SENAO — Audit Report / Information 2019

Nov 8, 2019

Senao International Co., Ltd. and Subsidiaries

Consolidated Financial Statements for the Years Ended December 31, 2019 and 2018 and Independent Auditors’ Report

DECLARATION OF CONSOLIDATION OF FINANCIAL STATEMENTS OF AFFILIATES

The entities that are required to be included in the consolidated financial statements of affiliates in accordance with the “Criteria Governing Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises” for the year ended December 31, 2019 are all the same as those included in the consolidated financial statements of Senao International Co., Ltd. and its subsidiaries prepared in conformity with the International Financial Reporting Standard 10 “Consolidated Financial Statements”. Relevant information that should be disclosed in the consolidated financial statements of affiliates is included in the consolidated financial statements of Senao International Co., Ltd. and its subsidiaries. Hence, we did not prepare a separate set of consolidated financial statements of affiliates.

Very truly yours,

SENAO INTERNATIONAL CO., LTD.

By

LAI, CHING-LIN Chairman February 21, 2020

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INDEPENDENT AUDITORS’ REPORT

The Board of Directors and Stockholders Senao International Co., Ltd.

Opinion

We have audited the accompanying consolidated financial statements of Senao International Co., Ltd. and its subsidiaries (the Group), which comprise the consolidated balance sheets as of December 31, 2019 and 2018, the consolidated statements of comprehensive income, changes in equity and cash flows for the years then ended, and the notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as of December 31, 2019 and 2018, 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 International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), IFRIC Interpretations (IFRIC), and SIC Interpretations (SIC) endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China.

Basis for Opinion

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

Key Audit Matter

Key audit matter is the matter that, in our professional judgment, was of most significance in our audit of the consolidated financial statements for the year ended December 31, 2019. The matter was addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on the matter.

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Key audit matter of the consolidated financial statements for the year ended December 31, 2019 is as follows:

Valuation of Inventories

As described in Note 9 to the consolidated financial statements, the carrying amount of the inventories held by Group was $1,866,957 thousand as of December 31, 2019, which represented 19% of the consolidated total assets. The inventories of the Group are mainly consisted of communication products. Due to rapid changes in technology, the value of inventory is greatly affected by market price fluctuations, and there is high risk of inventory loss or obsolescence. In addition, the amount of inventories is significant and the valuation of inventories involved significant judgments and estimates made by the management. Consequently, valuation of inventories was considered to be a key audit matter.

For the accounting policy on inventory and the related significant accounting judgments and estimates, refer to Notes 4-f. and 5.

Corresponding audit procedures:

We evaluated the appropriateness of the method applied in the calculation of the valuation loss for inventories at year end. Then, we verified the data used in the assumptions against the relevant supporting documents and recalculated the loss provision to ensure its accuracy.

Emphasis of Matter

As disclosed in Note 3 to the consolidated financial statements, the Group initially applied IFRS 16 “Leases” in 2019. Our audit opinion is not modified in respect of this matter.

Other Matter

We have also audited the parent company only financial statements of Senao International Co., Ltd. as of and for the years ended December 31, 2019 and 2018 on which we have issued an unmodified opinion with emphasis of matter.

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

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and IFRS, IAS, IFRIC, and SIC endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China, and for such internal control as management determines is necessary to enable the preparation of the consolidated financial statements that are free from material misstatement, whether due to fraud or error.

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

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

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Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements

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

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

1. Identify and assess the risks of material misstatement of the 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.

2. 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.

3. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

4. 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 auditors’ report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Group to cease to continue as a going concern.

5. 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.

6. 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.

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

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements for the year ended December 31, 2019 and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partners on the audit resulting in this independent auditors’ report are Dien Sheng Chang and Shih Ching Pin.

Deloitte & Touche Taipei, Taiwan Republic of China February 21, 2020

Notice to Readers

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

For the convenience of readers, the independent auditors’ report and the accompanying consolidated financial statements have been translated into English from the original Chinese version prepared and used in the Republic of China. If there is any conflict between the English version and the original Chinese version or any difference in the interpretation of the two versions, the Chinese-language independent auditors’ report and consolidated financial statements shall prevail.

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SENAO INTERNATIONAL CO., LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2019 AND 2018 (In Thousands of New Taiwan Dollars)

ASSETS CURRENT ASSETS Cash and cash equivalents (Note 6) Financial assets at fair value through profit or loss (Note 7) Notes receivable, net (Note 8) Trade receivables, net (Note 8) Trade receivables from related parties (Note 29) Other receivables (Note 8) Other receivables from related parties (Note 29) Inventories (Note 9) Other prepaid expenses (Note 29) Prepayments Other current assets (Notes 10 and 31) Total current assets NONCURRENT ASSETS Financial assets at fair value through other comprehensive income (Note 11) Investments accounted for using equity method (Note 13) Property, plant and equipment (Notes 14, 23 and 29) Right-of-use assets (Notes 15, 23 and 29) Goodwill (Note 16) Intangible assets (Notes 17 and 23) Deferred tax assets (Note 24) Refundable deposits (Note 29) Other noncurrent assets (Note 30) Total noncurrent assets TOTAL LIABILITIES AND EQUITY CURRENT LIABILITIES Financial liabilities at fair value through profit or loss (Note 7) Contract liabilities (Note 22) Notes payable (Note 18) Notes payable to related parties (Note 29) Trade payables (Note 18) Trade payables to related parties (Note 29) Other payables (Note 19) Other payables to related parties (Note 29) Current tax liabilities (Note 24) Lease liabilities - current (Notes 15 and 29) Advance receipts (Note 29) Other current liabilities Total current liabilities NONCURRENT LIABILITIES Deferred income tax liabilities (Note 24) Lease liabilities - noncurrent (Notes 15 and 29) Net defined benefit liabilities - noncurrent (Note 20) Guarantee deposits Total noncurrent liabilities Total liabilities EQUITY ATTRIBUTABLE TO STOCKHOLDERS OF THE PARENT Share capital - ordinary shares (Note 21) Capital surplus (Note 21) Retained earnings (Note 21) Legal reserve Special reserve Unappropriated earnings Total retained earnings Other equity Treasury shares (Note 21) Total equity attributable to stockholders of the parent NONCONTROLLING INTERESTS (Note 21) Total equity TOTAL		2019 Amount % $ 2,568,897 25 53 - 85,098 1 775,269 8 825,474 8 297,482 3 193,265 2 1,866,957 19 40,475 - 58,892 1 39,523 - 6,751,385 67 10,648 - 953,685 10 895,742 9 707,610 7 38,001 - 189,111 2 444,380 4 73,177 1 5,830 - 3,318,184 33 $ 10,069,569 100 $ 11 - 117,083 1 3,499 - 18 - 1,546,693 15 261,122 3 1,082,626 11 236,840 2 37,636 - 269,839 3 11,678 - 50,120 1 3,617,165 36 29,565 - 453,847 5 81,607 1 24,863 - 589,882 6 4,207,047 42 2,582,527 26 717,885 7 1,454,896 14 13,536 - 1,093,115 11 2,561,547 25 (13,781) - - - 5,848,178 58 14,344 - 5,862,522 58 $ 10,069,569 100		2018
				Amount % $ 2,513,558 26 - - 133,866 1 742,325 8 943,962 10 153,230 1 288,923 3 1,983,094 20 21,652 - 61,071 1 199,735 2 7,041,416 72 25,704 - 919,841 9 965,662 10 - - 46,947 1 193,264 2 442,467 5 78,748 1 13,837 - 2,686,470 28 $ 9,727,886 100 $ 217 - 52,841 1 16,589 - 18 - 2,230,261 23 215,780 2 926,967 9 237,564 2 1,443 - - - 6,733 - 51,749 1 3,740,162 38 32,156 1 - - 104,294 1 27,606 - 164,056 2 3,904,218 40 2,582,527 27 717,885 7 1,414,311 15 - - 1,106,892 11 2,521,203 26 (13,536) - - - 5,808,079 60 15,589 - 5,823,668 60 $ 9,727,886 100

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

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SENAO INTERNATIONAL CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME YEARS ENDED DECEMBER 31, 2019 AND 2018 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

OPERATING REVENUE (Notes 22 and 29) Sales Less: Sales returns Sales discounts and allowances Net sales Service and repairs revenue Total operating revenue OPERATING COSTS (Notes 9, 20, 23 and 29) Cost of goods sold Service and repairs costs Total operating costs GROSS PROFIT OPERATING EXPENSES (Notes 20, 23 and 29) Selling and marketing expenses General and administrative expenses Total operating expenses OTHER INCOME AND EXPENSES (Note 23) INCOME FROM OPERATIONS NON-OPERATING INCOME AND EXPENSES Other income (Note 23) Share of profit of associates accounted for using equity method Gain on financial assets and liabilities at fair value through profit or loss Interest expense (Notes 23 and 29) Miscellaneous disbursements Gain (loss) on disposal of investments Net loss on foreign currency exchange (Note 23) Total non-operating income and expenses		2019 Amount % $ 27,620,481 96 283,049 1 622,762 2 26,714,670 93 2,150,203 7 28,864,873 100 24,991,556 87 618,745 2 25,610,301 89 3,254,572 11 2,600,243 9 389,802 1 2,990,045 10 (8,865) - 255,662 1 121,515 - 143,443 - 259 - (14,695) - (2,726) - (21,282) - (2,312) - 224,202 -		2018
				Amount % $ 30,006,380 96 293,473 1 757,922 2 28,954,985 93 2,285,955 7 31,240,940 100 26,897,328 86 798,850 3 27,696,178 89 3,544,762 11 2,934,045 10 433,746 1 3,367,791 11 (57,943) - 119,028 - 132,483 - 155,981 1 5,199 - (182) - (5,164) - 1,342 - (2,036) - 287,623 1 (Continued)

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SENAO INTERNATIONAL CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME YEARS ENDED DECEMBER 31, 2019 AND 2018 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

INCOME BEFORE INCOME TAX INCOME TAX EXPENSE (Note 24) NET INCOME TOTAL OTHER COMPREHENSIVE INCOME (LOSS) Items that will not be reclassified to profit or loss: Remeasurement of defined benefit plans (Note 20) Unrealized gain or loss on investments in equity instruments at fair value through other comprehensive income Share of remeasurement of defined benefit plans of associates Income tax relating to items that will not be reclassified subsequently to profit or loss (Note 24) Items that may be reclassified subsequently to profit or loss: Exchange differences on translating the financial statements of foreign operations Share of exchange differences arising from the translation of the foreign operations of associates Total other comprehensive income (loss), net of income tax TOTAL COMPREHENSIVE INCOME NET INCOME ATTRIBUTABLE TO: Owners of the Parent Noncontrolling interests COMPREHENSIVE INCOME ATTRIBUTABLE TO: Owners of the Parent Noncontrolling interests		2019 Amount % $ 479,864 1 69,853 - 410,011 1 20,363 - (15,056) - (851) - (4,073) - 383 - 15,795 - (984) - 14,811 - 15,194 - $ 425,205 1 $ 411,231 1 (1,220) - $ 410,011 1 $ 426,425 1 (1,220) - $ 425,205 1		2018
				Amount % $ 406,651 1 8,134 - 398,517 1 (12,556) - (10,296) - 67 - 4,499 - (18,286) - (5,248) - 898 - (4,350) - (22,636) - $ 375,881 1 $ 405,854 1 (7,337) - $ 398,517 1 $ 383,218 1 (7,337) - $ 375,881 1

(Continued)

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SENAO INTERNATIONAL CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME YEARS ENDED DECEMBER 31, 2019 AND 2018 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

EARNINGS PER SHARE (Note 25) Basic Diluted	2019 Amount % $ 1.59 $ 1.59	2018
		Amount % $ 1.59 $ 1.58

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

(Concluded)

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SENAO INTERNATIONAL CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY YEARS ENDED DECEMBER 31, 2019 AND 2018 (In Thousands of New Taiwan Dollars, Except Dividends Per Share)

BALANCE, JANUARY 1, 2018 Appropriation of 2017 earnings Legal reserve Cash dividends - NT$3.1662 per share Other changes in capital surplus Changes in capital surplus from investments in associates accounted for using the equity method Changes in percentage of ownership interests in subsidiaries Net income for the year ended December 31, 2018 Other comprehensive loss for the year ended December 31, 2018 Total comprehensive income for the year ended December 31, 2018 Share-based payment transactions BALANCE, DECEMBER 31, 2018 Effect of retrospective application BALANCE, JANUARY 1, 2019 AS ADJUSTED Appropriation of 2018 earnings Legal reserve Special reserve Cash dividends - NT$1.4500 per share Net income for the year ended December 31, 2019 Other comprehensive income (loss) for the year ended December 31, 2019 Total comprehensive income (loss) for the year ended December 31, 2019 BALANCE, DECEMBER 31, 2019		Equity Attributable to Stockholders of the Parent	Equity Attributable to Stockholders of the Parent	Noncontrolling Total Interests (Note 21) $ 5,900,141 $ 22,682 - - (817,683) - (817,683) - (39) - (244) 244 405,854 (7,337) (22,636) - 383,218 (7,337) 342,686 - 5,808,079 15,589 (11,860) (25) 5,796,219 15,564 - - - - (374,466) - (374,466) - 411,231 (1,220) 15,194 - 426,425 (1,220) $ 5,848,178 $ 14,344	Total Equity $ 5,922,823 - (817,683) (817,683) (39) - 398,517 (22,636) 375,881 342,686 5,823,668 (11,885) 5,811,783 - - (374,466) (374,466) 410,011 15,194 425,205 $ 5,862,522
	Share Capital - Ordinary Shares (Note 21) Capital Surplus (Note 21) $ 2,582,527 $ 703,314 - - - - - - - (39) - - - - - - - - - 14,610 2,582,527 717,885 - - 2,582,527 717,885 - - - - - - - - - - - - - - $ 2,582,527 $ 717,885	Retained Earnings (Note 21) Legal Reserve Special Reserve Unappropriated Earnings $ 1,331,759 $ - $ 1,609,507 82,552 - (82,552) - - (817,683) 82,552 - (900,235) - - - - - (244) - - 405,854 - - (7,990) - - 397,864 - - - 1,414,311 - 1,106,892 - - (11,860) 1,414,311 - 1,095,032 40,585 - (40,585) - 13,536 (13,536) - - (374,466) 40,585 13,536 (428,587) - - 411,231 - - 15,439 - - 426,670 $ 1,454,896 $ 13,536 $ 1,093,115	Other Equity Exchange Differences on Translating Unrealized Gain (Loss) on Financial Assets at Fair Value Through Other Foreign Operations Comprehensive Income Treasury Shares (Note 21) $ 1,110 $ - $ (328,076) - - - - - - - - - - - - - - - - - - (4,350) (10,296) - (4,350) (10,296) - - - 328,076 (3,240) (10,296) - - - - (3,240) (10,296) - - - - - - - - - - - - - - - - 14,811 (15,056) - 14,811 (15,056) - $ 11,571 $ (25,352) $ -

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

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SENAO INTERNATIONAL CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2019 AND 2018 (In Thousands of New Taiwan Dollars)

CASH FLOWS FROM OPERATING ACTIVITIES Income before income tax Adjustments to reconcile income before income tax to net cash provided by operating activities: Depreciation expenses Amortization expenses Expected credit loss Net gain on financial liabilities at fair value through profit or loss Interest expense Interest income Compensation cost of share-based payment transactions Share of profit of associates accounted for using equity method Net loss on disposal of property, plant and equipment Net gain on lease modification Net loss (gain) on disposal of investment Impairment loss recognized on non-financial assets Net (gain) loss on foreign currency exchange Changes in operating assets and liabilities: Decrease (increase) in: Notes receivable Trade receivables Trade receivables from related parties Other receivables Other receivables from related parties Inventories Other prepaid expenses Prepayments Other current assets Increase (decrease) in: Contract liabilities Notes payable Trade payables Trade payables to related parties Other payables Other payables to related parties Advance receipts Other current liabilities Net defined benefit liabilities - noncurrent Cash generated from operations Interest paid Income tax paid Net cash generated from operating activities	2019 $ 479,864 428,858 45,746 1,254 (259) 14,695 (8,265) - (143,443) 2,670 (2,751) 21,282 8,946 (7,870) 48,768 (34,208) 118,488 (144,940) 95,658 116,137 (18,823) 2,179 (1,641) 64,242 (13,090) (683,568) 45,342 155,659 (724) 4,945 (1,629) (2,324) 591,198 (14,695) (39,294) 537,209	2018 $ 406,651 93,378 39,738 1,307 (5,199) 182 (11,762) 15,564 (155,981) 7,193 - (1,342) 50,750 1,024 91,105 39,835 286,176 7,580 41,699 321,400 20,519 (3,570) (7,822) (21,707) 4,602 (143,644) 81,863 (31,083) (265,370) (10,560) (16,738) (2,581) 833,207 (182) (136,883) 696,142 (Continued)

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SENAO INTERNATIONAL CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2019 AND 2018 (In Thousands of New Taiwan Dollars)

CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of financial assets at fair value through profit or loss Proceeds from disposal of financial assets at fair value through profit or loss Proceeds from disposal of investments accounted for using equity method Proceeds from capital reduction of investments accounted for using equity method Acquisition of property, plant and equipment Proceeds from disposal of property, plant and equipment Decrease in refundable deposits Acquisition of intangible assets Acquisition of time deposits with maturities of more than three months Proceeds from disposal of time deposits with maturities of more than three months Decrease (increase) in other noncurrent assets Interest received Dividends received Net cash generated from (used in) investing activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from short-term loans Repayment of short-term loans Decrease in guarantee deposits Repayment of the principal portion of lease liabilities Cash dividends paid Treasury shares transferred to employees Net cash used in financing activities EFFECTS OF EXCHANGE RATE CHANGES ON THE BALANCE OF CASH AND CASH EQUIVALENTS NET INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS, BEGINNING OF THE YEAR CASH AND CASH EQUIVALENTS, END OF THE YEAR	2019 $ - - - - (17,437) 212 5,571 (41,662) (62,752) 227,255 8,007 8,967 107,764 235,925 240,000 (240,000) (2,743) (340,393) (374,466) - (717,602) (193) 55,339 2,513,558 $ 2,568,897	2018 $ (476,489) 479,930 3,379 19,184 (60,881) 521 3,345 (37,512) (385,279) 317,367 11,168 13,197 99,474 (12,596) 95,000 (95,000) (196) - (817,683) 327,122 (490,757) 516 193,305 2,320,253 $ 2,513,558

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

(Concluded)

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SENAO INTERNATIONAL CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

1. GENERAL

Senao International Co., Ltd. (“Senao”; Senao and subsidiaries are hereinafter collectively referred to as “the Group”) was incorporated in the Republic of China (“ROC”) on May 18, 1979. On January 12, 2001, Senao received approval from the Securities and Futures Commission (the “SFC”) for a domestic initial public offering and its common stocks were listed and traded on the Taiwan Stock Exchange (the “TWSE”) on May 24, 2001. In need of organizational rebuilding and professional operation of all kinds of businesses, Senao has spun off the wireless communication business segment, including its assets and liabilities and incorporated Senao Networks, Inc. pursuant to the Business Mergers and Acquisitions Act. The spin-off date was October 1, 2006.

After rebuilding the organization, Senao mainly sells cell phones and the peripheral products, and provides the related repairs and maintenance services.

Chunghwa Telecom Co., Ltd. (“Chunghwa”) acquired the shares of Senao on January 15, 2007. Chunghwa has a substantial control over Senao, and it is the ultimate parent entity of Senao. As of December 31, 2019, Chunghwa’s ownership interest in Senao was 27.79%.

The consolidated financial statements are presented in Senao’s functional currency, the New Taiwan dollars.

2. APPROVAL OF FINANCIAL STATEMENTS

The consolidated financial statements were approved by the Board of Directors on February 21, 2020.

3. APPLICATION OF NEW AND REVISED STANDARDS AND INTERPRETATIONS

• a. Initial application of the amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and IFRS, IAS, IFRIC, and SIC (collectively, the “IFRSs”) endorsed and issued into effect by the Financial Supervisory Commission (FSC)

Except for the following, the initial application of the amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the IFRSs endorsed and issued into effect by the FSC would not have material impact on the Group’s accounting policies:

 IFRS 16 “Leases”

IFRS 16 provides a comprehensive model for the identification of lease arrangements and their treatment in the financial statements of both lessee and lessor. It supersedes IAS 17 “Leases” and a number of related interpretations. Refer to Note 4 for information relating to the relevant accounting policies.

The Group reassesses whether a contract is, or contains, a lease in accordance with the definition of a lease under IFRS 16. Contracts that are reassessed as containing leases are accounted for in accordance with the transitional provisions under IFRS 16.

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If the Group is a lessee, the Group recognizes right-of-use assets and lease liabilities for all leases on the consolidated balance sheets except for those whose payments under low-value asset are recognized as expenses on a straight-line basis. On the consolidated statements of comprehensive income, the Group presents the depreciation expense charged on right-of-use assets separately from the interest expense accrued on lease liabilities; interest is computed using the effective interest method. On the consolidated statements of cash flows, cash payments for the principal portion of lease liabilities are classified within financing activities; cash payments for the interest portion are classified within operating activities. Prior to the application of IFRS 16, payments under operating lease contracts were recognized as expenses on a straight-line basis. Cash flows for operating leases were classified within operating activities on the consolidated statements of cash flows.

The Group elected to apply IFRS 16 retrospectively with the cumulative effect of the initial application of this standard recognized in retained earnings on January 1, 2019. Comparative information was not restated.

Lease liabilities were recognized on January 1, 2019 for leases previously classified as operating leases under IAS 17. Lease liabilities were measured at the present value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate on January 1, 2019. Right-of-use assets are measured at their carrying amount as if IFRS 16 had been applied since the commencement date. The Group applies IAS 36 to all right-of-use assets.

The lessee’s weighted average incremental borrowing rate applied to lease liabilities recognized on January 1, 2019 was 1.79%. The difference between the (i) lease liabilities recognized and (ii) operating lease commitments disclosed under IAS 17 on December 31, 2018 is explained as follows:

The future minimum lease payments of non-cancellable operating lease commitments on December 31, 2018 Less: Recognition exemption for leases of low-value assets Undiscounted amounts on January 1, 2019 Discounted amounts using the incremental borrowing rate on January 1, 2019	$ 865,943 (2,740) $ 863,203 $ 836,389

The impact on assets, liabilities and equity as of January 1, 2019 from the initial application of IFRS 16 is set out as follows:

				Adjustments	Adjustments
				Arising from			Adjusted
		Carrying			Initial		Carrying
	Amount as		of	Application of		Amount as of
	January 1, 2019				IFRS 16	January 1, 2019
Right-of-use assets	$		-	$	821,557	$	821,557
Deferred tax assets	$	442,467			2,947	$	445,414
Total effect on assets				$	824,504
Lease liabilities - current	$		-	$	272,364	$	272,364
Lease liabilities - non-current	$		-		564,025	$	564,025
Total effect on liabilities				$	836,389
							(Continued)

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			Adjustments	Adjustments
			Arising from			Adjusted
		Carrying		Initial		Carrying
	Amount as of		Application of		Amount as of
	January 1, 2019			IFRS 16	January 1, 2019
Unappropriated earnings	$	1,106,892	$	(11,860)	$	1,095,032
Noncontrolling interests	$	15,589		(25)	$	15,564
Total effect on equity			$	(11,885)
						(Concluded)

• b. The IFRSs endorsed by the Financial Supervisory Commission (FSC) for application starting from 2020

New IFRSs Amendments to IFRS 3 “Definition of a Business” Amendments to IAS 1 and IAS 8 “Definition of Material”	Effective Date Announced by IASB
	January 1, 2020 (Note 1) January 1, 2020 (Note 2)

• Note 1: The Group shall apply these amendments to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after January 1, 2020 and to asset acquisitions that occur on or after the beginning of that period.

• Note 2: The Group shall apply these amendments prospectively for annual reporting periods beginning on or after January 1, 2020.

As of the date the consolidated financial statements were authorized for issue, the Group is continuously assessing the possible impact that the application of other standards and interpretations will have on the Group’s financial position and financial performance and will disclose the relevant impact when the assessment is completed.

• c. New IFRSs in issue but not yet endorsed and issued into effect by the FSC

New IFRSs Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets between an Investor and its Associate or Joint Venture” Amendments to IAS 1 “Classification of Liabilities as Current or Non-current”	Effective Date Announced by IASB (Note 1)
	To be determined by IASB January 1, 2022

• Note 1: Unless stated otherwise, the above New IFRSs are effective for annual reporting periods beginning on or after their respective effective dates.

As of the date the consolidated financial statements were authorized for issue, the Group is continuously assessing the possible impact that the application of other standards and interpretations will have on the Group’s financial position and financial performance and will disclose the relevant impact when the assessment is completed.

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4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

• a. Statement of compliance

The consolidated financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and IFRSs as endorsed and issued into effect by the FSC.

• b. Basis of preparation

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

The fair value measurements, which are grouped into Levels 1 to 3 based on the degree to which the fair value measurement inputs are observable and based on the significance of the inputs to the fair value measurement in its entirety, are described as follows:

• 1) Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities;

• 2) Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for an asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

• 3) Level 3 inputs are unobservable inputs for an asset or liability.

• c. Classification of current and noncurrent assets and liabilities

Current assets include assets held primarily for the purpose of trading, assets expected to be realized within 12 months after the reporting period and cash and cash equivalents unless the asset is restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period. Current liabilities include liabilities held primarily for the purpose of trading, liabilities due to be settled within 12 months after the reporting period and liabilities for which the Group does not have an unconditional right to defer settlement for at least 12 months after the reporting period.

Assets and liabilities that are not classified as current are classified as noncurrent.

• d. Basis of consolidation

• 1) The consolidated financial statements incorporate the financial statements of Senao and the entities controlled by Senao (i.e. its subsidiaries). Adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by Senao. All intra-group transactions, balances, income and expenses are eliminated in full upon consolidation. Total comprehensive income of subsidiaries is attributed to the owners of Senao and to the noncontrolling interests even if this results in the noncontrolling interests having a deficit balance.

• 2) Changes in the Group’s ownership interests in subsidiaries that do not result in the Group losing control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the interests of the Group and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the noncontrolling interests are adjusted and the fair value of the consideration paid or received is recognized directly in equity and attributed to the owners of the Company.

• 3) See Note 12, Tables 5 and 6 for detailed information on subsidiaries (including percentages of ownership and main businesses).

• 16 -

e. Foreign currencies

In preparing the financial statements of each individual group entity, transactions in currencies other than the entity’s functional currency (i.e. foreign currencies) are recognized at the rates of exchange prevailing at the dates of the transactions.

At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Exchange differences on monetary items arising from settlement or translation are recognized in profit or loss for the period.

Non-monetary items measured at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Exchange differences arising from the retranslation of non-monetary items are included in profit or loss for the period except for exchange differences arising from the retranslation of non-monetary items in respect of which gains and losses are recognized directly in other comprehensive income, in which cases, the exchange differences are also recognized directly in other comprehensive income.

Non-monetary items that are measured at historical cost in a foreign currency are translated using the exchange rate at the date of the transaction, which will not be recalculated.

For the purpose of presenting consolidated financial statements, the functional currencies of the Group entities (including subsidiaries and associates in other countries that use currencies which are different from the currency of Senao) are translated into the New Taiwan dollars on the balance sheet date as follows: Assets and liabilities are translated at the exchange rates prevailing at the end of the reporting period; and income and expense items are translated at the average exchange rates for the period. The resulting currency translation differences are recognized in other comprehensive income.

f. Inventories

Inventories are stated at the lower of cost or net realizable value. Inventory write-downs are made by item, except where it may be appropriate to group similar or related items. The net realizable value is the estimated selling price of inventories less all estimated costs of completion and costs necessary to make the sale. Inventories are recorded at the weighted-average cost.

g. Investments in associates

An associate is an entity over which the Group has significant influence and which is neither a subsidiary nor an interest in a joint venture.

The Group uses the equity method to account for its investments in associates. Under the equity method, investments in an associate are initially recognized at cost and adjusted thereafter to recognize the Group’s share of the profit or loss and other comprehensive income of the associate. The Group also recognizes the changes in the Group’s share of the equity of associates.

When the Group subscribes for additional new shares of an associate at a percentage different from its existing ownership percentage, the resulting carrying amount of the investment differs from the amount of the Group’s proportionate interest in the associate. The Group records such a difference as an adjustment to investments with the corresponding amount charged or credited to capital surplus - changes in capital surplus from investments in associates accounted for using the equity method. If the Group’s ownership interest is reduced due to its additional subscription of the new shares of the associate, the proportionate amount of the gains or losses previously recognized in other comprehensive income in relation to that associate is reclassified to profit or loss on the same basis as would be required if the investee had directly disposed of the related assets or liabilities. When the adjustment should be debited to capital surplus, but the capital surplus recognized from investments accounted for using the equity method is insufficient, the shortage is debited to retained earnings.

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The entire carrying amount of an investment is tested for impairment as a single asset by comparing its recoverable amount with its carrying amount. Any impairment loss recognized is not allocated to any asset, including goodwill, that forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognized to the extent that the recoverable amount of the investment subsequently increases.

When a group entity transacts with its associate, profits and losses resulting from the transactions with the associate are recognized in the consolidated financial statements only to the extent of interests in the associate of entities not related to the Group.

h. Property, plant and equipment

Property, plant and equipment are stated at cost and subsequently measured at cost less accumulated depreciation.

Depreciation of property, plant and equipment is recognized using the straight-line method. Each significant part is depreciated separately. The estimated useful lives, residual values and depreciation methods are reviewed at the end of each reporting period, with the effects of any changes in the estimates accounted for on a prospective basis.

On derecognition of an item of property, plant and equipment, the difference between the sales proceeds and the carrying amount of the asset is recognized in profit or loss.

i. Goodwill

Goodwill arising from the acquisition of a business is carried at cost as established at the date of acquisition of the business less accumulated impairment loss.

For the purposes of impairment testing, goodwill is allocated to each of the Group’s cash-generating units or groups of cash-generating units (referred to as “cash-generating units”) that are expected to benefit from the synergies of the combination.

A cash-generating unit to which goodwill has been allocated is tested for impairment annually or more frequently when there is an indication that the unit may be impaired, by comparing its carrying amount, including the attributed goodwill, with its recoverable amount. However, if the goodwill allocated to a cash-generating unit was acquired in a business combination during the current annual period, that unit shall be tested for impairment before the end of the current annual period. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then pro rata to the other assets of the unit based on the carrying amount of each asset in the unit. Any impairment loss is recognized directly in profit or loss. Any impairment loss recognized on goodwill is not reversed in subsequent periods.

j. Intangible assets

1) Intangible assets acquired separately

Intangible assets with finite useful lives that are acquired separately are initially measured at cost and subsequently measured at cost less accumulated amortization. Amortization is recognized on a straight-line basis. The estimated useful lives, residual values, and amortization methods are reviewed at the end of each reporting period, with the effect of any changes in the estimates accounted for on a prospective basis. The estimated useful lives of the intangible assets are set to zero except when the Group expects to dispose of the assets before the end of the useful life.

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• 2) Intangible assets acquired in a business combination

Intangible assets acquired in a business combination and recognized separately from goodwill are initially recognized at their fair value at the acquisition date. Subsequent to initial recognition, they are measured on the same basis as intangible assets that are acquired separately.

• 3) Derecognition of intangible assets

On derecognition of an intangible asset, the difference between the net disposal proceeds and the carrying amount of the asset is recognized in profit or loss.

• k. Impairment of property, plant and equipment and intangible assets other than goodwill

At the end of each reporting period, the Group reviews the carrying amounts of its property, plant and equipment and intangible assets, excluding goodwill, to determine whether there is any indication that those assets have suffered any impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. If the recoverable amount is less than the carrying amounts, the difference will be recognized in profit or loss as impairment loss. When an impairment loss is subsequently reversed, the carrying amount of the corresponding asset is increased to the revised estimate of its recoverable amount, but only to the extent of the carrying amount that would have been determined had no impairment loss been recognized on the asset in prior years.

• l. Financial instruments

Financial assets and financial liabilities are recognized when a group entity becomes a party to the contractual provisions of the instruments.

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to an acquisition or issuance of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss (FVTPL) are recognized immediately in profit or loss.

• 1) Financial assets

All regular way purchases or sales of financial assets are recognized and derecognized on a trade date basis.

• a) Measurement categories

• i. Financial assets at FVTPL

Financial assets are classified as at FVTPL when such a financial asset is mandatorily classified or designated as at FVTPL.

Financial assets at FVTPL are subsequently measured at fair value, with any gains or losses arising on remeasurement recognized in profit or loss. Fair value is determined in the manner described in Note 28.

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• ii. Investments in equity instruments at FVTOCI

On initial recognition, the Group may make an irrevocable election to designate investments in equity instruments as at FVTOCI. Designation as at FVTOCI is not permitted if the equity investment is held for trading or if it is a contingent consideration recognized by an acquirer in a business combination.

Investments in equity instruments at FVTOCI are subsequently measured at fair value with gains and losses arising from changes in fair value recognized in other comprehensive income and accumulated in other equity. The cumulative gain or loss will not be reclassified to profit or loss on disposal of the equity investments; instead, it will be transferred to retained earnings.

Dividends on these investments in equity instruments are recognized in profit or loss when the Group’s right to receive the dividends is established, unless the dividends clearly represent a recovery of part of the cost of the investment.

• iii. Financial assets at amortized cost

Financial assets that meet the following conditions are subsequently measured at amortized cost:

• i) The financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows; and

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

Subsequent to initial recognition, financial assets at amortized cost, including cash and cash equivalents, trade receivables, other receivables, other current assets, refundable deposits, etc., are measured at amortized cost, which equals the gross carrying amount determined using the effective interest method less any impairment loss. Exchange differences are recognized in profit or loss.

Interest income is calculated by applying the effective interest rate to the gross carrying amount of such a financial asset.

Cash equivalents include time deposits and commercial paper with original maturities within 3 months from the date of acquisition, which are highly liquid, readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. These cash equivalents are held for the purpose of meeting short-term cash commitments.

• b) Impairment of financial assets

As of balance sheet dates, the Group evaluates the impairment losses for expected credit losses (i.e. ECLs) on financial assets at amortized cost. The Group always recognizes lifetime expected credit losses for trade receivables and other receivables.

Expected credit losses reflect the weighted average of credit losses with the respective risks of default occurring as the weights. Lifetime ECLs represent the expected credit losses that will result from all possible default events over the expected life of a financial instrument.

The Group recognizes an impairment gain or loss in profit or loss for all financial instruments with a corresponding adjustment to their carrying amount through a loss allowance account.

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• c) Derecognition of financial assets

The Group derecognizes a financial asset only when the contractual rights to the cash flows from the asset expire or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party.

On derecognition of a financial asset at amortized cost in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable is recognized in profit or loss. On derecognition of an investment in an equity instrument at FVTOCI, the cumulative gain or loss which had been recognized in other comprehensive income is transferred directly to retained earnings, without recycling through profit or loss.

2) Financial liabilities

• a) Subsequent measurement

All financial liabilities are measured at amortized cost using the effective interest method.

• b) Derecognition of financial liabilities

The difference between the carrying amount of a financial liability derecognized and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognized in profit or loss.

3) Equity instruments

Equity instruments issued by the Group are recognized at the proceeds received, net of direct issue costs.

The repurchase of the Group’s own equity instruments is recognized in and deducted directly from equity. No gain or loss is recognized in profit or loss on the disposal of the Group’s own equity instruments.

• 4) Derivative financial instruments

The Group enters into a variety of derivative financial instruments to manage its exposure to foreign exchange rate risks, including foreign exchange forward contracts.

Derivatives are initially recognized at fair value at the date the derivative contracts are entered into and are subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognized in profit or loss immediately. When the fair value of a derivative financial instrument is positive, the derivative is recognized as a financial asset at fair value through profit or loss; when the fair value of a derivative financial instrument is negative, the derivative is recognized as a financial liability at fair value through profit or loss.

Derivatives embedded in hybrid contracts that contain financial asset hosts that is within the scope of IFRS 9 are not separated; instead, the classification is determined in accordance with the entire hybrid contract. Derivatives embedded in derivative host contracts that are not financial assets that is within the scope of IFRS 9 (e.g. financial liabilities) are treated as separate derivatives when they meet the definition of a derivative; their risks and characteristics are not closely related to those of the host contracts; and the host contracts are not measured at FVTPL.

• 21 -

m. Revenue recognition

Revenues from sales, services and repairs are separately identified as performance obligations. Further, the Group allocates the transaction consideration to the performance obligations. Revenue is recognized when performance obligations are satisfied.

• 1) Revenue from the sale of goods

Revenue from the sale of goods comes from sales of communication goods and peripheral products. Sales of communication goods and peripheral products are recognized as revenue when the control of the goods are transferred and all of the related performance obligations are satisfied.

• 2) Revenue from the rendering of services, including repairs and maintenance services

The Group recognizes revenue when the service is fulfilled and the Group has no further obligations to the customer.

• n. Leasing

2019

At the inception of a contract, the Group assesses whether the contract is, or contains, a lease.

• 1) The Group as lessor

Lease payments from operating leases are recognized as income on a straight-line basis over the terms of the relevant leases.

2) The Group as lessee

The Group recognizes right-of-use assets and lease liabilities for all leases at the commencement date of a lease, except for low-value asset leases where lease payments are recognized as expenses on a straight-line basis over the lease terms.

Right-of-use assets are initially measured at cost, which comprises the initial measurement of lease liabilities. Right-of-use assets are subsequently measured at cost less accumulated depreciation and impairment losses and adjusted for any remeasurement of the lease liabilities. Right-of-use assets are presented on a separate line in the consolidated balance sheets.

Right-of-use assets are depreciated using the straight-line method from the commencement dates to the earlier of the end of the useful lives of the right-of-use assets or the end of the lease terms.

Lease liabilities are initially measured at the present value of the lease payments, which comprise fixed payments. The lease payments are discounted using the interest rate implicit in a lease, if that rate can be readily determined. If that rate cannot be readily determined, the Group uses the lessee’s incremental borrowing rate.

Subsequently, lease liabilities are measured at amortized cost using the effective interest method, with interest expense recognized over the lease terms. When there is a change in future lease payments resulting from a change in lease term, the Group remeasures the lease liabilities with a corresponding adjustment to the right-of-use-assets. However, if the carrying amount of the right-of-use assets is reduced to zero, any remaining amount of the remeasurement is recognized in profit or loss. Lease liabilities are presented on a separate line in the consolidated balance sheets.

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2018

• 1) The Group as lessor

Rental income from operating leases is recognized on a straight-line basis over the term of the relevant lease.

• 2) The Group as lessee

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

• o. Employee benefits

• 1) Short-term employee benefits

Liabilities recognized in respect of short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in exchange for the related services.

• 2) Retirement benefits

Payments to defined contribution retirement benefit plans are recognized as expenses when employees have rendered services entitling them to the contributions.

Defined benefit costs (including service cost, net interest and remeasurement) under defined benefit retirement benefit plans are determined using the projected unit credit method. Service cost (including current service cost) and net interest on the net defined benefit liabilities are recognized as employee benefits expense in the period in which they occur. Remeasurement, comprising actuarial gains and losses and the return on plan assets (excluding interest), is recognized in other comprehensive income in the period in which it occurs. Remeasurement recognized in other comprehensive income is reflected immediately in retained earnings and will not be reclassified to profit or loss.

Net defined benefit liabilities represent the actual deficit in the Group’s defined benefit plans.

• p. Share-based payment arrangements - employee share options

The equity-settled share-based payments is measured at the fair value at the grant date.

The fair value at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group’s best estimates of the number of shares expected to vest, with a corresponding increase in capital surplus - employee share options. It is recognized as an expense in full at the grant date if vested immediately.

At the end of each reporting period, the Group revises its estimate of the number of employee share options expected to vest. The impact of the revision of the original estimates, if any, is recognized in profit or loss such that the cumulative expenses reflect the revised estimate, with a corresponding adjustment to capital surplus - employee share options.

• q. Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

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1) Current tax

According to the Income Tax Law, an additional tax of unappropriated earnings is recognized as income tax in the year the shareholders approve to retain earnings.

Adjustments of prior years’ tax liabilities are added to or deducted from the current year’s tax provision.

2) Deferred tax

Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities and the corresponding tax bases used in the computation of taxable profit. If a temporary difference arises from the initial recognition (other than in a business combination) of assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit, the resulting deferred tax asset or liability is not recognized. In addition, a deferred tax liability is not recognized on taxable temporary differences arising from the initial recognition of goodwill.

Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized and the prior years’ deficits can be offset.

Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments are only recognized to the extent that it is probable that there will be sufficient taxable profits against which to utilize the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the assets to be recovered. A previously unrecognized deferred tax asset is also reviewed at the end of each reporting period and recognized to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

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

• 3) Current and deferred taxes for the year

Current and deferred taxes are recognized in profit or loss, except when they relate to items that are recognized in other comprehensive income, in which case, the current and deferred taxes are also recognized in other comprehensive income. Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination.

• 24 -

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION

UNCERTAINTY

In the application of the Group’s accounting policies, management is required to make judgments, estimations and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered relevant from the management. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised if the revisions affect only that period or in the period of the revisions and future periods if the revisions affect both current and future periods.

Valuation of inventories

Inventories are measured at lower of cost or net realizable value. The management uses the estimated selling price in the ordinary course of business less the estimated costs of marketing as the net realizable value. In addition, the management considers the aging of products and the related turnover as the basis of the inventory obsolescence loss. Since the management determines and estimates the net realizable value based on market conditions as of reporting date and historical experience with product sales, the changes in market conditions may have a material impact on the valuation of inventories.

Lessee’s incremental borrowing rates

In determining a lessee’s incremental borrowing rate used in discounting lease payments, a risk-free rate for the same currency and relevant duration is selected as a reference rate, and the lessee’s credit spread adjustments and lease specific adjustments are also taken into account.

6. CASH AND CASH EQUIVALENTS

Cash on hand and petty cash Checking accounts and demand deposits Cash equivalents Commercial paper Time deposits		December 31	December 31
		2019 $ 197,686 1,530,741 840,470 - $ 2,568,897	2018 $ 240,277 1,319,527 858,901 94,853 $ 2,513,558

The annual yield rates of bank deposits, commercial paper and time deposits as of balance sheet dates were as follows:

Bank deposits Commercial paper Time deposits	December 31
	2019 2018 0.001%-0.35% 0.005%-0.50% 0.53%-0.54% 0.47%-0.48% - 1.40%-1.69%

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7. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS

Financial assets Financial assets mandatorily classified as at FVTPL Derivative financial assets Forward exchange contracts Financial liabilities Financial liabilities held for trading Derivative financial liabilities Forward exchange contracts		December	31
		2019 $ 53 $ 11	2018 $ - $ 217

At the end of the reporting period, outstanding foreign exchange forward contracts not under hedge accounting were as follows:

			Notional Amount
	Currency	Maturity Date	(In Thousands)
December 31, 2019
Forward exchange contracts - buy	NTD/USD	2020.01.07-2020.01.21	NTD25,524/USD850
December 31, 2018
Forward exchange contracts - buy	NTD/USD	2019.01.04-2019.01.09	NTD62,252/USD2,020

The Group entered into forward exchange contracts to hedge the exchange rate risk arising from assets and liabilities denominated in foreign currencies.

8. NOTES RECEIVABLE, TRADE RECEIVABLES AND OTHER RECEIVABLES

Notes receivable Notes receivable Less: Allowance for impairment loss/doubtful notes receivable Trade receivables Trade receivables Less: Allowance for impairment loss/doubtful trade receivables		December 31	December 31
		2019 $ 86,029 931 $ 85,098 $ 798,697 23,428 $ 775,269	2018 $ 134,797 931 $ 133,866 $ 764,489 22,164 $ 742,325 (Continued)

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Other receivables Receivables from disposal of investments Suppliers allowance receivable Others		**December 31 **	**December 31 **
		2019 $ 191,726 92,281 13,475 $ 297,482	2018 $ 3,494 122,224 27,512 $ 153,230 (Concluded)

a. Notes receivable and trade receivables

The average credit terms range from 30 to 90 days. The Group uses other publicly available financial information and its own trading records to rate its major customers. The Group’s exposure and the credit ratings of its counterparties are continuously monitored and the aggregate value of transactions concluded is spread amongst approved counterparties.

Since the Group’s customers, apart from the abovementioned corporate customers, are large and unrelated to each other, the divergence of the credit risk is constrained.

In order to minimize credit risk, the management of the Company has delegated a team responsible for determining credit limits, credit approvals and other monitoring procedures to ensure that follow-up action is taken to recover overdue debts. In addition, the Group reviews the recoverable amount of each individual trade debt at the end of the reporting period to ensure that adequate allowance is made for possible irrecoverable amounts. In this regard, the management believes the Group’s credit risk was significantly reduced.

The Group uses the lifetime expected loss provision for all notes receivable and trade receivables. The expected credit losses on notes receivable and trade receivables are estimated using a provision matrix by reference to past default experience of the debtor and an analysis of the debtor’s current financial position, adjusted for general economic conditions of the industry in which the debtors operate and an assessment of both the current as well as the forecast direction of economic conditions at the reporting date.

The Group writes off notes receivable or a trade receivable when there is information indicating that the debtor is in severe financial difficulty and there is no realistic prospect of recovery. For notes receivable or trade receivables that have been written off, the Group continues to engage in enforcement activity to attempt to recover the receivables due. Where recoveries are made, these are recognized in profit or loss.

The following table details the loss allowance of notes receivable and trade receivables based on the Group’s provision matrix.

December 31, 2019

Not Past Due Less than 60 Days 61 to 90 Days Over 91 Days* Expected credit loss rate 0%-0.0235% 0%-16.2253% 0%-36.8424% 0%-100% Notes receivable and trade receivables $ 839,332 $ 11,286 $ 1,065 $ 33,043 Less: Loss allowance (Lifetime ECL) 158 507 392 23,302 Amortized cost $ 839,174 $ 10,779 $ 673 $ 9,741	Total $ 884,726 24,359
	$ 860,367

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December 31, 2018

Not Past Due Less than 60 Days 61 to 90 Days Over 91 Days* Expected credit loss rate 0%-0.0339% 0%-54.9945% 0%-71.4210% 0%-100% Notes receivable and trade receivables $ 872,235 $ 737 $ 19 $ 26,295 Less: Loss allowance (Lifetime ECL) 257 121 14 22,703 Amortized cost $ 871,978 $ 616 $ 5 $ 3,592	Total $ 899,286 23,095
	$ 876,191

• For those customers who provided the collateral, the Group evaluated the expected credit loss rate as 0% because the value of the collateral provided is greater than the carrying value of the notes receivable and trade receivables.

The movements of the loss allowance of notes receivable and trade receivables were as follows:

Balance on January 1 Add: Amounts recovered Add: Provision of credit loss Balance on December 31	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2019 $ 23,095 159 1,105 $ 24,359	2018 $ 21,788 - 1,307 $ 23,095

b. Other receivables

The Group use the lifetime expected loss provision for all other receivables. The expected credit losses on other receivables are estimated using a provision matrix by reference to past default experience of the debtor and an analysis of the debtor’s current financial position, adjusted for general economic conditions of the industry in which the debtors operate and an assessment of both the current as well as the forecast direction of economic conditions at the reporting date. As the Group’s historical credit loss experience does not show significantly different loss patterns for different customer segments, the provision for loss allowance based on past due status is not further distinguished according to the Group’s different customer base.

9. INVENTORIES

Merchandise		**December 31 **	**December 31 **
		2019 $ 1,866,957	2018 $ 1,983,094

The cost of inventories recognized as cost of goods sold for the year ended December 31, 2019 was $24,991,556 thousand. The cost of goods sold included inventory write-downs of $187 thousand and loss on physical inventory of $551 thousand.

The cost of inventories recognized as cost of goods sold for the year ended December 31, 2018 was $26,897,328 thousand. The cost of goods sold included inventory write-downs of $1,485 thousand and loss on physical inventory of $235 thousand.

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10. OTHER CURRENT ASSETS

Time deposits with maturities of more than three months Trust account Others		December 31	December 31
		2019 $ 30,060 9,426 37 $ 39,523	2018 $ 191,913 7,822 - $ 199,735

Senao opened a trust account in Cathay United Bank because of issuance of electronic reward points. As of December 31, 2019, the amount of the outstanding electronic reward points, held in trust was $2,597 thousand (recognized as contract liability); the balance of the trust account was $9,426 thousand.

The annual yield rates of time deposits with maturities of more than three months were as follows:

Time deposits with maturities of more than three months Trust account	December 31
	2019 2018 0.60%-1.755% 0.60% 0.05% 0.05%

11. FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME

Non-current Investment in equity instruments Domestic non-listed stocks		December	31
		2019 $ 10,648	2018 $ 25,704

The stocks are held for medium to long-term strategic purposes and are expected to profit from long-term investment. Accordingly, the management elected to designate the investments in equity instruments as at FVTOCI as they believe that recognizing short-term fluctuations in the investments’ fair value in profit or loss would not be consistent with the Group’s strategy of holding the investments for long-term purpose.

12. SUBSIDIARIES

Subsidiaries included in the consolidated financial statements were as follows:

Name of Investor Name of Investee Nature of Activities Senao International Co., Ltd. Senao International (Samoa) Holding Ltd. (“Senao Samoa”) International investment Youth Co., Ltd. (“Youth”) Sale of information and communication technologies products Aval Technologies Co., Ltd. (“Aval”) Sale of information and communication technologies products Senyoung Insurance Agent Co., Ltd. (“Senyoung”) Property and liability insurance agency

Percentage ofOwnership December 31 2019 2018 Remark 100.00 100.00 - 92.89 92.89 a 100.00 100.00 - 100.00 100.00 -

(Continued)

• 29 -

Name of Investor Name of Investee Nature of Activities Senao International (Samoa) Holding Ltd. (Senao Samoa) Senao International HK Limited (“Senao HK”) International investment Youth Co., Ltd. ISPOT Co., Ltd. (“ISPOT”) Sale of information and communication technologies products Youyi Co., Ltd. (“Youyi”) Maintenance of information and communication technologies products Aval Technologies Co., Ltd. Wiin Technologies Co., Ltd. (“Wiin”) Sale of information and communication technologies products Senyoung Insurance Agent Co., Ltd. Senaolife Insurance Agent Co., Ltd. (“Senaolife”) Life insurance agency Senao International HK Limited (Senao HK) Senao Trading (Fujian) Co., Ltd. (“STF”) Sale of information and communication technologies products Senao International Trading (Shanghai) Co., Ltd. (“SITS”) Sale of information and communication technologies products Senao International Trading (Shanghai) Co., Ltd. (“SEITS”) Maintenance of information and communication technologies products Senao International Trading (Jiangsu) Co., Ltd. (“SITJ”) Sale of information and communication technologies products

Percentage ofOwnership December 31 2019 2018 Remark 100.00 100.00 - 100.00 100.00 - 100.00 100.00 - 100.00 - b 100.00 - c - 100.00 d 100.00 100.00 - - - e - 100.00 f (Concluded)

Remarks:

• a. Senao subscribed for new shares during the capital increase of Youth on December 5, 2018. Therefore, Senao’s ownership interest in Youth increased from 89.48% to 92.89%.

• b. Aval established Wiin on September 6, 2019 with $29,550 thousand and completed the establishment registration on September 12, 2019.

• c. Senyoung established Senaolife on January 24, 2019 with $29,500 thousand and completed the establishment registration on November 29, 2019.

• d. STF was approved to end and dissolve its business on September 27, 2018. The liquidation of STF was completed in May 2019.

• e. SEITS was approved to end and dissolve its business on March 15, 2017. The liquidation of SEITS was completed in March 2018.

• f. SITJ was approved to end and dissolve its business on April 15, 2018. The liquidation of SITJ was completed in March 2019.

13. INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD

Investments in associates Material associate Senao Networks, Inc. (“SNI”) Associate that is not individually material HopeTech Technologies Limited (“HopeTech”)		December 31	December 31
		2019 $ 953,685 - $ 953,685	2018 $ 919,841 - $ 919,841

• 30 -

a. Material associate

SNI	Proportion of Ownership and Voting Rights
	December 31
	2019 2018 33.79% 33.79%

Refer to Table 5 for the nature of activities, principal places of business and countries of incorporation of the associates.

The investments were accounted for using the equity method, and the share of profit or loss and other comprehensive income of those investments for the years ended December 31, 2019 and 2018 were based on the associate’s financial statements which have been audited for the same period.

Fair values (Level 1) of investments in associates with available published price quotations are summarized as follows:

SNI		December 31	December 31
		2019 $ 2,014,353	2018 $ 1,447,350

Summarized financial information in respect of each of the Group’s material associates is set out below. The summarized financial information below represents amounts shown in the associates’ financial statements prepared in accordance with IFRSs adjusted by the Group for equity accounting purposes.

SNI and its subsidiaries

Current assets Noncurrent assets Current liabilities Noncurrent liabilities Equity Noncontrolling interests Proportion of the Group’s ownership Equity attributable to the Group (carrying amount of the investment) Operating revenue Net profit for the year Other comprehensive income (loss) Total comprehensive income for the year		December 31	December 31
	2019 2018 $ 4,226,848 $ 3,775,894 1,886,579 1,519,222 (2,881,743) (2,429,767) (260,907) (18,708) 2,970,777 2,846,641 (148,623) (124,637) $ 2,822,154 $ 2,722,004 33.79% 33.79% $ 953,685 $ 919,841 For the Year Ended December 31
		2019 $ 7,939,870 $ 479,654 (5,432) $ 474,222	2018 $ 8,618,339 $ 503,194 2,828 $ 506,022

• 31 -

b. Aggregate information of associates that are not individually material

The Group’s share of: Net loss from continuing operations Other comprehensive income (loss) Total comprehensive income (loss) for the year	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2019 $ - - $ -	2018 $ (149) - $ (149)

HopeTech returned the proceeds of $19,184 thousand as a result of the capital reduction in January 2018.

Senao Samoa disposed all shares of HopeTech in June 2018 and received the proceeds of $3,379 thousand.

14. PROPERTY, PLANT AND EQUIPMENT

	December 31,
	2019
Assets used by the Group	$ 424,482
Assets leased under operating leases	471,260
	$ 895,742

a. Assets used by the Group - 2019

Cost Balance on January 1, 2019 Adjustments on initial application of IFRS 16 Balance at January 1, 2019 (adjusted) Additions Disposals Transfers to assets leased under operating leases Effect of foreign currency exchange differences Balance on December 31, 2019 Accumulated depreciation Balance on January 1, 2019 Adjustments on initial application of IFRS 16 Balance at January 1, 2019 (adjusted) Depreciation expenses Disposals Transfers to assets leased under operating leases Effect of foreign currency exchange differences Balance on December 31, 2019 Carrying amounts on December 31, 2019	Land $ 319,284 (98,773) 220,511 - - (51,106 ) - $ 169,405 $ - - - - - - - $ - $ 169,405	Buildings Machinery and Equipment $ 819,726 $ 68,227 (384,399) - 435.327 68,227 1,158 243 - (2,658 ) (199,454 ) - - - $ 237,031 $ 65,812 $ 341,655 $ 41,410 (161,954) - 179,701 41,410 7,895 7,021 - (2,650 ) (85,875 ) - - - $ 101,721 $ 45,781 $ 135,310 $ 20,031	Computer Telecommuni- cations Equipment $ 323,365 - 323,365 1,811 (118,018 ) - (16) $ 207,142 $ 255,295 - 255,295 23,796 (115,819 ) - (17) $ 163,255 $ 43,887	Office Equipment Leasehold Improvements $ 129,303 $ 320,045 - - 129,303 320,045 1,553 11,033 (6,364 ) (20,882 ) - - (7) (7) $ 124,485 $ 310,189 $ 82,577 $ 293,987 - - 82,577 293,987 12,019 17,231 (6,255 ) (20,316 ) - - (5) (1) $ 88,336 $ 290,901 $ 36,149 $ 19,288	Other Equipment $ 7,388 - 7,388 - (572 ) - - $ 6,816 $ 6,752 - 6,752 224 (572 ) - - $ 6,404 $ 412	Total $ 1,987,338 (483,172) 1,504,166 15,798 (148,494 ) (250,560 ) (30) $ 1,120,880 $ 1,021,676 (161,954) 859,722 68,186 (145,612 ) (85,875 ) (23) $ 696,398 $ 424,482

• 32 -

The above items of property, plant and equipment are depreciated on a straight-line basis over their estimated useful lives as follows:

Buildings Main buildings 50-55 years Mechatronic construction 15 years Decoration construction 3-5 years Machinery and equipment 5-8 years Computer telecommunications equipment 3-8 years Office equipment 3-6 years Leasehold improvements 3-5 years Other equipment 4-6 years

b. Assets leased under operating leases - 2019

Cost Balance on January 1, 2019 Adjustments on initial application of IFRS 16 Balance on January 1, 2019 (adjusted) Additions Transfers from assets used by the Group Balance on December 31, 2019 Accumulated depreciation Balance on January 1, 2019 Adjustments on initial application of IFRS 16 Balance on January 1, 2019 (adjusted) Depreciation expenses Transfers from assets used by the Group Balance on December 31, 2019 Carrying amounts at December 31, 2019	Land $ - 98,773 98,773 - 51,106 $ 149,879 $ - - - - - $ - $ 149,879	Buildings $ - 384,399 384,399 1,639 199,454 $ 585,492 $ - 161,954 161,954 16,282 85,875 $ 264,111 $ 321,381	Total $ - 483,172 483,172 1,639 250,560 $ 735,371 $ - 161,954 161,954 16,282 85,875 $ 264,111 $ 471,260

Operating leases relate to leases of land and building have lease terms of 5 years. The lessees do not have bargain purchase options to acquire the assets at the expiry of the lease periods.

The maturity analysis of lease payments receivable under operating lease payments was as follows:

		December 31,	December 31,
			2019
Year	1	$	45,600
Year	2		45,600
Year	3		45,600
Year	4		45,600
Year	5		15,200
		$	197,600

• 33 -

The above items of property, plant and equipment leased under operating leases are depreciated on a straight-line basis over their estimated useful lives as follows:

Buildings Main building 55 years Mechatronic construction 15 years Decoration construction 3-5 years

c. 2018

Cost Balance on January 1, 2018 Additions Disposals Effect of foreign currency exchange differences Balance on December 31, 2018 Accumulated depreciation Balance on January 1, 2018 Depreciation expenses Disposals Effect of foreign currency exchange differences Balance on December 31, 2018 Carrying amounts on December 31, 2018	Land $ 319,284 - - - $ 319,284 $ - - - - $ - $ 319,284	Buildings $ 818,773 976 (23 ) - $ 819,726 $ 317,086 24,592 (23 ) - $ 341,655 $ 478,071	Machinery and Equipment $ 65,950 2,277 - - $ 68,227 $ 33,506 7,904 - - $ 41,410 $ 26,817	Computer Telecommuni- cations Equipment $ 349,274 17,126 (42,900 ) (135) $ 323,365 $ 266,426 26,981 (38,040 ) (72) $ 255,295 $ 68,070	Office Equipment $ 113,181 26,117 (9,973 ) (22) $ 129,303 $ 81,051 10,900 (9,365 ) (9) $ 82,577 $ 46,726	Leasehold Improvements $ 364,057 14,385 (58,247 ) (150) $ 320,045 $ 327,631 22,734 (56,239 ) (139) $ 293,987 $ 26,058	Other Equipment $ 8,362 - (974 ) - $ 7,388 $ 7,221 267 (736 ) - $ 6,752 $ 636	Total $ 2,038,881 60,881 (112,117 ) (307) $ 1,987,338 $ 1,032,921 93,378 (104,403 ) (220) $ 1,021,676 $ 965,662

The above items of property, plant and equipment are depreciated on a straight-line basis over their estimated useful lives as follows:

Buildings Main buildings 50-55 years Mechatronic construction 15 years Decoration construction 3-5 years Machinery and equipment 5-8 years Computer telecommunications equipment 3-8 years Office equipment 3-6 years Leasehold improvements 3-5 years Other equipment 4-6 years

Operating leases are mainly leases of land and buildings. All operating lease contracts contain market review clauses in the event that the lessees exercise their options to extend. The lessees do not have bargain purchase options to acquire the assets at the expiry of the lease periods.

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

	December 31,
	2018
Not later than 1 year	$ 51,952
Later than 1 year and not later than 5 years	3,421
	$ 55,373

As of December 31, 2019 and 2018, there was no indication of impairment of property, plant and equipment. Therefore, the Group did not conduct an assessment of impairment.

• 34 -

15. LEASE ARRANGEMENTS

a. Right-of-use assets - 2019

	December 31,
	2019
Carrying amounts
Buildings	$ 707,051
Transportation equipment	259
Others	300
	$ 707,610
	For the Year
	Ended
	December 31,
	2019
Additions to right-of-use assets	$ 342,295
Depreciation charge for right-of-use assets
Buildings	$ 341,553
Transportation equipment	2,357
Others	480
	$ 344,390

The initial recognition of right-of-use assets and lease liabilities of $342,295 thousand was noncash transactions for the year ended December 31, 2019.

b. Lease liabilities - 2019

	December 31,
	2019
Carrying amounts
Current	$ 269,839
Non-current	453,847
	$ 723,686
Range of discount rate for lease liabilities was as follows:
	December 31,
	2019
Buildings	1.46%-1.85%
Transportation equipment	1.60%-1.79%
Others	1.50%-1.90%

• 35 -

• c. Material lease-in activities and terms

The Group leases certain buildings for the use of offices and retail stores with lease terms of 1 to 10 years. The Group does not have bargain purchase options to acquire the buildings at the end of the lease terms.

• d. Other lease information

Lease arrangements under operating leases for the leasing out of freehold property, plant and equipment are set out in Notes 14.

2019
	For the Year
		Ended
	December 31,
		2019
Expenses relating to low-value asset leases	$	4,445
Total cash outflow for leases	$	359,384

The Group leases certain office equipment which qualify as low-value asset leases. The Group has elected to apply the recognition exemption and thus, did not recognize right-of-use assets and lease liabilities for these leases.

2018

The future minimum lease payments of non-cancellable operating lease commitments are as follows:

	December 31,
	2018
Not later than 1 year	$ 285,974
Later than 1 year and not later than 5 years	567,151
Later than 5 years	12,818
	$ 865,943

The lease payments recognized in profit or loss were as follows:

For the Year Ended December 31, 2018 $ 418,793

• 36 -

16. GOODWILL

Cost Balance on January 1 and December 31 Accumulated impairment losses Balance on January 1 Impairment losses recognized Balance on December 31 Carrying amount on December 31	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2019 $ 55,569 $ 8,622 8,946 $ 17,568 $ 38,001	2018 $ 55,569 $ 8,622 - $ 8,622 $ 46,947

The Group acquired Youth and its subsidiaries on September 2, 2015, and recognized goodwill relating to Youth’s expected benefit from its business with Apple.

The Group considered the smallest identifiable asset group that generates cash inflows as a single cash-generating unit by businesses type.

The recoverable amount such cash-generating unit was determined by the Group based on a value in use calculation that used the cash flow projections in the financial budgets approved by management covering a 5-year period. The key assumptions and their related calculation methods used in the recoverable amount calculation were as follows:

a. Operating revenue growth rate

The Group calculated the recoverable amount according to the actual selling situation and the average price from the past few years and considered the impact of the high value-added product and wrapping services. Eventually, the Group estimated the future operating revenue based on the operating strategies and the market developing situation in the future.

• b. Expected gross profit rate

The Group adjusted the expected gross profit rate based on the average gross profit before the budget period considering the expected improvement on efficiency. Except for the improvement on expected efficiency, the expected gross profit rate reflected the experience from the past. The management used different products, services and channels of distribution as the basis of estimated profit gross rate.

c. Discount rate

The Group used the Weighted Average Cost of Capital (WACC) as the discount rate. The discount rates used by the Group were as follows:

Discount rate	December 31
	2019 2018 12.30% 13.70%

Due to industry competition that made gross profit rate decline, the Group expected the recoverable amount of goodwill was less than carrying amount, as a result, the Group recognized goodwill impairment loss of $8,946 thousand for the year ended December 31, 2019. The Group did not recognize any impairment loss for the year ended December 31, 2018.

• 37 -

17. INTANGIBLE ASSETS

Cost Balance on January 1, 2019 Additions Disposals Effect of foreign currency exchange differences Balance on December 31, 2019 Accumulated amortization Balance on January 1, 2019 Amortization expenses Disposals Effect of foreign currency exchange differences Balance on December 31, 2019 Carrying amounts on December 31, 2019 Cost Balance on January 1, 2018 Additions Disposals Effect of foreign currency exchange differences Balance on December 31, 2018 Accumulated amortization Balance on January 1, 2018 Amortization expenses Impairment losses recognized Disposals Effect of foreign currency exchange differences Balance on December 31, 2018 Carrying amounts on December 31, 2018	Computer Software Licenses and Franchises Trademark $ 186,118 $ 148,000 $ 56,178 41,662 - - (90,467) - - (12) - (103) $ 137,301 $ 148,000 $ 56,075 $ 155,429 $ 24,050 $ 17,553 32,855 7,400 5,491 (90,467) - - (12) - (34) $ 97,805 $ 31,450 $ 23,010 $ 39,496 $ 116,550 $ 33,065 $ 150,328 $ 206,000 $ 56,261 37,512 - - (1,713) (58,000) - (9) - (83) $ 186,118 $ 148,000 $ 56,178 $ 131,032 $ 23,175 $ 12,073 26,116 8,125 5,497 - 50,750 - (1,713) (58,000) - (6) - (17) $ 155,429 $ 24,050 $ 17,553 $ 30,689 $ 123,950 $ 38,625	Total $ 390,296 41,662 (90,467) (115) $ 341,376 $ 197,032 45,746 (90,467) (46) $ 152,265 $ 189,111 $ 412,589 37,512 (59,713) (92) $ 390,296 $ 166,280 39,738 50,750 (59,713) (23) $ 197,032 $ 193,264

• 38 -

Intangible assets are amortized on a straight-line basis over their estimated useful lives as follows:

Computer software 1-5 years Licenses and franchises 20 years Trademark 10-11 years

The Group evaluated that there was no future needs for certain licenses and franchises, which caused the carrying amount to be unrecoverable. Accordingly, the Group recognized an impairment loss of $50,750 thousand for the year ended December 31, 2018.

18. NOTES PAYABLE AND TRADE PAYABLES

Notes payable Operating Trade payables Operating		**December 31 **	**December 31 **
		2019 $ 3,499 $ 1,546,693	2018 $ 16,589 $ 2,230,261

a. Notes payable

Notes payable were mainly from the payment for the rent of the offices and the business places.

b. Trade payables

The average credit period is one month. The Group has set up financial risk management policies in place to ensure that all payables will be paid within the pre-agreed credit terms.

19. OTHER PAYABLES

Payables for bonuses Payables for salaries Accrued marketing compensation Accrued compensation to employees and remuneration to directors and supervisors Others		December 31	December 31
		2019 $ 169,080 150,011 147,535 26,403 589,597 $ 1,082,626	2018 $ 201,588 172,537 157,912 21,864 373,066 $ 926,967

• 39 -

20. RETIREMENT BENEFIT PLANS

a. Defined contribution plans

Senao, Youth, ISPOT, Youyi, Aval, Wiin, Senyoung and Senaolife within the Group adopted a pension plan under the Labor Pension Act (the “LPA”), which is a state-managed defined contribution plan. Under the LPA, an entity makes monthly contributions to employees’ individual pension accounts at 6% of monthly salaries and wages.

The employees of the Group’s subsidiaries in China are members of a state-managed retirement benefit plan operated by the government of China. The subsidiaries are required to contribute a specified percentage of payroll costs to the retirement benefit scheme to fund the benefits. The only obligation of the Group with respect to the retirement benefit plan is to make the specified contributions.

Senao Samoa did not set up a pension plan.

Senao HK has a defined contribution pension plan. Senao HK did not have any regular employee as of December 31, 2019, therefore, Senao HK did not recognize any pension cost.

b. Defined benefit plans

The defined benefit plans adopted by Senao in accordance with the Labor Standards Law is operated by the government of the ROC. Pension benefits are calculated on the basis of the length of service and average monthly salaries of the 6 months before retirement. Senao contributes amounts equal to 2% of total monthly salaries and wages to a pension fund administered by the pension fund monitoring committee. Pension contributions are deposited in the Bank of Taiwan in the committee’s name. Before the end of each year, Senao assesses the balance in the pension fund. If the amount of the balance in the pension fund is inadequate to pay retirement benefits for employees who conform to retirement requirements in the next year, Senao is required to fund the difference in one appropriation that should be made before the end of March of the next year. The pension fund is managed by the Bureau of Labor Funds, Ministry of Labor (“the Bureau”); the Group has no right to influence the investment policy and strategy.

The amounts included in the consolidated balance sheets in respect of the Group’s defined benefit plans were as follows:

Present value of funded defined benefit obligation Fair value of plan assets Funded status - deficit Net defined benefit liabilities		December 31	December 31
		2019 $ 238,828 (157,221) 81,607 $ 81,607	2018 $ 268,875 (164,581) 104,294 $ 104,294

• 40 -

Movements in net defined benefit liabilities were as follows:

	Present Value		Net Defined	Net Defined
	of Funded			Benefit
	Defined Benefit	Fair Value of	Liabilities
	Obligation	Plan Assets		(Assets)
Balance on January 1, 2019	$ 268,875	$ (164,581)	$	104,294
Service cost
Current service cost	1,095	-		1,095
Net interest expense (income)	2,688	(1,670)		1,018
Recognized in profit or loss	3,783	(1,670)		2,113
Remeasurement
Return on plan assets (excluding amounts
included in net interest)	-	(5,892)		(5,892)
Actuarial loss - changes in demographic
assumptions	5,706	-		5,706
Actuarial loss - changes in financial
assumptions	6,731	-		6,731
Actuarial gain - experience adjustments	(26,908)	-		(26,908)
Recognized in other comprehensive income	(14,471)	(5,892)		(20,363)
Contributions from the employer	-	(4,437)		(4,437)
Benefits paid	(19,359)	19,359		-
Balance on December 31, 2019	$ 238,828	$ (157,221)	$	81,607
Balance on January 1, 2018	$ 255,121	$ (160,802)	$	94,319
Service cost
Current service cost	1,088	-		1,088
Net interest expense (income)	3,827	(2,450)		1,377
Recognized in profit or loss	4,915	(2,450)		2,465
Remeasurement
Return on plan assets (excluding amounts
included in net interest)	-	(3,980)		(3,980)
Actuarial loss - changes in demographic
assumptions	2,558	-		2,558
Actuarial loss - changes in financial
assumptions	15,782	-		15,782
Actuarial gain - experience adjustments	(1,804)	-		(1,804)
Recognized in other comprehensive income	16,536	(3,980)		12,556
Contributions from the employer	-	(5,046)		(5,046)
Benefits paid	(7,697)	7,697		-
Balance on December 31, 2018	$ 268,875	$ (164,581)	$	104,294

An analysis by function of the amounts recognized in profit or loss in respect of the defined benefit plans is as follows:

Operating costs Operating expenses	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2019 $ 178 1,935 $ 2,113	2018 $ 215 2,250 $ 2,465

• 41 -

Through the defined benefit plans under the Labor Standards Law, the Group is exposed to the following risks:

• 1) Investment risk: The plan assets are invested in domestic and foreign equity and debt securities, bank deposits, etc. The investment is conducted at the discretion of the Bureau or under the mandated management. However, in accordance with relevant regulations, the return generated by plan assets should not be below the interest rate for a 2-year time deposit with local banks.

• 2) Interest risk: A decrease in the government bond interest rate will increase the present value of the defined benefit obligation; however, this will be partially offset by an increase in the return on the plans’ debt investments.

• 3) Salary risk: The present value of the defined benefit obligation is calculated by reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the present value of the defined benefit obligation.

The actuarial valuations of the present value of the defined benefit obligation were carried out by qualified actuaries. The significant assumptions used for the purposes of the actuarial valuations were as follows:

Discount rates Expected rates of salary increase	Measurement Date
	December 31
	2019 2018 0.75% 1.00% 2.00% 2.00%

If possible reasonable changes in each of the significant actuarial assumptions will occur and all other assumptions will remain constant, the present value of the defined benefit obligation would increase (decrease) as follows:

Discount rates 0.25% increase 0.25% decrease Expected rates of salary increase 0.25% increase 0.25% decrease		December	31
		2019 $ (6,843) $ 7,146 $ 6,941 $ (6,683)	2018 $ (8,083) $ 8,450 $ 8,230 $ (7,914)

The sensitivity analysis presented above may not be representative of the actual changes in the present value of the defined benefit obligation as it is unlikely that changes in assumptions would occur in isolation of one another as some of the assumptions may be correlated.

Expected contributions to the plans for the next year Average duration of the defined benefit obligation		December	31
		2019 $ 4,113 11.5 years	2018 $ 4,900 12.1 years

• 42 -

21. EQUITY

a. Share capital - ordinary shares

Number of shares authorized (in thousands) Shares authorized Number of shares issued and fully paid (in thousands) Shares issued		**December 31 **	**December 31 **
		2019 450,000 $ 4,500,000 258,253 $ 2,582,527	2018 450,000 $ 4,500,000 258,253 $ 2,582,527

The issued ordinary shares with a par value at $10 are entitled the right to vote and receive dividends.

The number of employee share warrants retained in the authorized shares is 20,000 thousand shares, which can be issued separately.

b. Capital surplus

The adjustments to capital surplus for the years ended December 31, 2019 and 2018 were as follows:

Balance on January 1, 2019 and December 31, 2019 Balance on January 1, 2018 Share-based payment transactions Changes in equity interest of associates accounted for using equity method Balance on December 31, 2018	Share Premium Compensation Costs Related to Share-based Payment Movements of Capital Surplus for Associates Accounted for Using Equity Method Movements of Capital Surplus due to Transcations of Treasury Shares $ 346,007 $ 215,648 $ 131,722 $ 24,508 $ 346,007 $ 215,648 $ 131,761 $ 9,898 - - - 14,610 - - (39) - $ 346,007 $ 215,648 $ 131,722 $ 24,508	Total $ 717,885 $ 703,314 14,610 (39) $ 717,885

Capital surplus from share premium and the premium from disposal of treasury shares may be utilized to offset deficits; furthermore, when Senao has no deficit, it may be distributed in cash or capitalized, which however is limited to a certain percentage of Senao’s paid-in capital.

The capital surplus from movements of investments in associates accounted for using equity method, subsequent invalidation from share-based payment transactions and those generated by reclassifying the employee share options to treasury shares under the share-based payment may only be utilized to offset deficits.

The capital surplus from share-based payment transactions cannot be utilized in any condition.

• 43 -

• c. Retained earnings and dividends policy

Under the Senao’s dividends policy, where Senao made a profit in a fiscal year, the profit shall be first utilized for paying taxes, offsetting losses of previous years, setting aside as a legal reserve 10% of the remaining profit, setting aside or reversing a special reserve in accordance with the laws and regulations, and then any remaining profit together with any undistributed retained earnings shall be used by Senao’s board of directors as the basis for proposing a distribution plan, which should be resolved in the shareholders’ meeting for the distribution of dividends and bonuses to shareholders. For the Senao’s policies on the distribution of employees’ compensation and remuneration of directors and supervisors, refer to Employees’ compensation and remuneration of directors and supervisors in Note 23-f.

In order to meet “the balanced dividend policy” to conform with Senao’s current operating environment and the goal of sustainability, the policy on the distribution of dividends emphasizes the need for Senao’s stability and growth. No less than 30% of the distributable remaining earnings shall be distributed as stockholders’ dividends, of which cash dividends to be distributed shall not be less than 10% of the total amount of dividends to be distributed.

An appropriation of earnings to a legal reserve shall be made until the legal reserve equals Senao’s paid-in capital. The legal reserve may be used to offset deficits. If Senao has no deficit and the legal reserve has exceeded 25% of Senao’s paid-in capital, the excess may be transferred to capital or distributed in cash.

Senao should appropriate or reserve a special reserve in accordance with Rule No. 1010012865 and Rule No. 1010047490 issued by the FSC and in the directive titled “Questions and Answers for Special Reserves Appropriated Following Adoption of IFRSs”. Distributions can be made out of any subsequent reserve of the debit to other equity items.

The appropriations of earnings for 2018 and 2017 approved in the shareholders’ meetings on June 14, 2019 and 2018, respectively, were as follows:

Legal reserve Special reserve Cash dividends	Appropriation of Earnings For Fiscal Year 2018 For Fiscal Year 2017 $ 40,585 $ 82,552 13,536 - 374,466 817,683	Dividends Per Share (NT$)
		For Fiscal Year 2018 For Fiscal Year 2017 $ 1.45 $ 3.25

Senao transferred 6,658 thousand shares of treasury stocks to employees on June 8, 2018, which increased the outstanding shares. The shareholders’ meetings authorized the chairman to adjust the distribution ratio of dividends on June 14, 2018. The chairman adjusted the dividends per share to $3.1662 on June 28, 2018.

As of the date of approval of consolidated financial statements, the board of directors of Senao has not resolved the appropriation of earnings for 2019.

• 44 -

d. Treasury shares

	Shares at the			Shares at the
	Beginning of			End of the
	the Year (In	Addition (In	Reduction (In	Year (In
	Thousands of	Thousands of	Thousands of	Thousands of
Purpose of Buy-back	Shares)	Shares)	Shares)	Shares)
2018
Buy back shares pursuant to an
employee share scheme	6,658	-	6,658	-

The Securities and Exchange Act limits the proportion of the buy-back shares to the outstanding shares; the buy-back shares should not be more than 10% of the total issued shares and the total amount of the buy-back shares should not exceed the retained earnings plus the share premium and the realized paid-in capital.

Under the Securities and Exchange Act, Senao shall neither pledge treasury shares nor exercise shareholders’ rights on these shares, such as the rights to dividends and to vote.

In April 2018, the board of directors of Senao resolved the transfer of the treasury shares to the qualified employees. As of December 31, 2018, Senao estimated and recognized the compensation costs as salary expenses and “capital surplus - employee share option” both in the amount of $15,564 thousand as calculated according to the stock option appraisal model on the grant date. After transferring those treasury stocks, the amount was reclassified to the capital surplus - treasury transaction. The number of shares transferred to the employees was 6,658 thousand share and the amount was $327,122 thousand. The difference between $327,122 thousand and the carrying amount of $328,076 thousand was $954 thousand, which was substracted from “capital surplus - treasury transaction”.

The abovementioned treasury shares transferred to the employees were appraised using the Black-Scholes Model. The parameters of the model were as follows:

Exercise price (per share) Market price on the grant day (per share) Expected price volatility Risk-free interest rate Expected dividend rate Expected duration Weighted average fair value of the stock option in the current period (per share)	The Date the Options Were Granted
	May 7, 2018 $49.28 $51.60 8.78% 0.59% 0.00% 0.05 year $2.3376

The expected price volatility was based on the three months’ daily history stock price volatility prior to the grant date.

• 45 -

e. Noncontrolling interests

Beginning balance Effect of retrospective adjustments Balance at January 1, 2019 as adjusted Changes in noncontrolling interests in subsidiaries Shares attributed to noncontrolling interests Net loss of the year Ending balance	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2019 $ 15,589 (25) 15,564 - (1,220) $ 14,344	2018 $ 22,682 - 22,682 244 (7,337) $ 15,589

22. REVENUE

Revenue from contracts with customers Revenue from sale of goods Revenue from rendering of services Revenue from repairs and maintenance services	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2019 $ 26,714,670 1,437,351 712,852 $ 28,864,873	2018 $ 28,954,985 1,438,299 847,656 $ 31,240,940

Refer to Note 34 for detail information relating to disaggregation of revenues.

Contract balances

Contract liabilities Sale of goods Others		December 31	December 31
		2019 $ 94,186 22,897 $ 117,083	2018 $ 28,981 23,860 $ 52,841

The changes in the balance of contract liabilities primarily result from the timing difference between the Group’s performance and the respective customer’s payment.

Revenue recognized in the current year that was included in the contract liabilities at the beginning of the year was as follows:

Revenues from the beginning contract liabilities Sale of goods Others	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2019 $ 28,981 22,798 $ 51,779	2018 $ 32,734 31,463 $ 64,197

• 46 -

23. NET INCOME

a. Other income and expenses

Impairment loss on goodwill Loss on disposal of property, plant and equipment Net gain on lease modification Impairment loss on intangible assets	**For the Year Ended December 31 **	**For the Year Ended December 31 **	**For the Year Ended December 31 **
		2019 $ (8,946) (2,670) 2,751 - $ (8,865)	2018 $ - (7,193) - (50,750) $ (57,943)

b. Other income

Rental income Interest income Others c. Interest expense Interest on lease liabilities Interest on bank loans d. Depreciation and amortization expenses Property, plant and equipment Right-of-use assets Intangible assets An analysis of depreciation by function Operating costs Operating expenses An analysis of amortization by function Operating expenses	For the Year Ended	For the Year Ended	December 31
	2019 $ 80,816 8,265 32,434 $ 121,515 **For the Year Ended **		2018 $ 68,752 11,762 51,969 $ 132,483 **December 31 **
	2019 $ 14,546 149 $ 14,695 For the Year Ended		2018 $ - 182 $ 182 December 31
		2019 $ 84,468 344,390 45,746 $ 474,604 $ 5,503 423,355 $ 428,858 $ 45,746	2018 $ 93,378 - 39,738 $ 133,116 $ 6,415 86,963 $ 93,378 $ 39,738

• 47 -

e. Employee benefits expense

Post-employment benefits (Note 20) Defined contribution plans Defined benefit plans Termination benefits Share-based payment Equity-settled share-based payment Other employee benefits Total employee benefits expense An analysis of employee benefits expense by function Operating costs Operating expenses	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2019 $ 81,427 2,113 83,540 25,483 - 1,778,254 $ 1,887,277 $ 148,712 1,738,565 $ 1,887,277	2018 $ 94,674 2,465 97,139 15,933 15,564 2,091,373 $ 2,220,009 $ 227,811 1,992,198 $ 2,220,009

f. Employees’ compensation and remuneration of directors and supervisors

According to the Articles of Incorporation of Senao, Senao accrued employees’ compensation and remuneration of directors and supervisors at rates of no less than 3% and no higher than 3%, respectively, of net profit before income tax, employees’ compensation, and remuneration of directors and supervisors.

If there is a change in the amounts after the annual consolidated financial statements are authorized for issue, the differences are recorded as a change in the accounting estimate and will be recognized in the following year.

The employees’ compensation and remuneration of directors and supervisors for the years ended December 31, 2019 and 2018, which had been approved by Senao’s board of directors on February 21, 2020 and February 22, 2019, respectively, were as follows:

Employees’ compensation Remuneration of directors and supervisors	For the Year Ended December 31	For the Year Ended December 31
	2019 Cash $ 17,560 7,526	2018
		Cash $ 15,181 6,506

There is no difference between the actual amounts of employees’ compensation and remuneration of directors and supervisors paid and the amounts recognized in the consolidated financial statements for the years ended December 31, 2019 and 2018.

Information on the employees’ compensation and remuneration of directors and supervisors resolved by Senao’s board of directors in 2020 and 2019 is available at the Market Observation Post System website of the Taiwan Stock Exchange.

• 48 -

• g. Net losses on foreign currency exchange

Foreign exchange gains Foreign exchange losses Net losses	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2019 $ 9,930 (12,242) $ (2,312)	2018 $ 14,625 (16,661) $ (2,036)

24. INCOME TAX

a. Major components of tax expense recognized in profit or loss

Current tax In respect of the current year Adjustments for prior years Deferred tax In respect of the current year Change in tax rate Adjustments for prior years Income tax expense recognized in profit or loss	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2019 $ 74,996 487 (5,249) - (381) $ 69,853	2018 $ 74,263 2,181 (10,744) (57,571) 5 $ 8,134

A reconciliation of accounting profit and income tax expense is as follows:

Income before income tax Income tax expense calculated at the statutory rate (20%) Nondeductible expenses in determining taxable income Investment gain not recognized in taxable income Deferred tax effect of earnings of subsidiaries Unrecognized deductible temporary differences Unrecognized loss carryforwards Change in tax rate Effect of different tax rates of group entities operating in other jurisdictions Adjustments for prior years’ tax Income tax expense recognized in profit or loss	For the Year Ended	For the Year Ended	December 31
		2019 $ 479,864 $ 95,973 918 (30,052) (1,944) (530) 6,657 - (1,275) 106 $ 69,853	2018 $ 406,651 $ 81,330 2,274 (16,261) (20,829) (697) 19,168 (57,571) (1,466) 2,186 $ 8,134

The Income Tax Act in the ROC was amended in 2018, and the corporate income tax rate was adjusted from 17% to 20%. In addition, the rate of the corporate surtax applicable to the 2018 unappropriated earnings has been reduced from 10% to 5%. The applicable tax rate used by subsidiaries in China is 25%. Senao Samoa’s income is exempt from taxation by law. Senao HK did not have any tax position until December 31, 2019.

• 49 -

• b. Income tax recognized in other comprehensive income

Deferred tax Remeasurement on defined benefit plan Effect of change in tax rate Current tax liabilities Income tax payable	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2019 $ 4,073 - $ 4,073 December	2018 $ (2,511) (1,988) $ (4,499) 31
		2019 $ 37,636	2018 $ 1,443

c. Current tax liabilities

d. Deferred tax assets and liabilities

The movements of deferred tax assets and deferred tax liabilities are as follows:

For the year ended December 31, 2019

Deferred tax assets Temporary differences Investment loss on subsidiaries Defined benefit obligation Payables for annual leave Valuation loss on inventory Unrealized sales discounts and allowances Contract liabilities Property, plant and equipment Others Loss carryforwards Deferred tax liabilities Temporary differences Intangible assets Unrealized foreign exchange gain Financial instruments at FVTPL	Balance on January 1, 2019 Adjustment on Initial Application of IFRS 16 $ 389,379 $ - 20,069 - 10,497 - 3,950 - 9,548 - 421 - 1,998 - 1,140 2,947 437,002 2,947 5,465 - $ 442,467 $ 2,947 $ 32,027 $ - 75 - 54 - $ 32,156 $ -	Balance on January 1, 2019 (Adjusted) Recognized in Profit or Loss Recognized in Other Compre- hensive Income $ 389,379 $ 10,129 $ - 20,069 (464 ) (4,073 ) 10,497 (31 ) - 3,950 (1,028 ) - 9,548 (5,023 ) - 421 1,949 - 1,998 (45 ) - 4,087 (453) - 439,949 5,034 (4,073 ) 5,465 (1,995) - $ 445,414 $ 3,039 $ (4,073) $ 32,027 $ (2,514 ) $ - 75 (75 ) - 54 (2) - $ 32,156 $ (2,591) $ -	Closing Balance $ 399,508 15,532 10,466 2,922 4,525 2,370 1,953 3,634
			440,910 3,470
			$ 444,380
			$ 29,513 - 52
			$ 29,565

• 50 -

For the year ended December 31, 2018

Deferred tax assets Temporary differences Investment loss on subsidiaries Defined benefit obligation Payables for annual leave Valuation loss on inventory Unrealized sales discounts and allowances Contract liabilities Property, plant and equipment Financial instruments at FVTPL Others Loss carryforwards Deferred tax liabilities Temporary differences Intangible assets Unrealized foreign exchange gain Financial instruments at FVTPL

Opening Balance Recognized in Profit or Loss Recognized in Other Comprehensive Income Closing Balance $ 325,761 $ 63,618 $ - $ 389,379 15,363 207 4,499 20,069 8,924 1,573 - 10,497 3,118 832 - 3,950 4,855 4,693 - 9,548 3,009 (2,588) - 421 1,762 236 - 1,998 82 (82) - - 1,220 (80) - 1,140 364,094 68,409 4,499 437,002 11,653 (6,188) - 5,465 $ 375,747 $ 62,221 $ 4,499 $ 442,467 $ 38,111 $ (6,084) $ - $ 32,027 134 (59) - 75 - 54 - 54 $ 38,245 $ (6,089) $ - $ 32,156

e. Deductible temporary differences and unused loss carryforwards for which no deferred tax assets have been recognized in the consolidated balance sheets

Loss carryforwards Expire in 2020 Expire in 2021 Expire in 2022 Expire in 2023 Expire in 2024 Expire in 2025 Expire in 2026 Expire in 2027 Expire in 2028 Expire in 2029 Deductible temporary differences		December	31
		2019 $ 22,505 9,325 10,237 8,226 8,166 15,415 8,395 2,559 907 288 $ 86,023 $ 813	2018 $ 41,369 9,325 10,237 8,434 1,607 15,415 8,395 2,559 590 - $ 97,931 $ 1,369

• 51 -

• f. Information about unused loss carryforwards

Loss carryforwards as of December 31, 2019 comprised:

Unused Amount	Expiry Year
$ 22,505	2020
9,325	2021
11,364	2022
8,899	2023
8,166	2024
16,097	2025
8,395	2026
3,477	2027
907	2028
358	2029
$ 89,493

• g. Income tax assessments

The income tax returns of Senao, Youth, ISPOT, Youyi, Aval, and Senyoung have been assessed by the tax authorities through 2017.

25. EARNINGS PER SHARE

The earnings and weighted average number of ordinary shares outstanding in the computation of earnings per share were as follows:

Net Income for the Year

Net income attributable to owners of Senao	For the Year Ended	For the Year Ended	December 31
		2019 $ 411,231	2018 $ 405,854

Weighted Average Number of Ordinary Shares Outstanding (In Thousands of Shares)

Weighted average number of ordinary shares in the computation of basic earnings per share Effect of potentially dilutive ordinary shares: Employee compensation Weighted average number of ordinary shares used in the computation of diluted earnings per share	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2019 258,253 609 258,862	2018 255,936 535 256,471

Senao may settle the employee compensation in shares or cash, Senao shall presume the entire amount of the compensation will be settled in shares, and the resulting potential shares are included in the weighted average number of shares outstanding used in the computation of diluted earnings per share, as the effect is dilutive. Such dilutive effect of the potential shares is included in the computation of diluted earnings per share until the number of shares to be distributed to employees is resolved in the following year.

• 52 -

Since the exercise price of the options issued by Senao as of December 31, 2019 and 2018 exceeded the average market price of the shares during 2019 and 2018, respectively, they were anti-dilutive and excluded from the computation of diluted earnings per share.

26. SHARE-BASED PAYMENT ARRANGEMENTS

	Resolution Date by
Effective Date for Plan	SENAO’s Board of	Stock Options Units	Exercise Price
Registration	Directors	(Thousand)	(NT$)
2012.05.28	2013.04.29	10,000	$66.2
			(Original price $93)

Each option is eligible to subscribe for one common share when exercisable. The options are granted at an exercise price equal to the closing price of Senao’s ordinary shares listed on the TWSE being the higher of closing price or par value. Senao’s plan has exercise price adjustment formula in case of changes in ordinary shares equity (including cash capital increase, new share issue through capitalization of earnings and capital surplus, merger, spin-off and new share issue for Global Depositary Shares, and so on) or distribution of cash dividends. The options of Senao’s plan are valid for six years and the graded vesting schedule provides 50% of options granted will vest two years after the grant date and another two tranches of 25% each will vest three and four years after the grant date respectively.

Senao modified the plan terms of the outstanding stock options in July 2018 and the exercise price changed from $70.70 to $66.20 per share. The modification did not cause any incremental fair value.

Information on Senao’s employee share options for the years ended December 31, 2019 and 2018 was as follows:

Balance on January 1 Options forfeited Balance on December 31 Options exercisable, end of period	For the Year Ended December 31	For the Year Ended December 31
	2019 Granted on May 7, 2013 Number of Options (Thousand) Weighted- average Exercise Price (NT$) 5,318 $ 66.2 (5,318) - - - - -	2018
		Granted on May 7, 2013
		Number of Options (Thousand) Weighted- average Exercise Price (NT$) 5,926 $ 70.70 (608) - 5,318 66.20 5,318 66.20

As of December 31, 2018, information about employee share options outstanding was as follows:

Options Outstanding

Weighted Range of Exercise Price (NT$) Number of Options (Thousand) Average Remaining Contractual Life (Years) Weighted Average Exercise Price (NT$) $66.20 5,318 0.35 $66.20	Options Exercisable
	Number of Options (Thousand) Weighted Average Exercise Price (NT$) 5,318 $66.20

• 53 -

Senao used the Black-Scholes model to evaluate the options’ fair value on the grant-date. The Black-Scholes model and the related information and the fair value of the options were as follows:

	Stock Options
	Granted on
	May 7, 2013
Exercise price (NT$)	$93.00
Grant-date share price (NT$)	$93.00
Risk-free interest rate	0.91%
Expected dividend rate	0.00%
Expected life	4.375 years
Expected volatility	36.22%
Weighted average fair value of grants (NT$)	$28.72

Expected volatility was based on the historical share price volatility of Senao over the period equal to the expected life of Senao’s plan.

27. CAPITAL MANAGEMENT

The Group manages its capital to ensure that entities in the Group will be able to continue as going concerns while maximizing the return to stakeholders through the optimization of the debt and equity balance.

28. FINANCIAL INSTRUMENTS

• a. Fair value of financial instruments not measured at fair value

The carrying amounts of the Group’s financial assets and liabilities not measured at fair value approximate their fair values.

• b. Fair value of financial instruments measured at fair value on a recurring basis

• 1) Fair value hierarchy

December 31, 2019

Financial assets at FVTPL Derivatives Financial assets at FVTOCI Investments in equity instruments at FVTOCI Domestic non-listed shares Financial liabilities at FVTPL Derivatives	Level 1 $ - $ - $ -	Level 2 $ 53 $ - $ 11	Level 3 $ - $ 10,648 $ -	Total $ 53
				$ 10,648
				$ 11

• 54 -

December 31, 2018

Financial assets at FVTOCI Investments in equity instruments at FVTOCI Domestic non-listed shares Financial liabilities at FVTPL Derivatives	Level 1 $ - $ -	Level 2 $ - $ 217	Level 3 $ 25,704 $ -	Total $ 25,704
				$ 217

There were no transfers between Levels 1 and 2 in the current and prior periods.

• 2) Valuation techniques and inputs applied for Level 2 fair value measurement

The fair value of derivative instruments are calculated based on the forward exchange rate on maturity date of each individual forward exchange contract. Exchange rates used are provided by financial institution’s quoting system. The estimates and assumptions the Group used for measurement are consistent with other market participants.

• 3) Valuation techniques and inputs applied for Level 3 fair value measurement

The fair values of non-listed domestic equity investments were determined using the income approach and the balance sheet approach.

In the income approach, the discounted cash flow method was used to capture the present value of the expected future economic benefits to be derived from the ownership of these investees. An increase in long-term revenue growth rates or a decrease in WACC or discount for lack of marketability used in isolation would result in increase in fair value.

In the balance sheet approach, the total value, including all specific assets and liabilities of the evaluation target, is considered to reflect the entity’s integrated value. A decrease in discount for lack of marketability would result in increase in fair value.

• c. Categories of financial instruments

Financial assets Financial assets at amortized cost (1) Designated as at FVTPL Mandatorily classified as at FVTPL Financial assets at FVTOCI Equity investments Financial liabilities Financial liabilities at FVTPL Held for trading Financial liabilities at amortized cost (2)	December 31
	2019 2018 $ 4,859,511 $ 5,055,676 53 - 10,648 25,704 11 217 2,810,167 3,258,796

• 55 -

• 1) The balances include loans and receivables measured at amortized cost, which comprise cash and cash equivalents, notes receivable, trade receivables, partial other receivables, other current assets, refundable deposits and partial other noncurrent assets.

• 2) The balances include financial liabilities measured at amortized cost, which comprise notes payable, trade payables, partial other payables and guarantee deposits.

• d. Financial risk management objectives and policies

The Group’s major financial instruments include receivables and payables. The Group’s Finance Department provides services to the business, coordinates access to domestic and international financial markets, monitors and manages the financial risks relating to the operations of the Group through internal risk reports which analyze exposures by degree and magnitude of risks. These risks include market risk (including foreign currency risk, interest rate risk and other price risk), credit risk and liquidity risk.

The Group sought to minimize the effects of these risks by using derivative financial instruments to hedge risk exposures. The use of financial derivatives was governed by the Group’s policies approved by the board of directors, whose purpose was to effectively manage the risks caused by changes in foreign currency rates and interest rates. Compliance with policies and exposure limits was reviewed by the internal auditors on a continuous basis. The Group did not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes.

The Group’s Finance Department reports quarterly to the Group’s board of directors, which assesses if the report is consistent with the established operating strategies and risk standards.

1) Market risk

The Group’s activities exposed it primarily to the financial risks of changes in foreign currency exchange rates and interest rates. The Group entered into foreign exchange forward contracts to manage its exposure to foreign currency risk.

There has been no change to the Group’s exposure to market risks or the manner in which these risks were managed and measured.

• a) Foreign currency risk

The carrying amounts of the Group’s foreign currency denominated monetary assets and monetary liabilities (including those eliminated on consolidation) at the end of the reporting period are set out in Notes 7 and 32.

Sensitivity analysis

The Group was mainly exposed to the fluctuations of USD.

• 56 -

The following table details the Group’s sensitivity to a 5% increase and decrease in the New Taiwan dollars (i.e. the functional currency) against the relevant foreign currencies. The sensitivity rate used when reporting foreign currency risk internally to key management personnel and representing management’s assessment of the reasonably possible change in foreign exchange rates is 5%. The sensitivity analysis included only outstanding foreign currency denominated monetary items and foreign exchange forward contracts, and adjusts their translation at the end of the reporting period for a 5% change in foreign currency rates. The number below indicates the movement in pre-tax profit associated with the New Taiwan dollar strengthening 5% against the relevant currency. For a 5% weakening of the New Taiwan dollars against the relevant currency, the pre-tax profit and the balances below would be an equal and negative change.

Profit/(loss)	USD Impact
	**For the Year Ended December 31 **
	2019 2018 $ 436 $ (1,077)

The abovementioned table was mainly attributable to the exposure on outstanding USD bank deposits, receivables, payables and foreign exchange forward contracts which were not hedged at the end of the reporting period.

b) Interest rate risk

The carrying amounts of the Group’s financial assets and financial liabilities with exposure to interest rates at the end of the reporting period were as follows:

Fair value interest rate risk Financial assets Financial liabilities Cash flow interest rate risk Financial assets	**December 31 **
	2019 2018 $ 881,693 $ 1,155,189 723,686 - 1,485,846 1,275,925

Sensitivity analysis

The sensitivity analysis below was determined based on the Group’s exposure to interest rates for non-derivative instruments at the end of the reporting period. A 25 basis point increase or decrease was used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the reasonably possible change in interest rates.

If interest rates had been 25 basis points higher/lower and all other variables were held constant, the Group’s pre-tax profit for the years ended December 31, 2019 and 2018 would increase/decrease by $3,715 thousand and $3,190 thousand, respectively, which was mainly attributable to the Group’s exposure to interest rates on its demand deposits.

c) Other price risk

The Group was exposed to equity price risk through its investments in equity securities. Equity investments are held for strategic rather than trading purposes. The Group manages this exposure by maintaining a portfolio of investments with different risks. In addition, the Group has appointed related departments, such as finance and investment, to monitor the price risk.

• 57 -

Sensitivity analysis

The sensitivity analysis was based on the exposure to equity price risks at the end of the reporting period. If equity prices of financial assets at FVTOCI had increased/decreased by 5%, the pre-tax other comprehensive income for the years ended December 31, 2019 and 2018 would have increased/decreased by $532 thousand and $1,285 thousand, respectively.

• 2) Credit risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. As at the end of the reporting period, the Group’s maximum exposure to credit risk, which would cause a financial loss to the Group due to the failure of counterparties to discharge an obligation and financial guarantees provided by the Group, could arise from the carrying amount of the respective recognized financial assets as stated in the consolidated balance sheets.

The Group adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral, where appropriate, as a means of mitigating the risk of financial loss from defaults.

The Group’s main credit risk is concentrated on the Group’s major clients. The receivables from the major clients composed 46% and 54% of the total trade receivables as of December 31, 2019 and 2018, respectively. Because the clients have good credit records, no material default risk was assessed; material credit risk did not exist.

3) Liquidity risk

The Group manages liquidity risk by monitoring and maintaining a level of cash and cash equivalents deemed adequate to finance the Group’s operations and mitigate the effects of fluctuations in cash flows.

• a) Liquidity and interest rate risk table

The following table details the Group’s remaining contractual maturity for its non-derivative financial liabilities with agreed repayment periods. The table has been drawn up based on the undiscounted cash flows of financial liabilities.

December 31, 2019

Weighted Average Effective Interest Rate (%) On Demand or Less than 1 Month 1-3 Months 3 Months to 1 Year Non-derivative financial liabilities Non-interest bearing - $ 2,785,304 $ - $ - Additional information about the maturity analysis for lease liabilities: Less than 1 Year 1-5 Years 5-10 Years Lease liabilities $ 280,712 $ 455,474 $ 8,500	$	1-5 Years $ 24,863
		Total 744,686

• 58 -

December 31, 2018

Weighted Average Effective Interest Rate (%) On Demand or Less than 1 Month Non-derivative financial liabilities Non-interest bearing - $ 3,231,190	1-3 Months $ -	3 Months to 1 Year $ -	1-5 Years $ 27,606

The following table detailed the Group’s liquidity analysis for its derivative instruments. The table was based on the undiscounted gross inflows and outflows on those derivatives that require gross settlement.

December 31, 2019

On Demand or Less than 1 Month 1-3 Months 3 Months to 1 Year Gross settled Foreign exchange forward contracts Inflows $ 25,566 $ - $ - Outflows 25,524 - - $ 42 $ - $ - December 31, 2018 On Demand or Less than 1 Month 1-3 Months 3 Months to 1 Year Gross settled Foreign exchange forward contracts Inflows $ 62,035 $ - $ - Outflows 62,252 - - $ (217) $ - $ -	1-5 Years $ - - $ - 1-5 Years $ - - $ -

• 59 -

b) Financing facilities

Unsecured bank loan facility Amount used Amount unused Secured bank loan facility Amount used Amount unused		December 31	December 31
		2019 $ - 4,090,000 $ 4,090,000 $ - 20,000 $ 20,000	2018 $ - 4,090,000 $ 4,090,000 $ - 20,000 $ 20,000

29. TRANSACTIONS WITH RELATED PARTIES

• a. The Group engages in business transactions with the following related parties:

Company Relationship

Chunghwa Telecom Co., Ltd. (“Chunghwa Telecom”) Ultimate parent entity Fellow subsidiary CHYP Multimedia Marketing & Communications Chunghwa Telecom’s subsidiary Co., Ltd. CHIEF Telecom Inc. Chunghwa Telecom’s subsidiary Chunghwa System Integration Co., Ltd. Chunghwa Telecom’s subsidiary Spring House Entertainment Tech. Inc. Chunghwa Telecom’s subsidiary Smartfun Digital Co., Ltd. Chunghwa Telecom’s subsidiary Honghwa International Co., Ltd. Chunghwa Telecom’s subsidiary Associate Senao Networks, Inc. Senao’s investee using the equity method EnGenius Tech. Co., Ltd. Senao Networks’s subsidiary Emplus Technologies, Inc. Senao Networks’s subsidiary Other related party Senao Technical and Cultural Foundation

Senao’s investee using the equity method Senao Networks’s subsidiary Senao Networks’s subsidiary

A nonprofit organization of which the funds donated by SENAO exceeds one third of its total funds Substantial related party Substantial related party Substantial related party Substantial related party Substantial related party Substantial related party Substantial related party Chunghwa Telecom’s investee using the equity method

E-Life Mall Co., Ltd.

Engenius Technologies Co., Ltd. Cheng Keng Investment Co., Ltd. Cheng Feng Investment Co., Ltd. Hwa Shun Investment Co., Ltd. Yu Yu Investment Co., Ltd. All Oriented Investment Co., Ltd. International Integrated System, Inc.

Chunghwa Telecom’s investee using the equity method

UUPON Inc.

Taiwan International Standard Electronics Co., Ltd. Chunghwa Telecom’s investee using the equity method

• 60 -

• b. Balances and transactions between Senao and subsidiaries have been eliminated on consolidation and not disclosed in this note. For the information on endorsements and guarantees Senao made for its subsidiaries, refer to attached Table 1. Terms of each transaction between the Group and other related parties are determined separately. Details of transactions between the Group and other related parties are disclosed below.

• 1) Operating revenues

Line Item Related Party Category Sales Ultimate parent entity Fellow subsidiaries Associates Other related parties Service Ultimate parent entity Fellow subsidiaries Associates Other related parties Repairs and maintenance Ultimate parent entity Fellow subsidiaries Associates Other related parties	**For the Year Ended December 31 **	**For the Year Ended December 31 **	**For the Year Ended December 31 **
		2019 $ 5,377,474 1,068 1,546 45,643 $ 5,425,731 $ 1,145,720 2,475 64,647 727 $ 1,213,569 $ 320 30 8 237 $ 595	2018 $ 5,443,386 986 1,098 69,282 $ 5,514,752 $ 1,182,239 2,657 112,261 (23) $ 1,297,134 $ 101 2 993 48 $ 1,144

• 2) Purchases of goods

Related Party Category Ultimate parent entity Fellow subsidiaries Associates Other related parties Operating expenses Related Party Category Ultimate parent entity Fellow subsidiaries Associates Other related parties	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
	2019 2018 $ 2,216,723 $ 1,904,795 873 4,306 - 513 1,864 - $ 2,219,460 $ 1,909,614 For the Year Ended December 31
		2019 $ 214,037 278 1,169 13,747 $ 229,231	2018 $ 138,267 301 418 14,811 $ 153,797

• 3) Operating expenses

• 61 -

Operating expense paid to ultimate parent entity was mainly the marketing expense resulting from goods sold by the ultimate parent entity for Senao.

4) Non-operating transactions

Line Item Related Party Category Non-operating income Ultimate parent entity Fellow subsidiaries Associates Other related parties Non-operating expense Ultimate parent entity Receivables from related parties Line Item Related Party Category Accounts receivable from Ultimate parent entity related parties Fellow subsidiaries Associates Other related parties	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2019 2018 $ 640 $ 796 57 - 331 - 3,438 - $ 4,466 $ 796 $ - $ 48 December 31
		2019 $ 813,058 275 5,472 6,669 $ 825,474	2018 $ 924,144 878 5,407 13,533 $ 943,962

• 5) Receivables from related parties

The outstanding receivables from related parties are unsecured. For the years ended December 31, 2019 and 2018, no allowance loss was recognized for receivables from related parties.

• 6) Other receivables from related parties

Line Item Related Party Category Other receivables from Ultimate parent entity related parties Fellow subsidiaries Other related parties		December 31	December 31
		2019 $ 193,259 4 2 $ 193,265	2018 $ 286,792 2,131 - $ 288,923

Other receivables were mainly balances of sales proceeds of goods sold by the ultimate parent entity for Senao.

7) Other prepaid expenses

Line Item Related Party Category Prepaid rents Ultimate parent entity Associates		December 31	December 31
		2019 $ 231 - $ 231	2018 $ 231 300 $ 531

• 62 -

8) Refundable deposits

Line Item Related Party Category Refundable deposits Ultimate parent entity 9) Notes payable to related parties Line Item Related Party Category Notes payable to related parties Ultimate parent entity 10) Trade payables to related parties Line Item Related Party Category Trade payables to related Ultimate parent entity parties Fellow subsidiaries		December 31	December 31
		2019 2018 $ 7,606 $ 11,615 December 31
		2019 2018 $ 18 $ 18 **December 31 **
		2019 $ 261,121 1 $ 261,122	2018 $ 215,780 - $ 215,780

The trade payables to related parties were unsecured.

11) Other payables to related parties

Line Item Related Party Category Other payables to related Ultimate parent entity parties Fellow subsidiaries Associates Other related parties		**December 31 **	**December 31 **
		2019 $ 232,876 24 573 3,367 $ 236,840	2018 $ 232,519 25 1,246 3,774 $ 237,564

The balances for the ultimate parent entity were proceeds of goods sold by the ultimate parent entity for Senao and the collection of monthly fees and bills. The associates paid daily subsistence allowance in Hwa Ya’s plants for Senao. The transactions with other related parties were donations to other related parties.

12) Advance receipts

Line Item Related Party Category Other advance receipts Associates		**December 31 **	**December 31 **
		2019 $ 3,990	2018 $ 2,730

• 63 -

13) Acquisitions of property, plant and equipment and intangible assets

Related Party Category Ultimate parent entity Other related parties	Purchase Price	Purchase Price	Purchase Price
	**For the Year Ended December 31 **
		2019 $ - 182 $ 182	2018 $ 410 - $ 410

Senao purchased office equipment from the ultimate parent entity.

• 14) Disposals of property, plant and equipment

Related Party Category Associates		Proceeds For the Year Ended December 31 2019 2018 $ 14 $ -		Gain(Loss) on Disposal	Gain(Loss) on Disposal
				For the Year Ended **December 31 **
		2019 $ 14		2019 $ 4	2018 $ -

• 15) Lease arrangements - the Group is lessee

Senao entered into a contract with the ultimate parent entity and the rent was paid by monthly or quarterly installments.

Acquisition of right-of-use assets

			For the Year	For the Year
				Ended
			December 31,
	Related Party Category			2019
Acquisitions of property,	plant and equipment from finance leases
Ultimate parent entity			$	50,744
			December 31,
Line Item		Related Party Category		2019
Lease liabilities - current		Ultimate parent entity	$	6,666
Lease liabilities - noncurrent		Ultimate parent entity	$	12,167

• 64 -

Line Item Related Party Category Interest expense Ultimate parent entity Associates Lease expense (stated as Ultimate parent entity operating expense) Associates		**December **	**31 **
		2019 $ 652 40 $ 692 $ 397 - $ 397	2018 $ - - $ - $ 47,369 3,600 $ 50,969

16) Lease arrangements - the Group is lessor

Senao Network entered into a contract with Senao to lease partial Hwa Ya’s plant and the rent was received monthly.

Line Item Related Party Category Non-operating income Associates Other related parties		December	31
		2019 $ 40,811 2 $ 40,813	2018 $ 31,212 2 $ 31,214

• c. Compensation of key management personnel

The remuneration of directors and members of key management personnel for the years ended December 31, 2019 and 2018 was as follows:

Short-term employee benefits Share-based payment Post-employment benefits	**For the Year Ended December 31 **	**For the Year Ended December 31 **	**For the Year Ended December 31 **
		2019 $ 48,258 - 659 $ 48,917	2018 $ 60,380 9,098 732 $ 70,210

The remuneration of directors and key executives was determined by the remuneration committee based on the performance of individuals and market trends.

30. ASSETS PLEDGED AS COLLATERAL OR FOR SECURITY

The Group used part of the bank deposits, which are recognized as other current assets, as collateral for the importation of goods. As of December 31, 2019 and 2018, the amount of the collateral was both $1,700 thousand.

• 65 -

31. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED COMMITMENTS

In addition to those disclosed in other notes, significant commitments of the Group as of December 31, 2019 and 2018 were as follows:

The Group applied for post-release duty payment to the customs. As of December 31, 2019 and 2018, the bank guarantees for the application were both $50,000 thousand.

32. SIGNIFICANT ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

The Group entities’ significant financial assets and liabilities denominated in foreign currencies aggregated by the foreign currencies other than functional currencies and the related exchange rates between foreign currencies and respective functional currencies were as follows:

December 31, 2019

		Foreign		Carrying	Carrying
	Currencies		Exchange Rate	Amount
Assets denominated in foreign currencies
Monetary items
USD	$	248	30.106 (USD:NTD)	$	7,473
USD		140	6.9618 (USD:RMB)		4,223
Liabilities denominated in foreign currencies
Monetary items
USD		1,528	30.106 (USD:NTD)		46,012
December 31, 2018
		Foreign		Carrying
	Currencies		Exchange Rate	Amount
Assets denominated in foreign currencies
Monetary items
USD	$	670	30.733 (USD:NTD)	$	20,585
USD		139	6.8754 (USD:RMB)		4,286
Liabilities denominated in foreign currencies
Monetary items
USD		2,128	30.733 (USD:NTD)		65,403

• 66 -

The significant unrealized foreign exchange gain/(loss) were as follows:

For the Year Ended December 31

Foreign Currencies USD USD	2019 Exchange Rate Net Foreign Exchange Gains (Losses) 30.106 (USD:NTD) $ (72) 6.9618 (USD:RMB) 52 $ (20)	2018
		Exchange Rate Net Foreign Exchange Gains (Losses) 30.733 (USD:NTD) $ 375 6.8754 (USD:RMB) (50) $ 325

33. ADDITIONAL DISCLOSURES

• a. Information about significant transactions and investees:

• 1) Financing provided to others: None.

• 2) Endorsements/guarantees provided: See Table 1.

• 3) Marketable securities held (excluding investments in subsidiaries and associates): See Table 2.

• 4) Marketable securities acquired and disposed of at costs or prices of at least NT$300 million or 20% of the paid-in capital: None.

• 5) Acquisition of individual real estate at costs of at least NT$300 million or 20% of the paid-in

  • capital: None.

• 6) Disposal of individual real estate at prices of at least NT$300 million or 20% of the paid-in capital: None.

• 7) Total purchases from or sales to related parties amounting to at least NT$100 million or 20% of the paid-in capital: See Table 3.

• 8) Receivables from related parties amounting to at least NT$100 million or 20% of the paid-in capital: See Table 4.

• 9) Names, locations, and other information of investees in which the Company exercises significant influence (excluding investment in mainland China): See Table 5.

• 10) Trading in derivative instruments: Please see Note 7.

• b. Information on investments in mainland China

• 1) Information on any investee company in mainland China, showing the name, principal business activities, paid-in capital, method of investment, inward and outward remittance of funds, ownership percentage, net income of investees, investment income or loss, carrying amount of the investment at the end of the period, repatriations of investment income, and limit on the amount of investment in the mainland China area: See Table 6.

• 67 -

• 2) Any of the following significant transactions with investee companies in mainland China, either directly or indirectly through a third party, and their prices, payment terms, and unrealized gains or losses:

  • a) The amount and percentage of purchases and the balance and percentage of the related payables at the end of the period: None.

  • b) The amount and percentage of sales and the balance and percentage of the related receivables at the end of the period: None.

  • c) The amount of property transactions and the amount of the resultant gains or losses: None.

  • d) The balance of negotiable instrument endorsements or guarantees or pledges of collateral at the end of the period and the purposes: None.

  • e) The highest balance, the end of period balance, the interest rate range, and total current period interest with respect to financing of funds: None.

  • f) Other transactions that have a material effect on the profit or loss for the period or on the financial position: None.

• c. Intercompany relationships and significant intercompany transactions: See Table 7.

34. SEGMENT INFORMATION

The Group’s reportable segments were sales department and other departments.

Sales department - selling information and communication products and the peripheral products in Taiwan.

Other departments - other unreported operating activities and departments. These departments provide services to support the sales department. Also, the sales made by the subsidiaries were part of other departments.

• a. Segment revenues and results

The following was an analysis of the Group’s revenue and results from continuing operations by reportable segments.

For the year ended December 31, 2019 Revenue from external customers Segment income Share of profit of associates accounted for using the equity method Rental income Interest income Gain on financial assets and liabilities at fair value through profit or loss	Sales $ 25,441,461 $ 795,150	Others $ 3,423,412 $ (111,113)	Total $ 28,864,873 $ 684,037 143,443 80,816 8,265 259 (Continued)

• 68 -

Loss on foreign currency exchange Other gain and loss Interest expense Loss on disposal of investment Central administration costs and remuneration to directors and supervisors Profit before tax For the year ended December 31, 2018 Revenue from external customers Segment income Share of profit of associates accounted for using the equity method Rental income Interest income Gain on financial liabilities at fair value through profit or loss Gain on disposal of investment Interest expense Exchange losses Other gain and loss Central administration costs and remuneration to directors and supervisors Profit before tax	Sales $ 27,806,067 $ 742,345	Others $ 3,434,873 $ (84,823)	Total $ (2,312) (8,865) (14,695) (21,282) (389,802) $ 479,864 $ 31,240,940 $ 657,522 155,981 68,752 11,762 5,199 1,342 (182) (2,036) (57,943) (433,746) $ 406,651 (Concluded)

The segment revenues reported above all came from transactions with external customers. There were no intersegment sales in 2019 and 2018.

Segment profit represented the profit before tax earned by each segment without share of profit of associates accounted for using the equity method, rental income, interest income, gains or losses on financial liabilities at fair value through profit or loss, gain on disposal of investment, dividend income, interest expense, exchange losses, loss on disposal of property, plant and equipment, impairment loss on intangible assets, central administration costs and directors’ salaries and goodwill impairment loss. This was the measure reported to the chief operating decision maker for the purpose of resource allocation and assessment of segment performance.

b. Segment total assets and liabilities

The measures of segment total assets and liabilities are not reported to the chief operating decision maker. Therefore, the information is not disclosed.

• 69 -

c. Geographical information

The Group operates in two principal geographical areas - Taiwan and mainland China.

The Group’s revenue from external customers by location of operations and information about its noncurrent assets by location of assets are detailed below:

The Group’s revenue from external customers by location of operations was as follows:

Taiwan Mainland China	Revenue from External Customers	Revenue from External Customers	Revenue from External Customers
	**For the Year Ended December 31 **
		2019 $ 28,808,589 56,284 $ 28,864,873	2018 $ 31,123,916 117,024 $ 31,240,940

The Group’s information about its noncurrent assets by location of assets was as follows:

Taiwan Mainland China		Noncurrent Assets	Noncurrent Assets
		December 31
		2019 $ 1,832,727 3,567 $ 1,836,294	2018 $ 1,214,626 5,084 $ 1,219,710

Noncurrent assets exclude financial instruments, investments using the equity method and deferred tax assets.

• d. Information about major customers

Major customer’s contributions to the Group’s revenue were as follows:

Customer from channel business department	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2019 $ 6,523,514	2018 $ 6,625,726

For the years ended December 31, 2019 and 2018, except the abovementioned major customer, the Group did not have any other single customer who contributed 10% or more of the total revenues.

• 70 -

• e. Disaggregation of revenues from customer contracts

For the year ended December 31, 2019 Information and communication products Revenues from services and repairs Others For the year ended December 31, 2018 Information and communication products Revenues from services and repairs Others	Sales $ 22,618,458 1,080,817 1,742,186 $ 25,441,461 $ 24,602,690 1,179,709 2,023,668 $ 27,806,067	Others $ 1,857,122 1,069,386 496,904 $ 3,423,412 $ 1,987,727 1,106,246 340,900 $ 3,434,873	Total $ 24,475,580 2,150,203 2,239,090 $ 28,864,873 $ 26,590,417 2,285,955 2,364,568 $ 31,240,940

• 71 -

TABLE 1

SENAO INTERNATIONAL CO., LTD. AND SUBSIDIARIES

ENDORSEMENTS/GUARANTEES PROVIDED YEAR ENDED DECEMBER 31, 2019 (Amounts in Thousands of New Taiwan Dollars)

No. (Note 1)	Endorsement/ Guarantee Provider	Guaranteed Party	Guaranteed Party	Limits on Endorsement/ Guarantee Amount Provided to Each Guaranteed Party (Note 3)	Maximum Balance for the Period (Note 4)	Ending Balance (Note 4)	Actual Borrowing Amount	Amount of Endorsement/ Guarantee Collateralized by Properties	Ratio of Accumulated Endorsement/ Guarantee to Net Equity Per Latest Financial Statements	Maximum Endorsement/ Guarantee Amount Allowable (Note 3)	Endorsement/ Guarantee Given by Parent on Behalf of Subsidiaries (Note 5)	Endorsement/ Guarantee Given by Subsidiaries on Behalf of Parent (Note 5)	Endorsement/ Guarantee Given on Behalf of Companies in Mainland China (Note 5)	Note
		Name	Nature of Relationship (Note 2)
0	Senao International Co., Ltd.	Aval Technologies Co., Ltd. Wiin Technologies Co., Ltd.	b b	$ 584,817 584,817	$ 300,000 100,000	$ 300,000 100,000	$ 300,000 100,000	$ - -	5.13% 1.71%	$ 2,924,089 2,924,089	Yes Yes	- -	- -	- -

Note 1: Significant transactions between the parent and its subsidiaries or among subsidiaries are numbered as follows:

a. “0” for the parent.

b. Subsidiaries are numbered from “1”.

Note 2: Relationships between the endorsement/guarantee provider and the guaranteed party:

• a. A company with which it does business.

• b. A company in which the Company directly and indirectly holds more than 50 percent of the voting shares.

• c. A company that directly and indirectly holds more than 50 percent of the voting shares in the Company.

• d. Companies in which the Company holds, directly or indirectly, 90% or more of the voting shares.

• e. The Company fulfills its contractual obligations by providing mutual endorsements/guarantees for another company in the same industry or for joint builders for purposes of undertaking a construction project.

• f. All capital contributing shareholders make endorsements/guarantees for their jointly invested company in proportion to their shareholding percentages.

• g. Companies in the same industry provide among themselves joint and several security for a performance guarantee of a sales contract for pre-construction homes pursuant to the Consumer Protection Act.

• Note 3: The total amount of endorsement or guarantee that the parent is allowed to provide is up to 50% of the net equity of the parent. The limits on endorsement or guarantee amount provided to each guaranteed party is up to 10% of the net equity of the parent.

Note 4: The maximum balance for the year and the ending balance are quota approved by the board of directors.

Note 5: The following circumstances represent “Yes”:

• a. Endorsement/Guarantee given by parent on behalf of subsidiaries.

• b. Endorsement/Guarantee given by subsidiaries on behalf of parent.

• c. Endorsement/Guarantee given on behalf of companies in mainland China.

• 72 -

TABLE 2

SENAO INTERNATIONAL CO., LTD. AND SUBSIDIARIES

MARKETABLE SECURITIES HELD (NOT INCLUDING SUBSIDIARY AND RELATED PARTY) DECEMBER 31, 2019

(Amounts in Thousands of New Taiwan Dollars)

Holding Company Name	Marketable Securities Type and Name	Relationship with the Company	Financial Statement Account		December	31, 2019		Note
				Shares (Thousands/ Thousand Units)	Carrying Value (Note)	Percentage of Ownership	Fair Value
Senao International Co., Ltd.	Stocks UUPON Inc. (previously known as Dian Zuan Integrating Marketing Co., Ltd.) N.T.U. Innovation Incubation Corporation	- -	Financial assets at FVOCI Financial assets at FVOCI	2,400 1,200	$ - 10,648	6.69 9.41	$ - 10,648

Note: For related information on subsidiaries and associates, refer to Tables 5 and 6.

• 73 -

TABLE 3

SENAO INTERNATIONAL CO., LTD. AND SUBSIDIARIES

TOTAL PURCHASES FROM OR SALES TO RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL YEAR ENDED DECEMBER 31, 2019

(Amounts in Thousands of New Taiwan Dollars)

Company Name	Related Party	Nature of Relationship		Transaction Details	Transaction Details		Abnormal Transaction (Note 2)	Abnormal Transaction (Note 2)	Notes/Trade Payable or Receivable	Notes/Trade Payable or Receivable
			Purchase/ Sales (Note 1)	Amount	% to Total	Payment Terms	Units Price	Payment Terms	Ending Balance	% to Total
Senao International Co., Ltd. Aval Technologies Co., Ltd.	Chunghwa Telecom Co., Ltd. Aval Technologies Co., Ltd. Senyoung Insurance Agent Co., Ltd. Youth Co., Ltd.	Ultimate parent entity Subsidiary Subsidiary Fellow subsidiary	Sales Purchase Purchase Sales Sales	$ 6,441,498 2,216,723 602,456 124,104 174,216	22.32 9.08 2.47 0.43 0.60	30-90 days 30 days 30 days 30 days 30 days	$ - - - - -	- - - - -	$ 797,620 (261,139) (180) 44,441 27,077	47.31 (14.42) (0.01) 2.64 1.61

Note 1: The sales from Chunghwa Telecom Co., Ltd. include sales revenue, service revenue and repairs and maintenance revenue.

Note 2: The related transaction terms are determined separately.

• 74 -

TABLE 4

SENAO INTERNATIONAL CO., LTD. AND SUBSIDIARIES

RECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL DECEMBER 31, 2019

(Amounts in Thousands of New Taiwan Dollars)

Company Name	Related Party	Nature of Relationship	Ending Balance	Turnover Rate (Note 1)	Overdue	Overdue	Amounts Received in Subsequent Period	Allowance for Bad Debts
					Amounts	Action Taken
Senao International Co., Ltd.	Chunghwa Telecom Co., Ltd.	Ultimate parent entity	$ 990,879 (Note 1)	7.48 (Note 2)	$ -	-	$ 123,369	$ -

Note 1: The receivables from related parties included $193,259 thousand which is the amount of products sold by Chunghwa Telecom Co., Ltd. for Senao, but not yet collected.

Note 2: The computation of the turnover of average receivables balance had already subtracted the receivables from Chunghwa Telecom Co., Ltd. for products sold for Senao.

• 75 -

TABLE 5

SENAO INTERNATIONAL CO., LTD. AND SUBSIDIARIES

NAMES, LOCATIONS, AND OTHER INFORMATION OF INVESTEES IN WHICH THE COMPANY EXERCISES SIGNIFICANT INFLUENCE (EXCLUDING INVESTMENT IN MAINLAND CHINA) YEAR ENDED DECEMBER 31, 2019

(Amounts in Thousands of New Taiwan Dollars)

Investor Company	Investee Company	Location	Main Businesses and Products	Original Investment Amount	Original Investment Amount	Balance as of December 31, 2019	Balance as of December 31, 2019	Balance as of December 31, 2019	Net Income (Loss) of the Investee	Recognized Gain (Loss)	Note
				December 31, 2019	December 31, 2018	Shares (Thousands)	Percentage of Ownership (%)	Carrying Value
Senao International Co., Ltd. Senao International (Samoa) Holding Ltd. Youth Co., Ltd. Aval Technologies Co., Ltd. Senyoung Insurance Agent Co., Ltd.	Senao Networks, Inc. Senao International (Samoa) Holding Ltd. Youth Co., Ltd. Aval Technologies Co., Ltd. Senyoung Insurance Agent Co., Ltd. Senao International HK Limited ISPOT Co., Ltd. Youyi Co., Ltd. Wiin Technologies Co., Ltd. Senaolife Insurance Agent Co., Ltd.	Taiwan Samoa Islands Taiwan Taiwan Taiwan Hong Kong Taiwan Taiwan Taiwan Taiwan	Telecommunication facilities manufacturing and sales International investment Sale of information and communication technologies products Sale of information and communication technologies products Property and liability insurance agency International investment Sale of information and communication technologies products Maintenance of information and communication technologies products Sale of information and communication technologies products Life insurance agency	$ 202,758 2,333,620 (US$ 78,475) 364,950 89,550 59,000 2,328,754 (US$ 78,340) 53,021 21,354 29,550 29,500	$ 202,758 2,416,645 (US$ 81,175) 364,950 60,000 59,000 2,393,646 (US$ 80,440) 53,021 21,354 - -	16,579 77,775 8,462 9,843 5,900 80,440 - - 2,955 2,950	33.79 100.00 92.89 100.00 100.00 100.00 100.00 100.00 100.00 100.00	$ 953,685 352,254 (US$ 11,700) 185,858 101,850 75,728 332,131 (US$ 11,032) 9,098 17,152 29,781 29,220	$ 424,479 (50,646) (US$ -1,638) (3,130) 2,363 25,036 (50,952) (US$ -1,648) (94) 315 231 (280)	$ 143,443 (50,646) (US$ -1,638) (20,345) 2,367 25,044 (50,952) (US$ -1,648) (286) 87 231 (280)	Note 1 Notes 1, 2 and 12 Notes 1, 3 and 12 Notes 1, 4, 5 and 12 Notes 1, 6 and 12 Notes 1, 7 and 12 Notes 1, 8 and 12 Notes 1, 9 and 12 Notes 1, 10 and 12 Notes 1, 11 and 12

Note 1: Calculated for the same period as the period of the audited financial statements.

Note 2: Senao resolved the capital reduction of Senao Samoa in December 2018 and received the corresponding shares return of US$2,700 thousand in April 2019.

Note 3: An investment loss of $2,561 thousand; the amount of impairment loss on intangible assets and the amount of impairment loss on goodwill are $8,838 thousand and $8,946 thousand respectively.

Note 4: An investment gain of $2,363 thousand; the amount of lease arrangements between the parent entity and subsidiaries is $6 thousand less lease modification profit of $2 thousand.

Note 5: On September 4, 2019, Aval increased its capital by cash; the total amount of capital increase was $29,550 thousand.

Note 6: An investment gain of $25,036 thousand; the amount of $8 thousand is comprised of lease arrangements between the parent entity and subsidiaries

Note 7: Senao Samoa resolved the capital reduction of Senao HK in January 2019 and received the corresponding shares return of US$2,100 thousand in March 2019.

Note 8: An investment loss of $94 thousand; the amount of $192 thousand is comprised of impairment loss on intangible assets.

Note 9: An investment gain of $315 thousand; the amount of $228 thousand is comprised of lease arrangements between the parent entity and subsidiaries less impairment loss on intangible assets.

Note 10: Aval invested $29,550 thousand in Wiin on September 6, 2019 and completed the establishment on September 12, 2019.

Note 11: Senyoung invested $29,500 thousand in Senaolife on January 24, 2019 and completed the establishment on November 29, 2019.

Note 12: The amount was eliminated upon consolidation.

Note 13: Information on investees in mainland China, refer to Table 6.

• 76 -

TABLE 6

SENAO INTERNATIONAL CO., LTD. AND SUBSIDIARIES

INVESTMENT IN MAINLAND CHINA YEAR ENDED DECEMBER 31, 2019 (Amounts in Thousands of New Taiwan Dollars)

Investee	Main Businesses and Products	Main Businesses and Products	Main Businesses and Products	Total Amount of Paid-in Capital	Investment Type (Note 1)	Accumulated Outflow of Investment from Taiwan as of January 1, 2019	Investment Flows	Investment Flows	Accumulated Outflow of Investment from Taiwan as of December 31, 2019	Net Income (Loss) of the Investee	% Ownership of Direct or Indirect Investment	Investment Gain (Loss) (Notes 2 and 3)	Carrying Value as of December 31, 2019 (Notes 2 and 3)	Accumulated Inward Remittance of Earnings as of December 31, 2019	Note
							Outflow	Inflow
Senao Trading (Fujian) Co., Ltd. Senao International Trading (Shanghai) Co., Ltd. Senao International Trading (Shanghai) Co., Ltd. (Note 5) Senao International Trading (Jiangsu) Co., Ltd.	Sale of information and communication technologies products Sale of information and communication technologies products Maintenance of information and communication technologies products Sale of information and communication technologies products			$ 1,073,170 (US$ 36,000) 955,838 (US$ 32,000) 26,053 (US$ 901) 263,736 (US$ 9,000)	b b b b	$ 1,073,170 (US$ 36,000) 955,838 (US$ 32,000) 87,540 (US$ 3,000) 263,736 (US$ 9,000)	$ - - - -	$ - - 61,487 (US$ 2,099) -	$ 1,073,170 (US$ 36,000) 955,838 (US$ 32,000) 26,053 (US$ 901) 263,736 (US$ 9,000)	$ 1,435 (US$ 46) (27,215) (US$ -880) - 310 (US$ 10)	100 100 100 100	$ 1,435 (US$ 46) (27,215) (US$ -880) - 310 (US$ 10)	$ - 50,497 (US$ 1,677) - -	$ - - - -	Note 6 - Note 7 Note 8
Accumulated Investment in Mainland China as of December 31, 2019		Investment Amounts Authorized by Investment Commission, MOEA	Upper Limit on Investment Stipulated by Investment Commission, MOEA (Note 4)
$2,318,797 (US$77,901)		$2,318,797 (US$77,901)	$3,517,513

Note 1: Investments are divided into three categories as follows:

• a. Direct investment.

• b. Investments through a holding company, which means Senao International (Samoa) Holding Ltd. here, registered in a third region. c. Others.

• Note 2: Calculated as the same period of audited financial statements.

• Note 3: The amount was eliminated upon consolidation.

• Note 4: We calculated the upper limit on investment in accordance with the “Regulations Governing Permission for Investment or Technical Cooperation in the Mainland Area”.

• Note 5: The English name is the same as the above entity; however, the Chinese name included in the respective Articles of Incorporations is different from the above entity name.

• Note 6: Senao Trading (Fujian) Co., Ltd. was approved to end and dissolve its business on September 27, 2018. The liquidation of Senao Trading (Fujian) Co., Ltd. was completed in May 2019.

• Note 7: Senao International Trading (Shanghai) Co., Ltd. was approved to end and dissolve its business on March 15, 2017. The liquidation of Senao International Trading (Shanghai) Co., Ltd. was completed in March 2018.

Note 8: Senao International Trading (Jiangsu) Co., Ltd. was approved to end and dissolve its business on April 15, 2018. The liquidation of Senao International Trading (Jiangsu) Co., Ltd. was completed in March 2019.

• 77 -

TABLE 7

SENAO INTERNATIONAL CO., LTD. AND SUBSIDIARIES

INTERCOMPANY RELATIONSHIPS AND SIGNIFICANT TRANSACTIONS YEAR ENDED DECEMBER 31, 2019

(Amounts in Thousands of New Taiwan Dollars)

No. (Note 1)	Company Name	Counterparty	Relationship (Note 2)		Transactions	Details
				Financial Statement Accounts	Amount (Note 3)	Payment Terms (Note 4)	% of Total Sales or Assets (Note 5)
0	Senao International Co., Ltd.	Youth Co., Ltd. Aval Technologies Co., Ltd. Senyoung Insurance Agent Co., Ltd.	a a a	Sales revenue Cost of goods sold Trade receivables from related parties Sales revenue Cost of goods sold Trade receivables from related parties Service revenue Trade receivables from related parties	$ 37,166 3,295 7,477 85,891 602,456 40,974 123,531 44,441	- - - - - - - -	- - - - 2.09 - - -
1	Aval Technologies Co., Ltd.	Youth Co., Ltd. ISPOT Co., Ltd.	c c	Sales revenue Trade receivables from related parties Sales revenue Trade receivables from related parties	174,216 27,077 22,546 4,839	- - - -	- - - -
2	Wiin Technologies Co., Ltd.	Youth Co., Ltd.	c	Sales revenue Trade receivables from related parties	4,165 3,424	- -	- -
3	Senyoung Insurance Agent Co., Ltd.	Senao International Co., Ltd.	b	Lease liabilities	2,423	-	-
4	Youyi Co., Ltd.	Youth Co., Ltd.	c	Lease liabilities	2,910	-	-

Note 1: Significant transactions between Senao and its subsidiaries or among subsidiaries are numbered as follows:

• a. “0” for the parent.

• b. Subsidiaries are numbered from “1”.

• Note 2: Related party transactions are divided into three categories as follows (there is no need for repeated disclosure between the entities, i.e., if the parent company discloses a transaction with a subsidiary, the subsidiary does not have to disclose the same information in the financial statements. Also, if a subsidiary discloses a transaction with another subsidiary, the other subsidiary does not have to disclose the same information in the financial statements):

• a. The parent to subsidiaries.

• b. Subsidiaries to the parent.

• c. Subsidiaries to subsidiaries.

Note 3: The amount was eliminated upon consolidation.

Note 4: The transaction terms related to the related parties are determined by both sides.

• Note 5: For assets and liabilities, amount is shown as a percentage to consolidated total assets as of December 31, 2019, while revenues, costs and expenses are shown as a percentage to consolidated revenues for the year ended December 31, 2019.

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