RT - Annual Report 2019 | FinancialReports.eu

TSE Code: 2379

REALTEK SEMICONDUCTOR CORP. 2019 Annual Report

The annual report is available at:

I. Taiwan Stock Exchange Market Observation Post System: https://mops.twse.com.tw
II. Realtek website for annual report: https://www.realtek.com

Printed Date: April 28, 2020

Notice to Readers:

The reader is advised that the annual report has been prepared originally in Chinese. The English version is directly translated from the Chinese version .

I. Spokesperson: Name: Huang, Yee-Wei Title: Vice President Deputy Spokesperson: Name: Lin, Han-Chen Title: Special Assistant to President Tel: (03) 578-0211 Email: [email protected]

II. Headquarters Address: No. 2, Innovation Road II, Hsinchu Science Park, Hsinchu 300, Taiwan Tel: (03) 578-0211

III. Transfer Agent: Company: CTBC BANK CO., LTD. Transfer Agency Department Address: 5F., No. 83, Sec. 1, Chongqing S. Rd., Taipei City 100, Taiwan. Website: www.ctbcbank.com Tel: (02) 6636-5566

IV. Auditor of the latest financial report: Auditors: Lin, Yu-Kuan & Tsang, Kwok-Wah Company: PricewaterhouseCoopers'

Address: 5F., No. 2, Gongye E. 3rd Rd., Hsinchu Science Park, Hsinchu 300, Taiwan Website: www.pwc.com.tw Tel: (03) 578-0205

V. GDR listed stock exchange and the way to search for information: Name: Luxembourg Stock Exchange
Please refer to Luxembourg Stock Exchange official website for Realtek GDR Price. Website: www.bourse.lu
VI. Company website: www.realtek.com

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Letter to Shareholders ..................................................................................................................................... 1

Company Introduction .................................................................................................................................... 3 Date of Establishment ...................................................................................................................................... 3 Company Milestones ....................................................................................................................................... 3 Corporate Governance Report ....................................................................................................................... 8 Organization .................................................................................................................................................... 8 Information of Directors and Officers ........................................................................................................... 10 Corporate Governance ................................................................................................................................... 20 Information Regarding Audit Fees ................................................................................................................ 47 Share transfer or share pledge of Directors, Officers and major shareholders holding more than 10% shares from last year to the date of the annual report printed. ................................................................................. 50

Capital Raising ............................................................................................................................................... 53 Source of Capital ........................................................................................................................................... 53 Structure of Shareholders .............................................................................................................................. 53 Distribution of Shareholding ......................................................................................................................... 54 List of Major Shareholders ............................................................................................................................ 54 Market price, net worth, earning, and dividends per common share and related information over the last two years ....................................................................................................................................................... 55 Dividend Policy and Status of Execution ...................................................................................................... 56 Status of GDR ................................................................................................................................................ 59 Operations Overview ..................................................................................................................................... 60 Business Overview ........................................................................................................................................ 60 Marketplace and Production Overview ......................................................................................................... 75 Employees ..................................................................................................................................................... 82 Environmental Expenses ............................................................................................................................... 82 Labor Relations ............................................................................................................................................. 82 Significant Agreements ................................................................................................................................. 85 Financial Status, Operating Results and Status of Risk Management ..................................................... 86 Financial Status ............................................................................................................................................. 86 Operational Results ....................................................................................................................................... 87 Cash Flow ...................................................................................................................................................... 88 Risk Items ...................................................................................................................................................... 89 Special Items ................................................................................................................................................... 91

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Financial Information .................................................................................................................................. 100 Condensed balance sheet and Statement of Comprehensive Income, independent auditor’s name and audit opinion in the recent five years .................................................................................................................... 100 Financial Analysis in the Recent Five Years ............................................................................................... 104 Audit Committee’s Review Report ............................................................................................................. 107 Consolidated Financial Statements .............................................................................................................. 108 Parent Company Only Financial Statements ............................................................................................... 191

Letter to Shareholders

1. 2019 Operating Results

Realtek delivered stellar operating results in 2019. The full-year consolidated revenues were NT$60.74 billion, a 32.6% growth from the previous year. Gross profit was NT$26.58 billion, up 29.9% from the year before. Net profit after tax was NT$6.79 billion, a 56.1% year-over-year increase. Earnings per share (EPS) was NT$13.36. According to IC Insights, 2019 global semiconductor market revenue was US$442.3 billion, a decline of 12.3% compared to 2018. Despite the macroeconomic impact of a weak memory market and uncertainties of the US-China trade war, Realtek banked on robust product technology, nimble market strategies, and concerted teamwork to produce excellent results. Realtek had the highest growth rate among the world’s top 50 semiconductor companies in 2019.

With global demand for connectivity devices of various types continuing to rise rapidly, IC companies must provide products that offer higher performance, are more integrated, and with lower power consumption. Realtek has accumulated a great deal of technological depth in connectivity and continues to make new advances to maintain its market-leading position. Amongst the 2019 top 100 domestic companies that submitted the most patent applications to Taiwan’s Intellectual Property Office, Realtek ranked sixth with 333 innovation patent applications. We incorporate these technological advances into new products that meet market needs and stimulate demand. At COMPUTEX Taipei 2019, Realtek won three major awards, including Best Choice Golden awards for our 8K Video Decoder and Processing IC (RTD2893) and our Bluetooth 5 ANC Smart Headset SoC (RTL8773B), and the Best Choice Category award for our Ultra-LowPower Versatile IoT Solution (RTL8722DM). Particularly notable was the 8K Video Decoder and Processing IC, which led all COMPUTEX award winners by receiving the Best Choice of the Year award.

2. 2020 Business Plan

After outperforming the market in 2019, for 2020 Realtek will release even more competitive products and strengthen positioning of all product lines in order to maintain market growth and technological leadership. For wireless controllers, Realtek’s first generation Wi-Fi 6 (11ax) will begin mass production in 2020 for use in a variety of applications. Optimization of existing 11ac and 11n products will provide more solutions with a higher price-performance ratio, thereby consolidating the current customer base while expanding emerging applications and markets.

For IoT controllers, Realtek has a comprehensive set of single-chip SoCs integrating microcontroller, voice, and/or ISP processors. These are highly integrated, low power consumption products that feature strong security and comprehensive AI functions that can meet the changing needs of our various customer groups. Realtek’s IoT products are already well-known and are projected to perform well in 2020 as the market quickly expands.

For Bluetooth peripheral products, Realtek’s True Wireless Stereo (TWS) single-chip was a favorite among consumers in 2019 and led market growth. In 2020, a new generation of TWS products with Active Noise Cancellation (ANC) will enable Realtek to maintain its position as the leader in Bluetooth audio, and to expand its market influence by working closely with supply chain and brand partners. Additionally, Realtek’s Bluetooth Low Power single-chip solutions are a popular choice for voice remote controllers and wearable applications, and should continue to see growth in 2020.

Regarding Ethernet, mass production of Realtek’s new generation of 2.5Gbps Ethernet Controllers for PC applications is already underway. With the upgrade of network infrastructure in countries around the world, it will also stimulate the demand for the new 2.5Gbps Ethernet in various connectivity products. For switch controllers, in recent years Realtek has been actively developing smart switches. In addition to

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the research and development of Layer 3 managed switches and higher-speed switches, the 2.5G/5G/10G physical layer technologies are progressing synchronously in Realtek to advance both the depth and breadth of product offerings. In 2020, smart switches will become a primary driver of growth, surpassing unmanaged switches.

In automobile Ethernet products, Realtek is again riding on its technological advantages to lead the world in the release of second-generation products. Its high-port count switch controller, which integrates 100BASE-T1 and 1000BASE-T1 PHYs, is a favorite of European and American automobile OEM manufacturers and tire-1 suppliers. Our switch controllers are on the way to meeting future requirements of new generation automotive in-vehicle network backbones in 2022/2023; we expect this market will be one of the mid-to-long term growth drivers for Realtek.

For TV controllers, in 2019 Realtek products closely matched the needs of the end market to gain the support of customers and achieve steady growth. In 2020, to meet the demand for 8K signal broadcast transmission, Realtek is offering an award-winning 8K TV decoder that does not require changes to the existing TV architecture. Development of this solution has been welcomed by TV customers and resulted in many collaborative design-ins. Besides new 8K products, penetration of the 4K TV market continues, thereby providing further revenue growth opportunity in 2020.

PC product sales grew in 2019 due to extensive commercial PC upgrades and replacements. In 2020, the overall market is expected to be more tepid. Realtek continues, however, to upgrade and optimize its PC codecs, image signal processors, card reader controllers, and Type-C controllers. At the same time, Realtek is developing non-PC applications based on its success in PC solutions. For example, in the consumer audio electronics market, Realtek’s unique low power chip design combined with power-saving software/hardware integrated design, smart audio power amplifiers, and programmable audio DSP are gradually finding their way into leading smartphone and electronic gaming brands. In recent years Realtek has developed highly integrated IP Camera single-chips in response to security and surveillance market demand. Target markets include consumer goods and smart home network monitoring devices. In 2020, Realtek will release a new generation of low power AI IP Camera controller with edge computing and H.264/H.265 encoding capabilities. Together, these products will provide consumers with a wide range of competitive solutions.

3. Strategy for Future Development and Impact by Competitive, Regulatory, and Macro Conditions

The global semiconductor industry faced numerous challenges in 2019, including uncertainties due to the US-China trade war, a weak market for memory, and slowed growth for high-end mobile phones and automotive and industrial applications. Before the start of 2020, despite the ongoing trade war, increased demand from 5G and AI was expected to restore growth to the industry. However, the sudden outbreak of COVID-19 epidemic is adding another uncertainty to the economic environment. Throughout, Realtek continued developing key technologies to provide customers with the best connectivity solutions for diverse applications they use. In the future, we will uphold this principle. We will use years of technological experience as well as our agile and flexible management strategies to face up to all challenges and produce greater value for all shareholders. We hope you will continue moving ahead with us on this exciting journey.

Thank you for your care and support! We wish you a healthy and prosperous future.

Chairman Yeh, Nan-Horng President Chiu, Sun-Chien Controller Chang, Jr-Neng

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Company Introduction

I. Date of Establishment

Realtek Semiconductor Corporation (“the Company”) was incorporated on October 21, 1987, and debuted on the Taiwan Stock Exchange in October 1998. It is headquartered in Taiwan and it has sales or R&D teams in China, Singapore, the United States, Japan, and South Korea.

II. Company Milestones

1987/10 The Company is incorporated. 1988/04 The Company’s Taipei office is established. 1991/12 The Pocket Ethernet Controller receives an Innovative Technology Award from the Hsinchu Science Park Administration.
1993/12 The High-Performance Window Accelerator Chip receives an Innovative Product Award from the Hsinchu Science Park Administration.
1995/02 The Full Duplex Plug-and-Play Ethernet Controller receives a Product Innovation Award from EDN Asia.
1996/12 For its extensive R&D initiatives and achievements, the Company receives an R&D Participation Award from the Hsinchu Science Park Administration.
1997/06 The Single-Chip Fast Ethernet Controller receives a Best Component Award and a Best Product Award at Computex Taipei 1997.
1997/09 The Company is listed in Gre Tai Securities Market (Taipei Exchange). 1997/11 The Single-Chip Fast Ethernet Controller receives a New Product Development Award from the Industrial Development Bureau, Ministry of Economic Affairs.
1998/10 The Company debuts on the Taiwan Stock Exchange.
1998/12 For the fourth consecutive year, the Company receives an R&D Participation Award from the Hsinchu Science Park Administration.
1999/12 The 4-Port Fast Ethernet Transceiver receives an innovative technology R&D grant from the Hsinchu Science Park Administration.
2000/05 For the first time, the Company issues unsecured convertible bonds; the total value is NT$1.4 billion.
2000/08 For its outstanding R&D achievements, the Company receives a Most Outstanding Award at the Ministry of Economic Affairs’ 8[th] Industrial Technology Development Awards.
2001/12 The Multi-mode Single-Chip 10/100M Fast Ethernet Controller SoC receives a Component Design Award from EDA Asia Magazine .
2002/01 For the first time, the Company issues Overseas Depositary Receipts; the total value is US$240,180,375.
2002/06 The ALC650 6-Channel Audio Codec receives a Best Choice Award at Computex Taipei 2002.
2002/11 The Company ranks among the Global Top 10 Electronic Component Providers by Taiwan’s Micro-Electronics Magazine .
2003/10 For the second consecutive year, the Company ranks among the Forbes Global 200 Best Small Companies.

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2003/10	The RTL8169S/RTL8110 Single-Chip Gigabit Ethernet Controller receives an
	Innovative Product award from the Hsinchu Science Park Administration.
2004/03	The PCI Express Single-Chip Gigabit Ethernet Controller receives an innovation
	R&D grant for NT$3 million from the Hsinchu Science Park Administration.
2004/06	The Dual-Band Triple-Mode WLAN Chipsets RTL8185L and RTL8255 receive
	a Best Choice Award at Computex Taipei 2004.
2004/09	The reference designs of the IEEE802.11a/b/g WLAN Chipsets RTL8185L and
	RTL8255 pass the Wi-Fi Alliance’s WPA2 (Wi-Fi Protected Access 2) testing
	and become the golden test bed.
2004/10	The Dual-Band Triple-Mode WLAN Chipset receives an Outstanding IT
	Application/Product Award from the committee for Taiwan Information
	Technology Month.
2004/12	The WLAN Chipsets RTL8187L and RTL8255 receive an Innovative Product
	Award from the Hsinchu Science Park Administration.
2004/12	The Company receives an R&D Accomplishment Award from the Hsinchu
	Science Park Administration.
2005/03	The Company unveils the ALC882 7.1+2 Channel High Definition Audio Codec.
2005/06	The Company celebrates the grand opening of its new building on Innovation Rd.
	II in Hsinchu Science Park.
2005/08	The Company releases the RTS5111, the world’s first USB 2.0 All-in-One Card
	Reader Controller with Integrated 5V/3.3V Regulator and Power MOSFET.
2005/11	For its substantive R&D achievements, the Company receives another R&D
	Accomplishment Award from the Hsinchu Science Park Administration.
2006/03	The Company releases a new generation of High Definition Audio codecs, the
	ALC885 and ALC888 Telecom.
2006/03	The ALC888 Telecom receives a Technology Innovation Accelerated Award for
	the “Digital Office” platform at the 2006 Intel Developer Forum.
2006/08	The Company passes ISO 14001 Environmental Management Systems
	certification.
2006/10	The Company celebrates its 20thanniversary.
2006/12	The ALC888 Telecom receives an Innovative Product Award from the Hsinchu
	Science Park Administration.
2006/12	For the third consecutive year, the Company receives an R&D Accomplishment
	Award from the Hsinchu Science Park Administration.
2007/01	At an extraordinary shareholders’ meeting, shareholders approveda capital
	reduction of NT$4,180,701,000 (each share qualified for a rebate of
	approximately NT$5); the reduction ratio is 50%.
2007/06	The RTL8111C PCI Express Single-Chip Gigabit Ethernet Controller receives a
	Best Choice Award at Computex Taipei 2007.
2007/07	The Company releases the RTL8366S and RTL8366SR low power, highly
	integrated 6-Port Gigabit Ethernet Switch Controller Single-Chip solutions
	featuring patented Green Ethernet technology.
2007/10	The Company releases the RTS5161/68/69, the world’sfirst multi-function card
	reader controller to integrate a NAND flash card reader, a smart card reader, a
	fingerprint reader, and an IR receiver.

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2007/10	The Company releases the ALC269, which is the first HD Audio Codec to
	integrate a 2W Class D Amplifier and the latest low power specifications. The
	device represents a breakthrough in reducing the power consumption of laptop
	computers.
2007/11	The Company releases the ALC889 HD Audio Codec, which features a Signal-
	to-Noise Ratio (SNR) of 108dB and is the only HD Audio Codec to have full rate
	Blu-Ray DVD playback.
2007/12	The RTL8111C-GR PCI Express Gigabit Ethernet Controller receives an
	Innovative Product Award from the Hsinchu Science Park Administration.
2007/12	For the fourth consecutive year, the Company receives an R&D Accomplishment
	Award from the Hsinchu Science Park Administration.
2008/05	The Company demonstrates a series of Networked Multimedia SoC solutions at
	Computex Taipei 2008.
2008/06	The RTD2485D All-in-One LCD Monitor Controller receives a Best Choice
	Award at Computex Taipei 2008.
2008/09	The Company releases the RTL8191S and RTL8192S,the world’s smallest, most
	energy efficient 802.11n WLAN IC Single-Chip solutions. They are the first
	controllers to integrate MAC/BB/RF with an embedded power amplifier,
	EEPROM, and switching regulators.
2008/10	The RTL8366SR 5+1-Port Gigabit Ethernet Switch Controller Single-Chip
	receives a 2008 EDN China Innovation Award.
2008/12	The RTD2485D All-in-One LCD Monitor Controller receives an Innovative
	Product Award from the Hsinchu Science Park Administration.
2009/08	The Company receives a 2009 National Invention and Creation Award.
2009/10	The Company releases the RTL8111E, the first Gigabit Ethernet Controller SoC
	to use the IEEE 802.3az standard.
2009/10	The RTD1073 Full-HD Digital Media Processor receives a 2009 EDN China
	Innovation Award.
2009/11	The RTD1073/1283 Full-HD Digital Media Processor receives a 2009
	Outstanding IT Application/Product Award.
2009/11	The RTL8111DP-GR PCI Express Gigabit Ethernet Management Controller
	receives a 2009 Innovative Product Award from the Hsinchu Science Park
	Administration.
2009/11	The Company receives the International Exchange and Cooperation Award from
	the Hsinchu Science Park Administration.
2009/11	The Company receives the 2009 R&D Accomplishment Award from the Hsinchu
	Science Park Administration.
2010/01	At the 2010 CES, the Company demonstrates industry-leading Green Ethernet
	power-savings technology, including the IEEE 802.3az Ethernet Single-Chip and
	Switch Controller, as well as the world’s most energy efficient power-over-USB
	2x2 802.11n Wireless Router using the Company's Green WLAN technology.
2010/06	The ALC899-GR High Fidelity PC Audio Codec receives a Best Choice Award
	at Computex Taipei 2010.
2010/06	The RTL8111E Single-Chip Gigabit Ethernet Controller receives a Best Choice
	Award at Computex Taipei 2010.

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2010/12	The RTL8111E Single-Chip Gigabit Ethernet Controller receives a 2010
	Outstanding IT Application and Products Award.
2010/12	The RTL8367M 7-Port Gigabit Ethernet Switch Controller receives a 2010
	Innovative Product Award from the Hsinchu Science Park Administration.
2010/12	The Company receives a 2010 Science Park R&D Accomplishment Award.
2011/10	The Company receives the 1stTaiwan Green Classics Award, hosted by the
	Bureau of Foreign Trade, Ministry of Economic Affairs.
2011/12	The Company receives an Industrial Sustainable Excellence Award from the
	Industrial Development Bureau, Ministry of Economic Affairs.
2011/12	The Company receives a National Industrial Innovation Award–Outstanding
	Enterprise Innovation Award from the Department of Industrial Technology,
	Ministry of Economic Affairs.
2011/12	The Company receives a 2011 Science Park R&D Accomplishment Award.
2012/12	The ALC5642 Hi-Fi Audio Integrated with Voice/Sound DSP and Codec Single-
	Chip receives a 2012 Innovative Product Award from the Hsinchu Science Park
	Administration.
2012/12	The Company receives a 2012 Science Park R&D Accomplishment Award.
2013/06	The RTD2995 4K2K UHD Smart TV SoC receives a Best Choice Golden Award
	at Computex Taipei 2013.
2013/11	The RTL8153 Low Power USB 3.0-to-Gigabit Ethernet Controller receives a
	2013 EDN China Innovation Award.
2013/12	The RTD2995 4K2K UHD Smart TV SoC receives a 2013 Innovative Product
	Award from the Hsinchu Science Park Administration.
2014/06	The RTL8118AS Ultra Low Power Gaming NIC receives a Best Choice Green
	ICT Award at Computex Taipei 2014.
2014/06	The RTL8881A AP/Router Network Processor SoC (with 11ac Wi-Fi) receives a
	Best Choice Award (in Communication) at Computex Taipei 2014.
2015/04	The Company’s subsidiary Realtek Singapore Pte Ltd. acquires 100% equity
	interest of Cortina Access, Inc. and its subsidiaries.
2015/06	The RTL8195AM Low Power Wi-Fi IoT SoC receives a Best Choice Golden
	Award at Computex Taipei 2015.
2015/12	The RTD2999 4K Ultra-High Picture Quality Smart TV SoC receives a 2015
	Innovative Product Award from the Hsinchu Science Park Administration.
2016/06	The RTL8762A Bluetooth Low Energy SoC receives a Best Choice Golden
	Award at Computex Taipei 2016.
2016/06	The RTS5421 USB 3.1 Type-C Hub receives a Best Choice Golden Award at
	Computex Taipei 2016.
2016/12	The Company receives a 2016 Science Park R&D Accomplishment Award.
2016/12	The RTL9020AA Automotive Camera SoC Integrated with Audio/Video
	Processor and Ethernet receives a 2016 Innovative Product Award from the
	Hsinchu Science Park Administration.
2017/06	The RTL9047A Automotive Ethernet Switch Controller receives a Best Choice
	Award in the Car Electronics category at Computex Taipei 2017.
2017/06	The RTL8771B Low Power Wearable GNSS Receiver receives a Best Choice
	Award in the Mobile & Wearables category at Computex Taipei 2017.

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2017/06	The world’s most energy efficient Bluetooth 5 Dual Mode Audio SoC, the
	RTL8763B, receives a Best Choice Award in the IC & Components category at
	Computex Taipei 2017.
2017/06	The RTL8117 Personal Cloud IC Solution receives a Best Choice Award: the
	Jury’s Special at Computex Taipei 2017.
2017/11	The Communications Network Group’s CN3 Wi-Fi R&D team receives a 2017
	Outstanding Technology Management Award.
2018/05	The Company releases the world’s first 2.5G Ethernet Controller SoC for
	multiple applications, including gaming.
2018/06	The RTL8715A Highly Integrated, Ultra-Low-Power Wi-Fi IP Camera SoC
	receives a Best Choice Award in the IoT Applications category at Computex
	Taipei 2018.
2018/06	The RTL8762C Bluetooth 5 Low Energy SoC receives a Best Choice Award in
	the IC & Components category at Computex Taipei 2018.
2018/06	The ALC5520 Multi-Mic Far-Field Speech Recognition Enhanced SoC solution
	receives a Best Choice Golden Award at Computex Taipei 2018.
2018/06	The Company receives an Asia Responsible Entrepreneurship Award.
2018/12	The ALC5520 Multi-Mic Far-Field Speech Recognition Enhanced SoC solution
	receives a 2018 Innovative Product Award from the Hsinchu Science Park
	Administration.
2019/06	The RTD2893 8K Video Decoder and Processing IC receives the Best Choice of
	the Year/Golden Award at Computex Taipei 2019.
2019/06	The RTL8773B Bluetooth 5 ANC Smart Headset SoC receives a Best Choice
	Golden Award at Computex Taipei 2019.
2019/06	The RTL8722DM Ameba D: Ultra-Low-Power Versatile IoT Solution wins a
	Best Choice IoT Category Award at Computex Taipei 2019.
2019/12	The RTD2893 8K Video Decoder and Processing IC receives a 2019 Innovative
	Product Award from the Hsinchu Science Park Administration.
2019/12	The Company receives a 2019 Science Park R&D Accomplishment Award for
	overall R&D results.

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Corporate Governance Report

I. Organization

1. Organizational Structure

==> picture [478 x 235] intentionally omitted <==

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

Board of Directors Audit
Chairman Committee
Chairman's Compensation
Office Committee
President Nominating
CEO Committee
President's
Office
Communications Computer Corporate Intelligent
Network Peripheral Multimedia R&D Center Technology Decision
Business Group Business Group Business Group Center Research Center
Quality Information Occupational
Manufacturing Management Finance Technology Administration Safety & Health
Division Department Division Department Department Center
----- End of picture text -----

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2. Responsibilities of Main Departments

Department	KeyResponsibilities
Chairman’s Office	Reviews the Company’s operations and implementation of resolutions made by shareholders’ meetings and the Board of Directors;Companyaudits.
President’s Office	Plans and executes the Company’s operational strategies and analysis; carries out Board of Directors’ resolutions, investment assessments, PR statements, legal and patent affairs, and international marketing.
Communications Network Business Group	Manages communications network product R&D, planning and marketing.
Computer Peripheral Business Group	Manages computer peripheral product R&D, planning and marketing.
Multimedia Business Group	Manages multimedia product R&D, planning and marketing.
R&D Center	Plans new products, develops and designs relevant core technologies, and manages circuit layouts.
Corporate TechnologyCenter	Overseesthe planning, research and service of all advanced technologies needed in Company’s product development
Intelligent Decision Research Center	Oversees big data analytics.
Manufacturing Division	Oversees raw materials, warehousing, materials control, procurement, IC manufacturing and testing,and testingequipment maintenance.
Quality Management Department	Oversees product quality control and reliability engineering.
Finance Division	Oversees finance,accounting,and stock affairs.
Information Technology Department	Oversees information management and computer systems integration and applications.
Administration Department	Oversees general affairs, factory administration, and human resources.
Occupational Safety & Health Center	Oversees occupational safety and health.

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Managers or Directors who are spouse or within second-degree relatives to each other	Relation		Brother					Brother
	Name		Yeh, Po-Len					Yeh, Nan- Horng
	Title		Director		-			Chairman
Other Selected Current Positions		NA	Chairman of Realsil Microelectronics Corp. (Note 2)	NA	President of Realtek Semiconductor Corp. Director of Realsun Technology Corporation (Note 2) Director of Realking Investments Limited (Note 2) Director of Hungwei Venture Capital Co., Ltd (Note 2) Director of Realtek Semiconductor (Japan) Corp. (Note 2)	Chief Financial Officer of Realtek Semiconductor Corp. Director of Realsun Investments Co., Ltd (Note2) Director of Realtek Semicomductor (ShenZhen) Corp. (Note 2)	NA	Director of Realsun Technology Corporation (Note 2) Director of Realking Investments Limited (Note 2) Director of Hungwei Venture Capital Co., Ltd (Note 2) Director of Realtek Semiconductor (HK) Ltd. (Note 2)	Chief Operating Officer of Realtek Semiconductor Corp. Director of Hungwei Venture Capital Co., Ltd. (Note 2) Director of Realsun Investments Co., Ltd. (Note 2) Director of Realking Investments Limited (Note 2) Director of Realsun Technology Corporation (Note 2) Chairman of Realtek Singapore Pte Ltd. (Note 2) Chairman of Realtek Investment Singapore Private Limited (Note 2) Director of Cortina Access, Inc. (Note 2) Chairman of Cortina Systems Taiwan Limited (Note 2)	None	CEO of Creative Education and Management Foundation Chairman of EZTravel Travel Service Co., Ltd. Chairman of You Hsin Creative Co., Ltd. Chairman of Eland Technologies Co., Ltd. Chairman of Eland Information Co., Ltd	President of Jasslin Technology Co., Ltd.	None
Education & Experience		NA	MBA(Master of Business Administration) ,Washington University in St. Louis, USA.	NA	M.S. in Electrical Engineering, National Taiwan University	MBA(Master of Business Administration), The City University of New York, USA.	NA	MSc. & Ph.D. in Material Engineering, Loughbourough University of Technology, United Kingdom	M.S. in Electrical Engineering, State University of New York, USA	Open Junior College	M.A. in Journalism, National Chengchi University	MBA(Master of Business Administration), Tulane University, USA	Bachelor of Electrical Engineering, National Taiwan University
Shareholding by Nominee Arrangement	%	-	-	-			-
	Share	-	-	-			-
Spouse & Minor Shareholding	%	-	-	-	0.00%		-	0.04%	0.02%	1.29%			0.03%
	Share	-	-	-	2,384		-	208,398	79,625	6,569,949			152,024
Current Shareholding	%	4.34%	-	0.98%	0.27%	0.01%	0.01%	0.46%	0.01%	1.24%	-	-	0.11%
	Share	22,146,604	-	5,023,359	1,370,831	40,686	66,000	2,323,899	42,205	6,308,389	-	-	563,688
Shareholding When Elected	%	4.36%	-	1.22%	0.27%	0.01%	0.01%	0.46%	0.01%	1.24%	-	-	0.11%
	Share	22,146,604	-	6,184,359	1,388,831	40,686	66,000	2,323,899	42,205	6,308,389	-	-	578,688
Date First Elected		2015.06.09	1994.04.02 (Note1)	2009.06.10	2000.06.09	2006.06.12	2015.06.09	1991.06.26	2018.06.05	1991.06.26	2015.06.09	2018.06.05	2018.06.05
Term of Office		3 years	3 years	3 years	3 years	3 years	3 years	3 years	3 years	3 years	3 years	3 years	3 years
Date Elected		2018.06.05	2018.06.05	2018.06.05	2018.06.05	2018.06.05	2018.06.05	2018.06.05	2018.06.05	2018.06.05	2018.06.05	2018.06.05	2018.06.05
Gender		-	Male	-	Male	Male	-	Male	Male	Femal e	Male	Male	Male
Name		Cotek Pharmaceutical Industry Co., Ltd.	Cotek Pharmaceutical Industry Co., Ltd. Representative: Yeh, Nan-Horng	Forehead International Co., Ltd.	Forehead International Co., Ltd. Representative: Chiu, Sun-Chien	Forehead International Co., Ltd. Representative: Chern, Kuo-Jong	Sonnen Limited	Sonnen Limited Representative: Yeh, Po-Len	Sonnen Limited Representative: Huang, Yung-Fang	Ni, Shu-Ching	Chen, Fu-Yen	Wang, Chun-Hsiung	Ou Yang, Wen-Han
Nationality / Country of Origin		ROC	ROC	BVI	ROC	ROC	BVI	ROC	ROC	ROC.	ROC	ROC	ROC
Title		Director	Chairman	Director	Vice Chairman	Director	Director	Director	Director	Director	Independent Director	Independent Director	Independent Director

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Table I: The major shareholders of institutional shareholders

April 12, 2020

	April 12, 2020
Institutional Shareholders	Major Shareholders of Institutional Shareholders
Cotek Pharmaceutical Industry Co., Ltd.	Leicester Worldwide Corporation (shareholding: 48.24%) DeTao Venture CapitalCorp. (shareholding:20%)
Sonnen Limited	Chang,Tseng SuiGin(shareholding:100%)
ForeheadInternationalCo.,Ltd.	Time WealthCo.,Ltd (shareholding:100%)

Table II: The major shareholders of the major shareholders of institutional shareholders in Table I

Table II: The major shareholders of the major shareholders of institutional shareholders in Table I	Table II: The major shareholders of the major shareholders of institutional shareholders in Table I
April 12, 2020
Shareholder	Major Shareholders Holding
Leicester Worldwide Corporation	Top Best Development Limited (shareholding: 33%) Apex Fortune Global Limited (shareholding: 33%) Perfectech INT'L Ltd (shareholding: 33%)
Time WealthCo.,Ltd	H.S.LeeHsia (shareholding:100%)

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Professional Background and Independence of Directors

Criteria Name Cotek Pharmaceutical Industry Co., Ltd. Representative: Yeh, Nan-Horng Forehead International Co., Ltd. Representative: Chiu, Sun-Chien Forehead International Co., Ltd. Representative: Chern, Kuo-Jong Sonnen Limited Representative: Yeh, Po-Len Sonnen Limited Representative: Huang, Yung-Fang Ni, Shu-Ching Chen, Fu-Yen	Possess five or more years of experience and the following professional qualifications An instructor or higher 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 area of commerce, law, finance, or accounting, or otherwise necessary for the business of the company.	Independence Status (Note) 1 2 3 4 5 6 7 8 910 11 12	Independence Status (Note) 1 2 3 4 5 6 7 8 910 11 12	Independence Status (Note) 1 2 3 4 5 6 7 8 910 11 12	Independence Status (Note) 1 2 3 4 5 6 7 8 910 11 12	Independence Status (Note) 1 2 3 4 5 6 7 8 910 11 12	Independence Status (Note) 1 2 3 4 5 6 7 8 910 11 12	Independence Status (Note) 1 2 3 4 5 6 7 8 910 11 12	Independence Status (Note) 1 2 3 4 5 6 7 8 910 11 12	Independence Status (Note) 1 2 3 4 5 6 7 8 910 11 12	Independence Status (Note) 1 2 3 4 5 6 7 8 910 11 12	Independence Status (Note) 1 2 3 4 5 6 7 8 910 11 12	Independence Status (Note) 1 2 3 4 5 6 7 8 910 11 12	Number of other public companies concurrently serving as an independent director
	�			�	�	�	�	�	�	�		�		0
	� � � � � �	� �	� �	� � � � �	� � � � �	� � � � � �	� � � � � �	� � � � � �	� � � � � �	� � � � � �	� � � � �	� � � � � �	� �	0 0 0 0 0 0 0 0
Wang, Chun-Hsiung	�	�	�	�	�	�	�	�	�	�	�	�	�
Ou Yang, Wen-Han	�	�	�	�	�	�	�	�	�	�	�	�	�

Note: ‘V’ indicates the conditions listed met during the director’s terms and two years prior.

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

(2) Not a director or supervisor of the company or any of its affiliates. (The same does not apply, however, in cases where the person is an independent director of the company, its parent company, or any subsidiary, as appointed in accordance with the Act or with the laws of the country of the parent or subsidiary.)

(3) 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 one percent or more of the total number of issued shares of the company or ranking in the top 10 in holdings.

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

(5) Not a director, supervisor, or employee of a corporate shareholder that directly holds five percent or more of the total number of issued shares of the company or of a corporate shareholder that ranks among the top five in shareholdings. (The same does not apply, however, in cases where the person is an independent director of the company, its parent company, or any subsidiary, as appointed in accordance with the Act or with the laws of the country of the parent or subsidiary.)

(6) Not a director, supervisor or employee of another companies controlled by the same person with more than half of directors or voting shares of the company and another companies. (The same does not apply, however, in cases where the person is an independent director of the company, its parent company, or any subsidiary, as appointed in accordance with the Act or with the laws of the country of the parent or subsidiary.)

(7) Not a director, supervisor or employee of another companies or institutions who are the same person or spouse as the company's chairman, president or equivalent. (The same does not apply, however, in cases where the person is an independent director of the company, its parent company, or any subsidiary, as appointed in accordance with the Act or with the laws of the country of the parent or subsidiary.)

(8) Not a director, supervisor, officer, or shareholder holding five percent or more of the shares, of a specified company or institution that has a financial or business relationship with the company. (The same does not apply, however, in cases where the specified company or institution holds 20 percent or more and no more than 50 percent of the total number of issued shares of the company, and the person is an independent

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director of the company, its parent company, or any subsidiary, as appointed in accordance with the Act or with the laws of the country of the parent or subsidiary.)

(9) Not a professional individual who, or an owner, partner, director, supervisor, officer or their spouse of a sole proprietorship, partnership, company, or institution that, provides audit or commercial, legal, financial, or accounting services with remuneration in the past two years with cumulative amounts exceeding NT$ 500,000 to the company or to any affiliate of the company. However, this restriction does not apply to a member of the remuneration committee, public tender offer review committee, or special committee for merger/consolidation and acquisition, who exercises powers pursuant to the Act or to the Business Mergers and Acquisitions Act or related laws or regulations.
(10) Not a spouse or relative within the second degree of kinship to any of other directors.
(11) Not under any condition pursuant to Article 30 of the Company Act.
(12) Not a juridical person or its representative as defined in Article 27 of the Company Act.

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Managers who are spouse or second-degree relative	Relation - - - - - - - - - -
	Name - - - - - - - - - -
	Title - - - - - - - - - -
Other Selected Current Positions	Director of Realsun Technology Corporation (Note) Director of Realking Investments Limited (Note) Director of Hungwei Venture Capital Co., Ltd (Note) Director of Realtek Semiconductor (Japan) Corp. (Note) Director of Realtek Venture Capital Co., Ltd (Note) Director of Realsun Investments Co., Ltd (Note) Director of Realking Investments Limited (Note) Director of Realsun Technology Corporation (Note) Chairman of Realtek Singapore Pte Ltd. (Note) Chairman of Realtek Investment Singapore Private Limited (Note) Director of Cortina Access, Inc. (Note) Chairman of Cortina Systems Taiwan Limited (Note) Director of Realsun Investments Co., Ltd (Note) Director of Realtek Semicomductor (ShenZhen) Corp. (Note) Chairman of Realsun Investments Co., Ltd (Note) Director of Realtek Semiconductor (HK) Limited (Note) Director of C-Media Electronics Inc. (Note) None Director of Compal Broadband Networks Inc. (Note) Director of Realtek Singapore Pte. Ltd. (Note) Director of Realtek Investment Singapore Private Limited (Note) Director of Cortina Access, Inc. (Note) Chairman of Cortina Systems Taiwan Limited (Note) Director of Realtek Investment Singapore Private Limited Supervisor of Greatek Electronics Inc. (Note)
Education & Experience	M.S. in Electrical Engineering, National Taiwan University M.S. in Electrical Engineering, State University of New York, USA MBA(Master of Business Administration), The City University of New York, USA Ph.D. in Chemical Engineering, Kansas State University, USA M.S. in Electrical Engineering, National Taiwan University MBA(Master of Business Administration), National Chengchi University B.S in Electronics Engineering, National Chiao Tung University M.S. in Electrical Engineering, National Taiwan University M.S. in Communications Engineering , National Chiao Tung University M.A. in Accounting, National Taiwan University
Shareholdi ng by Nominee Arrangeme nt	% - - - - - - - - - -
	Total - - - - - - - - - -
Spouse & Minor Shareholding	% 0.00% 0.02% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
	Total 2,384 79,625 0 0 0 17,989 0 0 4,000 0
Shareholding	% 0.27% 0.01% 0.01% 0.04% 0.01% 0.02% 0.02% 0.00% 0.00% 0.01%
	Total 1,370,831 42,205 40,686 188,560 50,000 112,118 120,267 74 23,948 35,045
Date Appointed	1999.07.01 2015.04.27 2002.03.28 2014.03.24 2018.03.13 2018.03.13 2018.03.13 2018.10.30 2018.10.30 2007.03.16
Gender	Male Male Male Male Male Male Male Male Male Male
Name	Chiu, Sun- Chien Huang, Yung- Fang Chern, Kuo- Jong Huang, Yee- Wei Lin, Ying-Hsi Lin, Lung-Wei Chang, King- Hsiung Tsai, Jon-Jinn Yen, Kuang- Yu Chang, Jr- Neng
Nationality	ROC ROC ROC ROC ROC ROC ROC ROC ROC ROC
Title	President Chief Operating Officer Chief Financial Officer Vice President Vice President Vice President Vice President Vice President Vice President Controller

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Remuneration received from investment	Remuneration received from investment	business other than subsidiaries or parent company None	business other than subsidiaries or parent company None	business other than subsidiaries or parent company None	business other than subsidiaries or parent company None	business other than subsidiaries or parent company None	business other than subsidiaries or parent company None	business other than subsidiaries or parent company None	None	None	None
A + B + C + D + E+F+G as percentage of net income after taxes		Consolidated Entities 2.66%							0.02%
		REA	LTEK 2.66%						0.02%
Remuneration from concurrent position as employee	Profit distribution for employee compensation (G)	Consolidated Entities	Stock 0						0
			Cash 24,600						0
		REALTEK	Stock 0						0
			Cash 24,600						0
	Pension (F)	Consolidated Entities 995							0
		REALTEK 995							0
	Salaries, bonuses and special expenses (E) (Note 2)	Consolidated Entities 34,559							0
		REALTEK 34,559							0
A + B + C+D as percentage of net income after taxes		Consolidated Entities 1.77%							0.02%
		REALTEK 1.77%							0.02%
Director remuneration	Business expenses (D)	Consolidated Entities 1,440							480
		REALTEK 1,440							480
	Remuneration from profit distribution (C) (Note 1)	Consolidated Entities 119,028							800
		REALTEK 119,028							800
	Pension (B)	Consolidated Entities
		REALTEK
	Remuneration (A)	Consolidated Entities
		REALTEK
	Name	Cotek Pharmaceutical Industry Co., Ltd. Representative: Yeh, Nan-Horng		Forehead International Co., Ltd. Representative: Chiu, Sun-Chien	Forehead International Co., Ltd. Representative: Chern, Kuo-Jong	Sonnen Limited Representative: Yeh, Po-Len	Sonnen Limited Representative: Huang, Yung- Fang	Ni, Shu-Ching	Chen, Fu-Yen	Wang, Chun- Hsiung	Ou Yang, Wen- Han
	Title	Chairman		Vice Chairman	Director	Director	Director	Director	Independent Director	Independent Director	Independent Director

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Remuneration Range

	Remuneration Range	Remuneration Range	Remuneration Range	Remuneration Range
Remuneration Range	Name of Directors
	Total remuneration (A+B+C+D)		Total remuneration (A+B+C+D+E+F+G)
	REALTEK	Consolidated Entities	REALTEK	Consolidated Entities
Less than $1,000,000	Yeh, Nan-Horng, Chiu, Sun-Chien, Chern, Kuo-Jong, Yeh, Po-Len, Huang, Yung-Fang, Chen, Fu-Yen, Wang, Chun-Hsiung, Ou Yang,Wen-Han	Yeh, Nan-Horng, Chiu, Sun-Chien, Chern, Kuo-Jong, Yeh, Po-Len, Huang, Yung-Fang, Chen, Fu-Yen, Wang, Chun-Hsiung, Ou Yang,Wen-Han	Chen, Fu-Yen, Wang, Chun-Hsiung, Ou Yang, Wen-Han	Chen, Fu-Yen, Wang, Chun-Hsiung, Ou Yang, Wen-Han
$1,000,000 (incl.) - $2,000,000 (excl.)	Ni, Shu-Ching	Ni, Shu-Ching	Ni, Shu-Ching	Ni, Shu-Ching
$2,000,000 (incl.) - $3,500,000 (excl.)
$3,500,000 (incl.) - $5,000,000 (excl.)
$5,000,000 (incl.) - $10,000,000 (excl.)			Yeh, Po-Len,	Yeh, Po-Len,
$10,000,000 (incl.) - $15,000,000 (excl.)			Yeh, Nan-Horng, Huang, Yung-Fang, Chern, Kuo-Jong,	Yeh, Nan-Horng, Huang, Yung-Fang, Chern, Kuo-Jong,
$15,000,000 (incl.) - $30,000,000 (excl.)	Cotek Pharmaceutical Industry Co., Ltd.	Cotek Pharmaceutical Industry Co., Ltd.	Chiu, Sun-Chien, Cotek Pharmaceutical IndustryCo.,Ltd.	Chiu, Sun-Chien, Cotek Pharmaceutical IndustryCo.,Ltd.
$30,000,000 (incl.) - $50,000,000 (excl.)	Sonnen Limited, Forehead International Co.,Ltd.	Sonnen Limited, Forehead International Co.,Ltd.	Sonnen Limited, Forehead International Co.,Ltd.	Sonnen Limited, Forehead International Co.,Ltd.
$50,000,000 (incl.) - $100,000,000 (excl.)
$100,000,000 and above
Total	12	12	12	12

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Compenation received frominvestment business other than subsidiaries or parent company None	Compenation received frominvestment business other than subsidiaries or parent company None	Compenation received frominvestment business other than subsidiaries or parent company None	Compenation received frominvestment business other than subsidiaries or parent company None	Compenation received frominvestment business other than subsidiaries or parent company None	Compenation received frominvestment business other than subsidiaries or parent company None	Compenation received frominvestment business other than subsidiaries or parent company None	Compenation received frominvestment business other than subsidiaries or parent company None	Compenation received frominvestment business other than subsidiaries or parent company None	Compenation received frominvestment business other than subsidiaries or parent company None	Compenation received frominvestment business other than subsidiaries or parent company None	Compenation received frominvestment business other than subsidiaries or parent company None
A + B + C + D as percentage of net income after taxes		Consolidated Entities 1.50%
		REALTEK 1.50%
Employee compensation (D)	Consolidated Entities	Stock 0
		Cash 31,309
	REALTEK	Stock 0
		Cash 31,309
Bonuses and special expenses (C) (Note)	Consolidated Entities 30,661
	REALTEK 30,661
Pension (B)	Consolidated Entities 2,256
	REALTEK 2,256
Salary (A)	Consolidated Entities 37,596
	REALTEK 37,596
	Name Chiu, Sun-Chien		Huang, Yung-Fang	Chern, Kuo-Jong	Huang, Yee-Wei	Lin, Ying-Hsi	Lin, Lung-Wei	Chang, King-Hsiung	Tsai, Jon-Jinn	Yen, Kuang-Yu	Chang, Jr-Neng
	Title President		Chief Operating Officer	Chief Financial Officer	Vice President	Vice President	Vice President	Vice President	Vice President	Vice President	Controller

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Compensation Range

	Compensation Range	Compensation Range
Compensation Range	Name of Presidents and Vice Presidents
	REALTEK	Consolidated Entities
Less than $1,000,000
$1,000,000(incl.)- $2,000,000(excl.)
$2,000,000(incl.)- $3,500,000(excl.)
$3,500,000(incl.)- $5,000,000(excl.)
$5,000,000 (incl.) - $10,000,000 (excl.)	Huang, Yee-Wei, Chang, King-Hsiung, Lin, Lung-Wei, Chang, Jr-Neng	Huang, Yee-Wei, Chang, King-Hsiung, Lin, Lung-Wei, Chang, Jr-Neng
$10,000,000 (incl.) - $15,000,000 (excl.)	Chern, Kuo-Jong, Huang, Yung-Fang, Lin, Ying-His, Yen,Kuang-Yu,Tsai,Jon-Jinn	Chern, Kuo-Jong, Huang, Yung-Fang, Lin, Ying-His, Yen,Kuang-Yu,Tsai,Jon-Jinn
$15,000,000(incl.)- $30,000,000(excl.)	Chiu, Sun-Chien	Chiu, Sun-Chien
$30,000,000(incl.)- $50,000,000(excl.)
$50,000,000(incl.)- $100,000,000(excl.)
$100,000,000 and above
Total	10	10

3.3 Employee’s Compensation for Officers

2019 / Unit: NT$K

==> picture [475 x 181] intentionally omitted <==

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

Percentage of net
Title Name Stock Cash Total income after taxes
(% )
President Chiu, Sun-Chien
Chief Operating
Officer Huang, Yung-Fang
Chief Financial
Chern, Kuo-Jong
Officer
Vice President Huang, Yee-Wei 0 31,309 31,309 0.46%
Vice President Lin, Ying-Hsi
Vice President Lin, Lung-Wei
Vice President Chang, King-Hsiung
Vice President Tsai, Jon-Jinn
Vice President Yen, Kuang-Yu
Controller Chang, Jr-Neng
----- End of picture text -----

Percentage of remuneration and compensation paid to Directors and Officers by the Company and all
companies of the consolidated statements accounts for net income after taxes for the recent two years.

Percentage of remuneration and compensation paid to Directors, Supervisors and Officers by the Company and all companies of the consolidated statements accounts for net income after taxes for 2018	Percentage of remuneration and compensation paid to Directors and Officers by the Company and all companies of the consolidated statements accounts for net income after taxes for 2019
4.23%	4.18 %

The 2019 annual remuneration of directors and compensation of employees were decided in accordance with the Company's articles of incorporation. If gained profits within a fiscal year, the Company shall allocate at a maximum of 3% of the profits as directors’ remuneration, and allocate no less than 1% of the profits as employees’ compensation. The decision for directors' remuneration was based on the board performance evaluation results of such aspects as the participation in the operation, the quality of the board of directors’ decision-making, alignment of the goals and missions of the Company, awareness of the duties of a director, management of internal relationship and communication, the director’s professionalism and continuing education, internal control, etc. The decision for officers’ compensation was based on the performance appraisal indicators such as the length of service and position, performance, contribution to the Company's operation, industry benchmark, the Company’s profitability, etc.

The directors’ remuneration and officers’ compensation were proposed to the board of directors after the resolution based on the

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performance evaluation results, the company’s operational performance, and future risk exposure approved by the remuneration committee, and processed after the approval of the board of directors. The directors’ remuneration and employees’ compensation will also be reported at the shareholders' meeting. The Company's remuneration committee and the board of directors will review the remuneration policies of directors and officers in a timely manner based on the actual operating conditions and relevant laws and regulations, in order to balance the company's sustainable operation and risk control.

The planning and operation of the succession of board members and senior management: 5.1 Succession planning for board members
- There are currently 9 directors (including 3 independent directors) for the Company. The nomination and selection of directors take into account the overall capacity and diversity of the board of directors, and adjust the composition of members according to the results of performance evaluation and the need for substantive operations. The succession planning of the board of directors includes the succession of the senior management of the group, and the recruitment of external professionals with background of business management, law, accounting, industry, technology, or marketing.
5.2 Succession planning for senior management
- The succession planning for senior management of the Company is mainly constructed as follows:
- (1) Based on the future development strategy, define the positions and talent needs of the company, and review the succession planning regularly in response to changes in operations and strategies.
- (2) Develop competent talents with potential and capacities to enter the succession planning talent pool, and establish a comprehensive training mechanism and talent development plan for the talent pool.
- (3) Timely promote the mid-level managers as deputies for the high-level managers, and understand the development of the middle-level management through performance appraisal and as a reference for succession planning.

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III. Corporate Governance

1. Operation of Board of Directors

Operation of Board of Directors:

The Board of Directors held meetings 4 times in 2019. Attendance status of Directors is as follows:

Title Chairman Vice Chairman Director Director Director Director Independent Director Independent Director Independent Director	Name Cotek Pharmaceutical Industry Co., Ltd. Representative: Yeh, Nan-Horng Forehead International Co., Ltd. Representative: Chiu, Sun-Chien Sonnen Limited Representative: Yeh, Po-Len Sonnen Limited Representative: Huang, Yung-Fang Forehead International Co., Ltd. Representative: Chern, Kuo-Jong Ni, Shu-Ching Chen, Fu-Yen Ou Yang, Wen-Han Wang, Chun-Hsiung	Attendance in Person 4 4 3 4 4 4 4 4 4	Attendance by Proxy 0 0 0 0 0 0 0 0 0	Attendance Rate (%) 100% 100% 75% 100% 100% 100% 100% 100% 100%	Remarks

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Other disclosures:

1.1 (1) Securities and Exchange Act §14-3 resolutions:

Date	Resolutions	The Opinions of All Independent Directors and the Company’sActions to the Opinions
Mar. 21, 2019	1. 2018 financial statements and consolidated financial statements 2. The Company intends to loan a fund to a subsidiary 3 Intercompany loans between theCompany’s subsidiaries 4. The Company's Auditor of financial statements and Audit Fee for 2019 5. 2018 Statement of Internal Control System	All independent directors approved
Apr. 26, 2019	1. Distribution of 2018 Retained Earnings 2. Cash distribution from capital surplus 3. Submit proposal to shareholders meeting to release the Director from non-competition restrictions 4. 2018 business report and 2019 business plan 5. Revise the Company’s Article of Incorporation 6. Revise “the Procedures for Financial Derivatives Transactions” 7. Revise “the Procedures for Acquisition or Disposal of Assets” 8. The Company intends to loan funds to subsidiaries
Oct. 31, 2019	1. The Company plans to build office building and parking construction 2. The Company acquires right-of-use asset of real estate 3. The Company intends to loan a fund to a subsidiary 4. Intercompany loans between theCompany’s subsidiaries 5. TheCompany’s invested company intends to loan a fund to a Mainland China subsidiary 6. The Company intends to adjust the endorsement guarantee amount for bank loan of subsidiaries 7. The Company intends to endorse the guarantee for a Mainland China subsidiary 8. The Status that the Company regularly evaluates the independence of auditor 9.Establishingor revising principles and regulations related to corporate governance and corporate social responsibility 10. Appointment of corporate governance officer 11. 2020 Annual Audit Plans

(2) Resolutions of the board of directors with objected or reserved opinions by independent directors and with records or written statements: None.

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1.2 Execution of the directors' interests evasion: The directors have avoided the proposal with personal stake.
1.3 The goals for strengthening the powers of the board of directors and performance evaluation:
(1) Set up functions committees: For the purpose of developing supervisory functions and strengthening management mechanisms, the Company has set up audit committee, remuneration committee, and nominating committee.
(2) Enhance corporate governance: The Company has established corporate governance best practice principles, corporate social responsibility best practice principles, and regulations governing the board performance evaluation, and also discloses corporation governance information in accordance with the relevant laws.
Board of Directors performance evaluation
2.1 Evaluation cycles: Conducting an internal board performance evaluation every year
2.2 Evaluation periods: From Jan. 1, 2019 to Dec. 31, 2019
2.3 Scope and method of evaluation: The evaluation of the board as a whole, individual board members and functional committees.
2.4 Method of evaluation: The internal evaluation of the board and self-evaluation by individual board members. The units conducting evaluations is nominating committee.
2.5 Criteria of evaluation:
- 2.5.1 The board of directors performance evaluation
  - (1) Participation in the operation of the company;
  - (2) Improvement of the quality of the board of directors' decision making;
  - (3) Composition and structure of the board of directors;
  - (4) Election and continuing education of the directors;
  - (5) Internal control.
- 2.5.2 The board members performance evaluation
  - (1) Alignment of the goals and missions of the company;
  - (2) Awareness of the duties of a director;
  - (3) Participation in the operation of the company;
  - (4) Management of internal relationship and communication;
  - (5) The director's professionalism and continuing education;
  - (6) Internal control.
- 2.5.3 Functional committees performance evaluation
  - (1) Participation in the operation of the company;
  - (2) Awareness of the duties of the functional committee;
  - (3) Improvement of quality of decisions made by the functional committee;
  - (4) Makeup of the functional committee and election of its members;
  - (5) Internal control.
2.6 Performance evaluation results: The 2019 performance evaluation results of the board, the board members, “ ”
audit committee, and remuneration committee are all outstanding .

3. Operation of Audit Committee

The Audit Committee assists the Board of Directors in performing its supervision functions. It is also responsible for tasks defined by the Company Act, Securities and Exchange Act and other relevant regulations. The operation of Audit Committee is based on the Audit Committee Charter. The Audit Committee shall convene at least once quarterly; 4 meetings were held in 2019. It also maintains good communication channels with the Company’s internal audit manager and the CPA.

The major annual review matters of Audit Committee were as follows:

(1) Financial statements.
(2) Internal control system.
(3) Material transaction of asset acquisition, intercompany loans, and endorsement and guarantee.
(4) The audit plan and implementation of the internal audit unit.
(5) Appointment, remuneration and independence assessment of the CPA.
(6) Establishing or revising principles and regulations related to corporate governance and corporate social responsibility.
.

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Operation of Audit Committee:

The Audit Committee held meetings 4 times in 2019. Attendance status of Independent Directors is as follows:

follows:
Title	Name	Attendance in Person	Attendance by Proxy	Attendance Rate (%)	Remarks
Independent Director Independent Director Independent Director	Ou Yang, Wen-Han Chen, Fu-Yen Wang, Chun-Hsiung	4 4 4	0 0 0	100% 100% 100%

Other disclosures:

3.1 (1) Securities and Exchange Act §14-5 resolutions

Date	Resolutions	The Opinions of All Independent Directors and the Company’s Actions to the Opinions
Mar. 19, 2019	1. 2018 financial statements and consolidated financial statements. 2. The Company intends to loan a fund to a subsidiary 3. Intercompany loans between theCompany’s subsidiaries 4. The Company's Auditor of financial statements and Audit Fee for 2019 5. 2018 Statement of Internal Control System	All independent directors approved
Apr. 24, 2019	1. Distribution of 2018 Retained Earnings 2. Cash distribution from capital surplus 3. Submit proposal to shareholders meeting to release the Director from non-competition restrictions 4. 2018 business report and 2019 business plan 5. Revise the Company’s Article of Incorporation 6. Revise “the Procedures for Financial Derivatives Transactions” 7. Revise “the Procedures for Acquisition or Disposal of Assets” 8. The Company intends to loan funds to subsidiaries
Oct. 25, 2019	1. The Company plans to build office building and parking construction 2. The Company acquires right-of-use asset of real estate 3. The Company intends to loan a fund to a subsidiary 4. Intercompany loans between the Company’s subsidiaries 5. The Company’s invested company intends to loan a fund to a Mainland China subsidiary 6. The Company intends to adjust the endorsement guarantee amount for bank loan of subsidiaries 7. The Companyintends to endorse theguarantee

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Date	Resolutions	The Opinions of All Independent Directors and the Company’s Actions to the Opinions
	for a Mainland China subsidiary 8. The Status that the Company regularly evaluates the independence of auditor 9.Establishingor revising principles and regulations related to corporate governance and corporate social responsibility 10. Appointment of corporate governance officer 11. 2020 Annual Audit Plans

(2) There was no resolution which was not approved by the Audit Committee but was approved by two thirds or more of all Directors.

3.2 Execution of the independent directors' interests evasion: None.

3.3 The communication between the independent directors and the internal audit manager and the CPA: The Company’s independent directors communicate with the CPA by the way of meetings, discussions, telephone calls or e-mails through the audit committee or separately to discuss the review results of the financial statements and related laws and regulations such as accounting, taxation, and securities management. If major issues occur, a meeting can be convened at any time.

The Company’s independent directors communicate with the internal audit manager by the way of meetings, discussions, telephone calls or e-mails through the audit committee or separately to discuss the company's audit-related works, audit reports, and the condition of discovering problems and tracking improvements. If major issues occur, a meeting can be convened at any time.

(1) The major items of communication between the independent directors and the CPA

Date	The Major Items of the Communication	The suggestions of independent directors and the Company’s action tothe suggestions
Dec. 2, 2019	1. The internal audit report for the third quarter of 2019 and Important review items. 2. Explanation of new accounting principles	No suggestion from independent directors
(2)The major items of communication between the independent directors and the internal audit manager
Date	TheMajor Items of the Communication	Resolution results
Dec. 12, 2019	2020 Annual Audit Plans	No suggestion from independentdirectors

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Deviation from the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies and the reason for deviation.	Deviation from the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies and the reason for deviation.	-		-	-	-	-		-
Implementation Status	Summary Description	The Company established and disclosed the corporate governance best practice principles based on “Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies,” with a dedicated “Corporate Governance” section on the Company’s website for all investors to inquire the Company’s corporate governance regulations.		The Company has set up an investor relations team and appointed a professional stock transfer agency to handle matters such as shareholder suggestions or doubts.	The Company regularly collects the shareholdings of directors and officers.	The Company and its related companies are all in compliance with the relevant internal control system. The Company also supervises the management strategy, financial and business, and audit management of the subsidiaries in accordance with the management practices of the subsidiaries.	The Company regularly educates and advises directors, officers and all employees that the disclosure of material internal information and the actions that may involve insiders trading are prohibited.		The diversity policy for the Company’s board members is as follows: The structure of the Company's board of directors shall be determined by choosing an appropriate number of board members in consideration of business scale, the shareholdings of major shareholders, and practical operational needs. The composition of the board of directors shall be determined by taking diversity into consideration. An appropriate policy on diversity based on
	No
	Yes	V		V	V	V	V		V
Evaluation Item		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”?	2. Shareholding Structure andShareholders’ 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?	(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 implement the risk management and firewall system between related companies?	(4) Does the Company establish internal rules against insiders trading with undisclosed information?	3. Composition and Responsibilities of the Board of Directors	(1) Does the Board develop and implement a diversity policy for the composition of its members?

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Deviation from the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies and the reason for deviation.	Deviation from the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies and the reason for deviation.
Implementation Status	Summary Description	the company's business operations, operating dynamics, and long-term development needs shall be formulated and include, without being limited to, the following two general standards: 1. Basic requirements and values: gender, age, nationality, and culture. 2. Professional knowledge and skills: a professional background (e.g., law, accounting, industry, finance, marketing, or technology), professional skills, and industry experience. All members of the board shall have the knowledge, skills, and experience necessary to perform their duties. To achieve the ideal goal of corporate governance, the board of directors shall possess the following abilities: 1. Ability to make operational judgments. 2. Ability to perform accounting and financial analysis. 3. Ability to conduct management administration. 4. Ability to conduct crisis management. 5. Knowledge of the industry. 6. International market perspective. 7. Ability to lead. 8. Ability to make policy decisions. There are nine directors, three of them are independent directors, for the Company. Each director has his or her own professional background, including business management, leadership decision, industry knowledge, financial accounting, international marketing, etc. The specific management objectives of the Company's board member diversity policy are that each of the eight abilities that the board of directors shall possess is at least possessed by five directors, and at least four of the eight abilities are possessed by individual board members. The management objective of diversity policy is reached by the Company's current board of directors and individual board members. The abilities possessed by individual board members of the Company is as note.
	No
	Yes
Evaluation Item

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Deviation from the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies and the reason for deviation.	Deviation from the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies and the reason for deviation.	-	-	-	-
Implementation Status	Summary Description	The Company has set up nominating committee. Please refer to the operation of nominating committee section disclosed in annual report or the Company's website.	The Company has established regulations governing the board performance evaluation and its evaluation method, regularly conducts performance evaluation every year, submits the results of performance evaluation to the board of directors, and bases the determination of remuneration, the election or nomination of an individual director on the evaluation results. The 2019 performance evaluation results of the board, the board members, audit committee, and remuneration committee are all“outstanding”. Please refer to Board of Directors performance evaluation section disclosed in annual report or the Company's website.	The Company regularly evaluates the performance and independence of the accountants every year and reports the results to the board of directors for approval. The Company's self-assessment of the independence of the accountants mainly includes: 1. The accountants have no significant financial interest in the company; 2. The accountants have no kinship relationship with the senior managers of the company; 3. The accountants shall not hold shares of the company; 4. The accountants shall not concurrently hold the position of the company; 5. The accountants provide independence statement The result of 2019 evaluation is that the independence of the accountants is in line with the Company's standards.	The Company, approved by the board of directors, has appointed a chief corporate governance officer to be in charge of corporate governance affairs. The main duties include handling of matters relating to board of directors meetings and shareholders meetings in compliance with law, preparation of minutes of the board of directors meetings and shareholders meetings, assistance in onboarding and continuing education of the directors, provision of information required for performance of duties
	No
	Yes	V	V	V	V
Evaluation Item		(2) Does the Company voluntarily establish other functional committees in addition to the Remuneration Committee and the Audit Committee?	(3) Does the Company establish regulations governing the board performance evaluation and its evaluation method, regularly conduct performance evaluation every year, submit the results of performance evaluation to the board of directors, and base the determination of remuneration, the election or nomination of an individual director on the evaluation results?	(4) Does the Company regularly evaluate the independence of accountants?	4. Does the Company have an adequate number of corporate governance personnel with appropriate qualifications and appoint a chief corporate governance officer to be in charge of corporate governance affairs. (including but not limited to providing data demanded by directors and supervisors, assisting directors and supervisors with legal compliance, handling matters relating to board meetings and shareholders meetings according to laws, and producing minutes of board

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Deviation from the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies and the reason for deviation.	Deviation from the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies and the reason for deviation.
Implementation Status	Summary Description	by the directors, assistance in the directors' compliance of law. The performance of duties for 2019 was as following: 1. Assisted independent directors and directors in performing their duties, provided required information, and arranged directors' further education: (1) Provided onboard directors revision and development of the latest laws and regulations regarding company management field and corporate governance, and updated them regularly. (2) Reviewed the confidential level of relevant information and provided the company information required by the directors, maintained smooth communication between the directors and officers. (3) Assisted in arranging relevant meetings when, in accordance with the corporate governance best-practice principles, independent directors needed to meet with the internal audit supervisor or accountants individually to understand the company's finance and business. (4) Assisted independent directors and directors to formulate annual training plans and arrange courses based on the company's industrial characteristics and directors' academic and professional experience background. 2. Assisted that the procedures and resolutions of board of directors meetings and shareholders meetings were in compliance with laws: (1) Reported to the board of directors, independent directors, and audit committee on the company's corporate governance operations, and confirmed whether the convening of the company's shareholders meetings and board of directors meetings were in compliance with relevant laws and corporate governance best-practice principles. (2) Assisted and reminded the directors of the laws and regulations to be followed when performing duties or making a formal resolution of the board of directors, and made suggestions when the board of directors will make a resolution in violation of the laws. (3) Checked the release of material information on
	No
	Yes
Evaluation Item		meetings and shareholders meetings)?

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Deviation from the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies and the reason for deviation.	Deviation from the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies and the reason for deviation.		-	-		-	-
Implementation Status	Summary Description	important resolutions of the board of directors after the meetings, and ensured the legality and correctness of the content of the material information for the transaction information equality of investors. 3. Informed directors of the agenda for board of directors seven days before the meeting, convened a meeting and provided meeting materials, reminded directors to recuse if there is a conflict of interest in the agenda items in advance, and completed the minutes of the board of directors meetings within 20 days after the meetings. 4. Registered the date of the shareholders meeting in advance in accordance with the law, prepared meeting notices, handbook, meeting minutes within the statutory deadlines, and handled registration of change matters in the revised articles of incorporation or director election. Training situation: Professional training is arranged in accordance with the requirements of “Operation directions for compliance with the establishment of board of directors by TWSE listed companies and the board's exercise of powers”.	The Company has built a designated section on the website for stakeholders, and assigned personnel to be in charge of handling related issues.	The Company appoints Chinatrust Commercial Bank Transfer Agency to deal with shareholder affairs.		The financial, business and corporate governance information has been disclosed on the company's website. Investors can also access the company's material information through the market observation post system.	The Company has set up an English website, and has a spokesman for external communication and designated personnel to disclose information about the company and the institutional investor conferences at market observation post system in accordance with the statutory requirements.
	No
	Yes		V	V		V	V
Evaluation Item			5. Does the Company establish a communication channel and build a designated section on its website for stakeholders (including but not limited to shareholders, employee and suppliers), as well as handle all the issues they care for in terms of corporate social responsibilities?	6. Does the Company appoint a professional shareholder transfer agency to deal with shareholder affairs?	7. Information Disclosure	(1) Does the Company have a corporate website to disclose the financial, business, and corporate governance information?	(2) Does the Company have other information disclosure channels (e.g. building an English website, appointing designated people to handle information collection and disclosure, implementing a spokesman system, webcasting investor conferences)?

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Deviation from the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies and the reason for deviation.	Deviation from the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies and the reason for deviation.	The Company follows Securities and Exchange Act to publish and report its annual financial report and its financial reports for the first, second and third quarters as well as its operating status for each month before the specified deadline.	-
Implementation Status	Summary Description	The Company follows Securities and Exchange Act to publish and report its annual financial report and its financial reports for the first, second and third quarters as well as its operating status for each month before the specified deadline.	1. The Company provides information on relevant regulations that directors should pay attention to at any time. 2. The directors of the Company attended the board of directors in good condition and all met the requirements of the laws. 3. If the proposal has a stake in the directors, the director is required to evade. 4. The Company has purchased the liability insurance for directors which was approved by the board of directors. 5. The Company protects the legitimate rights and interests of employees in accordance with the provisions of Labor Standards Act, and establishes a good relationship of mutual trust with employees through the welfare system enhancing the stability of employees' lives, and completed educational trainings.
	No	V
	Yes		V
Evaluation Item		(3) Does the Company publish and report its annual financial report within two months after the end of a fiscal year, and publish and report its financial reports for the first, second and third quarters as well as its operating status for each month before the specified deadline?	8. Is there any other important information to facilitate a better understanding of the Company’s corporate governance practices (including but not limited to employee rights, employee wellness, investor relations, supplier relations, rights of stakeholders, directors’ and supervisors’ training records, the implementation ofrisk management policies and risk evaluation measures, the implementation of customer relations policies, and purchasing liability insurance for directors and supervisors)?

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Ability to lead Ability to	make policy	decisions			v v	v v	v v	v v	v v	v	v v	v v	v v
International	market	perspective			v	v	v	v	v	v	v	v	v
Knowledge of	the industry				v	v	v	v	v		v
Ability to	conduct crisis	management			v	v	v	v	v	v	v	v	v
Ability to Ability to Ability to	make perform conduct	Gender operational accounting management	judgments and financial administration	analysis	Yeh, Nan-Horng Male v v v	Chiu, Sun-Chien Male v v v	Yeh, Po-Len Male v v v	Huang, Yung- Fang Male v v	Chern, Kuo-Jong Male v v v	Ni, Shu-Ching Female v v	Ou Yang, Wen- Han Male v v v	Chen, Fu-Yen Male v v	Wang, Chun- Hsiung Male v v

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		Other Kao, Chih-Chun v v v v v v v v v v v 0 Independent Director Wang, Chun-Hsiung v v v v v v v v v v v 0 Note 1: Title should be directors, independent directors, or others. Note 2: “V” indicates the conditions listed met during the member’s terms and two years prior. (1) Not an employee of the company or any of its affiliates. (2) Not a director or supervisor of the company or any of its affiliates. (The same does not apply, however, in cases where the person is an independent director of the company, its parent company, or any subsidiary, as appointed in accordance with the Act or with the laws of the country of the parent or subsidiary.) (3) 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 one percent or more of the total number of issued shares of the company or ranking in the top 10 in holdings. (4) Not a spouse, relative within the second degree of kinship, or lineal relative within the third degree of kinship, of any of the persons in the preceding three subparagraphs. (5) Not a director, supervisor, or employee of a corporate shareholder that directly holds five percent or more of the total number of issued shares of the company or of a corporate shareholder that ranks among the top five in shareholdings. (The same does not apply, however, in cases where the person is an independent director of the company, its parent company, or any subsidiary, as appointed in accordance with the Act or with the laws of the country of the parent or subsidiary.) (6) Not a director, supervisor or employee of another companies controlled by the same person with more than half of directors or voting shares of the company and another companies. (The same does not apply, however, in cases where the person is an independent director of the company, its parent company, or any subsidiary, as appointed in accordance with the Act or with the laws of the country of the parent or subsidiary.) (7) Not a director, supervisor or employee of another companies or institutions who are the same person or spouse as the company's chairman, president or equivalent. (The same does not apply, however, in cases where the person is an independent director of the company, its parent company, or any subsidiary, as appointed in accordance with the Act or with the laws of the country of the parent or subsidiary.) (8) Not a director, supervisor, officer, or shareholder holding five percent or more of the shares, of a specified company or institution that has a financial or business relationship with the company. (The same does not apply, however, in cases where the specified company or institution holds 20 percent or more and no more than 50
Remarks
Number of other public companies concurrently serving as an independent director	0	0 0
Independence Status (Note 2)	10 v	v v
	9 v	v v
	8 v	v v
	7 v	v v
	6 v	v v
	5 v	v v
	4 v	v v
	3 v	v v
	2 v	v v
	1 v	v v
Possess five or more years of experience and the following professional qualifications	Have work experience in the area of commerce, law, finance, or accounting, or otherwise necessary for the business of the company. v	v v
	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.
	An instructor or higher 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.
Criteria	Name Chen, Fu-Yen	Kao, Chih-Chun Wang, Chun-Hsiung
	Title Independent Director	Other Independent Director

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5.2. Operation of Remuneration Committee status
There are 3 members of the Remuneration Committee.
Current members term of office: July 25, 2018 to July 24, 2021.

The current Remuneration Committee held meetings 2 times in 2019. Attendance status of members is as follows:

Title Convener Member Member	Name Wang, Chun-Hsiung Kao, Chih-Chun Chen, Fu-Yen	Attendance in Person 2 2 2	Attendance by Proxy 0 0 0	Attendance Rate (%) 100% 100% 100%	Remarks

Other disclosures:

If advice of the Remuneration Committee was not adopted or modified by the Board of Directors, the meeting date, period, content of proposals, meeting resolution, and the Company’s action to the advices of the Remuneration Committee should be disclosed: None
If resolutions of the Remuneration Committee were objected or reserved with records or written statements by any member, the meeting date, period, content of proposals, opinions of all members, and action to the member’s opinions should be disclosed: None
The discussion item and resolution results of the Remuneration Committee, and the Company’s action to the advices of the Remuneration Committee:

Date	Content of proposals	Resolution results	The Company’s action to the advices of the Remuneration Committee
Mar. 19, 2019	1. Ratify the employees’ compensation for officers of 2017. 2. Approve the distribution of 2018 directors’ remuneration and officers’ compensation. 3. Approve 2019 officers’ salary adjustments.	Approved by all members of the committee.	Processed as the resolution results of the remuneration committee.
Oct. 18, 2019	1. Approve 2019 year-end bonus principle for officers.	Approved by all members of the committee.	Processed as the resolution results of the remuneration committee.

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6. Operation of Nominating Committee

6.1 The Company established Nominating Committee in October 2019. The committee is composed of three independent directors. The convener and chairman, Ou Yang, Wen-Han, possesses the abilities of financial analysis and management administration. The independent directors, Chen, Fu-Yen and Wang, Chun-Hsiung, possess the abilities of management administration and leadership. The professional abilities required by the Committee are all matched. The major duties of nominating committee are as follows:
(1) Laying down the standards of independence and a diversified background covering the expertise, skills, experience, gender, etc. of members of the board, and finding, reviewing, and nominating candidates for directors based on such standards.
(2) Establishing and developing the organizational structure of the board and each committee, and evaluating the performance of the board, each director, and each committee.
(3) Establishing and reviewing on a regular basis programs for the succession plans of directors and senior executives.
6.2 There are 3 members of the Nominating Committee.
6.3 Current term of office: 2019/10/31 to 2021/06/04. The Nominating Committee held meeting 1 time in 2019. Attendance status of members is as follows:

Name	Attendance in Person	Attendance Rate (%)
Ou Yang, Wen-Han	1	100%
Chen, Fu-Yen	1	100%
Wang, Chun-Hsiung	1	100%

6.4 The discussion items and resolution results of the Nominating Committee:

Date	Content of proposals	Resolution results	The Company’s action to the resolutions of the nominating Committee
Oct. 31,2019	1. Election of convener and chairman of first nominating committee. 2. Conduct 2019 Board of Directors performance evaluation.	Approved by all members of the committee.	Processed as the resolution results of the nominating committee.

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Deviation from the “Corporate	Social Responsibility Best Practice Principles for TWSE/GTSM-Listed Companies” and Reasons	-	-	- - - -
Implementation Status	Summary	The Company gives due consideration to the environment, society and corporate governance in its business operations, and establishes related risk management policies or strategies.	The Administration Department manages corporate social responsibility initiatives.	The Company has established proper environmental management systems and passed ISO 14001 certification. The Company endeavors to use resources more efficiently and to use renewable materials. The Company monitors the impact of climate change and formulates response plans and actions that are comprehensive and effective. The Company endeavors to implement environmental protection policies, including measuring total electricity usage, total water
	No
	Yes	�	�	� � � �
	Assessment Item	1. On the basis of the materiality principle, does the Company give due consideration to the environment, society and corporate governance in its business operations, and establish related risk management policies or strategies?	2. Does the Company establish a full-time (or part- time) dedicated unit tor the purpose of managing corporate social responsibility initiatives, and does the Board of Directors appoint executive-level positions with responsibility for handling such initiatives? Is the status of the handling reported back to the Board?	3. Environmental Issues (1) Does the Company establish proper environmental management systems based on the characteristics of its industries? (2) Does the Company endeavor to utilize all resources more efficiently and use renewable materials which have a low impact on the environment? (3) Does the Company monitor the impact of climate change on present and future operations and evaluate related opportunities? Does it establish measures to respond to climate change related impacts? (4) Does the Company take inventories of greenhouse gas emissions, water use, and waste volume during the past two years? Does it adopt guidelines to conserve energy and reduce carbon and greenhouse gases

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	- - - - - -
usage, and total waste generation. It conserves energy and reduces carbon as well as other greenhouse gases by replacing old electronics and other equipment with more efficient models.	The Company adopts management policies and processes in accordance with relevant laws and regulations. The Company establishes and implements appropriate employee welfare mechanisms as well as appropriate wage and remuneration, so that employees can share the Company’s operational achievements. The Company actively and diligently provides safe and healthful work environments for all employees in accordance with domestic and international work safety laws and regulations, to put people’s minds at ease. At the same time, it regularly seeks to improve work safety policies and procedures. The Company teaches organizational sustainable development goals and supports employee occupational development through Realtek Corporate University. This provides employees with a systematic, planned professional learning experience that is expansive and in-depth. The Company follows the laws and regulations of the government and international guidelines in relation to customer

	� � � � �
emissions, water use, and waste generation?	4. Social Issues (1) Does the Company comply with relevant laws and regulations and the International Bill of Human Rights? Does it adopt relevant management policies and processes? (2) Does the Company establish and implement appropriate remuneration mechanisms (including wages, vacation, and other benefits) and reflect the corporate business performance or achievements in the employee remuneration policy? (3) Does the Company provide safe and healthful work environments for employees, and does it organize training on safety and health for employees on a regular basis? (4) Does the Company establish effective training programs to foster employees’ career skills? (5) Does the Company follow the laws and regulations of the government and international guidelines in relation to customer health, safety, and privacy, as well as sales and labeling of its products and services? Does the Company establish policies to protect consumer

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	-	6. If the company has established its corporate social responsibility code of practice according to “Corporate Social Responsibility Best Practice Principles for TWSE-GTSM-Listed Companies,” please describe the operational status anddifferences: Realtek establishes its corporate social responsibility code of practice in accordance with the “Corporate Social Responsibility Best Practice Principles for TWSE/GTSM-Listed Companies.” Its operations and corporate social responsibility spirit and principles adhere to this statute.	7. Other important information to facilitate better understanding of the company’s implementation of corporate social responsibility: The Company actively participates in social welfare activities and actions, through sponsorships, donations to educational funds and training, the hiring of people with disabilities, and other deeds.
health, safety, and privacy, as well as sales and labeling of its products and services, in order to protect the rights and interests of consumers. The Company establishes policies that require suppliers to adhere to environmental, occupational health and safety, and labor rights laws and regulations.	Realtek publishes corporate social responsibility reports in accordance with Global Reporting Initiative standards. Besides regularly disclosing the Company’s economic performance to observers, it publicly discloses operational achievements of non-finance related issues, such as business integrity, stakeholder relations, environmental topics, workplace safety, and social participation. Realtek commissioned SGS Taiwan to review and verify its 2019 corporate social responsibility report.

�	�
rights and interests and provide a clear and effective procedure for accepting consumer complaints? (6) Does the Company establish policies to assess whether suppliers adhere to environmental, occupational health and safety, and labor rights laws and regulations, then follow up on implementation status?	5. Does the Company adopt internationally recognized standards or guidelines when producing corporate social responsibility reports and other related reports to disclose the status of implementing non-finance related policies? Does the Company obtain a third- party assurance or verification for the reports to enhance the reliability of the information in the reports?

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Deviation from the Ethical Corporate Management Best- Practice Principles for TWSE/TPEx Listed Companies and the reason for deviation.	Deviation from the Ethical Corporate Management Best- Practice Principles for TWSE/TPEx Listed Companies and the reason for deviation.	- - -	-
Implementation Status	Summary Description	The Company, approved by the board of directors, has established relevant regulations on ethical corporate management, such as codes of ethical conduct, codes of employee conduct, and measures to report illegal or unethical behavior, and has disclosed them on the corporate governance section of the Company’s website as ethical corporate management policies for directors, managers and all employees to follow. The Company’s relevant regulations on ethical corporate management, such as codes of ethical conduct, codes of employee conduct, and measures to report illegal or unethical behavior, have covered a risk assessment mechanism against unethical conducts and preventive measures against unethical conducts. The Company clearly specifies operational procedures, guidelines, well-defined disciplinary and appeal system for handling violations in the prevention programs against unethical conducts. The compliance situation is checked by internal audit unit. The company also reviews the measures when necessary.	The Company regularly conducts quality and credit evaluations for suppliers and customers. For those who have not passed the rating, they will be removed from the cooperation list.
	No
	Yes	V V V	V
Evaluation Item		1. Establishment of ethical corporate management policies and programs (1) Does the company establish its ethical corporate management policies approved by the board of directors, and clearly specify in their rules and external documents the ethical corporate management policies and practices, and the commitment by the board of directors and senior management on rigorous and thorough implementation of such policies? (2) Does the company establish a risk assessment mechanism against unethical conduct, analyze and assess on a regular basis business activities within business scope which are at a higher risk of being involved in unethical conduct, and establish prevention programs which at least include preventive measures against the conducts listed in article 7, paragraph 2 of Ethical Corporate Management Best Practice Principles for TWSE/GTSM Listed Companies? (3) Does the company clearly specify operational procedures, guidelines, well-defined disciplinary and appeal system for handling violations in the prevention programs against unethical conducts, implement such programs rigorously, and regularly review and correct the programs?	2. Implement ethical corporate management (1) Does the company evaluate business partners’ ethical records and include ethics-related clauses in business contracts?

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Deviation from the Ethical Corporate Management Best- Practice Principles for TWSE/TPEx Listed Companies and the reason for deviation.	Deviation from the Ethical Corporate Management Best- Practice Principles for TWSE/TPEx Listed Companies and the reason for deviation.	- -	- -	- -
Implementation Status	Summary Description	The internal auditing units of the Company regularly submit audit reports to the Board of Directors. The Company’s codes of ethical conduct and codes of employee conduct have covered policies to prevent conflicts of interest and communication channels for directors, managers and all employees to follow.	The Company has established accounting systems, internal control systems and internal auditing systems in accordance with various regulations. The auditors, based on the result of assessment of the risk of involvement in unethical conduct, devise relevant audit plans to examine the compliance with the prevention programs against unethical conducts, and report to the board of directors on a regular basis. The Company’s relevant regulations on ethical corporate management, such as codes of ethical conduct, codes of employee conduct, and measures to report illegal or unethical behavior, are disclosed on the corporate governance section of the Company’s website as ethical corporate management policies for directors, managers and all employees to follow.	The Company has established measures to report illegal or unethical behavior, created the way for reporting and appointed appropriate designated unit for reported cases. The Company’s measures to report illegal or unethical behavior has covered standard operating procedures, follow-up measures to be taken after the investigation is completed, and related confidentiality measures for
	No
	Yes	V V	V V	V V
Evaluation Item		(2) Does the company establish an exclusively dedicated unit under the board of directors, which report to the board of directors on a regular basis (at least once a year) for establishing and supervising the implementation of the ethical corporate management policies and prevention programs? (3) Does the company establish policies to prevent conflicts of interest and provide appropriate communication channels, and implement the policies?	(4) Does the company establish effective systems for both accounting and internal control systems to facilitate ethical corporate management, and the internal audit unit, based on the result of assessment of the risk of involvement in unethical conduct, devise relevant audit plans and examine accordingly the compliance with the prevention programs, or engage a certified public accountant to carry our the audit? (5) Does the company regularly hold internal and external educational trainings of ethical corporate management?	3. Implementation status of the whistle-blowing system (1) Does the company establish a concrete whistle- blowing system and incentive measures, create a convenient way for reporting, and appoint appropriate designated personnel for reported cases? (2) Does the company establish standard operating procedures, follow-up measures to be taken after the investigation is completed, and related confidentiality measures for reported cases?

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Evaluation Item Implementation Status Deviation from the Ethical Corporate Management Best- Practice Principles for TWSE/TPEx Listed Companies and the reason for deviation. Yes No Summary Description reported cases. (3) Does the company adopt measures for protecting whistle-blowers from inappropriate disciplinary actions due to their whistle-blowing? V The Company will take the necessary protective measures for the whistle-blowers, and promises that the Company's employees will not be subject to inappropriate disciplinary actions due to their whistle- blowing. - 4. Strengthening information disclosure Does the company disclose its ethical corporate management principles and the results of performance on the company’s website and MOPS? V The Company’s relevant regulations on ethical corporate management, such as codes of ethical conduct, codes of employee conduct, and measures to report illegal or unethical behavior, are disclosed on the Company’s websiteand MOPS, and are operated scrupulously. - 5. If the Company has established Principles of Ethical Corporate Management based on Ethical Corporate Management Best Practice Principles for TWSE/GTSM Listed Companies, please describe any deviation between the implementation and the principles. The Company has established relevant regulations on ethical corporate management, such as codes of ethical conduct, codes of employee conduct, and measures to report illegal or unethical behavior. No deviation is between the operation and the regulations. 6. Other important information to facilitate a better understanding of the company’s ethical corporate management implementation: (e.g., review and amend the company’s principles) The Company complies with related laws and regulations including Company Act, Securities and Exchange Act, Business Entity Accounting Act, etc. to implement ethical corporate management. 9. If the company has established corporate governance best-practice principles or related regulations, disclose the method of searching: The Company’s Corporate Governance Best-Practice Principles and relevant regulations can be found on the corporate governance section of the Company’s website or Market Observations Post System. 10. Other important information to facilitate a better understanding of the state of the company's implementation of corporate governance may also be disclosed: The company in time discloses material information in accordance with regulations, and regularly holds institutional investor conference to present financial and business related information.	Evaluation Item Implementation Status Deviation from the Ethical Corporate Management Best- Practice Principles for TWSE/TPEx Listed Companies and the reason for deviation. Yes No Summary Description reported cases. (3) Does the company adopt measures for protecting whistle-blowers from inappropriate disciplinary actions due to their whistle-blowing? V The Company will take the necessary protective measures for the whistle-blowers, and promises that the Company's employees will not be subject to inappropriate disciplinary actions due to their whistle- blowing. - 4. Strengthening information disclosure Does the company disclose its ethical corporate management principles and the results of performance on the company’s website and MOPS? V The Company’s relevant regulations on ethical corporate management, such as codes of ethical conduct, codes of employee conduct, and measures to report illegal or unethical behavior, are disclosed on the Company’s websiteand MOPS, and are operated scrupulously. - 5. If the Company has established Principles of Ethical Corporate Management based on Ethical Corporate Management Best Practice Principles for TWSE/GTSM Listed Companies, please describe any deviation between the implementation and the principles. The Company has established relevant regulations on ethical corporate management, such as codes of ethical conduct, codes of employee conduct, and measures to report illegal or unethical behavior. No deviation is between the operation and the regulations. 6. Other important information to facilitate a better understanding of the company’s ethical corporate management implementation: (e.g., review and amend the company’s principles) The Company complies with related laws and regulations including Company Act, Securities and Exchange Act, Business Entity Accounting Act, etc. to implement ethical corporate management. 9. If the company has established corporate governance best-practice principles or related regulations, disclose the method of searching: The Company’s Corporate Governance Best-Practice Principles and relevant regulations can be found on the corporate governance section of the Company’s website or Market Observations Post System. 10. Other important information to facilitate a better understanding of the state of the company's implementation of corporate governance may also be disclosed: The company in time discloses material information in accordance with regulations, and regularly holds institutional investor conference to present financial and business related information.	Evaluation Item Implementation Status Deviation from the Ethical Corporate Management Best- Practice Principles for TWSE/TPEx Listed Companies and the reason for deviation. Yes No Summary Description reported cases. (3) Does the company adopt measures for protecting whistle-blowers from inappropriate disciplinary actions due to their whistle-blowing? V The Company will take the necessary protective measures for the whistle-blowers, and promises that the Company's employees will not be subject to inappropriate disciplinary actions due to their whistle- blowing. - 4. Strengthening information disclosure Does the company disclose its ethical corporate management principles and the results of performance on the company’s website and MOPS? V The Company’s relevant regulations on ethical corporate management, such as codes of ethical conduct, codes of employee conduct, and measures to report illegal or unethical behavior, are disclosed on the Company’s websiteand MOPS, and are operated scrupulously. - 5. If the Company has established Principles of Ethical Corporate Management based on Ethical Corporate Management Best Practice Principles for TWSE/GTSM Listed Companies, please describe any deviation between the implementation and the principles. The Company has established relevant regulations on ethical corporate management, such as codes of ethical conduct, codes of employee conduct, and measures to report illegal or unethical behavior. No deviation is between the operation and the regulations. 6. Other important information to facilitate a better understanding of the company’s ethical corporate management implementation: (e.g., review and amend the company’s principles) The Company complies with related laws and regulations including Company Act, Securities and Exchange Act, Business Entity Accounting Act, etc. to implement ethical corporate management. 9. If the company has established corporate governance best-practice principles or related regulations, disclose the method of searching: The Company’s Corporate Governance Best-Practice Principles and relevant regulations can be found on the corporate governance section of the Company’s website or Market Observations Post System. 10. Other important information to facilitate a better understanding of the state of the company's implementation of corporate governance may also be disclosed: The company in time discloses material information in accordance with regulations, and regularly holds institutional investor conference to present financial and business related information.	Evaluation Item Implementation Status Deviation from the Ethical Corporate Management Best- Practice Principles for TWSE/TPEx Listed Companies and the reason for deviation. Yes No Summary Description reported cases. (3) Does the company adopt measures for protecting whistle-blowers from inappropriate disciplinary actions due to their whistle-blowing? V The Company will take the necessary protective measures for the whistle-blowers, and promises that the Company's employees will not be subject to inappropriate disciplinary actions due to their whistle- blowing. - 4. Strengthening information disclosure Does the company disclose its ethical corporate management principles and the results of performance on the company’s website and MOPS? V The Company’s relevant regulations on ethical corporate management, such as codes of ethical conduct, codes of employee conduct, and measures to report illegal or unethical behavior, are disclosed on the Company’s websiteand MOPS, and are operated scrupulously. - 5. If the Company has established Principles of Ethical Corporate Management based on Ethical Corporate Management Best Practice Principles for TWSE/GTSM Listed Companies, please describe any deviation between the implementation and the principles. The Company has established relevant regulations on ethical corporate management, such as codes of ethical conduct, codes of employee conduct, and measures to report illegal or unethical behavior. No deviation is between the operation and the regulations. 6. Other important information to facilitate a better understanding of the company’s ethical corporate management implementation: (e.g., review and amend the company’s principles) The Company complies with related laws and regulations including Company Act, Securities and Exchange Act, Business Entity Accounting Act, etc. to implement ethical corporate management. 9. If the company has established corporate governance best-practice principles or related regulations, disclose the method of searching: The Company’s Corporate Governance Best-Practice Principles and relevant regulations can be found on the corporate governance section of the Company’s website or Market Observations Post System. 10. Other important information to facilitate a better understanding of the state of the company's implementation of corporate governance may also be disclosed: The company in time discloses material information in accordance with regulations, and regularly holds institutional investor conference to present financial and business related information.	Evaluation Item Implementation Status Deviation from the Ethical Corporate Management Best- Practice Principles for TWSE/TPEx Listed Companies and the reason for deviation. Yes No Summary Description reported cases. (3) Does the company adopt measures for protecting whistle-blowers from inappropriate disciplinary actions due to their whistle-blowing? V The Company will take the necessary protective measures for the whistle-blowers, and promises that the Company's employees will not be subject to inappropriate disciplinary actions due to their whistle- blowing. - 4. Strengthening information disclosure Does the company disclose its ethical corporate management principles and the results of performance on the company’s website and MOPS? V The Company’s relevant regulations on ethical corporate management, such as codes of ethical conduct, codes of employee conduct, and measures to report illegal or unethical behavior, are disclosed on the Company’s websiteand MOPS, and are operated scrupulously. - 5. If the Company has established Principles of Ethical Corporate Management based on Ethical Corporate Management Best Practice Principles for TWSE/GTSM Listed Companies, please describe any deviation between the implementation and the principles. The Company has established relevant regulations on ethical corporate management, such as codes of ethical conduct, codes of employee conduct, and measures to report illegal or unethical behavior. No deviation is between the operation and the regulations. 6. Other important information to facilitate a better understanding of the company’s ethical corporate management implementation: (e.g., review and amend the company’s principles) The Company complies with related laws and regulations including Company Act, Securities and Exchange Act, Business Entity Accounting Act, etc. to implement ethical corporate management. 9. If the company has established corporate governance best-practice principles or related regulations, disclose the method of searching: The Company’s Corporate Governance Best-Practice Principles and relevant regulations can be found on the corporate governance section of the Company’s website or Market Observations Post System. 10. Other important information to facilitate a better understanding of the state of the company's implementation of corporate governance may also be disclosed: The company in time discloses material information in accordance with regulations, and regularly holds institutional investor conference to present financial and business related information.	Evaluation Item Implementation Status Deviation from the Ethical Corporate Management Best- Practice Principles for TWSE/TPEx Listed Companies and the reason for deviation. Yes No Summary Description reported cases. (3) Does the company adopt measures for protecting whistle-blowers from inappropriate disciplinary actions due to their whistle-blowing? V The Company will take the necessary protective measures for the whistle-blowers, and promises that the Company's employees will not be subject to inappropriate disciplinary actions due to their whistle- blowing. - 4. Strengthening information disclosure Does the company disclose its ethical corporate management principles and the results of performance on the company’s website and MOPS? V The Company’s relevant regulations on ethical corporate management, such as codes of ethical conduct, codes of employee conduct, and measures to report illegal or unethical behavior, are disclosed on the Company’s websiteand MOPS, and are operated scrupulously. - 5. If the Company has established Principles of Ethical Corporate Management based on Ethical Corporate Management Best Practice Principles for TWSE/GTSM Listed Companies, please describe any deviation between the implementation and the principles. The Company has established relevant regulations on ethical corporate management, such as codes of ethical conduct, codes of employee conduct, and measures to report illegal or unethical behavior. No deviation is between the operation and the regulations. 6. Other important information to facilitate a better understanding of the company’s ethical corporate management implementation: (e.g., review and amend the company’s principles) The Company complies with related laws and regulations including Company Act, Securities and Exchange Act, Business Entity Accounting Act, etc. to implement ethical corporate management. 9. If the company has established corporate governance best-practice principles or related regulations, disclose the method of searching: The Company’s Corporate Governance Best-Practice Principles and relevant regulations can be found on the corporate governance section of the Company’s website or Market Observations Post System. 10. Other important information to facilitate a better understanding of the state of the company's implementation of corporate governance may also be disclosed: The company in time discloses material information in accordance with regulations, and regularly holds institutional investor conference to present financial and business related information.
Deviation from the Ethical Corporate Management Best- Practice Principles for TWSE/TPEx Listed Companies and the reason for deviation.		-	-	5. If the Company has established Principles of Ethical Corporate Management based on Ethical Corporate Management Best Practice Principles for TWSE/GTSM Listed Companies, please describe any deviation between the implementation and the principles. The Company has established relevant regulations on ethical corporate management, such as codes of ethical conduct, codes of employee conduct, and measures to report illegal or unethical behavior. No deviation is between the operation and the regulations.	6. Other important information to facilitate a better understanding of the company’s ethical corporate management implementation: (e.g., review and amend the company’s principles) The Company complies with related laws and regulations including Company Act, Securities and Exchange Act, Business Entity Accounting Act, etc. to implement ethical corporate management.
Implementation Status	Summary Description	reported cases. The Company will take the necessary protective measures for the whistle-blowers, and promises that the Company's employees will not be subject to inappropriate disciplinary actions due to their whistle- blowing.	The Company’s relevant regulations on ethical corporate management, such as codes of ethical conduct, codes of employee conduct, and measures to report illegal or unethical behavior, are disclosed on the Company’s websiteand MOPS, and are operated scrupulously.
	No
	Yes	V	V
Evaluation Item		(3) Does the company adopt measures for protecting whistle-blowers from inappropriate disciplinary actions due to their whistle-blowing?	4. Strengthening information disclosure Does the company disclose its ethical corporate management principles and the results of performance on the company’s website and MOPS?

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11. Internal Control Status

11.1. Statement of internal control

Realtek Semiconductor Corporation Statement of Internal Control System

Date: March 20, 2020

Based on the findings of a self assessment, Realtek Semiconductor Corporation (Realtek) states the following with regard to its internal control system during the year 2019:
Realtek’s board of directors and management are responsible for establishing, implementing, and maintaining an adequate internal control system. Our internal control is a process designed to provide reasonable assurance over the effectiveness and efficiency of our operations (including profitability, performance and safeguarding of assets), reliability, timeliness, transparency of our reporting, and compliance with applicable rulings, laws and regulations.
An internal control system has inherent limitations. No matter how perfectly designed, an effective internal control system can provide only reasonable assurance of accomplishing its stated objectives. Moreover, the effectiveness of an internal control system may be subject to changes due to extenuating circumstances beyond our control. Nevertheless, our internal -

control system contains self monitoring mechanisms, and Realtek takes immediate remedial actions in response to any identified deficiencies.

Realtek evaluates the design and operating effectiveness of its internal control system based on the criteria provided in the Regulations Governing the Establishment of Internal Control Systems by Public Companies (herein below, the “Regulations”). The Criteria adopted by the Regulations identify five key components of managerial internal control: (1) control environment, (2) risk assessment, (3) control activities, (4) information and communication, and (5) monitoring activities.
Realtek has evaluated the design and operating effectiveness of its internal control system according to the aforesaid Regulations.
Base on the findings of such evaluation, Realtek believes that, on December 31, 2019, it has maintained, in all material respects, an effective internal control system (that includes the supervision and management of our subsidiaries), to provide reasonable assurance over our operational effectiveness and efficiency, reliability, timeliness, transparency of reporting, and compliance with applicable rulings, laws and regulations.
This Statement is an integral part of Realtek’s annual report for the year 2019 and prospectus, and will be made public. Any falsehood, concealment, or other illegality in the content made public will entail legal liability under Articles 20, 32, 171, and 174 of the Securities and Exchange Law.
This statement was passed by the board of directors in their meeting held on March 20, 2020, with none of the nine attending directors expressing dissenting opinions, and the remainder all affirming the content of this Statement.

Realtek Semiconductor Corporation

Chairman: Yeh, Nan Horng President: Chiu, Sun-Chien
11.2. The Company was not required to commission an independent auditor to audit its internal control system.
Reprimand of the Company and its employees according to the laws; reprimand of the Company’s employees for violating regulations of the internal control system, and major shortcomings and status of correction from last year to the date of the annual report printed: None

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Major resolutions of the shareholders’ meeting and the board meetings from last year to the date of the annual report printed:

date of the annual report printed:	date of the annual report printed:	date of the annual report printed:
13.1. Major resolutions of 2019shareholders’ meeting: Date Proposals June 12, 2019 Ratification Items 1. 2018 business report and financial statements 2. Distribution of 2018 retained earnings Discussion Item 1. Cash distribution from capital surplus 2. To revise the Articles of Incorporation
	Date	Proposals	Resolution Results And Implementation
	June 12, 2019	Ratification Items 1. 2018 business report and financial statements 2. Distribution of 2018 retained earnings Discussion Item 1. Cash distribution from capital surplus 2. To revise the Articles of Incorporation	Approved Approved Dividend record date: 2019/09/11 Payment date: 2019/10/09 Amount: NT$3,048,572,784 Approved Distribution record date: 2019/09/11 Payment date: 2019/10/09 Amount: NT$508,095,464 Approved Obtained the approval letter for registration change: 2019/06/19

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13.2. Major Resolutions of Board Meetings

Date	Summary of Major Resolutions	Resolution Results
Mar. 21, 2019	1. 2018 financial statements and consolidated financial statements. 2. Matter of 2019 shareholders’ meeting’s date, time, location, and agenda 3. Adoption of the shareholders' proposals for 2018 shareholders’ meeting 4. Employees’ compensation and Directors’ remuneration of 2018 5. Ratify the employees’ compensation for officers of 2017 6. The Company intends to loan a fund to a subsidiary 7. Intercompany loans between Company’s subsidiaries 8. The Company's Auditor of financial statements and Audit Fee for 2019 9. 2018 Statement of Internal Control System	Approved by all attending directors
Apr. 26, 2019	1. Distribution of 2018 Retained Earnings 2. Cash distribution from capital surplus 3. Release the Director from non-competition restrictions 4. Revise 2018 shareholders’ meeting’s agenda 5. 2018 business report and 2019 business plan 6. Revise the Company’s Article of Incorporation 7. Revise the Procedures for Financial Derivatives Transactions 8. Revise the Procedures for Acquisition or Disposal of Assets 9. The Companyintends to loan funds to subsidiaries	Approved by all attending directors
Jul. 31, 2019	1. The Company plans to add a new medical device product line 2.Revise the Company’s Article of Incorporation 3. TheCompany newly established " Intelligent Decision Research Center"	Approved by all attending directors
Oct. 31, 2019	1. The Company plans to build office building and parking construction 2. The Company acquires right-of-use asset of real estate 3. To reviews the year-end bonus rules for officers 4. The Company intends to loan a fund to a subsidiary 5.Intercompany loans between Company’s subsidiaries 6. Company’s invested companies intend to loan funds to Mainland China subsidiaries 7. The Company intends to adjust the endorsement guarantee limit for bank borrowings of subsidiaries 8. The Company intends to endorse the guarantee for a Mainland China subsidiary 9. The Status that the Company regularly evaluates the independence of auditor 10.Establishingor revising principles and regulations related to corporate governance and corporate social responsibility 11. Electing members of the Nomination Committee 12. Appointment of Corporate Governance Officer 13. 2019 Annual Audit Plans	Approved by all attending directors
Feb. 21,2020	1. To approve property purchase 2. The Company's Auditor of financial statements and Audit Fee for 2020

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Date	Summary of Major Resolutions	Resolution Results
Mar. 20,2020	1. 2019 financial statements and consolidated financial statements 2. Matters of convening 2020shareholders’ meeting 3. Adoption of the shareholders' proposals for 2020shareholders’ meeting 4.Employees’ compensation andDirectors’remuneration of 2019 5. The Company intends to loan a fund to a subsidiary 6. To revise the Articles of Incorporation 7. To revise provisions of the Company's internal regulations. 8. To revise the written system of internal control of the Company. 9. 2019 Statement of Internal Control System 10. The Company created "Corporate Technology Center" department and organization changes of R&D center	Approved by all attending directors
Apr. 24,2020	1. Distribution of 2019 Retained Earnings 2. 2019 cash dividends distribution from retained earnings 3. Cash distribution from capital surplus 4. 2019 business report and 2020 business plan 5. The Company plans to build factory & office buildings 6. The Companyintends to loan a fund to a subsidiary	Approved by all attending directors

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Directors’ objections against the important resolution of board meetings from last year to the date of the annual report printed: None
Information of resignation or dismissal of the persons related to the financial reports (including chairman, president, accounting officers, finance officers, internal audit manager, and R&D officers) from last year to the date of the annual report printed: None

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IV. Information Regarding Audit Fees

Accounting Firm PricewaterhouseCoopers Taiwan PricewaterhouseCoopers Taiwan	Name of CPA Hsueh, Seou- Hung Li, Tien-Yi Lin, Yu-Kuan Tsang, Kwok-Wah	Name of CPA Hsueh, Seou- Hung Li, Tien-Yi Lin, Yu-Kuan Tsang, Kwok-Wah	Name of CPA Hsueh, Seou- Hung Li, Tien-Yi Lin, Yu-Kuan Tsang, Kwok-Wah	Period Covered by CPA’s Audit 2019/01/01~2019/03/21 2019/03/22~2019/12/31	Period Covered by CPA’s Audit 2019/01/01~2019/03/21 2019/03/22~2019/12/31	Remarks -
Items Range 1 Less than $2,000,000 2 $2,000,000 (incl.) - $4,000,000 3 $4,000,000 (incl.) - $6,000,000 4 $6,000,000 (incl.) - $8,000,000 5 $8,000,000 (incl.) - $10,000,000 6 $100,000,000 and above		Audit Fee �		Non-audit Fee �

Non-audit fee paid to the auditors, the audit firm and its affiliates accounted for not less than one-fourth of total audit fee: For 2019, the non-audit fee paid to the auditors, the audit firm and its affiliates was 0.
Replaced the audit firm and the audit fee paid to the new audit firm was less than the payment of previous year: Not applicable.
Audit fee reduced not less than 10% previous year: Not applicable.

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V. Replacement of Independent Auditors

1. Regarding the former CPA

Replacement Date	February21, 2020	February21, 2020	February21, 2020	February21, 2020	February21, 2020
Replacement reasons and explanations	The internal regular rotation of PricewaterhouseCoopers Taiwan
Describe whether the Company terminated or the CPA rejected the appointment	Parties Status			CPA	The Company
	Appointment terminated automatically			Not applicable	Not applicable
	Appointment rejected (continued)			Not applicable	Not applicable
The Opinions other than Unmodified Opinion Issued in the Last Two Years and the Reasons for the Said Opinions(Note)		None
Is there any disagreement in opinion with the Company	YES		Accounting principles orpractices
			Disclosure of Financial Statements
			Audit scope or steps
			Others
	No	�
	Explanation
Supplementary Disclosure	None

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2. Regarding the Successor CPA

the Successor CPA
Name of accounting firm	PricewaterhouseCoopers Taiwan
Name of CPA	Lin, Yu-Kuan; Cheng, Ya-Huei
Date of appointment	February 21, 2020
Prior to the Formal Engagement, Any Inquiry or Consultation on the Accounting Treatment or Accounting Principles for Specific Transactions, and the Type of Audit Opinion that the CPA might issue on the Financial Report.	None
Written Opinions from the Successor CPA are different from the Former CPA’s opinions.	None

VI. If the Company’s Chairman, President, Managers in charge of finance or accounting operations held positions within the auditor’s firm or its affiliates during last year, the name, title, and period of holding positions should be disclosed: None

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VII. Share transfer or share pledge of Directors, Officers and major shareholders holding more than 10% shares from last year to the date of the annual report printed.

1. Changes in shareholding of Directors, Officers and major shareholders

Title	Name	2019	2019	As of April 12,2020	As of April 12,2020
		Shares increased (decreased)	Pledge shares increased (decreased)	Shares increased (decreased)	Pledge shares increased (decreased)
Chairman	Cotek Pharmaceutical Industry Co., Ltd.Representative: Yeh,Nan-Horng	-	5,050,000	�	1,000,000
Vice Chairman	Forehead International Co., Ltd. Representative: Chiu,Sun-Chien	(1,160,000)	-	-	-
Director	Forehead International Co., Ltd. Representative: Chern,Kuo-Jong
Director	Sonnen Limited Representative: Yeh,Po-Len	-	-	-	-
Director	Sonnen Limited Representative: Huang,Yung-Fang	-	-	-	-
Director	Ni, Shu-Ching	-	-	-	-
Independent Director	Chen, Fu-Yen	-	-	-	-
Independent Director	Wang, Chun-Hsiung	-	-	-	-
Independent Director	Ou Yang, Wen-Han	-	-	-	-
President	Chiu, Sun-Chien	-	-	(18,000)	-
Chief Operating Officer	Huang, Yung-Fang	-	-	-	-
Chief Financial Officer	Chern, Kuo-Jong	-	-	-	-
Vice President	Huang, Yee-Wei	-	-	-	-
Vice President	Lin, Ying-Hsi	-	-	-	-
Vice President	Lin, Lung-Wei	-	-	-	-
Vice President	Chang, King-Hsiung	-	-	-	-
Vice President	Tsai, Jon-Jinn	-	-	-	-
Vice President	Yen, Kuang-Yu	-	-	-	-
Controller	Chang, Jr-Neng	-	-	-	-

Information on stock transfer to related parties: None.
Information on pledge of shares to related parties: None.

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VIII. The relationship between any of the Company’s top ten shareholders:

							April 12,2020	April 12,2020
Name	Shareholding		Spouse & Minor Shareholding		Shareholding by Nominee Arrangement		Top Ten Shareholders who are Related Parties, Spouse, or Second-Degree Relatives
	Shares	%	Shares	%	Shares	%	Name	Relationship
Cathay Life Insurance Company, Ltd. Representative: Huang, Tiao-Kuei	23,531,000	4.61%	-	-	-	-	-	-
	-	-	-	-	-	-	-	-
Cotek Pharmaceutical Industry Co., Ltd. Representative: Yeh, Chia-Wen	22,146,604	4.34%	-	-	-	-	-	-
	-	-	-	-	-	-	-	-
Supervisory Committee of the Labor Retirement Fund-New Labor Retirement Fund	13,297,348	2.60%	-	-	-	-	-	-
Leicester Worldwide Corporation	12,616,184	2.47%	-	-	-	-	-	-
Supervisory Committee of the Labor Retirement Fund-Labor Retirement Fund	9,077,000	1.78%	-	-	-	-	-	-
JPMorgan Chase Bank N.A.,Taipei Branch in custody for Vanguard Total International Stock Index Fund,a series of Vanguard Star Funds	8,328,988	1.63%	-	-	-	-	-	-
Nan Shan Life Insurance Co., Ltd Representative: Du, Ying-Zong	7,935,000	1.55%	-	-	-	-	-	-
	-	-	-	-	-	-	-	-
Enable Educational Technology Co., Ltd. Representative: Yeh, Wei-Ting	7,781,000	1.52%	-	-	-	-	-	-
	-	-	-	-	-	-	-	-
Chunghwa Post Co., Ltd. Representative: Wu, Hong-Mo	7,584,856	1.49%	-	-	-	-	-	-
	-	-	-	-	-	-	-	-
Vanguard Emerging Markets Stock Index Fund, A Series Of Vanguard International EquityIndex Funds	6,913,539	1.35%	-	-	-	-	-	-

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IX. The consolidated shareholdings and percentage of investments held by the Company, Directors, Officers, and the companies controlled directly or indirectly by the Company.

			December 31,2019 / Unit: shares:%	December 31,2019 / Unit: shares:%	December 31,2019 / Unit: shares:%	December 31,2019 / Unit: shares:%
Investments	Investments of the Company		Investments directly or indirectly held by Directors, Officers, and the companies controlled directly or indirectlybytheCompany		Consolidated	Investments
	Shares	%	Shares	%	Shares	%
Leading Enterprises Limited	39,130	100%	�	�	39,130	100%
Amber Universal Inc.	41,432	100%	�	�	41,432	100%
Realtek Singapore Private Limited	80,000,000	89.03%	9,856,425	10.97%	89,856,425	100%
Realtek Investment Singapore Private Limited	200,000,000	100%	�	�	200,000,000	100%
Talent Eagle Enterprise Inc.	114,100,000	100%	�	�	114,100,000	100%
Bluocean Inc.	110,050,000	100%	�	�	110,050,000	100%
Realsun Investments Co., Ltd	28,000,000	100%	�	�	28,000,000	100%
Hung-wei Venture Capital Co., Ltd	25,000,000	100%	�	�	25,000,000	100%
Realking Investments Limited	29,392,985	100%	�	�	29,392,985	100%
Realsun Technology Corporation	500,000	100%	�	�	500,000	100%
Bobitag Inc.	1,918,910	66.67%	�	�	1,918,910	66.67%
Technology Partner� Venture Capital Corp.	4,178,509	32.43%	487,493	3.78%	4,666,002	36.21%
5V Technologies,Taiwan Ltd.	46,699	24.42%	�	�	46,699	24.42%
EstiNet Technologies Inc.	4,000,000	16.10%	�	�	4,000,000	16.10%

Note: The aforementioned are long-term investments under the equity method.

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Capital Raising

I. Source of Capital

Year & Month 09/2017 04/2018 04/2020	Issuing Price 10 10 10	Authorized Shares (K) Amount ($K) 890,000 8,900,000 890,000 8,900,000 890,000 8,900,000	Paid-in Shares (K) Amount ($K) 506,506 5,065,062 508,095 5,080,955 510,685 5,106,849	Remarks Source of Equity Capital increase by assets other than cash Employees' compensation - Employees' compensation - Employees' compensation -	Other Note 1 Note 2 Note 3

Note 1: The capitalization was approved by the Hsinchu Science Park Administration on Sep. 25, 2017 with an approval letter of No. 1060026285.

Note 2: The capitalization was approved by the Hsinchu Science Park Administration on Apr 11, 2018 with an approval letter of No. 1070010727.

Note 3: The capitalization was approved by the Hsinchu Science Park Administration on Apr 20, 2020 with an approval letter of No. 1090010606.

T f h	Authorized Capital	Authorized Capital	Authorized Capital	Remarks
ype o sare	Outstanding Shares	Un-issued Shares	Total
Common stock	510,684,875	379,315,125	890,000,000	Note

Note: The authorized capital retains 80,000,000 shares for the issue of employee warrant shares. Shelf Registration: Not Applicable.

II. Structure of Shareholders

tructure of Shareholders	tructure of Shareholders	tructure of Shareholders	tructure of Shareholders	tructure of Shareholders	tructure of Shareholders	tructure of Shareholders
April 12, 2020
Structure of Shareholders Number of Shareholders Shareholdings Shareholding Percentage	Government Institutions	Financial Institutions	Other Institutional Investors	Foreign Institutional & Individual Investors	Individual Investors	Total
	1	31	398	1,107	42,660	44,197
	10,406 0.00%	54,634,120 10.70%	79,808,198 15.63%	298,416,571 58.43%	77,815,580 15.24%	510,684,875 100.00%

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III. Distribution of Shareholding

	April 12, 2020	April 12, 2020	April 12, 2020	April 12, 2020	April 12, 2020	April 12, 2020
	Category	Number of Shareholders	Shareholdings		Shareholding Percentage
	1 to 999	31,543	2,367,451		0.46%
	1,000 to 5,000	9,961	17,582,308		3.44%
	5,001 to 10,000	981	7,097,754		1.39%
	10,001 to 15,000	338	4,073,515		0.80%
	15,001 to 20,000	151	2,718,209		0.53%
	20,001 to 30,000	202	5,011,476		0.98%
	30,001 to 40,000	118	4,125,349		0.81%
	40,001 to 50,000	103	4,690,007		0.92%
	50,001 to 100,000	253	17,901,588		3.51%
	100,001 to 200,000	179	25,453,662		4.98%
	200,001 to 400,000	165	46,692,496		9.14%
	400,001 to 600,000	54	27,170,649		5.32%
	600,001 to 800,000	37	25,388,060		4.97%
	800,001 to 1,000,000	20	17,805,012		3.49%
	1,000,001 and above	92	302,607,339		59.26%
	Total	44,197	510,684,875		100.00%
V	. List of Major Shareholders April 12, 2020 Shareholding Shareholder Shareholdings Percentage of Shareholding CathayLifeInsurance Company,Ltd. 23,531,000 4.61% Cotek Pharmaceutical Industry Co.,Ltd. 22,146,604 4.34% Supervisory Committee of the Labor Retirement Fund-New Labor Retirement Fund 13,297,348 2.60% LeicesterWorldwide Corporation 12,616,184 2.47% Supervisory Committee of the Labor Retirement Fund-Labor Retirement Fund 9,077,000 1.78% JPMorgan Chase Bank N.A.,Taipei Branch in custody for Vanguard Total International Stock Index Fund, a series of Vanguard Star Funds 8,328,988 1.63% NanShan LifeInsurance Co.,Ltd 7,935,000 1.55% EnableEducational Technology Co.,Ltd. 7,781,000 1.52% Chunghwa PostCo.,Ltd. 7,584,856 1.49% Vanguard Emerging Markets Stock Index Fund, A Series Of Vanguard International EquityIndex Funds 6,913,539 1.35%
	Shareholding Shareholder			Shareholdings		Percentage of Shareholding
	CathayLifeInsurance Company,Ltd.			23,531,000		4.61%
	Cotek Pharmaceutical Industry Co.,Ltd.			22,146,604		4.34%
	Supervisory Committee of the Labor Retirement Fund-New Labor Retirement Fund			13,297,348		2.60%
	LeicesterWorldwide Corporation			12,616,184		2.47%
	Supervisory Committee of the Labor Retirement Fund-Labor Retirement Fund			9,077,000		1.78%
	JPMorgan Chase Bank N.A.,Taipei Branch in custody for Vanguard Total International Stock Index Fund, a series of Vanguard Star Funds			8,328,988		1.63%
	NanShan LifeInsurance Co.,Ltd			7,935,000		1.55%
	EnableEducational Technology Co.,Ltd.			7,781,000		1.52%
	Chunghwa PostCo.,Ltd.			7,584,856		1.49%
	Vanguard Emerging Markets Stock Index Fund, A Series Of Vanguard International EquityIndex Funds			6,913,539		1.35%

IV. List of Major Shareholders

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V. Market price, net worth, earning, and dividends per common share and related information over the last two years

Item Market price per share Net worth per share Earnings per share	Year Highest	Year Highest	2018 151	201 9 251.5	March 31, 2020 273.5
	Lowest		101	136	162
	Average Before distribution		123.94 48.49	207.43 53.57	224.44 -
	After distribution(Note5) Weighted average shares		48.49 507,712 (thousand shares)	- 508,095 (thousand shares)	- 508,095 (thousand shares)
	Earnings per share		8.57	13.36	- -
	Cash dividends		6	9
Dividends per share (Note4) Return on investment	Stock	-	-	-	-
	dividends	-	-	-	-
	Accumulated unappropriated dividends		-	-	-
	Price/earnings ratio (Note1)		14.46	15.53	-
	Price/dividend ratio (Note2)		20.66	23.05	-
	Cash dividends yield (Note3)		4.84%	4.34%	-

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 = Cash Dividends / Average Market Price Per Share

Note 4: Cash dividends filled in 2019 and 2018 represent the distribution of 2018 and 2017 retained earnings, respectively and exclude cash dividends from capital surplus.

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VI. Dividend Policy and Status of Execution

Dividend Policy under the Articles of Incorporation
The Company belongs to the integrated circuit design industry and is in the growth phase of the enterprise life cycle. After considering the long-term business development of the Company, matching future investment fund requirements, and the long-term financial planning of the Company, if there are profits at the end of fiscal year, the Company shall first offset the accumulated losses with profits after tax, and then shall contribute 10% of profit as legal reserve, unless the accumulated legal reserve has reached the amount of the Company’s total capital, and contribute or reverse special reserve in accordance with relevant laws or regulation by the competent authority. If there are net profits remained, the remaining net profits and the retained earnings from previous years shall be distributed as shareholders’ dividend after the distribution proposal is prepared by the board of directors. In case the distribution is in the form of issuing new shares, the distribution proposal shall be approved at a shareholders meeting. In case the distribution is in the form of cash, the distribution proposal is authorized to be approved by the board of directors. After considering financial, business and operational factors, the Company may distribute the whole of distributable earnings of the current year, and may also distribute whole or part of the reserves in accordance with the law or the regulation by the competent authority.

When distributing dividends, the main consideration is the Company's future expansion of operating scale and requirement of cash flow. The cash dividends shall not be less than 10% of the total dividends distributed to shareholders in the current year.

According to Article 240, Paragraph 5, and Article 241, Paragraph 2 of the Company Act, the Company authorizes the distributable dividends, legal reserve, and capital reserve in whole or in part may be paid in cash after a resolution has been adopted by a majority vote at a meeting of the board of directors attended by two-thirds of the total number of directors, and in addition thereto a report of such distribution shall be submitted to the shareholders meeting.

2020 Annual Shareholders' Meeting report on the distribution of dividends for 2019: The Company’s dividend distribution from retained earnings for 2019, approved by the board of directors, was NTD 9 per share in cash.
VII. Impact to business performance and EPS resulting from stock dividend distribution: None.

VIII. Employees’ Compensation and Remuneration to Directors

1.Employees Compensation and Remuneration to Directors as Stated in the Articles of Incorporation:
If gained profits within a fiscal year, the Company shall allocate at a maximum of 3% of the profits as directors’ remuneration, and allocate no less than 1% of the profits as employees’ compensation. However, in case of the accumulated losses, certain profits shall first be reserved to cover the accumulated losses, and then allocate employees’ compensation and directors’ remuneration according to the proportion in the preceding paragraph.

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The distribution of employees' compensation in the preceding paragraph shall be in cash or in stock, and shall be resolved with a consent of a majority of the directors present at a meeting attended by over two-thirds of the total directors. The distribution of director's remuneration and employee’ compensation shall be reported to the shareholders meeting.

The employees entitled to receive employees’ compensation may include the employees of subsidiaries of the Company meeting certain specific requirements. The requirements are determined by the board of directors or its authorized person.

Accounting for Employee Compensation and Remuneration to Directors
The Company accrued employees’ compensation and remuneration to directors based on a percentage of profit as stated in the Articles of Incorporation Article. If the accrued amounts differ from the actual amounts approved by stockholders’ meeting, the Company will recognize the change as an adjustment to income of next year.
Employee compensation and Remuneration to Directors resolved by the Board of Directors
3.1. The Proposal of 2019 Employees’ Compensation and Remuneration to Directors resolved at the Board of Directors held on March 20, 2020:

Unit: New Taiwan Dollars; shares

Cash compensation 1,677,939,109	Employees’ Compensation Stock compensation Common Shares 419,484,582 2,589,411	total 2,097,423,691	Remuneration to Directors cash 119,828,246	Difference Difference Amount Effect of financial statements none No applicable

Note: the 2019 Employees’ compensation and directors’ remuneration resolved at the Board of Directors are the same as the accrued amounts in 2019.

3.2. The ratio of employees’ stock compensation divided by the total of income after tax and employees’ compensation:

Item	Amount	The ratio of employees’ stock compensation divided by the total of income after tax	The ratio of employees’ stock compensation divided by the total of employees’ compensation
Employees’ stock compensation	419,484,582	6.18%	20.00%

The 2018 Employees’ Compensation and Remuneration to Directors approved by the stockholders’ meeting (including common shares to employees, amount of employees’ stock compensation and share price) and the effect in financial statements if the actual amounts approved by stockholders’ meeting differ the accrued amounts

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			Unit: New Taiwan Dollars;shares	Unit: New Taiwan Dollars;shares
Cash compensation 1,151,674,037	Employees’ Compensation Stock compensation Common Shares 0 0	total 1,151,674,037	Remuneration to Directors cash 76,778,269	Difference Difference Amount Effect of financial statements none No applicable

Note: The 2018 Employees’ compensation and directors’ remuneration approved by the shareholders’ meeting are the same as accrued amounts in 2018.

IX. Status of Treasury Stocks: None

X. Status of Corporate Bonds: None

XI. Status of Preferred Stocks: None

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XII. Status of GDR

March 31, 2020

			March 31,2020
Issuing Date Item			Jan 24, 2002
IssuingDate			Jan 24,2002
Issuance &Listing			Luxembourg Stock Exchange.
Total Amount�US$�			240,180,375
OfferingPriceper Unit�US$�			17.25
Issued Units			13,923,500 units
Underlying Securities			New shares issued for capital increase of cash and issued common shares held by shareholders of the Company
Common Shares Represented			55,694,400 Common Shares
Rights and Obligations of GDR holders			According to the relevant instructions of thepublished manual
Trustee			N/A
DepositaryBank			Bankof NewYork Mellon
Custodian Bank			Mega International Commercial Bank
GDRs Outstanding			331,779 units
Apportionment of the expenses for the issuanceandmaintenance			In accordance with the contract of the underwriting syndicateand depositary bank
Terms and Conditions in the Deposit Agreement and Custody Agreement			The company will provide necessary public information in accordance with the contract for the depositary bank to notify the depositarycertificate holder
Closing price per GDRs �US$�	2019	Highest	32.53
		Lowest	17.59
		Average	16.03
	As of March 31 of 2020	Highest	36.28
		Lowest	21.49
		Average	29.77

XIII. Status of Employee Stock Warrants: None

XIV. Status of Employee Restricted Stocks: None

XV. Status of Mergers or Acquisitions, or as assignee of new shares issued by other companies: None

XVI. Status of Implementation of Fund Utilization Plan: Not Applicable

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Operations Overview

I. Business Overview

1. Business Scope

(1) Realtek’s Main Business Areas
i. Research, development, production, manufacturing, and the sale of various types of integrated circuits
ii. Software and hardware application design, testing, repairs, and technical consultations for various types of integrated circuits
iii. Research, development, and the sale of various types of silicon intellectual property
iv. Adjunct trade and sales that relate to Realtek’s core businesses

(2) Percentage of Operating Revenue Unit: NT$1,000

: NT$1,000
2019	IC Products	Other	Total
Net Operating Revenue	60,623,210	120,796	60,744,006
Percentage of Operating Revenue	99.80%	0.20%	100%

(3) Current Products

Communications Network Products:

PCIe Single-chip 2.5GBASE-T Controller for Gaming application
2.5GBASE-T Phyceiver
USB 3.2 Gen 2 to PCIe 3.0x2 Single-chip Bridging Controller for Storage application
Long Distance 10/100 BASE-T/100BASE-T1 Ethernet Phyceiver
PCIe Single chip 1GBase-X Fiber Ethernet Controller
USB3.2 Gen 1 Single-chip 1GBASE-T Ethernet Controller for Gaming Application
Programmable PCIe Single-chip 1GBASE-T Ethernet Controller
PCIe Single-chip 1GBASE-T Ethernet Controller for Gaming Application
100BASE-T1 Automotive Ethernet Phyceiver
100/1000BASE-T1 Dual Mode Automotive Ethernet Phyceiver
100BASE-T1 Automotive Multiport Ethernet Switch Controller
100/1000BASE-T1 Automotive Multiport Ethernet Switch Controller
Single-chip UHD HDR Streaming Multimedia SoC
Single chip Multi-CAS UHD Multimedia STB SoC
802.11b/g/n 1T1R WLAN Single-chip Controller with PCIe/USB2.0/SDIO2.0 Interfaces
802.11b/g/n 2T2R WLAN Single-chip Controller with PCIe/USB2.0/SDIO3.0 Interfaces
802.11b/g/n 1T1R WLAN and Bluetooth Smart Ready Single-chip Controller with

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PCIe/USB2.0/SDIO2.0 Interfaces)

802.11a/b/g/n/ac 1T1R WLAN and Bluetooth Smart Ready Single-chip Controller with PCIe/USB2.0/SDIO3.0 Interfaces
802.11a/b/g/n/ac 2T2R WLAN and Bluetooth 5 Single-chip Controller with PCIe/USB2.0/SDIO3.0 Interfaces
802.11a/b/g/n/ac 2T2R WLAN and Bluetooth 5 Single-chip Controller with PCIe/USB2.0/SDIO3.0 and HS-UART Interfaces
802.11a/b/g/n/ac 2T2R WLAN Single chip Controller with USB2.0 Interfaces
802.11a/b/g/n/ac 3T4R WLAN Single chip Controller with PCIe/USB3.0 Interfaces
802.11a/b/g/n/ac 4T4R WLAN Single-chip Controller with PCIe/USB3.0 Interfaces
Wireless LAN (Wi Fi) with Microcontroller Integrated SoC
Wireless LAN (Wi Fi), Bluetooth and Microcontroller Integrated Multifunction SoC
Low-power, Highly-integrated Dual Band Wi-Fi Network Camera SoC
Wireless LAN 802.11ac Dual Band Access Point / Router Integrated SoC
Bluetooth 5 BLE SoC
Bluetooth 5 Audio SoC
GNSS Satellite Positioning IC
Octal Port Fast Ethernet Transceiver
5/8/16/24 Port Fast Ethernet Switch Controller
Octal Port Gigabit Ethernet Transceiver
5/8-port Single Chip Gigabit Ethernet Switch Controller
16/24-port Gigabit Ethernet Switch Controller
24-port Gigabit + 2 Port 10G Ethernet Managed Switch Controller
48-port Gigabit + 4 Port 10G Ethernet Managed Switch Controller
24-port Gigabit + 4 Port 10G Ethernet Managed Switch Controller
48-port Gigabit + 6 Port 10G Ethernet Managed Switch Controller
Integrated Single Chip xPON Ethernet/xPON Network Router Processor
Single Port Ethernet/xPON Network Bridge Processor
2 Port xPON Ethernet/xPON Network Router Processor
GPON Laser Driver
Octal Port Integrated IEEE 802.3at Compliant PSE Controller
Long Distance 10/100BASE-T/100BASE-T1 Ethernet Switch Controller
VDSL 35B Router Controller

Computer Peripheral Products:

HD-A 4-Channel Audio Codec
HD-A 4-Channel Audio Codec with Embedded Class-D Amplifier and I2S In & Out
HD-A 4-Channel Audio Codec with High Wattage Class-D Amplifier Supporting Speaker Protection
HD-A Low Power Stereo Audio Codec

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HD-A Multi-Channel Audio Codec (7.1 and 10 Channels)
SoundWire 4-Channel Audio Codec with Embedded Class-D Amplifier and I2S In & Out
USB 2.0 Low Power Audio Codec with Hardware Equalizer
Mobile Device Audio CODEC with Power Amplifier
USB 2.0 to I2S Bridge Controller
Hi-Fi Audio CODEC with Programmable Voice/Audio DSP for Mobile Device
High Definition, High Efficiency Class-D Amplifier with Built-in Adaptive Boost, Equalizer and Speaker Protection for Handheld or Mobile Device
High Definition, High Efficiency Class-D Amplifier with Multiband Equalizer and Dynamic Range Control for TV, Soundbar, and Sound System
Embedded USB 2.0 & USB 3.0 High Definition Image Signal Processor Chip
Embedded USB2.0 Image Signal Processor Chip Supporting Windows Hello Face Recognition
Embedded SPI to USB1.1/2.0/ Fingerprint Hardware Encryption Bridge Controller
USB 3.0 /USB 3.1 Gen 2 4-Port Hub Controller
Highly Integrated USB Type-C Controller
Highly Integrated IP Camera SoC
Low Power AI IP Camera SoC

Multimedia Products:

Integrated LCD Controller with VGA Analog Interface
Integrated LCD Controller with DVI Interface
Integrated LCD Controller with HDMI Interface
Integrated LCD Controller with DisplayPort Interface
DisplayPort to LVDS Video Translator
DisplayPort to VGA Video Translator
DisplayPort to HDMI2.0 Video Translator
DisplayPort to HDMI2.1 Video Translator
USB Type-C to VGA Video Translator
USB Type-C to HDMI2.0 Video Translator
DisplayPort MST Hub Controller
Integrated High Resolution 5K3K/4K2K/QHD LCD Controller with HDR, DP1.4, HDMI2.0, and HDCP2.2
Integrated High Resolution 4K2K144Hz/QHD165Hz Gaming LCD Display Controller with Realtek Owl Sight Technology, DSC, HDR, DP1.4, HDMI2.0, and HDCP2.3
Integrated High Resolution QHD/FHD LCD Display Controller with USB Type-C Interface
High-end Integrated LCD TV Controller Chip
High-end Multimedia Digital/Analog LCD TV Controller Chip
High-end 3D Smart LCD TV Controller Chip
High-end Connected Digital/Analog LCD TV Controller Chip

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High-end UHD Smart Connected Digital/Analog LCD TV Controller Chip
High-end UHD HDR Smart Connected Digital/Analog LCD TV Controller Chip
High-end UHD HDR 60Hz/120Hz FRC Full-Function HDR Smart Connected LCD TV Controller Chip
High-end UHD Full-Function HDR and 3D Surround Sound Multi-Core Smart Connected LCD TV Controller Chip
High-end 8K LCD TV Video Decoder and Processing Chip

(4) Products Under Development

Communications Network Products:

New Generation USB3.2 Gen 1 Single-chip 2.5GBASE-T Controller for Gaming Application
USB3.2 Gen 2 Single-chip 2.5G/5GBASE-T Controller
PCIe Single-chip 2.5G/5GBASE-T Controller
2.5G/5GBASE-T Phyceiver
USB3.2 Gen2 x2 to USB PCIe 3.0 x 4 Single-chip Bridge Controller for Storage Application
1GBASE-T Ethernet Phyceiver for LED Transceiver Application
10BASE-T1, 100/1000BASE-T1 Automotive Ethernet Switch Controller
Multi-port 100/1000/2.5GBASE-T Ethernet Transceiver
New Generation Single-port 2.5G/5G/10GBASE-T Ethernet Transceiver
New Generation Quad-port 2.5G/5G/10GBASE-T Ethernet Transceiver
Octal-port IEEE 802.3at PSE Controller
Quad-port IEEE 802.3at PSE Controller
New Generation High-port Density Gigabit Ethernet Managed Switch Controller
New Generation 24-port 10G + 4-port 25G + 2-port 100G Ethernet Managed Switch Controller
New Generation Single-chip 10G xPON Home Gateway SoC
10G PON Laser Driver
VDSL 35B Transceiver
802.11b/g/n/ac 1T1R WLAN and Bluetooth 5 Single-chip Controller
802.11a/b/g/n/ac 1T1R WLAN and Bluetooth 5 Single-chip Controller
802.11a/b/g/n/ac/ax 2T2R WLAN and Bluetooth 5 Single-chip Controller
802.11a/b/g/n/ac/ax 4T4R WLAN Single-chip Controller with PCIe/ USB3.0 interfaces
� Next Generation of Wireless LAN (Wi-Fi), Bluetooth and Highly-integrated Microcontroller SoC
Wireless LAN 802.11ax Dual Band Access Point / Router Integrated SoC
Bluetooth 5 ANC Audio SoC
New Generation Ultra Low Power Audio SoC
New Generation BT5.x BLE SoC
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Next Generation Single-chip UHD HDR Multimedia SoC
Next Generation Single-chip UHD HDR Set-top Box SoC with Multi-CAS Support

Computer Peripheral Products:

HD-A 4-Channel Audio Codec with High Wattage Class-D Amplifier Supporting Speaker Protection
SoundWire Audio Codec
Low Power USB2.0 Audio Codec
USB2.0 Audio CODEC with DSP
Voice Audio DSP
Mobile Device Audio CODEC with Power Amplifier
Customized Stereo High Fidelity Audio Power Amplifier for Gaming Device
High Performance Programmable Voice/Audio DSP for Mobile Device
High Definition Codec and Class-D Amplifier Single-chip with SoundWire Interface for Mobile Device
High Definition, High Efficiency Class-D Smart Amplifier with Built-in Boost for Mobile Device
New Generation Embedded USB2.0/MIPI Interface Supporting Video High Dynamic Range (HDR) Camera Image Signal Processor
Card Reader Controller with PCIe Gen I Interface, Supporting SD 7.0
USB3.2 4-Port Hub Controller
Highly Integrated USB Type-C Controller
New Generation Highly Integrated 4K+HDR IP Camera SoC

Multimedia Products:

New Generation Integrated High-resolution UHD/QHD LCD Controller with USB TypeInterface
Integrated High-resolution 4K2K144Hz/QHD165Hz Gaming LCD Controller with HDMI2.1
New Generation High-end UHD Full-Function HDR and 3D Surround Sound Multi-Core Smart Connected LCD TV Controller Chip
New Generation High-end 8K TV Decoder
New Generation High-end 8K Android AI Smart LCD TV Controller Single-chip

2. Industry Overview

(1) Industry Status & Trends and Product Development & Competition
According to the market research firm IC Insights, the global semiconductor industry’s sales were US$442.3 billion in 2019, a decline of 12.3% compared to 2018. The main reason for the decline was a demand-supply imbalance of memory products that led to a 33% drop in output value. Excluding memory, the output value of the remaining IC products decreased by 2.5%. If counting only fabless IC design companies, sales fell by 2.7% year-over-year in 2019. Realtek’s

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2019 revenue in US dollars was nearly 2 billion, delivering a growth of 30.8% compared to 2018. It was the highest growth rate among the world’s top 50 semiconductor companies.

Communications Network Products:

In Ethernet, the market has seen a new generation of gaming PCs, motherboards, network adapter cards, and dongles adopting Realtek’s first generation 2.5Gbps Ethernet (2.5GbE) products. As each country upgrades its network infrastructure, the demand for 2.5GbE chips is rising. In addition, the telecom market is integrating 2.5GbE products into the planning of 5G Customer-Premises Equipment (CPE). In 2019, Realtek released its second-generation 2.5GbE single chip. With lowest power and smallest package among its peers, the chip was successfully designed into PC 2.5GbE products and other above-mentioned applications in the second half of 2019. In the communications network market, the demand for Low Power Ethernet Phyceivers for IP CAM/PON continued to reach record highs. New applications, such as LED public display, also contributed to revenues in the second half of 2019. Furthermore, falling SolidState Drive (SSD) prices encouraged more people to replace their traditional hard drives with SSDs. In time for this transition, Realtek developed a USB 3.2 Gen 2 to PCIe 3.0 x 2 Bridge for external PCIe or SATA SSD storage. A number of customers adopted this technology following its release in 2019.

In the Ethernet Switch market, Realtek has been the market share leader in embedded applications and Unmanaged Switches, while its market share in Smart Switches was steadily rising. In 2019, Realtek continued to develop higher-end, faster layer 3 Managed Switches and faster 10G, 40G, and 100G Switches. It is also developing 2.5G, 5G, and 10G PHY products to expand the product depth and breadth. Following years of advances, Realtek has smoothly transitioned into seeing embedded applications and Smart Switches as its main growth drivers. As demand in the Power-over-Ethernet (PoE) Switch market quickly rises and customers call for a total solution, Realtek has committed itself to PoE R&D, with a focus on the pairing of switches with Power Source Equipment (PSE) and security applications.

China is the world’s largest market for optical fiber, while growth prospects in other regions are firmly in sight. Over the past two years Realtek has endeavored, with success, to build a strong market share in China while expanding in other areas. The most sought-after new market specifications are xGPON products with greater bandwidth. For example, towards the end of 2019 Chinese telecom operators began to prepare tenders and conduct field tests for 10G PON Home Gateway Units (HGU). Cortina Access, a Realtek affiliate, is in an excellent position to fulfill these market needs.

Increasing numbers of car makers in Europe, the United States, China, Japan, South Korea, and other areas are turning to Automotive Ethernet for in-vehicle networking. Many use Automotive Ethernet to connect in-vehicle safety sensors, 360-degree camera systems, infotainment head units, and instrument panels. Realtek’s Automotive Ethernet products were already named as a ‘Golden Sample’ by IOP Certification Laboratory for Interoperability Testing; they were the first in the world to pass the OPEN Alliance TC10 Deep Sleep & Wake

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Up protocol. At a power consumption of a mere 35μA, they support remote Electronic Control Unit (ECU) wake-up, making them an imperative part of energy-efficient automobiles. They have been certified by many car makers, adopted by tier one suppliers, and are starting shipment. Looking ahead, Realtek is using its superior technical advantages to pioneer secondgeneration Automotive Ethernet products, including a Dual Mode Multiport 100/1000BASE-T1 Switch and Dual Mode PHY that supports 100/1000BASE-T1. European and American automobile manufacturers and their tier one suppliers are gradually adopting this technology for their 2022/2023 automotive network backbone needs. In addition, the 10BASE-T1 technology specifications jointly promoted with the automotive manufacturers in the OPEN Alliance are planned to be deployed into the next generation of Multiport Switches in order to meet 2024/2025 market needs.

After many years of streaming media such as Netflix, YouTube, and Amazon popularizing the use of Over the Top (OTT) boxes, other content providers such as Disney, Apple, and HBO have joined the market, further boosting demand and transforming the pay television industry. In addition to operators continuing to deliver high-quality audio and video content using broadcast, IP, or hybrid network services, they have also fully tuned to IP to launch OTT boxes. Google is pushing its Android TV platform as a way of steering the closed telecom market towards an open IP ecosystem that enables major telecom operators to offer hybrid OTT and IPTV boxes that play online video. With consumers’ changing viewing habits and demanding higher quality content, the operators are facing greater challenges in system security. In this quickly maturing market, with products trending towards high performance at low prices, Realtek is responding with a new generation of UHD Multimedia Controllers that meet each operator’s Multi-CAS security requirements. As well as integrating the new generation of HDR technologies, they support the latest audio-video codecs, such as AV1, AVS2, and VVC. Software and hardware reference designs that are cost competitive and offer low power consumption further help customers to develop high efficiency OTT boxes to take advantage of this key market. Realtek Multimedia Controllers that combine in-house multimedia and network total solutions have an advantage that is difficult to emulate.

For Wi-Fi controllers, PC OEM customers significantly decreased usage of 11n Wi-Fi in 2019. Other than in certain niche markets, 11ac Wi-Fi has already become the standard for PCs. Realtek observed the same trend in its 11ac shipments in PC markets in 2019 for both 11ac 1T1R and 2T2R products. At the same time, the new generation of 11ax standard Wi-Fi products was released into the market in 2019. PC customers started to use them in high-end markets. Realtek are joining the competition in this new Wi-Fi market in earnest as it starts mass production of its first generation of 11ax products in 2020.

In addition to the traditional PC market, Realtek's Wi-Fi solutions are being integrated into other products. Major international printer manufacturers started to use Realtek Wi-Fi solutions in 2018. Expanded deliveries in 2019 have increased overall 2019 revenues. Along with Wi-Fi, other wireless transmission methods gaining popularity include Bluetooth printing and Neighborhood Aware Networking (NAN or Wi-Fi Aware). These added options give end users

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greater convenience and capabilities. Although the tablet computer market has contracted since 2017, more than 150 million tablet computers continue to be produced each year. Realtek will take advantage of this market by continuing to offer high value Wi-Fi solutions to customers.

As technology matures and prices become more affordable, Wi-Fi use is flourishing in the consumer and IoT markets. For example, Wi-Fi has already become a standard feature in smart televisions. Realtek performs strongly in major global television markets. As the television market becomes saturated, Wi-Fi use is trending toward an M-shape, with high-end products using 11ac and gradually adopting 11ax while low-end products continue to use 11n. For all ranges of televisions, Realtek offers Wi-Fi solutions with high price-performance ratios that support expansion of this important market.

China is home to more than 100 million IP STB users. Support from the three leading telecom operators over the past five years has brought Wi-Fi capabilities to a high percentage of these devices. Broadcasting systems also continue to use Wi-Fi while introducing 4KP60 models that boost growth of Wi-Fi 11ac+BT and gradually creates demand for 11ax. Realtek’s Wi-Fi products have been used in IP STB products for many years. In 2020, Realtek will continue to offer high-quality Wi-Fi products that are suitable for IP STB.

Realtek’s Wi-Fi application in IP CAM has achieved good results in 2019. With the rise of AI technologies, human shape recognition, facial recognition, and gesture recognition are now possible using remote server or edge computing, thereby fueling a stable IP CAM growth. However, due to congestion in the 2.4GHz band, caused by interference from various ISM (industrial, scientific and medical) band transmission technologies, as well as channel competition and the overlap of AP network coverage, the quality of services of 2.4GHz WLAN will continue to drop, thereby inhibiting the practicality of IP CAM. Fortunately, as WLAN technology improves, the performance of the built-in RF front-end (PA and LNA) of 5GHz WLAN has been improved, which enlarges the coverage of WLAN in the 5GHz band and reduces the cost of dual-band WLAN. New technologies added to 802.11ax, including a longer OFDM symbol, guard interval, spatial reuse, and OFDMA are conducive to improve the transmission experience and will become mainstream in WLAN IP CAM applications. Realtek’s Wi-Fi technology adheres to international standards and undergoes frequent upgrades; it is well positioned to be the best Wi-Fi solution for IP CAM.

Google, Apple, Amazon and other western-based companies are leaders in the smart speaker market. Chinese Internet companies such as Alibaba, Xiaomi, and Baidu entered the competition and split the market share in entry-level smart speakers with 11n+BT Combo specs. Realtek’s Wi-Fi rode the wave and took the lead by pairing with China’s smart speaker SoC makers. In 2020, Realtek will actively expand the high-end smart speaker 11ac market in Europe and America.

In 2019, as 11ac continued to replace 11n for Integrated WLAN Access Point/Router products, an increasing number of global brands and network operators chose to adopt Realtek’s highly

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integrated, high-performance 802.11ac Dual Band Router solutions, resulting in continuing shipment growth. Realtek’s Dual Band Mesh Routers took advantage of an exceptional priceperformance ratio to spark new market demand and product growth. In high-end markets, Realtek released highly integrated 4-antenna 11ac Dual Band products to seize the market. In 2020, it will release a new generation of 11ax routers that will provide an improved, comprehensive router solution.

The Internet of Things (IoT) market grew more visible, and customer acceptance broadened, as applications such as Big Data, AI, and smart speakers became commonplace. In 2019, Realtek’s IoT customers and shipment grew quickly. Gartner forecasts that IoT growth will remain in double digits in 2020. The statistics portal Statista predicts that by 2025, there will be 75 billion devices with IoT functionality. Realtek will continue to invest in IoT development. Realtek already has a comprehensive suite of IoT products in mass production, including single-chip controllers for IoT household appliances, single-chip with microprocessors for diverse product applications, and single-chip with microprocessors that are suitable for sound, audio, and video applications. These are multifunctional, highly integrated, low energy, and high security. Every year Realtek pours more resources into developing new generations of energy-saving IoT chips in response to the change of IoT product needs, trending from mobile app control to adding AI applications, combined with voice and image recognition, to fulfill customers’ pricing and specification needs. Realtek directly cooperates with the organizations and companies that are leading the IoT revolution, including the makers of Apple HomeKit, Google Home, and Amazon Alexa, as well as the Open Connectivity Foundation (OCF), and ARM Mbed to provide customers with complete software and hardware development tool kits. Realtek is the world leader in releasing the first Ultra Low Energy Wireless IoT Single Chip to feature image and voice functions; it introduces product innovations every year and frequently receives COMPUTEX Taipei Best Choice Award in the IoT category.

Bluetooth has been widely adopted in mobile phones, TVs, OTT boxes, smart speakers and other products, assisting individuals or home users to enjoy Bluetooth earphones, sports bracelets, Bluetooth voice-assisted remote controllers, and Bluetooth 5 mesh peripherals, bringing easy entertainment enjoyment, user-friendly man-machine interfaces, as well as simple and fast operational feedback.

Consumers have shown a strong affinity for Bluetooth products; True Wireless Stereo (TWS) earbuds in particular, the sales of which grew significantly in 2019, a trend that is expected to continue. For TVs and OTT boxes, Bluetooth voice-assist remote controllers are replacing standard IR remote controllers. Commercial applications of Bluetooth Mesh networks that support smart voice ecosystems are maturing, which is supporting growth of peripheral Bluetooth products. In the future, with the low power characteristics of Bluetooth and online cloud services taking shape, Realtek's Bluetooth will not only be used in personal entertainment and smart homes, but also enter industries such as smart factories, property management, and B2B transportation management, providing multiple levels of cross-domain applications.

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Realtek has close to 20 years of experience in Bluetooth R&D, covering a wide range of applications, including Transceiver Controllers, Bluetooth BLE SoC, and Bluetooth Audio SoC. Realtek’s BLE series of products are especially popular among major international brands for voice-assist remote controllers, assisting the transition of remote controllers from infrared to Bluetooth; they also enable large color display upgrades for bracelets, thereby increasing the appeal and value of wearables. Further, Realtek’s first generation Bluetooth audio solution rode on the popularity of TWS earbuds brought by the success of Apple’s AirPods. In a short-time, Realtek became a primary solution provider.

In 2019, Realtek’s first generation Bluetooth TWS solution was well received in the market and a favorite of many international brands for its low power, extended coverage, and high compatibility. In 2020, Realtek’s next generation of TWS solutions add ANC capabilities to meet market expectation for new earphone functions. This new range of devices is expected to enable Realtek to maintain its position as the leader in Bluetooth audio, and to expand its market influence and empower market growth by working closely with supply chain and brand partners.

Computer Peripheral Products:

In 2019, Realtek continued to advance in the PC market by offering a High-Definition Audio Codec and a High-Definition, High-Efficiency, Class-D Smart Amplifier that turns PCs into a complete media center. It cooperated with electronic gaming manufacturers to finish new systems and peripheral products that provide an immersive sound experience for gamers. For voice assistants, Realtek released a third-generation microphone algorithm that is used in PC products as well as in the voice modules for headphones and teleconference systems, giving consumers a highly efficient, low power hardware and software solution. Meanwhile, as more mobile phones eliminate the 3.5 mm headphone jack, the market for USB Type-C to analog converter emerges. To take advantage of this opportunity, Realtek released USB chips that have already become the audio solution of choice for several gaming and commercial headphone manufacturers.

In the consumer electronics audio chip market, Realtek uses exclusive low power design technology and energy-saving hardware and software solutions to extend battery life. It developed an efficient Audio Codec with Class-D Amplifier, Built-in Adaptive Boost, Equalizer, and Speaker Protection. This highly integrated device helps customers reduce external components, thus reducing the motherboard area. In the smartphone and game console sectors, Realtek’s Low Power Audio Codec, Smart Amplifier, and Programmable Audio DSP have been gradually adopted by major brand manufacturers and received accolades.

With respect to Card Readers, Realtek released integrated card readers with PCI Express and USB 3.0 interfaces in response to the need of notebook and desktop PCs, integrating memory card readers and smart card readers. Realtek is the first in the market to release devices that support the latest SD7.0 memory cards and Intel’s newest energy-saving specifications. Besides keeping market share leadership, Realtek strives to create new product applications and value

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for customers.

To meet the increasing popularity of products supporting USB 3.0, and the rapid growth in their demand, Realtek’s 4-Port USB 3.0 hubs have been adopted by many system manufacturers, leading to increasingly larger monthly shipments. Realtek further leads the industry in releasing USB 3.1 GEN 2 hubs, many of which have been chosen by manufacturers on new platforms. Besides fast transmission and low power consumption, they integrate USB Type-C functions to provide customers with the option of designing higher-spec and more refined product design flexibility. In the future, Realtek will integrate existing technologies and products to launch newer multi-functional hubs to expand the market and create more diversified product designs for customers.

With the introduction of USB Type-C, Realtek simultaneously introduced a series of Type-C controllers that were the first highly integrated products in the market. They can not only reduce overall design costs, but also make the product more refined, Many manufacturers have already deployed them in a wide range of applications. Realtek will continue to develop products with enhanced specifications to provide customers with a wider range of product designs.

For Embedded Camera Controllers with a USB interface, due to the increasing demand for users to replace traditional password input with Biometrics, and the Windows 10 operating system’s incorporation of Windows Hello Face Authentication since 2015, the front-facing camera must support near-infrared and record image quality that meets the ever-evolving standards of Microsoft’s facial recognition algorithms. Over the past five years, Realtek has continued to lead the industry in performance, gaining Microsoft certification and full adoption by PC OEM customers, achieving an extremely high market share. Besides developing PC facial recognition technology, Realtek is entering the field of fingerprint recognition for the PC industry. It developed a Low Power SPI to USB Fingerprint Hardware Encryption Bridge Controller that has already been used by leading OEM customers.

In response to security and video surveillance industry needs, since 2016 Realtek has released a series of highly integrated IP Camera single chips. These contain highly flexible image signal processors and can support various CMOS sensors on the market, thus satisfying customers’ broad range of video preferences. The integrated audio and network functions offer a network camera single chip solution with high cost-effectiveness. Currently Realtek has successfully penetrated many consumer and smart home IP camera brand makers, making it one of the wellknown suppliers of IP Camera single chips. In 2020, Realtek will release a low power AI Camera single chip with highly integrated edge computing capabilities, H.264/H.265 Codec, and support for CMOS sensors that are up to 5 megapixels, thereby expanding Realtek’s security and video camera single chip portfolio, and continually providing customers with more competitive solutions.

Multimedia Products:

The market for LCD monitors remains steady. New opportunities are concentrated on devices

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offering high resolution, high refresh rates, superb video color, and the latest external display interfaces. Professional displays with ultra-high resolution and image quality, such as WFHD, QHD, WQHD, and UHD, high-quality displays that support HDR or WCG, and specialized displays that use high refresh rates to improve the gaming experience are focal points of this competitive market. Realtek continues to offer related solutions, and the response from customers has been highly positive. For notebook and desktop applications, Realtek offers a DisplayPort to VGA Video Translator and a DisplayPort to HDMI Video Translator that have been widely adopted by tier-one and tier-two brands. Many devices such as notebook computers, mobile phones, and the Apple iPad Pro now use USB Type-C for transferring video, data, and power. This raises demand for Type-C peripheral products. Realtek led the release of Integrated LCD Monitor Controllers with the USB Type-C Interface, and various video interface translators such as USB Type-C to VGA and USB Type-C to HDMI, as well as highly integrated DisplayPort video hub ICs. Customers have responded positively.

Fierce competition among suppliers of LCD TV Controllers in recent years has led key suppliers to gradually downsize, merge, or leave the market. Realtek, however, continues to develop new products, including Smart Connected LCD TV Controller Chips that support UHD (resolution of 3,840 x 2,160), LCD TV Controller Chips that support UHD 60 Hz/120 Hz Frame Rate Conversion, as well as a new generation of Integrated 4K Smart LCD TV Controllers that support HDR. With 8K broadcasts rolling out in 2020, Realtek provides an 8K TV decoder solution for customers to have a seamless transition to 8K TV without changing the original TV architecture, and more competitive products for LCD television manufacturers.

(2) Industrial Upstream, Midstream and Downstream Relationships

The IC manufacturing industry can be divided into upstream IC design and design services companies, midstream IC chip manufacturers, and downstream IC packaging and testing suppliers. IC design firms typically engage in design and sale of their own products or commissioned designs for other firms. Within the supply chain, they are knowledge intensive. Before the final product is completed, however, photo mask tooling, wafer fabrication, and product packaging and testing are needed. Generally, design firms contract external manufacturers to support these production and manufacturing processes.

3. R&D Development

(1) R&D Expenditures in the Past Two Years

		Unit: NT$1,000	Unit: NT$1,000
Year	Revenues	R&D Expenditure	s Ratio(%)
2018	45,805,746	12,969,972	28.32
2019	60,744,006	15,535,505	25.58

(2) Products Successfully Developing In the Past Year

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Communications Network Products:

PCIe Single-chip 2.5GBASE-T Controller for Gaming Application
2.5GBASE-T Phyceiver
USB 3.2 Gen 2 to PCIe 3.0x2 Single-chip Bridge Controller for Storage Application
Long Distance 10/100 BASE-T/100BASE-T1 Ethernet Phyceiver
PCIe Single-chip 1GBase-X Fiber Ethernet Single-chip Controller
USB3.2 Gen 1 Single-chip 1GBASE-T Ethernet Controller for Gaming Application
Programmable PCIe Single-chip 1GBASE-T Ethernet Controller
PCIe Single-chip 1GBASE-T Ethernet Controller for Gaming Application
100BASE-T1 Automotive Ethernet PHY
100/1000BASE-T1 Dual-mode Automotive Ethernet PHY
100BASE-T1 Automotive Ethernet Switch Controller
100/1000BASE-T1 Automotive Ethernet Switch Controller
Single-chip UHD STB SoC
802.11b/g/n 2T2R WLAN Single-chip Controller with PCIe/USB2.0/SDIO3.0 Interfaces
802.11a/b/g/n/ac 2T2R WLAN and Bluetooth 5 Single-chip Controller with PCIe/USB2.0/SDIO3.0 and HS-UART Interfaces
802.11a/b/g/n/ac 2T2R WLAN Single-chip Controller with USB2.0 Interface
802.11a/b/g/n/ac 4T4R WLAN Single-chip Controller with PCIe/ USB 3.0 Interfaces
Wireless LAN 802.11ax Dual Band Access Point / Router Integrated SoC
Bluetooth 5 Dual Mode Transceiver Controller IC
Bluetooth 5 BLE SoC
Bluetooth 5 Audio SoC
GNSS Satellite Positioning IC
Octal Port Gigabit Ethernet Transceiver
24-port Gigabit + 4-port 10G Ethernet Managed Switch Controller
48-port Gigabit + 6-port 10G Ethernet Managed Switch Controller
Integrated Single-chip xPON Network Gateway Processor
Integrated Single-chip 10G xPON Network Gateway Processor
GPON Laser Driver
Octal-port Integrated IEEE 802.3at-Compliant PSE Controller
QUAD Port Integrated IEEE 802.3bt-Compliant PSE Controller
Long Distance 10/100 BASE-T/100BASE-T1 Ethernet Switch Controller
VDSL 35B Router Controller

Computer Peripheral Products:

HD-A 4-Channel Audio Codec with High Wattage Class-D Amplifier Supporting Speaker Protection
USB 2.0 Low Power Audio Codec with Hardware Equalizer
Mini DSP (Digital Signal Processor) for Voice Input Processing

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SdW Audio Codec
Mobile Device Single-chip Audio Codec with Power Amplifier
Mobile Device Audio Codec with DSP
Low Power USB 2.0 Audio Codec
High Definition, High Efficiency Class-D Audio Amplifier with Equalizer and Speaker Protection for Handheld or Mobile Device
High Definition, High Efficiency Class-D Audio Amplifier with Multiband Equalizer and Dynamic Range Control for TV, Soundbar, and Sound System
SoundWire Interface High Definition Class-D Audio Amplifier with Built-in Audio Digital -
Signal Processing and Multi coil Speaker Driving Capability for Mobile Device and PC
Card Reader Controller with USB 2.0 Interface, Supporting SD 3.0 for Notebook PC
Card Reader Controller with USB 3.0 Interface, Supporting Intel NB Power Saving Specification
Card Reader with PCIe Interface, Supporting SD7.0
4-Port USB 3.0 Hub Controller
4-Port USB 3.1 Gen 2 Hub Controller
Type-C Controller
Embedded USB2.0 & USB3.0 High Definition Image Signal Processor Chip
Embedded USB2.0 and Windows Hello Face Authentication Enabling Image Signal Processor Chip
Low Power Embedded SPI to USB1.1 Fingerprint Hardware Encryption Bridge Controller
Low Power AI IP Camera SoC

Multimedia Products:

Ultra-low Power, High Resolution 5K3K/4K2K LCD Controllers with HDR, DP1.4, HDMI2.0, and HDCP2.2
High Resolution 4K2K144Hz/QHD165Hz Gaming LCD Controller with Realtek Owl Sight Technology, DSC, HDR, DP1.4, HDMI2.0, and HDCP2.3
DisplayPort to LVDS Video Translator
DisplayPort to HDMI2.1 Video Translator
USB Type-C to HDMI 2.0/VGA Video Translator
DisplayPort MST Hub Controller
High-end Integrated LCD TV Controller Chip
High-end Multimedia Digital/Analog LCD TV Controller Chip
High-end 3D Smart LCD TV Controller Chip
High-end Connected Digital/Analog LCD TV Controller Chip
High-end UHD Smart Connected Digital/Analog LCD TV controller Chip
High-end UHD HDR Smart Connected Digital/Analog LCD TV Controller Chip
High-end UHD HDR 60Hz/120Hz FRC Smart Connected Digital/Analog LCD TV Controller Chip
High-end UHD HDR 60Hz/120Hz FRC and New Generation 3D Surround Sound Smart Connected LCD TV controller Chip
High-end 8K LCD TV Video Decoder and Processing Chip
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Long-Term and Short-Term Business Development Plan
(1) Short-Term Business Development Plan
- i. Continue to use the Company’s innovation framework to lower chip capital costs, in order to ensure competitive prices and raise profit margins.
- ii. Maintain existing market share while expanding the overall market by releasing new products and offering diverse sales combinations and distribution strategies.
- iii. Take the needs of key customers into account when assisting them in the integration of product logistical support systems. Provide the best sales and marketing services to win customers’ trust and meet customer’s needs.
- iv. Participate in international exhibitions and product evaluation conferences to raise the exposure of new products and demonstrate product quality.

(2) Long-Term Business Development Plan

i. Participate in formulating and promoting international standards to acquire related product and technical information in advance, thus accelerating Time-to-Market. Participating in the evaluation and selection of the test platforms for the standard organizations to make Realtek an industry benchmark in interoperability testing.
ii. For products with a high market share, stabilize the market share and quality of products while building a global service and technology network. For products with relatively low market share, actively develop new customers and expand new markets and sales channels to meet the goal of increasing overall market share.
iii. Regularly hold product release events and technical conferences in response to regional market needs. Directly speak with brand owners and discuss their future product needs, thus strengthening client relations.

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II. Marketplace and Production Overview

1. Market Analysis

(1) Major Product Sales Regions

Unit: NT$1,000

Sales Region	2018		2019
	Sales Amount	Percentage	Sales Amount	Percentage
Taiwan	23,741,926	51.83%	30,193,504	49.71%
Asia	21,762,224	47.51%	30,226,514	49.76%
Other	301,596	0.66%	323,988	0.53%
Total	45,805,746	100.00%	60,744,006	100.00%

(2) Market Share

Realtek is one of the world’s leading IC suppliers. It designs and develops wired and wireless communications network as well as various computer peripheral IC products and multimedia applications. According to IC Insights, in 2019 Realtek ranked 12th worldwide in terms of revenue among IC design companies without fabrication plants.

(3) Future Market Supply and Demand and Growth Characteristics

Boosted by IoT and cloud services, many electronic goods, home electronics products, and transportation devices now have built-in Wi-Fi or Bluetooth. Examples include broadband devices like IPSTB, cable modems, and DSL, as well as consumer electronics products such as video game consoles, Blu-ray players, smart TVs, printers, refrigerators, air conditioners, voice-controlled smart speakers, cloud-based IP cameras, vacuum robots, drones, projectors, consumer and industrial robots, industrial controls, and even automotive. As more equipment is wirelessly connected, and as smart phones and cloud services become more widespread, the next wave of Wi-Fi and Bluetooth growth will come from hybrid applications involving IoT and AI. Furthermore, the increase in wireless connectivity speed will spur demand for heightened wired network connectivity speed. AP router, switch, PON, cable modem, NAS, gaming PC, commercial PC will all see gradual upgrades to 2.5Gbps Ethernet. In addition, the Internet of Vehicles, and trends such as autonomous and electric vehicles, are significantly raising data stream bandwidth while boosting demand for lighter, lower energy devices, thereby making Ethernet the backbone of in-vehicle networking.

The OTT and network operator set-top box market will continue to grow. At the same time, the market for UHD televisions is rising and UHD HDR video content is becoming widespread. Demand for high-end Wi-Fi, such as 802.11ac 2T2R, 4T4R, and 802.11ax is quickly increasing, and more people want integrated smart home products with voice controls. These changes are boosting demand for fast wireless connections and smart edge computing. Moreover, the network operator market is shifting towards a more open IP ecosystem that is

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boosting demand for IP OTT chips. Realtek is therefore developing highly integrated multimedia controllers with new features and a high cost-performance ratio. Used in conjunction with network communication chips, the controllers will offer a total solution that helps customers take advantage of opportunities in this market.

The IP camera is an important element of the Internet of Things. It combines remote and mobile access, AI and AI edge computing operations such as facial recognition, gesture recognition, voice and voiceprint recognition, as well as a new generation of H.265 Codec, 360-degree panoramic and 3D video techniques that make product applications more diverse. Besides traditional security surveillance, emerging applications with strong potential include AI optical recognition, unmanned stores, and delivery and warehouse systems that are essential for industry 4.0.

The strong development of the gaming industry in recent years has breathed new life into the PC market. Gaming and high-end PCs maintain their growth where high-end audio experience and value perception have become the selling points. To this end, Realtek has developed a new generation of audio codec with high voltage (+9V) Class- D amplifiers and speaker protection. These integrate embedded adaptive boost circuits with low power designs to help customers reduce external components and cut the size of the motherboard via a reduced rBOM. To satisfy the high audio quality requirements of gaming PCs, e.g., to meet the Hi-Fi audio specs (32bits/384KHz sample rate), Realtek combines strengths in software and hardware integration to develop audio technology that provides the best balance between a slim PC and a Hi- Fi audio application. In addition, voice applications are becoming common on the new generation of platforms among global PC brands. It is expected that the demand for intelligent voice wakeup and voice input for PC products will continue to rise. Acting in concert with the certification and promotion of voice technology by Microsoft Cortana and Amazon, Realtek will continue to work on voice recognition and voice wake-up technology and will add deep learning to enable good interactive experiences in voice applications, thereby giving users a convenient and enjoyable voice controls in both their work and daily life. Realtek will be the best voice and audio integrated solution provider for the new generation computer products.

New specs and interface technologies, such as 4K2K, USB Type-C, HDMI 2.1, DP 1.4, HDR, WCG, and high-frame-rate gaming, are ushering in growth in the LCD monitor market. Lower overall costs are another key trend. In the 2020 NB/DT market, more video interface connectors are using digital interfaces. For example, there is increased demand for the DisplayPort to HDMI 2.0 interface controller and the high-end DisplayPort to HDMI 2.1 interface controller. As more notebooks and mobile phones adopt USB Type-C and Thunderbolt 3 interfaces, demand for external USB Type-C video hubs is expected to increase dramatically. Realtek’s Single-Chip USB Type-C video translator will also benefit from the strong demand in this market.

Sales of LCD televisions are expected to gradually increase in 2020. Key growth will come from Central and South America, North America, China, and Southeast Asia. UHD/HDR TVs

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and Smart TVs will become mainstream products this year, and the market for 8K televisions will gradually grow as the availability of 8K broadcasts increases. For Google-led Android TV, on one hand, manufacturers using AOSP (Android Open Source Project) are prompted to switch to the development of end devices using regular versions of Android TV. On the other hand, a new development platform, Reference Plus, is launched to attract more OEMs. Over the longterm, growth in the global LCD television market will continue. Realtek will promote its products in key markets while providing customers with comprehensive solutions.

(4) Competitive Strengths

i. Advanced Core Technologies: Realtek has excellent complementary radio frequency (RF), analog and mixed signal circuit design capacity, IC manufacturing knowledge, systems technology, and intellectual property. These factors contribute to higher product effectiveness and production yield, thus lowering costs.
ii. Strong Customer Base: Realtek’s customer base includes leading manufacturers of PCs, motherboards, network hardware, consumer electronics, and multimedia products. By offering high-value, high-capacity products with excellent economic benefits, Realtek endeavors to build long-term partnerships with customers.
iii. Excellent Cost-Benefit Returns and Customer-Oriented Products: Realtek is adept at developing products with high cost-benefit returns. By combining chip and system design, it provides customers with high-value system integration and helps them quickly release new products.
iv. Experienced R&D and Management Teams: Realtek’s R&D and management teams have extensive experience in the semiconductor industry. An excellent workplace environment and strong corporate culture attract talented technical and management staff.

(5) Future Advantageous and Disadvantageous Factors

i. Advantageous Factors:
(a) Ahead of domestic peers in the release of many communications network, computer peripheral, and multimedia IC products. Competitive prices. Realtek will continue to develop advanced core technologies to help increase product yield and decrease production costs.
(b) Realtek maintains good relations with wafer foundries, which promotes a stable supply of raw materials and steady raw material costs.
(c) Active client support, including the best sales and marketing services. These factors support a strong customer base.
(d) Experienced R&D and management teams with decision-making authority combined with a corporate culture of mutual support attract talented technical staff.
ii. Disadvantageous Factors
Fierce competition in a short product life-cycle market. Failure to quickly release new products would lead to a loss of market share, thereby impacting profits.
iii. Countermeasures:
(a) Proactively invest in new product development to timely release new products and gain

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market share.

(b) Proactively improve existing products. Reduce costs or increase product added value by yield improvement and performance enhancement.
(c) Offer comprehensive product services or jointly develop new products with customers to foster win-win situations.

2. Main Applications for Major Products and Production Process

(1) Main Applications

i. Communications Network Products: routers, switches, home gateways, OTT boxes, Wi-Fi applications, smart home appliances, game consoles, security cameras, etc.
ii. Computer Peripheral Products: Desktop computers, notebook computers, card readers, etc. iii. Consumer Electronics Products: GPS, mobile electronic devices, mobile phones, tablet computers, etc.
iv. Multimedia Products: LCD monitors, multimedia video translators, smart HD TVs, etc.
(2) Production Process

Realtek primarily engages in product design; it commissions wafer foundries to do wafer manufacturing. Finished wafers are tested then sent to an assembly house for packaging. Packaged products then go through final testing.

3. Supply Status of Key Raw Materials

Wafers are Realtek’s primary raw materials. Since Realtek always maintains good partnerships with wafer manufacturers, it expects a steady supply of wafers in 2020. Nevertheless, we still must pay careful attention to the impact on supply and demand caused by COVID-19 pandemic.

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Major suppliers in the last two years Unit: NT$ thousands	2020 first Quarter	Relation to the Company
		% of Total Purchase 25 22 7 20 26 100
		Amount 2,478,160 2,175,100 644,116 1,907,514 2,572,326 9,777,216
		Name A B C D Other Total
	2019	Relation to the Company
		% of Total Purchase 31 19 5 16 29 100
		Amount 10,850,350 6,574,369 1,837,759 5,681,987 9,963,457 34,907,922
		Name A B C D Other Total
	2018	Relation to the Company
		% of Total Purchase 42 8 7 16 27 100
		Amount 10,187,430 1,996,534 1,764,782 3,929,930 6,639,162 24,517,838
		Name A B C D Other Total
		Item 1 2 3 4

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Unit: NT$ thousands	2020 first Quarter	Relation to the Company (note)	-81- There have been few changes in the Company's major customers in the last two years. Note: The chairmen of both companies are second-degree relatives.
		% of Total Operating revenue 19 18 17 46 100
		Amount 3,086,483 2,811,152 2,683,749 7,346,648 15,928,032
		Name B A D Other Total Operating revenue
	2019	Relation to the Company (note)
		% of Total Operating revenue 22 19 16 43 100
		Amount 13,368,262 11,392,557 10,014,670 25,968,517 60,744,006
		Name B D A Other Total Operating revenue
	2018	Relation to the Company (note)
		% of Total Operating revenue 23 23 18 36 100
		Amount 10,575,725 10,505,983 8,373,071 16,350,967 45,805,746
		Name A B D Other Total Operating revenue
		Item 1 2 3

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5. Production Volume and Value in the Past Two Years

Unit: NT$ thousands

oduction Volume and Value	in the Past Two Years	in the Past Two Years	in the Past Two Years	Unit: NT$ thousands	Unit: NT$ thousands	Unit: NT$ thousands
Year Quantity & Value Major Product	2018			2019
	Capacity	Output	Value	Capacity	Output	Value
IC (thousandpieces)	�	1,882,786	24,347,438	�	2,223,987	33,317,918
Total	�	1,882,786	24,347,438	�	2,223,987	33,317,918

6. Sales Volume and Value in the Past Two Years

Unit: NT$ thousands

2018	2018	2018	2018	2019	2019	2019	2019
Domestic Quantity Sales 854,381 23,322,421		Export Quantity Sales 1,051,363 26,349,948		Domestic Quantity Sales 1,002,456 29,410,554		Export Quantity Sales 1,244,477 37,494,168
�	35,137	�	34,741	�	47,973	�	72,823
854,381	23,357,558	1,051,363	26,384,689	1,002,456	29,458,527	1,244,477	37,566,991

Note: Sales volume and value as shown above has not deducted sales returns and allowances.

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III. Employees

Employee breakdown over the past two calendar years and up until the date of the Report’s publication.

Year Num ber Research and Development Administration and Sales Production and Testing Total Average Age	Year Research and Development	2018 4,183	2019 4,487	As of March 31, 2020 4,560
	Administration and Sales	421	486	500
	Production and Testing	156	182	187
		4,760 33.52	5,155 34.63	5,247 34.75
Average Years of Service Educ ation Ph.D./Master’s University/College Degree High School/Vocational High School Degree		6.28 71.37%	6.43 71.02%	6.47 71.03%
	University/College Degree	23.84%	26.71%	26.7%
	High School/Vocational High School Degree	4.79%	2.27%	2.27%

Note: Data are based on the Company’s consolidated statements, including employees of the Company and its subsidiaries.

IV. Environmental Expenses

The Company did not incur any losses, penalties or liabilities due to environmental pollution during the previous calendar year or up until the date of the Report’s publication.
The Company passed ISO 14001 Environmental Management Systems certification on September 22, 2006. It was recertified on December 25, 2014, and passed the latest version of ISO 14001 on August 16, 2017.

V. Labor Relations

Summary of the Company’s employee benefits, continuing education, training, pension plan and implementation results, as well as labor agreements and measures to uphold employee rights.
(1) Wages and Benefits
- i. Highly competitive wages.
- ii. In accordance with the Company's annual operational status, the Company offers annual raises, year-end bonuses, and Company-wide dividends so that employees can share the operations results with the company.
- iii. Five-day workweek and flexible office hours.

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iv. The Company’s people-oriented management system values employees and provides excellent communication channels and promotion opportunities.
v. The Company sets up and subsidizes cafeterias, cafes, and convenience stores to provide diverse food and beverage services at discounted prices.
vi. Besides labor and health insurance, the Company offers an employee group insurance and business insurance plans to bolster employee protections.
vii. Free annual health examinations help employees manage their health. Doctors and nurses offer consultations at the Company’s nursing station, and a Company-designed health care card further supports employees’ wellbeing.
viii. The Company provides well-equipped breastfeeding rooms to support female employees who need to pump milk or breastfeed.
ix. The Company offers New Year’s bonuses as well as wedding and funeral subsidies.
x. The Company offers leisure and recreational facilities based on 10 major themes. Employees use the facilities on weekdays and weekends for fitness, reading, study, games, health management, and other activities.
xi. The Reading Room has an abundant collection of books and recorded media that employees can use free of charge.
xii. The Employee Assistance Program offers psychological and legal counseling. Professional massage therapists offer stress relieving full-body, neck and shoulder, and foot massages.
xiii. The Employee Welfare Committee regularly offers diverse, professional lectures. Various group activities and sporting competitions as well as a wide selection of Realtek special contract stores further enrich workers’ lifestyles.
xiv. The Employee Welfare Committee provides New Year’s and birthday gift vouchers, travel subsidies, and a handsome flexible benefit fund.
xv. The Company holds family day events, year-end parties, and other activities.
xvi. Employees can conveniently park free-of-charge in the Company parking lots.
(2) Realtek Educational Training, and Development
Talent is a key requirement for building intellectual power, blazing competitive new trails, and fostering sustainable operations. The Company’s greatest assets in these pursuits are the professionals of various fields who compose its workforce. In order to sustain competitiveness and develop new talent, the Company founded the Realtek Corporate University, which offers classes covering topics such as professional R&D, leadership development, organizational operations, and spontaneous learning. This initiative is part of the comprehensive education and training plans the Company offers to help all employees raise their capabilities to new heights.
i. New Employee Training Camps
- Orientation for new employees focuses on teamwork, innovation and vitality to help new team members quickly adapt to the Company’s corporate lifestyle and culture.
ii. Professional R&D Training
- Each year the Company holds more than 100 education and training courses for new R&D staff to quickly raise their professional capabilities. It invites R&D experts from Taiwan and overseas to share their knowledge and techniques. Employees can also join fully subsidized

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external training courses.

iii. Management and Leadership Training
Besides providing management training to employees based on their rank and role, the Company fully subsidizes training classes for employees at external institutions.
iv. Self-Study and Development
The Company offers open, diverse study environments and contents. It maintains awareness of employees’ learning and development while taking into account their professional needs and lifestyle aspirations. Diversity, timeliness, and convenience are distinguishing features of our planning.
v. Tailored Professional Development Plans

A combination of traditional and on-line classes offers flexible professional development plans tailored to the specific needs of every employee. Raising the R&D capabilities of each individual and team gives the Company a workforce with diverse professional knowledge.

(3) Pension System

The Company established pension plans and created a Supervisory Committee of Labor Retirement Reserve to manage pension payments for regular employees in accordance with the “Labor Standards Act.” From 1995, it appropriated labor pension reserve funds each month based on pension actuarial evaluations. From July 1, 2005, it utilized a defined contribution system for employees who are ROC nationals in accordance with the “Labor Pension Act.” At least 6% of the worker’s monthly wages are paid into his or her Individual Account of Labor Pension at the Bureau of Labor Insurance. Employees receive monthly retirement payments calculated based upon their individual account balance and other factors or claim their pension in a lump-sum payment.

(4) Labor Agreements and Upholding Worker Rights
- i. The Company’s intranet offers a forum that gives employees immediate access to management.
- ii. The Company holds worker-employer meetings as a positive mechanism for communication.
- iii. The Company sets up two-way communication channel (CEO mailbox) for employees to speak their voices.
- iv. At regular departmental/unit meetings, employees can voice their opinions on problems.
- v. The Company has a sexual harassment prevention hotline and a prevention plan against unlawful violation to provide a safe work environment that puts employees’ minds at ease.
- v. The Company has an Employee Care and Consultation Center.
The Company did not incur any losses due to labor disputes during the past calendar year and up until the date of publication of this Report.

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VI. Significant Agreements

Agreement Type	Signatory	Contract Validity	Summary	Limitations
Rental Agreements 4 Items	Hsinchu Science Park Bureau	Sep, 2010~Dec, 2022 Mar, 2014~Dec, 2027 Sep, 2020~Dec, 2039	The lessee shall build a factory, warehouse, or laboratory or use the site for storage and delivery, loading and unloading, packaging, or repairs and maintenance.	The site must be used to build a factory, warehouse, or laboratory, or to conduct business- related tasks such as storage and delivery, loading and unloading, packaging, or repairs and maintenance.

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Financial Status, Operating Results and Status of Risk Management

I. Financial Status

Financial Status, Operating Results and Status of Ris Management I. Financial Status	Financial Status, Operating Results and Status of Ris Management I. Financial Status	Financial Status, Operating Results and Status of Ris Management I. Financial Status	Financial Status, Operating Results and Status of Ris Management I. Financial Status	Financial Status, Operating Results and Status of Ris Management I. Financial Status
Unit: NT$ thousands
Year Item	2019	2018	Changes	% of Changes
Current Assets	64,289,591	51,153,278	13,136,313	25.68%
Non-current assets	9,142,239	7,099,036	2,043,203	28.78%
Total assets	73,431,830	58,252,314	15,179,516	26.06%
Current liabilities	43,970,187	32,502,254	11,467,933	35.28%
Non-current liabilities	2,232,959	1,103,161	1,129,798	102.41%
Total Liabilities	46,203,146	33,605,415	12,597,731	37.49%
Share capital	5,080,955	5,080,955	0	0%
Capital surplus	2,736,854	3,236,659	(499,805)	(15.44%)
Retained earnings	19,618,212	15,917,714	3,700,498	23.25%
Other equity	(217,036)	401,964	(619,000)	(153.99%)
Non-controlling interest	9,699	9,607	92	0.96%
Total Equity	27,228,684	24,646,899	2,581,785	10.48%

Analysis of Changes equal to or over 20%

1.Increase in Current assets: Mainly due to increase in financial assets at amortized costcurrent and accounts receivable.

2.Increase in Non-current assets: Mainly due to increase in right-of-use assents.

3.Increase in Current liabilities : Mainly due to increase in short-term borrowings, accounts payable, and other current liabilities.

4.Increase in Non-current liabilities: Mainly due to increase in lease liabilities.

5.Increased in Retained earnings: Mainly due to increase in net income.

6.Decrease in Other equity: Mainly due to decrease in financial statements translation differences of foreign operations.

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II. Operational Results

Unit: NT$ thousands

			Unit:	NT$thousands
Year Item	2019	2018	Changes	% of Changes
Operating revenue	60,744,006	45,805,746	14,938,260	32.61%
Operating costs	(34,160,690)	(25,344,876)	(8,815,814)	34.78%
Gross profit	26,583,316	20,460,870	6,122,446	29.92%
Operating expenses	(20,252,451)	(16,696,410)	(3,556,041)	21.30%
Operating income	6,330,865	3,764,460	2,566,405	68.17%
Non-operating income and expenses	905,007	892,741	12,266	1.37%
Profit before income tax, net	7,235,872	4,657,201	2,578,671	55.37%
Income tax expense	(445,497)	(306,420)	(139,077)	45.39%
Net income for the year	6,790,375	4,350,781	2,439,594	56.07%

Analysis of Changes equal to or over 20%

1.Increase in Operating revenue and Operating costs: Mainly due to increase in operating revenue. 2.Increase in Operating expenses � Mainly due to increase in research and development expenses. 3.Increase in Profit before income tax, net � Mainly due to increase in operating income.

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III. Cash Flow

Analysis of the Change in Cash Flow in 2019

Analysis of the Change in Cash Flow in 2019
The beginning of Cash Balance (1) Net Cash Provided by Operating Activities (2) Net Cash Used in Investing and Financing Activities (3) The end of Cash Balance (1)+(2)-(3) 4,309,651 12,251,285 10,833,025 5,727,911	Unit: NT$ thousands Remedyfor Cash Shortage
	Investment plan �	Financial leverage plan �

Analysis of the Change in Cash Flow:

(1) Operating activities: Net cash inflow is mainly due to increase in operating income.

(2) Investing activities: Net cash outflow is mainly due to increase in financial assets at amortized cost and intangible assets.
(3) Financing activities: Net cash inflow is mainly due to increase in short-term borrowings.
Cash Flow Projection for Next Year: Not applicable.

IV. Impact on Financial and Business associated with Major Capital Expenditures in recent years: None.

V. Investment Policies in recent years, the reasons for losses and plans to improve for next year:

Our investment policies are based on strategic investments. The investment losses accounted for under equity method in 2019 was approximately NT$23,833 thousand. We will continuously focus on strategic investment and prudently evaluate investment plans in the future.

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VI. Risk Items

The effect upon the profits (or losses) of interest and exchange rate fluctuations and changes in the inflation rate, and response measures to be taken in the future.
Our exposure to interest rate risks arises from time deposits or short term loans with floating rates, which is not significant and normally incurred to support our operating activities. The Realtek Group is a multinational group in the Electronics industry. Currently, the majority of our revenues are denominated in USD. Our operating expenses are incurred in several currencies, primarily in USD, NTD, and RMB. After offsetting assets and liabilities between the same currency, the natural hedge is used to reduce the foreign exchange risk. Inflation risk does not have a significant impact on the results of our operating activities.
The policy regarding high-risk investments, highly leveraged investments, loans to other parties, endorsements and guarantees, and derivatives transactions, the main reasons for the profits/losses generated thereby, and response measures to be taken in the future:
The Realtek Group adopts a conservative investment policy and doesn’t engage in high-risk investments or highly leveraged investments.

The Realtek Group has formulated its procedures for Loaning Funds to Others, Procedures for Endorsements and Guarantees, and Procedures for Financial Derivatives Transactions in compliance with these Regulations. These procedures are aimed at improving operational performance and reducing financial risk.

Future R&D plans and expected R&D spending:
We will continuously research in chips regarding the area of communication networks, computer peripherals and multimedia. In addition, we will actively recruit outstanding R&D talents and invest in the best R&D resources and develop key technologies or obtain necessary licensed technology. The expected R&D spending for next year will be approximately NT$17.6 billion.
Impact on finance and business associated with changes in domestic and foreign regulations and laws, and corresponding reactions: None.
Impact on finance and business associated with new technology and industry changes, and corresponding reactions:
We pay attention to the trend of future technology at all times. At present, we not only devote to timely launch new products but also continuously enhance product functions and technical specifications in line with market trends and customer needs in order to strength our competitiveness and increase our market shares .
Impact on Company’s crisis management associated with changes in corporate image, and corresponding reactions:
Our corporate culture is “self-confidence and trust in people”. Integrity is the central core of our corporate culture. We will keep in a good standing of image according to our corporate culture.

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Risks and expected benefits associated with mergers and acquisitions, and corresponding reactions: None.
Risks and expected benefits associated with facility expansion, and corresponding reactions: In order to meet the needs of future growth and operating development, the board of directors has resolved to build and purchase factory & office buildings and parking garage. Currently, there are no risks for us.
Risks associated with Purchase and sales Concentration and corresponding reactions: The Company’s raw material is wafer. We have maintained a good cooperated-relationship with foundries. As for the purchase, we have not concentrated on a single foundry. The wafer supply is sufficient and stable. Moreover, we also have not concentrated on a single customer and the collection period is implemented in accordance with company policies and there is no abnormal situation.
Impact and risks to the Company associated with significant transfer of shares by the Company’s Directors and major Shareholders who own 10% or more of the Company’s outstanding shares, and corresponding reactions: None.
Impact to the Company associated with change in management, and corresponding reactions: None.
Litigious and non-litigious matters:
The Company, Directors, President, responsible Person, major Shareholders who own 10% or more of -
the Company’s total outstanding shares, and affiliated companies are not involved in final and un -
appealable judgments or significant litigious and non litigious proceedings or administrative disputes.
Disclosure of Information Security Risks
In order to ensure stable operations, the Company built a series of security systems for its computer networks and data center servers and implemented corresponding operating procedures. Regular inspections ensure effectiveness. Despite these measures, ongoing expansion and evolution of security threats combined with more advanced cyberattacks make it impossible to guarantee that all online attack or hacks can be thwarted. When the Company’s internal systems or data center servers are attacked or infected with a virus, malware, or ransomware, cybercriminals can destroy important data, steal information, disrupt networks and applications, hijack computers, or encrypt data to hold it for ransom. Consequences can be severe. Delayed or disrupted orders can lead to compensation claims from customers. Expensive repairs or system upgrades may be necessary. The Company could even face major legal responsibility or fines for failing to protect the information of its customers or third parties. In 2019, the Company did not detect any major cyberattacks and information security incidents that could affect operations seriously, nor has it been implicated in any information security related legal case.

VII. Other Material Events: None.

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66.67%	Bobitag Inc.	100% 100%	100% 100%	100% 100% 100% Realtek Semiconductor (HK) Limited Realtek Semiconductor (ShenZhen) Corp. 100% 100% Ubilinx Technology Inc. Realtek Singapore Private Limited Realtek Semiconductor (Japan) Corp. Circon Universal Inc.		28.57%
100%

	Realsun Technology Corporation
100%

	Realking Investments Limited
100%			100%

	Amber Universal Inc.
100%		100% 100%

	Realtek Investment Singapore Private Limited						RayMX Microelectronics Corp.
100%			100%	100%	100% Realtek Viet Nam Co., Ltd. Cortina Access, Inc. Cortina Systems Taiwan Limited. Cortina Network Systems (Shanghai) Co., Ltd. Empsonic Enterprises Inc.	71.43% Reasil Microelectronics Corporation

	Leading Enterprises Limited
		10.97%	10.97%	100%

100%		100% 89.03%		100%
	Bluocean Inc.
100%				100%

	Talent Eagle Enterprise Inc.
100%				100%

	Realsun Investments Co., Ltd
100%

	Hung-wei Venture Capital Co., Ltd

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Main Business Activities	Investment holdings	Investment holdings	Investment holdings	Investment holdings	Investment holdings	Investment holdings	Investment holdings	Investment holdings	Investment holdings	ICs manufacturing, design, research, development, sales, and marketing	Manufacture and installation of computer equipment and wholesale, retail and related service of electronic materials and information/software	R&D and technical support	ICs design, sales and consultancy	Information services and technical support	R&D and technical support	R&D and technical support	R&D and technical support	ICs manufacturing, design, research, development, sales, and marketing	Investment holdings	ICs manufacturing, design, research, development, sales, and marketing	R&D and information services	R&D and information services	R&D and technical support
Paid-in Capital	USD39,130,000	USD41,432,000	USD64,800,000	USD28,250,000	USD110,050,000	USD114,100,000	NTD280,000,000	NTD250,000,000	NTD293,929,850	NTD5,000,000	NTD28,783,650	NTD211,300,000	JYY20,000,000	HKD1,500,000	USD5,000,000	USD1,650,000	USD28,000,000	CNY26,250,000	USD200,000,000	USD89,856,425	USD13,148,179.73	USD40,000,000	USD1,000,000
Place of Registration	British Virgin Islands	British Virgin Islands	Mauritius	Mauritius	Cayman Islands	Cayman Islands	Taiwan	Taiwan	Taiwan	Taiwan	Taiwan	Taiwan	Japan	Hong Kong	China	China	China	China	Singapore	Singapore	United States	United States	Vietnam
Date of Incorporation	1998.04	1998.10	2002.01	2002.06	2016.02	2016.02	1998.06	1999.12	2000.04	2004.12	2012.12	2015.04	2001.12	1999.09	2004.07	2015.04	2001.12	2018.12	2016.08	2013.10	2015.04	2016.08	2018.09
Company Name	Leading Enterprises Limited	Amber Universal Inc.	Circon Universal Inc.	Empsonic Enterprises Inc.	Bluocean Inc.	Talent Eagle Enterprise Inc.	Realsun Investments Co., Ltd	Hung-wei Venture Capital Co., Ltd	Realking Investments Limited	Realsun Technology Corporation	Bobitag Inc.	Cortina Systems Taiwan Limited.	Realtek Semiconductor (Japan) Corp.	Realtek Semiconductor (HK) Limited	Realtek Semiconductor (ShenZhen) Corp.	Cortina Network Systems (Shanghai) Co., Ltd.	Reasil Microelectronics Corporation	RayMX Microelectronics Corporation	Realtek Investment Singapore Private Limited	Realtek Singapore Private Limited	Cortina Access, Inc.	Ubilinx Technology Inc.	Realtek Viet Nam Co., Ltd

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Division of Work Among the Affiliates	Not applicable	Not applicable	Not applicable	Not applicable	Not applicable	Not applicable	Not applicable	Not applicable	Not applicable	Not applicable	Not applicable	Provide research and development and technical services	Provide sales and technical services	Not applicable	Provide research and development and technical services	Provide research and development and technical services	Provide research and development and technical services	Not applicable	Not applicable	Not applicable	Provide consultancy and services	Provide consultancy and services	Provide research and development and technical services
Main Business Activities	Investment holdings	Investment holdings	Investment holdings	Investment holdings	Investment holdings	Investment holdings	Investment holdings	Investment holdings	Investment holdings	ICs manufacturing, design, research, development, sales, and marketing	Manufacture and installation of computer equipment and wholesale, retail and related service of electronic materials and information/software	R&D and technical support	ICs design, sales and consultancy	Information services and technical support	R&D and technical support	R&D and technical support	R&D and technical support	ICs manufacturing, design, research, development, sales, and marketing	Investment holdings	ICs manufacturing, design, research, development, sales, and marketing	R&D and information services	R&D and information services	R&D and technical support
Company Name	Leading Enterprises Limited	Amber Universal Inc.	Circon Universal Inc.	Empsonic Enterprises Inc.	Bluocean Inc.	Talent Eagle Enterprise Inc.	Realsun Investments Co., Ltd	Hung-wei Venture Capital Co., Ltd	Realking Investments Limited	Realsun Technology Corporation	Bobitag Inc.	Cortina Systems Taiwan Limited.	Realtek Semiconductor (Japan) Corp.	Realtek Semiconductor (HK) Limited	Realtek Semiconductor (ShenZhen) Corp.	Cortina Network Systems (Shanghai) Co., Ltd.	Reasil Microelectronics Corporation	RayMX Microelectronics Corporation	Realtek Investment Singapore Private Limited	Realtek Singapore Private Limited	Cortina Access, Inc.	Ubilinx Technology Inc.	Realtek Viet Nam Co., Ltd.

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Shareholding (note 2)	% of Investment Holding	100%	100%	100%	100%	100%	100%	100%	100%	100%	100%	100%	100%	100%	100%	100%	100%
	Shares/ Investment Amount	39,130	41,432	110,050,000	114,100,000	28,000,000	28,000,000	28,000,000	28,000,000	25,000,000	25,000,000	25,000,000	25,000,000	29,392,985	29,392,985	29,392,985	29,392,985
	Name	Realtek Semiconductor Corp. (Representative: Yeh, Po-Len)	Realtek Semiconductor Corp. (Representative: Yeh, Po-Len)	Realtek Semiconductor Corp. (Representative: Yeh, Nan-Horng)	Realtek Semiconductor Corp. (Representative: Yeh, Nan-Horng)	Realtek Semiconductor Corp. (Representative: Huang, Yee-Wei)	Realtek Semiconductor Corp. (Representative: Huang, Yung-Fang)	Realtek Semiconductor Corp. (Representative: Chern, Kuo-Jong)	Realtek Semiconductor Corp. (Representative: Chiang, Ting-Chi)	Realtek Semiconductor Corp. (Representative: Yeh, Po-Len)	Realtek Semiconductor Corp. (Representative: Chiu, Sun-Chien)	Realtek Semiconductor Corp. (Representative: Huang, Yung-Fang)	Realtek Semiconductor Corp. (Representative: Chiang, Ting-Chi )	Realtek Semiconductor Corp. (Representative: Yeh, Po-Len)	Realtek Semiconductor Corp. (Representative: Chiu, Sun-Chien)	Realtek Semiconductor Corp. (Representative: Huang, Yung-Fang)	Realtek Semiconductor Corp. (Representative: Chiang, Ting-Chi�
	Title (note 1)	Director	Director	Director	Director	Chairman and President	Director	Director	Supervisor	Chairman	Director and President	Director	Supervisor	Chairman	Director and President	Director	Supervisor
	Company Name	Leading Enterprises Limited	Amber Universal Inc.	Bluocean Inc.	Talent Eagle Enterprise Inc.	Realsun Investments Co., Ltd				Hung-wei Venture Capital Co., Ltd				Realking Investments Limited

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% of Investment Holding	100%	100%	100%	100%	100%	-	-	-	-	100%	100%	100%	100%	-	-	-	-	-	-	-	-	-
Shares/ Investment Amount	500,000	500,000	500,000	500,000	64,800,000	-	-	-	-	2,825,000	2,825,000	2,825,000	HK$1,500,000	-	-	-	-	-	-	-	-	-
Name	Realtek Semiconductor Corp. (Representative: Yeh, Po-Len)	Realtek Semiconductor Corp. (Representative: Chiu, Sun-Chien)	Realtek Semiconductor Corp. (Representative: Huang, Yung-Fang�	Realtek Semiconductor Corp. (Representative: Chern, Kuo-Jong�	Leading Enterprises Limited (Representative: Yeh, Po- Len)	Cheng, Shu-Chien	Chiu, Sun-Chien	Tung Nien-Tsu	Chiang, Ting-Chi	Realtek Singapore Private Limited (Representative: Huang, Yung-Fang)	Realtek Singapore Private Limited (Representative: Yen, Kuang-Yu)	Realtek Singapore Private Limited (Representative: Lin, Tsung-Ming)	Amber Universal Inc. (Representative: Yeh, Po-Len)	Lin, Ying-Hsi	Chern, Kuo-Jong	Chiang, Ting-Chi	Chen, Chin	Lin, Yung-Chieh	Yeh, Nan-Horng	Yeh, Ta-Hsun	Chiou, Mhu-Hsiu	Chern, Kuo-Jong
Title (note 1)	Chairman	Director	Director	Supervisor	Director	Director and President	Director	Director	Supervisor	Chairman	Director	Director	Director	Director	Director and President	Director	Director	Director	Chairman	Director and President	Director	Supervisor
Company Name	Realsun Technology Corporation				Circon Universal Inc.	Realtek Semiconductor (Japan) Corp.				Empsonic Enterprises Inc.			Realtek Semiconductor (HK) Limited		Realtek Semiconductor (ShenZhen) Corp.	Ubilinx Technology Inc.			Reasil Microelectronics Corporation

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% of Investment Holding	66.67%	66.67%	66.67%	0	-	-	-	-	-	-	-	-	-	-	-	100%	100%	100%	100%
Shares/ Investment Amount	1,918,910	1,918,910	1,918,910	0	-	-	-	-	-	-	-	-	-	-	-	21,130,000	21,130,000	21,130,000	21,130,000
Name	Realtek Semiconductor Corp. (Representative: Chiang, Ting-Chi)	Realtek Semiconductor Corp. (Representative: Lin, Yung-Chieh)	Realtek Semiconductor Corp. (Representative: Chan, Te-Chuan)	Guo, Yu-zhi	Huang, Yung-Fang	Yen, Kuang-Yu	Lin, Tsung-Ming	Huang, Yung-Fang	Yen, Kuang-Yu	Chang, Jr-Neng	Huang, Yung-Fang	Yen, Kuang-Yu	Zeineddine Chair	Zeineddine Chair	Ke, Chieh-Yuan	Realtek Singapore Private Limited (Representative: Huang, Yung-Fang)	Realtek Singapore Private Limited (Representative: Yen, Kuang-Yu)	Realtek Singapore Private Limited (Representative: Hsiao, Wang-Mien )	Realtek Singapore Private Limited (Representative: Lin, Yung-Chieh )
Title (note 1)	Chairman and President	Director	Director	Supervisor	Chairman	Director and President	Director	Chairman	Director and President	Director	Director	Director	Director	Director	Supervisor	Chairman	Director	Director	Supervisor
Company Name	Bobitag Inc.				Realtek Singapore Private Limited			Realtek Investment Singapore Private Limited			Cortina Access, Inc.			Cortina Network Systems (Shanghai) Co., Ltd.		Cortina Systems Taiwan Limited.

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												Supervisor Liu, Shuan-Ta - - Note 1: If the affiliates are foreign companies, list the same positions as domestic. Note 2: The shares are the total of shareholdings directly or indirectly held; if the affiliates do not issue shares, the shareholdings are presented by the investment amount. Note 3: The above information up to March 31, 2020
Shareholding (note 2)	% of Investment Holding	-	-	-	-	-	-	-	-	-	-	-
	Shares/ Investment Amount	-	-	-	-	-	-	-	-	-	-	-
	Name	Soh Wei Kwek	Kao Shu-yi	Nguyen Phuoc Vinh Thang	Tsai, Jon-Jinn	Zhu, Ying-hui	Su, Chu-Ting	Chen, Chih-tung	Chien, Chih-Ching	Wu, Wen-Bin	Lin, Yung-Chieh	Liu, Shuan-Ta
	Title (note 1)	Director	Director	Director	Chairman	Director and President	Director	Director	Director	Supervisor	Supervisor	Supervisor
	Company Name	Realtek Viet Nam Co., Ltd.			RayMX Microelectronics Corporation

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EPS (After Taxes)	-	-	-	-	0.79	0.25	(0.05)	0.09	-	-	-	-	-	-	-	0.14	-	-	-	-	0.89	-	-
Net Income for the year (After Taxes)	282,019	87,008	111,913	(278,776)	19,668	6,966	(1,384)	47	255	6	98,711	99,574	(413,581)	(25)	22,194	277	6,306,957	203,956	30,063	7,476	5,371	(9,032)	(28,097)
Operation Income	(687,748)	(12,381)	(18,052)	(5,430)	(3,007)	(101)	(49)	(0)	(611)	(118)	0	77,567	(408,848)	(26)	15,826	(30)	5,999,284	(198)	13,980	2,840	5,475	(9,288)	(26,581)
Operating revenue	0	0	0	0	0	0	0	0	69,240	0	0	1,036,024	0	0	348,116	0	19,705,002	0	214,462	106,520	96,718	0	250,159
Equity	11,151,039	3,312,175	3,479,391	2,585,498	418,438	354,481	286,939	5,107	2,483	8,151	1,455,628	1,450,798	41,892	1,159	253,983	29,097	11,678,695	6,494,453	736,550	163,119	76,519	19,760	85,231
Liabilities	3,247,386	603,387	3,032,094	6,967,844	5,608	214	44	0	4,436	0	0	409,850	124,007	0	79,336	100	5,742,345	0	68,443	31,970	11,701	7,274	175,125
Assets	14,398,425	3,915,562	6,511,485	9,553,342	424,046	354,695	286,983	5,107	6,919	8,151	1,455,628	1,860,648	165,899	1,159	333,319	29,197	17,421,040	6,494,453	804,993	195,089	88,220	27,034	260,356
Paid in Capital	15,005,734	4,739,146	3,313,165	3,435,095	250,000	280,000	293,930	5,000	5,542	1,950,869	850,495	842,968	1,204,240	5,799	150,530	19,189	3,666,058	6,021,200	1,229,710	108,382	60,212	30,106	113,445
Company	Leading Enterprises Limited	Amber Universal Inc.	Bluocean Inc.	Talent Eagle Enterprise Inc.	Hung-wei Venture Capital Co., Ltd	Realsun Investments Co., Ltd	Realking Investments Limited	Realsun Technology Corporation	Realtek Semiconductor (Japan) Corp.	Circon Universial Inc.	Empsonic Enterprises Inc.	Reasil Microelectronics Corporation	Ubilinx Technology, Inc	Realtek Semiconductor (HK) Limited	Realtek Semiconductor (ShenZhen) Corp.	Bobitag Inc.	Realtek Singapore Private Limited	Realtek Investment Singapore Private Limited	Cortina Access, Inc.	Cortina Network Systems (Shanghai) Co., Ltd.	Cortina Systems Taiwan Limited.	Realtek Viet Nam Co., Ltd	RayMX Microelectronics Corporation

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Affiliated Entities Consolidated Financial Statements:
The entities included in the consolidated financial statements are the same as the entities pursuant to the financial accounting standards to be included in the consolidated financial statements of the Parent Company. Therefore, please refer to consolidated financial reports for consolidated financial statement of affiliated entities.
II. Significant events with impact on shareholders’ rights or stock price regulated in Article 36-3-2 of the Securities and Exchange Act happened during last year to the date of the annual report printed: None
III. Acquisition or disposal of Realtek shares by subsidiaries during last year to the date of the annual report printed: None
IV. Issuance of private placement securities: None
V. Other Necessary Supplements: None

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Financial Information

I. Condensed balance sheet and Statement of Comprehensive Income, independent auditor’s name and audit opinion in the recent five years
Condensed Balance Sheet
1.1. Condensed Consolidated Balance Sheet

name and audit opinion in the recent five years 1. Condensed Balance Sheet 1.1. Condensed Consolidated Balance Sheet	name and audit opinion in the recent five years 1. Condensed Balance Sheet 1.1. Condensed Consolidated Balance Sheet	name and audit opinion in the recent five years 1. Condensed Balance Sheet 1.1. Condensed Consolidated Balance Sheet	name and audit opinion in the recent five years 1. Condensed Balance Sheet 1.1. Condensed Consolidated Balance Sheet	name and audit opinion in the recent five years 1. Condensed Balance Sheet 1.1. Condensed Consolidated Balance Sheet	name and audit opinion in the recent five years 1. Condensed Balance Sheet 1.1. Condensed Consolidated Balance Sheet
Unit: NT$thousands
Item Year	2015	2016	2017	2018	2019
Current assets Property, plant and equipment Right-of-use assets Intangible assets Other non-current assets Total assets Current liabilities Before distribution After distribution Non-current liabilities Total liabilities Before distribution After distribution Equity attributable to owners of the parent company Share capital Capital surplus Retained earnings Before distribution After distribution Other equity interest Treasury shares Non-controlling interest Before distribution	37,556,687 3,380,051 � 2,819,814 83,591 46,947,448 23,748,641 25,768,446 908,926 24,657,567 26,677,372 22,280,256 5,049,513 4,405,169 10,947,862 9,433,008 1,877,712 � 9,625 22,289,881	47,956,677 3,192,717 � 2,244,532 41,074 55,519,808 31,816,328 34,180,149 878,708 32,695,036 35,058,857 22,815,185 5,049,513 3,910,428 12,453,695 10,433,890 1,401,549 � 9,587 22,824,772	45,092,540 3,162,949 � 2,078,355 41,021 52,310,913 29,520,661 32,135,601 931,140 30,451,801 33,066,741 21,849,518 5,065,062 3,558,856 13,826,043 11,211,304 (600,443) � 9,594 21,859,112	51,153,278 3,316,578 � 1,686,249 50,169 58,252,314 32,502,254 36,058,922 1,103,161 33,605,415 37,162,083 24,637,292 5,080,955 3,236,659 15,917,714 12,869,141 401,964 � 9,607 24,646,899	64,289,591 3,446,162 1,403,245 1,952,960 61,646 73,431,830 43,970,187 � 2,232,959 46,203,146 � 27,218,985 5,080,955 2,736,854 19,618,212 � (217,036) � 9,699 27,228,684 �
Total Equity After distribution	20,270,076	20,460,951	19,244,373	21,090,457

Note � 1. The above annual financial statements are audited by independent auditors.
The financial statements since 2013 are prepared in accordance with IFRSs (International Financial Reporting Standards).
2019 Distribution is approved by the Board of Directors.

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1.2. Condensed Balance Sheet – Parent Company

Unit: NT$ thousands

Item Year	2015	2016	2017	2018	2019
Current assets Property, plant and equipment Right-of-use assets Intangible assets Other non-current assets Total assets Current abilities Before distribution After distribution Non-current liabilities Total liabilities Before distribution After distribution Share capital Capital surplus Retained earnings Before distribution After distribution Other equity interest Treasury shares Total Equity Before distribution	20,627,261 2,753,834 - 1,733,839 25,082 43,968,669 21,616,457 23,636,262 71,956 21,688,413 23,708,218 5,049,513 4,405,169 10,947,862 9,433,008 1,877,712 � 22,280,256	16,506,277 2,700,331 - 1,604,684 6,356 47,739,038 24,550,306 26,914,127 373,547 24,923,853 27,287,674 5,049,513 3,910,428 12,453,695 10,433,890 1,401,549 � 22,815,185	12,587,447 2,679,455 - 1,495,547 6,456 50,512,739 28,199,217 30,814,157 464,004 28,663,221 31,278,161 5,065,062 3,558,856 13,826,043 11,211,304 (600,443) � 21,849,518	13,962,708 2,863,756 - 1,160,549 14,444 53,992,856 28,733,410 32,290,078 622,154 29,355,564 32,912,232 5,080,955 3,236,659 15,917,714 12,869,141 401,964 � 24,637,292	22,953,769 3,019,258 1,091,607 1,652,722 46,151 67,445,996 39,316,733 � 910,278 40,227,011 � 5,080,955 2,736,854 19,618,212 � (217,036) � 27,218,985 �
After distribution	20,260,451	20,451,364	19,234,779	21,080,850

Note: 1. The above annual financial statements are audited by independent auditors.

The financial statements since 2013 are prepared in accordance with IFRSs (International Financial Reporting Standards).
2019 Distribution is approved by the Board of Directors.

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2. Condensed Statement of Comprehensive Income

2.1. Condensed Consolidated Statement of Comprehensive Income

Condensed Consolidated Statement of Comprehensive Income	Condensed Consolidated Statement of Comprehensive Income	Condensed Consolidated Statement of Comprehensive Income	Condensed Consolidated Statement of Comprehensive Income	Condensed Consolidated Statement of Comprehensive Income	Condensed Consolidated Statement of Comprehensive Income
Unit: NT$ thousands
Year Item Operating revenue Gross Profit Operating income Non-operating income(expenses) Net income before income tax, net Income From Operations of Continued Segments Income (Loss) From Operations of Discontinued Segments Net income for the year Total Comprehensive income for the year Net Profit Attributable to: Owner of the Company Net Profit(loss) Attributable to: Non- controlling interests Total Comprehensive Income Attributable to: Owner of the Company Total Comprehensive Income (Loss) Attributable to: Non-controlling interests	2015 31,745,809 13,590,365 1,820,105 802,629 2,622,734 2,427,873 � 2,427,873 3,213,433 2,427,999 (126) 3,213,559 (126)	2016 38,914,031 16,896,737 3,342,764 (7,378) 3,335,386 3,039,837 � 3,039,837 2,563,674 3,039,875 (38) 2,563,712 (38)	2017 41,688,021 17,903,422 3,204,237 422,116 3,626,353 3,392,160 � 3,392,160 1,390,168 3,392,153 7 1,390,161 7	2018 45,805,746 20,460,870 3,764,460 892,741 4,657,201 4,350,781 � 4,350,781 5,054,264 4,350,768 13 5,054,251 13	2019 60,744,006 26,583,316 6,330,865 905,007 7,235,872 6,790,375 � 6,790,375 6,130,163 6,790,283 92 6,130,071 92 13.36
Earningsper share	4.81	6.02	6.71	8.57

Note: 1. The above annual financial statements are audited by independent auditors.

The financial statements since 2013 are prepared in accordance with IFRSs (International Financial Reporting Standards).

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2.2. Condensed Statement of Comprehensive Income – Parent Company

2.2. Condensed Statement of Comprehensive Income – Parent Company	2.2. Condensed Statement of Comprehensive Income – Parent Company	2.2. Condensed Statement of Comprehensive Income – Parent Company	2.2. Condensed Statement of Comprehensive Income – Parent Company	2.2. Condensed Statement of Comprehensive Income – Parent Company	2.2. Condensed Statement of Comprehensive Income – Parent Company
Unit: NT$thousands
Year Item	2015	2016	2017	2018	2019
Operating revenue Gross Profit Operating income Non-operating income Net income before income tax,net Income From Operations of Continued Segments Net Income for the year Other comprehensive income (Loss), net Total Comprehensive income for the year	23,610,259 9,566,255 677,151 1,960,848 2,637,999 2,427,999 2,427,999 785,560 3,213,559	29,705,075 12,395,345 1,599,195 1,720,680 3,319,875 3,039,875 3,039,875 (476,163) 2,563,712	30,043,540 12,168,244 898,802 2,703,351 3,602,153 3,392,153 3,392,153 (2,001,992) 1,390,161	32,194,291 13,288,095 699,986 3,938,782 4,638,768 4,350,768 4,350,768 703,483 5,054,251	40,845,708 16,202,655 1,316,005 5,912,278 7,228,283 6,790,283 6,790,283 (660,212) 6,130,071 13.36
Earningsper share	4.81	6.02	6.71	8.57

Note: 1. The above annual financial statements are audited by independent auditors.

The financial statements since 2013 are prepared in accordance with IFRSs (International Financial Reporting Standards).

3. Name of Auditors and Issued Opinions in the recent five years

Year	Name of Auditors(CPA)	Audio Opinion
2015	Li,Tien-Yi & Tsang,Kwok-Wah	Modified Unqualified Opinion
2016	Li,Tien-Yi & Tsang,Kwok-Wah	Unqualified Opinions
2017	Hsueh,Seou-Hung& Li,Tien-Yi	Unqualified Opinions
2018	Hsueh,Seou-Hung& Li,Tien-Yi	Unqualified Opinions
2019	Lin,Yu-Kuan&Tsang,Kwok-Wah	Unqualified Opinions

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II. Financial Analysis in the Recent Five Years

1. Consolidated Financial Analysis

1. Consolidated Financial Analysis	1. Consolidated Financial Analysis
Year Item		2015 2016 2017 2018 2019
Capital Structure	Debt ratio (%) Long-term fund to Property, plant and equipment (%)	52.52 58.88 58.21 57.68 62.91 659.45 714.90 691.09 743.14 790.11
Liquidity	Current ratio (%) Quick ratio (%) Times interest earned(times)	158.14 150.72 152.74 157.38 146.21 137.67 133.65 132.98 138.43 128.67 23.43 23.01 24.77 34.63 45.46
Operating Performance	Average collection turnover (times) Average collection days Inventory turnover (times) Payment turnover (times) Average inventory turnover days Fixed assets turnover (times) Property, plant and equipment turnover(times)	5.71 6.49 6.35 6.32 6.74 64 56 57 58 54 4.37 5.05 4.29 3.98 4.57 3.98 4.93 4.83 4.64 4.95 84 72 85 92 80 9.4 11.84 13.11 14.13 17.96 0.72 0.75 0.77 0.82 0.92
Profitability Cash Flow	Return on total assets (%) Return on stockholders’ equity (%) Profit before tax to paid-in capital (%) Profit after tax to net sales (%) Earnings per share (NT$) Cash flow ratio (%) Cash flow adequacy ratio (%) Cash flow reinvestment ratio(%)	5.77 6.2 6.56 8.1 10.54 10.93 13.47 15.18 18.71 26.17 51.94 66.05 71.59 91.65 142.41 7.64 7.81 8.13 9.49 11.17 4.81 6.02 6.71 8.57 13.36 13.58 16.42 12.73 25.20 27.86 133.08 121.3 100 109.92 124.89 0.76 11.78 4.58 17.53 26.05
Leverage	Operating leverage Financial leverage	7.55 4.93 5.51 5.31 4.11 1.07 1.04 1.05 1.03 1.02
Analysis of Changes equal to or over 20% in the recent two years: Increase in Times interest earned: Mainly due to increase in net income. Increase in property, plant, equipment turnover: Mainly due to increase in operating revenue. Increase in profitability: Mainly due to increase in net income. Increase in Cash flow reinvestment ratio:Mainly due to increase in cash flows fromoperating activities. Decrease in Operatingleverage:Mainlydue to increase in operatingincome.

Note: The financial statements since 2013 are prepared in accordance with IFRSs (International Financial Reporting Standards).

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2. Financial Analysis-Parent Company

Year Item	Year Item	2015 2016 2017 2018 2019
Capital Structure	Debt ratio (%) Long-term fund to Property, plant and equipment (%)	49.32 52.2 56.74 54.36 59.64 809.06 844.9 815.44 860.31 901.51
Liquidity	Current ratio (%) Quick ratio (%) Times interest earned(Times)	95.42 67.23 44.63 48.59 58.38 81.6 53.11 28.10 33.81 43.05 28.35 27.96 25.72 34.55 50.31
Operating Performance	Average collection turnover (Times) Average collection days Inventory turnover (times) Payment turnover (times) Average inventory turnover days Fixed assets turnover (times) Property, plant and equipment turnover(times)	5.59 6.94 6.00 5.66 6.14 66 52 60 64 59 3.95 5.15 4.22 3.92 4.34 3.71 5.11 4.67 4.60 4.87 93 70 86 93 84 8.59 10.89 11.16 11.61 13.88 0.58 0.64 0.61 0.61 0.67
Profitability Cash Flow	Return on total assets (%) Return on stockholders’ equity (%) Profit before tax to paid-in capital (%) Profit after tax to net sales (%) Earnings per share (NT$) Cash flow ratio (%) Cash flow adequacy ratio (%) Cash flow reinvestment ratio (%)	6.2 6.87 7.18 8.57 11.40 10.94 13.48 15.18 18.71 26.18 52.24 65.74 71.11 91.29 142.26 10.28 10.23 11.29 13.51 16.62 4.81 6.02 6.71 8.57 13.36 1.62 15.64 6.99 16.13 10.06 129.80 103.78 71.41 74.81 59.46 -10.44 6.79 -2.09 6.10 1.26
Leverage	Operating leverage Financial leverage	14.68 10.52 13.72 19.19 12.50 1.17 1.08 1.19 1.25 1.12
Analysis of Changes equal to or over 20% in the recent two years: Increase in Current ratio and Quick ratio: Mainly due to increase cash and cash equivalents and accounts receivable. Increase in Times interest earned�Mainly due to increase in net income. Increase in profitability: Mainly due to increase in net income. Decrease inCash flow ratio: Mainly due to increase in current liabilities. Decrease in Cash flow adequacy/reinvestment ratio: Mainly due to increase in cash dividend paid and capital expenditure. Decrease in Operatingleverage: Mainlydue to increase in operatingincome.

Note: The financial statements since 2013 are prepared in accordance with IFRSs (International Financial Reporting Standards)

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Glossary:

1. Capital Structure Analysis:

(1). Debt ratio = Total liabilities / Total assets
(2). Long-term fund to property, plant and equipment ratio = (Shareholders’ equity + non-current liabilities) / Net property, plant and equipment
Liquidity Analysis:
(1). Current ratio = Current assets / Current liabilities
(2). Quick ratio = (Current assets – inventories – prepaid expenses) / Current liabilities
(3). Times interest earned = Earnings before interest and taxes / Interest expenses
Operating Performance Analysis:
(1). Average collection turnover = Net sales / Average trade receivables
(2). Days sales outstanding = 365 / Average collection turnover
(3). Average inventory turnover = Operating costs / Average inventory
(4). Average payment turnover = operating costs / Average trade payables
(5). Average inventory turnover days = 365 / Average inventory turnover
(6). Property, plant and equipment turnover = Net sales / Average property, plant and equipment
(7). Total assets turnover = Net sales / total assets
Profitability Analysis:
(1). Return on total assets = [Net income + Interest expenses x (1 tax rate)] / Average total assets
(2). Return on equity attributable to shareholders of the parent = Net income attributable to shareholders of the parent / Average equity attributable to shareholders of the parent
(3). Net margin = Net income / Net sales
(4). Earnings per share = (Net income attributable to shareholders of the parent preferred stock dividend) / Weighted average number of shares outstanding
Cash Flow:
(1). Cash flow ratio = Net cash provided by operating activities / Current Liabilities
(2). Cash flow adequacy ratio = Five-year sum of cash from operations / Five-year sum of capital expenditures, inventory additions, and cash dividend
(3). Cash flow reinvestment ratio = (Cash provided by operating activities cash dividends) / (Gross property, plant and equipment + long-term investments + other noncurrent assets + working capital)
Leverage:
(1). Operating leverage = (Net sales variable cost) / Operating income
(2). Financial leverage = Operating income / (Operating income interest expenses)

III. Has the company or its affiliates experienced financial difficulties in the most recent years up to the date of publication of the 2019 annual report: None.

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IV. Audit Committee’s Review Report

Audit Committee’s Review Report

The Company's 2019 business report, financial statements and distribution of retained earnings have been prepared by the Board of Directors. The financial statements also have been audited by Pricewaterhouse Coopers' with the opinion that they present fairly the Company’s financial position, operating performance, and cash flows. The Audit Committee has reviewed the business report, financial statements, and distribution of retained earnings, and found no irregularities. We hereby according to Securities and Exchange Act and Company Act submit this report.

To 2020 Annual Shareholders’ Meeting.

Realtek Semiconductor Corp.

Chairman of the Audit Committee: Ou Yang, Wen-Han

March 20, 2020

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V. Consolidated Financial Statements

REPORT OF INDEPENDENT ACCOUNTANTS TRANSLATED FROM CHINESE

PWCR 19000228

To the Board of Directors and Shareholders of Realtek Semiconductor Corporation

Opinion

We have audited the accompanying consolidated balance sheets of Realtek Semiconductor Corporation and its subsidiaries (the “Group”) as at December 31, 2019 and 2018, and the related consolidated statements of comprehensive income, of changes in equity and 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, based on our audits and the reports of other independent accountants (please refer to the Other matters section of our report), the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at December 31, 2019 and 2018, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with the “Regulations Governing the Preparation of Financial Reports by Securities Issuers” and the International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the Financial Supervisory Commission.

Basis for opinion

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

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Key audit matters

Key audit matters are those matters that, in our professional judgement, 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, we do not provide a separate opinion on these matters.

Key audit matters for the Group’s consolidated financial statements of the current period are stated as follows:

Existence of cash in banks

Description

Refer to Notes 4(6) and 4(9) of the consolidated financial statements for the accounting policies on cash and cash equivalents and time deposits that do not qualify as cash equivalents. The balance of cash and cash equivalents was NT$5,727,911 thousand, constituting 8% of the consolidated total assets as of December 31, 2019, as described in Note 6(1) of the consolidated financial statements. Time deposits that do not meet the definition of cash and cash equivalents, which refers to short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value are classified as "financial assets at amortised cost - current”. The balance of these time deposits amounted to NT$39,558,054 thousand, constituting 54% of consolidated total assets, refer to Note 6(4) of the consolidated financial statements for the details. The abovementioned assets constituted 62% of the total assets, have a significant impact on the consolidated financial statements, the nature and usage of those bank accounts varies, and the Group transacts with various financial institutions, thus, audit of cash in bank was considered as one of the key audit matters.

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How our audit addressed the matter

We performed the following audit procedures in respect of the above key audit matter:

Obtained detailed listings of cash in banks. Sent confirmation letters to all financial institutions and reviewed special terms and agreements in order to ensure the existence and rights and obligations of cash in banks.
Obtained an understanding of procedures for preparation and review of bank reconciliations, including validating unusual reconciling items.
Obtained an understanding of the usage of the bank accounts as well as sampled and validated significant cash transactions to ensure they are operational in nature and there are no significant and unusual transactions.

Evaluation of inventories

Description

Refer to Note 4(14) of the consolidated financial statements for inventory evaluation policies, Note 5(2) for uncertainty of accounting estimates and assumptions of inventory evaluation and Note 6(6) for the details of inventories.

The Group is primarily engaged in researching, developing, manufacturing, selling of various integrated circuits and related application software. Inventories are stated at the lower of cost and net realizable value. Due to the balances of inventories are significant to the financial statements and the rapid technological changes in the industry, there is a higher risk of decline in market value and obsolescence of inventories. Thus, we considered the evaluation of inventories as one of the key audit matters.

How our audit addressed the matter

We performed the following audit procedures in respect of the above key audit matter:

Obtained an understanding of accounting policies on the provision of allowance for inventory valuation losses and assessed the reasonableness.
Validated the accuracy of inventory aging report, as well as sampled and confirmed the consistency of quantities and amounts with detailed inventory listing, verified dates of movements with supporting documents and ensured the proper categorization of inventory aging report.
Evaluated and confirmed the reasonableness of net realizable value for inventories through validating respective supporting documents.

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Other matter – Reference to audits of other independent accountants

We did not audit the financial statements of certain consolidated subsidiaries and investments accounted for under equity method. Those financial statements were audited by other independent accountants, whose reports thereon have been furnished to us, and our opinion expressed herein, insofar as it relates to the amounts included in the financial statements and the information on the consolidated subsidiaries and investments accounted for under equity method were based solely on the reports of other independent accountants. Total assets (including investments accounted for under equity method amounted to NT$185,972 thousand and NT$261,628 thousand) of those consolidated subsidiaries amounted to NT$5,971,097 thousand and NT$6,469,495 thousand, constituting 8.13% and 11.11% of the consolidated total assets as of December 31, 2019 and 2018, respectively, and total operating revenues were both NT$0 thousand, both constituting 0% of the consolidated total operating revenues for the years then ended. Furthermore, according to the reports of other independent accountants, comprehensive losses of those investments accounted for under equity method amounted to NT$19,443 thousand and NT$41,330 thousand, constituting 0.32% and 0.82% of comprehensive incomes for the years then ended, respectively.

Other matter – Parent company only financial reports

We have audited and expressed an unqualified opinion with other matter section on the parent company only financial statements of Realtek Semiconductor Corporation as at and for the years ended December 31, 2019 and 2018.

Responsibilities of management and those charged with governance for the consolidated financial statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the “Regulations Governing the Preparation of Financial Reports by Securities Issuers” and the International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the Financial Supervisory Commission, 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.

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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.

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

Independent accountant’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 a report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ROC GAAS will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with ROC GAAS, we exercise professional judgement 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.

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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 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 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 remain solely responsible for our audit opinion.

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

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

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

Lin, Yu-Kuan Tsang, Kwoh-Wah

For and on behalf of PricewaterhouseCoopers, Taiwan March 20, 2020

The accompanying consolidated financial statements are not intended to present the financial position and results of operations and cash flows in accordance with accounting principles generally accepted in countries and jurisdictions other than the Republic of China. The standards, procedures and practices in the Republic of China governing the audit of such financial statements may differ from those generally accepted in countries and jurisdictions other than the Republic of China. Accordingly, the accompanying consolidated financial statements and report of independent accountants are not intended for use by those who are not informed about the accounting principles or auditing standards generally accepted in the Republic of China, and their applications in practice.

As the financial statements are the responsibility of the management, PricewaterhouseCoopers cannot accept any liability for the use of, or reliance on, the English translation or for any errors or misunderstandings that may derive from the translation.

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REALTEK SEMICONDUCTOR CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2019 AND 2018

(Expressed in thousands of New Taiwan dollars)

Assets	Notes 6(1) 6(2) 6(4) and 8 6(5) 6(5) and 7 6(6) 6(3) 6(4) and 8 6(7) 6(8) 6(9) 6(10) 6(11) 6(27)	December31,2019 December31,2018 AMOUNT % AMOUNT % � �� � �� � �� � �� � �� �� �� �� �� �� �� �� �� � �� � �� � �� � �� �� �� �� �� � �� � �� �� �� �� �� � �� � �� � � � �� � �� � �� � �� � �� � � � �� � �� � �� � �� � �� � �� � �� � �� � �� �� �� �� � �� �� �� ��	December31,2018	December31,2018
				%
Current assets 1100 Cash and cash equivalents 1110 Financial assets at fair value through profit or loss - current 1136 Financial assets at amortised cost - current 1170 Accounts receivable, net 1180 Accounts receivable, net - related parties 1200 Other receivables 130X Inventories, net 1410 Prepayments 11XX Total current assets Non-current assets 1517 Financial assets at fair value through other comprehensive income - non- current 1535 Financial assets at amortised cost - non-current 1550 Investments accounted for under equity method 1600 Property, plant and equipment 1755 Right-of-use assets 1760 Investment property 1780 Intangible assets 1840 Deferred income tax assets 1900 Other non-current assets 15XX Total non-current assets 1XXX Total assets
				��

(Continued)

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REALTEK SEMICONDUCTOR CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 2019 AND 2018

(Expressed in thousands of New Taiwan dollars)

Liabilities and Equity	December31,2019 December31,2018 Notes AMOUNT % AMOUNT % 6(13) � �� �� �� �� 6(21) �� � �� � �� � �� � �� �� �� �� 7 �� � �� � 6(14) �� �� �� �� 7 �� � �� � �� � �� � �� � � � 6(21) �� � �� � �� �� �� �� 6(16) �� � �� � 6(27) �� � �� � �� � � � �� � �� � �� � �� � �� �� �� �� 6(17) �� � �� � 6(18) �� � �� � 6(19) �� � �� � � � �� � �� �� �� �� 6(20) � �� � �� � �� �� �� �� �� � �� � �� �� �� �� � �� �� ��	December31,2018	December31,2018
			%
Current liabilities 2100 Short-term borrowings 2130 Contract liabilities - current 2150 Notes payable 2170 Accounts payable 2180 Accounts payable - related parties 2200 Other payables 2220 Other payables - related parties 2230 Current income tax liabilities 2280 Lease liabilities - current 2300 Other current liabilities 21XX Total current liabilities Non-current liabilities 2550 Provisions - non-current 2570 Deferred income tax liabilities 2580 Lease liabilities - non-current 2600 Other non-current liabilities 25XX Total non-current liabilities 2XXX Total liabilities Equity Share capital 3110 Common shares Capital surplus 3200 Capital surplus Retained earnings 3310 Legal reserve 3320 Special reserve 3350 Undistributed earnings Other equity 3400 Other equity interest 31XX Equity attributable to holders of the parent company 36XX Non-controlling interest 3XXX Total equity 3X2X Total liabilities and equity
			��

The accompanying notes are an integral part of these consolidated financial statements.

~10~

-116-

REALTEK SEMICONDUCTOR CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

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

Items
4000
Operating revenue
5000
Operating costs
5950
Gross profit
Operating expenses
6100
Selling expenses
6200
General and administrative expenses
6300
Research and development expenses
6450
Expected credit gains (losses)
6000
Total operating expenses
6900
Operating income
Non-operating income and expenses
7010
Other income
7020
Other gains and losses
7050
Finance costs
7060
Share of loss of associates and joint
ventures accounted for under equity
method
7000
Total non-operating income and
expenses
7900
Profit before income tax, net
7950
Income tax expense
8200
Net income for the year

Year ended December 31
2019
2018
Notes
AMOUNT
%
AMOUNT
%
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~11~

-117-

REALTEK SEMICONDUCTOR CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

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

					Year ended December 31	Year ended December 31	Year ended December 31
				2019			2018
	Items	Notes		AMOUNT	%		AMOUNT	%
	Other comprehensive income, net 6(20) Components of other comprehensive
	income that will not be reclassified to
profit or loss 8311 Losses on remeasurements of
	defined benefit plans				� ��		��		�
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	comprehensive income		�� �� ��						�
8320	Share of other comprehensive
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	ventures accounted for under equity
	method, components of other
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8310	Total components of other
	comprehensive income that will
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	loss		�� �� ��						�
	Components of other comprehensive
	income that will be reclassified to
profit or loss 8361 Cumulative translation differences
	of foreign operation		�	��		�� ��			�
8360	Total components of other
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	net		�	��		��	��		�
8500	Total comprehensive income for the
	year			�� ��			��		��
Profit attributable to: 8610 Equity holders of the parent
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Comprehensive income 8710 Equity holders of the parent
	company			�� ��			��		��
8720	Non-controlling interest		�� � ��						�
	Total comprehensive income for
	the year			�� ��			��		��
Earnings per share (in dollars) 9750 Basic earnings per share 6(28) ��								��
9850	Diluted earnings per share	6(28)			��			��

The accompanying notes are an integral part of these consolidated financial statements.

~12~

-118-

												Total equity		��	��	��	��	��	��		�	�	��		��	��		��	��	��		��	��	��	��		�	�	��	��		��			�	��	��
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REALTEK SEMICONDUCTOR CORPORATION AND SUBSIDIARIES	CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY	FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018	(Expressed in thousands of New Taiwan dollars, except as otherwise indicated)	Equity attributable to owners of the parent	Retained Earnings	Unrealised gains	(losses) from	financial assets	Financial statements measured at fair	translation value through other Unrealized gain on	Undistributed differences of foreign comprehensive available-for-sale	Legal reserve Special reserve earnings operations income financial assets		� �� � � � �� �� � � ��	� � �� � �� � ��	�� � �� �� �� �	� � �� � � �	� � � �� �� �� �	� � �� �� �� �		�� � � �� � � �	� �� � �� � � �	� � � �� � � � �		� � � � � �	� � � � � � �		� � � � � �	� � � � � �	� �� � �� � �� �� �� � � �		� �� � �� � �� �� �� � � �	� � �� � � �	� � � � �� �� � �	� � �� �� �� �		�� � � �� � � �	� � �� �� � � �	� � � �� � � � �	� � � � � � �		� � � � � �			� � � �� � �� �	� � � � � �	� �� � � � �� �� �� � � �
												Common shares Capital surplus		� �� ��	� �	�� ��	� �	� �	� �		� �	� �	� �		�� ��	� � ��		� ��	� ��	� �� ��		� �� ��	� �	� �	� �		� �	� �	� �	� � ��		� ��			� �	� ��	� �� ��
												Notes	2018	Balance at January 1, 2018	Modified retrospective approach adjustment 6(20)	Balance at 1 January after adjustments	Net income for the year	Other comprehensive income (loss) for the year 6(20)	Total comprehensive income (loss)	Distribution of 2017 earnings 6(19)	Legal reserve	Special reserve	Cash dividends	Employees' compensation transferred to 6(18)	commom stock	Cash from capital surplus 6(18)	Changes in equity of associates accounted for 6(18)	under equity method	Cash dividends returned 6(18)	Balance at December 31, 2018	2019	Balance at January 1, 2019	Net income for the year	Other comprehensive income (loss) for the year 6(20)	Total comprehensive income (loss)	Distribution of 2018 earnings 6(19)	Legal reserve	Special reserve	Cash dividends	Cash from capital surplus 6(18)	Changes in equity of associates accounted for 6(18)	under equity method	Disposal of investments in equity instruments 6(20)	measured at fair value through other	comprehensive income	Cash dividends returned 6(18)	Balance at December 31, 2019

-119-

REALTEK SEMICONDUCTOR CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

(Expressed in thousands of New Taiwan dollars)

CASH FLOWS FROM OPERATING ACTIVITIES
Profit before tax
Adjustments
Adjustments to reconcile profit (loss)
Depreciation

Amortization

Expected credit losses (gains)

Interest expense

Interest income

Dividend income

(Gain) loss on financial assets at fair value
through profit or loss

Share of loss of associates and joint ventures
accounted for under equity method

Loss (gain) on disposal of property, plant and
equipment

Impairment loss

Other intangible assets transferred to expenses
Changes in operating assets and liabilities
Changes in operating assets
Financial assets at fair value through profit or
loss - current
Accounts receivable, net
Accounts receivable, net - related parties
Other receivables
Inventories
Prepayments
Changes in operating liabilities
Contract liabilities - current
Notes payable
Accounts payable
Accounts payable - related parties
Other payables
Other payables - related parties
Advance receipts
Other current liabilities
Provisions - non-current
Accrued pension obligations

Notes
2019
2018
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(Continued)

-120-~14~

REALTEK SEMICONDUCTOR CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

(Expressed in thousands of New Taiwan dollars)

Cash inflow generated from operations
Receipt of interest
Receipt of dividend
Interest paid
Income tax paid
Net cash flows from operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of financial assets at amortised cost
Proceeds from disposal of financial assets at
amortised cost
Acquisition of financial assets at fair value
through other comprehensive income
Proceeds from disposal of financial assets at fair
value through other comprehensive income
Proceeds from capital reduction of investee
accounted for under equity method

Acquisition of property, plant and equipment

Proceeds from disposal of property, plant and
equipment
Acquisition of intangible assets

Acquisition of right-of-use assets
Increase in refundable deposits
(Increase) decrease in other non-current assets
Net cash flows used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in short-term borrowings
Decrease in short-term borrowings
Repayment of principal portion of lease liabilities

Guarantee deposits returned

Cash dividends paid

Cash dividends returned
Net cash flows from (used in) financing
activities
Effect of exchange rate
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year

Notes
2019
2018
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The accompanying notes are an integral part of these consolidated financial statements.

~15~

-121-

REALTEK SEMICONDUCTOR CORPORATION AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2019 AND 2018

(Expressed in thousands of New Taiwan dollars, except as otherwise indicated)

1. HISTORY AND ORGANISATION

Realtek Semiconductor Corporation (the “Company”) was incorporated as a company limited by shares on October 21, 1987 and commenced commercial operations in March 1988. The Company was based in Hsinchu Science-Based Industrial Park since October 28, 1989. The Company and its subsidiaries (collectively referred herein as the “Group”) are engaged in the research, development, design, testing, and sales of ICs and application softwares for these products.

2. THE DATE OF AUTHORISATION FOR ISSUANCE OF THE CONSOLIDATED FINANCIAL

STATEMENTS AND PROCEDURES FOR AUTHORISATION

These consolidated financial statements were authorised for issuance by the Board of Directors on March 20, 2020.

3. APPLICATION OF NEW STANDARDS,AMENDMENTS AND INTERPRETATIONS

(1) Effect of the adoption of new issuances of or amendments to International Financial Reporting Standards (“IFRSs”) as endorsed by the Financial Supervisory Commission (“FSC”) New standards, interpretations and amendments endorsed by the FSC effective from 2019 are as follows:

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

Except for the following, the above standards and interpretations have no significant impact to the Group’s financial condition and financial performance based on the Group’s assessment.

~16~

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IFRS 16, ‘Leases’

A. IFRS 16, ‘Leases’, replaces IAS 17, ‘Leases’ and related interpretations and SICs. The standard requires lessees to recognize a ‘right-of-use asset’ and a lease liability (except for those leases with terms of 12 months or less and leases of low-value assets). The accounting stays the same for lessors, which is to classify their leases as either finance leases or operating leases and account for those two types of leases differently. IFRS 16 only requires enhanced disclosures to be provided by lessors.
B. The Group has elected to apply IFRS 16 by not restating the comparative information (referred herein as the ‘modified retrospective approach’) when applying “IFRSs” effective in 2019 as endorsed by the FSC. Accordingly, the Group increased ‘right-of-use asset’ by $1,048,079 and increased ‘lease liability’ by $1,048,079 with respect to the lease contracts of lessees on January 1, 2019.
C. The Group has used the following practical expedients permitted by the standard at the date of initial application of IFRS 16:
(a)The use of a single discount rate to a portfolio of leases with reasonably similar characteristics.
(b)The exclusion of initial direct costs for the measurement of ‘right-of-use asset’.
D. The Group calculated the present value of lease liabilities by using the incremental borrowing interest rate range from 0.97% to 6.5%.
E. The Group recognized lease liabilities which had previously been classified as ‘operating leases’ under the principles of IAS 17, ‘Leases’. The reconciliation between operating lease commitments under IAS 17 measured at the present value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate and lease liabilities recognized as of January 1, 2019 is as follows:

(2)

Effect of new issuances of or amendments to IFRSs as endorsed by the FSC but not yet adopted
by the Group
Operating lease commitments disclosed by applying IAS 17 as at December
31, 2018
258,087
$ Add: Adjustments as a result of a different treatment of extension and
termination options
1,108,891
Total lease contracts amount recognised as lease liabilities by applying IFRS
16 on January 1, 2019
1,366,978
Incremental borrowing interest rate at the date of initial application
0.97%~6.5%
Lease liabilities recognised as at January 1, 2019 by applying IFRS 16
1,048,079
$

New standards, interpretations and amendments endorsed by the FSC effective from 2020 are as follows:

~17~

-123-

New Standards,Interpretations and Amendments	Effective date by International Accounting Standards Board
Amendment to IAS 1 and IAS 8, ‘Disclosure Initiative-Definition of Material’ Amendments to IFRS 3, ‘Definition of a business’ Amendments to IFRS 9, IAS 39 and IFRS 7, ‘Interest rate benchmark reform’	January 1, 2020 January 1, 2020 January 1, 2020

The above standards and interpretations have no significant impact to the Group’s financial condition and financial performance based on the Group’s assessment.

(3) IFRSs issued by IASB but not yet endorsed by the FSC

New standards, interpretations and amendments issued by IASB but not yet included in the IFRSs as endorsed by the FSC are as follows:

NewStandards,Interpretations and Amendments 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, ‘Classification of liabilities as current or non-current’	Effective date by International Accounting Standards Board To be determined by International Accounting Standards Board January 1, 2021 January 1, 2022

The above standards and interpretations have no significant impact to the Group’s financial condition

and financial performance based on the Group’s assessment.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated.

(1) Compliance statement

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

(2) Basis of preparation

A. Except for the following items, the consolidated financial statements have been prepared under the historical cost convention:
(a) Financial assets (including derivative instruments) at fair value through profit or loss.
(b) Financial assets at fair value through other comprehensive income.

~18~

-124-

  - (c) Defined benefit liabilities recognized based on the net amount of pension fund assets less present value of defined benefit obligation.

B. The preparation of financial statements in conformity with International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the FSC (collectively referred herein as the “IFRSs”) requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 5.
(3) Basis of consolidation
A. Basis for preparation of consolidated financial statements:
- (a) All subsidiaries are included in the Group’s consolidated financial statements. Subsidiaries are all entities (including structured entities) controlled by the Group. The Group controls an entity when the Group is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Consolidation of subsidiaries begins from the date the Group obtains control of the subsidiaries and ceases when the Group loses control of the subsidiaries.
- (b) Inter-company transactions, balances and unrealised gains or losses on transactions between companies within the Group are eliminated. Accounting policies of subsidiaries have been adjusted where necessary to ensure consistency with the policies adopted by the Group.
- (c) Profit or loss and each component of other comprehensive income are attributed to the owners of the parent and to the non-controlling interests. Total comprehensive income is attributed to the owners of the parent and to the non-controlling interests even if this results in the noncontrolling interests having a deficit balance.
- (d) Changes in a parent’s ownership interest in a subsidiary that do not result in the parent losing control of the subsidiary (transactions with non-controlling interests) are accounted for as equity transactions, i.e. transactions with owners in their capacity as owners. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognized directly in equity.
- (e) When the Group loses control of a subsidiary, the Group remeasures any investment retained in the former subsidiary at its fair value. That fair value is regarded as the fair value on initial recognition of a financial asset or the cost on initial recognition of the associate or joint venture. Any difference between fair value and carrying amount is recognized in profit or loss. All amounts previously recognized in other comprehensive income in relation to the subsidiary are reclassified to profit or loss on the same basis as would be required if the related assets or liabilities were disposed of. That is, when the Group loses control of a subsidiary, all gains or losses previously recognized in other comprehensive income in relation to the subsidiary should be reclassified from equity to profit or loss, if such gains or losses would be reclassified

~19~

-125-

to profit or loss when the related assets or liabilities are disposed of.

B. Subsidiaries included in the consolidated financial statements:

Name of investor	Name of subsidiary	Main business activities	Ownership (%)	Ownership (%)	Description
			December 31,2019	December 31,2018
Realtek Semiconductor Corporation Realtek Semiconductor Corporation Realtek Semiconductor Corporation Realtek Semiconductor Corporation Realtek Semiconductor Corporation Realtek Semiconductor Corporation Realtek Semiconductor Corporation Realtek Semiconductor Corporation Realtek Semiconductor Corporation Realtek Semiconductor Corporation	Leading Enterprises Limited Amber Universal Inc. Realtek Singapore Private Limited Bluocean Inc. Talent Eagle Enterprise Inc. Realtek Investment Singapore Private Limited Realsun Investment Co., Ltd. Hung-wei Venture Capital Co., Ltd. Realking Investments Limited Realsun Technology Corporation	Investment holdings � ICs manufacturing, design, research, development, sales, and marketing Investment holdings � � � � � ICs manufacturing, design, research, development, sales, and marketing	100% 100% 89% 100% 100% 100% 100% 100% 100% 100%	100% 100% 89% 100% 100% 100% 100% 100% 100% 100%

~20~

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Name of investor	Name of subsidiary	Main business activities	Ownership (%)	Ownership (%)	Description
			December 31,2019	December 31,2018
Realtek Semiconductor Corporation Leading Enterprises Limited Leading Enterprises Limited Leading Enterprises Limited Amber Universal Inc. Amber Universal Inc. Empsonic Enterprises Inc. Realtek Singapore Private Limited Realtek Singapore Private Limited	Bobitag Inc. Realtek Semiconductor (Japan) Corp. Circon Universal Inc. Realtek Singapore Private Limited Realtek Semiconductor (HK) Limited Realtek Semiconductor (Shen Zhen) Corp. Realsil Microelectronics Corp. Cortina Access Inc. Cortina Systems Taiwan Limited	Manufacture and installation of computer equipment and wholesale, retail and related service of electronic materials and information / software ICs design,sales and consultancy Investment holdings ICs manufacturing, design, research, development, sales, and marketing Information services and technical support R&D and technical support � R&D and information services R&D and technical support	67% 100% 100% 11% 100% 100% 100% 100% 100%	67% 100% 100% 11% 100% 100% 100% 100% 100%

~21~

-127-

Name of investor	Name of subsidiary	Main business activities	Ownership (%)	Ownership (%)	Description
			December 31,2019	December 31,2018
Realtek Singapore Private Limited Talent Eagle Enterprise Inc. Realtek Singapore Private Limited Realtek Singapore Private Limited Realtek Singapore Private Limited Realsil Microelectronics Corp.	Cortina Network Systems Shanghai Co., Ltd. Ubilinx Technology Inc. Empsonic Enterprises Inc. Realtek Viet Nam Co., Ltd. RayMX Microelectronics Corp. RayMX Microelectronics Corp.	R&D and technical support R&D and information services Investment holdings R&D and technical support ICs manufacturing, design, research, development, sales, and marketing �	100% 100% 100% 100% 29% 71%	100% 100% 100% 100% 29% 71%

C. Subsidiaries not included in the consolidated financial statements: None.
D. Adjustments for subsidiaries with different balance sheet dates: None.
E. Significant restrictions: None.
F. Subsidiaries that have non-controlling interests that are material to the Group: None.

(4) Foreign currency translation

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). The consolidated financial statements are presented in New Taiwan dollars, which is the Company’s functional and presentation currency.

A. Foreign currency transactions and balances
(a) Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are remeasured. Foreign exchange gains and losses resulting from the settlement of such transactions are recognized in profit or loss in the period in which they arise.

~22~

-128-

(b) Monetary assets and liabilities denominated in foreign currencies at the period end are retranslated at the exchange rates prevailing at the balance sheet date. Exchange differences arising upon re-translation at the balance sheet date are recognized in profit or loss.
(c) Non-monetary assets and liabilities denominated in foreign currencies held at fair value through profit or loss are re-translated at the exchange rates prevailing at the balance sheet date; their translation differences are recognized in profit or loss. Non-monetary assets and liabilities denominated in foreign currencies held at fair value through other comprehensive income are re-translated at the exchange rates prevailing at the balance sheet date; their translation differences are recognized in other comprehensive income. However, nonmonetary assets and liabilities denominated in foreign currencies that are not measured at fair value are translated using the historical exchange rates at the dates of the initial transactions.
(d) All other foreign exchange gains and losses based on the nature of those transactions are presented in the statement of comprehensive income within ‘other gains and losses’.
B. Translation of foreign operations
(a) The operating results and financial position of all the group entities, associates and joint arrangements that have a functional currency different from the presentation currency are translated into the presentation currency as follows:
- i. Assets and liabilities for each balance sheet presented are translated at the closing exchange rate at the date of that balance sheet;
- ii. Income and expenses for each statement of comprehensive income are translated at average exchange rates of that period; and
- iii. All resulting exchange differences are recognized in other comprehensive income.
(b) When the foreign operation partially disposed of or sold is an associate, exchange differences that were recorded in other comprehensive income are proportionately reclassified to profit or loss as part of the gain or loss on sale. In addition, even when the Group retains partial interest in the former foreign associate after losing significant influence over the former foreign associate, such transactions should be accounted for as disposal of all interest in these foreign operations.
(c) Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing exchange rates at the balance sheet date.

(5) Classification of current and non-current items

A. Assets that meet one of the following criteria are classified as current assets; otherwise they are classified as non-current assets:
(a) Assets arising from operating activities that are expected to be realised, or are intended to be sold or consumed within the normal operating cycle;
(b) Assets held mainly for trading purposes;
(c) Assets that are expected to be realised within twelve months from the balance sheet date;

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(d) Cash and cash equivalents, excluding restricted cash and cash equivalents and those that are to be exchanged or used to settle liabilities more than twelve months after the balance sheet date.
Otherwise the Group classified as non-current assets.
B. Liabilities that meet one of the following criteria are classified as current liabilities; otherwise they are classified as non-current liabilities:
(a) Liabilities that are expected to be settled within the normal operating cycle;
(b) Liabilities arising mainly from trading activities;
(c) Liabilities that are to be settled within twelve months from the balance sheet date;
(d) Liabilities for which the repayment date cannot be extended unconditionally to more than twelve months after the balance sheet date. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.

Otherwise the Group classified as non-current liabilities.

(6) Cash equivalents

Cash equivalents refer to short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Time deposits that meet the definition above and are held for the purpose of meeting short-term cash commitments in operations are classified as cash equivalents.

(7) Financial assets at fair value through profit or loss
A. Financial assets at fair value through profit or loss are financial assets that are not measured at amortised cost or fair value through other comprehensive income. Financial assets at amortised cost or fair value through other comprehensive income are designated as at fair value through profit or loss at initial recognition when they eliminate or significantly reduce a measurement or recognition inconsistency.
B. On a regular way purchase or sale basis, financial assets at fair value through profit or loss are recognized and derecognized using trade date accounting.
C. At initial recognition, the Group measures the financial assets at fair value and recognizes the transaction costs in profit or loss. The Group subsequently measures the financial assets at fair value, and recognizes the gain or loss in profit or loss.
D. The Group recognizes the dividend income when the right to receive payment is established, future economic benefits associated with the dividend will flow to the Group and the amount of the dividend can be measured reliably.

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

A. Financial assets at fair value through other comprehensive income comprise equity securities which are not held for trading, and for which the Group has made an irrevocable election at initial recognition to recognize changes in fair value in other comprehensive income.
B. On a regular way purchase or sale basis, financial assets at fair value through other comprehensive income are recognized and derecognized using trade date accounting.

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C. At initial recognition, the Group measures the financial assets at fair value plus transaction costs. The Group subsequently measures the financial assets at fair value:
The changes in fair value of equity investments that were recognized in other comprehensive income are reclassified to retained earnings and are not reclassified to profit or loss following the derecognition of the investment. Dividends are recognized as revenue when the right to receive payment is established, future economic benefits associated with the dividend will flow to the Group and the amount of the dividend can be measured reliably.

(9) Financial assets at amortised cost

The Group’s time deposits which do not fall under cash equivalents are those with a short maturity period and are measured at initial investment amount as the effect of discounting is immaterial.

(10) Accounts receivable
A. Accounts receivable entitle the Group a legal right to receive consideration in exchange for transferred goods or rendered services.
B. The short-term accounts and notes receivable without bearing interest are subsequently measured at initial invoice amount as the effect of discounting is immaterial.
(11) Impairment of financial assets
For financial assets at amortised cost, at each reporting date, the Group recognizes the impairment provision for 12 months expected credit losses if there has not been a significant increase in credit risk since initial recognition or recognizes the impairment provision for the lifetime expected credit losses (ECLs) if such credit risk has increased since initial recognition after taking into consideration all reasonable and verifiable information that includes forecasts. On the other hand, for accounts receivable that do not contain a significant financing component, the Group recognizes the impairment provision for lifetime ECLs.
(12) Derecognition of financial assets

The Group derecognizes a financial asset when the contractual rights to receive the cash flows from the financial asset expire.

(13) Operating leases (lessor)

Lease income from an operating lease (net of any incentives given to the lessee) is recognized in profit or loss on a straight-line basis over the lease term.

(14) Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is determined using the weighted-average method. The cost of finished goods and work in progress comprises raw materials, direct labour, other direct costs and related production overheads (allocated based on normal operating capacity). It excludes borrowing costs. The item by item approach is used in applying the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated cost of completion and applicable variable selling expenses.

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(15) Investments accounted for under equity method / associates

A. Associates are all entities over which the Group has significant influence but not control. In general, it is presumed that the investor has significant influence, if an investor holds, directly or indirectly 20 percent or more of the voting power of the investee. Investments in associates are accounted for under equity method and are initially recognized at cost.
B. The Group’s share of its associates’ post-acquisition profits or losses is recognized in profit or loss, and its share of post-acquisition movements in other comprehensive income is recognized in other comprehensive income. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognize further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the associate.
C. When changes in an associate’s equity do not arise from profit or loss or other comprehensive income of the associate and such changes do not affect the Group’s ownership percentage of the associate, the Group recognizes change in ownership interests in the associate in ‘capital surplus’ in proportion to its ownership.
D. Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been adjusted where necessary to ensure consistency with the policies adopted by the Group.
E. In the case that an associate issues new shares and the Group does not subscribe or acquire new shares proportionately, which results in a change in the Group’s ownership percentage of the associate but maintains significant influence on the associate, then ‘capital surplus’ and ‘investments accounted for under equity method’ shall be adjusted for the increase or decrease of its share of equity interest. If the above condition causes a decrease in the Group’s ownership percentage of the associate, in addition to the above adjustment, the amounts previously recognized in other comprehensive income in relation to the associate are reclassified to profit or loss proportionately on the same basis as would be required if the relevant assets or liabilities were disposed of.
F. Upon loss of significant influence over an associate, the Group remeasures any investment retained in the former associate at its fair value. Any difference between fair value and carrying amount is recognized in profit or loss.
G. When the Group disposes its investment in an associate and loses significant influence over this associate, the amounts previously recognized in other comprehensive income in relation to the associate, are reclassified to profit or loss, on the same basis as would be required if the relevant assets or liabilities were disposed of. If it retains significant influence over this associate, the amounts previously recognized in other comprehensive income in relation to the associate are reclassified to profit or loss proportionately in accordance with the aforementioned approach.

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(16) Property, plant and equipment

A. Property, plant and equipment are initially recorded at cost. Borrowing costs incurred during the construction period are capitalised.
B. Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognized. All other repairs and maintenance are charged to profit or loss during the financial period in which they are incurred.
C. Other property, plant and equipment apply cost model and are depreciated using the straight-line method to allocate their cost over their estimated useful lives. Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item must be depreciated separately.
D. The assets’ residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each financial year-end. If expectations for the assets’ residual values and useful lives differ from previous estimates or the patterns of consumption of the assets’ future economic benefits embodied in the assets have changed significantly, any change is accounted for as a change in estimate under IAS 8, ‘Accounting Policies, Changes in Accounting Estimates and Errors’, from the date of the change. The estimated useful lives of the fixed assets are as follows: buildings - 10~55 years and other fixed assets - 3~5 years.
(17) Leasing arrangements (lessee) � right-of-use assets/ lease liabilities
Effective 2019
A. Leases are recognized as a right-of-use asset and a corresponding lease liability at the date at which the leased asset is available for use by the Group.
B. Lease liabilities include the net present value of the remaining lease payments at the commencement date, discounted using the incremental borrowing interest rate. Fixed payments, less any lease incentives receivable.
- The Group subsequently measures the lease liability at amortised cost using the interest method and recognizes interest expense over the lease term. The lease liability is remeasured and the amount of remeasurement is recognized as an adjustment to the right-of-use asset when there are changes in the lease term or lease payments do not arise from contract modifications.
C. At the commencement date, the right-of-use asset is stated at cost comprising the following:
- (a) The amount of the initial measurement of lease liability; and
- (b) Any lease payments made at or before the commencement date.

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

(18) Operating leases (lessee)

Applicable for 2018

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

(19) Investment property

An investment property is stated initially at its cost and measured subsequently using the cost model. Except for land, investment property is depreciated on a straight-line basis over its estimated useful life of 20 years.

(20) Intangible assets

A. Computer software

Computer software is stated at cost and amortised on a straight-line basis over its estimated useful life of 1 to 5 years.

B. Goodwill

Goodwill arises in a business combination accounted for by applying the acquisition method.

C. Other intangible assets

Separately acquired intangible assets with a finite useful life are stated at cost, net of accumulated amortisation and accumulated impairment. Intangible assets acquired in a business combination are recognized at fair value at acquisition date. The amortisation amounts of separately and consolidated acquired intangible assets were amortised on a straight-line basis over their estimated useful lives of 2-5 years.

(21) Impairment of non-financial assets

A. The Group assesses at each balance sheet date the recoverable amounts of those assets where there is an indication that they are impaired. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell or value in use. When the circumstances or reasons for recognizing impairment loss for an asset in prior years no longer exist or diminish, the impairment loss is reversed. The increased carrying amount due to reversal should not be more than what the depreciated or amortised historical cost would have been if the impairment had not been recognized.
B. The recoverable amounts of goodwill is evaluated periodically. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. Impairment loss of goodwill previously recognized in profit or loss shall not be reversed in the following years.

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(22) Borrowings

Borrowings comprise short-term bank borrowings. Borrowings are recognized initially at fair value, net of transaction costs incurred.

(23) Notes and accounts payable

A. Accounts payable are liabilities for purchases of raw materials, goods or services and notes payable are those resulting from operating and non-operating activities.
B. The short-term notes and accounts payable without bearing interest are subsequently measured at initial invoice amount as the effect of discounting is immaterial.

(24) Derecognition of financial liabilities

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

(25) Provisions

Provisions are recognized when the Group has a present legal or constructive obligation as a result of past events, and it is probable that an outflow of economic resources will be required to settle the obligation and the amount of the obligation can be reliably estimated. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation on the balance sheet date.

(26) Employee benefits

A. Short-term employee benefits

Short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in respect of service rendered by employees in a period and should be recognized as expense in that period when the employees render service.

B. Pensions
(a) Defined contribution plan

For defined contribution plans, the contributions are recognized as pension expense when they are due on an accrual basis. Prepaid contributions are recognized as an asset to the extent of a cash refund or a reduction in the future payments.

(b) Defined benefit plan

i. Net obligation under a defined benefit plan is defined as the present value of an amount of pension benefits that employees will receive on retirement for their services with the Company in current period or prior periods. The liability recognized in the balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the balance sheet date less the fair value of plan assets. The net defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The rate used to discount is determined by using interest rates of highquality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension

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liability; when there is no deep market in high-quality corporate bonds, the Company uses interest rates of government bonds (at the balance sheet date) instead.

     - ii. Remeasurements arising on defined benefit plans are recognized in other comprehensive income in the period in which they arise and are recorded as retained earnings.

C. Employees’ compensation and directors’ remuneration
- Employees’ compensation and directors’ and remuneration are recognized as expense and liability, provided that such recognition is required under legal or constructive obligation and those amounts can be reliably estimated. Any difference between the resolved amounts and the subsequently actual distributed amounts is accounted for as changes in estimates. If employee compensation is distributed by shares, the Group calculates the number of shares based on the closing price at the previous day of the Board meeting resolution.
(27) Income tax
A. The tax expense for the period comprises current and deferred tax. Tax is recognized in profit or loss, except to the extent that it relates to items recognized in other comprehensive income or items recognized directly in equity, in which cases the tax is recognized in other comprehensive income or equity.
B. The current income tax expense is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the Company and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in accordance with applicable tax regulations. It establishes provisions where appropriate based on the amounts expected to be paid to the tax authorities. An additional tax is levied on the unappropriated retained earnings and is recorded as income tax expense in the year the stockholders resolve to retain the earnings.
C. Deferred tax is recognized, using the balance sheet liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated balance sheet. However, the deferred tax is not accounted for if it arises from initial recognition of goodwill or of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit nor loss. Deferred tax is provided on temporary differences arising on investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.
D. Deferred tax assets are recognized only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. At each balance sheet date, unrecognized and recognized deferred tax assets are reassessed.

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E. A deferred tax asset shall be recognized for the carryforward of unused tax credits resulting from research and development expenditures to the extent that it is possible that future taxable profit will be available against which the unused tax credits can be utilised.

(28) Share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds.

(29) Dividends

Dividends are recorded in the Company’s financial statements in the period in which they are resolved by the Company’s shareholders. Cash dividends are recorded as liabilities; stock dividends are recorded as stock dividends to be distributed and are reclassified to ordinary shares on the effective date of new shares issuance.

(30) Revenue recognition

A. Sales of goods
(a) The Group manufactures and sells various integrated circuit related products. Sales are recognized when control of the products has transferred, being when the products are delivered to the customers, 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 wholesaler, and either the wholesaler has accepted the products in accordance with the sales contract, or the Group has objective evidence that all criteria for acceptance have been satisfied.
(b) Revenue from these sales is recognized based on the price specified in the contract. A refund liability is recognized for expected sales discounts and allowances payable to customers in relation to sales made until the end of the reporting period. As the time interval between the transfer of committed goods or service and the payment of customer does not exceed one year, the Group does not adjust the transaction price to reflect the time value of money.
(c) A receivable is recognized when the goods are delivered as this is the point in time that the consideration is unconditional because only the passage of time is required before the payment is due.
B. Services revenue

Revenue from design, royalty and technical services is recognized after completing the services in which the services are rendered.

(31) Operating segments

Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision-Maker. The Group’s Chief Operating Decision-Maker is responsible for allocating resources and assessing performance of the operating segments.

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5. CRITICAL ACCOUNTING JUDGEMENTS, ESTIMATES AND KEY SOURCES OF ASSUMPTION UNCERTAINTY

The preparation of these consolidated financial statements requires management to make critical judgements in applying the Group’s accounting policies and make critical assumptions and estimates concerning future events. Assumptions and estimates may differ from the actual results and are continually evaluated and adjusted based on historical experience and other factors. Such assumptions and estimates have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year; and the related information is addressed below:

(1) Critical judgements in applying the Group’s accounting policies

None.

(2) Critical accounting estimates and assumptions

Evaluation of inventories

As inventories are stated at the lower of cost and net realisable value, the Group must determine the net realisable value of inventories on balance sheet date using judgements and estimates. Due to the rapid technology innovation, the Group evaluates the amounts of normal inventory consumption, obsolete inventories or inventories without market selling value on balance sheet date, and writes down the cost of inventories to the net realisable value. Such an evaluation of inventories is principally based on the demand for the products within the specified period in the future. Therefore, there might be material changes to the evaluation.

As of December 31, 2019, the carrying amount of inventories was $7,391,535.

6. DETAILS OF SIGNIFICANT ACCOUNTS

(1) Cash and cash equivalents

TAILS OF SIGNIFICANT ACCOUNTS Cash and cash equivalents
Cash on hand and revolving funds Checking accounts and demand deposits Time deposits Total	December 31,2019 841 $ 4,221,046 1,506,024 5,727,911 $	December 31,2018
		1,819 $ 3,248,619 1,059,213
		4,309,651 $

The Group transacts with a variety of financial institutions all with high credit quality to disperse credit risk, so it expects that the probability of counterparty default is remote.

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

Financial assets at fair value through profit or loss
Items Current items: Financial assets mandatorily measured at fair value through profit or loss Listed stocks Beneficiary certificates	December 31,2019 69,001 $ 5,011 74,012 $	December 31,2018
		69,781 $ 1,251,322
		1,321,103 $

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

loss are listed below:
		Years ended	December31,
		2019	2018
Financial assets mandatorily measured at fair
value through profit or loss
Equity instruments	($	780)	($	27,094)
Beneficiary certificates		6,544		7,854
	$	5,764	($	19,240)

B. The Group has no financial assets at fair value through profit or loss pledged to others.
(3) Financial assets at fair value through other comprehensive income

Items Non-current items: Equity instruments Listed stocks Emerging stocks Unlisted stocks	December31,2019 492,258 $ 13,357 1,353,863 1,859,478 $	December31,2018
		253,908 $ 339,027 1,058,137
		1,651,072 $

A. The Group has elected to classify equity instruments investments that are considered to be strategic investments as financial assets at fair value through other comprehensive income. The fair value of such investments amounted to $1,859,478 and $1,651,072 on December 31, 2019 and 2018, respectively.
B. Amounts recognized in other comprehensive income in relation to the financial assets at fair value through other comprehensive income are listed below:

Equity instruments at fair value through other comprehensive income Fair value change recognised in other comprehensive income Cumulative losses reclassified to retained earnings due to derecognition	Years ended December 31,	Years ended December 31,
	2019 227,352 $ 41,212 $	2018
		165,659 $
		- $

C. The Group has no financial assets at fair value through other comprehensive income pledged to others.

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(4) Financial assets at amortised cost

Financial assets at amortised cost
Items Current items: Time deposits Non-current items: Time deposits	December31,2019 39,558,054 $ 69,477 $	December31,2018
		31,286,209 $
		- $

A. Details of the Group’s financial assets at amortised cost pledged to others as collateral are provided in Note 8.

B. Information relating to credit risk of financial assets at amortised cost is provided in Note 12(2).

(5) Accounts receivable

Accountsreceivable
A. The aging analysis of accounts receivable is as follows: December 31,2019 Accounts receivable 8,321,221 $ Accounts receivable - related parties 2,209,114 Less: Allowance for bad debts 79,607) ( 10,450,728 $ December 31,2019 Not past due 10,153,312 $ Up to 30 days 376,366 31 to 90 days 1 Over 90 days 656 10,530,335 $	December 31,2018
	5,693,973 $ 1,783,992 58,172) (
	7,419,793 $
	December 31,2018
	7,460,264 $ 17,665 - 36
	7,477,965 $

The above aging analysis is based on past due date.

B. As of December 31, 2019 and 2018, accounts receivable was all from contracts with customers. And as of January 1, 2018, the balance of receivables from contracts with customers amounted to $6,946,663.
C. The Group has no accounts receivable pledged to others.
D. Information relating to credit risk of accounts receivable is provided in Note 12(2).
(6) Inventories

Inventories
Raw materials Work in process Finished goods Total		December 31,2019
	Allowance for obsolescence and Cost market value decline 1,054,744 $ 26,672) ($ 4,624,767 355,239) ( 2,550,754 456,819) ( 8,230,265 $ 838,730) ($		Book value
			1,028,072 $ 4,269,528 2,093,935
			7,391,535 $

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Raw materials Work in process Finished goods Total		December 31,2018
	Allowance for obsolescence and Cost market value decline 399,009 $ 23,147) ($ 3,614,676 218,774) ( 2,524,712 434,471) ( 6,538,397 $ 676,392) ($		Book value
			375,862 $ 3,395,902 2,090,241
			5,862,005 $

Operating costs incurred on inventories for the years ended December 31, 2019 and 2018 were as follows:

follows:
Cost of inventories sold and others Loss on market value decline and obsolete and slow-moving inventories Loss on scrap inventory	Years endedDecember31,
	2019 33,813,815 $ 166,028 180,847 34,160,690 $	2018
		25,003,275 $ 138,066 203,535
		25,344,876 $

(7) Investments accounted for under equity method

Investments accounted for under equity method
Technology Partner V Venture Capital Corporation 5V Technologies, Taiwan Ltd. Estinet Technologies Incorporation Innorich Venture Capital Corp.	December 31,2019 22,247 $ - 3,701 160,024 185,972 $	December 31,2018
		36,917 $ 16,106 40,682 167,923
		261,628 $

A. The loss on investments accounted for under equity method amounted to $23,833 and $43,307 for the years ended December 31, 2019 and 2018, respectively.
B. The Group’s held stocks in Technology Partner V Venture Capital Corporation decreased due to the return of capital in August of 2019 and the proceeds from stocks returned was $17,908.
C. Certain investments mentioned above have been impaired, and the Group recognized impairment loss amounting to $41,397 for the year ended December 31, 2019.

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(8) Property, plant and equipment

			Buildings			Machinery	Machinery			equipment			equipment			Others			Total
At January 1, 2019
Cost		$	3,246,163		$		3,726,816		$	2,225,944		$	232,162		$	754,293		$	10,185,378
Accumulated
depreciation and
impairment	(		1,197,942)	(			3,456,955)	(		1,514,287)	(		151,702)	(		547,914)	(		6,868,800)
		$	2,048,221		$		269,861		$	711,657		$	80,460		$	206,379		$	3,316,578
2019
Opening net book		$	2,048,221		$		269,861		$	711,657		$	80,460		$	206,379		$	3,316,578
amount
Additions			-				147,583			425,288			51,034			126,070			749,975
Disposals	(		18)				-	(		105)	(		124)	(		2)	(		249)
Reclassifications			-				27,167			-			-	(		27,167)			-
Depreciation	(		121,031)	(			77,024)	(		318,746)	(		27,082)	(		63,137)	(		607,020)
Net exchange difference	(		10,365)				2,109	(		4,429)	(		287)	(		150)	(		13,122)
Closing net book
amount		$	1,916,807		$		369,696		$	813,665		$	104,001		$	241,993		$	3,446,162
At December 31, 2019
Cost		$	3,222,502		$		3,899,552		$	2,623,658		$	280,814		$	850,212		$	10,876,738
Accumulated
depreciation and
impairment	(		1,305,695)	(			3,529,856)	(		1,809,993)	(		176,813)	(		608,219)	(		7,430,576)
		$	1,916,807		$		369,696		$	813,665		$	104,001		$	241,993		$	3,446,162
			Buildings			Machinery			Test	equipment		Office	equipment			Others			Total
At January 1, 2018
Cost	$		3,205,530	$			3,611,076	$		1,783,425	$		204,663	$		722,408	$		9,527,102
Accumulated
depreciation and
impairment	(		1,074,899)	(			3,377,730)	(		1,276,016)	(		137,072)	(		498,436)	(		6,364,153)
	$		2,130,631	$			233,346	$		507,409	$		67,591	$		223,972	$		3,162,949
2018
Opening net book	$		2,130,631	$			233,346	$		507,409	$		67,591	$		223,972	$		3,162,949
amount
Additions			6,238				124,429			455,980			35,609			84,858			707,114
Disposals	(		9)				-	(		37)	(		97)			-	(		143)
Reclassifications			50,407				-			-	(		567)	(		50,826)	(		986)
Depreciation	(		130,452)	(			88,176)	(		251,035)	(		21,630)	(		48,744)	(		540,037)
Net exchange difference	(		8,594)				262	(		660)	(		446)	(		2,881)	(		12,319)
Closing net book
amount	$		2,048,221	$			269,861	$		711,657	$		80,460	$		206,379	$		3,316,578
At December 31, 2018
Cost	$		3,246,163	$			3,726,816	$		2,225,944	$		232,162	$		754,293	$		10,185,378
Accumulated
depreciation and
impairment	(		1,197,942)	(			3,456,955)	(		1,514,287)	(		151,702)	(		547,914)	(		6,868,800)
	$		2,048,221	$			269,861	$		711,657	$		80,460	$		206,379	$		3,316,578

A. Amount of borrowing costs capitalised as part of property, plant and equipment: None.

B. The Group has no property, plant and equipment pledged to others.

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� (9) Leasing arrangements lessee

Effective 2019

A. The Group leases various assets including land and buildings. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose covenants, but leased assets may not be used as security for borrowing purposes.
B. The carrying amount of right-of-use assets and the depreciation are as follows:

Land Buildings	December 31,2019 Carryingamount 1,082,850 $ 320,395 1,403,245 $	Year ended December 31,2019
		Depreciation
		20,983 $ 68,826
		89,809 $

C. For the year ended December 31, 2019, the additions to right-of-use assets were $432,193.
D. The information on profit and loss accounts relating to lease contracts is as follows:

The information on profit and loss accounts relating to lease contracts is as	follows:
Items affecting profit or loss Interest expense on lease liabilities	Year ended December 31,2019
	23,915 $

E. For the year ended December 31, 2019, the Group’s total cash outflow for leases were $100,647.
(10) Investment property

Investment property
			Buildings
		2019			2018
At January 1
Cost	$		83,688	$		85,694
Accumulated depreciation and impairment	(		28,820)	(		25,440)
	$		54,868	$		60,254
Opening net book value	$		54,868	$		60,254
Depreciation	(		3,977)	(		4,047)
Net exchange difference	(		1,755)	(		1,339)
Closing net book amount	$		49,136	$		54,868
At December 31
Cost	$		80,799	$		83,688
Accumulated depreciation and impairment	(		31,663)	(		28,820)
	$		49,136	$		54,868

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A. Rental income from the lease of the investment property and direct operating expenses arising from the investment property are shown below:

from the investment property are shown below:
Rental income from the lease of the investment property Operating expenses arising from the investment property that generated rental income during the year	Years ended December 31,
	2019 1,486 $ 3,977 $	2018
		6,298 $
		4,047 $

B. The Group’s investment property is located in Mainland China. The fair value is based on valuation information from Information Centre of Real Estate in local governments in Mainland China and is adjusted accordingly. As of December 31, 2019 and 2018, the fair value was $134,439 and $136,949 and classified as level 3, respectively.

(11) Intangible assets

Intangible assets
		Computer			Intellectual
		software			property			Goodwill			Others			Total
At January 1, 2019
Cost	$	3,234,611		$	3,911,807		$	650,778		$	298,916		$	8,096,112
Accumulated amortisation
and impairment	(	2,738,897)	(		3,149,643)	(		350,621)	(		170,702)	(		6,409,863)
	$	495,714	$		762,164	$		300,157	$		128,214		$	1,686,249
2019
Opening net book amount	$	495,714		$	762,164		$	300,157		$	128,214		$	1,686,249
Additions		847,571			596,018			-			597			1,444,186
Transfers		1,800			-			-	(		2,326)	(		526)
Amortisation	(	568,851)	(		405,131)			-	(		45,803)	(		1,019,785)
Impairment loss		-			-	(		148,086)			-	(		148,086)
Net exchange difference	(	14)	(		2,658)	(		5,054)	(		1,352)	(		9,078)
Closing net book amount	$	776,220	$		950,393	$		147,017	$		79,330		$	1,952,960
At December 31, 2019
Cost	$	4,083,596		$	4,500,995		$	645,724		$	291,141		$	9,521,456
Accumulated amortisation
and impairment	(	3,307,376)	(		3,550,602)	(		498,707)	(		211,811)	(		7,568,496)
	$	776,220	$		950,393	$		147,017	$		79,330		$	1,952,960

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Computer Intellectual software property At January 1, 2018 Cost 2,772,830 $ 3,751,440 $ Accumulated amortisation and impairment 2,241,399) ( 2,673,224) ( 531,431 $ 1,078,216 $ 2018 Opening net book amount 531,431 $ 1,078,216 $ Additions 460,145 164,064 Transfers 1,353 2,096 Amortisation 497,239) ( 452,899) ( Net exchange difference 24 29,313) ( Closing net book amount 495,714 $ 762,164 $ At December 31, 2018 Cost 3,234,611 $ 3,911,807 $ Accumulated amortisation and impairment 2,738,897) ( 3,149,643) ( 495,714 $ 762,164 $	Goodwill Others Total 642,134 $ 298,771 $ 7,465,175 $ 350,621) ( 121,576) ( 5,386,820) ( 291,513 $ 177,195 $ 2,078,355 $ 291,513 $ 177,195 $ 2,078,355 $ - 1,800 626,009 - 10,161) ( 6,712) ( - 44,714) ( 994,852) ( 8,644 4,094 16,551) ( 300,157 $ 128,214 $ 1,686,249 $ 650,778 $ 298,916 $ 8,096,112 $ 350,621) ( 170,702) ( 6,409,863) ( 300,157 $ 128,214 $ 1,686,249 $	Total
		7,465,175 $ 5,386,820) (
		2,078,355 $
		1,686,249 $
		8,096,112 $ 6,409,863) (
		1,686,249 $

Details of amortisation on intangible assets are as follows:

Operating costs Operating expenses	Years endedDecember31,	Years endedDecember31,
	2019 4,107 $ 1,015,678 1,019,785 $	2018
		3,907 $ 990,945
		994,852 $

(12) Impairment of non-financial assets

A. The Group recognized impairment loss for the year ended December 31, 2019 was $148,086. Details of such loss are as follows:

Year ended December 31, 2019 Recognised in profit or Recognised in other loss comprehensive income Impairment loss � Goodwill $ 148,086 $ -

B. Goodwill is allocated to the Group’s cash-generating units identified according to operating segment. The recoverable amount of all cash-generating units has been determined based on value-in-use calculations. These calculations use pre-tax cash flow projections based on financial budgets approved by the management covering a five-year period. Cash flows beyond the fiveyear period are extrapolated using the estimated growth rates stated below.
Due to performance of the products acquiring from merger with Cortina was overestimated, the goodwill assessment for 2019 was conducted which is based on financial budgets estimated by the management covering a five-year period. The discount rate is 14.4%. The following sets forth the key assumptions that influence estimation of recoverable amounts and methods for determining key assumptions:

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(a) Estimation of growth rate: Conservatively estimated the financial budget for the next 5 years at a zero growth rate.
(b) Costs of goods sold and gross margin: Based on financial budgets estimated by the management covering five-year period and historical experience.
(c) Estimation of operating expense: Estimated annual operating expenses are based on financial budgets estimated by the management covering five-year period and actual operating expense ratio.

The recoverable amount calculated based on the above assumptions is lower than the sum of carrying value of identifiable assets of the cash-generating unit and goodwill. Thus, there is impairment for the assets. The Group recognized impairment loss for the year ended December 31, 2019.

(13) Short-term borrowings

31, 2019. Short-term borrowings
Type of borrowings Bank borrowings Unsecured borrowings Type ofborrowings Bank borrowings Unsecured borrowings	December 31,2019 18,966,042 $ December31,2018 14,526,311 $	Interest rate range	Collateral
		0.71%~2.64% Interest raterange 0.67%~4.16%	None Collateral None

Interest expense recognized in profit or loss amounted to $136,339 and $140,387 for the years ended December 31, 2019 and 2018, respectively.

(14) Other payables

December 31, 2019 and 2018, respectively. Other payables
Accrued salaries Payable for employees' compensation Other accrued expenses Payables on equipment Payables on software and intellectual property Others	December31,2019 4,041,988 $ 3,978,638 1,715,223 113,350 725,345 171,624 10,746,168 $	December31,2018
		3,390,433 $ 1,884,203 1,235,690 110,401 684,438 237,043
		7,542,208 $

(15) Pension

A. (a) The Company and its domestic subsidiaries have a defined benefit pension plan in accordance with the Labor Standards Law, covering all regular employees’ service years prior to the enforcement of the Labor Pension Act on July 1, 2005 and service years thereafter of employees who chose to continue to be subject to the pension mechanism under the Law. Under the defined benefit pension plan, two units are accrued for each year of service for the first 15 years and one unit for each additional year thereafter, subject to a maximum of 45 units. Pension benefits are based on the number of units accrued and the average monthly salaries and wages of the last 6 months prior to retirement. The Company and its domestic

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subsidiaries contribute monthly an amount equal to 2% of the employees’ monthly salaries and wages to the retirement fund deposited with Bank of Taiwan, the trustee, under the name of the independent retirement fund committee. Also, the Company and its domestic subsidiaries would assess the balance in the aforementioned labor pension reserve account by December 31, every year. If the account balance is insufficient to pay the pension calculated by the aforementioned method to the employees expected to qualify for retirement in the following year, the Company and its domestic subsidiaries will make contributions for the deficit by next March.

(b) The amounts recognized in the balance sheet are determined as follows:

	December	31,2019	December	31,2018
Present value of defined benefit obligations	($	595,932)	($	568,382)
Fair value of plan assets		522,312		495,415
Net liability in the balance sheet	($	73,620)	($	72,967)

Present value of defined benefit obligations Year ended December 31, 2019 At January 1 568,382) ($ Current service cost 2,709) ( Interest (expense) income 6,366) ( 577,457) ( Remeasurements: Return on plan assets (excluding amounts included in interest income or expense) - Change in demographic assumptions 1,283) ( Change in financial assumptions 6,415) ( Experience adjustments 20,397) ( 28,095) ( Pension fund contribution - Paid pension 9,620 At December 31 595,932) ($	Fair value of plan Net defined assets benefit liability 495,415 $ 72,967) ($ - 2,709) ( 5,544 822) ( 500,959 76,498) ( 24,973 24,973 - 1,283) ( - 6,415) ( - 20,397) ( 24,973 3,122) ( 6,000 6,000 9,620) ( - 522,312 $ 73,620) ($	Net defined benefit liability
		3,122) (
		6,000 -
		73,620) ($

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Present value of defined benefit obligations Year ended December 31, 2018 At January 1 536,470) ($ Current service cost 2,745) ( Interest (expense) income 6,675) ( 545,890) ( Remeasurements: Return on plan assets (excluding amounts included in interest income or expense) - Change in demographic assumptions 1,639) ( Change in financial assumptions 8,197) ( Experience adjustments 16,166) ( 26,002) ( Pension fund contribution - Paid pension 3,510 At December 31 568,382) ($	Fair value of plan Net defined assets benefit liability 473,679 $ 62,791) ($ - 2,745) ( 5,927 748) ( 479,606 66,284) ( 13,319 13,319 - 1,639) ( - 8,197) ( - 16,166) ( 13,319 12,683) ( 6,000 6,000 3,510) ( - 495,415 $ 72,967) ($	Net defined benefit liability
		12,683) (
		6,000 -
		72,967) ($

(d) The Bank of Taiwan was commissioned to manage the Fund of the Company’s and domestic subsidiaries’ defined benefit pension plan in accordance with the Fund’s annual investment and utilisation plan and the “Regulations for Revenues, Expenditures, Safeguard and Utilisation of the Labor Retirement Fund” (Article 6: The scope of utilisation for the Fund includes deposit in domestic or foreign financial institutions, investment in domestic or foreign listed, over-the-counter, or private placement equity securities, investment in domestic or foreign real estate securitization products, etc.). With regard to the utilisation of the Fund, its minimum earnings in the annual distributions on the final financial statements shall be no less than the earnings attainable from the amounts accrued from two-year time deposits with the interest rates offered by local banks.

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

Discount rate Future salary increases	Years endedDecember31,	Years endedDecember31,
	2019 0.8% 5%	2018
		1.125%
		5.25%

Future mortality rate was estimated based on the 5th Taiwan Standard Ordinary Experience Mortality Table for the years ended December 31, 2019 and 2018. Because the main actuarial assumption changed, the present value of defined benefit obligation is affected. The analysis was as follows:

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Increase by 0.25% Decrease by 0.25% 16,562 $ 17,221) ($ Discount rate Increase by 0.25% Decrease by 0.25% 16,573 $ 17,256) ($ Discount rate	Increase by 0.25% Decrease by 0.25% 16,562 $ 17,221) ($ Discount rate Increase by 0.25% Decrease by 0.25% 16,573 $ 17,256) ($ Discount rate	Increase by 0.25% Decrease by 0.25% 16,562 $ 17,221) ($ Discount rate Increase by 0.25% Decrease by 0.25% 16,573 $ 17,256) ($ Discount rate
Increase by 0.25%				Increase by 0.25%

Increase by 0.25%				Increase by 0.25%
16,573 $	(	17,256) $	(	16,206) $	15,665 $

The sensitivity analysis above is based on one assumption which changed while the other conditions remain unchanged. In practice, more than one assumption may change all at once. The method of analysing sensitivity and the method of calculating net pension liability in the balance sheet are the same.

(f) Expected contributions to the defined benefit pension plans of the Group for the year ending December 31, 2020 amounts to $6,000.
(g) As of December 31, 2019, the weighted average duration of the retirement plan is 13 years. The analysis of timing of the future pension payment was as follows:

Within 1 year 2~5 years 5~10 years Over 10 years	281,271 $ 112,554 197,517 36,248
	627,590 $

B. (a) Effective July 1, 2005, the Company and its domestic subsidiaries have established a defined contribution pension plan (the “New Plan”) under the Labor Pension Act (the “Act”), covering all regular employees with R.O.C. nationality. Under the New Plan, the Company and its domestic subsidiaries contribute monthly an amount based on 6% of the employees’ monthly salaries and wages to the employees’ individual pension accounts at the Bureau of Labor Insurance. The benefits accrued are paid monthly or in lump sum upon termination of employment.
(b) The Company’s mainland China subsidiaries, Realsil Microelectronics Corp., Realtek Semiconductor (Shen Zhen) Corp., Cortina Network Systems Shanghai Co., Ltd., and RayMX Microelectronics Corp. have a defined contribution plan. Monthly contributions to an independent fund administered by the government in accordance with the pension regulations in the People’s Republic of China (PRC) are based on certain percentage of employees’ monthly salaries and wages. Monthly contributions to an independent fund are

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administered by the government. Other than the monthly contributions, the Group has no further obligations.

(c) The pension costs under the defined contribution pension plans of the Group for the years ended December 31, 2019 and 2018 were $259,176 and $231,441, respectively.

(16) Provision

ended December 31, 2019 and 2018 were $2 Provision	59,176 and $231,441, re	spectively.
At January 1 Changes in provision Effect of exchange rate At December 31	2019 999,868 $ 102,181 26,240) ( 1,075,809 $	2018
		901,430 $ 98,438 -
		999,868 $

As of December 31, 2019, provisions were estimated for possible infringement litigations.

(17) Share capital

A. As of December 31, 2019, the Company’s authorised capital was $8,900,000, consisting of 890 million shares of ordinary stock (including 80 million thousand shares reserved for employee stock options), and the paid-in capital was $5,080,955 with a par value of $10 (in dollars) per share. All proceeds from shares issued have been collected. The beginning balance and closing balance of the number of the Company’s ordinary shares outstanding of the period remain the same as in previous two periods.

At January 1 Employees’ compensation transferred to common stock At December 31	2019 508,095 - 508,095 Unit	2018 506,506 1,589 508,095 : Thousands of shares

B. On January 24, 2002, the Company increased its new common stock and sold its old common stock by issuing 13,924 thousand units of GDRs for cash. Each GDR unit represents 4 common stocks, so the total common stocks issued were 55,694 thousand shares. The Company’s GDRs are traded in Luxembourg stock exchange. As of December 31, 2019, the outstanding GDRs were 312 thousand units, or 1,249 thousand shares of common stock, representing 0.25% of the Company’s total common stocks.

(18) Capital surplus

Pursuant to the R.O.C. Company Act, capital surplus arising from paid-in capital in excess of par value on issuance of common stocks and donations can be used to cover accumulated deficit or to issue new stocks or cash to shareholders in proportion to their share ownership, provided that the Company has no accumulated deficit. Further, the R.O.C. Securities and Exchange Act requires that the amount of capital surplus to be capitalised mentioned above should not exceed 10% of the paid-in capital each year. Capital surplus should not be used to cover accumulated deficit unless the legal reserve is insufficient.

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Sharepremium At January 1 3,196,250 $ Change in associates accounted for under equity method - Cash from capital surplus 508,095) ( Cash dividends returned - At December 31 2,688,155 $ Sharepremium At January 1 3,540,653 $ Change in associates accounted for under equity method - Cash from capital surplus 508,095) ( Employees’compensation transferred to common stock 163,692 Cash dividends returned - At December 31 3,196,250 $		2019
		Change in associates accounted for under equitymethod 40,208 $ 8,064 - - 48,272 $ 2018
		Change in associates accounted for under equitymethod 18,203 $ 22,005 - - - 40,208 $

(19) Retained earnings

A. Under the Company’s Articles of Incorporation, the current year’s earnings, if any, shall first be used to pay all taxes and offset prior years’ operating losses and then 10% of the remaining amount shall be set aside as legal reserve, if legal reserve has accumulated to an amount equal to the paid-in capital, then legal reserve is not required to be set aside any more. After that, special reserve shall be set aside or reversed in accordance with the related laws or the regulations made by the Competent Authority. The remainder, if any, along with prior year’s accumulated undistributed earnings shall be proposed by the Board of Directors. However, the appropriation of earnings shall be resolved by the shareholders if earnings are distributed by issuing new shares, or the appropriation of earnings shall be resolved by the Board of Directors, if earnings are distributed in the form of cash. The Company should consider factors of finance, business and operations to appropriate distributable earnings for the period, and appropriate all or partial reserve in accordance with regulations and the Competent Authority. The Company’s dividend policy takes into consideration the Company’s future expansion plans and future cash flows. In accordance with the Company’s dividend policy, cash dividends shall account for at least 10% of the total dividends distributed.

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In accordance with Company Act Article 240, Item 5 and Article 241, Item 2, the resolution, for all or partial of distributable dividends, legal reserve and capital surplus are distributed in the form of cash, will be adopted by a majority vote at a meeting of the Board of Directors attended by two-thirds of the total number of directors, and will be reported to the shareholders.

B. Except for covering accumulated deficit or issuing new stocks or cash to shareholders in proportion to their share ownership, the legal reserve shall not be used for any other purpose. The use of legal reserve for the issuance of stocks or cash to shareholders in proportion to their share ownership is permitted, provided that the distribution of the reserve is limited to the portion in excess of 25% of the Company’s paid-in capital.
C. In accordance with the regulations, the Company shall set aside special reserve from the debit balance on other equity items at the balance sheet date before distributing earnings. When debit balance on other equity items is reversed subsequently, the reversed amount could be included in the distributable earnings.
D. The appropriation of 2018 and 2017 earnings had been resolved at the stockholders’ meeting on June 12, 2019 and June 5, 2018, respectively. Details are summarised below:

Dividends per share Amount (indollars) Legal reserve 435,077 $ - $ (Reversal of) special reserve 600,443) ( - Cash dividends 3,048,573 6.00 Total 2,883,207 $ 6.00 $ 2018	2017	2017
	Amount 339,215 $ 600,443 2,286,430 3,226,088 $	Dividends per share (indollars)
		- $ - 4.50
		4.50 $

E. On June 12, 2019 and June 5, 2018, the stockholders resolved during their meeting to distribute $508,095 by cash ($1 per share) and $508,095 by cash ($1 per share) from capital surplus, respectively.
F. For the information relating to employees’ compensation and directors’ remuneration, please refer to Note 6(25).

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(20) Other equity items

(21)

Operating revenue
Unrealised
gains (losses)
Currency
on valuation
translation difference
Total
At January 1
272,153
$ 129,811
$ 401,964
$ Revaluation:
–Group
227,352
-
227,352
–Associates
4,390
-
4,390
Reclassified to retained
earnings
41,212
-
41,212
Currency translation
differences:
–Group
-
891,954)
(
891,954)
(
At December 31
545,107
$ 762,143)
($ 217,036)
($ 2019
Unrealised
gains (losses)
Available-for-
sale
Currency
translation
on valuation
investment
difference
Total
At January 1
-
$ 212,720
$ 813,163)
($ 600,443)
($ Modified retrospective
approach adjustment:
Revaluation
538,977
212,720)
(
-
326,257
Revaluation transferred
to retained earnings
103,142)
(
-
-
103,142)
(
Revaluation:
–Group
165,659)
(
-
-
165,659)
(
–Associates
1,977
-
-
1,977
Currency translation
differences:
–Group
-
-
942,974
942,974
At December 31
272,153
$ -
$ 129,811
$ 401,964
$ 2018
2019
2018
Revenue from contracts with customers
60,744,006
$ 45,805,746
$ Years endedDecember31,

A. Disaggregation of revenue from contracts with customers

The Group derives revenue from the transfer of goods and services at a point in time in the following major product lines:

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For the nine-month period ended Integrated YearendedDecember31,2019 circuitproducts Revenue from external customer contracts 60,623,210 $ Timing of revenue recognition At a point in time 60,623,210 $ For the nine-month period ended Integrated YearendedDecember31,2018 circuitproducts Revenue from external customer contracts 45,735,868 $ Timing of revenue recognition At a point in time 45,735,868 $	Others 120,796 $ 120,796 $ Others 69,878 $ 69,878 $	Total
		60,744,006 $
		60,744,006 $
		Total
		45,805,746 $
		45,805,746 $

B. Contract liabilities

The Group has recognized the following revenue-related contract liabilities:

Contract liabilities – advance sales receipts	December31,2019 104,974 $	December31,2018 148,696 $	January1,2018
			103,169 $

Revenue recognized that was included in the contract liability balance at the beginning of the period:

period:
Contract liabilities – advance sales receipts	Years endedDecember31,
	2019 136,590 $	2018
		91,285 $

C. Refund liabilities (shown in other current liabilities)

The Group estimates the discounts based on accumulated experience. The estimation is subject to an assessment at each reporting date.

The following refund liabilities:

to an assessment at each reporting date. The following refund liabilities:
Refund liabilities – current	December31,2019 5,368,247 $	December31,2018
		3,705,665 $

(22) Other income

Otherincome
Interest income: Interest income from bank deposits Dividend income Other income	Years ended December 31,
	2019 1,277,211 $ 30,150 105,418 1,412,779 $	2018
		989,290 $ 32,942 112,739
		1,134,971 $

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(23) Other gains and losses

Other gains and losses

Finance costs
Expenses by nature
Employee benefit expenses
(Losses) gains on disposal of property, plant and
equipment
Net currency exchange losses
Gains (losses) on financial assets at fair value
through profit or loss
Impairment loss of intangible assets
Impairment loss of investments accounted for
under equity method
Other losses
Interest expense
Bank borrowings
Lease liabilities
Employee benefit expenses
Depreciation
Amortisation
Wages and salaries
Labor and health insurance fees
Pension costs
Other personnel expenses
Total

2019
2018
157)
($ 133
$ 125,351)
(
35,720)
(
5,764
19,240)
(
148,086)
(
-
41,397)
(
-
14,458)
(
3,709)
(
323,685)
($ 58,536)
($ Years ended December 31,
2019
2018
136,339
$ 140,387
$ 23,915
-
160,254
$ 140,387
$ Years endedDecember31,
2019
2018
13,777,223
$ 10,831,592
$ 700,806
$ 544,084
$ 1,019,785
$ 994,852
$ Years endedDecember31,
2019
2018
12,900,156
$ 10,048,153
$ 440,945
394,056
262,707
234,934
173,415
154,449
13,777,223
$ 10,831,592
$ Years endedDecember31,

2019
12,900,156
$ 440,945
262,707
173,415
13,777,223
$

(24) Finance costs

(25) Expenses by nature

(26) Employee benefit expenses

A. In accordance with the Company’s Articles of Incorporation, the Company shall appropriate no higher than 3% for directors’ remuneration and no less than 1% for employees’ compensation, if the Company generates profit. If the Company has accumulated deficit, earnings should be reserved to cover losses before the appropriation of directors’ remuneration and employees’ compensation. Aforementioned employees’ compensation could be

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distributed by cash or stocks. Specifics of the compensation are to be determined by a majority vote at a meeting of the Board of Directors attended by two-thirds of the total number of directors. The resolution should be reported to the shareholders during the shareholders’ meeting.

B. For the years ended December 31, 2019 and 2018, employees’ compensation was accrued at $2,097,424 and $1,151,674, respectively; directors’ remuneration was accrued at $119,828 and $76,778, respectively. If the estimated amounts differ from the actual distribution resolved by the Board of Directors and the shareholders’ meeting, the Company will recognize the change as an adjustment to income of next year.

Employees’ cash compensation was $1,151,674, and directors’ remuneration was $76,778 for 2018. Employees’ compensation and directors’ remuneration of 2018 as resolved at the meeting of the Board of Directors were in agreement with those amounts recognized in the 2018 financial statements.

Information about employees’ compensation and directors’ remuneration of the Company as resolved by the Board of Directors will be posted in the “Market Observation Post System” at the website of the Taiwan Stock Exchange.

(27) Income tax

A. Income tax expense

the website of the Taiwan Stock Exchange. ome tax Income tax expense
		Years ended December 31,
		2019	2018
Current income tax:
Current income tax on profits for the year	$	396,097	$	463,769
Tax on undistributed earnings		74,745		16,607
Prior year income tax over estimation	(	19,067)	(	35,671)
Total current income tax		451,775		444,705
Deferred income tax:
Origination and reversal of temporary
differences	(	6,278)	(	12,360)
Impact of change in tax rate		-	(	125,925)
Total deferred income tax	(	6,278)	(	138,285)
Income tax expense	$	445,497	$	306,420

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B. Reconciliation between income tax expense and accounting profit

		Years ended	December 31,
		2019	2018
Income tax calculated based on income before
tax and statutory tax rate	$	1,453,137	$	946,174
Expenses disallowed by tax regulation and
effects from tax-exempt income	(	1,063,318)	(	494,765)
Impact of change in tax rate		-	(	125,925)
Prior year income tax over estimation	(	19,067)	(	35,671)
Income tax on undistributed surplus earnings		74,745		16,607
Income tax expense	$	445,497	$	306,420

C. Amounts of deferred income tax assets or liabilities as a result of temporary differences are as follows:

follows:
Deferred income tax assets: -Temporary differences: Unrealised loss on market price decline and obsolete and slow-moving inventories and others Deferred income tax liabilities: -Temporary differences: Unrealised exchange gain	Year	35,691 $ 114,163 $ 29,413) ( 51,723) ( 6,278 $ 62,440 $ ended December 31,2019 December 31 Recognised in profit or loss
	78,472 $ 22,310) ( 56,162 $ January1	35,691 $ 29,413) ( 6,278 $ Recognised in profit or loss

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Deferred income tax assets: -Temporary differences: Unrealised loss on market price decline and obsolete and slow-moving inventories and others Deferred income tax liabilities: -Temporary differences: Unrealised exchange gain	Year	Year	12,921 $ 78,472 $ 561) ( 22,310) ( 12,360 $ 56,162 $ ended December 31,2018 December 31 Recognised in profit or loss
	65,551 $ 21,749) ( 43,802 $ January1		12,921 $ 561) ( 12,360 $ Recognised in profit or loss

D. The amounts of deductible temporary differences that are not recognized as deferred income tax assets are as follows:

tax assets are as follows:
Deductible temporary differences	December31,2019 1,108,747 $	December31,2018
		783,339 $

E. The Company’s income tax returns through 2017 have been assessed and approved by the Tax Authority.
F. Under the amendments to the Income Tax Act which was promulgated by the President of the Republic of China in Feburary 7, 2018, the Company’s applicable income tax rate was raised from 17% to 20% effective from January 1, 2018. The Group has assessed the impact of the change in income tax rate.

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(28) Earnings per share

Earningsper share
Basic earnings per share Profit attributable to ordinary shareholders of the parent Diluted earnings per share Profit attributable to ordinary shareholders of the parent Assumed conversion of all dilutive potential ordinary shares Employees’ compensation Profit attributable to ordinary shareholders of the parent plus assumed conversion of all dilutive potential ordinary shares Basic earnings per share Profit attributable to ordinary shareholders of the parent Diluted earnings per share Profit attributable to ordinary shareholders of the parent Assumed conversion of all dilutive potential ordinary shares Employees’ compensation Profit attributable to ordinary shareholders of the parent plus assumed conversion of all dilutive potential ordinary shares	Year ended December 31,2019
	Amount after Weighted average number of ordinary shares outstanding (shares Earnings per share tax in thousands) (in dollars) 6,790,283 $ 508,095 13.36 $ 6,790,283 $ 508,095 - 8,926 6,790,283 $ 517,021 13.13 $ Year ended December 31,2018		Earnings per share (in dollars)
			13.36 $
			13.13 $
	Amount after tax 4,350,768 $ 4,350,768 $ - 4,350,768 $	Weighted average number of ordinary shares outstanding (shares in thousands) 507,712 507,712 10,477 518,189	Earnings per share (in dollars)
			8.57 $
			8.40 $

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(29) Supplemental cash flow information

Investing activities with partial cash payments

							Years	endedDecember	endedDecember	endedDecember	endedDecember	31,
						2019					2018
Purchase of property, plant and equipment				$			749,975 $					707,114
Add: Opening balance of payable on equipment							110,401					33,141
Less: Ending balance of payable on equipment				(			113,350) (					110,401)
Cash paid during the year				$			747,026 $					629,854
							Years	endedDecember				31,
						2019					2018
Purchase of intangible assets				$			1,444,186 $					626,009
Add: Opening balance of payable on
software and intellectual property							684,438					650,649
Less: Ending balance of payable on
software and intellectual property				(			725,345) (					684,438)
Cash paid during the year				$			1,403,279 $					592,220
Changes in liabilities from financing activities
					Guarantee						Liabilities from
			Short-term		deposits			Lease				financing
		borrowings			received			liabilites			activities-gross
At January 1, 2019	$		14,526,311		$	4,887		1,048,079 $		$		15,579,277
Changes in cash flow from financing
activities			4,439,731		(	1,437)		76,732) (				4,361,562
Interest paid				-			-	23,915) (		(		23,915)
Interest of lease liabilities				-			-	23,915				23,915
Changes in other non-cash items				-			-	141,328				141,328
At December 31, 2019	$		18,966,042		$	3,450		1,112,675 $		$		20,082,167
							Guarantee			Liabilities from
			Short-term				deposits					financing
			borrowings				received			activities-gross
At January 1, 2018	$			18,052,624			$	5,165	$			18,057,789
Changes in cash flow from financing
activities	(			3,526,313)			(	278)	(			3,526,591)
At December 31, 2018	$			14,526,311			$	4,887	$			14,531,198

(30) Changes in liabilities from financing activities

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7. RELATED PARTY TRANSACTIONS

(1) Parent and ultimate controlling party

The ultimate controlling party of the Group is the Company.

(2) Names of related parties and relationship

Names of related parties Relationship with the Company G.M.I Technology Inc. Other related party Actions Semiconductor Co., Ltd. Other related party C-Media Electronics Inc. Other related party Greatek Electronics Inc. Other related party EmBestor Technology Inc. Other related party

(3) Significant related party transactions and balances

A. Operating revenue

gnificant related party transactions and balances Operating revenue
Sales of goods� G.M.I Technology Inc. Others	Years endedDecember31,
	2019 11,392,557 $ 280,803 11,673,360 $	2018
		8,373,071 $ 442,676
		8,815,747 $

Goods are sold based on the price lists in force and terms that would be available to third parties, and the general collection term was 30 ~ 60 days after monthly billings.

B. Processing cost

Processing cost
Greatek Electronics Inc.	Years endedDecember31,
	2019 1,322,403 $	2018
		1,087,478 $

Processing cost is paid to associates on normal commercial terms and conditions, and the general payment term was 69 days after monthly billings.

C. Receivables from related parties

payment term was 69 days after monthly billings. Receivables from related parties
Accounts receivable� G.M.I Technology Inc. Other	December31,2019 2,142,256 $ 54,461 2,196,717 $	December31,2018
		1,718,808 $ 53,263
		1,772,071 $

Aforementioned receivables were 30 ~ 60 days after monthly billings. The receivables from related parties arise mainly from sale transactions. The receivables are unsecured in nature and bear no interest.

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D. Payables to related parties

Payables to related parties
Accounts payable� Greatek Electronics Inc.	December31,2019 329,514 $	December31,2018
		249,869 $

The payment term above was 69 days after monthly billings. The payables to related parties arise mainly from processing cost. The payables bear no interest.

E. Other transactions and other (receivables) payables:

Years endedDecember31,	Years endedDecember31,	Years endedDecember31,
Ending Amount balance 444,257 $ 87,293 $ 16,698) $ - $ ( 4,430) $ - $ ( 2019	2018
Amount 444,257 $ 16,698) $ 4,430) $	Amount 354,542 $ 19,420) $ 7,799) $	Ending balance
		69,047 $
		- $
		- $

The payment term above was 49 days after monthly billings; collection term was 30 ~ 60 days after monthly billings.

(4) Key management compensation

after monthly billings. Key management compensation
Salaries and other short-term employee benefits Post-employment benefits Total	Years endedDecember31,
	2019 120,242 $ 2,697 122,939 $	2018
		105,676 $ 2,557
		108,233 $

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8. PLEDGED ASSETS

The Group’s assets pledged as collateral are as follows:

Pledged asset Time deposits (shown in financial assets at amortised cost -current) " Time deposits (shown in financial assets at amortised cost - non- current) "	December 31,2019 December 31,2018 - $ 30,270 $ - 35,789 34,307 - 35,170 - 69,477 $ 66,059 $ Book value	Purposes
	December 31,2019 - $ - 34,307 35,170 69,477 $
		Guarantee for customs duties for the importation of materials Guarantee for leasing land and office in Science Park Guarantee for customs duties for the importation of materials Guarantee for leasing land and office in Science Park

9. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED CONTRACT COMMITMENTS

(1) Contingencies

None.

(2) Operating lease agreements

Applicable for 2018

The Group leases land and office buildings for operational needs under non-cancellable operating lease agreements. The lease terms are between 2019 and 2027. Most of the lease agreements are renewable at the market price at the end of the lease period. The Group recognized rental expense of $85,701 for these leases in profit or loss for the year ended December 31, 2018.

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

follows:
No later than one year Later than one year but not later than five years Later than five years	December31,2018
	69,071 $ 149,106 39,910
	258,087 $

10. SIGNIFICANT DISASTER LOSS

None.

11. SIGNIFICANT EVENTS AFTER THE BALANCE SHEET DATE

On February 21, 2020, the Board of Directors resolved at their meeting to enter into a property purchase contract, obtaining property in Zhongshan District, Taipei from Huaku Development Co., Ltd. with the transaction amount of 730 million NT dollars.

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12. OTHERS

(1) Capital management

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

(2) Financial instruments

A. Financial instruments by category

mpany may adjust the amount of dividends paid ue new shares or sell assets to reduce debt. nancial instruments Financial instruments by category	to shareholders, return	capital to shareholder
Financial assets Financial assets at fair value through profit or loss Financial assets mandatorily measured at fair value through profit or loss Financial assets at fair value through other comprehensive income Designation of equity instrument Financial assets at amortised cost/ Receivables Cash and cash equivalents Financial assets at amortised cost Accounts receivable (including related parties) Other receivables (including related parties) Refundable deposits Financial liabilities Financial liabilities at amortised cost Short-term borrowings Notes payable Accounts payable (including related parties) Other accounts payable (including related parties) Guarantee deposits received Other financial liabilities Lease liability	December31,2019 74,012 $ 1,859,478 $ 5,727,911 $ 39,627,531 10,450,728 768,699 32,384 56,607,253 $ 18,966,042 $ 3,276 7,771,238 10,833,461 3,450 5,368,247 42,945,714 $ 1,112,675 $	December31,2018
		1,321,103 $
		1,651,072 $
		4,309,651 $ 31,286,209 7,419,793 657,190 28,573
		43,701,416 $
		14,526,311 $ 8,657 5,885,855 7,611,255 4,887 3,705,665
		31,742,630 $
		- $

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B. Financial risk management policies
(a) The Group’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk, interest rate risk and price risk), credit risk and liquidity risk.
(b) Risk management is carried out by a finance division (Group finance) under policies approved by the Board of Directors. Group finance identifies, evaluates and hedges financial risks in close cooperation with the Group’s operating units.
C. Significant financial risks and degrees of financial risks
(a) Market risk

Foreign exchange risk

i. The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the USD and CNY. Foreign exchange risk arises from future commercial transactions, recognized assets and liabilities and net investments in foreign operations.
ii. Management has set up a policy to require the Group to manage its foreign exchange risk against its functional currency. The Group is required to hedge its entire foreign exchange risk exposure with the Group finance.
iii. The Group’s businesses involve some functional currency operations (the Company’s functional currency: NTD � other certain subsidiaries’ functional currency: USD and CNY). The information on assets and liabilities denominated in foreign currencies whose values would be materially affected by the exchange rate fluctuations is as follows:

December 31, 2019

(Foreign currency: functional currency) Financial assets Monetary items USD:NTD Non-monetary items USD:NTD Financial liabilities Monetary items USD:NTD	Foreign currency amount (In thousands) 325,970 $ 1,285,500 220,816	Exchangerate 30.106 30.106 30.106	Book value (NTD)
			9,813,647 $ 38,701,252 6,647,887

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			December31,2018
		Foreign
		currency
		amount		Book value
	(In thousands)		Exchangerate	(NTD)
(Foreign currency:
functional currency)
Financial assets
Monetary items
USD:NTD	$	179,859	30.733 $	5,527,618
CNY:USD		71,029	0.1456	317,942
Non-monetary items
USD:NTD		1,159,786	30.733	35,643,714
Financial liabilities
Monetary items
USD:NTD		134,264	30.733	4,126,322
The exchange loss including realised and unrealised arising from significant foreign
exchange variation on the monetary		items held	by the Group for	the years ended
December 31, 2019 and 2018, amounted to $125,351 and$35,720, respectively.
Analysis of foreign currency market risk arising from significant foreign exchange
variation:

(Foreign currency: functional currency) Financial assets Monetary items USD:NTD Non-monetary items USD:NTD Financial liabilities Monetary items USD:NTD	YearendedDecember31,	2019
	Sensitivityanalysis
	Effect on Degree ofvariation profitor loss 1% 98,136 $ 1% - 1% 66,479) (	Effect on other comprehensive income
		- $ 387,103 -

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Year ended December 31, 2018

	YearendedDecember31,	2018
(Foreign currency: functional currency) Financial assets Monetary items USD:NTD CNY:USD Non-monetary items USD:NTD Financial liabilities Monetary items USD:NTD	Sensitivityanalysis
	Effect on Degree ofvariation profitor loss 1% 55,276 $ 1% 3,179 1% - 1% 41,263) (	Effect on other comprehensive income
		- $ - 356,437 -

Price risk

i. The Group’s equity securities, which are exposed to price risk, are the held financial assets at fair value through profit or loss and financial assets at fair value through other comprehensive income.
ii. The Group’s investments in equity securities comprise domestic listed and unlisted stocks. The prices of equity securities would change due to the change of the future value of investee companies. If the prices of these equity securities had increased/decreased by 10% with all other variables held constant, post-tax profit for the years ended December 31, 2019 and 2018 would have increased/decreased by $7,401 and $132,110, respectively, as a result of gains/losses on equity securities classified as at fair value through profit or loss. Other components of equity would have increased/decreased by $185,948 and $165,107, respectively, as a result of gains/losses on equity securities classified as at fair value through other comprehensive income.

Cash flow and fair value interest rate risk

The Group has no material interest rate risk.

(b) Credit risk
i. Credit risk refers to the risk of financial loss to the Group arising from default by the clients or counterparties of financial instruments on the contract obligations. The main factor is that counterparties could not repay in full the accounts receivable based on the agreed terms, and the contract cash flows of financial assets at amortised cost and at fair value through other comprehensive income.

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ii. The Group manages their credit risk taking into consideration the entire group’s concern. According to the Group’s credit policy, each local entity in the Group is responsible for managing and analysing the credit risk for each of their new clients before standard payment and delivery terms and conditions are offered. Internal risk control assesses the credit quality of the customers, taking into account their financial position, past experience and other factors.
iii. The Group adopts the assumption under IFRS 9, that is, the default occurs when the contract payments are past due over 90 days.
iv. The Group adopts the following assumption under IFRS 9 to assess whether there has been a significant increase in credit risk on that instrument since initial recognition: If the contract payments were past due over 30 days based on the terms, there has been a significant increase in credit risk on that instrument since initial recognition.
v. The following indicators are used to determine whether the credit impairment of debt instruments has occurred:
(i) It becomes probable that the issuer will enter bankruptcy or other financial reorganization due to their financial difficulties;
(ii) The disappearance of an active market for that financial asset because of financial difficulties;
(iii) Default or delinquency in interest or principal repayments;
(iv) Adverse changes in national or regional economic conditions that are expected to cause a default.
vi. The Group classifies customers’ accounts receivable, contract assets and rents receivable in accordance with customer types. The Group applies the modified approach using provision matrix to estimate expected credit loss under the provision matrix basis.
vii. The Group wrote-off the financial assets, which cannot be reasonably expected to be recovered, after initiating recourse procedures. However, the Group will continue executing the recourse procedures to secure their rights.
viii. The Group used the forecast ability of semiconductor industry research report to adjust historical and timely information to assess the default possibility of accounts receivable. On December 31, 2019 and 2018, the provision matrix are as follows:

At December 31, 2019 Expected loss rate Total book value Loss allowance	Notpast due 0%~1% 10,153,312 $ 75,187 $	1~90 days past due 0%~1% 376,367 $ 3,764 $	90 days past due 100% 656 $ 656 $	Total
				10,530,335 $
				79,607 $

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At December 31, 2018 Expected loss rate Total book value Loss allowance	Notpast due 0%~1% 7,460,264 $ 58,031 $	1~90 days past due 0.2%~1% 17,665 $ 105 $	90 days past due 100% 36 $ 36 $	Total
				7,477,965 $
				58,172 $

ix. Movements in relation to the Group applying the modified approach to provide loss allowance for accounts receivable are as follows:

		2019
		Loss allowance for
		accounts receivable
At January 1	$	58,172
Provision for impairment		21,332
Effect of exchange rate		103
At December 31	$	79,607
		2018
		Loss allowance for
		accounts receivable
At January 1	$	59,792
Reversal of impairment loss	(	1,721)
Effect of exchange rate		101
At December 31	$	58,172

x. For financial assets at amortised cost, the credit rating levels are presented below:

	December 31,2019
12 months 39,627,531 $	Significant increase in Impairment of credit risk credit - $ - $ Lifetime December 31,2018	Total
	Significant increase in credit risk - $ December
		39,627,531 $

12 months 31,286,209 $	Significant increase in Impairment of credit risk credit - $ - $ Lifetime	Total
	Significant increase in credit risk - $
		31,286,209 $

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The Group’s financial assets at amortised cost are all time deposits with an original due date of more than three months, and there is no significant abnormality in credit risk assessment.

(c) Liquidity risk
i. Cash flow forecasting is performed in the operating entities of the Group and aggregated by Group finance. Group finance monitors forecasts of the Group’s liquidity requirements to ensure it has sufficient cash to meet operational needs while maintaining sufficient headroom on its undrawn committed borrowing facilities.
ii. Group finance invests surplus cash in interest bearing current accounts, time deposits, money market deposits and marketable securities, choosing instruments with appropriate maturities or sufficient liquidity to provide sufficient head-room as determined by the above-mentioned forecasts.
iii. The table below analyses the Group’s non-derivative financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date for non-derivative financial liabilities. The amounts disclosed in the table are the contractual undiscounted cash flows.

Non-derivative financial liabilities:

Non-derivative financial liabilities:
Short-term borrowings Notes payable Accounts payable (including related parties) Other payables (including related parties) Lease liability Guarantee deposits received Other financial liabilities December 31, 2019 Non-derivative financial liabilities: Short-term borrowings Notes payable Accounts payable (including related parties) Other payables (including related parties) Guarantee deposits received Other financial liabilities December 31, 2018	Less than 1 year 18,966,042 $ 3,276 7,771,238 10,833,461 107,586 - 5,368,247 Less than 1 year 14,526,311 $ 8,657 5,885,855 7,611,255 - 3,705,665	Between 1 and 5years - $ - - - 354,895 - - Between 1 and 5years - $ - - - - -	Over 5years
			- $ - - - 982,688 3,450 - Over 5years
			- $ - - - 4,887 -

iv. The Group does not expect the timing of occurrence of the cash flows estimated through the maturity date analysis will be significantly earlier, nor expect the actual cash flow amount will be significantly different.

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(3) Fair value information

A. The different levels that the inputs to valuation techniques are used to measure fair value of financial and non-financial instruments have been defined as follows:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. A market is regarded as active where a market in which transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. The fair value of the Group’s investment in listed stocks and beneficiary certificates is included in Level 1.
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. The fair value of the Group’s investment is included in Level 2.
Level 3: Unobservable inputs for the asset or liability. The fair value of the Group’s investment in equity investment without active market is included in Level 3.
B. Fair value information of investment property at cost is provided in Note 6(10).
C. The related information of financial and non-financial instruments measured at fair value by level on the basis of the nature, characteristics and risks of the assets is as follows:
(a) The related information of nature of the assets is as follows:

December 31, 2019 Assets Recurring fair value measurement Financial assets at fair value through profit or loss Equity securities Financial assets at fair value through other comprehensive income Equity securities Total December 31, 2018 Assets Recurring fair value measurement Financial assets at fair value through profit or loss Equity securities Financial assets at fair value through other comprehensive income Equity securities Total	Level 1 74,012 $ 505,615 579,627 $ Level 1 1,321,103 $ 592,935 1,914,038 $	Level 2 - $ - - $ Level 2 - $ - - $	Level 3 - $ 1,353,863 1,353,863 $ Level 3 - $ 1,058,137 1,058,137 $	Total
				74,012 $ 1,859,478
				1,933,490 $
				Total
				1,321,103 $ 1,651,072
				2,972,175 $

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(b) The methods and assumptions the Group used to measure fair value are as follows:
i. The instruments the Group used market quoted prices as their fair values (that is, Level 1) are listed below by characteristics:

Market quoted price	Listed shares	Closed- end fund	Open- end fund	Government bond	Corporate bond	Convertible (exchangeable) bond
	Closing price	Closing price	Net asset value	Translation price	Weighted average quoted price	Closing price

ii. Except for financial instruments with active markets, the fair value of other financial instruments is measured by using valuation techniques or by reference to counterparty quotes. The fair value of financial instruments measured by using valuation techniques can be referred to current fair value of instruments with similar terms and characteristics in substance, discounted cash flow method or other valuation methods, including calculated by applying model using market information available at the consolidated balance sheet date.
iii. The output of valuation model is an estimated value and the valuation technique may not be able to capture all relevant factors of the Group’s financial and non-financial instruments. Therefore, the estimated value derived using valuation model is adjusted accordingly with additional inputs.
D. For the years ended December 31, 2019 and 2018, there was no transfer between Level 1 and Level 2.
E. The following chart is the movement of Level 3 for the years ended December 31, 2019 and 2018:

2018:
			2019
		Non-derivative equityinstrument
At January 1		$	1,058,137
Gains recognised in other comprehensive income			295,726
At December 31		$	1,353,863
			2018
		Non-derivative equityinstrument
At January 1		$	312,684
Modified retrospective adjustment			766,919
Gains recognised in other comprehensive income	(		49,466)
Acquired in the period			28,000
At December 31		$	1,058,137

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F. For the years ended December 31, 2019 and 2018, there was no transfer into or out from Level 3.
G. The finance division is in charge of valuation procedures for fair value measurements being categorised within Level 3, which is to verify independent fair value of financial instruments. Such assessment is to ensure the valuation results are reasonable by applying independent information to make results close to current market conditions, confirming the resource of information is independent, reliable and in line with other resources and represented as the exercisable price, updating inputs used to the valuation model and making any other necessary adjustments to the fair value.
H. The following is the qualitative information of significant unobservable inputs and sensitivity analysis of changes in significant unobservable inputs to valuation model used in Level 3 fair value measurement:

Fair value at Significant Range December 31, Valuation unobservable (weighted Relationship of 2019 technique input average) inputs to fair value Non-derivative equity instrument: Unlisted $ 115,580 Market Price to book 3.58 The higher the shares comparable ratio multiple multiple, the higher companies the fair value � 19,791 Net asset Not applicable - Not applicable value Private equity 1,218,492 Net asset Not applicable - Not applicable fund value investment

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Non-derivative equity instrument: Unlisted shares � Private equity fund investment	Fair value at December 31, 2018	Valuation technique	Significant unobservable input	Range (weighted average)	Relationship of inputs to fair value
	117,986 $ 28,000 912,151	Market comparable companies The last transaction price of the non-active market Net asset value	Price to book ratio multiple Not applicable Not applicable	2.56 - -	The higher the multiple, the higher the fair value Not applicable Not applicable

I. The Group has carefully assessed the valuation models and assumptions used to measure fair value; therefore, the fair value measurement is reasonable. However, use of different valuation models or assumptions may result in different measurement. The following is the effect of profit or loss or of other comprehensive income from financial assets and liabilities categorised within Level 3 if the inputs used to valuation models have changed:

December 31, 2019

Input Price to book ratio multiple Input
		- $
		December
	Favourable Unfavourable Change change - $ - $ ecognisedinprofitor loss
Price to book ratio multiple

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13. SUPPLEMENTARY DISCLOSURES

(1) Significant transactions information

A. Loans to others: Please refer to table 1.
B. Provision of endorsements and guarantees to others: Please refer to table 2.
C. Holding of marketable securities at the end of the period (not including subsidiaries, associates and joint ventures): Please refer to table 3.
D. Acquisition or sale of the same security with the accumulated cost exceeding $300 million or 20% of the Company’s paid-in capital: Please refer to table 4.
E. Acquisition of real estate reaching $300 million or 20% of paid-in capital or more: None.
F. Disposal of real estate reaching $300 million or 20% of paid-in capital or more: None.
G. Purchases or sales of goods from or to related parties reaching $100 million or 20% of paidin capital or more: Please refer to table 5.
H. Receivables from related parties reaching $100 million or 20% of paid-in capital or more: Please refer to table 6.
I. Trading in derivative instruments undertaken during the reporting periods: None.
J. Significant inter-company transactions during the reporting periods: Please refer to table 7.
(2) Information on investees

Names, locations and other information of investee companies (not including investees in Mainland China): Please refer to table 8.

(3) Information on investments in Mainland China

A. Basic information: Please refer to table 9.
B. Significant transactions, either directly or indirectly through a third area, with investee companies in the Mainland Area: Please refer to table 1, table 2 and table 7.

14. SEGMENT INFORMATION

(1) General information

The Group operates business only in a single industry. The Chief Operating Decision-Maker, who allocates resources and assesses performance of the Group as a whole, has identified that the Group has only one reportable operating segment.

(2) Measurement of segment information

The Chief Operating Decision-Maker assesses the performance of the operating segments based on the consolidated financial statements. The accounting policy of operating segments is the same as that described in Note 4.

(3) Information on segment profit (loss), assets and liabilities

Information on segment profit (loss), assets and liabilities referring to the revenue from external customers and segmental financial information reported to the chief operating decision-maker is measured in a manner consistent with that in the consolidated statement of comprehensive income and financial information.

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(4) Reconciliation for segment profit (loss)

Reconciliation for segment income (loss) referring to the segment assets, liabilities and profit before income tax reported to the chief operating decision-maker is measured in a manner consistent with balance sheets and the consolidated statement of comprehensive income. Thus, reconciliation is not needed.

(5) Revenue information by category

Revenue from external customers is derived from the sale of integrated circuits. Other income is derived from design, royalty and technical services. Breakdown of the revenue from all sources are as follows:

s follows:
Revenue from ICs Others Total	Years ended December 31,
	2019 60,623,210 $ 120,796 60,744,006 $	2018
		45,735,868 $ 69,878
		45,805,746 $

(6) Revenue information by geographic area

Geographical information for the years ended December 31, 2019 and 2018 is as follows:

Taiwan Asia Others Total	Revenue Non-current assets 40,845,708 $ 5,804,262 $ 19,898,298 921,103 - 155,400 60,744,006 $ 6,880,765 $ Year ended December 31,2019	Year ended December 31,2018	Year ended December 31,2018
	Revenue 40,845,708 $ 19,898,298 - 60,744,006 $	Revenue 32,194,291 $ 13,611,455 - 45,805,746 $	Non-current assets 4,027,191 $ 1,021,286 30,814 5,079,291 $

Note: Non-current assets exclude financial instruments and deferred income tax assets.

(7) Major customer information

Major customer information of the Group for the years ended December 31, 2019 and 2018 is as follows:

ollows:
Customer B Customer D Customer A	YearendedDecember31,		2019
	Revenue 13,368,262 $ 11,392,557 10,014,670	Percentage 22% 19% 16%	Segment
			The whole group � �

Customer B Customer D Customer A	Revenue Percentage 13,368,262 $ 22% 11,392,557 19% 10,014,670 16% YearendedDecember31,	Revenue Percentage 13,368,262 $ 22% 11,392,557 19% 10,014,670 16% YearendedDecember31,	Segment The whole group � � 2019
Customer A Customer B Customer D	YearendedDecember31,		2018
	Revenue 10,575,725 $ 10,505,983 8,373,071	Percentage 23% 23% 18%	Segment
			The whole group � �

~70~

-176-

None	None	None	None	None	None	None	None	None
10,887,594 $	10,887,594	10,887,594	10,887,594	10,887,594	10,887,594	10,887,594	10,887,594	10,887,594
2,721,899 $	2,721,899	2,721,899	2,721,899	2,721,899	10,887,594	10,887,594	10,887,594	10,887,594
- $	-	-	-	-	-	-	-	-
None	None	None	None	None	None	None	None	None
- $	-	-	-	-	-	-	-	-
Operations	Operations	Operations	Operations	Operations	Operations	Operations	Operations	Operations
- $	-	-	-	-	-	-	-	-
Short-term financing	Short-term financing	Short-term financing	Short-term financing	Short-term financing	Short-term financing	Short-term financing	Short-term financing	Short-term financing
-	1.8	1.8	1.8	1.8	-	1.8	1.8	-
- $	602,120	1,490,247	1,737,116	1,806,360	-	5,127,161	1,505,300	-
903,180 $	602,120	1,806,360	1,806,360	1,806,360	1,806,360	6,021,200	1,505,300	903,180
903,180 $	602,120	1,806,360	1,806,360	1,806,360	1,806,360	6,021,200	1,505,300	903,180
Y	Y	Y	Y	Y	Y	Y	Y	Y
Other receivables- related parties	Other receivables- related parties	Other receivables- related parties	Other receivables- related parties	Other receivables- related parties	Other receivables- related parties	Other receivables- related parties	Other receivables- related parties	Other receivables- related parties
Realtek Singapore Private Limited	Amber Universal Inc.	Bluocean Inc.	Talent Eagle Enterprise Inc.	Leading Enterprises Limited	Bluocean Inc.	Talent Eagle Enterprise Inc.	Bluocean Inc.	Leading Enterprises Limited
Realtek Semiconductor Corporation	Realtek Semiconductor Corporation	Realtek Semiconductor Corporation	Realtek Semiconductor Corporation	Realtek Semiconductor Corporation	Leading Enterprises Limited	Leading Enterprises Limited	Amber Universal Inc.	Cortina Access, Inc.
�	�	�	�	�	�	�	�	�

-177-

Item Value Reason for short-term financing Allowance for doubtful accounts REALTEK SEMICONDUCTOR CORPORATION AND SUBSIDIARIES Loans to others For the year ended December 31, 2019 Table 1 Expressed in thousands of NTD (Except as otherwise indicated) Maximum outstanding balance during the year ended December 31, 2019 (Note 3) Balance at December 31, 2019 Actual amount drawn down (Note 4) No (Note 1) Creditor Borrower General ledger account Is a related party Collateral Limit on loans granted to a single party Ceiling on total loans granted (Note 2) Footnote Interest rate Nature of loan Amount of transactions with the borrower	None
	10,887,594
	10,887,594
	-
	None
	-
	Operations
	-
	Short-term financing
	1.8
	1,255,420
	3,010,600
	3,010,600
	Y
	Other receivables- related parties
	Realtek Singapore Private Limited
	Realtek Investment Singapore Private Limited
	�

-178-

None	None	None	None
10,887,594 $	10,887,594	10,887,594	10,887,594
10,887,594 $	10,887,594	10,887,594	10,887,594
- $	-	-	-
None	None	None	None
- $	-	-	-
Operations	Operations	Operations	Operations
- $	-	-	-
Short-term financing	Short-term financing	Short-term financing	Short-term financing
-	-	-	4.35
- $	-	-	43,217
903,180 $	345,736	345,736	129,651
903,180 $	345,736	345,736	129,651
Y	Y	Y	Y
Other receivables- related parties	Other receivables- related parties	Other receivables- related parties	Other receivables- related parties
Realsil Microelectronics Corp.	RayMX Microelectronics Corp.	Suzhou Hongwei Microelectronic Corp.	Realsil Microelectronics Corp.
Realtek Singapore Private Limited	Realsil Microelectronics Corp.	Realsil Microelectronics Corp.	Cortina Network systems Shanghai Co., Ltd.
�	�	�	�

-179-


N	N	Y	Y	Y	Y
N	N	N	N	N	N
Y	Y	Y	Y	N	N
13,609,493 $	13,609,493	13,609,493	13,609,493	13,609,493	13,609,493
10%	20%	3%	3%	2%	2%
- $	-	-	-	-	-
- $	361,272	-	7,092	-	-
2,721,899 $	5,443,797	816,570	816,570	602,120	602,120
2,721,899 $	5,443,797	816,570	816,570	602,120	602,120
13,609,493 $	13,609,493	13,609,493	13,609,493	13,609,493	13,609,493
2	2	2	2	2	2
Realtek Singapore Private Limited	Leading Enterprises Limited	Realsil Microelectronics Corp.	RayMX Microelectronics Corp.	Realsil Microelectronics Corp.	RayMX Microelectronics Corp.
Realtek Semiconductor Corporation	Realtek Semiconductor Corporation	Realtek Semiconductor Corporation	Realtek Semiconductor Corporation	Leading Enterprises Limited	Realsil Microelectronics Corp.
0	0	0	0	1	2

-180-


$ 28,736	104,033	216,401	104,033	97,516	18,064	657,021	345,070	5,533	40,265	278,659	13,357	19,791	5,007
2.05%	5.34%	3.03%	5.34%	6.89%	-	12.49%	6.56%	-	2.88%	1.05%	0.33%	12.17%	-
$ 28,736	104,033	216,401	104,033	97,516	18,064	657,021	345,070	5,533	40,265	278,659	13,357	19,791	5,007
1,623,501	3,575,000	23,124,000	3,575,000	8,623,301	5,000,000	9,000,000	4,726,836	336,346	2,274,875	5,823,602	1,093,968	2,800,000	934,291
Financial assets at fair value through profit or loss	Financial assets at fair value through other comprehensive income	Financial assets at fair value through other comprehensive income	Financial assets at fair value through other comprehensive income	Financial assets at fair value through other comprehensive income	Financial assets at fair value through other comprehensive income	Financial assets at fair value through other comprehensive income	Financial assets at fair value through other comprehensive income	Financial assets at fair value through other comprehensive income	Financial assets at fair value through profit or loss	Financial assets at fair value through other comprehensive income	Financial assets at fair value through other comprehensive income	Financial assets at fair value through other comprehensive income	Financial assets at fair value through profit or loss
Other related parties	None	None	None	None	None	None	None	None	Other related parties	Other related parties	None	Other related parties	None
C-media Electronics Inc. - Common stock	Compal broadband networks Inc. - Common stock	Shieh-Yong Investment Co., Ltd. - Common stock	Compal broadband networks Inc. - Common stock	Fortemedia Inc. - Common stock	Starix Technology, Inc.- Preferred stock	Octtasia Investment Holding Inc. - Common stock	Octtasia Investment Holding Inc. - Common stock	United Microelectronics Corporation - Common stock	C-media Electronics Inc.- Common stock	Greatek Electroninc Inc. - Common stock	Subtron technology Co., Ltd - Common stock	Embestor Technology Inc. - Common stock	Tian Tianjin Aggressive Fund
Realtek Semiconductor Corporation	Realking Investment Limited	Realsun Investment Co., Ltd.	Realsun Investment Co., Ltd.	Leading Enterprises Limited	Leading Enterprises Limited	Leading Enterprises Limited	Amber Universal Inc.	Hung-wei Venture Capital Co., Ltd.	Hung-wei Venture Capital Co., Ltd.	Hung-wei Venture Capital Co., Ltd.	Hung-wei Venture Capital Co., Ltd.	Hung-wei Venture Capital Co., Ltd.	Cortina Network Systems Shanghai Co., Ltd.

-181-

Number of shares Book value (Note 3) Ownership (%) Fair value Footnote (Note 4) Securities held by Marketable securities �Note 1� Relationship with the securities issuer(Note 2) General ledger account (Except as otherwise indicated) REALTEK SEMICONDUCTOR CORPORATION AND SUBSIDIARIES Holding of marketable securities at the end of the period (not including subsidiaries, associates and joint ventures) December 31, 2019 Table 3 Expressed in thousands of NTD As of December 31, 2019			Note 1: Marketable securities in the table refer to stocks, bonds, beneficiary certificates and other related derivative securities within the scope of IFRS 9 ‘Financial instrument'. Note 2: Leave the column blank if the issuer of marketable securities is non-related party. Note 3: Fill in the amount after adjusted at fair value and deducted by accumulated impairment for the marketable securities measured at fair value; fill in the acquisition cost or amortised cost deducted by accumulated impairment for the marketable securities not measured at fair value. Note 4: The number of shares of securities and their amounts pledged as security or pledged for loans and their restrictions on use under some agreements should be stated in the footnote if the securities presented herein have such conditions.
	$ -	4
	6.59%	-
	$ -	4
	4,800,000	712
	Financial assets at fair value through other comprehensive income	Financial assets at fair value through profit or loss
	None	None
	CyWeeMotion Group Limited	Tian Li Bao Money Fund
	Bluocean Inc.	RayMX Microelectronics Corp.

-182-

General Relationship Marketable ledger with Number of Number of Number of Gain (loss) on Number of Investor securities account Counterparty the investor shares Amount shares Amount shares Selling price Book value disposal shares Amount Additions Disposals Balance as at January 1, 2019 Balance as at December 31, 2019	$ 1,204,240
	40,000,000
	$ -
	$ -
	$ -
	-
	$ 405,182
	14,000,000
	$ 799,058
	26,000,000
	Investee company accounted for under equity method
	Ubilinx Technology Inc.
	Equity investments under equity method
	Ubilinx Technology Inc.
	Talent Eagle Enterprise Inc.

-183-


11%	9%	0%	(4%)	(0%)
1,172,793 $	929,236	40,227	313,185) (	16,329) (
Approximately the same with third party transactions	Approximately the same with third party transactions	Approximately the same with third party transactions	Approximately the same with third party transactions	Approximately the same with third party transactions
Approximately the same with third party transactions	Approximately the same with third party transactions	Approximately the same with third party transactions	Approximately the same with third party transactions	Approximately the same with third party transactions
Approximately the same with third party transactions	Approximately the same with third party transactions	Approximately the same with third party transactions	Approximately the same with third party transactions	Approximately the same with third party transactions
(10%)	(9%)	(0%)	3%	1%
5,996,976) ($	5,226,296) (	169,283) (	1,024,163	298,240
(Sales)	(Sales)	(Sales)	Purchase	Purchase
Other related parties	Other related parties	Other related parties	Other related parties	Other related parties
G.M.I Technology Inc.	G.M.I Technology Inc.	G.M.I Technology Inc.	Greatek Electronics Inc.	Greatek Electronics Inc.
Realtek Semiconductor Corporation	Realtek Singapore Private Limited	RayMX Microelectronics Corp.	Realtek Semiconductor Corporation	Realtek Singapore Private Limited

-184-

Table 6 Amount Action taken Amount collected subsequent to the balance sheet date Allowance for doubtful accounts Creditor Counterparty Relationship with the counterparty Balance as at December 31, 2019 Turnover rate Overdue receivables Receivables from related parties reaching NT$100 million or 20% of paid-in capital or more December 31, 2019 Expressed in thousands of NTD (Except as otherwise indicated)	11,847 $	-
	569,399 $	368,596
	-	-
	$ -	-
	5.57	6.27
	1,172,793 $	929,236
	Other related parties	Other related parties
	G.M.I Technology Inc.	G.M.I Technology Inc.
	Realtek Semiconductor Corporation	Realtek Singapore Private Limited

-185-

0.07%	0.11%	0.06%	2.70%	0.75%	0.57%	0.16%
No similar transaction can be compared with. Transaction prices and terms are determined in accordance with mutual agreement.	No similar transaction can be compared with. Transaction prices and terms are determined in accordance with mutual agreement.	No similar transaction can be compared with. Transaction prices and terms are determined in accordance with mutual agreement.	No similar transaction can be compared with. Transaction prices and terms are determined in accordance with mutual agreement.	No similar transaction can be compared with. Transaction prices and terms are determined in accordance with mutual agreement.	No similar transaction can be compared with. Transaction prices and terms are determined in accordance with mutual agreement.	No similar transaction can be compared with. Transaction prices and terms are determined in accordance with mutual agreement.
$ 48,980	65,119	34,049	1,639,884	552,750	347,426	116,209
Other receivables	Sales revenue	Technical service fees	Technical service fees	Other payables	Technical service fees	Other payables
�	�	�	�	�	�	�
RayMX Microelectronics Corp.	RayMX Microelectronics Corp.	Realtek Semiconductor (Japan) Corp.	Realsil Microelectronics Corp.	Realsil Microelectronics Corp.	Realtek Semiconductor (Shen Zhen) Corp.	Realtek Semiconductor (Shen Zhen) Corp.
Realtek Semiconductor Corporation	Realtek Semiconductor Corporation	Leading Enterprises Limited	Realtek Singapore Private Limited	Realtek Singapore Private Limited	Realtek Singapore Private Limited	Realtek Singapore Private Limited
�	�	�	�	�	�	�

-186-

0.35%	0.03%	0.18%	0.04%	0.16%	0.06%	0.07%
No similar transaction can be compared with. Transaction prices and terms are determined in accordance with mutual agreement.	No similar transaction can be compared with. Transaction prices and terms are determined in accordance with mutual agreement.	No similar transaction can be compared with. Transaction prices and terms are determined in accordance with mutual agreement.	No similar transaction can be compared with. Transaction prices and terms are determined in accordance with mutual agreement.	No similar transaction can be compared with. Transaction prices and terms are determined in accordance with mutual agreement.	No similar transaction can be compared with. Transaction prices and terms are determined in accordance with mutual agreement.	No similar transaction can be compared with. Transaction prices and terms are determined in accordance with mutual agreement.
$ 214,462	20,143	106,735	27,690	96,982	35,055	48,980
Technical service fees	Other payables	Technical service fees	Other payables	Technical service fees	Technical service fees	Other receivables
�	�	�	�	�	�	�
Cortina Access, Inc.	Cortina Access, Inc.	Cortina Network Systems Shanghai Co., Ltd.	Cortina Network Systems Shanghai Co., Ltd.	Cortina Systems Taiwan Limited	Realtek Semiconductor (Japan) Corp.	RayMX Microelectronics Corp.
Realtek Singapore Private Limited	Realtek Singapore Private Limited	Realtek Singapore Private Limited	Realtek Singapore Private Limited	Realtek Singapore Private Limited	Realtek Singapore Private Limited	Realtek Singapore Private Limited
�	�	�	�	�	�	�

-187-

Subsidiary	Subsidiary	Subsidiary	Subsidiary	Subsidiary	Subsidiary	Subsidiary	Subsidiary	Subsidiary	Subsidiary	Subsidiary	Investments accounted for under equity method	Investments accounted for under equity method	Investments accounted for under equity method
282,019 $	87,008	5,638,064	111,913	278,776) (	203,956	6,966	19,668	1,384) (	47	184	1,151) (	5,384) (	9,398) (
282,019 $	87,008	6,306,957	111,913	278,776) (	203,956	6,966	19,668	1,384) (	47	277	21,594) (	57,015) (	39,968) (
$ 11,151,040	3,312,175	10,370,572	3,479,391	2,585,499	6,494,453	354,481	418,438	286,939	5,107	19,398	22,247	3,701	-
100%	100%	89.03%	100%	100%	100%	100%	100%	100%	100%	66.67%	32.43%	16.10%	24.42%
39,130	41,432	80,000,000	110,050,000	114,100,000	200,000,000	28,000,000	25,000,000	29,392,985	500,000	1,918,910	4,178,509	4,000,000	46,699
$ 15,318,249	4,837,812	2,458,640	3,382,167	3,506,635	6,146,600	280,000	250,000	293,930	5,000	20,000	84,565	110,000	46,699
$ 15,005,734	4,739,146	2,408,480	3,313,165	3,435,095	6,021,200	280,000	250,000	293,930	5,000	19,189	66,657	110,000	46,699
Investment holdings	Investment holdings	ICs manufacturing, design, research, development, sales, and marketing	Investment holdings	Investment holdings	Investment holdings	Investment holdings	Investment holdings	Investment holdings	ICs manufacturing, design, research, development, sales, and marketing	Manufacturing and installation of computer equipment and wholesasle, retail and related services of electronic materials and information/software	Investment holdings	Research and development, design, manufacturing, sales and other services of electronic components,information/Software and integrated circuits	Research and development, design, manufacturing, sales and other services of electronic components,information/Software and integrated circuits
British Virgin Islands	British Virgin Islands	Singapore	Cayman Islands	Cayman Islands	Singapore	Taiwan	Taiwan	Taiwan	Taiwan	Taiwan	Taiwan	Taiwan	Taiwan
Leading Enterprises Limited	Amber Universal Inc.	Realtek Singapore Private Limited	Bluocean Inc.	Talent Eagle Enterprise Inc.	Realtek Investment Singapore Private Limited	Realsun Investments Co., Ltd.	Hung-wei Venture Capital Co., Ltd.	Realking Investments Limited	Realsun Technology Corporatioin	Bobitag Inc.	Technology Partner V Venture Capital Corporation	Estinet Technologies Incorporation	5VTechnologies, Taiwan Ltd.
Realtek Semiconductor Corporation	Realtek Semiconductor Corporation	Realtek Semiconductor Corporation	Realtek Semiconductor Corporation	Realtek Semiconductor Corporation	Realtek Semiconductor Corporation	Realtek Semiconductor Corporation	Realtek Semiconductor Corporation	Realtek Semiconductor Corporation	Realtek Semiconductor Corporation	Realtek Semiconductor Corporation	Realtek Semiconductor Corporation	Realtek Semiconductor Corporation	Realtek Semiconductor Corporation

-188-

Investments accounted for under equity method	Sub-Subsidiary	Sub-Subsidiary	Sub-Subsidiary	Sub-Subsidiary	Sub-Subsidiary	Sub-Subsidiary	Sub-Subsidiary	Sub-Subsidiary	Sub-Subsidiary
7,900) ($	255	6	691,815	25) (	98,711	30,063	5,371	9,032) (	413,581) (
21,228) ($	255	6	6,306,957	25) (	98,711	30,063	5,371	9,032) (	413,581) (
$ 160,023	2,483	8,151	1,281,046	1,159	1,455,628	1,025,799	61,592	19,772	41,892
37.38%	100%	100%	10.97%	100%	100%	100%	100%	100%	100%
20,000,000	400	64,800,000	9,856,425	-	2,825,000	16,892	21,130,000	1,000,000	40,000,000
$ 200,000	5,568	1,991,498	1,283,769	5,886	868,207	1,255,320	61,466	30,733	799,058
$ 200,000	5,542	1,950,869	1,257,578	5,799	850,495	1,229,710	60,212	30,106	1,204,240
Venture capital activities	ICs deign,sales, and consultancy	Investment holdings	ICs manufacturing, design, research, development, sales, and marketing	Information services and technical support	Investment holdings	R&D and information services	R&D and technical support	R&D and technical support	R&D and information services
Taiwan	Japan	Mauritius	Singapore	Hong Kong	Mauritius	U.S.A	Taiwan	Vietnam	U.S.A
Innorich Venture Capital Corp.	Realtek Semiconductor (Japan) Corp.	Circon Universal Inc.	Realtek Singapore Private Limited	Realtek Semiconductor (HK) Limited	Empsonic Enterprises Inc.	Cortina Access Inc.	Cortina Systems Taiwan Limited	Realtek Viet Nam Co., Ltd.	Ubilinx Technology Inc.
Realking Investments Limited	Leading Enterprises Limited	Leading Enterprises Limited	Leading Enterprises Limited	Amber Universal Inc.	Realtek Singapore Private Limited	Realtek Singapore Private Limited	Realtek Singapore Private Limited	Realtek Singapore Private Limited	Talent Eagle Enterprise Inc.

-189-

Remitted to
Mainland
China
Remitted
back to
Taiwan
Table 9
Expressed in thousands of NTD
(Except as otherwise indicated)
Footnote
Accumulated
amount of
remittance from
Taiwan to
Mainland China
as of December
31, 2019
Net income of
investee for the
year ended
December 31,
2019
Investee in Mainland
China
Main business activities
Paid-in Capital
Investment
method
(Note1)
Accumulated amount of
remittance from Taiwan to
Mainland China as of
January 1, 2019
Ownership held
by the Company
(direct or
indirect)
Investment income (loss)
recognised by the
Company for the year
ended December 31,
2019
(Note2(2C))
Book value of
investment in
Mainland China
as of December
31, 2019
Accumulated
amount of investment
income remitted back to
Taiwan as of December 31,
2019
Amount remitted from
Taiwan to Mainland
China/Amount remitted
back to Taiwan for the year
ended December 31, 2019

Cortina Network Systems
Shanghai Co., Ltd.
R&D and technical support
108,382
$ (2)
108,382
$ $ -
$ -
108,382
$ 7,476
$ 100%
7,476
$ 96,784
$ $ -
Realsil Microelectronics
Corp.
R&D and technical support
842,968
(2)
842,968
-
-
842,968
99,574
100%
99,574
1,450,798
-
Realtek Semiconductor
(Shen Zhen) Corp.
R&D and technical support
150,530
(2)
150,530
-
-
150,530
22,194
100%
22,194
253,983
-
RayMX Microelectronics
Corp.
ICs manufacturing, design,
research, development,
sales, and marketing
113,445
(2)
113,445
-
-
113,445
28,097)
(
100%
28,097)
(
85,230
-
Company name
Accumulated amount
of remittance from Taiwan
to Mainland
China as of
December 31, 2019
Investment amount
approved by the
Investment
Commission of the
Ministry of
Economic Affairs
(MOEA)
Ceiling on
investments in
Mainland China
imposed by the
Investment
Commission of
MOEA
Cortina Network Systems
Shanghai Co., Ltd.
108,382
$ 108,382
$ $ 16,331,391
Realsil Microlectronics
Corp.
842,968
842,968
Realtek Semiconductor
(Shan Zhen) Corp.
150,530
150,530
RayMX Microelectronics
Corp.
113,445
113,445
Note 1: Investment methods are classified into the following three categories; fill in the number of category each case belongs to:
(1) Directly invest in a company in Mainland China.
(2) Through investing in an existing company in the third area, which then invested in the investee in Mainland China.
(3) Others.
Note 2: In the 'Investment income (loss) recognised by the Company for the year ended December 31, 2019' column, except for the financial statements of Cortina Network System Shanghai Co., Ltd. were audited by other independent
accountants, the remaining financial statements were audited by the independent accountants of parent company in Taiwan.
Note 3: The amount of foreign currencies denominated in New Taiwan dollars in this table, which related to income and expenses were re-translated at the average exchange rate from January 1, 2019 to December 31, 2019, others were
re-translated at the exchange rate prevailing at the end of the financial reporting period.

-190-

VI. Parent Company Only Financial Statements

REPORT OF INDEPENDENT ACCOUNTANTS TRANSLATED FROM CHINESE

PWCR19000226

To the Board of Directors and Shareholders of Realtek Semiconductor Corporation

Opinion

We have audited the accompanying parent company only balance sheets of Realtek Semiconductor Corporation (the “Company”) as at December 31, 2019 and 2018, and the related parent company only statements of comprehensive income, of changes in equity and of cash flows for the years then ended, and notes to the parent company only financial statements, including a summary of significant accounting policies.

In our opinion, based on our audits and the reports of other independent accountants (please refer to the Other matter section of our report), the accompanying parent company only financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2019 and 2018, and its financial performance and its cash flows for the years then ended in accordance with the “Regulations Governing the Preparation of Financial Reports by Securities Issuers”.

Basis for opinion

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

~2~

-191-

Key audit matters

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

Key audit matters for the Company’s parent company only financial statements of the current period are stated as follows:

Valuation of inventories

Description

Refer to Note 4(13) of the parent company only financial statements for inventory valuation policies, Note 5(2) for uncertainty of accounting estimates and assumptions of inventory valuation and Note 6(3) for the details of inventories.

The Company is primarily engaged in researching, developing, manufacturing, selling of various integrated circuits and related application software. Inventories are stated at the lower of cost and net realizable value. Due to the balances of inventories are significant to the financial statements and the rapid technological changes in the industry, there is a higher risk of decline in market value and obsolescence of inventories. Thus, we considered the valuation of inventories as one of the key audit matters.

How our audit addressed the matter

We performed the following audit procedures in respect of the above key audit matter:

Obtained an understanding of accounting policies on the provision for inventory valuation losses and assessed the reasonableness.
Validated the accuracy of inventory aging report, as well as sampled and confirmed the consistency of quantities and amounts with detailed inventory listing, verified dates of movements with supporting documents and ensured the proper categorization of inventory aging report.
Evaluated and confirmed the reasonableness of net realizable value for inventories through validating respective supporting documents.

~3~

-192-

Other matter – Reference to audits of other independent accountants

We did not audit the financial statements of certain investments accounted for under equity method. Those financial statements were audited by other independent accountants whose reports thereon have been furnished to us, and our opinion expressed herein is based solely on the audit reports of the other independent accountants. Investments accounted for under equity method amounted to NT$6,938,839 thousand and NT$6,900,458 thousand, constituting 10.29% and 12.78% of total assets as of December 31, 2019 and 2018, respectively. Comprehensive income amounted to NT$151,087 thousand and NT$108,408 thousand, constituting 2.46% and 2.14% of total comprehensive income for the years ended December 31, 2019 and 2018, respectively.

Responsibilities of management and those charged with governance for the parent company only financial statements

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

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

Those charged with governance, including the Audit Committee, are responsible for overseeing the Company’s financial reporting process.

Independent accountant’s responsibilities for the audit of the parent company only financial statements

Our objectives are to obtain reasonable assurance about whether the parent company only financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue a report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ROC GAAS will always detect a material misstatement when

~4~

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it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these parent company only financial statements.

As part of an audit in accordance with ROC GAAS, we exercise professional judgement and maintain professional skepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the parent company only financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.
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 Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our report to the related disclosures in the parent company only 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 report. However, future events or conditions may cause the Company to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the parent company only financial statements, including the disclosures, and whether the parent company only financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

~5~

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Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the parent company only financial statements. We are responsible for the direction, supervision and performance of the audit. We remain solely responsible for our audit opinion.

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

Lin, Yu-Kuan

[Tsang, Kwoh-Wah ]

For and on behalf of PricewaterhouseCoopers, Taiwan March 20, 2020

The accompanying parent company only financial statements are not intended to present the financial position and results of operations and cash flows in accordance with accounting principles generally accepted in countries and jurisdictions other than the Republic of China. The standards, procedures and practices in the Republic of China governing the audit of such financial statements may differ from those generally accepted in countries and jurisdictions other than the Republic of China. Accordingly, the accompanying parent company only financial statements and report of independent accountants are not intended for use by those who are not informed about the accounting principles or auditing standards generally accepted in the Republic of China, and their applications in practice.

~6~

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REALTEK SEMICONDUCTOR CORPORATION PARENT COMPANY ONLY BALANCE SHEETS DECEMBER 31, 2019 AND 2018

(Expressed in thousands of New Taiwan dollars)

Assets	Notes 6(1) 8 6(2) 6(2) and 7 7 6(3) 8 6(4) 6(5) 6(6) 6(7) 6(21)	December31,2019 December31,2018 AMOUNT % AMOUNT % �� � �� � �� � �� � � � �� � �� �� �� � �� � �� � �� � �� � �� � �� � �� � �� � �� � �� � �� �� �� �� � � �� � �� � � � �� �� �� �� �� � �� � �� � � � �� � �� � �� � �� � �� � �� � �� �� �� �� �� �� �� ��	December31,2018	December31,2018
				%
Current assets 1100 Cash and cash equivalents 1110 Financial assets at fair value through profit or loss - current 1136 Financial assets at amortised cost - current 1170 Accounts receivable, net 1180 Accounts receivable, net - related parties 1200 Other receivables 1210 Other receivables - related parties 130X Inventories, net 1410 Prepayments 11XX Total current assets Non-current assets 1517 Financial assets at fair value through other comprehensive income - non- current 1535 Financial assets at amortised cost - non-current 1550 Investments accounted for under equity method 1600 Property, plant and equipment 1755 Right-of-use assets 1780 Intangible assets 1840 Deferred income tax assets 1900 Other non-current assets 15XX Total non-current assets 1XXX Total assets
				��

(Continued)

~7~

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REALTEK SEMICONDUCTOR CORPORATION PARENT COMPANY ONLY BALANCE SHEETS

DECEMBER 31, 2019 AND 2018

(Expressed in thousands of New Taiwan dollars)

Liabilities and Equity	December31,2019 December31,2018 Notes AMOUNT % AMOUNT % 6(8) � �� �� � �� �� 6(15) �� � �� � �� � �� � �� � �� � 7 �� � �� � 6(9) �� �� �� �� 7 �� � �� � �� � �� � �� � � � 6(15) �� � �� � �� �� �� �� � � �� � 6(21) �� � �� � �� � � � 6(10) �� � �� � �� � �� � �� �� �� �� 6(11) �� � �� �� 6(12) �� � �� � 6(13) �� � �� � � � �� � �� �� �� �� 6(14) � �� � �� � �� �� �� �� 9 � �� �� � �� ��	December31,2018	December31,2018
			%
Current liabilities 2100 Short-term borrowings 2130 Contract liabilities - current 2150 Notes payable 2170 Accounts payable 2180 Accounts payable - related parties 2200 Other payables 2220 Other payables - related parties 2230 Current income tax liabilities 2280 Lease liabilities - current 2300 Other current liabilities 21XX Total current liabilities Non-current liabilities 2550 Provisions - non-current 2570 Deferred income tax liabilities 2580 Lease liabilities - non-current 2600 Other non-current liabilities 25XX Total non-current liabilities 2XXX Total liabilities Equity Share capital 3110 Common shares Capital surplus 3200 Capital surplus Retained earnings 3310 Legal reserve 3320 Special reserve 3350 Undistributed earnings Other equity 3400 Other equity interest 3XXX Total equity Significant contingent liabilities and unrecognized contract commitments 3X2X Total liabilities and equity
			��

The accompanying notes are an integral part of these parent company only financial statements.

~8~

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REALTEK SEMICONDUCTOR CORPORATION

PARENT COMPANY ONLY STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

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

					YearendedDecember	YearendedDecember	YearendedDecember	YearendedDecember	31
				2019					2018
	Items	Notes		AMOUNT		%			AMOUNT	%
4000	Operating revenue	6(15) and 7	�	��	��			�	��	��
5000	Operating costs	6(3) and 7	�	��			��		��	��
5900	Gross profit		��		��			��		��
Operating expenses 6(20)(21) and 7 6100 Selling expenses � �� �� �� �
6200	General and administrative expenses		�	��			��		��	�
6300	Research and development expenses		�	��			��		��	��
6450	Expected credit gains (losses)	12(2)	�	�� �				��		�
6000	Total operating expenses		�	��			��		��	��
6900	Operating income		��		�			��		�
Non-operating income and expenses 7010 Other income 6(16) and 7 �� � �� �
7020	Other gains and losses	6(17)	�	�� ��					��	�
7050	Finance costs	6(18)	�	�� ��					��	�
7070	Share of profit of associates and joint	6(4)
	ventures accounted for under equity
	method		��		��			��		��
7000	Total non-operating income and
	expenses		��		��			��		��
7900	Profit before income tax, net		��		��			��		��
7950	Income tax expense	6(21)	�	��			��		��	�
8200	Net income for the year		�	��	��			�	��	��
	Other comprehensive income, net 6(14) Components of other comprehensive
	income (loss) that will not be reclassified
to profit or loss 8311 Losses on remeasurements of defined
	benefit plans		�	�	��				��	�
8316	Unrealised losses from investments in
	equity instruments measured at fair value
	through other comprehensive income		�		��				��	�
8330	Share of other comprehensive income
	(loss) of associates and joint ventures
	accounted for under equity method		��		��				��	�
8310	Total other comprehensive income
	(loss) that will not be reclassified to
	profit or loss		��		��				��	�
	Components of other comprehensive
	income (loss) that will be reclassified to
profit or loss 8380 Share of other comprehensive (loss)
	income of associates and joint ventures
	accounted for under equity method		�	��			��	��		�
8360	Total other comprehensive (loss)
	income that will be reclassified to
	profit or loss		�	��			��	��		�
8300	Other comprehensive (loss) income for
	the year		��	��			��	�	��	�
8500	Total comprehensive income for the year		�	��	��			�	��	��
Earnings Per Share (in dollars) 9750 Basic earnings per share 6(22) � �� �										��
9850	Diluted earnings per share	6(22)	�			��		�		��

The accompanying notes are an integral part of these parent company only financial statements.

~9~

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REALTEK SEMICONDUCTOR CORPORATION	PARENT COMPANY ONLY STATEMENTS OF CHANGES IN EQUITY	PARENT COMPANY ONLY STATEMENTS OF CHANGES IN EQUITY	FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018	FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018	(Expressed in thousands of New Taiwan dollars)	Retained earnings Other equity interest	Unrealised gains	(losses) from	financial assets	Financial measured at fair	statements value through Unrealised gain or	translation other loss on available-	Undistributed differences of comprehensive for-sale financial	Notes Common shares Capital surplus Legal reserve Special reserve earnings foreign operations income assets Total equity		�� � �� �� � � ��	6(14) � � � � �� � �� �� ��	�� �� �� � �� �� �� � ��	� � � � �� � � � ��	6(14) � � � � � �� �� � �� � ��	� � � � �� �� � �� � ��	6(13)	� � �� � � �� � � � �	� � � �� �� � � � �	� � � � � �� � � � � ��	6(12) �� �� � � � � � � ��	6(12) � � �� � � � � � � � ��	6(12) � �� � � � � � � ��	6(12) � �� � � � � � � ��	�� �� �� � �� � ��		�� �� �� � �� � ��	� � � � �� � � � ��	6(14) � � � � � � �� �� � � ��	� � � � �� �� �� � ��	6(13)	� � �� � � �� � � � �	� � � � �� �� � � � �	� � � � � �� � � � � ��	6(12) � � �� � � � � � � � ��	6(12) � �� � � � � � � ��	6(14)	� � � � � �� � �� � �	6(12) � �� � � � � � � ��	�� � �� �� �� � ��	The accompanying notes are an integral part of these parent company only financial statements.	~10~
															2018	Balance at January 1, 2018	Modified retrospective approach adjustment	Balance at January 1 after adjustments	Net income for the year	Other comprehensive income (loss)	Total comprehensive income (loss)	Distribution of 2017 earnings	Legal reserve	Special reserve	Cash dividends	Employees' compensation transferred to common stock	Cash dividends from capital surplus	Changes in equity of associates accounted for under equity method	Cash dividends returned	Balance at December 31, 2018	2019	Balance at January 1, 2019	Net income for the year	Other comprehensive income (loss)	Total comprehensive income (loss)	Distribution of 2018 earnings	Legal reserve	Special reserve	Cash dividends	Cash dividend from capital surplus	Changes in equity of associates accounted for under equity method	Disposal of investments in equity instruments measured at fair value through	other comprehensive income	Cash dividends returned	Balance at December 31, 2019

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REALTEK SEMICONDUCTOR CORPORATION PARENT COMPANY ONLY STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

(Expressed in thousands of New Taiwan dollars)

CASH FLOWS FROM OPERATING ACTIVITIES
Profit before tax
Adjustments
Adjustments to reconcile profit (loss)
Depreciation

Amortization

Expected credit losses (gains)

Impairment loss

Interest expense

Interest income

Dividend income

Loss on financial assets at fair value through
profit or loss

Share of gain of associates and joint ventures
accounted for under equity method

Gain on disposal of property, plant and
equipment

Other intangible assets transferred to expenses

Changes in operating assets and liabilities
Changes in operating assets
Accounts receivable, net
Accounts receivable, net - related parties
Other receivables
Other receivables, net - related parties
Inventories
Prepayments
Changes in operating liabilities
Contract liabilities - current
Notes payable
Accounts payable
Accounts payable - related parties
Other payables
Other payables - related parties
Provisions - non-current
Other current liabilities
Accrued pension obligations

Notes
2019
2018
�
��
��
6(19)
��
��
6(19)
��
��
12(2)
��
��
6(17)
��
�
6(18)
��
��
6(16)
�
��
��
6(16)
�
��
��
6(17)
��
��
6(4)
�
��
��
6(17)
�
��
�
6(17)
��
��
�
��
��
�
��
��
��
��
�
��
��
�
��
��
�
��
��
�
��
��
�
��
��
��
��
��
��
��
��
��
��
�
��
��
��
��
�
��
��

(Continued)

-200-~11~

REALTEK SEMICONDUCTOR CORPORATION PARENT COMPANY ONLY STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

(Expressed in thousands of New Taiwan dollars)

Cash inflow generated from operations
Receipt of interest
Receipt of dividends
Interest paid
Income taxes paid
Net cash flows from operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of financial assets at amortised cost
Proceeds from disposal of financial assets at
amortised cost
Proceeds from disposal of financial assets at fair
value through other comprehensive income
Proceeds from capital reduction of investee
accounted for under equity method

Acquisition of cash dividends from investments
accounted for under equity method
Acquisition of property, plant and equipment

Proceeds from disposal of property, plant and
equipment
Acquisition of intangible assets

Acquisition of right-of-use assets
Increase in other receivables, net - related parties
Increase in refundable deposits
Increase in other non-current assets
Net cash flows (used in) from investing
activities
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in short-term borrowings
Decrease in short-term borrowings
Repayment of principal portion of lease liabilities

Guarantee deposits returned

Cash dividends paid

Cash dividends returned
Net cash flows from (used in) financing
activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year

Notes
2019
2018
�
��
��
��
��
��
��
�
��
��
�
��
��
��
��
�
��
�
��
��
��
�
6(4)
��
�
��
��
6(23)
�
��
��
��
�
6(23)
�
��
��
�
��
�
�
��
��
�
��
��
�
��
�
�
��
��
��
��
�
��
��
6(24)
�
��
�
6(24)
�
��
��
6(13)
�
��
��
��
��
��
��
��
��
��
��
�
��
��

The accompanying notes are an integral part of these parent company only financial statements.

~12~

-201-

REALTEK SEMICONDUCTOR CORPORATION

NOTES TO THE PARENT COMPANY ONLY FINANCIAL STATEMENTS DECEMBER 31, 2019 AND 2018

(Expressed in thousands of New Taiwan dollars, except as otherwise indicated)

1. HISTORY AND ORGANISATION

Realtek Semiconductor Corporation (the “Company”) was incorporated as a company limited by shares on October 21, 1987 and commenced commercial operations in March 1988. The Company was based in Hsinchu Science-Based Industrial Park since October 28, 1989. The Company is engaged in the research, development, design, testing, and sales of ICs and application softwares for these products.

2. THE DATE OF AUTHORISATION FOR ISSUANCE OF THE PARENT COMPANY ONLY FINANCIAL STATEMENTS AND PROCEDURES FOR AUTHORISATION

These parent company only financial statements were authorised for issuance by the Board of Directors on March 20, 2020.

3. APPLICATION OF NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS

(1) Effect of the adoption of new issuances of or amendments to International Financial Reporting Standards (“IFRSs”) as endorsed by the Financial Supervisory Commission (“FSC”) New standards, interpretations and amendments endorsed by the FSC effective from 2019 are as follows:

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

Except for the following, the above standards and interpretations have no significant impact to the Company’s financial condition and financial performance based on the Company’s assessment. IFRS 16, ‘Leases’

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

~13~

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B. The Company has elected to apply IFRS 16 by not restating the comparative information (referred herein as the ‘modified retrospective approach’) when applying “IFRSs” effective in 2019 as endorsed by the FSC. Accordingly, the Company increased ‘right-of-use asset’ by $732,121, increased ‘lease liability’ by $732,121 with respect to the lease contracts of lessees on January 1, 2019.
C. The Company has used the following practical expedients permitted by the standard at the date of initial application of IFRS 16:
(a) The use of a single discount rate to a portfolio of leases with reasonably similar characteristics.
(b) The exclusion of initial direct costs for the measurement of ‘right-of-use asset’.
D. The Company calculated the present value of lease liabilities by using the incremental borrowing interest rate ranging from 0.97% to 1.71%.
E. The Company recognized lease liabilities which had previously been classified as ‘operating leases’ under the principles of IAS 17, ‘Leases’. The reconciliation between operating lease commitments under IAS 17 measured at the present value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate and lease liabilities recognized as of January 1, 2019 is as follows:

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

(2)

Effect of new issuances of or amendments to IFRSs as endorsed by the FSC but not yet adopted
Operating lease commitments disclosed by applying IAS 17 as at
December 31, 2018
148,933
$ Add: Adjustments as a result of a different treatment of
extension and termination options
834,929
Total lease contracts amount recognised as lease liabilities by applying
IFRS 16 on January 1, 2019
983,862
Incremental borrowing interest rate at the date of initial application
0.97%~1.71%
Lease liabilities recognised as at January 1, 2019 by applying IFRS 16
732,121
$

by the Company

New standards, interpretations and amendments endorsed by the FSC effective from 2020 are as follows:

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

The above standards and interpretations have no significant impact to the Company’s financial condition and financial performance based on the Company’s assessment.

~14~

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(3) IFRSs issued by IASB but not yet endorsed by the FSC

New standards, interpretations and amendments issued by IASB but not yet included in the IFRSs as endorsed by the FSC are as follows:

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

The above standards and interpretations have no significant impact to the Company’s financial condition and financial performance based on the Company’s assessment.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of these parent company only financial statements are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated.

(1) Compliance statement

The parent company only financial statements of the Company have been prepared in accordance with the “Regulations Governing the Preparation of Financial Reports by Securities Issuers”.

(2) Basis of preparation
A. Except for the following items, the parent company only financial statements have been prepared under the historical cost convention:
- (a) Financial assets (including derivative instruments) at fair value through profit or loss.
- (b) Financial assets at fair value through other comprehensive income.
- (c) Defined benefit liabilities recognized based on the net amount of pension fund assets less present value of defined benefit obligation.
B. The preparation of financial statements in conformity with International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the FSC (collectively referred herein as the “IFRSs”) requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Company’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the parent company only financial statements are disclosed in Note 5.

(3) Foreign currency translation

Items included in the financial statements of each of the Company’s entities are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). The parent company only financial statements are presented in New Taiwan dollars, which is the Company’s functional and presentation currency.

~15~

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A. Foreign currency transactions and balances
(a) Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are remeasured. Foreign exchange gains and losses resulting from the settlement of such transactions are recognized in profit or loss in the period in which they arise.
(b) Monetary assets and liabilities denominated in foreign currencies at the period end are retranslated at the exchange rates prevailing at the balance sheet date. Exchange differences arising upon re-translation at the balance sheet date are recognized in profit or loss.
(c) Non-monetary assets and liabilities denominated in foreign currencies held at fair value through profit or loss are re-translated at the exchange rates prevailing at the balance sheet date; their translation differences are recognized in profit or loss. Non-monetary assets and liabilities denominated in foreign currencies held at fair value through other comprehensive income are re-translated at the exchange rates prevailing at the balance sheet date; their translation differences are recognized in other comprehensive income. However, nonmonetary assets and liabilities denominated in foreign currencies that are not measured at fair value are translated using the historical exchange rates at the dates of the initial transactions.
(d) All other foreign exchange gains and losses based on the nature of those transactions are presented in the statement of comprehensive income within ‘other gains and losses’.
B. Translation of foreign operations
(a) The operating results and financial position of all the Company entities, associates and joint arrangements that have a functional currency different from the presentation currency are translated into the presentation currency as follows:
- i. Assets and liabilities for each balance sheet presented are translated at the closing exchange rate at the date of that balance sheet;
- ii. Income and expenses for each statement of comprehensive income are translated at average exchange rates of that period; and
- iii. All resulting exchange differences are recognized in other comprehensive income.
(b) When the foreign operation partially disposed of or sold is an associate, exchange differences that were recorded in other comprehensive income are proportionately reclassified to profit or loss as part of the gain or loss on sale. In addition, even when the Company retains partial interest in the former foreign associate after losing significant influence over the former foreign associate, such transactions should be accounted for as disposal of all interest in these foreign operations.
(c) Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing exchange rates at the balance sheet date.

~16~

-205-

(4) Classification of current and non-current items

A. Assets that meet one of the following criteria are classified as current assets; otherwise they are classified as non-current assets:
(a) Assets arising from operating activities that are expected to be realised, or are intended to be sold or consumed within the normal operating cycle;
(b) Assets held mainly for trading purposes;
(c) Assets that are expected to be realised within twelve months from the balance sheet date;
(d) Cash and cash equivalents, excluding restricted cash and cash equivalents and those that are to be exchanged or used to settle liabilities more than twelve months after the balance sheet date.
Otherwise the Company classified as non-current assets.
B. Liabilities that meet one of the following criteria are classified as current liabilities; otherwise they are classified as non-current liabilities:
(a) Liabilities that are expected to be settled within the normal operating cycle;
(b) Liabilities arising mainly from trading activities;
(c) Liabilities that are to be settled within twelve months from the balance sheet date;
(d) Liabilities for which the repayment date cannot be extended unconditionally to more than twelve months after the balance sheet date. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.

Otherwise the Company classified as non-current liabilities.

(5) Cash equivalents

(6) Financial assets at fair value through profit or loss
A. Financial assets at fair value through profit or loss are financial assets that are not measured at amortised cost or fair value through other comprehensive income. Financial assets at amortised cost or fair value through other comprehensive income are designated as at fair value through profit or loss at initial recognition when they eliminate or significantly reduce a measurement or recognition inconsistency.
B. On a regular way purchase or sale basis, financial assets at fair value through profit or loss are recognized and derecognized using trade date accounting.
C. At initial recognition, the Company measures the financial assets at fair value and recognizes the transaction costs in profit or loss. The Company subsequently measures the financial assets at fair value, and recognizes the gain or loss in profit or loss.

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D. The Company recognizes the dividend income when the right to receive payment is established, future economic benefits associated with the dividend will flow to the Company and the amount of the dividend can be measured reliably.
(7) Financial assets at fair value through other comprehensive income
A. Financial assets at fair value through other comprehensive income comprise equity securities which are not held for trading, and for which the Company has made an irrevocable election at initial recognition to recognize changes in fair value in other comprehensive income.
B. On a regular way purchase or sale basis, financial assets at fair value through other comprehensive income are recognized and derecognized using trade date accounting.
C. At initial recognition, the Company measures the financial assets at fair value plus transaction costs. The Company subsequently measures the financial assets at fair value:
- The changes in fair value of equity investments that were recognized in other comprehensive income are reclassified to retained earnings and are not reclassified to profit or loss following the derecognition of the investment. Dividends are recognized as revenue when the right to receive payment is established, future economic benefits associated with the dividend will flow to the Company and the amount of the dividend can be measured reliably.
(8) Financial assets at amortised cost

The Company’s time deposits which do not fall under cash equivalents are those with a short maturity period and are measured at initial investment amount as the effect of discounting is immaterial.

(9) Accounts receivable
A. Accounts receivable entitle the Company a legal right to receive consideration in exchange for transferred goods or rendered services.
B. The short-term accounts and notes receivable without bearing interest are subsequently measured at initial invoice amount as the effect of discounting is immaterial.

(10) Impairment of financial assets

For financial assets at amortised cost, at each reporting date, the Company recognizes the impairment provision for 12 months expected credit losses if there has not been a significant increase in credit risk since initial recognition or recognizes the impairment provision for the lifetime expected credit losses (ECLs) if such credit risk has increased since initial recognition after taking into consideration all reasonable and verifiable information that includes forecasts. On the other hand, for accounts receivable that do not contain a significant financing component, the Company recognizes the impairment provision for lifetime ECLs.

(11) Derecognition of financial assets

The Company derecognizes a financial asset when the contractual rights to receive the cash flows from the financial asset expire.

(12) Operating leases (lessor)

Lease income from an operating lease (net of any incentives given to the lessee) is recognized in profit or loss on a straight-line basis over the lease term.

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(13) Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is determined using the weighted-average method. The cost of finished goods and work in progress comprises raw materials, direct labour, other direct costs and related production overheads (allocated based on normal operating capacity). It excludes borrowing costs. The item by item approach is used in applying the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated cost of completion and applicable variable selling expenses.

(14) Investments accounted for under equity method / associates
A. Subsidiaries are all entities controlled by the Company. The Company controls an entity when the Company is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity.
B. Unrealised profit (loss) occurred from the transactions between the Company and subsidiaries have been offset. The accounting policies of the subsidiaries have been adjusted where necessary to ensure consistency with the policies adopted by the Company.
C. The Company’s share of its subsidiaries’ post-acquisition profits or losses is recognized in profit or loss, and its share of post-acquisition movements in other comprehensive income is recognized in other comprehensive income. When the Company’s share of losses in a subsidiary equals or exceeds its interest in the subsidiary, the Company continues to recognize losses proportionate to its ownership.
D. Associates are all entities over which the Company has significant influence but not control. In general, it is presumed that the investor has significant influence, if an investor holds, directly or indirectly 20 percent or more of the voting power of the investee. Investments in associates are accounted for under equity method and are initially recognized at cost.
E. The Company’s share of its associates’ post-acquisition profits or losses is recognized in profit or loss, and its share of post-acquisition movements in other comprehensive income is recognized in other comprehensive income. When the Company’s share of losses in an associate equals or exceeds its interest in the associate (including any other unsecured receivables), the Company does not recognize further losses, unless it has incurred statutory/constructive obligations or made payments on behalf of the associate.
F. When changes in an associate’s equity do not arise from profit or loss or other comprehensive income of the associate and such changes do not affect the Company’s ownership percentage of the associate, the Company recognizes the Company’s share of change in equity of the associate in ‘capital surplus’ in proportion to its ownership.

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G. Unrealised gains on transactions between the Company and its associates are eliminated to the extent of the Company’s interest in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been adjusted where necessary to ensure consistency with the policies adopted by the Company.
H. In the case that an associate issues new shares and the Company does not subscribe or acquire new shares proportionately, which results in a change in the Company’s ownership percentage of the associate but maintains significant influence on the associate, then ‘capital surplus’ and � investments accounted for under equity method’ shall be adjusted for the increase or decrease of its share of equity interest. If the above condition causes a decrease in the Company’s ownership percentage of the associate, in addition to the above adjustment, the amounts previously recognized in other comprehensive income in relation to the associate are reclassified to profit or loss proportionately on the same basis as would be required if the relevant assets or liabilities were disposed of.
I. Upon loss of significant influence over an associate, the Company remeasures any investment retained in the former associate at its fair value. Any difference between fair value and carrying amount is recognized in profit or loss.
J. When the Company disposes its investment in an associate and loses significant influence over this associate, the amounts previously recognized in other comprehensive income in relation to the associate, are reclassified to profit or loss, on the same basis as would be required if the relevant assets or liabilities were disposed of. If it retains significant influence over this associate, the amounts previously recognized in other comprehensive income in relation to the associate are reclassified to profit or loss proportionately in accordance with the aforementioned approach.
K. Pursuant to the “Regulations Governing the Preparation of Financial Reports by Securities Issuers,” profit (loss) of the current period and other comprehensive income in the parent company only financial statements shall equal to the amount attributable to owners of the parent in the parent company only financial statements. Owners’ equity in the parent company only financial statements shall equal to equity attributable to owners of the parent in the parent company only financial statements.
(15) Property, plant and equipment
A. Property, plant and equipment are initially recorded at cost. Borrowing costs incurred during the construction period are capitalised.
B. Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognized. All other repairs and maintenance are charged to profit or loss during the financial period in which they are incurred.

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C. Other property, plant and equipment apply cost model and are depreciated using the straight-line method to allocate their cost over their estimated useful lives. Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item must be depreciated separately.
D. The assets’ residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each financial year-end. If expectations for the assets’ residual values and useful lives differ from previous estimates or the patterns of consumption of the assets’ future economic benefits embodied in the assets have changed significantly, any change is accounted for as a change in estimate under IAS 8, ‘Accounting Policies, Changes in Accounting Estimates and Errors’, from the date of the change. The estimated useful lives of the fixed assets are as follows: buildings - 10~55 years and other fixed assets - 3~5 years.

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

Effective 2019
A. Leases are recognized as a right-of-use asset and a corresponding lease liability at the date at which the leased asset is available for use by the Company.
B. Lease liabilities include the net present value of the remaining lease payments at the commencement date, discounted using the incremental borrowing interest rate. Fixed payments, less any lease incentives receivable.
The Company subsequently measures the lease liability at amortised cost using the interest method and recognizes interest expense over the lease term. The lease liability is remeasured and the amount of remeasurement is recognized as an adjustment to the right-of-use asset when there are changes in the lease term or lease payments do not arise from contract modifications.
C. At the commencement date, the right-of-use asset is stated at cost comprising the following: (a) The amount of the initial measurement of lease liability; and
(b) Any lease payments made at or before the commencement date.
The right-of-use asset is measured subsequently using the cost model and is depreciated from the commencement date to the earlier of the end of the asset’s useful life or the end of the lease term. When the lease liability is remeasured, the amount of remeasurement is recognized as an adjustment to the right-of-use asset.

(17) Operating leases (lessee)

Applicable for 2018

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

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(18) Intangible assets

A. Computer software

Computer software is stated at cost and amortised on a straight-line basis over its estimated useful life of 1 to 5 years.

B. Other intangible assets

Separately acquired intangible assets with a finite useful life are stated at cost, net of accumulated amortisation and accumulated impairment. Intangible assets acquired in a business combination are recognized at fair value at acquisition date. The amortisation amounts of separately and parent company only acquired intangible assets were amortised on a straight-line basis over their estimated useful lives of 2-5 years.

(19) Impairment of non-financial assets

The Company assesses at each balance sheet date the recoverable amounts of those assets where there is an indication that they are impaired. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell or value in use. When the circumstances or reasons for recognising impairment loss for an asset in prior years no longer exist or diminish, the impairment loss is reversed. The increased carrying amount due to reversal should not be more than what the depreciated or amortised historical cost would have been if the impairment had not been recognized.

(20) Borrowings

Borrowings comprise short-term bank borrowings. Borrowings are recognized initially at fair value, net of transaction costs incurred.

(21) Notes and accounts payable

A. Accounts payable are liabilities for purchases of raw materials, goods or services and notes payable are those resulting from operating and non-operating activities.
B. The short-term notes and accounts payable without bearing interest are subsequently measured at initial invoice amount as the effect of discounting is immaterial.

(22) Derecognition of financial liabilities

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

(23) Provisions

Provisions are recognized when the Company has a present legal or constructive obligation as a result of past events, and it is probable that an outflow of economic resources will be required to settle the obligation and the amount of the obligation can be reliably estimated. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation on the balance sheet date.

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(24) Employee benefits

A. Short-term employee benefits

B. Pension
(a) Defined contribution plan

For defined contribution plan, the contributions are recognized as pension expense when they are due on an accrual basis. Prepaid contributions are recognized as an asset to the extent of a cash refund or a reduction in the future payments.

(b) Defined benefit plan
- i. Net obligation under a defined benefit plan is defined as the present value of an amount of pension benefits that employees will receive on retirement for their services with the Company in current period or prior periods. The liability recognized in the balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the balance sheet date less the fair value of plan assets. The net defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The rate used to discount is determined by using interest rates of highquality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension liability; when there is no deep market in high-quality corporate bonds, the Company uses interest rates of government bonds (at the balance sheet date) instead.
- ii. Remeasurements arising on defined benefit plan are recognized in other comprehensive income in the period in which they arise and are recorded as retained earnings.
C. Employees’ compensation and directors’ remuneration
Employees’ compensation and directors’ remuneration are recognized as expense and liability, provided that such recognition is required under legal or constructive obligation and those amounts can be reliably estimated. Any difference between the resolved amounts and the subsequently actual distributed amounts is accounted for as changes in estimates. If employee compensation is distributed by shares, the Company calculates the number of shares based on the closing price at the previous day of the Board meeting resolution.

(25) Income tax

A. The tax expense for the period comprises current and deferred tax. Tax is recognized in profit or loss, except to the extent that it relates to items recognized in other comprehensive income or items recognized directly in equity, in which cases the tax is recognized in other comprehensive income or equity.

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B. The current income tax expense is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the Company and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in accordance with applicable tax regulations. It establishes provisions where appropriate based on the amounts expected to be paid to the tax authorities. An additional tax is levied on the unappropriated retained earnings and is recorded as income tax expense in the year the stockholders resolve to retain the earnings.
C. Deferred tax is recognized, using the balance sheet liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the parent company only balance sheet. However, the deferred tax is not accounted for if it arises from initial recognition of goodwill or of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit nor loss. Deferred tax is provided on temporary differences arising on investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference is controlled by the Company and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.
D. Deferred tax assets are recognized only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. At each balance sheet date, unrecognized and recognized deferred tax assets are reassessed.
E. A deferred tax asset shall be recognized for the carryforward of unused tax credits resulting from research and development expenditures to the extent that it is possible that future taxable profit will be available against which the unused tax credits can be utilised.

(26) Share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds.

(27) Dividends

(28) Revenue recognition

A. Sales of goods

(a) The Company manufactures and sells various integrated circuit related products. Sales are recognized when control of the products has transferred, being when the products are delivered to the customers, and there is no unfulfilled obligation that could affect the customer’s acceptance of the products. Delivery occurs when the products have been shipped

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to the specific location, the risks of obsolescence and loss have been transferred to the wholesaler, and either the wholesaler has accepted the products in accordance with the sales contract, or the Company has objective evidence that all criteria for acceptance have been satisfied.

(b) Revenue from these sales is recognized based on the price specified in the contract. A refund liability is recognized for expected sales discounts and allowances payable to customers in relation to sales made until the end of the reporting period. As the time interval between the transfer of committed goods or service and the payment of customer does not exceed one year, the Company does not adjust the transaction price to reflect the time value of money.
(c) A receivable is recognized when the goods are delivered as this is the point in time that the consideration is unconditional because only the passage of time is required before the payment is due.
B. Services revenue

Revenue from design, royalty and technical services is recognized after completing the services in which the services are rendered.

5. CRITICAL ACCOUNTING JUDGEMENTS, ESTIMATES AND KEY SOURCES OF

ASSUMPTION UNCERTAINTY

The preparation of these parent company only financial statements requires management to make critical judgements in applying the Company’s accounting policies and make critical assumptions and estimates concerning future events. Assumptions and estimates may differ from the actual results and are continually evaluated and adjusted based on historical experience and other factors. Such assumptions and estimates have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year; and the related information is addressed below:

(1) Critical judgements in applying the Company’s accounting policies

None.

(2) Critical accounting estimates and assumptions

Evaluation of inventories

As inventories are stated at the lower of cost and net realisable value, the Company must determine the net realisable value of inventories on balance sheet date using judgements and estimates. Due to the rapid technology innovation, the Company evaluates the amounts of normal inventory consumption, obsolete inventories or inventories without market selling value on balance sheet date, and writes down the cost of inventories to the net realisable value. Such an evaluation of inventories is principally based on the demand for the products within the specified period in the future. Therefore, there might be material changes to the evaluation.

As of December 31, 2019, the carrying amount of inventories was $5,820,326.

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6. DETAILS OF SIGNIFICANT ACCOUNTS

(1) Cash and cash equivalents

TAILS OF SIGNIFICANT ACCOUNTS Cash and cash equivalents
Cash on hand and revolving funds Checking accounts and demand deposits Time deposits	December 31,2019 654 $ 1,827,874 1,505,300 3,333,828 $	December 31,2018
		1,554 $ 1,551,811 -
		1,553,365 $

The Company transacts with a variety of financial institutions all with high credit quality to disperse credit risk, so it expects that the probability of counterparty default is remote.

(2) Accounts receivable

credit risk, so it expects that the probability of counterparty default is remote. Accounts receivable
A. The aging analysis of accounts receivable is as follows: December 31,2019 Accounts receivable 6,655,435 $ Accounts receivable – related parties 1,239,652 Less: Allowance for bad debts 79,607) ( 7,815,480 $ Not past due 7,518,066 $ Up to 30 days 376,364 31 to 90 days 1 Over 90 days 656 7,895,087 $ December 31,2019	December 31,2018
	4,351,094 $ 1,044,224 53,989) (
	5,341,329 $
	5,386,539 $ 8,743 - 36 5,395,318 $ December 31,2018

The above aging analysis is based on past due date.

B. As of December 31, 2019 and 2018, accounts receivable arose from contracts with customers. As of January 1, 2018, the balance of receivables from contracts with customers amounted to $5,915,866.

C. The Company has no accounts receivable pledged to others.

D. Information relating to credit risk of accounts receivable is provided in Note 12(2).

(3) Inventories

Inventories
Raw materials Work in process Finished goods Total		December 31,2019
	Cost 825,412 $ 3,731,699 1,986,572 6,543,683 $	Allowance for obsolescence and market value decline 26,448) ($ 312,273) ( 384,636) ( 723,357) ($	Book value
			798,964 $ 3,419,426 1,601,936
			5,820,326 $

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	December 31,2018
Cost 224,177 $ 2,814,518 1,640,931 4,679,626 $	Allowance for obsolescence and market value decline 23,147) ($ 218,774) ( 341,058) ( 582,979) ($	Book value
		201,030 $ 2,595,744 1,299,873
		4,096,647 $

Operating costs incurred on inventories for the years ended December 31, 2019 and 2018 were as follows:

	follows:
(4)	Investments accounted for under equity method Cost of inventories sold and others Loss on market value decline and obsolete and slow-moving inventories Loss on scrap inventory Subsidiaries: Leading Enterprises Limited Amber Universal Inc. Realtek Singapore Private Limited Realtek Investment Singapore Private Limited Talent Eagle Enterprise Inc. Bluocean Inc. Realsun Investments Co., Ltd. Hung-wei Venture Capital Co., Ltd. Realking Investments Limited Realsun Technology Corporatioin Bobitag Inc. Associates: Technology Partner V Venture Capital Corporation 5V Technologies, Taiwan Ltd. Estinet Technologies Incorporation	Years ended December 31,
		2019 24,356,841 $ 140,378 145,834 24,643,053 $ December 31,2019 11,151,040 $ 3,312,175 10,370,572 6,494,453 2,585,499 3,479,391 354,481 418,438 286,939 5,107 19,398 22,247 - 3,701 38,503,441 $	2018
			18,601,009 $ 102,326 202,861
			18,906,196 $
			December 31,2018
			10,903,503 $ 3,195,092 7,750,098 6,427,012 2,916,363 3,440,632 437,910 374,178 348,721 5,563 19,214 36,917 16,106 40,682
			35,911,991 $

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A. Subsidiaries

Details of the Company’s subsidiaries are provided in Note 4(3) in the Company’s 2019 consolidated financial statements.
B. The gain on Investments accounted for under equity method amounted to $6,053,732 and $3,968,591 for the years ended December 31, 2019 and 2018, respectively.
C. The Company’s held stocks in Technology Partner V Venture Capital Corporation decreased due to the return of capital in August 2019 and the proceeds from capital returned was $17,908.
D. Certain investments mentioned above have been impaired, and the Company recognized impairment loss amounting to $41,397 for the year ended December 31, 2019.

(5) Property, plant and equipment

Property, plant and	equipment
At January 1, 2019 Cost Accumulated depreciation and impairment 2019 Opening net book amount Additions Reclassifications Depreciation Closing net book amount At December 31, 2019 Cost Accumulated depreciation and impairment	Buildings 2,574,744 $ 878,259) ( 1,696,485 $ 1,696,485 $ - - 92,881) ( 1,603,604 $ 2,574,744 $ 971,140) ( 1,603,604 $	Machinery 3,694,106 $ 3,435,978) ( 258,128 $ 258,128 $ 145,879 27,167 73,035) ( 358,139 $ 3,863,302 $ 3,505,163) ( 358,139 $	Test equipment 1,899,377 $ 1,250,013) ( 649,364 $ 649,364 $ 391,153 - 286,431) ( 754,086 $ 2,281,360 $ 1,527,274) ( 754,086 $	Office equipment Others 188,464 $ 696,142 $ 116,837) ( 507,990) ( 71,627 $ 188,152 $ 71,627 $ 188,152 $ 45,469 102,773 - 27,167) ( 23,226) ( 54,199) ( 93,870 $ 209,559 $ 233,933 $ 772,540 $ 140,063) ( 562,981) ( 93,870 $ 209,559 $	Total
					9,052,833 $ 6,189,077) (
					2,863,756 $
					2,863,756 $ 685,274 - 529,772) (
					3,019,258 $
					9,725,879 $ 6,706,621) (
					3,019,258 $

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At January 1, 2018 Cost Accumulated depreciation and impairment 2018 Opening net book amount Additions Reclassifications Depreciation Closing net book amount At December 31, 2018 Cost Accumulated depreciation and impairment	Buildings 2,518,099 $ 776,967) ( 1,741,132 $ 1,741,132 $ 6,238 50,407 101,292) ( 1,696,485 $ 2,574,744 $ 878,259) ( 1,696,485 $	Machinery 3,576,741 $ 3,351,878) ( 224,863 $ 224,863 $ 117,365 - 84,100) ( 258,128 $ 3,694,106 $ 3,435,978) ( 258,128 $	Test equipment Office equipment Others Total 1,487,712 $ 155,991 $ 663,079 $ 8,401,622 $ 1,032,998) ( 98,600) ( 461,724) ( 5,722,167) ( 454,714 $ 57,391 $ 201,355 $ 2,679,455 $ 454,714 $ 57,391 $ 201,355 $ 2,679,455 $ 414,633 33,630 83,470 655,336 - 986) ( 50,407) ( 986) ( 219,983) ( 18,408) ( 46,266) ( 470,049) ( 649,364 $ 71,627 $ 188,152 $ 2,863,756 $ 1,899,377 $ 188,464 $ 696,142 $ 9,052,833 $ 1,250,013) ( 116,837) ( 507,990) ( 6,189,077) ( 649,364 $ 71,627 $ 188,152 $ 2,863,756 $

A. Amount of borrowing costs capitalised as part of property, plant and equipment: None.
B. The Company has no property, plant and equipment pledged to others.

� (6) Leasing arrangements lessee

Effective 2019

A. The Company leases various assets including land and buildings. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose covenants, but leased assets may not be used as security for borrowing purposes.
B. The carrying amount of right-of-use assets and the depreciation charge are as follows:

Land Buildings		December 31,2019		Year ended December 31,2019
		Carryingamount		Depreciation charge
		1,062,048 $ 29,559 1,091,607 $		20,502 $ 12,531 33,033 $

C. For the year ended December 31, 2019, the additions to right-of-use assets was $392,519.

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

Year ended December 31, 2019

Items affecting profit or loss Interest expense on lease liabilities $ 12,651

E. For the year ended December 31, 2019, the Company’s total cash outflow for leases was $38,374.

(7) Intangible assets

At January 1, 2019 Cost Accumulated amortisation and impairment 2019 Opening net book amount Additions Transfers Amortisation Closing net book amount At December 31, 2019 Cost Accumulated amortisation and impairment At January 1, 2018 Cost Accumulated amortisation and impairment 2018 Opening net book amount Additions Transfers Amortisation Closing net book amount At December 31, 2018 Cost Accumulated amortisation and impairment	Computer software 3,220,861 $ 2,725,336) ( 495,525 $ 495,525 $ 844,689 1,800 568,635) ( 773,379 $ 4,067,350 $ 3,293,971) ( 773,379 $ Computer software 2,759,363 $ 2,229,775) ( 529,588 $ 529,588 $ 460,145 1,353 495,561) ( 495,525 $ 3,220,861 $ 2,725,336) ( 495,525 $	Intellectualproperty Others Total 3,713,979 $ 3,548 $ 6,938,388 $ 3,052,503) ( - 5,777,839) ( 661,476 $ 3,548 $ 1,160,549 $ 661,476 $ 3,548 $ 1,160,549 $ 596,018 - 1,440,707 - 2,326) ( 526) ( 379,373) ( - 948,008) ( 878,121 $ 1,222 $ 1,652,722 $ 4,309,997 $ 1,222 $ 8,378,569 $ 3,431,876) ( - 6,725,847) ( 878,121 $ 1,222 $ 1,652,722 $ Intellectualproperty Others Total 3,558,380 $ 11,909 $ 6,329,652 $ 2,604,330) ( - 4,834,105) ( 954,050 $ 11,909 $ 1,495,547 $ 954,050 $ 11,909 $ 1,495,547 $ 153,503 1,800 615,448 2,096 10,161) ( 6,712) ( 448,173) ( - 943,734) ( 661,476 $ 3,548 $ 1,160,549 $ 3,713,979 $ 3,548 $ 6,938,388 $ 3,052,503) ( - 5,777,839) ( 661,476 $ 3,548 $ 1,160,549 $

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Details of amortisation on intangible assets are as follows:

Short-term borrowings Operating costs Operating expenses Type of borrowings Bank borrowings Unsecured borrowings Type of borrowings Bank borrowings Unsecured borrowings	December 31,2019 18,604,770 $ December 31,2018 14,526,311 $	Years ended December 31,	Years ended December 31,
		2019 4,107 $ 943,901 948,008 $ Interest rate range 0.71%~1.91% Interest rate range 0.67%~4.16%	2018
			3,907 $ 939,827
			943,734 $
			Collateral None Collateral None

(8) Short-term borrowings

Interest expense recognized in profit or loss amounted to $131,449 and $140,170 for the years ended December 31, 2019 and 2018, respectively.

(9) Other payables

Accrued salaries Payable for employees' compensation Other accrued expenses Payables on equipment Payables on software and intellectual property Others	December 31,2019 3,574,723 $ 3,978,614 1,374,970 113,350 725,345 162,667 9,929,669 $	December 31,2018 3,043,992 $ 1,881,190 965,327 110,401 684,438 182,494 6,867,842 $

(10) Pension

A. (a) The Company has a defined benefit pension plan in accordance with the Labor Standards Law, covering all regular employees’ service years prior to the enforcement of the Labor Pension Act on July 1, 2005 and service years thereafter of employees who chose to continue to be subject to the pension mechanism under the Law. Under the defined benefit pension plan, two units are accrued for each year of service for the first 15 years and one unit for each additional year thereafter, subject to a maximum of 45 units. Pension benefits are based on the number of units accrued and the average monthly salaries and wages of the last 6 months prior to retirement. The Company contributes monthly an amount equal to 2% of the employees’ monthly salaries and wages to the retirement fund deposited with Bank of Taiwan, the trustee, under the name of the independent retirement fund committee. Also, the Company would assess the balance in the aforementioned labor pension reserve account by December 31, every year. If the account balance is insufficient to pay the pension calculated by the aforementioned method to the employees expected to qualify for retirement in the

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following year, the Company will make contributions for the deficit by next March.

(b) The amounts recognized in the balance sheet are determined as follows:

	December	31,2019	December	31,2018
Present value of defined benefit obligations	($	595,932)	($	568,382)
Fair value of plan assets		522,312		495,415
Net liability in the balance sheet	($	73,620)	($	72,967)

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

Present value of defined benefit obligations Year ended December 31, 2019 At January 1 568,382) ($ Current service cost 2,709) ( Interest (expense) income 6,366) ( 577,457) ( Remeasurements: Return on plan assets (excluding amounts included in interest income or expense) - Change in demographic assumptions 1,283) ( Change in financial assumptions 6,415) ( Experience adjustments 20,397) ( 28,095) ( Pension fund contribution - Paid pension 9,620 At December 31 595,932) ($ Present value of defined benefit obligations Year ended December 31, 2018 At January 1 536,470) ($ Current service cost 2,745) ( Interest (expense) income 6,675) ( 545,890) ( Remeasurements: Return on plan assets (excluding amounts included in interest income or expense) - Change in demographic assumptions 1,639) ( Change in financial assumptions 8,197) ( Experience adjustments 16,166) ( 26,002) ( Pension fund contribution - Paid pension 3,510 At December 31 568,382) ($	Fair value of plan Net defined assets benefit liability 495,415 $ 72,967) ($ - 2,709) ( 5,544 822) ( 500,959 76,498) ( 24,973 24,973 - 1,283) ( - 6,415) ( - 20,397) ( 24,973 3,122) ( 6,000 6,000 9,620) ( - 522,312 $ 73,620) ($ Fair value of plan Net defined assets benefit liability 473,679 $ 62,791) ($ - 2,745) ( 5,927 748) ( 479,606 66,284) ( 13,319 13,319 - 1,639) ( - 8,197) ( - 16,166) ( 13,319 12,683) ( 6,000 6,000 3,510) ( - 495,415 $ 72,967) ($	Net defined benefit liability
		12,683) (
		6,000 -
		72,967) ($

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(d) The Bank of Taiwan was commissioned to manage the Fund of the Company’s defined benefit pension plan in accordance with the Fund’s annual investment and utilisation plan and the “Regulations for Revenues, Expenditures, Safeguard and Utilisation of the Labor Retirement Fund” (Article 6: The scope of utilisation for the Fund includes deposit in domestic or foreign financial institutions, investment in domestic or foreign listed, over-the-counter, or private placement equity securities, investment in domestic or foreign real estate securitization products, etc.). With regard to the utilisation of the Fund, its minimum earnings in the annual distributions on the final financial statements shall be no less than the earnings attainable from the amounts accrued from two-year time deposits with the interest rates offered by local banks.
(e) The principal actuarial assumptions used were as follows:

products, etc.). With regard to the utilisation of the Fund, its minimum earnings in the annual distributions on the final financial statements shall be no less than the earnings attainable from the amounts accrued from two-year time deposits with the interest rates offered by local banks. The principal actuarial assumptions used were as follows:	f the Fund, its minimum earnings in the annual s shall be no less than the earnings attainable deposits with the interest rates offered by local re as follows:	f the Fund, its minimum earnings in the annual s shall be no less than the earnings attainable deposits with the interest rates offered by local re as follows:	f the Fund, its minimum earnings in the annual s shall be no less than the earnings attainable deposits with the interest rates offered by local re as follows:	f the Fund, its minimum earnings in the annual s shall be no less than the earnings attainable deposits with the interest rates offered by local re as follows:
Future mortality rate was estimated based on the 5th Taiwan Standard Ordinary Experience Mortality Table for the years ended December 31, 2019 and 2018. Because the main actuarial assumption changed, the present value of defined benefit obligation is affected. The analysis was as follows: 2019 2018 Discount rate 0.8% 1.125% Future salary increases 5% 5.25% Years ended December 31, Increase by Decrease by Increase by Decrease by 0.25% 0.25% 0.25% 0.25% December 31, 2019 Effect on present value of defined benefit obligation 16,562 $ 17,221) ($ 16,154) ($ 15,635 $ Discount rate Future salaryincreases Increase by Decrease by Increase by Decrease by 0.25% 0.25% 0.25% 0.25% December 31, 2018 Effect on present value of defined benefit obligation 16,573 $ 17,256) ($ 16,206) ($ 15,665 $ Discount rate Future salaryincreases	Years ended December 31,
			2018
			1.125%
			5.25%
		Increase by Decrease by 0.25% 0.25% 16,154) ($ 15,635 $ Future salaryincreases		Decrease by 0.25%
				15,635 $
		Increase by 0.25% 16,206) ($		Decrease by 0.25%
				15,665 $

Future mortality rate was estimated based on the 5th Taiwan Standard Ordinary Experience Mortality Table for the years ended December 31, 2019 and 2018.

Because the main actuarial assumption changed, the present value of defined benefit obligation is affected. The analysis was as follows:

(f) Expected contributions to the defined benefit pension plans of the Company for the year ending December 31, 2020 amount to $6,000.

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(g) As of December 31, 2019, the weighted average duration of the retirement plan is 13 years. The analysis of timing of the future pension payment was as follows:

Within 1 year 2~5 years 5~10 years Over 10 years	281,271 $ 112,554 197,517 36,248
	627,590 $

B. (a) Effective July 1, 2005, the Company has established a defined contribution pension plan (the “New Plan”) under the Labor Pension Act (the “Act”), covering all regular employees with R.O.C. nationality. Under the New Plan, the Company contributes monthly an amount based on 6% of the employees’ monthly salaries and wages to the employees’ individual pension accounts at the Bureau of Labor Insurance. The benefits accrued are paid monthly or in lump sum upon termination of employment.
- (b) The pension costs under the defined contribution pension plans of the Company for the years ended December 31, 2019 and 2018 were $244,680 and $223,627, respectively.
(11) Share capital
A. As of December 31, 2019, the Company’s authorised capital was $8,900,000, consisting of 890 million shares of ordinary stock (including 80 million shares reserved for employee stock options), and the paid-in capital was $5,080,955 with a par value of $10 (in dollars) per share. All proceeds from shares issued have been collected. The beginning balance and closing balance of the number of the Company’s ordinary shares outstanding of the period remain the same as in previous two periods.

Unit : Thousands of shares

At January 1 Employees' compensation transferred to common stock At December 31	2019 508,095 - 508,095	2018
		506,506 1,589
		508,095

B. On January 24, 2002, the Company increased its new common stock and sold its old common stock by issuing 13,924 thousand units of GDRs for cash. Each GDR unit represents 4 common stocks, so the total common stocks issued were 55,694 thousand shares. The Company’s GDRs are traded in Luxembourg stock exchange. As of December 31, 2019, the outstanding GDRs were 312 thousand units, or 1,249 thousand shares of common stock, representing 0.25% of the Company’s total common stocks.

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(12) Capital surplus

		2019
	Share premium	Change in associates accounted for under equitymethod 40,208 $ 8,064 - - 48,272 $ 2018
3,196,250 $ - 508,095) ( - 2,688,155 $ Share premium
	Share premium	Change in associates accounted for under equitymethod 18,203 $ 22,005 - - - 40,208 $
3,540,653 $ - 508,095) ( 163,692 - 3,196,250 $

(13) Retained earnings

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made by the Competent Authority. The remainder, if any, along with prior year’s accumulated undistributed earnings shall be proposed by the Board of Directors. However, the appropriations of earnings shall be resolved by shareholders if earnings are distributed by issuing new shares, or the appropriations of earnings shall be resolved by the Board of Directors, if earnings are distributed in the form of cash. The Company should consider factors of finance, business and operations to appropriate distributable earnings for the period, and appropriate all or partial reserve in accordance with regulations and the Company’s future expansion plans and future cash flows. In accordance with the Company’s dividend policy, cash dividends shall account for at least 10% of the total dividends distributed.

In accordance with Company Act Article 240, Items 5 and Article 241, Item 2, the resolution, for all or partial of distributed dividends, legal reserve and capital surplus are distributed in the form of cash, will be adopted by a majority vote at a meeting of the Board of Directors attended by two-thirds of the total number of directors, and will be reported to the shareholders.

B. Except for covering accumulated deficit or issuing new stocks or cash to shareholders in proportion to their share ownership, the legal reserve shall not be used for any other purpose. The use of legal reserve for the issuance of stocks or cash to shareholders in proportion to their share ownership is permitted, provided that the distribution of the reserve is limited to the portion in excess of 25% of the Company’s paid-in capital.
C. In accordance with the regulations, the Company shall set aside special reserve from the debit balance on other equity items at the balance sheet date before distributing earnings. When debit balance on other equity items is reversed subsequently, the reversed amount could be included in the distributable earnings.
D. The appropriations of 2018 and 2017 earnings had been resolved at the stockholders’ meeting on June 12, 2019 and June 5, 2018, respectively. Details are summarised below:

Dividends per Amount share(in dollars) Legal reserve 435,077 $ - $ (Reversal of) Special reserve 600,443) ( - Cash dividends 3,048,573 6.00 2,883,207 $ 6.00 $ 2018	2017	2017
	Amount 339,215 $ 600,443 2,286,430 3,226,088 $	Dividends per share(in dollars)
		- $ - 4.50
		4.50 $

E. On June 12, 2019 and June 5, 2018, the stockholders resolved during their meeting to distribute $508,095 by cash ($1 per share) and $508,095 by cash ($1 per share) from additional paid-in capital in excess of par, ordinary share, respectively.
F. For the information relating to employees’ compensation and directors’ remuneration, please refer to Note 6(20).

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(14) Other equity items

(14)	Other equity items	Other equity items	Other equity items
(15)	Operating revenue At January 1 Revaluation –Group –Associates –Reclassified to reatained earnings Currency translation differences: –Group At December 31 Unrealised gains (losses) on valuation At January 1 - $ Modified retrospective approach adjustment: Revaluation 538,977 Revaluation transferred to retained earnings 103,142) ( Revaluation –Group 165,659) ( –Associates 1,977 Currency translation differences: –Group - At December 31 272,153 $ Revenue from contracts with customers						2019
					Unrealised gains (losses) on valuation

			Unrealised gains (losses) on valuation		Available-for- sale investment
		- $ 538,977 103,142) ( 165,659) ( 1,977 - 272,153 $ customers		$ ( $
					$

						2019 40,845,708 $		2018
								32,194,291 $

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A. Disaggregation of revenue from contracts with customers

The Company derives revenue from the transfer of goods and services at a point in time in the following major product lines:

following major product lines:
Year ended December 31,2019	Integrated circuitproducts 40,729,445 $ 40,729,445 $ Integrated circuitproducts 32,125,500 $ 32,125,500 $	Others 116,263 $ 116,263 $ Others 68,791 $ 68,791 $	Total
Revenue from external customer contracts Timing of revenue recognition At a point in time Year ended December 31,2018			40,845,708 $
			40,845,708 $
			Total
Revenue from external customer contracts Timing of revenue recognition At a point in time			32,194,291 $
			32,194,291 $

B. Contract liabilities

The Company has recognized the following revenue-related contract liabilities:

Contract liabilities – advance sales receipts	December 31,2019 67,853 $	December 31,2018 110,764 $	January1,2018
			89,223 $

Revenue recognized that was included in the contract liability balance at the beginning of the period:

Years ended December 31, 2019 2018 Contract liabilities – advance sales receipts $ 100,804 $ 77,338

C. Refund liabilities (shown in other current liabilities)

The Company estimates the discounts based on accumulated experience. The estimation is subject to an assessment at each reporting date.

subject to an assessment at each reporting date.
Refund liabilities – current	December 31,2019 3,831,860 $	December 31,2018
		2,581,910 $

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(16) Other income

Other income
Interest income: Interest income from bank deposits Other interest income Total interest income Rent income Dividend income Grant income Other income	Years ended December 31,
	2019 42,689 $ 75,753 118,442 12,865 406 44,434 18,244 194,391 $	2018
		22,694 $ 43,974
		66,668
		20,636 812 14,814 9,423
		112,353 $

(17) Other gains and losses

Other gains and losses
		Years ended	December 31,
		2019	2018
Gains on disposal of property, plant and equipment	$	92	$	-
Net currency exchanges (losses) gains	(	145,314)		14,331
Losses on financial assets
at fair value through profit or loss	(	325)	(	11,283)
Impairment loss of investments accounted for
under equity method	(	41,397)		-
Other losses	(	4,801)	(	5,040)
	($	191,745)	($	1,992)

(18) Finance costs

Finance costs
Interest expense Bank borrowings Lease liabilities	Years ended December 31,
	2019 131,449 $ 12,651 144,100 $	2018
		140,170 $ -
		140,170 $

(19) Expenses by nature

Employee benefit expenses Depreciation Amortisation

Years ended December 31,	Years ended December 31,
2019 11,303,979 $ 562,805 $ 948,008 $	2018
	8,731,937 $
	470,049 $
	943,734 $

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(20) Employee benefit expenses

Employee benefit expenses
Wages and salaries Labor and health insurance fees Pension costs Other personnel expenses	Years ended December 31,
	2019 10,471,633 $ 410,720 248,211 173,415 11,303,979 $	2018
		7,985,523 $ 364,845 227,120 154,449
		8,731,937 $

A. In accordance with the Company’s Articles of Incorporation, the Company shall appropriate no higher than 3% for directors’ remuneration and no less than 1% for employees’ compensation, if the Company generates profit. If the Company has accumulated deficit, earnings should be reserved to cover losses before the appropriation of directors’ remuneration and employees’ compensation. Aforementioned employees’ compensation could be distributed by cash or stocks. Specifics of the compensation are to determined by a majority vote at a meeting of the Board of Directors attended by two-thirds of the number of directors. The resolution should be reported to the shareholders during the shareholders’ meeting.
B. For the years ended December 31, 2019 and 2018, employees’ compensation was accrued at $2,097,424 and $1,151,674 , respectively; directors’ remuneration was accrued at $119,828 and $76,778 , respectively. If the estimated amounts differ from the actual distribution resolved by the Board of Directors and the shareholders’ meeting, the Company will recognize the change as an adjustment to income of next year.
Employees' cash compensation was $1,151,674, and directors' remuneration was $76,778 for 2018. Employees' compensation and directors' remuneration for 2018 as resolved at the meeting of the Board of Directors were in agreement with those amounts recognized in the 2018 financial statements.
Information about employees’ compensation and directors’ remuneration of the Company as resolved by the Board of Directors will be posted in the “Market Observation Post System” at the website of the Taiwan Stock Exchange.

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(21) Income tax

A. Income tax expense

ome tax Income tax expense
		Years ended	December 31,
		2019	2018
Current income tax:
Current income tax on profits for the year	$	388,600	$	445,349
Income tax on undistributed earnings		74,745		16,607
Prior year income tax over estimation	(	19,067)	(	35,671)
Total current income tax		444,278		426,285
Deferred income tax:
Origination and reversal of temporary
differences	(	6,278)	(	12,360)
Impact of change in tax rate		-	(	125,925)
Total deferred income tax	(	6,278)	(	138,285)
Income tax expense	$	438,000	$	288,000

B. Reconciliation between income tax expense and accounting profit

		Years ended	December 31,	December 31,
		2019		2018
Income tax calculated based on income before
tax and statutory tax rate	$	1,445,657	$	927,754
Expenses disallowed by tax regulation and
effects from tax-exempt income	(	1,063,335)	(	494,765)
Impact of change in tax rate		-	(	125,925)
Prior year income tax over estimation	(	19,067)	(	35,671)
Income tax on undistributed surplus earnings		74,745		16,607
Income tax expense	$	438,000	$	288,000

C. Amounts of deferred income tax assets or liabilities as a result of temporary differences are as follows:

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Year ended December 31, 2019	Year ended December 31, 2019	Year ended December 31, 2019
January1 Recognised in profit or loss December 31 78,472 $ 35,691 $ 114,163 $ 22,310) ( 29,413) ( 51,723) ( 56,162 $ 6,278 $ 62,440 $ Year ended December 31,2018		December 31
		114,163 $ 51,723) (
		62,440 $
January1 65,551 $ 21,749) ( 43,802 $	Recognised in profit or loss 12,921 $ 561) ( 12,360 $	December 31
		78,472 $ 22,310) (
		56,162 $

D. The amounts of deductible temporary differences that were not recognized as deferred income tax assets are as follows:

tax assets are as follows:
Deductible temporary differences	December 31,2019 1,108,747 $	December 31,2018
		783,339 $

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

F. Under the amendments to the Income Tax Act which was promulgated by the President of the Republic of China on February 7, 2018, the Company’s applicable income tax rate was raised from 17% to 20% effective from January 1, 2018. The Company has assessed the impact of the change in income tax rate.

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(22) Earnings per share

Effective January 1, 2008, as employees’ compensation could be distributed in the form of stock, the diluted EPS computation shall include those estimated shares that would be increased from employees’ stock compensation issuance in the weighted-average number of common shares outstanding during the reporting year, which take into account the dilutive effects of stock bonus on potential common shares. Whereas, basic EPS shall be calculated based on the weighted-average number of common shares outstanding during the reporting year that include the shares of employees’ stock compensation for the appropriation of prior year earnings, which have already been resolved at the stockholders’ meeting held in the reporting year. Since capitalisation of employees’ compensation no longer belongs to distribution of stock dividends, the calculation of basic EPS and diluted EPS for all periods presented shall not be adjusted retroactively.

Basic earnings per share Profit attributable to ordinary shareholders Diluted earnings per share Profit attributable to ordinary shareholders Assumed conversion of all dilutive potential ordinary shares Employees’ compensation Profit attributable to ordinary shareholders plus assumed conversion of all dilutive potential ordinary shares		Year ended December 31, 2019	Year ended December 31, 2019	Year ended December 31, 2019		Earnings per share (in dollars)
		Amount after tax		Weighted average number of ordinary shares outstanding (shares in thousands)
		6,790,283 $ 6,790,283 $ - 6,790,283 $		508,095 508,095 8,926 517,021		13.36 $ 13.13 $

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Basic earnings per share Profit attributable to ordinary shareholders Diluted earnings per share Profit attributable to ordinary shareholders Assumed conversion of all dilutive potential ordinary shares Employees’ compensation Profit attributable to ordinary shareholders plus assumed conversion of all dilutive potential ordinary shares		Year ended December 31,2018	Year ended December 31,2018	Year ended December 31,2018		Earnings per share (in dollars)
		Amount after tax		Weighted average number of ordinary shares outstanding (shares in thousands)
		4,350,768 $ 4,350,768 $ - 4,350,768 $		507,712 507,712 10,477 518,189		8.57 $ 8.40 $

(23) Supplemental cash flow information

Investing activities with partial cash payments

Supplemental cash flow information Investing activities with partial cash payments shareholders plus assumed conversion of all dilutive potential ordinary shares 4,350,768 $	518,189 8.40 $
Purchase of property, plant and equipment Add: Opening balance of payable on equipment Less: Ending balance of payable on equipment ( Cash paid during the year Purchase of intangible assets Add: Opening balance of payable on software and intellectual property Less: Ending balance of payable on software and intellectual property ( Cash paid during the year	2019 2018 685,274 $ 655,336 $ 110,401 33,141 113,350) 110,401) ( 682,325 $ 578,076 $ Years ended December 31, 2019 2018 1,440,707 $ 615,448 $ 684,438 650,649 725,345) 684,438) ( 1,399,800 $ 581,659 $ Years ended December 31,
	2019 1,440,707 $ 684,438 725,345) 1,399,800 $

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(24) Changes in liabilities from financing activities

At January 1, 2019 Changes in cash flow from financing activities Interest paid Interest on lease liabilities Changes in other non-cash items At December 31, 2019 At January 1, 2018 Changes in cash flow from financing activities At December 31, 2018		Short-term borrowings	Refundable deposits received	Refundable deposits received	Lease liabilities	Lease liabilities	Liabilities from financing activities- gross
		14,526,311 $ 4,078,459 - - - 18,604,770 $ Short-term borrowings	4,739 $ 1,481) ( - - - 3,258 $ deposits received		732,121 $ 14,531,050 $ 25,723) ( 4,051,255 12,651) ( 12,651) ( 12,651 12,651 105,697 105,697 812,095 $ 19,420,123 $ Liabilities from financing activities-gross
		18,052,624 $ 3,526,313) ( 14,526,311 $		5,043 $ 304) ( 4,739 $		18,057,667 $ 3,526,617) ( 14,531,050 $

7. RELATED PARTY TRANSACTIONS

(1) Names of related parties and relationship

Names of related parties

Leading Enterprises Limited Realtek Singapore Private Limited Bluocean Inc. Talent Eagle Enterprise Inc. Amber Universal Inc. Cortina Systems Taiwan Limited RayMX Microelectronics Corp. G.M.I Technology Inc. Actions Semiconductor Co., Ltd. C-Media Electronics Inc. Greatek Electronics Inc. EmBestor Technology Inc.

Relationship with the Company

Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Sub-subsidiary Sub-subsidiary Other related party Other related party Other related party Other related party Other related party

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(2) Significant related party transactions and balances

A. Operating revenue

nificant related party transactions and balances Operating revenue
Sales of goods� G.M.I Technology Inc. Others	Years ended December 31,
	2019 5,996,976 $ 269,079 6,266,055 $	2018
		4,888,451 $ 427,950
		5,316,401 $

Goods are sold based on the price lists in force and terms that would be available to third parties, and the general collection term was 30 ~ 60 days after monthly billings.

B. Processing cost Greatek Electronics Inc.	Years ended December 31,	Years ended December 31,
	2019 1,024,163 $	2018
		887,456 $

Processing cost is paid to associates on normal commercial terms and conditions, and the general payment term was 69 days after monthly billings.

C. Receivables from related parties

Receivables from related parties
Accounts receivable� G.M.I Technology Inc. Others		December 31,2019 1,172,793 $ 54,462 1,227,255 $	December 31,2018
			$ 980,790 52,992 1,033,782 $

Aforementioned receivables were 30 ~ 60 days after monthly billings. The receivables from related parties arise mainly from sale transactions. The receivables bear no interest. D. Payables to related parties:

Payables to related parties:
Accounts payable� Greatek Electronics Inc.		December 31,2019 313,185 $	December 31,2018
			228,279 $

The payment term above was 69 days after monthly billings. The payables to related parties arise mainly from processing cost. The payables are unsecured in nature and bear no interest.

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E. Other transactions and other (receivables) payables:

				Years ended December 31,	Years ended December 31,	Years ended December 31,
			2019			2018
					Ending			Ending
		Amount			balance Amount			balance
Other related parties-
Sales commissions	$	227,843		$	55,690 $	206,978	$	38,283
Technical royalty revenue	($	4,430)		$	- ($	7,799)	$	-
Cash dividend income	($	406)		$	- ($	812)	$	-
Subsidiaries and sub-subsidiaries-
Interest income	($	70,752)		($	44,587) ($	43,612)	($	41,149)
Other income	$		-	($	48,980) ($	50,000)	($	50,000)
Cash dividend income	($	2,750,826)		$	- 2,745,981) ($		$	-
Rent income	($	1,922)		($	243) ($	1,883)	($	241)
The payment term above was 49 days	after monthly			billings; collection		term was	30	~ 60 days
after monthly billings.
F. Loans to related parties:
Loans to related parties:
(a) Outstanding balance:
			December 31,2019			December		31,2018
Subsidiaries
Leading Enterprises Limited			$		1,806,360	$		365,921
Talent Eagle Enterprise Inc.					1,737,116			1,628,849
Bluocean Inc.					1,490,247			602,367
Amber Universal Inc.					602,120			-
			$		5,635,843	$		2,597,137
(b) Interest income
					Year ended	December,
					2019		2018
Subsidiaries			$		70,752	$		43,612
The loans to subsidiaries are repayable monthly				over 1 year and carry interest at 1.8% and
3.3% for the years ended December 31, 2019 and				2018, respectively.

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G. Endorsements and guarantees provided to related parties:

(3)	Key management compensation Subsidiaries Salaries and other short-term employee benefits Post-employment benefits Total	December 31,2019 December 31,2018 9,798,836 $ 10,106,104 $ Years ended December 31,	December 31,2018
			10,106,104 $
		2019 120,242 $ 2,697 122,939 $	2018 105,676 $ 2,557 108,233 $

8. PLEDGED ASSETS

The Company’s assets pledged as collateral are as follows:

Pledged asset Time deposits (shown in financial assets at amortised cost - current) " Time deposits (shown in financial assets at amortised cost - non-current) "	December 31,2019 December 31,2018 - $ 30,270 $ - 31,131 34,307 - 30,578 - 64,885 $ 61,401 $ Book value	Purposes
	December 31,2019 - $ - 34,307 30,578 64,885 $
		Guarantee for customs duties for the importation of materials Guarantee for leasing land and office in Science Park Guarantee for customs duties for the importation of materials Guarantee for leasing land and office in Science Park

SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED CONTRACT COMMITMENTS

(1) Contingencies

None.

(2) Operating lease agreements

Applicable for 2018

The Company leases lands and office buildings for operational needs under non-cancellable operating lease agreements. The lease terms are between 2019 and 2027. Most of the lease agreements are renewable at the market price at the end of the lease period. The Company recognized rental expense of $28,434 for these leases in profit or loss for the year ended December 31, 2018.

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

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No later than one year Later than one year but not later than five years Later than five years	December 31,2018
	24,761 $ 84,262 39,910
	148,933 $

10. SIGNIFICANT DISASTER LOSS

None.

11. SIGNIFICANT EVENTS AFTER THE BALANCE SHEET DATE

12. OTHERS

(1) Capital management

The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going concern in order to provide returns for shareholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

Financial instruments

A. Financial instruments by category

nancial instruments Financial instruments by category
Financial assets Financial assets at fair value through profit or loss Financial assets mandatorily measured at fair value through profit or loss Financial assets at fair value through other comprehensive income Designation of equity instrument Financial assets at amortised cost/Receivables Cash and cash equivalents Financial assets at amortised cost Accounts receivable (including related parties) Other receivables (including related parties) Refundable deposits	December 31,2019 28,736 $ - $ 3,333,828 $ 64,885 7,815,480 5,750,070 16,166 16,980,429 $	December 31,2018
		29,061 $
		936 $
		1,553,365 $ 61,401 5,341,329 2,730,970 14,444
		9,701,509 $

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December 31, 2019 December 31, 2018

	December 31,2019	December 31,2018
Financial liabilities Financial liabilities at amortised cost Short-term borrowings Notes payable Accounts payable (including related parties) Other accounts payable (including related parties) Refundable deposits received Other financial liability Lease liability	18,604,770 $ 3,276 5,972,703 9,985,359 3,258 3,831,860 38,401,226 $ 812,095 $	14,526,311 $ 8,657 4,021,555 6,906,125 4,739 2,581,910
		28,049,297 $
		- $

B. Financial risk management policies
(a) The Company’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk, interest rate risk and price risk), credit risk and liquidity risk.
(b) Risk management is carried out by a finance division (Company finance) under policies approved by the Board of Directors. Company finance identifies, evaluates and hedges financial risks in close cooperation with the Company’s operating units.
C. Significant financial risks and degrees of financial risks
(a) Market risk

Foreign exchange risk

i. The Company operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the USD. Foreign exchange risk arises from future commercial transactions, recognized assets and liabilities and net investments in foreign operations.
ii. Management has set up a policy to require the Company to manage its foreign exchange risk against its functional currency. The Company is required to hedge its entire foreign exchange risk exposure with the Company finance.
iii. The Company’s businesses involve some functional currency operations (the Company’s and certain subsidiaries’ functional currency: NTD). The information on assets and liabilities denominated in foreign currencies whose values would be materially affected by the exchange rate fluctuations is as follows:

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December 31,2019	December 31,2019	December 31,2019
Foreign currency amount Book value (In thousands) Exchange rate (NTD) 549,291 $ 30.106 16,536,969 $ 1,285,500 30.106 38,701,252 220,816 30.106 6,647,887 December 31,2018		Book value (NTD)
Foreign currency amount (In thousands) 234,227 $ 1,159,786 134,264	Exchange rate 30.733 30.733 30.733	Book value (NTD)
		7,198,500 $ 35,643,714 4,126,322

The total exchange (loss) gain, including realised and unrealised arising from significant foreign exchange variation on the monetary items held by the Company for the years ended December 31, 2019 and 2018, amounted to ($145,314) and $14,331, respectively. Analysis of foreign currency market risk arising from significant foreign exchange variation:

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Effect on Effect on other comprehensive Degree of variation profit or loss income Foreign currency: unctional currency) Financial assets Monetary items USD:NTD 1% 165,370 $ - $ Investments accounted for under equity method USD:NTD 1% - 387,013 Financial liabilities Monetary items USD:NTD 1% 66,479) ( - Year ended December 31,2019 Sensitivity analysis Effect on Effect on other comprehensive Degree of variation profit or loss income Foreign currency: unctional currency) Financial assets Monetary items USD:NTD 1% 71,985 $ - $ Investments accounted for under equity method USD:NTD 1% - 356,437 Financial liabilities Monetary items USD:NTD 1% 41,263) ( - Year ended December 31,2018 Sensitivityanalysis	Year ended December 31,	2019
	Sensitivity analysis
		Effect on other comprehensive income

Price risk

i. The Company’s equity securities, which are exposed to price risk, are the held financial assets at fair value through profit or loss and financial assets at fair value through other comprehensive income.

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ii. The Company’s investments in equity securities comprise domestic listed and unlisted stocks. The prices of equity securities would change due to the change of the future value of investee companies. If the prices of these equity securities had decreased/increased by 10% with all other variables held constant, post-tax profit for the years ended December 31, 2019 and 2018 would have decreased/increased by $2,874 and $2,906, respectively, as a result of gains/losses on equity securities classified as at fair value through profit or loss. Other components of equity would have decreased/increased by $0 and $94, respectively, as a result of gains/losses on equity securities classified as equity investment at fair value through other comprehensive income.
Cash flow and fair value interest rate risk

The Company has no material interest rate risk.

(b) Credit risk
i. Credit risk refers to the risk of financial loss to the Company arising from default by the clients or counterparties of financial instruments on the contract obligations. The main factor is that counterparties could not repay in full the accounts receivable based on the agreed terms, and the contract cash flows of financial assets at amortised cost, at fair value through profit or loss and at fair value through other comprehensive income.
ii. The Company manages their credit risk taking into consideration the entire Company’s concern. According to the Company’s credit policy, the Company is responsible for managing and analysing the credit risk for each of their new clients before standard payment and delivery terms and conditions are offered. Internal risk control assesses the credit quality of the customers, taking into account their financial position, past experience and other factors.
iii. The Company adopts the assumption under IFRS 9, that is, the default occurs when the contract payments are past due over 90 days.
iv. The Company adopts the following assumption under IFRS 9 to assess whether there has been a significant increase in credit risk on that instrument since initial recognition: If the contract payments were past due over 30 days based on the terms, there has been a significant increase in credit risk on that instrument since initial recognition.
v. The following indicators are used to determine whether the credit impairment of debt instruments has occurred:
(i) It becomes probable that the issuer will enter bankruptcy or other financial reorganization due to their financial difficulties;
(ii) The disappearance of an active market for that financial asset because of financial difficulties;
(iii) Default or delinquency in interest or principal repayments;
(iv) Adverse changes in national or regional economic conditions that are expected to cause a default.

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vi. The Company classifies customers’ accounts receivable in accordance with customer types. The Company applies the modified approach using provision matrix to estimate expected credit loss under the provision matrix basis.
vii. The Company wrote-off the financial assets, which cannot be reasonably expected to be recovered, after initiating recourse procedures. However, the Company will continue executing the recourse procedures to secure their rights.
viii. The Company used the forecast ability of semiconductor industry research report to adjust historical and timely information to assess the default possibility of accounts receivable. On December 31, 2019 and 2018, the provision matrix is as follows:

At December 31, 2019 Expected loss rate Total book value Loss allowance At December 31, 2018 Expected loss rate Total book value Loss allowance	Notpast due 1% 7,518,066 $ 75,187 $ Notpast due 1% 5,386,539 $ 53,866 $	1~90 dayspast due 1% 376,365 $ 3,764 $ 1~90 dayspast due 1% 8,743 $ 87 $	90 days past due 100% 656 $ 656 $ 90 days past due 100% 36 $ 36 $	Total
				7,895,087 $
				79,607 $
				Total
				5,395,318 $
				53,989 $

ix. Movements in relation to the Company applying the modified approach to provide loss allowance for accounts receivable are as follows:

At January 1 Provision for impairment At December 31 At January 1 Reversal of impairment loss At December 31	2019 Loss allowance for accounts receivable 53,989 $ 25,618 79,607 $ 2018 Loss allowance for accounts receivable 59,792 $ 5,803) ( 53,989 $

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x. For financial assets at amortised cost, the credit rating levels are presented below:

	December 31,2019
12 months 64,885 $	Significant increase in Impairment credit risk of credit - $ - $ Lifetime December 31,2018	Total
	Significant increase in credit risk - $ December
		64,885 $

12 months 61,401 $	Significant increase in Impairment credit risk of credit - $ - $ Lifetime	Total
	Significant increase in credit risk - $
		61,401 $

The financial assets at measured cost are bank time deposits with original maturity more than three months, and there is no major material in credit risk assessment.

(c) Liquidity risk
i. Cash flow forecasting is performed in the operating entities of the Company and aggregated by Company finance. Company finance monitors rolling forecasts of the Company’s liquidity requirements to ensure it has sufficient cash to meet operational needs while maintaining sufficient headroom on its undrawn committed borrowing facilities.
ii. Company finance invests surplus cash in interest bearing current accounts, time deposits, money market deposits and marketable securities, choosing instruments with appropriate maturities or sufficient liquidity to provide sufficient head-room as determined by the above-mentioned forecasts.
iii. The table below analyses the Company’s non-derivative financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date for non-derivative financial liabilities. The amounts disclosed in the table are the contractual undiscounted cash flows.

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Non-derivative financial liabilities:

Non-derivative financial liabilities:
December 31, 2019 Short-term borrowings Notes payable Accounts payable (including related parties) Other payables (including related parties) Lease liability Guarantee deposits received Other financial liabilities Non-derivative financial liabilities: December 31, 2018 Short-term borrowings Notes payable Accounts payable (including related parties) Other payables (including related parties) Guarantee deposits received Other financial liabilities	Less than 1 year	Between 1 and 5years	Over 5years
	18,604,770 $ 3,276 5,972,703 9,985,359 40,860 - 3,831,860 Less than 1 year	- $ - - - 125,645 - - Between 1 and 5years	- $ - - - 934,269 3,258 - Over 5years
	14,526,311 $ 8,657 4,021,555 1,980,943 - 2,581,910	- $ - - - - -	- $ - - - 4,739 -

iv. The Company does not expect the timing of occurrence of the cash flows estimated through the maturity date analysis will be significantly earlier, nor expect the actual cash flow amount will be significantly different.

(2) Fair value information

A. The different levels that the inputs to valuation techniques are used to measure fair value of financial and non-financial instruments have been defined as follows:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. A market is regarded as active where a market in which transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. The fair value of the Company’s investment in listed stocks and beneficiary certificates is included in Level 1.
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3: Unobservable inputs for the asset or liability. The fair value of the Company's investment in equity investment without active market is included in Level 3.
B. The related information of financial and non-financial instruments measured at fair value by level on the basis of the nature, characteristics and risks of the assets and liabilities is as follows: (a) The related information of nature of the assets is as follows:

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December 31, 2019		Level 1		Level 2			Level 3		Total
Assets
Recurring fair value measurement
Financial assets at fair value
through profit or loss
Equity securities	$	28,736	$		-	$	-	$	28,736
December 31, 2018		Level 1		Level 2			Level 3		Total
Assets
Recurring fair value measurement
Financial assets at fair value
through profit or loss
Equity securities	$	29,061	$		-	$	-	$	29,061
Financial assets at fair value through
other comprehensive income
Equity securities		-			-		936		936
	$	29,061	$		-	$	936	$	29,997

(b) The methods and assumptions the Company used to measure fair value are as follows:
i. The instruments the Company used market quoted prices as their fair values (that is, Level 1) are listed below by characteristics:

Market quoted price	Listed shares	Closed- end fund	Opened- end fund	Government bond	Corporate bond	Convertible (exchangeable) bond
	Closing price	Closing price	Net asset value	Translation price	Weighted average quoted price	Closing price

ii. Except for financial instruments with active markets, the fair value of other financial instruments is measured by using valuation techniques or by reference to counterparty quotes. The fair value of financial instruments measured by using valuation techniques can be referred to current fair value of instruments with similar terms and characteristics in substance, discounted cash flow method or other valuation methods, including calculated by applying model using market information available at the parent company only balance sheet date.
iii. The output of valuation model is an estimated value and the valuation technique may not be able to capture all relevant factors of the Company’s financial and non-financial instruments. Therefore, the estimated value derived using valuation model is adjusted accordingly with additional inputs.

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C. For the years ended December 31, 2019 and 2018, there was no transfer between Level 1 and Level 2.
D. The following chart is the movement of Level 3 for the years ended December 31, 2019 and 2018:

At January 1 Modified retrospective adjustment Losses recognised in other comprehensive income Current sale At December 31	2019 Non-derivative Non-derivative equityinstrument equityinstrument 936 $ 6,575 $ - 5,501) ( - 138) ( 936) ( - - $ 936 $ 2018

E. For the years ended December 31, 2019 and 2018, there was no transfer into or out from Level 3.
F. The finance division is in charge of valuation procedures for fair value measurements being categorised within Level 3, which is to verify independent fair value of financial instruments. Such assessment is to ensure the valuation results are reasonable by applying independent information to make results close to current market conditions, confirming the resource of information is independent, reliable and in line with other resources and represented as the exercisable price, updating inputs used to the valuation model and making any other necessary adjustments to the fair value.
G. The following is the qualitative information of significant unobservable inputs and sensitivity analysis of changes in significant unobservable inputs to valuation model used in Level 3 fair value measurement:

Non-derivative equity instrument: Private equity fund investment	Fair value at December 31, 2018	Valuation technique	Significant unobservable input Range (weighted average) Not applicable -	Relationship of inputs to fair value
	936 $	Net asset value		Not applicable

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13. SUPPLEMENTARY DISCLOSURES

(1) Significant transactions information

A. Loans to others: Please refer to table 1.
B. Provision of endorsements and guarantees to others: Please refer to table 2.
C. Holding of marketable securities at the end of the period (not including subsidiaries, associates and joint ventures): Please refer to table 3.
D. Acquisition or sale of the same security with the accumulated cost exceeding $300 million or 20% of the Company’s paid-in capital: Please refer to table 4.
E. Acquisition of real estate reaching $300 million or 20% of paid-in capital or more: None.
F. Disposal of real estate reaching $300 million or 20% of paid-in capital or more: None.
G. Purchases or sales of goods from or to related parties reaching $100 million or 20% of paidin capital or more: Please refer to table 5.
H. Receivables from related parties reaching $100 million or 20% of paid-in capital or more: Please refer to table 6.
I. Trading in derivative instruments undertaken during the reporting periods: None.
J. Significant inter-company transactions during the reporting periods: Please refer to table 7.
(2) Information on investees
Names, locations and other information of investee companies (not including investees in Mainland China): Please refer to table 8.

(3) Information on investments in Mainland China

A. Basic information: Please refer to table 9.
B. Significant transactions, either directly or indirectly through a third area, with investee companies in the Mainland Area: Please refer to table 1, table 2 and table 7.

14. SEGMENT INFORMATION

None.

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None	None	None	None	None	None	None	None	None	None	None
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None	None	None	None	None	None	None	None	None	None	None
- $	-	-	-	-	-	-	-	-	-	-
Operations	Operations	Operations	Operations	Operations	Operations	Operations	Operations	Operations	Operations	Operations
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Y	Y	Y	Y	Y	Y	Y	Y	Y	Y	Y
Other receivables- related parties	Other receivables- related parties	Other receivables- related parties	Other receivables- related parties	Other receivables- related parties	Other receivables- related parties	Other receivables- related parties	Other receivables- related parties	Other receivables- related parties	Other receivables- related parties	Other receivables- related parties
Realtek Singapore Private Limited	Amber Universal Inc.	Bluocean Inc.	Talent Eagle Enterprise Inc.	Leading Enterprises Limited	Bluocean Inc.	Talent Eagle Enterprise Inc.	Blueocean Inc.	Leading Enterprises Limited	Realtek Singapore Private Limited	Realsil Microelectronics Corp.
Realtek Semiconductor Corporation	Realtek Semiconductor Corporation	Realtek Semiconductor Corporation	Realtek Semiconductor Corporation	Realtek Semiconductor Corporation	Leading Enterprises Limited	Leading Enterprises Limited	Amber Universal Inc.	Cortina Access, Inc.	Realtek Investment Singapore Private Limited	Realtek Singapore Private Limited
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None	None	None
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None	None	None
-	-	-
Operations	Operations	Operations
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Y	Y	Y
Other receivables- related parties	Other receivables- related parties	Other receivables- related parties
RayMX Microelectronics Corp.	Suzhou Hongwei Microelectronic Corp.	Realsil Microelectronics Corp.
Realsil Microelectronics Corp.	Realsil Microelectronics Corp.	Cortina Network Systems Shanghai Co., Ltd.
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Realtek Singapore Private Limited	Leading Enterprises Limited	Realsil Microelectronics Corp.	RayMX Microelectronics Corp.	Realsil Microelectronics Corp.	RayMX Microelectronics Corp.
Realtek Semiconductor Corporation	Realtek Semiconductor Corporation	Realtek Semiconductor Corporation	Realtek Semiconductor Corporation	Leading Enterprises Limited	Realsil Microelectronics Corp.
�	�	�	�	�	�

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Financial assets at fair value through profit or loss	Financial assets at fair value through other comprehensive income	Financial assets at fair value through other comprehensive income	Financial assets at fair value through other comprehensive income	Financial assets at fair value through other comprehensive income	Financial assets at fair value through other comprehensive income	Financial assets at fair value through other comprehensive income	Financial assets at fair value through other comprehensive income	Financial assets at fair value through other comprehensive income	Financial assets at fair value through profit or loss	Financial assets at fair value through other comprehensive income	Financial assets at fair value through other comprehensive income	Financial assets at fair value through other comprehensive income	Financial assets at fair value through profit or loss	Financial assets at fair value through other comprehensive income	Financial assets at fair value through profit or loss
Other related parties	None	None	None	None	None	None	None	None	Other related parties	Other related parties	None	Other related parties	None	None	None
C-media Electronics Inc. - Common stock	Compal broadband networks Inc. - Common stock	Shieh-Yong Investment Co., Ltd. - Common stock	Compal broadband networks Inc. - Common stock	Fortemedia Inc. - Common stock	Starix Technology, Inc.-Preferred stock	Octtasia Investment Holding Inc. - Common stock	Octtasia Investment Holding Inc. - Common stock	United Microelectronics Corporation - Common stock	C-media Electronics Inc.- Common stock	Greatek Electroninc Inc. - Common stock	Subtron technology Co., Ltd - Common stock	Embestor Technology Inc. - Common stock	Tian Tianjin Aggressive Fund	CyWeeMotion Group Limited	Tian Li Bao Money Fund
Realtek Semiconductor Corporation	Realking Investment Limited	Realsun Investment Co., Ltd.	Realsun Investment Co., Ltd.	Leading Enterprises Limited	Leading Enterprises Limited	Leading Enterprises Limited	Amber Universal Inc.	Hung-wei Venture Capital Co., Ltd.	Hung-wei Venture Capital Co., Ltd.	Hung-wei Venture Capital Co., Ltd.	Hung-wei Venture Capital Co., Ltd.	Hung-wei Venture Capital Co., Ltd.	Cortina Network Systems Shanghai Co. Ltd.	Bluocean Inc.	RayMx Microelectronics Corp.

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Table 4 General Relationship Marketable ledger with Number of Number of Number of Gain (loss) on Number of Investor securities account Counterparty the investor shares Amount shares Amount shares Selling price Book value disposal shares Amount Year ended December 31, 2019 Expressed in thousands of NTD (Except as otherwise indicated) Additions Disposals Balance as at January 1, 2019 Balance as at December 31, 2019	$ 1,204,240
	40,000,000
	$ -
	$ -
	$ -
	-
	$ 405,182
	14,000,000
	$ 799,058
	26,000,000
	Investee company accounted for under equity method
	Ubilinx Technology Inc.
	Equity investments under equity method
	Ubilinx Technology Inc.
	Talent Eagle Enterprise Inc.

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11%	9%	0%	(4%)	(0%)
1,172,793 $	929,236	40,227	313,185) (	16,329) (
Approximately the same with third party transactions	Approximately the same with third party transactions	Approximately the same with third party transactions	Approximately the same with third party transactions	Approximately the same with third party transactions
Approximately the same with third party transactions	Approximately the same with third party transactions	Approximately the same with third party transactions	Approximately the same with third party transactions	Approximately the same with third party transactions
Approximately the same with third party transactions	Approximately the same with third party transactions	Approximately the same with third party transactions	Approximately the same with third party transactions	Approximately the same with third party transactions
(10%)	(9%)	0%	3%	1%
5,996,976) ($	5,226,298) (	169,283) (	1,024,163	298,240
(Sales)	(Sales)	(Sales)	Purchase	Purchase
Other related parties	Other related parties	Other related parties	Other related parties	Other related parties
G.M.I Technology Inc.	G.M.I Technology Inc.	G.M.I Technology Inc.	Greatek Electronics Inc.	Greatek Electronics Inc.
Realtek Semiconductor Corporation	Realtek Singapore Private Limited	RayMX Microelectronics Corp.	Realtek Semiconductor Corporation	Realtek Singapore Private Limited

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Table 6 Amount Action taken Amount collected subsequent to the balance sheet date Allowance for doubtful accounts Creditor Counterparty Relationship with the counterparty Balance as at December 31, 2019 Turnover rate Overdue receivables REALTEK SEMICONDUCTOR CORPORATION Receivables from related parties reaching NT$100 million 0r 20% of paid-in capital or more December 31, 2019 Expressed in thousands of NTD (Except as otherwise indicated)	11,847 $	-
	569,399 $	368,596
	-	-
	$ -	-
	5.57	6.27
	1,172,793 $	929,236
	Other related parties	Other related parties
	G.M.I Technology Inc.	G.M.I Technology Inc.
	Realtek Semiconductor Corporation	Realtek Singapore Private Limited

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0.07%	0.11%	0.06%	2.70%	0.75%	0.57%
No similar transaction can be compared with. Transaction prices and terms are determined in accordance with mutual agreement.	No similar transaction can be compared with. Transaction prices and terms are determined in accordance with mutual agreement.	No similar transaction can be compared with. Transaction prices and terms are determined in accordance with mutual agreement.	No similar transaction can be compared with. Transaction prices and terms are determined in accordance with mutual agreement.	No similar transaction can be compared with. Transaction prices and terms are determined in accordance with mutual agreement.	No similar transaction can be compared with. Transaction prices and terms are determined in accordance with mutual agreement.
$ 48,980	65,119	34,049	1,639,884	552,750	347,426
Other receivables	Sales revenue	Technical service fees	Technical service fees	Other payables	Technical service fees
�	�	�	�	�	�
RayMX Microelectronics Corp.	RayMX Microelectronics Corp.	Realtek Semiconductor (Japan) Corp.	Realsil Microelectronics Corp.	Realsil Microelectronics Corp.	Realtek Semiconductor (Shen Zhen) Corp.
Realtek Semiconductor Corporation	Realtek Semiconductor Corporation	Leading Enterprises Limited	Realtek Singapore Private Limited	Realtek Singapore Private Limited	Realtek Singapore Private Limited
�	�	�	�	�	�

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0.16%	0.35%	0.03%	0.18%	0.04%	0.16%	0.06%
No similar transaction can be compared with. Transaction prices and terms are determined in accordance with mutual agreement.	No similar transaction can be compared with. Transaction prices and terms are determined in accordance with mutual agreement.	No similar transaction can be compared with. Transaction prices and terms are determined in accordance with mutual agreement.	No similar transaction can be compared with. Transaction prices and terms are determined in accordance with mutual agreement.	No similar transaction can be compared with. Transaction prices and terms are determined in accordance with mutual agreement.	No similar transaction can be compared with. Transaction prices and terms are determined in accordance with mutual agreement.	No similar transaction can be compared with. Transaction prices and terms are determined in accordance with mutual agreement.
$ 116,209	214,462	20,143	106,735	27,690	96,982	35,055
Other payables	Technical service fees	Other payables	Technical service fees	Other payables	Technical service fees	Technical service fees
�	�	�	�	�	�	�
Realtek Semiconductor (Shen Zhen) Corp.	Cortina Access, Inc.	Cortina Access, Inc.	Cortina Network Systems Shanghai Co. Ltd.	Cortina Network Systems Shanghai Co. Ltd.	Cortina Systems Taiwan Limited	Realtek Semiconductor (Japan) Corp.
Realtek Singapore Private Limited	Realtek Singapore Private Limited	Realtek Singapore Private Limited	Realtek Singapore Private Limited	Realtek Singapore Private Limited	Realtek Singapore Private Limited	Realtek Singapore Private Limited
�	�	�	�	�	�	�

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General ledger account Amount Transaction terms Percentage of consolidated total operating revenues or total assets (Note 3) Transaction (Except as otherwise indicated) Significant inter-company transactions during the reporting period Year ended December 31, 2019 Table 7 Expressed in thousands of NTD Number (Note 1) Company name Counterparty Relationship (Note 2)	0.07%	Note 1: The numbers filled in for the transaction company in respect of inter-company transactions are as follows: (1) Parent company is ‘0’. (2) The subsidiaries are numbered in order starting from ‘1’. Note 2: Relationship between transaction company and counterparty is classified into the following three categories; fill in the number of category each case belongs to (If transactions between parent company and subsidiaries or between subsidiaries refer to same transaction, it is not required to disclose twice. For example, if the parent company has already disclosed its transaction with a subsidiary, then the subsidiary is not required to disclose the transaction; for transactions between two subsidiaries, if one of the subsidiaries has disclosed the transaction, then the other is not required to disclose the transaction.): (1) Parent company to subsidiary. (2) Subsidiary to parent company. (3) Subsidiary to subsidiary Note 3: Regarding percentage of transaction amount to consolidated total operating revenues or total assets, it is computed based on period-end balance of transaction to consolidated total assets for balance sheet accounts and based on accumulated transaction amount for the period to consolidated total operating revenues for income statement accounts. Note 4: Only transactions above NT$10 million are disclosed. Transactions of related parties are not further disclosed here.
	No similar transaction can be compared with. Transaction prices and terms are determined in accordance with mutual agreement.
	$ 48,980
	Other receivables
	�
	RayMX Microelectronics Corp.
	Realtek Singapore Private Limited
	�

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Subsidiary	Subsidiary	Subsidiary	Subsidiary	Subsidiary	Subsidiary	Subsidiary	Subsidiary	Subsidiary	Subsidiary	Subsidiary	Investments accounted for under equity method	Investments accounted for under equity method	Investments accounted for under equity method	Investments accounted for under equity method
282,019 $	87,008	5,638,064	111,913	278,776) (	203,956	6,966	19,668	1,384) (	47	184	1,151) (	5,384) (	9,398) (	7,900) (
282,019 $	87,008	6,306,957	111,913	278,776) (	203,956	6,966	19,668	1,384) (	47	277	21,594) (	57,015) (	39,968) (	21,228) (
$ 11,151,040	3,312,175	10,370,572	3,479,391	2,585,499	6,494,453	354,481	418,438	286,939	5,107	19,398	22,247	3,701	-	160,023
100%	100%	89.03%	100%	100%	100%	100%	100%	100%	100%	66.67%	32.43%	16.10%	24.42%	37.38%
39,130	41,432	80,000,000	110,050,000	114,100,000	200,000,000	28,000,000	25,000,000	29,392,985	500,000	1,918,910	4,178,509	4,000,000	46,699	20,000,000
$ 15,318,249	4,837,812	2,458,640	3,382,167	3,506,635	6,146,600	280,000	250,000	293,930	5,000	20,000	84,565	110,000	46,699	200,000
$ 15,005,734	4,739,146	2,408,480	3,313,165	3,435,095	6,021,200	280,000	250,000	293,930	5,000	19,189	66,657	110,000	46,699	200,000
Investment holdings	Investment holdings	ICs manufacturing, design, research, development, sales, and marketing	Investment holdings	Investment holdings	Investment holdings	Investment holdings	Investment holdings	Investment holdings	ICs manufacturing, design, research, development, sales, and marketing	Manufacturing and installation of computer equipment and wholesasle, retail and related services of electronic materials and information/software	Investment holdings	Research and development, design, manufacturing, sales and other services of electronic components, information/Software and integrated circuits.	Research and development, design, manufacturing, sales and other services of electronic components, information/Software and integrated circuits.	Venture capital activities
British Virgin Islands	British Virgin Islands	Singapore	Cayman Islands	Cayman Islands	Singapore	Taiwan	Taiwan	Taiwan	Taiwan	Taiwan	Taiwan	Taiwan	Taiwan	Taiwan
Leading Enterprises Limited	Amber Universal Inc.	Realtek Singapore Private Limited	Bluocean Inc.	Talent Eagle Enterprise Inc.	Realtek Investment Singapore Private Limited	Realsun Investments Co., Ltd.	Hung-wei Venture Capital Co., Ltd.	Realking Investments Limited	Realsun Technology Corporatioin	Bobitag Inc.	Technology Partner V Venture Capital Corporation	Estinet Technologies Incorporation	5VTechnologies, Taiwan Ltd.	Innorich Venture Capital Corp.
Realtek Semiconductor Corporation	Realtek Semiconductor Corporation	Realtek Semiconductor Corporation	Realtek Semiconductor Corporation	Realtek Semiconductor Corporation	Realtek Semiconductor Corporation	Realtek Semiconductor Corporation	Realtek Semiconductor Corporation	Realtek Semiconductor Corporation	Realtek Semiconductor Corporation	Realtek Semiconductor Corporation	Realtek Semiconductor Corporation	Realtek Semiconductor Corporation	Realtek Semiconductor Corporation	Realking Investments Limited

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Sub-Subsidiary	Sub-Subsidiary	Sub-Subsidiary	Sub-Subsidiary	Sub-Subsidiary	Sub-Subsidiary	Sub-Subsidiary	Sub-Subsidiary	Sub-Subsidiary
255	6	691,815 $	25) (	98,711	30,063	5,371	9,032) (	413,581) (
255 $	6	6,306,957	25) (	98,711	30,063	5,371	9,032) (	413,581) (
$ 2,483	8,151	1,281,046	1,159	1,455,628	1,025,799	61,592	19,772	41,892
100%	100%	10.97%	100%	100%	100%	100%	100%	100%
400	64,800,000	9,856,425	-	2,825,000	16,892	21,130,000	1,000,000	40,000,000
$ 5,568	1,991,498	1,283,769	5,886	868,207	1,255,320	61,466	30,733	799,058
$ 5,542	1,950,869	1,257,578	5,799	850,495	1,229,710	60,212	30,106	1,204,240
ICs deign,sales, and consultancy	Investment holdings	ICs manufacturing, design, research, development, sales, and marketing	Information services and technical support	Investment holdings	R&D and information services	R&D and technical support	R&D and technical support	R&D and information services
Japan	Mauritius	Singapore	Hong Kong	Mauritius	U.S.A	Taiwan	Vietnam	U.S.A
Realtek Semiconductor (Japan) Corp.	Circon Universal Inc.	Realtek Singapore Private Limited	Realtek Semiconductor (HK) Limited	Empsonic Enterprises Inc.	Cortina Access Inc.	Cortina Systems Taiwan Limited	Realtek Viet Nam Co., Ltd.	Ubilinx Technology Inc.
Leading Enterprises Limited	Leading Enterprises Limited	Leading Enterprises Limited	Amber Universal Inc.	Realtek Singapore Private Limited	Realtek Singapore Private Limited	Realtek Singapore Private Limited	Realtek Singapore Private Limited	Talent Eagle Enterprise Inc.

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Remitted to
Mainland
China
Remitted
back to
Taiwan
Footnote
Accumulated
amount of
remittance from
Taiwan to
Mainland China
as of December
31, 2019
Net income of
investee for
the year ended
December 31,
2019
Investee in Mainland
China
Main business activities
Paid-in Capital
Investment
method
(Note1)
Accumulated amount of
remittance from Taiwan to
Mainland China as of
January 1, 2019
Ownership held
by the Company
(direct or
indirect)
Investment income (loss)
recognised by the
Company for the year
ended December 31,
2019
(Note2(2)C)
Book value of
investment in
Mainland China
as of December
31, 2019
Accumulated
amount of investment
income remitted back to
Taiwan as of December 31,
2019
Amount remitted from
Taiwan to Mainland
China/Amount remitted
back to Taiwan for the
year ended December 31,
2019

Cortina Network
Systems Shanghai Co.,
Ltd.
R&D and technical support
108,382
$ (2)
108,382
$ $ -
$ -
108,382
$ 7,476
$ 100%
7,476
$ 96,784
$ $ -
Realsil Microelectronics
Corp.
R&D and technical support
842,968
(2)
842,968
-
-
842,968
99,574
100%
99,574
1,450,798
-
Realtek Semiconductor
(Shen Zhen) Corp.
R&D and technical support
150,530
(2)
150,530
-
-
150,530
22,194
100%
22,194
253,983
-
RayMX
Microelectronics Corp.
ICs manufacturing, design,
research, development,
sales, and marketing
113,445
(2)
113,445
-
-
113,445
28,097)
(
100%
28,097)
(
85,230
-
Company name
Accumulated amount
of remittance from Taiwan
to Mainland
China as of
December 31, 2019
Investment amount
approved by the
Investment
Commission of the
Ministry of
Economic Affairs
(MOEA)
Ceiling on
investments in
Mainland China
imposed by the
Investment
Commission of
MOEA
Cortina Network
Systems Shanghai Co.,
Ltd.
$ 108,382 $ 108,382
$ 16,331,391
Realsil Microlectronics
Corp.
842,968 842,968
Realtek Semiconductor
(Shan Zhen) Corp.
150,530 150,530
RayMX
Microelectronics Corp.
113,445
113,445
Note 1: Investment methods are classified into the following three categories; fill in the number of category each case belongs to:
(1) Directly invest in a company in Mainland China.
(2) Through investing in an existing company in the third area, which then invested in the investee in Mainland China.
(3) Others.
Note 2: In the Investment income (loss) recognised by the Company for the year ended December 31, 2019 column, except for the financial statements of Cortina Network Systems Shanghai Co. Ltd. were audited by other independent accountants, the remaining financial statements
were audited by the independent accountants of parent company in Taiwan.
Note 3: The amount of foreign currencies denominated in New Taiwan dollars in this table, which related to income and expenses were re-translated at the average exchange rate from January 1, 2019 to December 31, 2019, others were re-translated at the exchange rate prevailing
at the end of the financial reporting period.

-261-

AI assistant

RT — Annual Report 2019

52043_rns_2020-06-17_c84f3615-b3a0-4b10-902f-e83f7ef74b3e.pdf

REALTEK SEMICONDUCTOR CORP. 2019 Annual Report

Notice to Readers:

Table of Contents

Letter to Shareholders

1. 2019 Operating Results

2. 2020 Business Plan

3. Strategy for Future Development and Impact by Competitive, Regulatory, and Macro Conditions

Company Introduction

I. Date of Establishment

II. Company Milestones

Corporate Governance Report

I. Organization

1. Organizational Structure

2. Responsibilities of Main Departments

Professional Background and Independence of Directors

Remuneration Range

3.3 Employee’s Compensation for Officers

2019 / Unit: NT$K

III. Corporate Governance

1. Operation of Board of Directors

Operation of Board of Directors:

Other disclosures:

1.1 (1) Securities and Exchange Act §14-3 resolutions:

3. Operation of Audit Committee

Operation of Audit Committee:

Other disclosures:

(1) The major items of communication between the independent directors and the CPA

6. Operation of Nominating Committee

11. Internal Control Status

11.1. Statement of internal control

Realtek Semiconductor Corporation Statement of Internal Control System

Date: March 20, 2020

13.2. Major Resolutions of Board Meetings

IV. Information Regarding Audit Fees

V. Replacement of Independent Auditors

1. Regarding the former CPA

2. Regarding the Successor CPA

VII. Share transfer or share pledge of Directors, Officers and major shareholders holding more than 10% shares from last year to the date of the annual report printed.

1. Changes in shareholding of Directors, Officers and major shareholders

VIII. The relationship between any of the Company’s top ten shareholders:

IX. The consolidated shareholdings and percentage of investments held by the Company, Directors, Officers, and the companies controlled directly or indirectly by the Company.

Capital Raising

I. Source of Capital

II. Structure of Shareholders

III. Distribution of Shareholding

IV. List of Major Shareholders

V. Market price, net worth, earning, and dividends per common share and related information over the last two years

VI. Dividend Policy and Status of Execution

VIII. Employees’ Compensation and Remuneration to Directors

IX. Status of Treasury Stocks: None

X. Status of Corporate Bonds: None

XI. Status of Preferred Stocks: None

XII. Status of GDR

XIII. Status of Employee Stock Warrants: None

XIV. Status of Employee Restricted Stocks: None

Operations Overview

I. Business Overview

1. Business Scope

(3) Current Products

Communications Network Products:

Computer Peripheral Products:

Multimedia Products:

(4) Products Under Development

Communications Network Products:

Computer Peripheral Products:

Multimedia Products:

2. Industry Overview

Communications Network Products:

Computer Peripheral Products:

for customers.

Multimedia Products:

(2) Industrial Upstream, Midstream and Downstream Relationships

3. R&D Development

(1) R&D Expenditures in the Past Two Years

Communications Network Products:

Computer Peripheral Products:

Multimedia Products:

RT Annual Report 2019