -	(1,433) -	- -
1,066	-	(1,433)	-
(12,301) 607 -	- - -	(45,283) (689) -	(2) - -
(11,694)	-	(45,972)	(2)
(10,628)	-	(47,405)	(2)
$ 88,532	3	(45,040)	(3)
$	1.01		0.02
$	1.01		0.02

See accompanying notes to financial statements.

(English Translation of Consolidated Financial Statements Originally Issued in Chinese) POWERTECH INDUSTRIAL CO., LTD. AND SUBSIDIARIES

Consolidated Statements of Changes in Equity

For the years ended December 31, 2018 and 2017

(Expressed in Thousands of New Taiwan Dollars)

				Equity	attributable to owners of parent	attributable to owners of parent	attributable to owners of parent
					Retained earnings			Exchange
								differences on
								translation of
						Unappropriat	Total	foreign
		Ordinary	Capital	Legal	Special	ed retained	retained	financial	Treasury	Total
		shares	surplus	reserve	reserve	earnings	earnings	statements	shares	equity
Balance at January 1, 2017	$	1,032,244	291,152	299,226	18,643	157,242	475,111	(6,269)	-	1,792,238
Profit		-	-	-	-	2,365	2,365	-	-	2,365
Other comprehensive income		-	-	-	-	(1,433)	(1,433)	(45,972)	-	(47,405)
Total comprehensive income		-	-	-	-	932	932	(45,972)	-	(45,040)
Appropriation and distribution of retained earnings:
Legal reserve appropriated		-	-	12,990	-	(12,990)	-	-	-	-
Special reserve appropriated		-	-	-	6,268	(6,268)	-	-	-	-
Cash dividends of ordinary share		-	-	-	-	(117,869)	(117,869)	-	-	(117,869)
Purchase of treasury share		-	-	-	-	-	-	-	(89,837)	(89,837)
Retirement of treasury share		(50,000)	(14,171)	-	-	(25,666)	(25,666)	-	89,837	-
Balance at December 31, 2017		982,244	276,981	312,216	24,911	(4,619)	332,508	(52,241)	-	1,539,492
Effects of retrospective application (note 3(a)(ii))		-	-	-	-	(17,316)	(17,316)	-	-	(17,316)
Equity at beginning of period after adjustments		982,244	276,981	312,216	24,911	(21,935)	315,192	(52,241)	-	1,522,176
Profit		-	-	-	-	99,160	99,160	-	-	99,160
Other comprehensive income		-	-	-	-	1,066	1,066	(11,694)	-	(10,628)
Total comprehensive income		-	-	-	-	100,226	100,226	(11,694)	-	88,532
Appropriation and distribution of retained earnings:
Legal reserve appropriated		-	-	237	-	(237)	-	-	-	-
Balance at December 31, 2018	$	982,244	276,981	312,453	24,911	78,054	415,418	(63,935)	-	1,610,708

See accompanying notes to financial statements.

(English Translation of Consolidated Financial Statements Originally Issued in Chinese) POWERTECH INDUSTRIAL CO., LTD. AND SUBSIDIARIES

For the years ended December 31, 2018 and 2017

(Expressed in Thousands of New Taiwan Dollars)

Cash flows from (used in) operating activities: Profit before tax Adjustments: Adjustments to reconcile profit (loss): Depreciation expense Amortization expense Expected credit loss (gain) / Provision for bad debt expense Net gain on financial assets or liabilities at fair value through profit or loss Interest expense Interest income Dividend income Share of loss of associates accounted for using equity method Loss on disposal of property, plant, and equipment Impairment loss on financial assets Total adjustments to reconcile profit (loss) Changes in operating assets and liabilities: Decrease (increase) in financial assets at fair value through profit or loss Decrease (increase) in notes receivable Decrease (increase) in accounts receivable Decrease (increase) in other receivable Decrease (increase) in inventories Decrease (increase) in prepayments Decrease (increase) in other current assets Total changes in operating assets Increase (decrease) in financial liabilities held for trading Increase (decrease) in contract liabilities Increase (decrease) in accounts payable Increase (decrease) in other payable Increase (decrease) in receipts in advance Increase (decrease) in other current liabilities Increase (decrease) in net defined benefit liability Total changes in operating liabilities Total changes in operating assets and liabilities Total adjustments Cash inflow generated from operations Interest received Dividends received Interest paid Income taxes paid Net cash flows from (used in) operating activities Cash flows from (used in) investing activities: Acquisition of financial assets at fair value through other comprehensive income Acquisition of financial assets at cost Acquisition of investments accounted for using equity method Acquisition of property, plant and equipment Proceeds from disposal of property, plant and equipment Decrease (increase) in refundable deposits Decrease (increase) in other non-current assets Decrease (increase) in prepayments for business facilities Net cash flows used in investing activities Cash flows from (used in) financing activities: Decrease in guarantee deposits received Cash dividends paid Payments to acquire treasury shares Net cash flows 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 at beginning of period Cash and cash equivalents at end of period	2018 $ 110,786 57,010 6,725 (16,576) (10,086) - (11,989) (768) 2,466 13 10,086	2017 14,152 69,282 3,920 2,297 (9,489) 542 (8,595) (749) 1,673 133 9,489
	36,881	68,503
	3,069 (717) 13,028 (4,091) (91,607) 9,309 (1,263)	(3,069) 4,820 (67,871) 7,740 80,234 (16,034) 3,308
	(72,272)	9,128
	13 54,407 56,994 30,717 (44,300) 8,733 (1,395)	- - (47,370) (23,353) (17,958) 2,994 (1,327)
	105,169	(87,014)
	32,897	(77,886)
	69,778	(9,383)
	180,564 12,152 768 - (11,062)	4,769 8,268 749 (542) (17,752)
	182,422	(4,508)
	- - (7,342) (39,076) 326 (2,826) (3,727) (8,679)	(8,373) (51,897) (900) (62,045) 134 123 (7,932) 17,757
	(61,324)	(113,133)
	- - -	(369) (117,869) (89,837)
	-	(208,075)
	(10,359) 110,739 705,350	(44,032) (369,748) 1,075,098
	$ 816,089	705,350

See accompanying notes to financial statements.

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) POWERTECH INDUSTRIAL CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

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

(1) Company history

POWERTECH INDUSTRIAL CO., LTD. (the Company) was incorporated on November 14, 2000, as a company limited by shares under the laws of the Republic of China (R.O.C). The registered address is 10F, No. 407, Sec. 2, Chung Shan Rd., Zhonghe District, New Taipei City, Taiwan, R.O.C. The Company and its subsidiaries (the Group) are primarily engaged in the manufacturing of electronic circuit power protection devices, smart home wireless remote control devices, wired and wireless communication equipment, and electronic modules and parts, and in international trade.

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

The consolidated financial statements were approved and authorized for issuance by the Board of Directors on March 22, 2019.

(3) New standards, amendments and interpretations adopted:

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

The following new standards, interpretations and amendments have been endorsed by the FSC and are effective for annual periods beginning on or after January 1, 2018.

New, Revised or Amended Standards and Interpretations
Amendment to IFRS 2“Clarifications of Classification and Measurement of
Share-based Payment Transactions”
Amendments to IFRS 4“Applying IFRS 9 Financial Instruments with IFRS 4
Insurance Contracts”
IFRS 9“Financial Instruments”
IFRS 15“Revenue from Contracts with Customers”
Amendment to IAS 7“Statement of Cash Flows -Disclosure Initiative”
Amendment to IAS 12“Income Taxes- Recognition of Deferred Tax Assets for
Unrealized Losses”
Amendments to IAS 40“Transfers of Investment Property”
Annual Improvements to IFRS Standards 2014–2016 Cycle:
Amendments to IFRS 12
Amendments to IFRS 1 and Amendments to IAS 28
IFRIC 22“Foreign Currency Transactions and Advance Consideration”

Effective date
per IASB

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

(Continued)

POWERTECH INDUSTRIAL CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

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

(i) IFRS 15 “Revenue from Contracts with Customers”

IFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognized. It replaces the existing revenue recognition guidance, including IAS 18 “Revenue” and IAS 11 “Construction Contracts”. The Group applies this standard retrospectively with the cumulative effect, it need not restate those contracts, but instead, continues to apply IAS 11, IAS 18 and the related Interpretations for comparative reporting period. The Group recognizes the cumulative effect upon the initially application of this Standard as an adjustment to the opening balance of retained earnings on January 1, 2018.

The Group uses the practical expedients for completed contracts, which means it need not restate those contracts that have been completed on January 1, 2018.

The following are the nature and impacts on changing of accounting policies:

1) Sales of goods

For the sale of products, revenue is currently recognized when the trade terms of contracts are made, which is taken to be the point in time at which the customer accepts the goods and the related risks and rewards of ownership transfer. Revenue is recognized at this point provided that the revenue and costs can be measured reliably, the recovery of the consideration is probable and there is no continuing management involvement with the goods. Under IFRS 15, revenue will be recognized when a customer obtains control of the goods.

2) Impacts on financial statements

There are no significant impacts of adopting IFRS15 on the Group’s consolidated financial statements:

(ii) IFRS 9 “Financial Instruments”

IFRS 9 replaces IAS 39 “Financial Instruments: Recognition and Measurement” which contains classification and measurement of financial instruments, impairment and hedge accounting.

As a result of the adoption of IFRS 9, the Group adopted the consequential amendments to IAS 1 “Presentation of Financial Statements” which requires impairment of financial assets to be presented in a separate line item in the statement of profit or loss and OCI. Previously, the Group’s approach was to include the impairment of trade receivables in administrative expenses. Additionally, the Group adopted the consequential amendments to IFRS 7 Financial Instruments: Disclosures that are applied to disclosures about 2018 but generally have not been applied to comparative information.

(Continued)

POWERTECH INDUSTRIAL CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

The detail of new significant accounting policies and the nature and effect of the changes to previous accounting policies are set out below:

1) Classification of financial assets and financial liabilities

IFRS 9 contains three principal classification categories for financial assets: measured at amortized cost, fair value through other comprehensive income (FVOCI) and fair value through profit or loss (FVTPL). The classification of financial assets under IFRS 9 is generally based on the business model in which a financial asset is managed and its contractual cash flow characteristics. The standard eliminates the previous IAS 39 categories of held to maturity, loans and receivables and available for sale. Under IFRS 9, derivatives embedded in contracts where the host is a financial asset in the scope of the standard are never bifurcated. Instead, the hybrid financial instrument as a whole is assessed for classification. For an explanation of how the Group classifies and measures financial assets and accounts for related gains and losses under IFRS 9, please see note 4(g) and note 6(b).

The adoption of IFRS 9 did not have any significant impact on its accounting policies on financial liabilities.

2) Impairment of financial assets

IFRS 9 replaces the ‘incurred loss’ model in IAS 39 with the ‘expected credit loss’ (ECL) model. The new impairment model applies to financial assets measured at amortized cost, contract assets and debt investments at FVOCI, but not to investments in equity instruments. Under IFRS 9, credit losses are recognized earlier than they are under IAS 39 – please see note 4(g).

3) Transition

The adoption of IFRS 9 have been applied retrospectively, except as described below,

‧Differences in the carrying amounts of financial assets and financial liabilities resulting from the adoption of IFRS 9 are recognized in retained earnings and reserves as on January 1, 2018. Accordingly, the information presented for 2017 does not generally reflect the requirements of IFRS 9 and therefore is not comparable to the information presented for 2018 under IFRS 9.
‧The following assessments have been made on the basis of the facts and circumstances that existed at the date of initial application.
- － The determination of the business model within which a financial asset is held.
- － The designation and revocation of previous designations of certain financial assets and financial liabilities as measured at FVTPL.
- － The designation of certain investments in equity instruments not held for trading as at FVOCI.
4) Classification of financial assets on the date of initial application of IFRS 9

(Continued)

POWERTECH INDUSTRIAL CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

The following table shows the original measurement categories under IAS 39 and the new measurement categories under IFRS 9 for each class of the Group’s financial assets as of January 1, 2018.

Financial Assets Cash and equivalents Derivative instruments Equity instruments Trade and other receivables, net Other financial assets (Guarantee deposits paid)	IAS39		IFRS9	Carrying Amount 705,350 20,931 42,408 814,354 756
	Measurement categories	Carrying Amount	Measurement categories
	Loans and receivables Designated as at FVTPL Financial assets measured at cost- non current (note 1) Loans and receivables (note 2) Loans and receivables	705,350 Amortized cost 20,931 Mandatorily at FVTPL 42,408 Mandatorily at FVTPL 831,670 Amortized cost 756 Amortized cost

Note1: These equity securities (including financial assets measured at cost) represent investments that the Group intends to hold for the long term for strategic purposes. As permitted by IFRS 9, the Group has designated these investments at the date of initial application as measured at FVTPL.
Note2: Notes, trade and other receivables that were classified as loans and receivables under IAS 39 are now classified at amortized cost. An increase of $17,316 thousand in the allowance for impairment was recognized in opening retained earnings upon transition to IFRS 9 on January 1, 2018.

The following table reconciles the carrying amounts of financial assets under IAS 39 to the carrying amounts under IFRS 9 upon transition to IFRS 9 on 1 January, 2018.

2017.12.31 IAS 39 Carrying Amount $ 20,931 -	Reclassifications - 42,408	Remeasurements - -	2018.1.1 IFRS 9 Carrying Amount	2018.1.1 Retained earnings - -	2018.1.1 Other equity
					- -
$ 20,931	42,408	-	63,339	-	-
$ 42,408 -	- (42,408)	- -		- -	- -
$ 42,408	(42,408)	-	-	-	-
$ 1,537,776 -	- -	- (17,316)		- (17,316)	- -
$ 1,537,776	-	(17,316)	1,520,460	(17,316)	-

(Continued)

POWERTECH INDUSTRIAL CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

(iii) Amendments to IAS 7 “Disclosure Initiative”

The amendments require disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flow and non-cash changes.

If the Group had contents above, the Group would present a reconciliation between the opening and closing balances for liabilities with changes arising from financing activities. However, the Group is not applied to the amendments above.

(iv) Amendments to IAS 12 “Recognition of Deferred Tax Assets for Unrealized Loss”

The amendments clarify the accounting for deferred tax assets for unrealized losses on debt instruments measured at fair value.

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

The following new standards, interpretations and amendments have been endorsed by the FSC and are effective for annual periods beginning on or after January 1, 2019 in accordance with Ruling No. 1070324857 issued by the FSC on July 17, 2018:

New, Revised or Amended Standards and Interpretations
IFRS 16“Leases”
IFRIC 23“Uncertainty over Income Tax Treatments”
Amendments to IFRS 9“Prepayment features with negative compensation”
Amendments to IAS 19“Plan Amendment, Curtailment or Settlement”
Amendments to IAS 28“Long-term interests in associates and joint ventures”
Annual Improvements to IFRS Standards 2015–2017 Cycle

Effective date
per IASB

January 1, 2019
January 1, 2019
January 1, 2019
January 1, 2019
January 1, 2019
January 1, 2019

(i) IFRS 16“Leases”

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

IFRS 16 introduces a single and an on-balance sheet lease accounting model for lessees. A lessee recognizes a right-of-use asset representing its right to use the underlying asset and a lease liability representing its obligation to make lease payments. In addition, the nature of expenses related to those leases will now be changed since IFRS 16 replaces the straight-line operating lease expense with a depreciation charge for right-of-use assets and interest expense on lease liabilities. There are recognition exemptions for short-term leases and leases of low-value items. The lessor accounting remains similar to the current standard – i.e. the lessors will continue to classify leases as finance or operating leases.

(Continued)

POWERTECH INDUSTRIAL CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

1) Determining whether an arrangement contains a lease

On transition to IFRS 16, the Group can choose to apply either of the following:

‧ IFRS 16 definition of a lease to all its contracts; or
‧ a practical expedient that does not need any reassessment whether a contract is, or contains, a lease.

The Group plans to apply the practical expedient to grandfather the definition of a lease upon transition. This means that it will apply IFRS 16 to all contracts entered into before January 1, 2019 and identified as leases in accordance with IAS 17 and IFRIC 4.

2) Transition

As a lessee, the Group can apply the standard using either of the following:

‧ retrospective approach; or
‧ modified retrospective approach with optional practical expedients.

The lessee applies the election consistently to all of its leases.

On January 1, 2019, the Group plans to initially apply IFRS 16 using the modified retrospective approach. Therefore, the cumulative effect of adopting IFRS 16 will be recognized as an adjustment to the opening balance of retained earnings at January 1, 2019, with no restatement of comparative information.

When applying the modified retrospective approach to leases previously classified as operating leases under IAS 17, the lessee can elect, on a lease-by-lease basis, whether to apply a number of practical expedients on transition. The Group chooses to elect the following practical expedients:

‧ apply a single discount rate to a portfolio of leases with similar characteristics.
‧ adjust the right-of-use assets, based on the amount reflected in IAS 37 onerous contract provision, immediately before the date of initial application, as an alternative to an impairment review.
‧ apply the exemption not to recognize the right-of-use assets and liabilities to leases with lease term that ends within 12 months of the date of initial application.
‧ exclude the initial direct costs from measuring the right-of-use assets at the date of initial application.
‧ use hindsight when determining the lease term if the contract contains options to extend or terminate the lease.

(Continued)

POWERTECH INDUSTRIAL CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

3) So far, the most significant impact identified is that the Group will have to recognize the new assets and liabilities for its operating leases of offices, warehouses, and factory facilities.The Group estimated that the right of use assets and the lease liabilities to increase both by $83,847 thousand on January 1, 2019. Besides, The Group does not expect the adoption of IFRS 16 to have any impact on its ability to comply with the revised maximum leverage threshold loan covenant.
(ii) IFRIC 23 Uncertainty over Income Tax Treatments

In assessing whether and how an uncertain tax treatment affects the determination of taxable profit (tax loss), tax bases, unused tax losses, unused tax credits, as well as tax rates, an entity shall assume that a taxation authority will examine the amounts it has the right to examine and have a full knowledge on all related information when making those examinations.

If an entity concludes that it is probable that the taxation authority will accept an uncertain tax treatment, the entity shall determine the taxable profit (tax loss), tax bases, unused tax losses, unused tax credits, as well as tax rates consistently with the tax treatment used or planned to be used in its income tax filings. Otherwise, an entity shall reflect the effect of uncertainty for each uncertain tax treatment by using either the most likely amount or the expected value, depending on which method the entity expects to better predict the resolution of the uncertainty.

The actual impacts of adopting the standards may change depending on the economic conditions and events which may occur in the future.

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

Board (IASB), but have yet to be endorsed by the FSC:
New, Revised or Amended Standards and Interpretations Amendments to IFRS 3“Definition of a Business” Amendments to IFRS 10 and IAS 28“Sale or Contribution of Assets Between an Investor and Its Associate or Joint Venture” IFRS 17“Insurance Contracts” Amendments to IAS 1 and IAS 8“Definition of Material”	Effective date per IASB
	January 1, 2020 Effective date to be determined by IASB January 1, 2021 January 1, 2020

(Continued)

POWERTECH INDUSTRIAL CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

Those which may be relevant to the Group are set out below:

Issuance / Release Dates October 31, 2018	Standards or Interpretations Amendments to IAS 1 and IAS 8“Definition of Material”	Content of amendment
		The amendments clarify the definition of material and how it should be applied by including in the definition guidance that until now has featured elsewhere in IFRS Standards. In addition, the explanations accompanying the definition have been improved. Finally, the amendments ensure that the definition of material is consistent across all IFRS Standards.

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

(4) Summary of significant accounting policies:

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

The significant accounting policies presented in the consolidated financial statements are summarized as follows. Except for those specifically indicated in note 3, notes 4(g) and 4(n), the following accounting policies have been applied consistently to all periods presented in the consolidated financial statements.

(a) Statement of compliance

These consolidated financial statements have been prepared in accordance with the “Regulations Governing the Preparation of Financial Reports by Securities Issuers” (hereinafter referred to as “the Regulations”) and the International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations and SIC Interpretations endorsed by the FSC (hereinafter referred to as the IFRS endorsed by the FSC”).

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

Except for the following significant accounts, the consolidated financial statements have been prepared on a historical cost basis:

1) Financial instruments measured at fair value through profit or loss are measured at fair value;
2) The defined benefit liability (asset) is recognized as the fair value of the plan assets less the present value of the defined benefit obligation and the effect of the asset ceiling mentioned in note 4(o).

(Continued)

POWERTECH INDUSTRIAL CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

(ii) Functional and presentation currency

The functional currency of each Group entity is determined based on the primary economic environment in which the entity operates. The consolidated financial statements are presented in New Taiwan Dollars, which is the Company ’ s functional currency. All financial information presented in New Taiwan Dollars has been rounded to the nearest thousand.

Principles of preparation of the consolidated financial statements

The consolidated financial statements comprise the Company and its subsidiaries. The financial statements of the subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

Intra-group balances and transactions, and any unrealized income and expenses arising from intra-group transactions are eliminated in preparing the consolidated financial statements.

Subsidiaries' financial reports have been adjusted so that their accounting policies are consistent with the Group's.

Changes in the Group’s ownership interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions.

(i) List of subsidiaries included in the consolidated financial statements:

Name of investor The Company The Company The Company The Company DIGITAL DIGITAL BEST	Name of subsidiary DIGITAL WORLD INC. (DIGITAL) OPPORTUNIST INTL CO., LTD. (OPPORTUNIST) HURRAY CLOUD TECHNOLOGY CO., LTD (HURRAY CLOUD TECHNOLOGY) DE YAN MANAGEMENT CONSULTING CO., LTD (DE YAN MANAGEMENT) BEST WISDOM LIMITED (BEST) TREASURE LUCK LTD. (TREASURE) SURGELION INTL LTD. (SURGELION)	Principal activity Investing company Investing company Trading and leasing company Management consulting Investing company Trading company Investing company	Shareholding	Shareholding
			December 31, 2018 100% 100% 100% 100% 100% 100% 100%	December 31, 2017
				100% 100% 100% 100% 100% 100% 100%

(Continued)

POWERTECH INDUSTRIAL CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

Name of investor SURGELION OPPORTUNIST OPPORTUNIST TOTAL DONGGUAN QUAN SHENG	Name of subsidiary DONGGUAN QUAN SHENG ELECTRIC CO., LTD. (DONGGUAN QUAN SHENG) TOTAL PLUS INTL LTD. (TOTAL) PERFECT SKY INTL CO., LTD. (PERFECT)) DONGGUAN FU JU ELECTRIC CO., LTD. (DONGGUAN FU JU) DONGGUAN KANGCHI TRADING LTD. (DONGGUAN KANGCHI)	Principal activity Manufacture and sales of power outlets, wire, cable and power cord, and providing after-sales service Investing company Trading company Manufacture and sales of power cord, wire, plastic covers, circuit board modules, radios and power outlets Sales of electrical appliances, power outlets, wire, cable and computer peripherals	Shareholding	Shareholding
			December 31, 2018 100% 100% 100% 100% 100%	December 31, 2017
				100% 100% 100% 100% 100%

(ii) Subsidiaries excluded from the consolidated financial statements: None.
(d) Foreign currency
(i) Foreign currency transactions

Transactions in foreign currencies are translated to the respective functional currencies of the Group entities at the exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortized cost in the functional currency at the beginning of the year adjusted for the effective interest and payments during the year, and the amortized cost in foreign currency translated at the exchange rate at the end of the year.

Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Non-monetary items in a foreign currency that are measured based on historical cost are translated using the exchange rate at the date of the transaction.

Foreign currency differences arising on retranslation are recognized in profit or loss except for the translation of foreign currency in the financial statements into the Group’s functional currency, which is recognized in other comprehensive income:

1) Non-monetary equity investment of fair value through other comprehensive income;
2) Qualifying cash flow hedges to the extent that the hedge is effective.

(Continued)

POWERTECH INDUSTRIAL CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

(ii) Foreign operations

The assets and liabilities of foreign operations are translated to the reporting currency at the exchange rates at the reporting date. The income and expenses of foreign operations are translated at the average exchange rate. Translation differences are recognized in other comprehensive income, and presented in the foreign currency translation reserve in equity.

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

(e) Classification of current and non current assets and liabilities

An asset is classified as current under one of the following criteria, and all other assets are classified as noncurrent.

(i) It is expected to be realized, or intended to be sold or consumed, in the normal operating cycle;
(ii) It is held primarily for the purpose of trading;
(iii) It is expected to be realized within twelve months after the reporting period; or
(iv) The asset is cash or a cash equivalent (as defined in IAS 7) unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.

A liability is classified as current under one of the following criteria, and all other liabilities are classified as noncurrent.

The Group shall classify a liability as current when:

(i) It is expected to be settled in the normal operating cycle;
(ii) It is held primarily for the purpose of trading;
(iii) It is due to be settled within twelve months after the reporting period; or
(iv) It 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 issuing equity instruments do not affect its classification.
(f) Cash and cash equivalents

Cash and cash equivalents include cash on hand and savings accounts. Cash equivalents consist of highly liquid investments that are readily convertible to known amounts of cash and are will mature within a short period so that rate fluctuations have little effect their values.

(Continued)

POWERTECH INDUSTRIAL CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose of the consolidated statement of cash flows.

(g) Financial instruments
(i) Financial assets (applicable from January 1, 2018)

Financial assets are classified into the following categories: measured at amortized cost, and fair value through profit or loss (FVTPL).

The Group shall reclassify all affected financial assets only when it changes its business model for managing its financial assets.

1) Financial assets measured at amortized cost

A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated as at FVTPL:

‧it is held within a business model whose objective is to hold assets to collect contractual cash flows; and
‧its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

A financial asset measured at amortized cost is initially recognized at fair value, plus any directly attributable transaction costs. These assets are subsequently measured at amortized cost using the effective interest method. The amortized cost is reduced by impairment losses. Interest income, foreign exchange gains and losses, and impairment loss, are recognized in profit or loss. Any gain or loss on derecognition is recognized in profit or loss.

2) Fair value through profit or loss (FVTPL)

All financial assets not classified as amortized cost or FVOCI described as above are measured at FVTPL, including derivative financial assets and accounts receivable (except for those presented as accounts receivable but measured at FVTPL). On initial recognition, the Group may irrevocably designate a financial asset, which meets the requirements to be measured at amortized cost or at FVOCI, as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

Financial assets in this category are measured at fair value at initial recognition. Attributable transaction costs are recognized in profit or loss as incurred. Subsequent changes that are measured at fair value, which take into account any dividend and interest income, are recognized in profit or loss.

(Continued)

POWERTECH INDUSTRIAL CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

3) Impairment of financial assets

The Group recognizes loss allowances for expected credit losses on financial assets measured at amortized cost (including cash and cash equivalents, notes and accounts receivable, other receivable, guarantee deposit paid and other financial assets).

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

‧debt securities that are determined to have low credit risk at the reporting date; and
‧other debt securities and bank balances for which credit risk (i.e. the risk of default occurring over the expected life of the financial instrument) has not increased significantly since initial recognition.

Loss allowance for trade receivables and contract assets are always measured at an amount equal to lifetime ECL.

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

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

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

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

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

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

‧significant financial difficulty of the borrower or issuer;
‧a breach of contract such as a default or being past due;

(Continued)

POWERTECH INDUSTRIAL CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

‧the lender of the borrower, for economic or contractual reasons relating to the borrower's financial difficulty, having granted to the borrower a concession that the lender would not otherwise consider;
‧it is probable that the borrower will enter bankruptcy or other financial reorganization; or
‧the disappearance of an active market for a security because of financial difficulties.

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

The gross carrying amount of a financial asset is written off to the extent that there is no realistic prospect of recovery. This is generally the case when the Group determines that the debtor does not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject to the write-off. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Group’s procedures for recovery of amounts due.

4) Derecognition of financial assets

Financial assets are derecognized when the contractual rights to the cash flows from the assets expire, or when the Group transfers substantially all the risks and rewards of ownership of the financial assets.

(ii) Financial assets (policy applicable before January 1, 2018)

Financial assets are classified into the following categories: financial assets at fair value through profit or loss and loans and receivables.

1) Financial assets at fair value through profit or loss

Financial assets are classified as held for trading if they are acquired principally for the purpose of selling in the short term. Financial assets in this category are measured at fair value at initial recognition. Attributable transaction costs are recognized in profit or loss as incurred. Financial assets at fair value through profit or loss are measured at fair value, and changes therein are recognized in profit or loss. A regular way purchase or sale of financial assets is recognized and derecognized, as applicable, using trade date accounting.

2) Loans and receivables

Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognized initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, loans and receivables other than insignificant interest on short term receivables are measured at amortized cost using the effective interest method, less any impairment losses. A regular way purchase or sale of financial assets is recognized and derecognized, as applicable, using trade date accounting. Interest income is recognized in non-operating income and expenses.

(Continued)

POWERTECH INDUSTRIAL CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

3) Impairment of financial assets

Except for financial assets at fair value through profit or loss, financial assets are assessed for impairment at each reporting date. A financial asset is impaired if, and only if, there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset that can be estimated reliably.

Objective evidence that financial assets are impaired includes default or delinquency by a debtor, restructuring of an amount due to the Group on terms that the Group would not consider otherwise, indications that a debtor or issuer will enter bankruptcy, adverse changes in the payment status of borrowers or issuers, economic conditions that correlate with defaults or the disappearance of an active market for a security. In addition, for an investment in an equity security, a significant or prolonged decline in its fair value below its cost is considered objective evidence of impairment.

All individually significant receivables are assessed for specific impairment. Receivables that are not individually significant are collectively assessed for impairment by grouping together assets with similar risk characteristics. In assessing collective impairment, the Group uses historical trends of the probability of default, the timing of recoveries and the amount of loss incurred, adjusted for management’s judgment as to whether current economic and credit conditions are such that the actual losses are likely to be greater or less than the those suggested by historical trends.

An impairment loss in respect of a financial asset measured at amortized cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the asset’s original effective interest rate.

An impairment loss in respect of a financial asset is deducted from the carrying amount except for accounts receivable, for which an impairment loss is reflected in an allowance account against the receivables. When it is determined a receivable is uncollectible, it is written off from the allowance account. Changes in the amount of the allowance account are recognized in profit or loss.

Impairment losses and recoveries of accounts receivable are recognized in operating expenses.

4) Derecognition of financial assets

Financial assets are derecognized when the contractual rights of the cash inflow from the assets are terminated, or when the Group transfers substantially all the risks and rewards of ownership of the financial assets.

On derecognition of a financial asset in its entirety, the difference between the carrying amount and the sum of the consideration received or receivable and any cumulative gain or loss that had been recognized in other comprehensive income and presented in “other equity – unrealized gains or losses on available-for-sale financial assets” in profit or loss is recognized in non-operating income and expenses.

(Continued)

POWERTECH INDUSTRIAL CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

The Group separates the part that continues to be recognized and the part that is derecognized based on the relative fair values of those parts on the date of the transfer. The difference between the carrying amount allocated to the part derecognized and the sum of the consideration received for the part derecognized, and any cumulative gain or loss allocated to it that had been recognized in other comprehensive income, shall be recognized in profit or loss.

(iii) Financial liabilities and equity instruments
1) Financial liabilities at fair value through profit or loss

A financial liability is classified in this category if it is classified as held for trading or is designated as such on initial recognition. Attributable transaction costs are recognized in profit or loss as incurred. Financial liabilities at fair value through profit or loss are measured at fair value, and changes therein, which take into account any interest expense, are recognized in other gains and losses and finance cost under non-operating income and expenses.

2) Other financial liabilities

Financial liabilities not classified as held for trading or designated as at fair value through profit or loss, which comprise loans and borrowings, and other payables, are measured at fair value, plus any directly attributable transaction costs at the time of initial recognition. Subsequent to initial recognition, they are measured at amortized cost calculated using the effective interest method.

3) Derecognition of financial liabilities

The Group derecognizes a financial liability when its contractual obligation has been discharged or cancelled, or has expired. The difference between the carrying amount of a financial liability removed and the consideration paid (including any non-cash assets transferred or liabilities assumed) is recognized in profit or loss, and is included in non-operating income or expenses.

4) Offsetting of financial assets and liabilities

The Group presents financial assets and liabilities on a net basis when the Group has the legally enforceable right to offset, and intends to settle such financial assets and liabilities on a net basis, or to realize the assets and settle the liabilities simultaneously.

(iv) Derivative financial instruments

Embedded derivatives are separated from the host contract and accounted for separately when the economic characteristics and risk of the host contract and the embedded derivatives are not closely related.

(Continued)

POWERTECH INDUSTRIAL CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(h) Inventories

The cost of inventories includes expenditure incurred in acquiring the inventories, production or conversion costs, and other costs incurred in bringing them to their existing location and condition. The cost of inventories includes an appropriate share of fixed production overhead based on normal capacity and allocated variable production overhead based on actual output. However, unallocated fixed production overhead arising from lower or idle capacity is recognized in cost of goods sold during the period. If actual capacity is higher than normal capacity, fixed production overhead should be allocated based on actual capacity. The method of valuing inventories is the weighted-average method.

Inventories are measured at the lower of cost or net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses at the end of the period. When the cost of inventories is higher than the net realizable value, inventories are written down to net realizable value, and the write-down amount is charged to current year’s cost of goods sold. If net realizable value increases in the future, the cost of inventories is reversed within the original write-down amount, and such reversal is treated as a reduction of cost of goods sold.

(i)

Investment in associates

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

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

The consolidated financial statements include the Group’s share of the profit or loss and other comprehensive income of equity-accounted investees, after adjustments, to align their accounting policies with those of the Group, from the date that significant influence commences until the date that significant influence ceases. The Group recognizes any changes, proportionately with the shareholding ratio under additional paid in capital, when an associate’s equity changes due to reasons other than profit or loss or comprehensive income, which did not result in changes in actual controlling power.

Unrealized profits resulting from transactions between the Group and an associate are eliminated to the extent of the Group’s interest in the associate. Unrealized losses on transactions with associates are eliminated in the same way, except to the extent that the underlying asset is impaired.

When the Group’s share of losses exceeds its interests in an associate, the carrying amount of the investment, including any long term interests that form part thereof, is reduced to zero, and the recognition of further losses is discontinued except to the extent the Group has an obligation or has made payments on behalf of the associate.

(j) Property, plant, and equipment

(i) Recognition and measurement

Items of property, plant and equipment are measured at cost, less accumulated depreciation and

(Continued)

POWERTECH INDUSTRIAL CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

accumulated impairment losses. Cost includes expenditure that is directly attributed to the

(Continued)

POWERTECH INDUSTRIAL CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

acquisition of the asset, and any borrowing cost that is eligible for capitalization.

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 shall be depreciated separately unless the useful life and depreciation method of that significant part are the same as those of another significant part of that same item.

The gain or loss arising from the derecognition of an item of property, plant and equipment is determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item, and it shall be recognized in profit or loss, under net other income and expenses.

(ii) Subsequent cost

Subsequent expenditure is capitalized only when it is probable that the future economic benefits associated with the expenditure will flow to the Group. The carrying amount of those parts that are replaced is derecognized. Ongoing repairs and maintenance are expensed as incurred.

(iii) Depreciation

Depreciation is calculated on the cost of an asset less its residual value and is recognized in profit or loss on a straight line basis over the estimated useful lives of each component of an item of property, plant and equipment. Items of property, plant and equipment with the same useful life may be grouped in determining the depreciation charge. The remainder of the items may be depreciated separately. The depreciation charge for each period shall be recognized in profit or loss.

Leased assets are depreciated by using the straight line method during the period of expected use, consistent with the depreciation policy the lessee adopts for depreciable assets that are owned. If there is reasonable certainty that the lessee will obtain ownership by the end of the lease term, the period of expected use is the useful life of the asset; otherwise, the asset is depreciated over the shorter of the lease term and its useful life.

Land has an unlimited useful life and therefore is not depreciated.

The estimated useful lives, for the current and comparative years, of significant items of property, plant and equipment are as follows:

Buildings	3~50 years
Research and development equipment	2~10 years
Transportation equipment	5~10 years
Office equipment	1~ 5 years
Molding equipment	3~ 5 years
Machinery	3~10 years
Other equipment	3~10 years

(Continued)

POWERTECH INDUSTRIAL CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

Depreciation methods, useful lives, and residual values are reviewed at each reporting date. If expectations differ from the previous estimates, the changes are accounted for as changes in accounting estimate.

(k) Leases

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

Other leases are operating leases and are not recognized in the Group’s statement of financial position. Payments made under an operating lease (excluding insurance and maintenance expenses) are recognized in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognized as an integral part of the total lease expense over the term of the lease. Any benefit provided by the lessor to enter into the lease is accounted for as a reduction of lease expense on a straight-line basis.

(l) Impairment of non-financial assets

The carrying amounts of the Group’s non financial assets, other than assets arising from inventories, deferred tax assets, and assets arising from employee benefits, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. If it is not possible to determine the recoverable amount (the higher of its fair value less costs of disposal and its value in use) for the individual asset, then the Group will have to determine the recoverable amount for the asset’s cash generating unit.

The recoverable amount for an individual asset or a cash-generating unit is the higher of its fair value, less costs to sell, and its value in use. If, and only if, the recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset shall be reduced to its recoverable amount. That reduction is an impairment loss. An impairment loss shall be recognized immediately in profit or loss.

An assessment is made at the end of each reporting period as to whether there is any indication that an impairment loss recognized in prior periods for an asset other than goodwill may no longer exist or may have decreased. An impairment loss recognized in prior periods for an asset other than goodwill shall be reversed if, and only if, there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognized. If this is the case, the carrying amount of the asset shall be increased to its recoverable amount. That increase is a reversal of an impairment loss.

(m) Treasury stock

Repurchased shares are recognized under treasury shares (a contra-equity account) based on their repurchase price (including all directly accountable costs), net of tax. Gains on disposal of treasury shares should be recognized under “capital reserve – treasury share transactions”. Losses on disposal of treasury shares should be offset against existing capital reserves arising from similar types of treasury shares. If there are insufficient capital reserves to be offset against, then such losses should be accounted for under retained earnings. The carrying amount of treasury shares should be

(Continued)

POWERTECH INDUSTRIAL CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

calculated using the weighted average of different types of repurchase.

During the cancellation of treasury shares, “capital reserve – share premiums” and “share capital” should be debited proportionately. Gains on cancellation of treasury shares should be recognized under existing capital reserves arising from similar types of treasury shares; losses on cancellation of treasury shares should be offset against existing capital reserves arising from similar types of treasury shares. If there are insufficient capital reserves to be offset against, then such losses should be accounted for under retained earnings.

(n) Revenue

(i) Revenue from contracts with customers (applicable from January 1, 2018)

Revenue is measured based on the consideration to which the Group expects to be entitled in exchange for transferring goods or services to a customer. The Group recognizes revenue when it satisfies a performance obligation by transferring control of a good or a service to a customer. The accounting policies for the Group’s main types of revenue are explained below.

i) Sale of goods

The Group is primarily engaged in the manufacturing of electronic circuit power protection devices, smart home wireless remote control devices, wired and wireless communication equipment, and electronic modules and parts and in the sales to customers. The Group recognizes revenue when control of the products has transferred, being when the products are delivered to the customer, the customer has full discretion over the channel and price to sell the products, and there is no unfulfilled obligation that could affect the customer’s acceptance of the products. Delivery occurs when the products have been shipped to the specific location, the risks of obsolescence and loss have been transferred to the customer, and either the customer has accepted the products in accordance with the sales contract, the acceptance provisions have lapsed, or the Group has objective evidence that all criteria for acceptance have been satisfied.

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

ii) Financing components

The Group does not expect to have any contracts where the period between the transfer of the promised goods or services to the customer and payment by the customer exceeds one year. As a consequence, the Group does not adjust any of the transaction prices for the time value of money.

(ii) Revenue (policy applicable before January 1, 2018)

Revenue from the sale of goods in the course of ordinary activities is measured at the fair value of the consideration received or receivable, net of returns, trade discounts, and volume rebates. Sales revenue is recognized when the goods has delivered and the significant risks and rewards of ownership have been transferred to the customer. Revenue from rendering service is recognized when services are completed and the amount of revenue can be measured reliably. Revenue from the transfer of assets from customers should be recognized immediately when the customer has contracted with the Group to obtain goods or services that are an output of

(Continued)

POWERTECH INDUSTRIAL CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

the Group’s ordinary activities in exchange for consideration. If the agreement does not specify a period, the revenue shall be recognized over a period no longer than the useful life of the transferred asset used to provide the ongoing service.

(o) Employee benefits

(i) Defined contribution plans

Obligations for contributions to defined contribution pension plans are recognized as an employee benefit expense in profit or loss in the periods during which services are rendered by employees.

(ii) Defined benefit plans

A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The Group’s net obligation in respect of defined benefit pension plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value. Any unrecognized past service costs and the fair value of any plan assets are deducted. The discount rate is the yield at the reporting date on government bonds that have maturity dates approximating the terms of the Group’s obligations and that are denominated in the same currency in which the benefits are expected to be paid.

The calculation is performed annually by a qualified actuary using the projected unit credit method. If the calculation results in a benefit to the Group, the recognized asset is limited to the total of any unrecognized past service costs and the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. In order to calculate the present value of economic benefits, consideration is given to any minimum funding requirements that apply to any plan in the Group. An economic benefit is available to the Group if it is realizable during the life of the plan, or on settlement of the plan liabilities.

If the benefits of a plan are improved, the expense of the portion of the increased benefit relating to past service by employees, is recognized immediately in profit or loss.

Remeasurements of the net defined benefit liability (asset), which comprise (1) actuarial gains and losses, (2) the return on plan assets (excluding interest), and (3) the effect of the asset ceiling (if any, excluding interest), are recognized immediately in other comprehensive income. The Group reclassifies the amounts recognized in other comprehensive income to retained earnings.

(iii) Short term employee benefits

Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as related service is provided.

A liability is recognized for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee, and the obligation can be estimated reliably.

(Continued)

POWERTECH INDUSTRIAL CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(p) Income taxes

Income tax expenses include both current taxes and deferred taxes. Except for expenses related to business combinations or recognized directly in equity or other comprehensive income, all current and deferred taxes shall be recognized in profit or loss.

Current taxes include tax payables and tax deduction receivables on taxable gains (losses) for the year calculated using the statutory tax rate on the reporting date or the actual legislative tax rate, as well as tax adjustments related to prior years.

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

(i) Assets and liabilities that are initially recognized but are not related to the business combination and have no effect on net income or taxable gains (losses) arising from the transaction.
(ii) Temporary differences arising from equity investments in subsidiaries or joint ventures where there is a high probability that such temporary differences will not reverse.

Deferred tax assets and liabilities shall be measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, based on tax rates that have been enacted or substantively enacted by the end of the reporting period.

Deferred tax assets and liabilities may be offset against each other if the following criteria are met:

(i) The entity has the legal right to settle tax assets and liabilities on a net basis; and
(ii) The taxing of deferred tax assets and liabilities fulfills one of the scenarios below:
1) levied by the same taxing authority; or
2) levied by different taxing authorities, but where each such authority intends to settle tax assets and liabilities (where such amounts are significant) on a net basis every year of the period of the expected asset realization or debt liquidation, or where the timing of asset realization and debt liquidation is matched.

A deferred tax asset is recognized for the carry forward of unused tax losses, unused tax credits, and deductible temporary differences to the extent that it is probable that future taxable profit will be available against which the unused tax losses, unused tax credits, and deductible temporary differences can be utilized. Such unused tax losses, unused tax credits, and deductible temporary differences are also revaluated every year on the financial reporting date, and adjusted based on the probability that future taxable profit will be available against which the unused tax losses, unused tax credits, and deductible temporary differences can be utilized.

(q) Earnings per share

The Group discloses the Company’s basic and diluted earnings per share attributable to ordinary shareholders of the Company. The calculation of basic earnings per share is the profit attributable to ordinary shareholders of the Company divided by the weighted-average number of ordinary shares outstanding. The calculation of diluted earnings per share is the profit attributable to ordinary

(Continued)

POWERTECH INDUSTRIAL CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

shareholders of the Company divided by the weighted-average number of ordinary shares ’ outstanding after adjustment for the effects of all potentially dilutive ordinary shares. The Group s potentially dilutive ordinary shares comprise accrued employee bonuses and employee stock options.

(r) Operating segments

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the Group). Operating results of the operating segment are regularly reviewed by the Group’s chief operating decision maker to make decisions about resources to be allocated to the segment and to assess its performance. Each operating segment consists of standalone financial information.

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

The preparation of the consolidated financial statements, in conformity with the IFRSs endorsed by the FSC, requires management to make judgments, estimates, and assumptions that affect the application of the accounting policies and the reported amount of assets, liabilities, income, and expenses. Actual results may differ from these estimates.

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

There are no critical judgment in applying the accounting policies that have significant effect on the amounts recognized in the consolidated financial statements.

Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment within the next financial year is as follows:

(a) Impairment of trade receivable

The Group has estimated the loss allowance of trade receivable that is based on the risk of a default occurring and the rate of expected credit loss. The Group has considered historical experience, current economic conditions and forward-looking information at the reporting date to determine the assumptions to be used in calculating the impairments and the selected inputs. The relevant assumptions and input values, please refer to note 6(d).

(b) Valuation of inventories

As inventories are stated at the lower of cost or net realizable value. The Group estimates the net realizable value of inventories for normal spoilages, obsolescence and unmarketable items at the end of the reporting period and then writes down the cost of inventories to net realizable value. The net realizable value of the inventory is mainly determined based on assumptions as to future demand within a specific time horizon. Due to the rapid industrial transformation, there may be significant changes in the net realizable value of inventories. Please refer to note 6(e) for further description on valuation of inventories.

The Group’s accounting policies include measuring financial and non-financial assets and liabilities

(Continued)

POWERTECH INDUSTRIAL CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

at fair value through profit or loss.

The Group’s financial instrument valuation group conducts independent verification on fair value by using data sources that are independent, reliable, and representative of exercise prices. This financial instrument valuation group also periodically adjusts valuation models, conducts back-testing, renews input data for valuation models, and makes all other necessary fair value adjustments to assure the rationality of fair value. The Group strives to use market observable inputs when measuring assets and liabilities. Different levels of the fair value hierarchy to be used in determining the fair value of financial instruments are as follows:

Level 1: quoted prices (unadjusted) in active markets for identifiable assets or liabilities.

Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (ie as prices) or indirectly (ie derived from prices).

Level 3: inputs for the assets or liability that are not based on observable market data.

For any transfer within the fair value hierarchy, the impact of the transfer is recognized on the reporting date. Please refer to Note 6(q) for assumptions used in measuring fair value.

(6) Explanation of significant accounts:

(a) Cash and cash equivalents

Cash and cash equivalents
Cash on hand Demand deposits Time deposits Foreign currency deposits Cash equivalents－Reverse Repurchase Agreement	December 31, 2018 $ 1,227 72,168 471,867 146,815 124,012	December 31, 2017 912 123,680 389,472 161,526 29,760
	$ 816,089	705,350

Please refer to note 6(q) for interest rate risk, and sensitivity analysis of the financial assets and liabilities of the Group.

(b) Financial instruments
(i) Financial assets at fair value through profit or loss- current

Forward exchange contracts Stock options Foreign unlisted shares	December 31, 2018 $ - 27,948 32,322	December 31, 2017 3,069 17,862 -
	$ 60,270	20,931

In order to enhance the relationship between the Group and the clients, the Group purchased

(Continued)

POWERTECH INDUSTRIAL CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

the stocks of one of its major sales clients, TRICKLESTAR LIMITED, from a non-related party, CIRCLEBRIGHT LIMITED. This investment includes three stock options.

As of December 31, 2018, all the call options are not executed and are invalid. In addition, this investment contains three reverse repos. The Group can demand CIRCLEBRIGHT LIMITED repurchase the stocks at initial price, if one of the agreements happen. Agreements are as follows: (1) EPS each year is lower than USD$1.00. (2) Fail to pass the IPO in five years. (3) IPO price is lower than the 110% of average subscription price.

The Group recognized the profit of stock options as FVTPVL at $10,086 thousand and the loss of foreign unlisted shares as impairment loss on financial assets at $10,086 thousand on December 31, 2018.

The Group received cash dividends from TRICKLESTAR LIMITED during 2018 and 2017 as $768 thousand and $749 thousand respectively.

Financial assets above are not pledged.

Please refer to note 6(q) for the aforementioned financial instruments’ exposure to credit risk, foreign currency risk, and interest rate risk.

(ii) Financial liabilities at fair value through profit or loss-current

Derivative instrument-Forward exchange contracts	December 31, 2018 $ 13	December 31, 2017
		-

The Group uses derivative financial instruments to hedge foreign exchange risk and interest risk the Group is exposed to, arising from its operating, financing, and investing activities. As of December 31, 2018 and 2017, the Group held the following derivative financial instruments not designated as hedging instruments:

Forward exchange contracts:

December 31, 2018	December 31, 2018	December 31, 2018
Contract Amount (in thousands) Currency Maturity Period USD1,000/CNY30,736 USD to NTD 2019.01.04 December 31, 2017		Maturity Period
Contract Amount (in thousands) USD5,000/CNY33,471	Currency USD to CNY	Maturity Period
		2018.03.26~2018.05.14

For the years ended 2018 and 2017, the Group has recognized profit or loss on financial assets as $(859) thousand and $2,186 thousand respectively, which were recognized under other gains or losses.

(Continued)

POWERTECH INDUSTRIAL CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

Financial assets at cost, non-current Foreign unlisted shares	December 31, 2017 $ 42,408

The Group reclassified the financial assets measured at cost to financial assets at FVTPL on December 31, 2018, as it does not have a quoted price in an active market and it's fair value can not be reliably measured.

The investments were accounted originally for Financial assets at cost as $51,897 thousand and Financial assets at FVTPL $8,373 thousand respectively. The Group has appointed the independent expert to revaluate the financial assets above. By the experts' report on December 29, 2017, the Group recognized the gain of financial assets at FVTPL as $9,489 thousand and the impairment loss of Financial assets at cost at $9,489 thousand by option pricing on December 31, 2017.

Financial assets above are not pledged.

(d) Notes and accounts receivable, and other receivables

Notes receivable- operations Accounts receivables- at amortized cost Less: allowance for doubtful accounts	December 31, 2018 $ 1,899 814,629 (6,590)	December 31, 2017 1,182 827,660 (5,853)
	$ 809,938	822,989

The Group applies the simplified approach to provide for its expected credit losses, i.e. the use of lifetime expected loss provision for all receivables on December 31, 2018. To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and the days past due, as well as incorporated forward looking information. The loss allowance provision as of December 31, 2018 was determined as follows:

Current 1 to 30 days past due 31 to 60 days past due 61 to 90 days past due 91 to 120 days past due 121 to 150 days past due More than 180 days past due	Gross carrying amount $ 628,231 152,270 30,377 81 671 520 4,378	Weighted-ave rage loss rate	Loss allowance provision 42 1,580 489 2 31 68 4,378
		0.01% 1.04% 1.61% 2.67% 4.66% 13.02% 100%
	$ 816,528		6,590

As of December 31, 2017, the Group applied the incurred loss model to consider the loss allowance

(Continued)

POWERTECH INDUSTRIAL CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

provision of notes and trade receivable, and the aging analysis of notes and trade receivable, which were past due but not impaired, was as follows:

Past due 1 to 60 days Past due 61 to 180 days Past due 181 to 365 days Past due over a year	December 31, 2017 177,826 105,512 250 1,157
	284,745

The movement in the allowance for notes and trade receivable was as follows:

2018 5,853 17,316	2017 Individually assessed impairment Collectively assessed impairment 3,537 - 2,297 - - - 19 -	2017 Individually assessed impairment Collectively assessed impairment 3,537 - 2,297 - - - 19 -
	Individually assessed impairment 3,537 2,297 - 19
23,169 - (16,576) (3)
$ 6,590	5,853	-

The Group entered into an accounts receivables factoring agreement without recourse with a financial institution. As of December 31, 2018 and 2017, the Group has submitted bank invoices amounting to $0 and $2,208 thousand respectively. The group still owns the risk and reward of accounts receivables. Therefore, the Group will not derecognize the accounts receivables.

(e) Inventories

Raw materials Work in process Finished goods	December 31, 2018	December 31, 2017 124,249 101,588 32,158
	$ 132,802 128,190 88,610
	$ 349,602	257,995

As of December 31, 2018 and 2017, the Group did not pledge its inventories as collateral for its loans.

The operating costs arising from the ordinary sale of inventories directly recorded under operating cost in the years 2018 and 2017 were as follows:

(Continued)

2018 2017

POWERTECH INDUSTRIAL CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(Continued)

POWERTECH INDUSTRIAL CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

Cost of inventories sold Loss on (Gain on reversal of) decline in market value Gains on physical count, net Total (f) Prepayment Prepayment for purchase Input tax and offset against Business tax payable Other prepaid expense	$ 2,660,977 2,414,277 4,856 (23,289) (112) (798)
	$ 2,665,721 2,390,190
	December 31, 2018
	$ 98,645 107,954

(g) Investments accounted for by using equity method
(i) A summary of the Group’s financial information for investments accounted for using the equity method at the reporting date is as follows:

Associates

	December 31,	December	31,
	2018	2017
$	13,491		8,008

The Group’s financial information for investments accounted for using the equity method that are individually insignificant was as follows:

Carrying amount of individually insignificant associates’equity Attributable to the Group: Loss from continuing operations Other comprehensive (loss) income Comprehensive income	December 31, 2018		December 31, 2017 8,008
	$ 13,491
	2018 $ (2,466) 607		2017 (1,673) (689)
	$ (1,859)		(2,362)

In order to enhance the relationship between the Group and the clients, the Group has incorporated ZERNET LIMITED with CIRCLEBRIGHT LIMITED (The parent company of TRICKLESTAR LIMITED) in May of 2016. The share capital of ZERNET LIMITED is USD1,000 thousand. The Group invested USD300 thousand, with 30% ownership.

ZERNET LIMITED had approved the capital increase by cash in shareholders' meeting in November of 2017. It issued common stocks of USD100 thousand. The Group purchased USD USD30 thousand proportionally in December of 2017.

(Continued)

POWERTECH INDUSTRIAL CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

ZERNET LIMITED had approved the capital increase by cash in shareholders' meeting in

(Continued)

POWERTECH INDUSTRIAL CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

March of 2018. It issued common stocks of USD800 thousand and executed the capital increase as USD400 thousand in July and October of 2018, respectively. The Group purchased USD120 thousand proportionally in July and December of 2018, respectively.

(h) Property, plant and equipment

The cost and depreciation of the property, plant and equipment of the Group for the years ended December 31, 2018 and 2017, were as follows:

Land	Building and improvements	Research and development equipment	Transportation equipment	Office equipment	Molding equipment	Machinery	Other equipment	Construction in progress	Total
$ 85,70 - - - -	1 49,761 - (47) - -	60,993 150 (54) - (322)	5,276 646 (629) - (85)	71,010 6,249 (331) 585 (313)	546,406 30,235 (4,716) 5,140 (11,417)	254,536 1,299 (5,276) - (5,111)	48,638 269 (296) - (973)	586 228 - (585) (5)	1,122,907 39,076 (11,349) 5,140 (18,226)
$ 85,701 49,714		60,767	5,208	77,200	565,648	245,448	47,638	224	1,137,548
$ 85,701 49,761 - - - - - - - -		66,866 1,880 (7,661) 81 (173)	5,330 - - - (54)	71,222 3,860 (3,909) - (163)	500,043 51,339 (51) (47) (4,878)	254,948 4,117 (1,689) - (2,840)	51,038 - (1,814) - (586)	- 849 - (271) 8	1,084,909 62,045 (15,124) (237) (8,686)
$ 85,701 49,761		60,993	5,276	71,010	546,406	254,536	48,638	586	1,122,907
$ - 22,904 - 902 - (47) - -		57,743 1,173 (51) (303)	4,663 401 (597) (78)	67,893 5,157 (316) (263)	469,949 38,221 (4,703) (9,881)	213,026 10,038 (5,016) (4,434)	45,650 1,118 (280) (931)	- - - -	881,828 57,010 (11,010) (15,890)
$ - 23,759		58,562	4,389	72,471	493,586	213,614	45,557	-	911,938
$ - 21,995 - 909 - - - -		63,265 2,278 (7,661) (139)	4,260 439 - (36)	67,571 4,343 (3,896) (125)	429,121 45,110 (48) (4,234)	201,701 14,917 (1,495) (2,097)	46,640 1,286 (1,757) (519)	- - - -	834,553 69,282 (14,857) (7,150)
$ - 22,904		57,743	4,663	67,893	469,949	213,026	45,650	-	881,828
$ 85,701 25,955		2,205	819	4,729	72,062	31,834	2,081	224	225,610
$ 85,701 27,766		3,601	1,070	3,651	70,922	53,247	4,398	-	250,356
$ 85,701 26,857		3,250	613	3,117	76,457	41,510	2,988	586	241,079

As of December 31, 2018 and 2017 the previously mentioned property, plant and equipment were not pledged as collateral. Please refer to note 6(p) for the information on losses from disposal.

(i) Employee benefits

(i) Defined benefit plans

Reconciliation of defined benefit obligation at present value and plan asset at fair value are as follows:

December	31,	December	31,
2018		2017

(Continued)

POWERTECH INDUSTRIAL CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

Present value of defined benefit obligations Fair value of plan assets Recognized liabilities for defined benefit obligations	$ 35,366 41,080 (14,192) (17,445)
	$ 21,174 23,635

The Group makes defined benefit plan contributions to the pension fund account with Bank of Taiwan that provides pensions for employees upon retirement. Plans (covered by the Labor Standards Law) entitle a retired employee to receive retirement benefits based on years of service and average monthly salary for the six months prior to retirement.

1) Composition of plan assets

The Group allocates pension funds in accordance with the “Regulations for Revenues, Expenditures, Safeguard and Utilization of the Labor Retirement Fund”, and such funds are managed by the Bureau of Labor Funds, Ministry of Labor. With regard to the utilization of the funds, minimum earnings shall be no less than the earnings attainable from two-year time deposits with interest rates offered by local banks.

The Group’s Bank of Taiwan labor pension reserve account balance amounted to $14,192 thousand at the end of the reporting period. For information on the utilization of the labor pension fund assets including the asset allocation and yield of the fund, please refer to the website of the Bureau of Labor Funds, Ministry of Labor.

2) Movements in present value of defined benefit obligations

The movements in present value of the defined benefit obligations for the Group, for the years ended December 31, 2018 and 2017, were as follows:

Defined benefit obligations at January 1 Current service costs and interest Remeasurement losses (gains) －Return on plan assets excluding interest income －Actuarial loss arising from changes in demographic assumptions －Actuarial gain arising from changes in financial assumptions Paid defined benefit plan assets Defined benefit obligation at December 31	2018 $ 41,080 440 (1,190) 191 465 (5,620)	2017 40,495 486 640 434 323 (1,298)
	$ 35,366	41,080

3) Movements of defined benefit plan assets

The movements in the present value of the defined benefit plan assets for the Group, for the years ended December 31, 2018 and 2017, were as follows:

2018 2017

(Continued)

POWERTECH INDUSTRIAL CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

Fair value of plan assets, January 1 $ 17,445 16,966

(Continued)

POWERTECH INDUSTRIAL CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

Interest income Remeasurement losses (gains): －Return on plan assets excluding interest income Contributions' made Paid defined benefit plan assets Fair value of plan assets, December 31	187 203 532 (35) 1,648 1,609 (5,620) (1,298)
	$ 14,192 17,445

4) Movements of the effect of the asset ceiling

As of December 31, 2018 and 2017, the effect of limiting net defined benefit assets to the asset ceiling was as follows:

Remeasurement losses (gains) －changes in the effect of limiting a net defined benefit asset to the asset ceiling The effect of the asset ceiling on December 31	2018 $ 1,066	2017 (1,433)
	$ 1,066	(1,433)

5) Expenses recognized in profit or loss

The expenses recognized in profit or loss for the Group, for the years ended December 31, 2018 and 2017, were as follows:

Net interest of net liabilities for defined benefit obligations	2018 $ 253	2017 282

6) Remeasurement of the net defined benefit liability (asset) recognized in other comprehensive income

The Group’s remeasurement of the net defined benefit liability (asset) recognized in other comprehensive income for the years ended December 31, 2018 and 2017, were as follows:

Accumulated amount at January 1 Recognized during the period Accumulated amount at December 31	2018 $ (2,773) 1,066	2017 (1,340) (1,433)
	$ (1,707)	(2,773)

7) Actuarial assumptions

The following are the key actuarial assumptions at the reporting date:

(Continued)

2017

POWERTECH INDUSTRIAL CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

2018

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POWERTECH INDUSTRIAL CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

Discount rate at December 31,	0.85%	1.07%
Future salary increase rate	1.00%	1.00%

The Group expects to make contributions of $1,648 to the defined benefit plans for the one-year periods after the reporting date of 2018.

The weighted-average duration of the defined benefit plan is 6 years.

8) Sensitivity analysis for actuarial assumption

As of December 31, 2018 and 2017, if the actuarial assumptions had change, the impacts on the present value of the defined benefit obligation of the Group shall be as follows:

December 31, 2018 Discount rate Future salary increase rate December 31, 2017 Discount rate Future salary increase rate	The effect of defined benefit obligation Increased 0.50％ Decreased0.50％ $ (1,043) 1,182 1,172 (1,046) (1,215) 1,351 1,345 (1,222)
	Increased 0.50％ $ (1,043) 1,172 (1,215) 1,345

The sensitivity analysis assumes all other variables remain constant during the measurement. This may not be representative of the actual change in the defined benefit obligation as some of the variables may be correlated. The model used in the sensitivity analysis is the same as that used for the defined benefit obligation liability.

The sensitivity analysis is performed on the same basis as in the prior period.

(ii) Defined contribution plans

The Company allocates 6% of each employee’s monthly wages to the labor pension personal account at the Bureau of Labor Insurance in accordance with the provisions of the Labor Pension Act. Under this defined contribution plan, the Company allocates a fixed amount to the Bureau of Labor Insurance without additional legal or constructive obligation.

’ Subsidiaries in China have made monthly contributions equal to 13% of each employee s monthly wages to China Pension Insurance in accordance with the provisions of the Endowment Insurance of the People’s Republic of China. The contribution is deposited into each employee’s independent account. Each employee’s pension is managed and arranged by the government. The above mentioned companies have no further obligation beyond the monthly contributions.

The Group’s pension costs under the defined contribution method were $38,856 thousand and

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POWERTECH INDUSTRIAL CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

$39,806 thousand for the years ended December 31, 2018 and 2017, respectively. Payment was made to the Bureau of Labor Insurance and the local authorities of overseas subsidiaries of the

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POWERTECH INDUSTRIAL CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

Group.

(j) Income tax

According to the amendments to the "Income Tax Act" enacted by the office of the President of the Republic of China (Taiwan) on February 7, 2018, an increase in the corporate income tax rate from 17% to 20% is applicable upon filing the corporate income tax return commencing FY 2018.

(i) Income tax expense

The components of income tax expense for the years ended December 31, 2018 and 2017, were as follows:

Current income tax expense Currently incurred Adjusted prior period Deferred tax benefit Origination and reversal of temporary differences Adjustment in tax rate Income tax expense from continuing operations	2018 $ 19,369 (3,809)	2017 9,151 (2,413)
	(2,496) (1,438)	5,049 -
	$ 11,626	11,787

Income tax calculated on pre-tax financial income was reconciled with income tax expense for the years ended December 31, 2018 and 2017, as follows:

Profit before income tax Income tax using the Company’s domestic tax rate Effects of tax rate in foreign jurisdiction Investment (income)loss accounted for using equity method Over estimate of prior years income tax Adjustment in tax rate Others Total	2018 $ 110,786	2017 14,152
	$ 22,157 (1,671) (2,187) (3,809) (1,438) (1,426)	2,406 (323) 11,077 (2,413) - 1,040
	$ 11,626	11,787

(ii) Deferred income tax assets

1) Unrecognized deferred tax assets

Deferred tax assets have not been recognized in respect of the following items:

December	31,	December	31,
2018		2017

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POWERTECH INDUSTRIAL CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

The carryforward of unused tax losses $ 4,376 -

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POWERTECH INDUSTRIAL CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

2) Recognized deferred tax assets and liabilities

Changes in the amount of deferred tax assets for the years ended December 31, 2018 and 2017, were as follows:

Deferred tax assets:

Balance, January 1, 2018 (Debit) credit to income statement Adjustment in tax rate Balance, December 31, 2018 Balance, January 1, 2017 (Debit) credit to income statement Balance, December 31, 2017	Impairment of doubtful accounts	Others Total 3,512 8,144 2,130 2,496 620 1,438
	$ 4,632 366 818
	$ 5,816	6,262 12,078
	$ 4,497 135	3,261 7,758 251 386
	$ 4,632	3,512 8,144

The R.O.C. Income Tax Act allows net losses, as assessed by the tax authorities, to offset taxable income over a period of ten years for local tax reporting purposes.

Deferred tax assets have not been recognized in respect of these items because it is not probable that future taxable profit will be available against which the Group can utilize the benefits therefrom.

As of December 31, 2018 the information of the Group’s unused tax losses for which no deferred tax assets were recognized are as follows:

Years of loss 2018(estimated)	Unused tax loss $ 4,376	Expiry date
		2028

(iii) Examination and assessment of tax return

The tax returns of the Company have been examined and approved by the tax authority for the years through 2016.

HURRAY CLOUD TECHNOLOGY and DE YAN MANAGEMENT was incorporated on January 10, 2018 and January 30, 2018, respectively, so there were no examination results yet.

(k) Capital and other equity

(i) Common stock

As of December 31, 2018 and 2017, the number of authorized shares of the Company were $1,500,000 thousand, consisting of 150,000 thousand shares, with par value of NTD10 per share. Issued shares were both 98,224 thousand ordinary shares. All issued shares were paid up upon issuance.

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POWERTECH INDUSTRIAL CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(ii) Capital surplus

The balances of capital surplus as of December 31, 2018 and 2017, were as follows:

Additional paid-in capital Employee share options－acquisition of treasury shares	December 31, 2018 $ 245,438 31,543	December 31, 2017 245,438 31,543
	$ 276,981	276,981

According to the ROC Company Act, capital surplus can only be used to offset a deficit, and only the realized capital surplus can be used to issue new stocks or be distributed as cash dividends to stockholders in proportion to their share ownership. The aforementioned realized capital surplus includes capital surplus resulting from premium on issuance of capital stock and earnings from donated assets received. According to the Regulations Governing the Offering and Issuance of Securities by Securities Issuers, capital increases by transferring paid-in capital in excess of par value should not exceed 10% of the total common stock outstanding.

(iii) Retained earnings

The Company's article of incorporation stipulate that Company's net earnings should first be used to offset the prior years' deficits, if any, before paying any income taxes. Of the remaining balance, 10% is to be appropriated as legal reserve.

After the abovementioned appropriations, the remaining profit shall collectively, with any undistributed surplus earnings from previous years, be included in a surplus earnings distribution plan submitted by the Board of Directors for approval at a shareholders' meeting.

According to the dividend policy of the Company, the Company shall first take into consideration its industry developments and fund demand in order to meet its capital expenditure budget and long-term financial goals. The cash dividends shall not be more than 20% of total dividends.

1) Legal reserve

According to the R.O.C. Company Act, the Company must retain 10% of its after-tax annual earnings as legal reserve until such retention equals the amount of total capital. When a company incurs no loss, it may, pursuant to a resolution by a shareholders’ meeting, distribute its legal reserve by issuing new shares or by distributing cash, and only the portion of legal reserve which exceeds 25% of capital may be distributed.

2) Special reserve

By choosing to apply exemptions granted under IFRS 1 “First-time Adoption of International Financial Reporting Standards ” during the Company ’ s first-time adoption of the IFRSs endorsed by the FSC, unrealized revaluation gains recognized under shareholders’ equity and cumulative translation adjustments (gains) shall be reclassified as investment property at the adoption date. According to regulations, the increase in retained earnings amounted to $18,643 thousand. In accordance with Ruling

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POWERTECH INDUSTRIAL CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

No. 1010012865 issued by the FSC on April 6, 2012, an increase in retained earnings due to

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POWERTECH INDUSTRIAL CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

the first-time adoption of IFRSs shall be reclassified as a special earnings reserve during earnings distribution, and when the relevant assets are used, disposed of, or reclassified, this special earnings reserve shall be reversed as distributable earnings proportionately. As of December 31, 2018 and 2017, the carrying amount of special earnings reserve were both $24,911 thousand.

In accordance with the guidelines of the above Ruling, a portion of current-period earnings and undistributed prior-period earnings shall be reclassified as a special earnings reserve during earnings distribution. The amount to be reclassified should be equal to the difference between the total net current-period reduction of special earnings reserve resulting from the first-time adoption of IFRSs and the carrying amount of other shareholders’ equity as stated above. Similarly, a portion of undistributed prior-period earnings shall be reclassified as a special earnings reserve (which does not qualify for earnings distribution) to account for cumulative changes to other shareholders’ equity pertaining to prior periods due to the first-time adoption of IFRSs. Amounts of subsequent reversals pertaining to the net reduction of other shareholders’ equity shall qualify for additional distributions.

3)

Earnings distribution

Earnings distribution for 2017 and 2016 were decided via the general meeting of shareholders held on June 14, 2018 and June 14, 2017 respectively. The relevant dividend distributions to shareholders were as follows:

Dividends distributed to ordinary shareholders Cash dividends	2017	2017		Dividend per share (dollars) 1.20		2016
	Dividend per share (dollars)	Amount				Amount 117,869
	$ -	$ -

Related information will be posted on the “Market Observation Post System” of the TSEC after the convening of the meeting of the shareholders.

4)

Treasury stock

On January 23, 2017, in order to maintain the Company’s credit and shareholders' equity, according to the resolution approved during the shareholders' meeting, the Company have already purchased 5,000 thousand of shares of stock amounting to $89,837, which were retired before June 30, 2017. The sum of the book value of retired treasury stocks higher than face value and additional paid-in capital is reversed as Capital surplus-Treasury stocks (NTD1,987 thousand) and Capital surplus-Additional paid-In Capital-Common Stock (NTD12,184 thousand). The insufficient balance was debited to Retained earnings (NTD25,666 thousand).

According to the rule of the Securities and Exchange Act, the number of shares bought back may not exceed 10% of the total number of issued and outstanding shares of the company. The total amount of the shares bought back may not exceed the amount of

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POWERTECH INDUSTRIAL CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

retained earnings plus premium on capital stock plus realized capital reserve. As of

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POWERTECH INDUSTRIAL CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

December 31, 2018, the purchase amount of the company is in accord with the law.

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

5) Other equity (net of tax)

Balance at January 1, 2018 Exchange differences on translation of net assets of foreign operations Exchange differences on associates accounted for using equity method Balance at December 31, 2018 Balance at January 1, 2017 Exchange differences on translation of net assets of foreign operations Exchange differences on associates accounted for using equity method Balance at December 31, 2017	Exchange differences on translation of foreign financial statements
	$ (52,241) (12,301) 607 $ (63,935)
	Exchange differences on translation of foreign financial statements
	$ (6,269) (45,283) (689)
	$ (52,241)

(l) Earnings per share

The calculation of basic and diluted earnings per share was as follows:

(i) Basic earnings per share

Profit attributable to ordinary shareholders of the Company Weighted-average number of common shares outstanding (thousand shares) Basic earnings per share (New Taiwan dollars)	2018 $ 99,160	2017 2,365
	98,224	98,932
	$ 1.01	0.02

(ii) Diluted earnings per share

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POWERTECH INDUSTRIAL CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

Profit attributable to ordinary shareholders of the Company (diluted) Weighted-average number of common shares outstanding (thousand shares) Impact of potentially dilutive common shares-employee bonus Weighted-average number of common shares outstanding-diluted (thousand shares) Diluted earnings per share (New Taiwan dollars)	2018 $ 99,160	2017 2,365
	98,224 408	98,932 6
	98,632	98,938
	$ 1.01	0.02

(m) Revenue from contracts with clients

Details of revenue for the years ended 2018 are as follows:

(i) Disaggregation of revenue

	2018	Total 2,409,561 19,359 711,820
Operations $ 2,409,561 19,359 710,711	Manufacture - - 1,109
$ 3,139,631	1,109	3,140,740
$ 2,277,217 442,532 373,664 46,218	- - - 1,109	2,277,217 442,532 373,664 47,327
$ 3,139,631	1,109	3,140,740

For details on revenue for the year ended December 31, 2017, please refer to note (n).

(ii) Contract balances

Accounts receivable Less: allowance for impairment Total	December 31, 2018 $ 816,528 (6,590)	January 1, 2018 828,842 (5,853)
	$ 809,938	822,989
	December 31,	January 1,

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2018 2018

POWERTECH INDUSTRIAL CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(Continued)

POWERTECH INDUSTRIAL CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

Contract liabilities-module Contract liabilities-purchases Total	$ 23,878 15,786 30,529 28,514
	$ 54,407 44,300

For details on accounts receivable and allowance for impairment, please refer to note 6(d).

The amount of revenue recognized for the year ended December 31, 2018, that was included in the contract liability balance at the beginning of the period was $28,722 thousand.

The major change in the balance of contract assets and contract liabilities is the difference between the time frame in the performance obligation to be satisfied and the payment to be received.

(n) Revenue

Details of revenue for the years ended 2017, are as follows:

Sale of goods Sales returns and allowance	2017 $ 2,868,592 (9,963)
	$ 2,858,629

For details on revenue ended December 31, 2018, please refer to note (m).

(o) Employee compensation and remuneration for directors and supervisors

The Company’s articles of incorporation require that earnings shall first be offset against any deficit, then, 2%~15% will be distributed as employee remuneration and a maximum of 3% will be allocated as directors' and supervisors' remuneration. Employees who are entitled to receive the above mentioned employee remuneration, in share or cash, include the employees of the subsidiaries of the Company who meet certain specific requirement.

The Company accrued and recognized its remuneration to employee for the year ended December 31, 2018 and 2017, amounting to $6,000 thousand and $88 thousand, respectively, and to directors and supervisors amounting to $500 thousand and $0 thousand, respectively. These amounts are calculated by using the Company's pre-tax net profit for the period before deducting the amount of the remuneration to employees, directors and supervisors, multiplied by the distribution ratio of remuneration to the employees, directors and supervisors under the Company's articles of association, and expensed under operating costs or operating expenses.

The related information can be accessed from Market Observation Post System website. The amounts, as stated in the consolidated financial statements, are identical to those of the actual distributions for 2018 and 2017.

(p) Non-operating income and expenses
(i) Other income

Details of other income for the years ended December 31, 2018 and 2017 are as follows:

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POWERTECH INDUSTRIAL CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

Interest income Dividend income	2018 $ 11,989 768	2017 8,595 749
	$ 12,757	9,344

(ii) Other gains and losses

Details of other gains and losses for the years ended December 31, 2018 and 2017 are as follows:

Losses on disposal of property, plant and equipment Foreign exchange gains (losses), net Gains on financial assets (liabilities) at fair value through profit or los Impairment loss on financial assets Others	2018 $ (13) 13,675 9,227 (10,086) 25,345	2017 (133) (62,555) 11,675 (9,489) 14,633
	$ 38,148	(45,869)

(iii) Finance costs

Details of other gains and losses for the years ended December 31, 2018 and 2017 are as follows:

Interest expense	2018 $ -	2017 (542)

(q) Financial instruments
(i) Credit risk
- 1) Exposure to credit risk

The maximum exposure to credit risk is mainly from the carrying amount of financial assets.

2) Concentration of credit risk

The majority of the Group’s customers are in energy saving and power protection industries. To reduce the credit risk of accounts receivable, the Group continuously evaluates customers’ financial condition, and requires customers to provide a guarantee if necessary. The Group regularly evaluates the possibility of recovery of accounts receivable and estimates the doubtful accounts. The loss is always within expectations. As of December 31, 2018 and 2017, the top 10 customers accounted for 84% and 78% of the Group’s total accounts receivable, respectively. Accordingly, concentration of credit risk existed.

(Continued)

POWERTECH INDUSTRIAL CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

3) Receivables and debt securities

(Continued)

POWERTECH INDUSTRIAL CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

For credit risk exposure of note and trade receivables, please refer to note 6(d).

(ii) Liquidity risk

The following are the contractual maturities of financial liabilities of the Group, including estimated interest payments and excluding the impact of netting arrangements:

December 31, 2018 Non derivative financial liabilities Accounts payable Other payables Derivative financial liabilities Other forward exchange contract Outflow December 31, 2017 Non derivative financial liabilities Accounts payable Other payables	Carrying amount $ 493,154 88,108 13 $ 581,275 $ 436,160 70,907 $ 507,067	Contractual cash flow 493,154 88,108 13 581,275 436,160 70,907 507,067	Within 6 months 493,154 88,108 13 581,275 436,160 70,907 507,067	6-12 months - - - - - - -	1-2 years - - - - - - -	2-5 years - - - - - - -	More than 5 years
							- - -
							-
							- -
							-

The Group does not expect that the cash flows could occur significantly earlier or at significantly different amounts.

(iii) Foreign currency risk

1) Foreign currency risks exposure

The Consolidated Company’s significant exposure to foreign currency risk were as follows:

December 31, 2018 Financial assets: Monetary items: USD RMB HKD EUR Non-Monetary items: USD	Foreign currency $ 35,560 49,993 182 27 439	Exchange rate 30.715 4.472 3.921 35.200 30.715	NTD
			1,092,225 223,569 714 950 13,491

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POWERTECH INDUSTRIAL CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

Financial liabilities:

(Continued)

POWERTECH INDUSTRIAL CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

Monetary items: USD RMB HKD December 31, 2017 Financial assets Monetary items: USD RMB HKD EUR Non-Monetary items: USD Financial liabilities: Monetary items: USD HKD	13,676 193,190 2,160 Foreign currency $ 32,087 23,394 545 26 269 46,193 2,904	30.715 4.472 3.921 Exchange rate 29.760 4.565 3.807 35.570 29.760 29.760 3.807	420,058 863,946 8,469 NTD
			954,909 106,794 2,075 925 8,008 1,374,704 11,056

2) Sensitivity analysis

The Group’s exposure to foreign currency risk arises from the translation of the foreign currency exchange gains and losses on cash and cash equivalents, accounts receivable, other receivables, accounts payable, and other payables. The management adopted 100 basis points as a reasonable change in interest rates, and therefore, it evaluated the impacts of 100 basis point changes in interest rates. If the interest rates on borrowings had increased or decreased by 100 basis points with all the other variables held constant, profit before tax for the years ended December 31, 2018 and 2017, would have increased by $250 thousand and decreased by $3,211 thousand, respectively, mainly as a result of liabilities bearing floating interest rates.

3) Foreign exchange gains and losses of monetary items

The Group discloses the information on foreign currency exchange gains and losses in summary because the consolidated entities have various functional currencies. For the years ended December 31, 2018 and 2017, the foreign currency exchange gains and losses (including realized and unrealized gains and losses) of the Group were $13,675 thousand and $(62,555) thousand, respectively.

(iv) Interest rate analysis

The Group’s significant financial assets are certificate of deposits. However, the interest rates are fixed; significant cash flow risk arising from a change in the interest rate is unlikely to

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POWERTECH INDUSTRIAL CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

occur.

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

The Group has no financial liabilities with floated rate at December 31, 2018 and 2017.

(v) Fair value information
1) Categories and fair values of financial instruments

The following table shows the carrying amounts and fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy. It does not include fair value information for financial assets and financial liabilities not measured at fair value for which the carrying amount is a reasonable approximation of the fair value, and does not include the investments in equity instruments which do not have any quoted price in an active market.

	December 31, 2018	December 31, 2018	December 31, 2018
Carrying amount		Fair value
	Level 1 - - - - - - - - - - - - -	Level 2 - - - - - - - - - - 13 - -	Level 3 27,948 32,322 60,270 - - - - - - 60,270 - - -	Total 27,948 32,322 60,270 - - - - - - 60,270 13 - -
$ 27,948 32,322 60,270 816,089 809,938 12,772 440 3,582 1,642,821 $ 1,703,091 $ 13 493,154 88,108

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POWERTECH INDUSTRIAL CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

Subtotal Total	581,262 $ 581,275	- -	- 13	- -	-
					13

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POWERTECH INDUSTRIAL CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

	December 31, 2017	December 31, 2017	December 31, 2017
Carrying amount		Fair value
	Level 1 - - - - - - - - - - - - - - -	Level 2 - 3,069 - 3,069 - - - - - - 3,069 - - - -	Level 3 42,408 - 17,862 17,862 - - - - - - 60,270 - - - -	Total 42,408 3,069 17,862 20,931 - - - - - - 63,339 - - - -
42,408
$ 3,069 17,862
20,931
705,350 822,989 8,681 603 756
1,538,379
$ 1,601,718
$ 436,160 70,907
507,067
$ 507,067

2) Valuation techniques for financial instruments measured at fair value

Measurements of fair value of financial instruments without an active market are based on a valuation technique or quoted price from a competitor. Fair value measured by a valuation technique can be extrapolated from similar financial instruments, guideline public company method, or other valuation technique including a model using observable market data at the reporting date.

Measurement of the fair value of stock options is based on the valuation techniques generally accepted by market participants such as options pricing models. Fair value of forward foreign currency contracts is usually determined by using the forward currency exchange rate.

3) The Group's financial instruments measured at fair value and classified as level 3 only

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POWERTECH INDUSTRIAL CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

have one significant unobservable input. Quantified information of the significant unobservable inputs are as follows:

Type Financial assets measured at FVTPL-Derivatives-Sto ck options. Financial assets measured at FVTPL-Foreign unlisted stock	Valuation techniques Options pricing models-Black-Scholes Model Guideline public company method	Significant unobservable inputs ‧Volatility (2018.12.31 and 2017.12.31: 33.65% and 19.15%) ‧Liquidity discount (2018.12.31 and 2017.12.31:84% and 90%) ‧P/B ratio (2018.12.31 and 2017.12.31: 6.12 and 6.18)	Inter-relationship between key unobservable inputs and fair value measurement
			‧The estimated fair value would increase if: Volatility were higher ‧The estimated fair value would decrease if: liquidity discount were higher ‧The estimated fair value would increase if: P/B ratio were higher

4) The movement of instrument in level 3.

Financial assets measured at fair value through profit or loss Derivatives-Stoc k options $ 17,862 10,086	Foreign unlisted stocks 42,408 (10,086)	Total 60,270 60,270
$ 27,948	32,322	60,270
$ - 8,373 9,489	- -	- 8,373 9,489
$ 17,862	-	17,862

5) Fair value measurements in Level 3–sensitivity analysis of reasonably possible alternative assumptions.

For fair value measurements in Level 3, changing one or more of the assumptions to reflect reasonably possible alternative assumptions would have the following effects:

December 31,2018 Financial assets measured at fair value through profit or loss.	Inputs	Upward or downward movement	Profit or loss	Other comprehensive income
			Favorable Unfavorable	Favorable Unfavorable

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POWERTECH INDUSTRIAL CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

Derivative-Stock options and Foreign unlisted stocks Risk free rate 0.1% Derivative-Stock options and Foreign unlisted stocks Common stock price 7% Derivative-Stock options and Foreign unlisted stocks Volatility 1% December 31,2017 Financial assets measured at fair value through profit or loss. Derivative-Stock options Risk free rate 0.1% Derivative-Stock options Common stock price 7% Derivative-Stock options Volatility 1%	$ 12 (6) - -
	$ 2,777 (2,764) - -
	$ (37) 43 - -
	$ 77 (65) - -
	$ 2,440 (2,155) - -
	$ (220) 250 - -

The favorable and unfavorable effects represent the changes in fair value, and fair value is based on a variety of unobservable inputs calculated using a valuation technique. The analysis above only reflects the effects of changes in a single input, and it does not include the interrelationships with another input.

(r) Financial risk management
(i) Overview

The Group has exposure to the following risks arising from financial instruments:

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

This note presents information about the consolidated Company’s exposure to each of the above risks, the objectives, policies and processes for measuring and managing risk, and the consolidated Company’s management of capital. Please see other related notes for quantitative information.

(ii) Risk management framework

The board of directors monitors the management to ensure compliance with the Group’s risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the Group. The board of directors is assisted in its oversight role by Internal Audit. Internal Audit undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the board of directors.

(iii) Credit risk

Credit risk is the risk of financial loss of the Group if a customer or counterparty to a financial ’ instrument fails to meet its contractual obligations, and arises principally from the Group s accounts receivable and securities investment.

1) Accounts receivable and other receivables

According to the credit policy, the Group has to evaluate the credit of each new customer

(Continued)

POWERTECH INDUSTRIAL CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

before setting the payment and delivery terms. The evaluations include external credit

(Continued)

POWERTECH INDUSTRIAL CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

ratings, if available, and bank references. The Group reviews credit limits periodically.

The Group monitors the credit risk of the customer based on the aging of the receivables, the due date, and other financial information.

The Group sets the allowance for bad debt to reflect the estimated losses for notes receivable and accounts receivable for customers that are rated at high risk. The allowance for bad debt consists of specific losses relating to individually significant exposure.

2) Investments

The credit risk exposure in the bank deposits, fixed income investments, and other financial instruments is measured and monitored by the Group’s finance department. Since those who transact with the Group are banks, financial institutions, corporate organizations, and government agencies with good credit, there are no compliance issues, and therefore, there is no significant credit risk.

3) Guarantee

The Group did not provide any guarantee as of December 31, 2018 and 2017.

(iv) Liquidity risk

Liquidity risk is the risk the Group will lack sufficient cash or other financial instruments to settle its financial liabilities or to meet its contractual obligations. Since the current assets of the Group exceed the current liabilities, the working capital is sufficient for future cash needs. Thus, the Group does not have the liquidity risk to fulfill contractual obligations.

Moreover, as of December 31, 2018 and 2017, the Group had unused short-term credit facilities of $940,005 thousand and $933,320 thousand, respectively.

(v) Market risk

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

(s) Capital management

The Group manages capital to safeguard the capacity to continue to operate and to safeguard the certainty and stability of its financial resources. Capital consists of ordinary shares, capital surplus, retained earnings, and non-controlling interests of the Group. The Board of Directors monitors the return on capital as well as the level of dividends to ordinary shareholders.

The Group’s debt-to-equity ratio at the reporting date was as follows:

Total liabilities	December 31, 2018 $ 837,756	December 31, 2017 729,549

(Continued)

POWERTECH INDUSTRIAL CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

816,089	816,089	705,350
$ 21,667		24,199
$ 1,610,708		1,539,492
	1.35%	1.57%

As of December 31, 2018, the Group’s capital management strategy was consistent with the prior years.

(7) Related-party transactions:

(a) The parent and ultimate controlling party

The Company is the ultimate controlling party of the Group.

Name of related party Relationship with the Group ZERNET LIMITED Associates

(c) Significant transactions with related parties
Other current liabilities

1. Other current liabilities
Account	Relationship	December 31, 2018 $ 9,687	December 31, 2017 9,687
Other current liabilities	Associates-ZERNET

The Group offers its associates services on product design and mold-manufacturing.

(d) Key management personnel compensation

Short term employee benefits Post employment benefits	2018 $ 11,491 782	2017 10,638 781
	$ 12,273	11,419

(8) Pledged assets: None
(9) Significant Commitments and contingencies: None

(10) Losses Due to Major Disasters: None

(11) Subsequent Events: None

(12) Other:

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

(Continued)

POWERTECH INDUSTRIAL CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

By function By item	2018	2018	2018	2017	2017	2017
	Operating costs	Operating expenses	Total	Operating costs	Operating expenses	Total
Employee benefits
Salary	384,150	196,464	580,614	366,490	181,701	548,191
Labor and health insurance	-	12,706	12,706	-	12,191	12,191
Pension	27,556	11,553	39,109	29,000	11,088	40,088
Others	11,974	10,840	22,814	7,784	11,091	18,875
Depreciation	44,777	12,233	57,010	53,147	16,135	69,282
Amortization	2,523	4,202	6,725	1,066	2,854	3,920

(Continued)

POWERTECH INDUSTRIAL CO., LTD. AND ITS SUBSIDIARIES Notes to Consolidated Financial Statements

(13) Other disclosures:

(a) Information on significant transactions:

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

(i) Loans to other parties: None
(ii) Guarantees and endorsements for other parties: None
(iii) Securities held as of December 31, 2018 (excluding investment in subsidiaries, associates and joint ventures):

Name of holder	Category and name of security	Relationship with company	Account title	Ending balance	Ending balance	Ending balance	Ending balance	Highest Percentage of ownership (%)	Note
				Shares/Units (thousands)	Carrying value	Percentage of ownership (%)	Fair value
The Company	TRICKLESTAR LIMITED-Foreign unlisted stocks	-	Financial assets at FVTPL-current	125	32,322	4.66%	32,322	4.79%	Unpledged
The Company	TRICKLESTAR LIMITED-Stock options	-	Financial assets at FVTPL-current	-	27,948	- %	27,948	- %	Unpledged

(iv) Individual securities acquired or disposed of with accumulated amount exceeding the lower of NT$300 million or 20% of paid-in capital: None
(v) Acquisition of individual real estate with amount exceeding the lower of NT$300 million or 20% of paid-in capital: None
(vi) Disposal of individual real estate with amount exceeding the lower of NT$300 million or 20% of paid-in capital: None
(vii) Related-party transactions for purchases and sales with amounts exceeding the lower of NT$100 million or 20% of paid-in capital:

(In Thousands of New Taiwan Dollars)

Name of company	Related party	Nature of relationship	Transaction details	Transaction details	Transaction details	Transaction details	Transactions with terms different from others	Transactions with terms different from others	Notes/Accounts receivable (payable)	Notes/Accounts receivable (payable)
			Purchase/Sale	Amount	Percentage of total purchases/sales	Payment terms	Unit price	Payment terms	Ending balance	Percentage of total notes/accounts receivable (payable)
The Company	PERFECT	Subsidiary	Purchase	884,916	31%	30-60 days	-	-	(52,197)	(5)%
The Company	DONGGUAN QUAN SHENG	Subsidiary	Purchase	1,574,741	55%	30-60 days	-	-	(840,389)	(83)%
The Company	TREASURE	Subsidiary	Purchase	130,510	5%	30-60 days	-	-	(107,730)	(11)%
PERFECT	DONGGUAN QUAN SHENG	Related	Purchase	878,850	100%	Note 2	-	-	(126,665)	(100)%

Note 1: The purchase price is adjusted for tax planning and transfer pricing. Note 2: The adjustment depends on capital movement.

Note 3: The balance of accounts payable has derecognized other payables.

Note 4: Transactions above had been reversed while making consolidated report.

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

(In Thousands of New Taiwan Dollars)

Name of company	Counter-party	Nature of relationship	Ending balance	Turnover rate	Overdue	Overdue	Amounts received in subsequent period (Note 1)	Allowance for bad debts
					Amount	Action taken
TREASURE	The Company	Subsidiary	107,730	1.51	-	-	-	-
DONGGUAN QUAN SHENG	The Company	Subsidiary	840,389	3.75	-	-	436,294	-
DONGGUAN QUAN SHENG	PERFECT	Related	126,665	1.64	-	-	126,665	-

Note 1: As of March 11, 2019.

Note 2: Transactions above had been reversed while making consolidated report.

(ix) Trading in derivative instruments: Please refer to notes 6(b)

(Continued)

POWERTECH INDUSTRIAL CO., LTD. AND ITS SUBSIDIARIES

Notes to Consolidated Financial Statements

(x) Business relationships and significant intercompany transactions:

(In Thousands of New Taiwan Dollars)

				(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)
No.	Name of company	Name of counter-party	Nature of relationship	Intercompany transactions
				Account name	Amount	Trading terms	Percentage of the consolidated net revenue or total assets
0	The Company	PERFECT	1	Purchases	884,916 (USD29,328 thousand)	Note 1	28%
0	The Company	PERFECT	1	Accounts payable	52,917 (USD1,699 thousand)	Note 1	2%
0	The Company	TREASURE	1	Purchases	130,510 (USD4,325 thousand)	Note 1	4%
0	The Company	TREASURE	1	Accounts payable	107,730 (USD3,507 thousand)	Note 1	4%
0	The Company	DONGGUAN QUAN SHENG	1	Purchases	1,574,741 (USD52,191 thousand)	No significant differences	50%
0	The Company	DONGGUAN QUAN SHENG	1	Accounts payable	840,389 (USD27,361 thousand)	No significant differences	34%
1	PERFECT	DONGGUAN QUAN SHENG	3	Purchases	(USD29,127 thousand)	Note 1	28%
1	PERFECT	DONGGUAN QUAN SHENG	3	Accounts payable	(USD4,124 thousand)	Note 1	5%
2	TREASURE	DONGGUAN QUAN SHENG	3	Purchases	(USD 3,623 thousand)	Note 1	3%
2	TREASURE	DONGGUAN FU JU	3	Purchases	(USD 637 thousand)	Note 1	1%
3	DONGGUAN QUAN SHENG	The Company	2	Purchases	(USD1,037 thousand)	No significant differences	1%

Note 1: The receivables are adjusted according to capital management of the subsidiary and offset with its sales receivables. Note 2: The number of the relationship with the transaction counterparty represents the following:

(1) 1 represents downstream transactions.

(2) 2 represents upstream transactions.

(3) 3 represents sidestream transactions.

Note 3: Transactions above had been reversed while making consolidated report.

(b) Information on investees:

The following is the information on investees for the years ended December 31, 2018 (excluding information on investees in Mainland China):

(In Thousands of New Taiwan Dollars)

Name of investor	Name of investee	Location	Main businesses and products	Original investment amount	Original investment amount	Balance as of December 31, 2018	Balance as of December 31, 2018	Balance as of December 31, 2018	Highest Percentage of ownership	Net income (losses) of investee	Share of profits/losses of investee	Note
				December 31, 2018	December 31, 2017	Shares (thousands)	Percentage of ownership	Carrying value
The Company	DIGITAL	Samoa	Investing business			12,293	100%	1,254,934	100%	(8,364)	(8,364)	Subsidiary
The Company	OPPORTUNIST	Mauritius	Investing business			3,855	100%	107,810	100%	41,916	41,916	Subsidiary
The Company	HURRY CLOUD TECHNOLOGY	Taiwan	Trading and lease of electronic devices.			3,125	100%	28,120	100%	(21,880)	(21,880)	Subsidiary
The Company	DE YAN MANAGEMENT	Taiwan	Business management consulting			200	100%	3,726	100%	1,726	1,726	Subsidiary
The Company	ZERNET LIMITED	Hong Kong	Design and wholesale business	USD 570	USD 330	570	30%	13,491	30%	(8,220)	(2,466)	Associates by equity method
DIGITAL	BEST	Samoa	Investing business	USD 12,264	USD 12,264	12,264	100%	995,114	100%	19,153	19,153	Subsidiary
DIGITAL	TREASURE	Samoa.	Wholesale business	USD 10	USD 10	10	100%	259,728	100%	(27,525)	(27,525)	Subsidiary
BEST WISDOM	SURGELION	Hong Kong	Investing business	USD 12,363 (Note 1)	USD 12,363 (Note 1)	-	100%	990,452	100%	19,138	19,138	Subsidiary
OPPORTUNIST	TOTAL	Mauritius	Investing business	USD 3,855	USD 3,855	3,855	100%	57,758	100%	1,990	1,990	Subsidiary
OPPORTUNIST	PERFECT	Mauritius	Wholesale business	USD 10	USD 10	10	100%	49,546	100%	39,912	39,912	Subsidiary

Note 1: The original investment includes prepaid long-term investment.

(Continued)

POWERTECH INDUSTRIAL CO., LTD. AND ITS SUBSIDIARIES

Notes to Consolidated Financial Statements

(c) Information on investment in mainland China:
(i) The names of investees in Mainland China, the main businesses and products, and other information:

(In Thousands of New Taiwan Dollars)

Name of investee	Main businesses and products	Total amount of paid-in capital	Method of investment	Accumulated outflow of investment from Taiwan as of January 1, 2017	Investment flows	Investment flows	Accumulated outflow of investment from Taiwan as of December 31, 2018	Net income (losses) of the investee	Percentage of ownership	Maximum Investment	Investment income (losses)	Book value	Accumulated remittance of earnings in current period
					Outflow	Inflow
DONGGUAN QUAN SHENG	Manufacture and sales of power outlet, wire, cable and power cord, and provide after-sale service	378,162 (HK29,994 :US8,483)	(2)(a).	378,162 (HK29,994； US8,483)	-	-	378,162 (HK29,994； US8,483)	19,130	100%	100%	19,130	990,146	-
DONGGUAN FU JU	Items include power cord, wire, plastic cover, circuit board modules, radio and power outlet	117,792 (US3,835)	(2)(b).	114,444 (US3,726)	-	-	114,444 (US3,726)	1,979	100%	100%	1,979	57,366	-
DONGGUAN KANGCHI	Sales of electrical appliances, power outlet, wire, cable and computer peripherals	4,472 (RMB1,000)	(2)(c).	-	-	-	-	853	100%	100%	853	6,399	-

Note 1: The financial statements of the investee are audited by the auditors of the parent company and accounted for by the equity method.

Note 2: The method of investment is divided into the following three categories:

(1) Directly invest in Mainland China.

(2) Through the establishment of third region companies then investing in Mainland China.

(a) The investment amounts are the remittances from SURGELION INT'L LTD to DONGGUAN QUAN SHENG by the Company.

(b) The investment amounts are the remittances from TOTAL PLUS INT'S LTD to DONGGUAN FU JU by the Company.

(3) Other methods

Note 3: The aforementioned TWD are in accordance with the exchange rate on December 31, 2018. Note 4: Transactions above had been reversed while making consolidated report.

(ii) Limitation on investment in Mainland China:

Accumulated Investment in Mainland China as of December 31, 2018	Investment Amounts Authorized by Investment Commission, MOEA	Upper Limit on Investment
492,606 (USD 12,209 thousand; HKD 29,994 thousand)	580,145 (USD 18,888 thousand)	966,425 (Note)

Note: 60% of the total equity from the Company.

(iii) Significant transactions:

Please refer to 13(a) for further information.

(Continued)

POWERTECH INDUSTRIAL CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(14) Segment information:

The Group’s operating segment information and reconciliation are as follows:

(a) General information

The Group has recognized the reportable departments by the reporting information that is used to make decisions according to the management.

The management of the Group runs the business based on functionality. By functionality, the Group is currently divided into an operating center and a manufacturing center. The operating center mainly includes the research and development unit, business unit, and other management units of the Company. The manufacturing center mainly includes the production unit, production-related supporting unit, and Mainland China domestic unit.

(b) Profit or loss data of the reporting segments (including specific revenues and expenses), assets and liabilities of the segments, the basis of measurement, and the related adjustment or eliminations

The Group’s operating segment information and reconciliation are as follows:

		2018		Total
$ $ $ $ $	Manufacturing 1,109 2,590,167 8,989	Operating	Adjustment or elimination
		3,139,631 1,499 3,000	- (2,591,666) -	3,140,740 - 11,989 3,152,729 99,160 2,448,464 837,756 Total
	2,600,265	3,144,130	(2,591,666)
	10,933	88,227	-
	2,200,308	2,844,355	(2,596,199)
	837,565	1,201,799	(1,201,608)
		2017
$	Manufacturing 21,161 2,432,074 6,030	Operating	Adjustment or elimination
		2,837,468 55,614 2,565	- (2,487,688) -	2,858,629 - 8,595 2,867,224 2,365 2,269,041 729,549
$	2,459,265	2,895,647	(2,487,688)
$	(65,156)	67,521	-
$	2,981,054	2,549,171	(3,261,184)
$	1,639,561	1,009,679	(1,919,691)

(Continued)

POWERTECH INDUSTRIAL CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

(Continued)

Revenue from the external customers of the Group was as follows:

一、 Products and services	2018 $ 2,277,217 442,532 373,664 47,327	2017 2,151,542 344,586 308,110 54,391
Surge Protector for IT Peripherals Power Noise Filter for Audio and Video Devices IoT and Smart Home Power Safety System Others Total
	$ 3,140,740	2,858,629

(d) Geographic information

In presenting information on the basis of geography, segment revenue is based on the geographical location of customers and segment assets are based on the geographical location of the assets.

二、 Geographic information	2018 $ 2,409,561 170,494 19,359 541,326	2017 2,086,225 192,367 27,095 552,942
三、 Revenue from external customers: 四、 United States 五、 Europe 六、 Australia 七、 Other countries Total 八、 Non-current assets: 九、 Taiwan 十、 China Total
	$ 3,140,740	2,858,629
	$ 124,351 141,716	123,228 157,767
	$ 266,067	280,995

Non-current assets include property, plant and equipment, and other assets, not including deferred income tax assets.

(e) Major customers

For the years ended December 31, 2018 and 2017, the amounts of sales to customers representing greater than 10% of net revenue were as follows:

十一、 Customer A Customer B Customer C Customer D Total	2018 $ 346,440 465,543 389,368 385,924	2017 480,662 326,735 188,283 238,017
	$ 1,587,275	1,233,697

AI assistant

POWERTECH — Annual Report 2018

52310_rns_2019-06-28_ba349e32-9e28-4da2-84b9-b8a31e99b6b8.pdf

Stock Code: 3296

POWERTECH INDUSTRIAL CO., LTD.

2018

Annual Report

Notice to readers

Spokesperson

Deputy Spokesperson

Registrar Agent

Headquarters, Branches and Plant

Plant

Auditors

DOMESTIC STOCK EXCHANGE LISTING

Corporate Website

Contents

I. Letter to Shareholders

Dear Shareholders,

Analysis of financial revenue and expenditure and profitability

research and development status

C. Operating principles:

The expected number of sales and its basis

Important production and marketing policies

The future development strategy of the company

By the external competitive environment, regulatory environment and the overall operating environment

Chairman & CEO

II. Company Profile

2.1 Date of Incorporation : 11 14, 2000

2.2 Company History

III. Corporate Governance Report

3.1 Organization

3.1.1 Organizational Chart

3.1.2 Major Corporate Functions

3.2 Directors, Supervisors and Management Team

3.2.1 Directors and Supervisors

Major shareholders of the institutional shareholders

Professional qualifications and independence analysis of directors and supervisors

of office.

3.2.2 Management Team

04.15.2018

3.2.3 Remuneration of Directors, Supervisors, President, and Vice President

Remuneration of Directors

Remuneration of Supervisors

Remuneration of the President and Vice President

3.2.4 Comparison of Remuneration for Directors, Supervisors, Presidents and Vice Presidents in the Most Recent Two Fiscal Years and Remuneration Policy for Directors, Supervisors, Presidents and Vice Presidents

3.3 Implementation of Corporate Governance

3.3.1 Board of Directors

3.3.2 Attendance of Supervisors at Board Meeting

A. Attendance of Supervisors at Board Meetings

3.3.3 Corporate Governance Implementation Status and Deviations from “the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies”

3.3.4 Composition, Responsibilities and Operations of the Remuneration Committee

A. Professional Qualifications and Independence Analysis of Remuneration Committee Members

B. Attendance of Members at Remuneration Committee Meetings

3.3.5 Corporate Social Responsibility

3.3.6 Ethical Corporate Management

3.3.7 Corporate Governance Guidelines and Regulations

3.3.8 Other Important Information Regarding Corporate Governance

3.3.9 Internal Control Systems

3.3.10 Major Resolutions of Shareholders’ Meeting and Board Meetings

3.4 Information Regarding the Company’s Audit Fee and Independence

3.4.1 Audit Fee

3.4.2 Replacement of CPA

A. Regarding the former CPA

B. Regarding the successor CPA

3.4.3 Audit Independence

3.5 Changes in Shareholding of Directors, Supervisors, Managers and Major Shareholders

3.5.1 Shares Trading with Related Parties

3.5.2 Shares Pledge with Related Parties

3.6 Relationship among the Top Ten Shareholders

3.7 Ownership of Shares in Affiliated Enterprises

IV. Capital Overview

4.1 Capital and Shares

4.1.1 Source of Capital

A. Issued Shares

4.1.3 Shareholding Distribution Status

4.1.4 List of Major Shareholders

4.1.5 Market Price, Net Worth, Earnings, and Dividends per Share

4.1.6 Dividend Policy and Implementation Status

A. Dividend Policy

POWERTECH Annual Report 2018