SUNON - AGM Information 2019 | FinancialReports.eu

Stock Code：2421

Sunonwealth Electric Machine Industry Co., Ltd. 2019 Annual General Shareholders’ Meeting Meeting Handbook

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Printed on June 19, 2019

Sunonwealth Electric Machine Industry Co., Ltd. Agenda for the 2019 General Shareholders Meeting

I. Time: 9:00 a.m. June 19, 2019 (Wednesday)
II. Location: 6F-1 (Employee Cafeteria), No. 288-7, Xinya Road, Qianzhen District, Kaohsiung City
III. Chairman's Speech:
IV. Matters to be Reported:
(I) The Company's 2018 Business Report.
(II) 2018 Audit Committee's Report.
(III) Report on the distribution of remuneration for employees and Directors in 2018.
(IV) Report on the status of endorsements and guarantees.
(V) Report on status of the short-form merger of the Company and the subsidiary company Sunon SMT Co., Ltd.
V. Proposed Resolutions:
(I) 2018 Business Report and Financial Statements.
(II) Earnings distribution for 2018.
VI. Discussion Items:
(I) Amendment of the Articles of Incorporation.
(II) Amendment of the Procedures for Acquisition and Disposal of Assets.
(III) Amendment of the Procedures for Loaning of Funds to Others.
(IV) Amendment of the Procedures for Making Endorsements and Guarantees.
VII. Extraordinary Motions
VIII.Adjournment

[Report items]

(I) The Company's 2018 Business Report. Please refer to page 40 to 46 of the Handbook.
(II) The 2018 Audit Committee's Report. Please refer to page 47 of the Handbook.
(III) Report on the distribution of remuneration for employees and Directors in 2018. The Company's earnings in 2018 (net profit before tax with remuneration for employees and Directors) totaled NT$762,637,438. The Company plans to distribute NT$9,500,000 as remuneration for Directors and NT$16,500,000 as remuneration for employees in accordance with Article 29 of the Articles of Incorporation. All remuneration shall be distributed in cash.
(IV) Report on the status of endorsements and guarantees
As of December 31, 2018, the Company's total endorsement and guarantees for external parties total US$20 million.
(V) Report on status of the short-form merger of the Company and the subsidiary company Sunon SMT Co., Ltd.
To consolidate group resources, the Company proceeded with a short-form merger with Sunon SMT Co., Ltd. in accordance with Article 19 of the Business Mergers and Acquisitions Act and other related regulations. The Company became the surviving company and Sunon SMT Co., Ltd. became the dissolved company after the merger.
The reference date of the merger was October 1, 2018 and the merger procedures have been completed.
The merger was approved in the Jing-Shou-Shang No. 10701132330 Letter from the Department of Commerce, Ministry of Economic Affairs dated November 22, 2018.

[Proposed Resolutions]

Agenda item #1 (Proposed by the Board of Directors)

Agenda: The 2018 Business Report and Financial Statements are filed for resolution. Description:

I. The Company's Financial Statements for 2018 have been audited by the CPAs Ching-Lin Li and Shu-Man Tsai of Crowe Horwath (TW). Please refer to page 8 to 30 of the Handbook.
II. The aforementioned statements of final accounts and the Business Report have been reviewed by the Audit Committee.
III. They are hereby filed for resolution.

Resolution:

Agenda item #2 (Proposed by the Board of Directors)

Agenda: The earnings distribution proposal for 2018 is filed for resolution. Description:

I. The Company's net profit after tax in 2018 was NT$605,120,130 and total distributable

earnings was NT$573,772,870. The Company plans to appropriate NT$501,859,464 as dividends for shareholders with NT$2 per share. All dividends shall be distributed in cash (calculated to the NTD and the remaining amounts below NT$1 will be rounded down). The sum of fractional amounts of less than NT$1 shall be tallied and transferred to the Employee Welfare Committee.

II. After the dividends are approved by the shareholders' meeting, the Chairman of the Board is authorized to establish the ex-dividend date, distribution date, and other related matters.
III. If the number of shares outstanding is affected by changes in the Company's share capital before the ex-dividend date for the distribution of earnings and causes changes in the shareholders' dividend rate, the shareholders' meeting is requested to authorize the Chairman of the Board process the adjustments at his full discretion.

	the Board process the adjustments at his full discretion.
IV.	Please refer to the table below for the earnings distribution statement
	Undistributed earnings at the beginning of the period	59,183,721
	Plus: After-tax net profit of 2018	605,120,130
	Plus: Disposal of equity instruments in other comprehensive	12,400,000
	income measured at fair value through profit and loss
	Minus: Appropriation for statutory reserve	(60,512,013)
	Minus: Appropriation for special earnings reserve	(37,598,132)
	Minus: Other consolidated income (loss) (remeasurement in	(4,820,836)
	defined benefit plans in 2018)
	Distributable earnings in current period	573,772,870
	Minus: Distributed shareholder dividends - cash dividends	(501,859,464)
	of NT$2 per share (Note)
	Undistributed retained earnings from previous years	71,913,406
	Note: Stock dividends for shareholders: 250,929,732 shares *NT$2 =NT$501,859,464

Chairman of the Board: Yin-Su Hong President: Ching-Shen Hong Head of Accounting: William Li

V. These are filed for resolution by the shareholders.

Resolution:

[Discussion items]

Agenda item #1 (Proposed by the Board of Directors)

Agenda: The amendment of the Articles of Incorporation is filed for discussion.

Description: I. The comparison table of the Articles of Incorporation before and after the amendment is filed as follows in accordance with the Company Act:

Content	After amendment	Before amendment	Reason for amendment
Article 1	The Company is constituted in accordance with the Company Act and registered under the name of "Sunonwealth Electric Machine Industry Co., Ltd.". The Company's name in English is"Sunonwealth Electric Machine Industry Co.,	The Company is constituted in accordance with provisions regarding companies limited by shares in the Company Act and registered under the name of "Sunonwealth Electric Machine Industry Co., Ltd.".	The Company's name in English is added in accordance with Article 392-1 of the Company Act.
	Ltd.".
Article 7	The Company's stocks shall be registered. Share certificates shall be affixed with the signatures or personal seals of the director representing the Company and shall bedulycertifiedor authenticated by the bank which is competent to certify shares under the lawsbefore issuance thereof. Registered share certificates issued by the Company are not required to be printed. The Company, however, should contact the Securities Central Depository for registration of the share certificates.	The Company's stocks shall be registered. Share certificates shall be signed or sealed by atleast three Directors andprovided with serial numbers and the Company's seal.The stocks shall be issuedafter proper certification by the competent authority. Registered share certificates issued by the Company are not required to be printed. The Company, however, should contact the Securities Central Depository for registration of the share certificates.	Amended in accordance with Article 161-2 and Article 162 of the Company Act.
Article 33	The Articles of Incorporation were established on August 12, 1980... the 26th amendment was on June 4, 2014; the 27th amendment was on June 9, 2015; the 28th amendment was on June 3, 2016; the 29th amendment	The Articles of Incorporation were established on August 12, 1980... the 26th amendment was on June 4, 2014; the 27th amendment was on June 9, 2015; the 28th amendment was on June 3,	Added new date of amendment.

was on June 19, 2019. 2016.

2. The amendment is hereby filed for resolution.

Resolution:

Agenda item #2 (Proposed by the Board of Directors)

Agenda: The amendment of the Procedures for Acquisition and Disposal of Assets is filed for discussion.

Description:

I. The Procedures are amended in accordance with the amendment of the Regulations Governing the Acquisition and Disposal of Assets by Public Companies, as stipulated in the Jin-Guan-Zheng-Fa No. 1070341072 Letter of the Financial Supervisory Commission dated November 26, 2018.
II. Please refer to page 48 to 68 of the Handbook for the comparison table of the Procedures for Acquisition and Disposal of Assets before and after the amendment.
III. The amendment is hereby filed for resolution. Resolution:

Agenda item #3 (Proposed by the Board of Directors)

Agenda: The amendment to the Procedures for Loaning of Funds to Others is filed for discussion. Description:

I. The Procedures are amended in accordance with the amendment of the Regulations Governing Loaning of Funds and Making of Endorsements/Guarantees by Public Companies, as stipulated in the Jin-Guan-Zheng-Shen No. 1080304826 Letter of the Financial Supervisory Commission dated March 7, 2019.
II. Refer to page 69 to 74 for the comparison table of the Procedures for Loaning of Funds to Others before and after the amendment.
III. The amendment is hereby filed for resolution. Resolution:

Agenda item #4 (Proposed by the Board of Directors)

Agenda: The amendment to the Procedures for Making Endorsements and Guarantees is filed for discussion.

Description:

I. The Procedures are amended in accordance with the amendment of the Regulations Governing Loaning of Funds and Making of Endorsements/Guarantees by Public Companies, as

stipulated in the Jin-Guan-Zheng-Shen No. 1080304826 Letter of the Financial Supervisory Commission dated March 7, 2019.

II. Refer to page 75 to 80 for the comparison table of the Procedures for Making Endorsements and Guarantees before and after the amendment.
III. The amendment is hereby filed for resolution.

Resolution:

[Extraordinary motions]

Sunonwealth Electric Machine Industry Co., Ltd.

Statement of Shares Held by Directors

(April 21, 2019)

Title	Name	Appointment date	Term	Number of shares currentlyheld	Number of shares currentlyheld	Number of shares currentlyheld
				Number of shares		Shareholding ratio
Chairman of the Board	Yu Yuan Investment Co., Ltd. Representative: Yin-Su Hong Fu-Ing Hong Chen Ching-Shen Hong Li-Ju Chen	2018.5.30	3 years	14,825,000		5.91%
Director	Nice Enterprise Co., Ltd. Representative: Ching-LiangChen	2018.5.30	3 years	4,006,813		1.60%
Director	Tseng-ChengLin	2018.5.30	3years	-		-
Independent Director	Chun-Hao Xin	2018.5.30	3 years	-		-
Independent Director	Mei-Hsiang Pai	2018.5.30	3 years	24,128		0.01%
Independent Director	Chih-Ming Chen	2018.5.30	3 years		-	-

Shareholdings required of all Directors		12,000,000	Shareholdings of all Directors			18,855,941

Book closure date:2019/4/21

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國富浩華聯合會計師事務所

Crowe (TW) CPAs 80250 高雄市苓雅區四維三路 6 號 27 樓之 1 27F-1., No.6, Siwei 3rd Rd., Lingya Dist., Kaohsiung City 80250, Taiwan Tel +886 7 3312133 Fax +886 7 3331710 www.crowe.tw

INDEPENDENT AUDITORS’ REPORT

The Board of Directors and Shareholders Sunonwealth Electric Machine Industry Co., Ltd.

Opinion

We have audited the accompanying consolidated balance sheets of Sunonwealth Electric Machine Industry Co., Ltd. and its subsidiaries (the “Group") as of December 31, 2018 and 2017, and the related 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, based on our audits and the report of the other independent accountants, as described in the other matters section of our report, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as of December 31, 2018 and 2017, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), IFRIC Interpretations (IFRlC), 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 base on the result that we audited and the audit reports of other accountants.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements for the year ended December 31, 2018. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, we do not provide a separate opinion on these matters.

Key audit matters of the Group's consolidated financial statements for the year ended December 31, 2018 are stated as follows:

Valuation of inventory

Please refer to Note 4(8) to the consolidated financial statements for the accounting policy of inventories, Note 5(2)F for critical accounting judgments and key sources of estimation and assumption uncertainty of inventories, and Note 6(5) for inventory valuation.

Description of key audit matter:

As of December 31, 2018, inventory was $1,794,369 thousand and accounted for 20% of the total assets. Due to rapid changes in technology may lead to write-downs of slow moving inventories to their net relizable values. As uncertainty exists in management's judgment when the determining the loss on inventory, the valuation of inventory has been identified as a key audit matter.

How the matter was addressed in our audit:

In relation to the key audit matter above, our principal audit procedures included the understanding of the feature of the product and the inventory aging to confirm the appropriateness of the inventory evaluation method ； testing the book value of the inventory to assess the rationality of the change in the impairment loss of the inventory, obtaining the inventory status of the Group and compare the actual write-offs of the past to assess the appropriateness of the depreciation and damage to the goods.

Revenue recognition

Please refer to Note 4(20) to the consolidated financial statements for the accounting policy of revenue recognition, Note 5(1)C and Note 5(2)A for critical accounting judgements and key sources of estimation and assumption uncertainty of revenue recognition, and Note 6 (24) for the description of revenue recognition.

Description of key audit matter:

The Group’s sales revenue is easily influenced by various factors such as the industry boom and market environment, and has a significant impact on the utilization rate of the Group (the levy of idle capacity loss), inventory risk and cash flow. Consequently, this is one of the key areas our audit focused on.

How the matter was addressed in our audit:

In relation to the key audit matter above, our principal audit procedures included testing the Group’s controls surrounding revenue recognition; inspecting customer orders and performing a test of revenue transactions which incurred within a certain period before or after the balance sheet date; analysis of the trend of product sales and comparing the number of relevant changes or differences with the budget to confirm whether there is a significant exception.

Other Matters

As described in Note 4(3) to the consolidated financial statements, we didn’t audit the financial statements of certain subsidiaries. The financial statements of the subsidiaries were audited by the other auditors. Therefore, our opinion, insofar as it relates to the amounts and information disclosed, is solely based on the report of the other auditors. The figures as to these subsidiaries’ total assets amounted to $447,334 thousand and $447,350 thousand, representing 4.99% and 5.08% of the consolidated assets, and their total liabilities amounted to $304,169 thousand and $322,978 thousand, representing 6.29% and 6.96% of the consolidated liabilities as of December 31, 2018 and 2017, respectively; their total revenues amounted $1,054,511 thousand and $1,065,868 thousand, representing 8.81% and 9.74% of the consolidated revenue, and their total comprehensive income amounted to $18,793 thousand and $30,967 thousand, representing 3.27% and 5.03% of the consolidated comprehensive income for the years ended December 31, 2018 and 2017, respectively.

We have also audited the parent company only financial statements of Sunonwealth Electric Machinie Industry Co., Ltd. as of and for the years ended December 31, 2018 and 2017 on which we have issued an unmodified opinion.

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

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the 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 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 (inclusive of the Audit Committee) are responsible for overseeing the Group's financial reporting process.

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:

Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group's internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in Our 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.
Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation .
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion .

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

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all re1ationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

December 31, 2017	Amount %		$636,262 7.2	- -	2,549,796 28.9	802,233 9.1	74,031 0.8	40,045 0.5	97,417 1.1	- -	4,199,784 47.6		320,000 3.6	41,425 0.5	- -	73,712 0.8	4,499 0.1	439,636 5.0	4,639,420 52.6				2,509,297 28.5	365,706 4.1		563,140 6.4	82,857 0.9	746,322 8.5	(127,111) (1.4)	4,140,211 47.0	33,838 0.4	4,174,049 47.4	$8,813,469 100.0
December 31, 2018	Amount %		$843,257 9.4	72,085 0.8	2,671,027 29.8	799,255 8.9	46,654 0.5	42,570 0.5	- -	2,361 -	4,477,209 49.9		220,000 2.5	51,715 0.6	2,456 -	75,660 0.8	5,145 0.1	354,976 4.0	4,832,185 53.9				2,509,297 28.0	366,903 4.1		628,886 7.0	127,111 1.4	671,883 7.5	(164,709) (1.9)	4,139,371 46.1	- -	4,139,371 46.1	$8,971,556 100.0
	Note		6(13)	6(24)		6(14)		6(15)		6(17)			6(16)	6(29)	6(17)	6(18)							6(19)	6(20)		6(21)	6(21)	6(21)	6(22)		6(23)
December 31, 2018 December 31, 2017	Amount % Amount % Liabilities and Equity	CURRENT LIABLITIES	$1,144,973 12.8 $1,386,750 15.7 Short-term loans	107,831 1.2 228,965 2.6 Contract liabilities - current	Accounts payable	31,737 0.4 27,775 0.3 Other payables	3,059,211 34.1 2,696,286 30.6 Current tax liabilities	45,695 0.5 83,634 0.9 Provisions - current	3,563 - 4,709 0.1 Advance receipts	1,794,369 20.0 1,744,494 19.8 Obligation under capital leases - current	47,778 0.5 57,476 0.7 Total current liabilities	143,382 1.6 26,742 0.3 NONCURRENT LIABILITIES	6,378,539 71.1 6,256,831 71.0 Long-term loans	Deferred income tax liabilities	- - 62,000 0.8 Obligation under capital leases - noncurrent	2,377,611 26.5 2,293,868 26.0 Net defined benefit liabilities - noncurrent	75,011 0.9 75,461 0.9 Guarantee deposits	23,506 0.3 21,988 0.2 Total noncurrent liabilities	65,794 0.7 54,742 0.6 Total Liabilities	29,322 0.3 26,607 0.3 EQUITY ATTRIBUTABLE TO OWNERS OF	18,805 0.2 19,761 0.2 THE PARENT	2,968 - 2,211 - Share capital	2,593,017 28.9 2,556,638 29.0 Ordinary shares	Capital surplus	Retained earnings	Legal reserve	Special reserve	Unappropriated earnings	Other equity	Total equity attributable to owners of the parent	NON-CONTROLLING INTERESTS	Total equity	$8,971,556 100.0 $8,813,469 100.0 TOTAL LIABILITIES AND EQUITY	The accompanying notes are an integral part of the consolidated financial statements.
	Note		6(1)	6(2)		6(3)	6(4)			6(5)		6(6)			6(8)	6(9)	6(10)	6(11)	6(29)		6(12)
	Assets	CURRENT ASSETS	Cash and cash equivalents	Financial assets at fair value through profit or	loss - current	Notes receivable, net	Accounts receivable, net	Other receivables	Current tax assets	Inventories	Prepayments	Other financial assets - current	Total current assets	NONCURRENT ASSETS	Financial assets carried at cost - noncurrent	Property, plant and equipment	Investment properties, net	Intangible assets	Deferred income tax assets	Refundable deposits	Long-term prepaid rent	Other noncurrent assets - others	Total noncurrent assets										TOTAL ASSESTS

SUNONWEALTH ELECTRIC MACHINE INDUSTRY CO., LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

Year Ended December 31	Year Ended December 31	Year Ended December 31
2018	% 100.0 79.9 20.1 4.4 4.8 5.8 - 15.0 5.1 1.1 0.5 (0.1) 1.5 6.6 1.5 5.1 (0.1) 0.1 - (0.4) (0.1) (0.3) 4.8 5.1 - 5.1 4.8 - $4.8	2017
Amount $11,965,298 9,563,763 2,401,535 531,682 570,707 690,164 7,433 1,799,986 601,549 136,934 63,530 (18,188) 182,276 783,825 176,142 607,683 (6,841) 8,985 (2,020) (45,335) (8,614) (32,557) $575,126 605,120 2,563 607,683 572,736 2,390 $575,126 $2.41		Amount $10,946,728 8,492,264 2,454,464 520,355 527,294 650,911 - 1,698,560 755,904 151,542 (51,580) (13,781) 86,181 842,085 178,669 663,416 (4,365) - (741) (53,256) (8,618) (48,262) $615,154 657,459 5,957 663,416 609,585 5,569 $615,154 $2.62	%
			100.0 77.6
			22.4 4.8 4.8 5.9 -
			15.5
			6.9
			1.4 (0.5) (0.1)
			0.8
			7.7 1.6
			6.1
			- - - (0.5) (0.1)
			(0.4)
			5.7
			6.0 0.1
			6.1
			5.6 0.1
			$5.7

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

						Total	Equity	$4,066,965		-	-	(501,860)	(501,860)	663,416	(48,262)	615,154	(6,210)	4,174,049	3,415	4,177,464		-	-	(577,138)	(577,138)	607,683	(32,557)	575,126	-	147		(36,228)	-		$4,139,371
						Non-controlling	Interests	$34,479		-	-	-	-	5,957	(388)	5,569	(6,210)	33,838	-	33,838		-	-	-	-	2,563	(173)	2,390	-	-		(36,228)	-		-
							Treasury Shares	-		-	-	-	-	-	-	-	-	-	-	-		-	-	-	-	-	-	-	-	-		-	-		-
								$
Equity Attributable to Shareholders of the Parent	Others	Unrealized	Gain (Loss) on	Exchange Financial Assets	Differences on at Fair Value Through Retained Earnings	Unappropriated Translating foreign Other Comprehensive	Capital Surplus Legal Reserve Special Reserve Earnings Operations Income	$365,706 $505,950 $79,155 $655,235 ($82,857) - $		- 57,190 - (57,190) - -	- - 3,702 (3,702) - -	- - - (501,860) - -	- 57,190 3,702 (562,752) - -	- - - 657,459 - -	- - - (3,620) (44,254) -	- - - 653,839 (44,254) -	- - - - - -	365,706 563,140 82,857 746,322 (127,111) -	- - - - - 3,415	365,706 563,140 82,857 746,322 (127,111) 3,415		- 65,746 - (65,746) - -	- - 44,254 (44,254) - -	- - - (577,138) - -	- 65,746 44,254 (687,138) - -	- - - 605,120 - -	- - - (4,821) (36,548) 8,985	- - - 600,299 (36,548) 8,985	1,050 - - - (1,050) -	147 - - - - -		- - - - - -	- - - 12,400 - (12,400)		$366,903 $628,886 $127,111 $671,883 ($164,709) -	The accompanying notes are an integral part of the consolidated financial statements.
					Share Capital		Odinary Shares	$2,509,297		-	-	-	-	-	-	-	-	2,509,297	-	2,509,297		-	-	-	-	-	-	-	-	-		-	-		$2,509,297
								BALANCE AT JANUARY 1, 2017	Appropriations and distributions of prior years' earnings:	Legal reserve	Special reserve	Cash dividends - $2 per share	Total	Net income in 2017	Other comprehensive income (loss) in 2017, net of income tax	Total comprehensive income in 2017	Increase (decrease) in non-controlling interests	BALANCE AT DECEMBER 31, 2017	Impact of retrospective application and retrospective restatement	Adjusted balabce at January 1, 2018 17	Appropriations and distributions of prior years' earnings:	Legal reserve	Special reserve	Cash dividends - $2.3 per share	Total	Net income in 2018	Other comprehensive income (loss) in 2018, net of income tax	Total comprehensive income in 2018	Reorganization	Differences between considerations and carrying amounts	of subsidiaries acquired or disposed	Increase (decrease) in non-controlling interests	Disposal of equity instruments at fair value	through other comprehensive income	BALANCE AT DECEMBER 31, 2018

SUNONWEALTH ELECTRIC MACHINE INDUSTRY CO., LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

CASH FLOWS FROM OPERATING ACTIVITIES Income before income tax Adjustment for : Income and expenses having no effect on cash flows: Depreciation Amortization Expected credit loss Provision for (reversal of) allowance for doubtful accounts Net loss (gain) on financial assets and liabilities at fair value through profit or loss Interest expense Interest income Loss on disposal and retirement of property, plant and equipment Transfer of property, plant and equipment to expenses Gain on disposal of investments Impairment loss on non-financial assets Total income and expenses having no effect on cash flows Net changes in operating assets and liabilities Decerase (increase) in financial assets held for trading Decerase (increase) in financial assets mandatorily classified as at fair value through profit or loss Decerase (increase) in notes receivable Decrease (increase) in accounts receivable Decrease (increase) in other receivables Decrease (increase) in inventories Decrease (increase) in prepayments Decrease (increase) in other financial assets Total changes in operating assets Net changes in operating liabilities Increase (decrease) in contract liabilities Increase (decrease) in accounts payable Increase (decrease) in other payables Increase (decrease) in provisions Increase (decrease) in advance receipts Increase (decrease) in net defined benefit liabilities Total changes in operating liabilities Total net changes in operating assets and liabilities Total adjustments	Year Ended December 31	Year Ended December 31
	2018 $783,825 285,265 57,248 7,433 - (4) 18,188 (31,377) 8,229 1,571 (25,547) - 321,006 - 124,941 (3,962) (370,924) 37,815 (47,998) (29,532) 16,679 (272,981) (25,275) 121,899 18,694 2,945 - (4,893) 113,370 (159,611)	2017
		$842,085 260,181 51,309 - (2,056) 40 13,781 (30,726) 2,508 2,214 (3,716) 15,371
		308,906
		(42,980) - 19,431 130,136 (30,786) (366,142) (37,357) 14,263
		(313,435)
		- 80,323 59,441 (450) 33,859 (4,868)
		168,305
		(145,130)
	161,395	163,776

Cash generated from operations Interest received Interest paid Income tax paid Net cash generated from operating activities CASH FLOWS FROM INVESTING ACTIVITIES Disposal of financial assets at fair value through other comprehensive income Disposal subsidiary Acquisition of property, plant and equipment Proceeds from disposal of property, plant and equipment Increase in refundable deposits Decrease in refundable deposits Acquisition of intangible assets Increase in other financial assets Increase in other noncurrent assets Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Increase in short-term loans Repayments of long-term loans Increase in guarantee deposits Increase in obligation under captial leases Cash dividends paid Increase (decrease) in non-controlling interests Net cash used in financing activities EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS , BEGINNING OF PERIOD CASH AND CASH EQUIVALENTS , END OF PERIOD	Year Ended December 31	Year Ended December 31
	2018 945,220 31,492 (17,778) (192,501) 766,433 74,400 23,330 (440,705) 17,365 (3,225) - (15,507) (133,319) (7,391) (485,052) 206,995 (100,000) 646 4,817 (577,138) (36,081) (500,761) (22,397) (241,777) 1,386,750 $1,144,973	2017
		1,005,861 30,870 (24,088) (214,543)
		798,100
		- - (427,401) 33,246 - 8,272 (4,894) - (3,331)
		(394,108)
		182,130 - 1,361 - (501,860) (6,598)
		(324,967)
		(30,691)
		48,334 1,338,416
		$1,386,750

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

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國富浩華聯合會計師事務所

Crowe (TW) CPAs 80250 高雄市苓雅區四維三路 6 號 27 樓之 1 27F-1., No.6, Siwei 3rd Rd., Lingya Dist., Kaohsiung City 80250, Taiwan Tel +886 7 3312133 Fax +886 7 3331710 www.crowe.tw

INDEPENDENT AUDITORS’ REPORT

The Board of Directors and Shareholders Sunonwealth Electric Machine Industry Co., Ltd.

Opinion

We have audited the accompanying parent company only balance sheets of Sunonwealth Electric Machine Industry Co., Ltd. (the “Company") as of December 31, 2018 and 2017, and the parent company only statements of comprehensive income, changes in equity and cash flows for the years then ended, and the notes to the parent company only financial statements, including a summary of significant accounting policies.

In Our opinion, based on our audits and the report of the other independent accountants, as described in the other matters section of our report, the accompanying parent company only financial statements present fairly, in all material respects, the parent company only financial position of the Company as of December 31, 2018 and 2017, and its parent company only financial performance and its parent company only cash flows for the years then ended in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers.

Basis for Opinion

We conducted our audits in accordance with the Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants and 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 parent company only Financial Statements section of our report. We are independent of the Company 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 base on the results that we audit and the audit report of other accountants.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the parent company only financial statements for the year ended December 31, 2018. These matters were addressed in the context of our audit of the parent company only financial statements as a whole, and in forming our opinion thereon, we do not provide a separate opinion on these matters.

Key audit matters of the Company's parent company only financial statements for the year ended December 31, 2018 are stated as follows:

Valuation of inventory

Please refer to Note 4(7) to the parent company only financial statements for the accounting policy of inventories, Note 5(2)G for critical accounting judgments and key sources of estimation and assumption uncertainty of inventories, and Note 6(4) for inventory valuation.

Description of key audit matter:

As of December 31, 2018, inventory was $869,834 thousand and accounted for 11.8% of the total assets. Due to rapid changes in technology may lead to write-downs of slow moving inventories to their net realizable values. As uncertainty exists in management's judgment when the determining the loss on inventory, the valuation of inventory has been identified as a key audit matter.

How the matter was addressed in our audit:

In relation to the key audit matter above, our principal audit procedures included the understanding of the feature of the product and the inventory aging to confirm the appropriateness of the inventory evaluation method ； testing the book value of the inventory to assess the rationality of the change in the impairment loss of the inventory, obtaining the inventory status of the Company and compare the actual write-offs of the past to assess the appropriateness of the depreciation and damage to the goods.

Revenue recognition

Please refer to Note 4(19) to the parent company only financial statements for the accounting policy of revenue recognition, Note 5(1)D and Note 5(2)A for critical accounting judgements and key sources of estimation and assumption uncertainty of revenue recognition, and Note 6 (21) for the description of revenue recognition.

Description of key audit matter:

The Company’s sales revenue is easily influenced by various factors such as the industry boom and market environment, and has a significant impact on the utilization rate of the Company (the levy of idle capacity loss), inventory risk and cash flow. Consequently, this is one of the key areas our audit focused on.

How the matter was addressed in our audit:

In relation to the key audit matter above, our principal audit procedures included testing the Company’s controls surrounding revenue recognition; inspecting customer orders and performing a test of revenue transactions which incurred within a certain period before or after the balance sheet date; analysis of the trend of product sales and comparing the number of relevant changes or differences with the budget to confirm whether there is a significant exception.

Other Matters

We did not audit the financial statements of investments accounted for using the equity method that are included in the parent company only financial statements. Those financial statements were audited by other independent accountants whose reports thereon have been furnished to us, and our opinion expressed herein, insofar as it relates to the amounts included in the parent company only financial statements is based solely on the audit reports of other independent accountants. The balance of these investments accounted for under the equity method amounted to $126,809 thousand and $ 109,447 thousand, constituting 1.72% and 1.54% of total assets as of December 31, 2018 and 2017, respectively, and share of profits of subsidiaries was $15,400 thousand and $32,803 thousand, constituting 2.09% and 4.09% of profit before income tax for the years ended December 31, 2018 and 2017, respectively.

Responsibilities of Management and Those Charged with Governance for the Parent Company Only Financial Statements

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

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

Those charged with governance (inclusive of the Audit Committee) are responsible for overseeing the Company's financial reporting process.

Auditors' Responsibilities for the Audit of the Parent Company Only Financial Statements

Our objectives are to obtain reasonable assurance about whether the parent company only financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue 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 parent company only financial statements.

Identify and assess the risks of material misstatement of the parent company only financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in Our auditors' report to the related disclosures in the parent company only financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors' report. However, future events or conditions may cause the Company to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the parent company only financial statements, including the disclosures, and whether the parent company only financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the parent company only financial statements. We are responsible for the direction, supervision and performance of the Company audit. We remain solely responsible for our audit opinion .

December 31, 2017	Amount %		$410,000 5.8	- -	920,729 13.0	818,564 11.5	271,924 3.8	12,190 0.2	66,427 0.9	12,636 0.2	20,034 0.3	- -	2,532,504 35.7		320,000 4.5	31,479 0.5	- -	70,630 1.0	3,077 -	425,186 6.0	2,957,690 41.7		2,509,297 35.3	365,706 5.2		563,140 7.9	82,857 1.2	746,322 10.5	(127,111) (1.8)	4,140,211 58.3	$7,097,901 100.0
December 31, 2018	Amount %		$510,000 6.9	10,745 0.1	1,021,169 13.9	1,026,604 13.9	261,760 3.5	13,440 0.2	34,211 0.5	13,120 0.2	- -	2,361 -	2,893,410 39.2		220,000 3.0	51,377 0.8	2,456 -	75,660 1.0	3,177 -	352,670 4.8	3,246,080 44.0		2,509,297 34.0	366,903 4.9		628,886 8.5	127,111 1.7	671,883 9.1	(164,709) (2.2)	4,139,371 56.0	$7,385,451 100.0
	Note		6(11)	6(21)		7	6(12)	6(12)、7		6(13)		6(15)			6(14)	6(26)	6(15)	6(16)					6(17)	6(18)		6(19)	6(19)	6(19)	6(20)
December 31, 2018 December 31, 2017	Amount % Amount % Liabilities and Equity	CURRENT LIABLITIES	$447,217 6.1 $422,062 6.0 Short-term loans	31,737 0.4 27,775 0.4 Contract liabilities - current	1,780,771 24.1 1,706,598 24.0 Accounts payable	347,039 4.7 318,011 4.5 Accounts payable - related parties	9,838 0.1 12,886 0.2 Other payables	11,242 0.2 38,938 0.5 Other payables - related parties	869,834 11.8 760,871 10.7 Current tax liabilities	14,591 0.2 8,711 0.1 Provisions - current	3,512,269 47.6 3,295,852 46.4 Advance receipts	Obligation under capital leases - current	- - 62,000 0.9 Total current liabilities	2,691,244 36.4 2,605,105 36.7 NONCURRENT LIABILITIES	1,062,632 14.4 1,027,463 14.5 Long-term loans	75,011 1.0 75,461 1.1 Deferred income tax liabilities	12,904 0.2 8,890 0.1 Obligation under capital leases - noncurrent	28,840 0.4 20,583 0.3 Net defined benefit liabilities - noncurrent	2,485 - 2,303 - Guarantee deposits	66 - 244 - Total noncurrent liabilities	3,873,182 52.4 3,802,049 53.6 Total Liabilities	Share capital	Ordinary shares	Capital surplus	Retained earnings	Legal reserve	Special reserve	Unappropriated earnings	Other equity	Total equity	$7,385,451 100.0 $7,097,901 100.0 TOTAL LIABILITIES AND EQUITY	The accompanying notes are an integral part of the financial statements.
	Note		6(1)	6(2)	6(3)	6(3)、7		7	6(4)				6(6)	6(7)	6(8)	6(9)	6(10)	6(26)
	Assets	CURRENT ASSETS	Cash and cash equivalents	Notes receivable, net	Accounts receivable, net	Accounts receivable - related parties, net	Other receivables	Other receivables - related parties	Inventories	Prepayments	Total current assets	NONCURRENT ASSETS	Financial assets carried at cost - noncurrent	Investments accounted for using equity method	Property, plant and equipment	Investment properties, net	Intangible assets	Deferred income tax assets	Refundable deposits	Other noncurrent assets - others	Total noncurrent assets										TOTAL ASSESTS

SUNONWEALTH ELECTRIC MACHINE INDUSTRY CO., LTD. PANENT COMPANY ONLY STATEMENTS OF COMPREHENSIVE INCOME (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

Year Ended December 31	Year Ended December 31	Year Ended December 31
2018	% 100.0 84.9 15.1 0.4 0.4 3.3 3.2 5.1 - 11.6 3.5 1.1 1.0 (0.1) 3.5 5.5 9.0 1.6 7.4 - 0.1 - - (0.6) (0.1) (0.4) 7.0	2017
Amount $8,186,530 6,951,866 1,234,664 32,687 32,758 268,733 263,774 416,191 2,547 951,245 283,490 92,337 83,577 (7,873) 285,106 453,147 736,637 131,517 605,120 (6,841) 8,985 - (2,020) (45,162) (8,614) (32,384) $572,736 $2.41		Amount $7,688,919 6,396,832 1,292,087 32,758 25,807 258,383 248,571 399,923 - 906,877 378,259 91,061 71,001 (6,889) 269,311 424,484 802,743 145,284 657,459 (4,336) - (21) (737) (52,872) (8,618) (47,874) $609,585 $2.62	%
			100.0 83.2
			16.8 0.4 0.3 3.4 3.2 5.2 -
			11.8
			4.9
			1.1 0.9 - 3.5
			5.5
			10.4 1.9
			8.5
			- - - - (0.7) (0.1)
			(0.6)
			7.9

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

					Total	Equity	$4,032,486		-	-	(501,860)	(501,860)	657,459	(47,874)	609,585	4,140,211	3,415	4,143,626		-	-	(577,138)	(577,138)	605,120	(32,384)	572,736	-	147		-		$4,139,371
			Unrealized	Gain (Loss) on	Available-for-sale	Financial Assets	-		-	-	-	-	-	-	-	-	-	-		-	-	-	-	-	-	-	-	-		-	-	-
Others	Unrealized	Gain (Loss) on	Financial Assets	at Fair Value Through	Other Comprehensive	Income	-		-	-	-	-	-	-	-	-	3,415	3,415		-	-	-	-	-	8,985	8,985	-	-		(12,400)		-
			Exchange	Differences on	Translating Foreign	Operations	($82,857)		-	-	-	-	-	(44,254)	(44,254)	(127,111)	-	(127,111)		-	-	-	-	-	(36,548)	(36,548)	(1,050)	-		-		($164,709)
				Retained Earnings	Unappropriated	Capital Surplus Legal Reserve Special Reserve Earnings	$365,706 $505,950 $79,155 $655,235		- 57,190 - (57,190)	- - 3,702 (3,702)	- - - (501,860)	- 57,190 3,702 (562,752)	- - - 657,459	- - - (3,620)	- - - 653,839	365,706 563,140 82,857 746,322	- - - -	365,706 563,140 82,857 746,322		- 65,746 - (65,746)	- - 44,254 (44,254)	- - - (577,138)	- 65,746 44,254 (687,138)	- - - 605,120	- - - (4,821)	- - - 600,299	1,050 - - -	147 - - -		- - - 12,400		$366,903 $628,886 $127,111 $671,883	The accompanying notes are an integral part of the financial statements.
				Share Capital		Ordinary Shares	$2,509,297		-	-	-	-	-	-	-	2,509,297	-	2,509,297		-	-	-	-	-	-	-	-	-		-		$2,509,297
							BALANCE AT JANUARY 1, 2017	Appropriations and distributions of prior years' earnings:	Legal reserve	Special reserve	Cash dividends - $2 per share	Total	Net income in 2017	Other comprehensive income (loss) in 2017, net of income tax	Total comprehensive income in 2017	BALANCE AT DECEMBER 31, 2017	Impact of retrospective application and retrospective restatement Adjusted balabce at January 1, 2018 28		Appropriations and distributions of prior years' earnings:	Legal reserve	Special reserve	Cash dividends - $2.3 per share	Total	Net income in 2018	Other comprehensive income (loss) in 2018, net of income tax	Total comprehensive income in 2018	Reorganization	Differences between considerations and carrying amounts	of subsidiaries acquired or disposed	Disposal of equity instruments at fair value	through other comprehensive income	BALANCE AT DECEMBER 31, 2018

SUNONWEALTH ELECTRIC MACHINE INDUSTRY CO., LTD. PARENT COMPANY ONLY STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

CASH FLOWS FROM OPERATING ACTIVITIES Income before income tax Adjustment for : Income and expenses having no effect on cash flows: Depreciation Amortization Expected credit loss Provision for (reversal of) allowance for doubtful accounts Interest expense Interest income Share of profits of subsidiaries, associates and joint ventures Gain on disposal and retirement of property, plant and equipment Transfer of property, plant and equipment to expenses Impairment loss on non-financial assets Unrealized gross profit on sales to subsidiaries and associates Realized gross profit on sales to subsidiaries and associates Total income and expenses having no effect on cash flows Net changes in operating assets and liabilities Decerase (increase) in notes receivable Decrease (increase) in accounts receivable Decrease (increase) in accounts receivable - related parties Decrease (increase) in other receivables Decrease (increase) in other receivables - related parties Decrease (increase) in inventories Decrease (increase) in prepayments Total changes in operating assets Net changes in operating liabilities Increase (decrease) in contract liabilities Increase (decrease) in accounts payable Increase (decrease) in accounts payable - related parties Increase (decrease) in other payables Increase (decrease) in other payables - related parties Increase (decrease) in provisions Increase (decrease) in advance receipts Increase (decrease) in net defined benefit liabilities Total changes in operating liabilities Total net changes in operating assets and liabilities Total adjustments	Year Ended December 31	Year Ended December 31
	2018 $736,637 37,209 9,248 2,547 - 7,873 (7,968) (285,106) (114) 445 - 32,687 (32,758) (235,937) (3,436) (76,720) 17,978 3,486 6,354 (112,925) (6,164) (171,427) (9,266) 88,576 186,200 (9,366) (431) 399 - (4,974) 251,138 79,711 (156,226)	2017
		$802,743 30,020 5,146 - (441) 6,889 (6,467) (269,311) (582) 1,256 15,371 32,758 (25,807)
		(211,168)
		19,431 (211,986) (39,709) (3,025) 6,615 (120,333) (2,174)
		(351,181)
		- (30,834) (87,942) 35,540 (1,334) (94) 6,521 (4,977)
		(83,120)
		(434,301)
		(645,469)

Cash generated from operations Interest received Dividends received Interest paid Income tax paid Net cash generated from operating activities CASH FLOWS FROM INVESTING ACTIVITIES Disposal of financial assets at fair value through other comprehensive income Acquisition of property, plant and equipment Proceeds from disposal of property, plant and equipment Increase in refundable deposits Decrase in other receivables - related parties Acquisition of intangible assets Cash received through merger Increase in other noncurrent assets Net cash generated from (used in) investing activities CASH FLOWS FROM FINANCING ACTIVITIES Increase in short-term loans Repayments of long-term loans Increase in guarantee deposits Increase in obligation under captial leases Cash dividends paid Acquisition of subsidiary equity Net cash used in financing activities NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS , BEGINNING OF YEAR CASH AND CASH EQUIVALENTS , END OF YEAR	Year Ended December 31	Year Ended December 31
	2018 580,411 7,954 139,540 (7,875) (155,582) 564,448 74,400 (70,570) 2,922 (182) 21,342 (11,778) 48,256 (635) 63,755 100,000 (100,000) 100 4,817 (577,138) (30,827) (603,048) 25,155 422,062 $447,217	2017
		157,274 6,351 380,821 (6,906) (110,611)
		426,929
		- (56,694) 1,623 (559) 10,908 (4,716) - (1,690)
		(51,128)
		130,000 - 280 - (501,860) -
		(371,580)
		4,221 417,841
		$422,062

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

The effects of the stock dividends proposed by the shareholders' meeting on the Company's business performances and earnings per share.

Year Item	Year Item	Year Item	2019 (Estimated)
Initialpaid-in capital(NT$1,000)			2,509,297
Distribution of stock and cash dividends in the current fiscalyear	Cash dividendsper share(NT$)		2.00
	Number of shares distributed per share in capital increase by retained earnings (NT$)		-
	Number of shares distributed per share in capital increase by capital reserve (NT$)		-
Change in operating performance	Operating profits(NT$1,000)		Not applicable (Note 2)
	Percentage of increase (decrease) in operating profit over the sameperiod in theprevious fiscalyear(%)
	After-tax netprofit(NT$1,000)
	Percentage of increase (decrease) in after-tax net profit over the sameperiod in theprevious fiscalyear(%)
	Earningsper share(NT$)
	Percentage of increase (decrease) in EPS over the same period in theprevious fiscalyear(%)
	Annual average return on investment (reciprocal of average annualprice/earnings ratio) (%)
Pro forma earnings per share and price/earnings ratio	If capital increase by retained earnings is entirely replaced by cash dividend distribution	Pro forma earningsper share
		Pro forma average annual return on investment
	If capital reserve is not used for capital increase	Pro forma earningsper share
		Pro forma average annual return on investment
	If capital reserve is not used for capital increase and capital increase by retained earnings is replaced by cash dividend distribution	Pro forma earningsper share
		Pro forma average annual return on investment

Note 1: Filed in accordance with the resolution of the meeting of the Board of Directors on March 14, 2019. To be passed in the general shareholders meeting in 2019.

Note 2: According to the "Regulations Governing the Publication of Financial Forecasts of Public Companies", the Company is not required to disclose its financial forecasts for 2019.

Sunonwealth Electric Machine Industry Co., Ltd. Shareholders' Meeting Policy

Article 1: Unless otherwise specified by law or the Articles of Incorporation, the shareholders' meetings of the Company shall be implemented in accordance with this Policy.
Article 2: The Company shall provide an attendance log to record attendance of shareholders in attendance; alternatively, attendance cards may be presented to signify their presence at the meeting. The number of shares represented during the meeting is calculated based on the total amount registered in the attendance log or the attendance cards collected.
Article 3: Shareholders' attendance and votes are determined by the number of shares represented during the meeting.
Article 4: Shareholders' meetings of the Company shall be held at locations that are suitable and convenient for shareholders to attend. Meetings shall not begin earlier than 9 AM or later than 3 PM.
Article 5: Shareholders' meetings that are convened by the Chairman shall be chaired by the Chairman. If the Chairman is unable to perform such duties due to leave of absence or any reason, the Vice Chairman shall act on the Chairman's behalf. If the Vice Chairman is also unavailable or is non-existent, the Chairman may appoint one of the Managing Directors to act on the Chairman's behalf. If the Company does not have a Managing Director, one of the Directors shall be appointed to act on the Chairman's behalf. If no such designation is made by the Chairman, the Managing Directors or Directors shall select one person from among themselves to serve as chair. If the shareholders' meeting is convened by an authorized party other than the Board of Directors, the meeting shall be chaired by the authorized convener.
Article 6: The Company may summon its lawyers, certified public accountants, and any relevant personnel to be present at the shareholders' meeting. Organizers of the shareholders' meeting must wear proper identification or arm badges.
Article 7: The Company's shareholder meetings must be video or audio recorded and kept for at least one year.
Article 8: The chair shall announce the commencement of the meeting as soon as it is due. However, if the attendants represented less than half of the Company's outstanding shares, the chair may announce to postpone the meeting up to two times, for a period totaling no more than one hour. If after two postponements the number of shareholders present is still insufficient while representing at least one third of the total issued shares, provisional resolutions may be adopted in accordance with Article 175, Paragraph 1 of the Company Act. If the number of shares represented during the meeting accumulates to more than half of all outstanding shares before the meeting ends, the chair may re-propose the tentative resolution for final voting according to Article 174 of the Company Act.
Article 9: If the shareholders' meeting is convened by the Board of Directors, the Board of Directors

shall determine the meeting proceedings. The proceedings shall not be changed unless resolved during the shareholders' meeting. The above rule also applies if the shareholders' meeting is convened by any authorized party other than the Board of Directors. In either of the two arrangements described above, the chair cannot dismiss the meeting while an agenda item (including extraordinary motions) is still in progress. If the chair violates the meeting policy by dismissing the meeting when it is not allowed to do so, the attending shareholders may elect another chair with the support of more than half of voting rights represented and continue the meeting.

Article 10: Shareholders who wish to speak during the meeting must produce an opinion slip detailing the topics and the shareholder's account number (or the attendance ID serial). The order of shareholders' comments shall be determined by the chair. Shareholders who submit an opinion slip without actually speaking are considered to have remained silent. If the shareholder's actual comments differ from those stated on the opinion slip, the actual comments expressed shall be recorded. While a shareholder is speaking, other shareholders shall not speak simultaneously or interfere in any way unless agreed by the chair and the person speaking. Any violators shall be restrained by the chair.
Article 11: Each shareholder shall speak no more than twice, for a maximum of five minutes each, on the same agenda item unless otherwise agreed by the chair. The chair may stop shareholders from speaking if they violate the rules or speak outside the agenda item under discussion.
Article 12: Corporate entities that have been designated as proxy attendants shall only appoint one representative to attend the shareholders' meeting. Where a corporate shareholder has appointed two or more representatives to attend the shareholders' meeting, only one representative may speak per agenda item.
Article 13: After the shareholder has finished speaking, the chair may answer to the shareholder's queries personally or appoint any relevant personnel to do so.
Article 14: When the chair at a board meeting is of the opinion that a proposal has been discussed sufficiently to put it to a vote, the chair may announce the discussion closed and call a vote.
Article 15: The chair will appoint a ballot scrutineer and a ballot counter; the ballot scrutineer must be a shareholder. Voting results shall be made known on-site immediately and recorded in writing.
Article 16: The chair may put the meeting in recess at appropriate times.
Article 17: Unless otherwise regulated by the Company Act or the Articles of Incorporation, an agenda item is passed when supported by shareholders who represent more than half of the total voting rights in the meeting. No voting power shall be granted, however, to shares specified in Article 179 of the Company Act. An agenda is considered passed if the chair receives no objections from any attendants. This voting method is as effective as does the conventional ballot method.

Article 18: When there is an amendment or alternative to a proposal, the chair shall present the amended or alternative proposal together with the original proposal and decide the order in which they will be put to a vote. If any resolution is passed, all other proposals shall be deemed rejected and no further voting is necessary.
Article 19: The chair may instruct marshals (or security staff) to help maintain order in the meeting. While maintaining order in the meeting, all marshals or security staff must wear arm bands which identify their roles as "Marshall."
Article 20: Matters not provided herein shall be subject to the provisions of the Articles of Incorporation and other applicable laws and regulations.
Article 21: The Policy shall come into effect upon approval of the shareholders' meeting. The same applies to all subsequent amendments.
Article 22: The Policy was established on June 23, 1991. The first amendment was on April 3, 1997. The second amendment was on April 3, 1998. The third amendment was on May 28, 2002. The fourth amendment was on June 16, 2006.

Sunonwealth Electric Machine Industry CO., LTD.

Articles of Incorporation

SECTION I: General Principals

Article 1. The Company is called 建準電機工業股份有限公司 and is registered as a company limited by shares according to the ROC Company Act. The English name of the Company is Sunonwealth Electric Machine Industry Co., Ltd. Article 2 The Company is engaged in the following businesses: 01.CC01080 Electronic Parts and Components Manufacturing 02.CC01990 Electrical Machinery, Supplies Manufacturing 03.CB01010 Machinery and Equipment Manufacturing 04.CC01010 Electric Power Supply, Electric Transmission and Power Distribution Machinery Manufacturing 05.CC01030 Electric Appliance and Audiovisual Electric Products Manufacturing 06.F401010 International Trade 07.ZZ99999 All business items that are not prohibited or restricted by law, except those that are subject to special approval. Article 3. The Company’s headquarter is located in Kaohsiung city, Taiwan and may set up domestic or foreign branches, offices or business establishments as resolved by the Board of Directors, if necessary. Article 4. Public announcements by the Company are to be made following Article 28 of Company Act. Article 5. The total amount of the Company’s reinvestment shall not be subject to the restriction of not exceeding 40% of its paid-in capital, and the Company may act as a guarantor.

SECTION II: Shares

Article 6. The total capital amount of the Company shall be three billion New Taiwan Dollars (NT$3,000,000,000), divided into three hundred million (300,000,000) shares, at a par value of ten New Taiwan Dollars (NT$10) per share, and may be issued separately according to the resolution of the Board of Directors. Article 6-1. To transfer shares to employees at less than the average actual share repurchase price, a company must have obtained the consent of at least two-thirds of the voting rights present at the most recent shareholders meeting attended by shareholders representing a majority of total issued shares. Article 7. The share certificate of the Company shall all be name-bearing share certificates and shall be affixed with the seals or by signature of at least three (3) directors of the Company, and issued after being duly authenticated pursuant to the law. The Company may issue shares without printing share certificate(s), but shall have the shares registered with the Taiwan Depository & Clearing Corporation.

Article	8_._	A shareholder shall for record purposes provide to the Company his official name. it
		shall state the official name and registered address of the each shareholder
		and(or) the proxy of the shareholder in the roster of shareholder. Where there are
		several persons owning the same share or shares, such co-owners shall select one
		of them for the exercise of their shareholders rights.
Article	9_._	Unless otherwise required by the laws and the Securities and Exchange Act, the
		shareholder services including transferring of share ownership, creation of pledge,
		removal of pledge, reporting of loss, inheritance, gift, change of basic shareholder
		information, etc. shall be handled in accordance with the Regulations Governing the
		Administration of Shareholder Services of Public Companies promulgated by
		competent authority
Article	10.	A company shall not handle any requests for transfers of shares within 60 days prior
		to the shareholders meeting, 30 days prior to the special shareholders meeting, or 5
		days prior to the record date for the distribution of dividends, bonuses or other
		interests.
		SECTION III: General Shareholders’ Meeting
Article	11.	Shareholders’ meeting shall be of two types, namely general and extraordinary
		shareholders’ meeting. The former shall be convened once a year within six months
		after the close of each fiscal year and the latter shall be convened whenever necessary.
		Notices which clearly state the purpose(s) for convening meeting shall be sent to each
		shareholder at least thirty (30) days in advance, in case of general meetings, and at least
		fifteen (15) days in advance, in case of extraordinary meetings.
Article	12.	Any shareholder, who for any reason is unable to attend general shareholders’
		meetings, may execute a proxy printed by the Company, in which the authorized
		matters shall be expressly stated, to authorize a proxy to attend the meeting for
		him/her.
Article	13.	Shareholders’ meeting shall be convened by the Board of Directors and, be
		presided over by the Chairman of the Board of Directors; in case the Chairman of
		the Board of Directors is on leave or unable to perform his duties for cause, the
		Chairman of the Board of Directors shall designate a director to act as the
		chairman; if no such designation, the directors shall elect one from among
		themselves.
Article	14.	Except in the circumstances otherwise provided under the Article 179 of the Company
		Act, a shareholder shall have one voting power in respect of each share in his/her/its
		possession.
Article	15.	Unless otherwise required by the Company Act, shareholders’ resolutions shall be
		adopted by at least half of the votes of the shareholders present at a general
		shareholders’ meeting who hold at least half of all issued and outstanding shares of the
		Company.
Article	16.	Shareholder meeting minutes made for the purpose of recording all proceedings and
		resolutions at meetings of the holders of any class of Shares should be signed by
		respective chairpersons and dispatched within 20 days from the date the meetings
		concluded to all of the Shareholders for the time being entitled to receive notice of and
		to attend and vote at the meetings. Minutes shall also specify the place, the day and
		the hour of the meeting and name of the chairperson and are to be kept in the
		Company along with relevant Shareholder sign-in records and instruments of proxies.
		The attendance list bearing the signatures of the shareholders present at the
		shareholders meeting and the powers of attorney of the proxies shall be kept for a
		period of at least one year.

SECTION IV: Director

Article	17.	The Company shall have seven (7) to nine (9) directors to be elected by the general
		shareholders’ meeting through the provisions of Article 192-1 of the Company Act in
		that a candidate nomination system from the nominees listed to serve a term of three
		years, and may continue to serve in the office if re-elected. The minimum number of
		total shares to be owned by the directors of the Company shall be in compliance with
		the Rules and Review Procedures for Director and Supervisor Share Ownership
		Ratios at Public Companies as promulgated by the Financial Supervisory
		Commission.
		The aforesaid Board of Directors must have at least three (3) or one-fifth (1/5) of all
		directors, whichever is higher, independent directors.Shareholders shall elect
		independent directors from among those listed in the slate of independent director
		candidates. The independent directors may not continue to server over nine (9) years.
		Regulations governing the professional qualifications, restrictions on shareholdings
		and concurrent positions held, assessment of independence, method of nomination,
		and other matters for compliance with respect to independent directors shall be
		subject to the applicable laws.
		The monthly remuneration and Transportation allowance of the directors of the
		company shall be prescribed by the Remuneration Committee referring to the typical
		pay levels adopted by peer companies and be submitted to the Board of Directors for
		resolution.
		The Board of Directors may obtain directors liability insurance during their terms of
		directorship when necessary with a resolution to be adopted by a majority vote of the
		directors at a meeting of the Board of Directors attended by at least a majority of the
		entire directors of the company.
Article	18.	Tenure of incumbent Directors and Supervisor may be extended until such date new
		Directors and new Supervisor are appointed if shareholder general meeting to elect
		new Directors and new Supervisor, for any reason, is not convened in time.
Article	19.	The Board of Directors is constituted by directors, and the Chairman is elected by
		more than half of the directors at a board meeting at which two-thirds or more of the
		directors are present. The Chairman shall perform all his/her duties in accordance
		with laws and regulations, the Articles of Incorporation, resolutions adopted at
		meetings of Shareholders and the Board of Directors.
Article	20.	By-elections shall be convened for the purpose of filling vacant seats in the board of
		Directors if any such vacancy arises prior to expiration of the designated 3-year tenure.
		Appointment through by-election shall not carry tenure beyond the original expiration
		date of the vacant position for which the by-election is held.
Article	21.	The meeting of the Board of Directors shall be held once every quarter; special
		meeting of the Board of Directors may be held when Chairman deems necessary or
		requested by two (2) or more Board members. Unless otherwise stipulated in the
		Company Act, board meetings shall be called and chaired by the Chairman of the
		Company. When the Chairman cannot exercise his power and authority, the act on
		his behalf shall be in according with the provisions of Article 192-1 of the Company
		Act.
		In convening a meeting of the Board of Directors, a notice indicated the purpose(s) for
		convening the meeting shall be given to each director no later than 7 days prior to the
		scheduled meeting date in writing or via e-mail or fax. However, in the case of
		urgency, the meeting may be convened at any time.

Article 22. Unless otherwise required by the Company Act, shareholders’ resolutions shall be adopted by at least half of the votes of the shareholders present at a general shareholders’ meeting who hold at least half of all issued and outstanding shares of the Company. A director may execute a proxy to appoint another director to attend the Board of Directors meeting and to exercise his/her voting right, but a director can accept only one proxy. In case a meeting of the board of directors is proceeded via visual communication network, then the directors taking part in such a visual communication meeting shall be deemed to have attended the meeting in person.
Article 23. Board meeting minutes made for the purpose of recording all proceedings and resolutions at meetings of the Directors should be signed by the chairman and dispatched within 20 days from the date the meetings concluded to all of the Directors. Minutes shall be kept in the Company along with relevant Director sign-in records and instruments of proxies.
Article 24. The Company shall set forth the Audit Committee, which comprises of all the independent directors, in accordance with the Securities and Exchange Act. Oneof independent directors shall be convener, and at least one of whom shall have accounting or financial expertise.
After the establishment of the Audit Committee, the Audit Committee shall be responsible for performing the power of supervisors as provided in the Company Act, the Securities and Exchange Act, the Articles of Incorporation and the internal rules of the Company and the relevant laws and regulations.

The resolution of the Audit Committee shall be made at the meeting in which a majority of the independent directors shall vote in favor of the resolution.

Atticle 25. When holding a meeting of the board of directors, the company may invite personnel of relevant departments to attend the meeting as nonvoting participants.

SECTION V: Manager

Article 26. The Company may have managers whose appointment, dismissal andremuneration shall be handled in accordance with Article 29 of the Company Act.
Article 27. (Deleted)

SECTION VI: ACCOUNTING

Article 28. At the end of each fiscal year, the Board of Directors shall prepare financial and accounting books in accordance with the ROC Company Act and submit them according to law to the ordinary general shareholders’ meeting for approval.
the business report;
the financial statements; and
3 . the surplus earning distribution or loss off-setting proposals.

Article 29. The company operates the business of electronic components industry and it is currently at the growth stage of the industry life cycle. Research, development and increasing production capacity are the key to competitive capability and sustainable operation. Based on the factors including capital required for operation and stable dividends distribution, the Company adopts Residual Dividend Policy with fixed dividends.If the Company is profitable, 2% (inclusive) of the profits shall be allocated as compensation to employees and 5% (inclusive) or less of the profits should be allocated as compensation to directors. While the Company has accumulated losses,

the profit shall be set aside to compensate losses before distribution.

The company may, by a resolution adopted by a majority vote at a meeting of board of directors attended by two-thirds of the total number of directors, have the profit distributable as employees’ compensation in the preceding paragraph distributed in the form of shares or in cash; and in addition thereto a report of such distribution shall be submitted to the shareholders’ meeting.

Qualification requirements of employees, including the employees of subsidiaries of the company meeting certain specific requirements, entitled to receive shares or cash.

At each fiscal year-end, the Company should allocate as legal surplus ten percent (10%) of earnings that are net of tax payment and net of adjustments for any losses from prior years. Total of earnings balance from current fiscal year and undistributed earnings from previous years is considered earnings available for distribution. Proposal of earnings distribution shall be presented in board meetings and resolved in shareholder general meetings.

In the case of dividends distribution by the Company, the Board of Directors may refer to the operational and capital expenditure requirements to draw a proposal of appropriate proportions of cash and stock dividends, and such proposal shall be submitted to the shareholders' meeting for approval. Stock dividend provided that the cash dividends shall not be less than 20% of the total dividends.

SECTION VII: Appendix

Article 30. The internal organization of the Company and the detailed procedures of business operation shall be determined by the Board of Directors.
Article 31. In regard to all matters not provided for in these Articles of Incorporation, the Company Act or other laws and regulations shall govern.
Article 32. Terms of these articles of incorporation have been fully ratified, confirmed, and approved by shareholder general meeting and filed with authority for adoption. Any future amendment to the terms of these articles shall be approved by shareholder general meeting and file with authority for adoption.
Article 33. These Article of Incorporation were enacted on Aug 12,1980 and amended on Sep. 26, 1980 for the first time, on May 25, 1983 for the second time, on Sep. 1,1986 for the third time, on Oct. 5,1988 for the fourth time, on Mar. 7,1989 for the fifth time, on Mar. 23,1989 for the sixth time, on Oct. 1,1989 for the seventh time, on Mar. 1,1991 for the eighth time, on June 23,1981 for the ninth time, on June 19,1983 for the tenth time, on Aug. 20,1994 for the eleventh time, on June 16,1995 for the twelfth time, on May 30,1996 for the thirteenth time, on Apr 3,1997 for the fourteenth time, and on May 14, 1999 for the fifteenth time , on May 26,2000 for the sixteenth time, on May 28,2002 for the seventeenth time, on June 3,2003 for the eighteenth time, on June 27,2005 for the nineteenth time, on June 16,2006 for the twentyth time, on June 22,2007 for the twenty-first time, on June 19,2008 for the twenty-second time, on May 27,2009 for the twenty-third time, on June 9,2010 for the twenty-fourth time, on May 25,2012 for the twenty-fifth time, on June 4,2014 for the twenty-sixth time, on June 9,2015 for the twenty-seventh time, on June 3,2016 for the twenty-eighth time.

Sunonwealth Electric Machine Industry Co., Ltd. 2018 Business Report

I. Business Performance

The global economy gradually recovered in 2018. Amid the rapid changes in the industry from the Internet of Things to the Internet of Scenes and the Internet of Sound and from e-commerce to unmanned stores, AI technologies of the future world have become more refined. Technological changes have brought forth challenges and impact to all industries. In addition, the strained trade relations between China and the United States and President Trump's economic and trade policies have caused changes in the overall market and filled the industry with uncertainty. Although Sunonwealth Group faced difficult challenges in 2018, we resolved customers' issues and satisfied their demands to win their trust. We continued growth at a steady pace and used multiple years of industrial development and the hard work of employees to achieve record highs in revenue. As 5G technologies are fully initiated in the near future, product transmission speed will become faster and heat dissipation will become increasingly important. Sunonwealth will use its core motor technologies and heat dissipation solutions as the foundation and use more innovative concepts to provide customers with comprehensive energy efficient motors, heat dissipation, and ventilation solutions and provide engaging new products for the industry in the future.

Sunonwealth has been focused on inventions and innovation in core technologies in energy-efficient motors for 39 years. Sunonwealth has continuously achieved innovation and led product development trends in the industry in solutions for motors, fans, heat dissipation modules, and ventilation. Examples include the world's first MagLev motor fans and the world's smallest and slimmest Mighty Mini Fan. The product received wide acclaim in the industry and it was widely adopted in mobile devices, automotive electronics, IoT, home appliances, medical applications, industrial applications, refrigeration equipment, monitoring and control services, and green building ventilation. It was designated for use by multiple international brands and we became customers' optimal heat dissipation design partner.

The Company's net operating revenues in 2018 was NT$8,186,530 thousand which was an increase of NT$497,611 or 6.47% from NT$7,688,919 thousand in 2017. The consolidated net operating revenues was NT$11,965,298 thousand which was an increase of NT$1,018,570 thousand or 9.30% from NT$10,946,728 in 2017.

Sunonwealth Group launched the world's first DR MagLev Motor Fan which uses new MagLev technology with micro dust insulation technology and S&C (seal & clip) to effectively prevent motor stator blades from falling off and provides superior dust resistance, higher reliability, and longer useful life. It has become Sunonwealth's optimal competitive niche in the heat dissipation industry. Sunonwealth has intensified development in inventions and innovation for many years and we have established comprehensive and industry-leading technology capacity. Sunonwealth was ranked 48th in the world and 4th in Taiwan in terms of technical strength by the MIT Technology Review . These achievements prove Sunonwealth's technical prowess in the

industry.

In response to the miniaturization, thin design, battery life, and high-performance designs of mobile devices, tablets, and Ultrabooks, the next generation of products must improve in performance, operation speeds, wireless transmission and storage capacity, and functions. Sunonwealth offers the "mini fans" and the "Mighty Mini Fan" series and customized manufacturing services for heat dissipation products with a thickness of 2mm to fully satisfy heat dissipation requirements for the next generation of mobile products. Products are used for heat dissipation and ventilation in various IT, medical, and digital life products such as miniature projectors, portable air detectors, smart phones, computer sticks, VR/AR/MR wearable display devices, high-speed cameras, tablets, electronic breathing masks, and other portable miniature electronic devices to maximize product performance.

The LED lighting industry was one of the most promising green energy industries in the 21st century. With the increase in global energy conservation, carbon reduction, and environmental protection awareness, LED light bulbs' 80% energy savings over traditional light bulbs continues to power rapid growth in the industry. Sunonwealth's LED cooling modules uses high-efficiency active cooling with unique ventilation designs that direct air flow to components at the power source to cool the chip and lower the temperature of internal components at the same time. It effectively improved the useful life of LED lights and the high-efficiency heat dissipation of the active cooling make LED lighting products lighter and smaller. It effectively resolves cooling issues for LED lights with high lumen and small footprints. In addition to providing LED cooling modules, Sunonwealth also provides comprehensive cooling designs for entire lamps to greatly reduce the time required for design conceptualization, repeated verification and tests and mass production of products. It allows customers to take the lead in grasping market opportunities in a competitive market.

As network technology progresses and the IoT continues to develop, servers and network communication equipment have become important infrastructure in many countries. With long periods of 24-hour operations, fast transmission, zero-interruption, energy efficiency, and weather resistance are basic requirements for all communication products. To provide communication equipment with optimal heat dissipation solutions, Sunonwealth has designed various fan control and fan module products with high air volume, high air flow pressure, wide voltage adaptation, high IP protection, energy efficient, and power failure brake circuit design are compatible with international communication protocols. In addition, we have also developed anti-vibration motor structure designs for high air volume and high air flow pressure fan products to reduce the vibration and noise of high-speed operations. The motors completely satisfy the cloud industry equipment market's requirements for the design of cooling products.

In terms of automotive applications, in response to the increase in green energy and environmental protection awareness and the rapid development of electric vehicles, Sunonwealth's fan products have gradually been expanded from traditional automotive applications to various electronic applications in electric vehicles. Our products are used in the CPUs of advanced driver

assistance systems and trip computers and our customers include major automobile manufacturers such as Tesla, BMW, Mercedes Benz, Audi, and Jaguar. As cars gradually become smarter, the proportion of automotive electronics applications has grown each year and automotive electronics has become the source of 90% of the innovation in the current automotive industry. Various applications for cleaner energy, safer, smarter, and more comfortable vehicles are being developed. Cooling design has become a key technology for maintaining the maximum performance of high-end electronics products. Since 1999, Sunonwealth has accumulated years of experience in projects with European and American automobile manufacturers and we provide products with high reliability, high protection, high temperature resistance, vibration resistance, acid corrosion resistance, salt fog resistance (GR487 certification), dust resistance, waterproof, and certified in 1000 desert tests that meet cooling and ventilation requirements of the automotive industry and satisfy automobile manufacturers' high demand for quality.

In the past ten or more years, the use of chlorofluorocarbons (CFCs) have gradually been ceased in the refrigeration, air-conditioning, and fire safety equipment produced around the world due to the Montreal Protocol. The levels of these substances have been gradually reduced each year and the Antarctic ozone hole was finally minimized and stabilized this year. Countries have outlawed or reduced the use of such substances while fluorine-free and environmentally friendly refrigerants have been adopted in more and more refrigeration equipment. As most environmentally friendly refrigerants are produced from hydrocarbons which are flammable and explosive, Sunonwealth has begun producing ultra-high efficiency energy-saving EC fans for commercial refrigeration equipment to effectively control surface temperature during operations and maintain them within a safe range so that no short circuits in internal parts can cause any flame. This prevents any high temperature of flames or explosions and make Sunonwealth's EC Axial Fans safer for customers' designs and usage.

Global warming has caused severe climate issues in recent years and countries began to pay more attention to energy conservation, carbon emissions reduction, and sustainable development of the environment. Sunonwealth's international customers with whom we have worked for many years began transitioning from traditional motors to energy-efficient DC motors and Sunonwealth has advanced greatly in energy-efficient motor technologies and environmentally friendly materials for products. Sunonwealth has accumulated technologies for energy-efficient motors and abundant experience in industrial cooperation and R&D for many years. We have established a series of ultra-energy-efficient DC ventilation products for sectors that still use traditional motors in 2015. The futuristic products consume 80% less energy and are ultra-quiet, waterproof, flame retardant, and equipped with multiple protection technologies that provide people with safer, more comfortable, and more energy-efficient ventilation products. In addition to adopting the latest motor technologies for our products, we surpassed traditional constraints in the external design of the products by integrating LED lighting and ventilation design and adopting minimalist styles for control panels. Our products have received the iF product design award in Germany and the Taiwan Excellence Silver Award. They provide the home environment with superior ventilation products.

In response to the increasingly severe smog endemic around the world that severely threaten human health, Sunonwealth created the Flow2 One-AHR Ventilation Fan to address air pollution and smog in 2016. The product is used for bidirectional exchange of air for closed building environment. With simple installation, it provides fresh air for indoor areas and quickly expels indoor CO2, dust, formaldehyde, and other pollution. It also filters PM.25 from external air to introduce fresh air and increases the oxygen content of the indoor environment. The total heat exchange function achieves truly comfortable indoor temperature and humidity and the product received recognition in the 2017 Taiwan Excellence Award. We launched an advanced model in 2018 with an innovative external design and more efficient PM2.5 filtering. Its smart functions detect air quality at home and provides refreshing air at all times so that you can enjoy forest-like good air without opening the windows.

In response to global energy conservation trends, air-conditioning used along with ceiling fans can effectively lower indoor temperature by 5-8°C. Under general temperatures, it can even replace air-conditioning and lower the air-conditioning cost of commercial spaces. As ceiling fans operate over long periods of time, higher energy efficiency standards have become more important. Sunonwealth's ceiling fans are completely lead-free in design and they meet RoHS 2.0 and REACH requirements. The fans are powered by ultra-slim motors and the fans incorporate aluminum and patented aircraft-grade blade designs that effectively reduce drag and eliminate nose. We provide higher performance with lighter and quieter designs than competitors and the ultra-slim fashionable external appearance also provide large spaces with more energy efficient options to improve the appearance of workplace and home living environment.

Sunonwealth has established a pair of core business units in Kaohsiung including the "Invention and Innovation Center" and the "Business Headquarters" to construct a customer service and technical and R&D support system that spans across all continents in the world. Sunonwealth's Invention and Innovation Center invents innovative motors and integrates more than 400 R&D engineers its laboratories in Europe, the United States, Japan, and China to resolve energy conservation and heat management design challenges of customers in all regions and provide customers across the world with the most suitable solutions. The Business Headquarters is the Group's command center for its global operations. With 12 subsidiary companies and offices in Europe, the United States, Japan, and China, more than 130 distributors across the world, and more than 1,000 sales service locations, Sunonwealth Group is able to provide rapid and attentive services to customers across the world through a series of close-knit networks.

II. Production status

The Company produced a total of 138,683 thousand fan products in 2018 which was a 3.62% increase from 133,841 thousand units in 2017. Ac fans accounted for 4.5% of total annual production while DC fans accounted for 95.5%.

Sunonwealth currently has five production bases in Taiwan and China. The Kaohsiung Plant is the headquarters of the Invention and Innovation Center and it focuses on the trial and mass

production of new products and the production of the Mighty Mini Fan. With five production bases in Foshan, Beihai, Kunshan, and Hefei in China, and Kaohsiung, the Group's comprehensive production and supply network has a monthly output of 27 million units in cooling fans and 20 million cooling modules. We use flexible processes and delivery capacity to respond to customer demands and provide rapid and reliable supply services.

In terms of production quality management, Sunonwealth implements ISO quality management systems to improve quality performance. We continue to expand high-tech automation equipment for production to increase production efficiency, standardization, and zero-defect and win customers' long-term trust. All production bases have passed ISO9001, ISO14001, and OHSAS18001 international certification. In response to the quality requirements of the automotive electronics industry, we obtained ISO/TS 16949 certification in 2006 to satisfy high-level safety requirements and meet strict standards in the international automobile industry.

To ensure that products completely meet the EU's RoHS and other green environmental protection regulations, Sunonwealth established an exclusive green supply chain system and fully introduced green procurement procedures to increase management over green materials and control over R&D recognition operations. We strictly prohibit the use of controlled substances and we prohibit suppliers from using or including prohibited substances in production and products. We passed the IECQ QC080000 Hazardous Substance Process Management audit and certification in 2008 and we established a green quality management system that meet international standards.

Sunon places great emphasis on environmental protection and energy conservation in product design and R&D and we adopt green designs that reduce consumption of components and save energy and electricity. The production process requires complete compliance of suppliers with the related substance control declaration standard for the environment in the EU's RoHS and REACH directives in terms of the production process and raw materials. We do not use materials extracted from conflict resources. In addition, we also pay close attention to international issues regarding environmental protection and use of energy and resources. We have implemented the halogen-free initiative and completed education and training for suppliers and employees. In addition, Sunonwealth Group also actively educates all employees on the importance of "environmental protection and energy conservation". In addition to establishing comprehensive procedures and systems for digital documents, we also implemented the 6S policy (sort, set in order, shine, standardize, sustain, and safety) in all plants. We aim to set Sunonwealth Group as a role model and inspire more people to work hard to protect the Earth and our environment. We aim to create "An Entirely Green Sunon".

III. Research and development status

Sunonwealth upholds the "Trinity R&D theory" for the Group's inventions and innovation. We have accumulated more than 39 years of experience in motor technologies and we focus on 3 major technological fields including "motor invention", "motor applications", and "total solutions for heat dissipation". We aim to explore the best performance and unlimited possibilities in motor

applications. Our persistent pursuit of technical breakthrough and product innovation have pushed Sunonwealth Group to the forefront of technology development to provide clients with key modules in motors, cooling fans, and cooling modules to help them build their next-generation dream products. As of the end of December 31, 2018, we had been granted 2,671 patents worldwide with 366 pending patents totaling 3,037 patents. These patents for R&D and innovation achievements demonstrate the Company's lead in innovation and its advantages in grasping market opportunities. The Company's short-term and medium to long-term research plans in recent years are summarized in the table below:

Term	R&D Program(Project)Content
Short-term plans	1. Low-noise and low-vibration DC fan product development 2. Durable and energy-efficient fan and module product development 3. High-performance large-scale DC fan product development 4. Energy-efficient environmentally friendly DC fan product development 5. Low-energy consumption smart control EC motor products 6. High-grade IP protection fan development 7. DC automotive brushless motor development 8. Large-scale energy-efficient smart control motors 9. Vehicle-mounted heat dissipation module development 10. Heat dissipation modules for communication and photography systems 11. Air quality sensors and micro fan products for air quality management 12. Home environment and commercial ceiling fan/ceiling fan motor development 13. Water-cooling system development 14. Industrial/commercial EC Axial Fan & EC Blowers 15. Smart online air quality Flow2 One-AHR Ventilation Fan product development 16. Micro high-load axial fan film system development 17. Smart control module development 18. IoT module and motor applications and research 19. Industry 4.0 light-weight motor development 20. Automotive communication protocols circuit design and development
Medium and long-term plans	1. Continuous R&D for high-performance heat-dissipation module solutions 2. Continuous R&D for high-reliabilitycomponent and

Term

R&D Program(Project)Content

Short-term plans

1. Low-noise and low-vibration DC fan product development
2. Durable and energy-efficient fan and module product
development
3. High-performance large-scale DC fan product development
4. Energy-efficient environmentally friendly DC fan product
development
5. Low-energy consumption smart control EC motor products
6. High-grade IP protection fan development
7. DC automotive brushless motor development
8. Large-scale energy-efficient smart control motors
9. Vehicle-mounted heat dissipation module development
10. Heat dissipation modules for communication and
photography systems
11. Air quality sensors and micro fan products for air quality
management
12. Home environment and commercial ceiling fan/ceiling fan
motor development
13. Water-cooling system development
14. Industrial/commercial EC Axial Fan & EC Blowers
15. Smart online air quality Flow2 One-AHR Ventilation Fan
product development
16. Micro high-load axial fan film system development
17. Smart control module development
18. IoT module and motor applications and research
19. Industry 4.0 light-weight motor development
20. Automotive communication protocols circuit design and
development

Medium and
long-term plans

1. Continuous R&D for high-performance heat-dissipation
module solutions
2. Continuous R&D for high-reliabilitycomponent and

technologies 3. Continuous &RD for slim and precision products 4. Nano heat dissipation technology development 5. R&D for Green energy technologies and products 6. Continuous development of heat-resistant cooling materials 7. Heat dissipation modules for communication and transmission 8. Research in programmable control for smart motor fans 9. Development of overall control modules for one-to-multiple equipment 10. Smart remote-control module development 11. IoT control system development 12. High-weather resistance and high-reliability ventilation equipment

As the leader in the cooling fans and modules industry, Sunonwealth integrates the energy of its global R&D team and uses energy-efficient motors to initiate the "quiet revolution", "energy conservation revolution", "performance revolution", and "miniature revolution" with the aim of bringing quiet, comfortable, and smart green innovative technologies for humans and fulfilling the mission of "Make Life Easier".

Chairman of the Board Yin-Su Hong

President Ching-Shen Hong

Accounting Managerial Officer William Li

Audit Committee's Audit Report

The Board of Directors has prepared and submitted the 2018 business report, financial statements, and earnings distribution proposal. The financial statements have been audited by Crowe Horwath (TW) CPAs and they have submitted an audit report. The Audit Committee has reviewed the business report, financial statements, and the earnings distribution proposal and did not find any instances of noncompliance. According to Article 14-4 of the Securities and Exchange Act and Article 219 of the Company Act, it is hereby submitted for your review and perusal.

Sunonwealth Electric Machine Industry Co., Ltd. Chairman of the Audit Committee: Chun-Hao Xin

March 14, 2019

Comparison Table of the "Procedures for the Acquisition or Disposal of Assets" before and after the amendment

Content	After amendment	Before amendment	Reason for amendment
Article 1	The Company and its subsidiaries shall follow these Procedures in the acquisition or disposal of the following assets: I. Omitted II. Real estate (including land, buildings, and investment properties) and equipment. III. Omitted IV. Omitted V. Right of use assets. VI. Creditor rights of financial institutions (including receivables, bills purchased and discounted, loans, and non-accrual loans). VII. Derivative products. VIII. Assets legally acquired or disposed of through mergers, divestments, business acquisitions or share exchange. IX. Other important assets.	The Company and its subsidiaries shall follow these Procedures in the acquisition or disposal of the following assets: I. Omitted II. Real estate (including land, buildings,and investment properties) and equipment. III. Omitted IV. Omitted V. Creditor rights of financial institutions (including receivables, bills purchased and discounted, loans, and non-accrual loans). VI. Derivative products. VII. Assets legally acquired or disposed of through mergers, divestments, business acquisitions or share exchange. VIII. Other important assets.	Amended in accordance with amendments to IFRS 16 "Leases".

Article 2	The limits on the Company and its subsidiaries' acquisition of real estate,right-of-use assets,or securities for non-business use shall be restricted to 60% of its total nominal assets (original investment amount). Investments in individual securities shall not exceed 50% of the aforementioned limit (30% of total nominal assets).	The limits on the Company and its subsidiaries' acquisition of real estate or securities for non-business use shall be restricted to 60% of its total nominal assets (original investment amount). Investments in individual securities shall not exceed 50% of the aforementioned limit (30% of total nominal assets).	Amended in accordance with amendments to IFRS 16 "Leases".
Article 3	Terms used in the Procedures are defined as follows: I. Derivatives: Forward contracts, options contracts, futures contracts, leverage contracts, or swap contracts, whose value is derived from aspecified interest rate, financial instrument price, commodity price,foreign exchange rate,index of prices or rates, credit rating or credit index, or other variable;orhybrid contracts combining the above contracts; or hybrid contracts or structured products containing embedded derivatives.The term "forward contracts" does not include insurance contracts, performance contracts, after-sales service contracts, long-term leasing contracts, or long-term purchase (sales) contracts. II. Assets legally acquired or disposed of through mergers,	Terms used in the Procedures are defined as follows: I. Derivatives: Derivatives refer to forward contracts, options contracts, futures, leverage contracts, swap contracts etc.,and any combination of the above, whose value is derived from assets,interest rates, exchange rates,indices, or other benefits.The forward contracts mentioned here do not include insurance contracts, performance contracts, after-sale service contracts, long term lease contracts, and long-term (purchase) saleagreements. II. Assets legally acquired or disposed of through mergers,	Amended in accordance with amendments of definitions in IFRS 9 "Financial instruments" and the Company Act

	divestments, business acquisitions or share exchange: Assets acquired or disposed of through mergers, divestments, or acquisitions conducted under the Business Mergers and Acquisitions Act, Financial Holding Company Act, Financial Institution Merger Act and other acts, or through an arrangement whereby new shares are issued in exchange for another company's shares (i.e. share exchange) under Article 156-3of the Company Act. III. Omitted IV. Omitted V. Omitted VI. Omitted VII. Stock Exchange: The domestic stock exchange refers to Taiwan Stock Exchange Corporation. A foreign securities exchange refers to any organized securities exchange market that is regulated by the competent securities authorities of the jurisdiction where it is located. VIII. Securities brokerage operation venue: A domestic OTC venue refers to a venue for OTC trading provided by a securities firm in	divestments, business acquisitions or share exchange: They refer to assets acquired or disposed of through mergers, divestments, or acquisitions conducted under the Business Mergers and Acquisitions Act, Financial Holding Company Act, Financial Institution Merger Act and other acts, or through an arrangement whereby new shares are issued in exchange for another company's shares (i.e. share exchange）under Article 156, Paragraph 8 of the Company Act. III. Omitted IV. Omitted V. Omitted VI. Omitted

			accordance with the Regulations Governing Securities Trading on the Taipei Exchange. A foreign OTC venue refers to a venue at a financial institution that is regulated by a foreign competent authority and permitted to conduct securities business.
Article 4		Professional appraisers and their officers, certified public accounts, attorneys, and securities underwriters that provide the Company with appraisal reports, certified public accountant's opinions, attorney's opinions, or securities brokerage's opinions for the acquisition or disposal of assetsshall meet the following criteria: I. May not have previously received a final and unappealable sentence to imprisonment for 1 year or longer for a violation of the Act, the Company Act, the Banking Act of The Republic of China, the Insurance Act, the Financial Holding Company Act, or the Business Entity Accounting Act, or for fraud, breach of trust, embezzlement, forgery of documents, or occupational crime. However, this provision does not apply if 3 years have already passed since			Professional appraisers and their officers, certified public accounts, attorneys, and securities underwriters that provide the Company with appraisal reports, certified public accountant's opinions, attorney's opinions, or underwriter's opinions for the acquisition or disposal of assets shall not be a related party of any party to the transaction.	Amended in accordance with amended clauses in the "Regulations Governing the Acquisition and Disposal of Assets by Public Companies" promulgated by the competent authority.
		I.

	completion of service of the
	sentence, since expiration of
	the period of a suspended
	sentence, or since a pardon
	was received.
II.	May not be a related party or
	de facto related party of any
	party to the transaction.
III.	If the Company is required to
	obtain appraisal reports from
	two or more professional
	appraisers, the different
	professional appraisers or
	appraisal officers may not be
	related parties or de facto
	related parties of each other.
	The aforementioned
	personnel shall meet the
	following criteria when
	submitting an appraisal
	report or opinion:
	1. Prior to accepting a
	case, they shall
	prudently assess their
	own professional
	capabilities, practical
	experience, and
	independence.
	2. When examining a case,
	they shall appropriately
	plan and execute
	adequate working
	procedures, in order to
	produce a conclusion
	and use the conclusion
	as the basis for issuing
	the report or opinion.
	The related working
	procedures, data

		3. 4.	collected, and conclusion shall be fully and accurately specified in the case working papers. They shall undertake an item-by-item evaluation of the comprehensiveness, accuracy, and reasonableness of the sources of data used, the parameters, and the information, as the basis for issuance of the appraisal report or the opinion. They shall issue a statement attesting to the professional competence and independence of the personnel who prepared the report or opinion, and that they have evaluated and found that the information used is reasonable and accurate, and that they have complied with applicable laws and regulations.
Article 7		In acquiring or disposing of real property,equipment,or right-of-use assets thereofwhere the transaction amount reaches 20 percent of the Company's paid-in capital or NT$300 million or more,the Company,unless		In acquiring or disposing of real property or equipment where the transaction amount reaches 20 percent of the Company's paid-in capital or NT$300 million or more, the Company, unless transactingwith agovernment	Amended in accordance with amendments to IFRS 16 "Leases" and

		transacting with adomestic government agency, engaging others to build on its own land, engaging others to build on rented land, or acquiring or disposing of equipmentor right-of-use assets thereofheld for business use, shall obtain an appraisal report prior to the date of occurrence of the event from a professional appraiser and shall further comply with the following provisions: I. Where due to special circumstances it is necessary to give a limited price, specified price, or special price as a reference basis for the transaction price, the transaction shall be submitted for approval in advance by the Board of Directors; thesame procedure shall also be followedwheneverthere is anysubsequentchange to the terms and conditions of the transaction.	agency, engaging others to build on its own land, engaging others to build on rented land, or acquiring or disposing of equipment held for business use, shall obtain an appraisal report prior to the date of occurrence of the event from a professional appraiser and shall further comply with the following provisions: I. Where due to special circumstances it is necessary to give a limited price, specified price, or special price as a reference basis for the transaction price, the future transaction shall be submitted for approval in advance by the Board of Directors.Any future changes to the terms of the transaction shall also be subject to the above procedures.	amended clauses in the "Regulations Governing the Acquisition and Disposal of Assets by Public Companies" promulgated by the competent authority.
Article 12		When the Company intends to acquire or dispose of real propertyor right-of-use assets thereoffrom or to a related party, or when it intends to acquire or dispose of assets other than real propertyor right-of-use assets thereoffrom or to a related party and the transaction amount reaches 20 percent or more of paid-in capital, 10 percent or more of the Company's total	When the Company intends to acquire or dispose of real property from or to a related party, or when it intends to acquire or dispose of assets other than real property from or to a related party and the transaction amount reaches 20 percent or more of paid-in capital, 10 percent or more of the Company's total assets, or NT$300 million or more,except in tradingof	Amended in accordance with amendments to IFRS 16 "Leases" and amended clauses in the "Regulations Governing

	assets, or NT$300 million or more, except in trading of domesticgovernment bonds or bonds under repurchase and resale agreements, or subscription or redemption of money market funds issued by domestic securities investment trust enterprises, the Company may not proceed to enter into a transaction contract or make a payment until the following matters have been approved by the Audit Committee and the Board of Directors: I. Omitted II. Omitted III. With respect to the acquisition of real property or right-of-use assets thereof from a related party, information regarding appraisal of the reasonableness of the preliminary transaction terms in accordance with Article 13 and Article 15. IV. Omitted V. Omitted VI. Omitted VII. Omitted With respect to the following transactions between the Company and subsidiariesor between subsidiaries whose current outstanding shares or total capital are directly or indirectly wholly owned by the Company, the Board of Directors may, pursuant to Article 10,delegate	government bonds or bonds under repurchase and resale agreements, or subscription or redemption of money market funds issued by domestic securities investment trust enterprises, the Company may not proceed to enter into a transaction contract or make a payment until the following matters have been approved by the Audit Committee and the Board of Directors: I. Omitted II. Omitted III. With respect to the acquisition of real property from a related party, information regarding appraisal of the reasonableness of the preliminary transaction terms in accordance with Article 13 to Article 15. IV. Omitted V. Omitted VI. Omitted VII. Omitted With respect to the acquisition or disposal of business-use machinery equipment between the Company and its subsidiaries, the Company's Board of Directors may, pursuant to Article 10, delegate the Chairman of the Board to decide such matters when the transaction is	the Acquisition and Disposal of Assets by Public Companies" promulgated by the competent authority.

		the Chairman of the Board to decide such matters when the transaction is within NT$300 million and have the decisions subsequently submitted to and ratified in the next Board of Directors meeting: I. Acquisition or disposal of equipment or right-of-use assets thereof held for business use. II. Acquisition or disposal of real property right-of-use assets held for business use. When proposed for discussion by the Board of Directors, dissenting opinions or qualified opinions of Independent Directors must be detailed in board meeting minutes.	within NT$300 million and have the decisions subsequently submitted to and ratified in the next Board of Directors meeting. When proposed for discussion by the Board of Directors, dissenting opinions or qualified opinions of Independent Directors must be detailed in board meeting minutes.
Article 13		When the Company acquires real propertyor right-of-use assets thereoffrom a related party, it shall evaluate the reasonableness of the transaction costs by the following means: I. Based on the price of transaction with the related party, adding the required interest on funding and other costs to be borne by the buyer by law. "Necessary interest on funding" is imputed as the weighted average interest rate on borrowing in the year the Company purchases the property; provided, it may not be higher than the	On acquiring real estate from a related party, the Company shall adopt the following methods to assess the reasonableness of the transaction costs: I. Based on the price of transaction with the related party, adding the required interest on funding and other costs to be borne by the buyer by law. "Necessary interest on funding" is imputed as the weighted average interest rate on borrowing in the year the Company purchases the property; provided, it may not be higher than the maximum non-financial industry lendingrate announced by	Amended in accordance with amendments to IFRS 16 "Leases" and amended clauses in the "Regulations Governing the Acquisition and Disposal of Assets by Public Companies" promulgated

	maximum non-financial industry lending rate announced by the Ministry of Finance. II. Total loan value appraisal from a financial institution where the related party has previously created a mortgage on the property as security for a loan; provided, the actual cumulative amount loaned by the financial institution shall have been 70 percent or more of the financial institution's appraised loan value of the property and the period of the loan shall have been 1 year or more. However, this shall not apply where the financial institution is a related party of one of the transaction counterparties. Where land and structures thereupon are combined as a single property purchasedor leasedin one transaction, the transaction costs for the land and the structures may be separately appraised in accordance with either of the means listed in the preceding paragraph. Where a public company acquires real propertyor right-of-use assets thereoffrom a related party, the Company shall appraise the cost of the real propertyor right-of-use assets thereofin accordance with thetwo	the Ministry of Finance. II. Total loan value appraisal from a financial institution where the related party has previously created a mortgage on the property as security for a loan; provided, the actual cumulative amount loaned by the financial institution shall have been 70 percent or more of the financial institution's appraised loan value of the property and the period of the loan shall have been 1 year or more. However, this shall not apply where the financial institution is a related party of one of the transaction counterparties. Where land and buildings thereupon are combined as a single property purchased in one transaction, the transaction costs for the land and the buildings may be separately appraised in accordance with either of the means listed in the preceding paragraph. When acquiring real estate from a related party, the Company shall appraise the cost of the real estate in accordance withParagraph 1 andParagraph 2 above, in the meantime engaging a CPA to review the appraisal and render an opinion.	by the competent authority.
	accordance with the

		precedingparagraphs and engage a CPA to review the appraisal and render an opinion.
Article 14		Where the Company acquires real propertyor right-of-use assets thereoffrom a related party and one of the following circumstances exists, the acquisition shall be conducted in accordance with Article 12 and Article 13 shall not apply: I. The related party acquired the real propertyor right-of-use assets thereof through inheritance or as a gift. II. More than 5 years will have elapsed from the time the related party signed the contract to obtain the real propertyor right-of-use assets thereofto the signing date for the current transaction. III. The real property is acquired through signing of a joint development contract with the related party, or through engaging a related party to build real property, either on the Company's own land or on rented land. IV. The real property right-of-use assets for business use are acquired by the Company with its subsidiaries, or by its subsidiaries in which it directly or indirectly holds 100 percent of the issued	Where the Company acquires real property from a related party and one of the follows circumstances exists, the acquisition shall be conducted in accordance with Article 12 and Article 13 shall not apply: I. The related party acquired the real property through inheritance or as a gift. II. More than 5 years will have elapsed from the time the related party signed the contract to obtain the real property to the signing date for the current transaction. III. The real property is acquired through signing of a joint development contract with the related party, or through engaging a related party to build real property, either on the Company's own land or on rented land.	Amended in accordance with amendments to IFRS 16 "Leases" and amended clauses in the "Regulations Governing the Acquisition and Disposal of Assets by Public Companies" promulgated by the competent authority.

		shares or authorized capital.
Article 15	When the results of the Company's appraisal conducted in accordance with Article 13, Paragraph 1 and Paragraph 2 are uniformly lower than the transaction price, the matter shall be handled in compliance with Article 16. However, where the following circumstances exist, objective evidence has been submitted and specific opinions on reasonableness have been obtained from a professional real property appraiser and a CPA have been obtained, this restriction shall not apply: I. Where the related party acquired undeveloped land or leased land for development, it may submit proof of compliance with one of the following conditions: 1. Where undeveloped land is appraised in accordance with the means in the preceding Article, and structures according to the related party's construction cost plus reasonable construction profit are valued in excess of the actual transaction price. By definition, "Reasonable construction profit" shall be the average gross operating profit reported bythe		When the results of the Company's appraisal conducted in accordance with Article 13, Paragraph 1 and Paragraph 2 are uniformly lower than the transaction price, the matter shall be handled in compliance with Article 16. However, where the following circumstances exist, objective evidence has been submitted and specific opinions on reasonableness have been obtained from a professional real property appraiser and a CPA have been obtained, this restriction shall not apply: I. Where the related party acquired undeveloped land or leased land for development, it may submit proof of compliance with one of the following conditions: 1. Where undeveloped land is appraised in accordance with the means in the preceding Article, and structures according to the related party's construction cost plus reasonable construction profit are valued in excess of the actual transaction price. By definition, "Reasonable construction profit" shall be the average gross operating profit reported bythe	Amended in accordance with amended clauses in the "Regulations Governing the Acquisition and Disposal of Assets by Public Companies".

		2.	construction division of the related party over the most recent 3 years or the gross profit margin for the construction industry for the most recent period as announced by the Ministry of Finance, whichever is lower. When compared with completedtransactions for similarly-sized parcels by other non-related parties within one year located on other floors of the same building/land or in neighboring areas, the transaction terms are considered equivalent after taking into consideration the reasonable price difference for properties on different floors/areas according to the practices of the real estate trading or leasing market.	2. 3.	construction division of the related party over the most recent 3 years or the gross profit margin for the construction industry for the most recent period as announced by the Ministry of Finance, whichever is lower. When compared with completedtransactions for similarly-sized parcels by other non-related parties within one year located on other floors of the same building/land or in neighboring areas, the transaction terms are considered equivalent after taking into consideration the reasonable price difference for properties on different floors/areas according to the practices of the real estate trading market. When compared with lease transactions concluded by other non-related parties within one year which involves properties on other floors of the building/land, the transaction terms are considered equivalent after taking into consideration the

reasonable price difference for properties on different floors according to the practices of the real estate leasing market.

II. Where a public company acquiring real property, or obtaining real property right-of-use assets through leasing, from a related party provides evidence that the terms of the transaction are similar to the terms of completed transactions involving neighboring or closely valued parcels of land of a similar size by unrelated parties within the preceding year.

Completed transactions involving neighboring or closely valued parcels of land in the preceding paragraph in principle refers to parcels on the same or an adjacent block and within a distance of no more than 500 meters or parcels close in publicly announced current value; transactions involving similarly sized parcels in principle refers to transactions completed by unrelated parties for parcels with a land area of no less than 50 percent of the property in the planned transaction; within the

II. Where the Company has provided evidence that the terms and conditions for purchasing the real property from the related party are equivalent to the terms of the transactions concluded in neighboring areas for similarly-sized parcels by other non-related parties within one year. The "transactions concluded in neighboring areas" prescribed in the preceding paragraph refers to parcels on the same or an adjacent block and within a distance of no more than 500 meters or parcels close in publicly announced current value; transactions involving similarly sized parcels in principle refers to transactions completed by unrelated parties for parcels with a land area of no less than 50 percent of the property in the planned transaction; within the preceding year refers to the year preceding the date of occurrence of the acquisition of the real property.

			preceding year refers to the year preceding the date of occurrence of the acquisition of the real propertyor obtainment of the right-of-use assets thereof.
Article 16		Where the Company acquires real propertyor right-of-use assets thereoffrom a related party and the results of appraisals conducted in accordance with Article 13 to Article 15 are uniformly lower than the transaction price, the following steps shall be taken: I. A special reserve shall be set aside in accordance with Article 41, Paragraph 1 of the Securities Act against the difference between the real property transaction price and the appraised cost, and may not be distributed or used for capital increase or issuance of bonus shares. Where the Company uses the equity method to account for its investment in another company, then the special reserve called for under Article 41, Paragraph 1 of the Securities and Exchange Act shall be set aside pro rata in a proportion consistent with the share of the Company's equity stake in the other company. II. Independent Directors shall complywith Article 218 of		Where the Company acquires real property from a related party and the results of appraisals conducted in accordance with Article 13 to Article 15 are uniformly lower than the transaction price, the following steps shall be taken: I. A special reserve shall be set aside in accordance with Article 41, paragraph 1 of the Securities and Exchange Act against the difference between the transaction price and the appraised cost for the real estate. These funds may not be distributed or used for capital increase or issuance of bonus shares. Where the Company uses the equity method to account for its investment in another company, then the special reserve called for under Article 41, Paragraph 1 of the Securities and Exchange Act shall be set aside pro rata in a proportion consistent with the share of the Company's equity stake in the other company. II. Independent Directors shall complywith Article 218 of	Amended in accordance with Revisions to IFRS 16 "Leases".

If the Company has set aside a special reserve under the preceding paragraphs, it shall not draw on the reserve unless it has recognized the loss on decline in market value of the assets it purchased or leased at a premium; terminated the lease contract; has disposed of the assets or made adequate compensation; or has restored the status quo ante; or there is other evidence confirming that there was nothing unreasonable about the transaction. Agreement from the Financial Supervisory Commission is also required. The rules specified in the two preceding paragraphs shall also be followed if there is other evidence showing nonconformity with general business practices when the Company acquires real property or right-of-use assets thereof from a related party.

the Company Act and supervise the Company's execution of the actions specified in the preceding subparagraph. III. The Independent Directors shall report to the shareholders' meeting on actions taken pursuant to Subparagraph 1 and Subparagraph 2 and disclose transaction details in the annual report and investment prospectus of the Company. If the Company has set aside a special reserve under the preceding paragraphs, it shall not draw on the reserve unless it has recognized the loss on decline in market value of the assets it purchased at a premium; has disposed of the assets or made adequate compensation; or has restored the status quo ante; or there is other evidence confirming that there was nothing unreasonable about the transaction. Agreement from the competent authority of securities is also required. The rules specified in the two preceding paragraphs shall also be followed if there is other evidence showing nonconformity with general business practices when the Company acquires real property from a related party.

	Article 26	Under any of the following circumstances, the Company shall, within 2 days from the date of occurrence of the event, publicly announce and report the relevant information about the acquisition or disposal of assets on the designated website of the competent authority of securities using the format specified by the competent authority of securities: I. Acquisition or disposal of real propertyor right-of-use assets thereoffrom or to a related party, or acquisition or disposal of assets other than real propertyor right-of-use assets thereof from or to a related party where the transaction amount reaches 20 percent or more of paid-in capital, 10 percent or more of the Company's total assets, or NT$300 million or more; provided, this shall not apply to trading ofdomestic government bonds or bonds under repurchase and resale agreements, or subscription or redemption of money market funds issued by domestic securities investment trust enterprises. II. Merger, demerger, acquisition, or transfer of shares. III. Situations where the losses resultingfrom the derivative	Under any of the following circumstances, the Company shall, within 2 days from the date of occurrence of the event, publicly announce and report the relevant information about the acquisition or disposal of assets on the designated website of the competent authority of securities using the format specified by the competent authority of securities: I. Acquisition or disposal of real property from or to a related party, or acquisition or disposal of assets other than real property from or to a related party where the transaction amount reaches 20 percent or more of paid-in capital, 10 percent or more of the Company's total assets, or NT$300 million or more; provided, this shall not apply to trading of government bonds or bonds under repurchase and resale agreements, or subscription or redemption of money market funds issued by domestic securities investment trust enterprises. II. Merger, demerger, acquisition, or transfer of shares. III. Situations where the losses resultingfrom the derivative	Amended in accordance with amendments to IFRS 16 "Leases" and amended clauses in the "Regulations Governing the Acquisition and Disposal of Assets by Public Companies" promulgated by the competent authority.

	IV. V. VI.	transactions has reached the stop-loss limit, including the aggregate limit for all transactions and the limit for individual transactions. Acquisition or disposal of operating equipmentor right-of-use assets thereof with non-related parties that amounts to more than NT$500 million. Where land is acquired under an arrangement on engaging others to build on the Company's own land, engaging others to build on rented land, joint construction and allocation of housing units, joint construction and allocation of ownership percentages, or joint construction and separate sale,and furthermore the transaction counterparty is not a related party,and the amount the Company expects to invest in the transaction reaches NT$500 million. Where an asset transaction other than any of those referred to in the preceding six subparagraphs, a disposal of receivables by a financial institution, or an investment in the mainland China area reaches 20 percent or more of paid-in capital or NT$300 million; provided,this shall	transactions has reached the stop-loss limit, including the aggregate limit for all transactions and the limit for individual transactions. IV. Acquisition or disposal of operating equipment with non-related parties that amounts to more than NT$500 million. V. Where land is acquired under an arrangement on engaging others to build on the Company's own land, engaging others to build on rented land, joint construction and allocation of housing units, joint construction and allocation of ownership percentages, or joint construction and separate sale, and the amount the Company expects to invest in the transaction reaches NT$500 million. VI. Where an asset transaction other than any of those referred to in the preceding six subparagraphs, a disposal of receivables by a financial institution, or an investment in the mainland China area reaches 20 percent or more of paid-in capital or NT$300 million;

		not apply to the following circumstances: 1. Trading ofdomestic government bonds. 2. Trading of bonds under repurchase and resale agreements, or subscription or redemption of money market funds issued by domestic securities investment trust enterprises. The "Transaction Amount" prescribed in the preceding paragraph shall be determined based on the following definition: I. The amount of each individual transaction. II. The cumulative transaction amount of acquisitions or disposals of the same type of underlying asset with the same trading counterparty within one year. III. The cumulative transaction amount of real estate acquired or disposed ofor right-of-use assets thereof (to be accumulated separately for acquisition and disposals) for the same developmentproject	provided, this shall not apply to the following circumstances: 1. Trading of government bonds. 2. Trading of bonds under repurchase and resale agreements, or subscription or redemption of money market funds issued by domestic securities investment trust enterprises. The "Transaction Amount" prescribed in the preceding paragraph shall be determined based on the following definition: I. The amount of each individual transaction. II. The cumulative transaction amount of acquisitions or disposals of the same type of underlying asset with the same trading counterparty within one year. III. The cumulative transaction amount of real estate acquired or disposed of (to be accumulated separately for acquisition and disposals) for the same development project within one year.

	within one year: IV. The cumulative transaction amount of the same securities acquired or disposed of (to be accumulated separately for acquisition and disposals) within one year. The "within one year" mentioned above shall refer to the one year dating back from the date of occurrence of the fact. Amounts that have already been announced in accordance with the Procedures may be excluded from calculation. The Company shall compile monthly reports on the status of derivative transactions conducted up to the end of the preceding month by itself and any of its subsidiaries that are not publicly-listed companies in Taiwan. The information shall be transmitted to the information reporting website specified by the competent authority of securities before the 10th of each month usingthe required format.	IV. The cumulative transaction amount of the same securities acquired or disposed of (to be accumulated separately for acquisition and disposals) within one year. The "within one year" mentioned above shall refer to the one year dating back from the date of occurrence of the fact. Amounts that have already been announced in accordance with the Procedures may be excluded from calculation. The Company shall compile monthly reports on the status of derivative transactions conducted up to the end of the preceding month byitselfand any of its subsidiaries that are not publicly-listed companies in Taiwan. The information shall be transmitted to the information reporting website specified by the competent authority of securities before the 10th of each month usingthe required format.
Article 30	In the event that the subsidiary is not a publicly listed company, the Company shall, on behalf of the subsidiary, carry out relevant information announcement and reporting as stipulated in Chapter 6 herein,if necessary.	In the event that the subsidiary is not a publicly listed company, the Company shall, on behalf of the subsidiary, carry out relevant information announcement and reporting as stipulated in Chapter 6 herein,if necessary.	Amended in accordance with amended clauses in the "Regulations

		With regard to the threshold for announcement or reporting by subsidiaries prescribed in Article 26, Paragraph 1 herein regarding the paid-in capital or total assets, the calculation basis for the threshold shall be the paid-in capital or total assets of the Company.	With regard to the threshold for announcement or reporting by subsidiaries prescribed in Article 29, paragraph 1 herein (i.e.,20% ofpaid-in capital or10%of total assets), the calculation basis for the threshold shall be the paid-in capital or total assets of the Company.	Governing the Acquisition and Disposal of Assets by Public Companies".
Article 35		The Policy was established on June 3, 2003. The first amendment was on June 22, 2007. The second amendment was on June 9, 2011. The third amendment was on May 25, 2012. The fourth amendment was on June 4, 2014. The fifth amendment was on June 9, 2015. The sixth amendment was on June 8, 2017.The seventh amendment was on June 19, 2019.	The Policy was established on June 3, 2003. The first amendment was on June 22, 2007. The second amendment was on June 9, 2011. The third amendment was on May 25, 2012. The fourth amendment was on June 4, 2014. The fifth amendment was on June 9, 2015. The sixth amendment was on June 8, 2017.	Added the amendment date.

Comparison Table of the "Procedures for Loaning of Funds to Others" before and after the amendment

Content	After amendment	Before amendment	Reason for amendment
Article 3	Aggregate amount of loans and the maximum amount permitted to a single borrower The aggregate amount of loans shall not exceed 40 percent of the lender's net worth. Loans can be divided into the two following conditions. (I) The aggregate amount of loans for companies or businesses with business transactions with the Company shall not exceed 20% of the Company's net worth; The amount of individual loans shall be limited to the total amount of trading between the parties in the most recent year. The amount of trading means the sales or purchasing amount between the parties, whichever is higher. (II) The aggregate amount of loans for companies or businesses with requirements for short-term financing loans shall not exceed 20% of the Company's net worth; The amount in individual loans shall not exceed 10% of the Company's net worth. The aggregate amount of loans and loans to individual borrowers that are foreign companies 100% owned directlyor indirectlybythe	Aggregate amount of loans and the maximum amount permitted to a single borrower The aggregate amount of loans shall not exceed 40 percent of the lender's net worth. Loans can be divided into the two following conditions. (I) The aggregate amount of loans for companies or businesses with business transactions with the Company shall not exceed 20% of the Company's net worth; The amount of individual loans shall be limited to the total amount of trading between the parties in the most recent year. The amount of trading means the sales or purchasing amount between the parties, whichever is higher. (II) The aggregate amount of loans for companies or businesses with requirements for short-term financing loans shall not exceed 20% of the Company's net worth; The amount in individual loans shall not exceed 10% of the Company's net worth. The aggregate amount of loans and loans to individual foreign companies 100% owned directlyor	Amended in accordance with amendments to Article 3 of the "Regulations Governing the Acquisition and Disposal of Assets by Public Companies" promulgated by the competent authority.

		Companyor from individual borrowers that are foreign companies 100% owned directly or indirectly by the Companyshall not exceed 60% of the lender's net worth.	indirectly by the Company shall not exceed 60% of the Company's net worth.
Article 4		Duration of loans and calculation of interest (I) As a principle, the duration of loans shall not exceed one year or one business cycle (whichever is longer) starting from the loan date. As a principle, the duration of loans to individual borrowers that are foreign companies 100% owned directly or indirectly by the Companyor from individual borrowers that are foreign companies 100% owned directly or indirectly by the Company shall not exceed two years. (II) Loan interest shall be calculated on a daily basis and the sum of the daily loan balance (total amount) shall be multiplied by the annual interest rate and divided by 365 to calculate the interest. As a principle, the annual interest rate shall not be lower than the Company's average interest rate for short-term borrowings from banks. (III) Unless otherwise specified, the calculation of loan interest shall in principle be calculated on a monthly interest repayment basis and the borrower shall be	Duration of loans and calculation of interest (I) As a principle, the duration of loans shall not exceed one year or one business cycle (whichever is longer) starting from the loan date. As a principle, the duration of loans between the Company and foreign companies 100% owned directly or indirectly by the Company shall not exceed two years. (II) Loan interest shall be calculated on a daily basis and the sum of the daily loan balance (total amount) shall be multiplied by the annual interest rate and divided by 365 to calculate the interest. As a principle, the annual interest rate shall not be lower than the Company's average interest rate for short-term borrowings from banks. (III) Unless otherwise specified, the calculation of loan interest shall in principle be calculated on a monthly interest repayment basis and the	Amended in accordance with amendments to Article 3 of the "Regulations Governing the Acquisition and Disposal of Assets by Public Companies" promulgated by the competent authority.

	notified to pay the interest one week before the agreed interest payment date.	borrower shall be notified to pay the interest one week before the agreed interest payment date.
Article 7	Subsequent measures for control and management of loans, and procedures for handling delinquent creditor's rights. (II)Registration and custody of cases 1.-3. (omitted) 4. Where a change in the Company causes a borrower to be incompatible with the regulations in theProceduresor causes the amount to exceed the limit, the audit unit shall supervise the Finance Department to establish a deadline for recovering the loan in excess of the limit and submit the improvement plan to the Audit Committee to complete improvements based on the schedule of the plan. 5.(omitted)	Subsequent measures for control and management of loans, and procedures for handling delinquent creditor's rights. (II)Registration and custody of cases 1.-3. (omitted) 4. Where a change in the Company causes a borrower to be incompatible with the regulations in theStandardsor causes the amount to exceed the limit, the audit unit shall supervise the Finance Department to establish a deadline for recovering the loan in excess of the limit and submit the improvement plan to the Audit Committee to complete improvements based on the schedule of the plan. 5.(omitted)	Revised wording.
Article 9	Information disclosure I. The Company shall enter the balance of loans of the Company and its subsidiaries from the previous month into the Market Observation Post System before the 10th day of each month. II. Where the balance of Company's loans reaches one of the following thresholds, it shall enter the information on the Market Observation Post	Information disclosure I. The Company shall enter the balance of loans of the Company and its subsidiaries from the previous month into the Market Observation Post System before the 10th day of each month. II. Where the balance of Company's loans reaches one of the following thresholds, it shall enter the information on the Market Observation Post	Amended in accordance with amendments to Article 7 of the "Regulations Governing the Acquisition and Disposal of Assets by

	III.	System within two days of the occurrence of such events: (I) The balance of the Company and its subsidiaries' loans to others reaches 20% or more of the Company's net worth as specified in the latest financial statements. (II) The balance of the Company and its subsidiaries' loans to a single company reaches 10% or more of the Company's net worth as specified in the latest financial statements. (III) The new loans of the Company and its subsidiaries reach NT$10 million or 2% or more of the Company's net worth as specified in the latest financial statements. The date of occurrence refers to, the earliest of, the signing date, payment date, the Board of Directors' resolution date or any other dates when the transaction counterparty and the amountof the loancan be verified with certainty. In the event that the subsidiary is not a publicly listed company, the Company shall, on behalf of the subsidiary, carry out relevant information announcement and reporting as stipulated in Subparagraph 3		System within two days of the occurrence of such events: (I) The balance of the Company and its subsidiaries' loans to others reaches 20% or more of the Company's net worth as specified in the latest financial statements. (II) The balance of the Company and its subsidiaries' loans to a single company reaches 10% or more of the Company's net worth as specified in the latest financial statements. (III) The new loans of the Company and its subsidiaries reach NT$10 million or 2% or more of the Company's net worth as specified in the latest financial statements. The date of occurrence refers to, the earliest of, thetransaction contract signing date, payment date, the Board of Directors' resolution date or any other dates when the transactioncounterparty and the transactionamount can be verified with certainty. III. In the event that the subsidiary is not a publicly listed company, the Company shall, on behalf of the subsidiary, carry out relevant information announcement and reporting as stipulated in Subparagraph 3	Public Companies" promulgated by the competent authority.

III. In the event that the subsidiary is not a publicly listed company, the Company shall, on behalf of the subsidiary, carry out relevant information announcement and reporting as stipulated in Subparagraph 3

	above, if necessary. IV. The Company shall evaluate the conditions of the loans and set aside adequate reserve for bad debts. It shall also disclose related information in the Financial Report and provide related information to the CPA for implementation of necessaryauditing procedures.		above, if necessary. IV. The Company shall evaluate the conditions of the loans and set aside adequate reserve for bad debts. It shall also disclose related information in the Financial Report and provide related information to the CPA for implementation of necessaryauditing procedures.
Article 11	Implementation and revision These Procedures, after resolution in the Board of Directors' meeting, shall be submitted to the shareholders' meeting for approval. They shall take effect after approval in the shareholders' meeting. If there is any objection raised by a Director and such objections have been recorded or made in writing, the Company shall submit the objection to the shareholders' meeting for discussion. The same shall apply to amendments.		Implementation and revision These Procedures, after resolution in the Board of Directors' meeting, shall be submitted to the shareholders' meeting for approval. They shall take effect after approval in the shareholders' meeting.The opinions of Independent Directors shall be taken into full consideration in discussions in the Board of Directors meeting and their specific opinions for approval or objection and reasons for the objection shall be included in the meeting minutes of the Board of Directors.If there is any objection raised by a Director and such objections have been recorded or made in writing, the Company shall submit the objection to the shareholders' meeting for discussion. The same shall apply to amendments.	Amended in accordance with amendments to Article 8 of the "Regulations Governing the Acquisition and Disposal of Assets by Public Companies" promulgated by the competent authority.
Article 12	The Procedures were established on June 3, 2003. The first amendment was on May 27, 2009. The second amendment was on June 9, 2010. The third amendment was on May 31,2012. The fourth amendment		The Procedures were established on June 3, 2003. The first amendment was on May 27, 2009. The second amendment was on June 9, 2010. The third amendment was on May 31,2012. The fourth amendment	Added the amendment date.

	was on May 31, 2013. The fifth amendment was on June 9, 2015. The sixth amendment was on June 19, 2019.	was on May 31, 2013. The fifth amendment was on June 9, 2015.

Comparison Table of the "Procedures for Making Endorsements and Guarantees" before and after the amendment

Content	After amendment		Before amendment	Reason for amendment
Article 1	Purpose TheProceduresare established to govern the Company's endorsements and guarantees for external entities. Matters not addressed herein shall be governed byrelevant regulations.		Purpose TheRegulationsare established to govern the Company's endorsements and guarantees for external entities. Matters not addressed herein shall be governed byrelevant regulations.	Revised wording.
Article 5	Decision-making and authorization level The Company's endorsements and guarantees must be approved in a resolution of the Board of Directors before implementation. Material endorsements or guarantees shall be approved with the consent of one-half or more of the entire membership of the Audit Committee and proposed to the Board of Directors meeting for a resolution. To facilitate timeliness and efficiency, the Board of Directors may delegate the Chairman of the Board to decide on guarantees and endorsements within 30% of the Company's net value in the current period and have the decisions subsequently submitted to and ratified in the next Board of Directors meeting. The opinions of Independent Directors shall be taken into full consideration in discussions regardingthe Company's		Decision-making and authorization level The Company's endorsements and guarantees must be approved in a resolution of the Board of Directors before implementation. Material endorsements or guarantees shall be approved with the consent of one-half or more of the entire membership of the Audit Committee and proposed to the Board of Directors meeting for a resolution. To facilitate timeliness and efficiency, the Board of Directors may delegate the Chairman of the Board to decide on guarantees and endorsements within 30% of the Company's net value in the current period and have the decisions subsequently submitted to and ratified in the next Board of Directors meeting.The related conditions shall be reported to the shareholders'meeting for reference. The opinions of Independent Directors shall be taken into full	Amended in accordance with Article 17 of the "Regulations Governing the Acquisition and Disposal of Assets by Public Companies" promulgated by the competent authority.

	endorsements or guarantees for others in the Board of Directors meeting and their specific opinions for approval or objection and reasons for the objection shall be included in the meeting minutes of the Board of Directors. Where a subsidiary in which the Company holds, directly or indirectly, more than 90% of the voting shares provides endorsements or guarantees in accordance with Article 3, Paragraph 2, it shall submit the proposal to the Company's Board of Directors for approval before implementation. However, this restriction shall not apply to endorsements or guarantees made between companies in which the Company holds, directly or indirectly, 100% of the voting shares.	consideration in discussions regarding the Company's endorsements or guarantees for others in the Board of Directors meeting and their specific opinions for approval or objection and reasons for the objection shall be included in the meeting minutes of the Board of Directors. Where a subsidiary in which the Company holds, directly or indirectly, more than 90% of the voting shares provides endorsements or guarantees in accordance with Article 3, Paragraph 2, it shall submit the proposal to the Company's Board of Directors for approval before implementation. However, this restriction shall not apply to endorsements or guarantees made between companies in which the Company holds, directly or indirectly, 100% of the voting shares.
Article 8	Important notes for endorsements and guarantees: I.-II. (omitted) III. Where the Company's endorsement or guarantee due to business requirements requires an amount over the limits specified in the Proceduresand the endorsements/guarantees meet the conditions specified in theProcedures,the approval of the Board of Directors and ajoint	Important notes for endorsements and guarantees: I.-II. (omitted) III. Where the Company's endorsement or guarantee due to business requirements requires an amount over the limits specified in the Regulationsand the endorsements/guarantees meet the conditions specified in the Regulations,the approval of the Board of Directors and a jointguarantee from more than	Revised wording.

	guarantee from more than half of the Directors shall be required. TheProcedures shall be amended and submitted to the shareholders' meeting for ratification. If the shareholders' meeting does not approve the amendment, a plan shall be formulated to cancel the excess parts within a specific period. The opinions of Independent Directors shall be taken into full consideration in discussions in the Board of Directors meeting and their specific opinions for approval or objection and reasons for the objection shall be included in the meeting minutes of the Board of Directors.	half of the Directors shall be required. TheRegulationsshall be amended and submitted to the shareholders' meeting for ratification. If the shareholders' meeting does not approve the amendment, a plan shall be formulated to cancel the excess parts within a specific period. The opinions of Independent Directors shall be taken into full consideration in discussions in the Board of Directors meeting and their specific opinions for approval or objection and reasons for the objection shall be included in the meeting minutes of the Board of Directors.
Article 9	Deadline and contents for required announcements and reports I. The Company shall enter the balance of the endorsements and guarantees of the Company and its subsidiaries from the previous month into the Market Observation Post System before the 10th day of each month. II. Where the balance of Company's endorsements and guarantees reaches one of the following thresholds, it shall enter the information on the Market Observation Post System within two days of the	Deadline and contents for required announcements and reports. I. The Company shall enter the balance of the endorsements and guarantees of the Company and its subsidiaries from the previous month into the Market Observation Post System before the 10th day of each month. II. Where the balance of Company's endorsements and guarantees reaches one of the following thresholds, it shall enter the information on the Market Observation Post System within two days of the	Amended in accordance with amendments to Article 7 and Article 25 of the "Regulations Governing the Acquisition and Disposal of Assets by Public Companies" promulgated bythe

		occurrence of such events: (I) The balance of the Company and its subsidiaries' endorsements and guarantees reaches 50% or more of the Company's net worth as specified in the latest financial statements. (II) The balance of the Company and its subsidiaries' endorsements and guarantees for a single company reaches 20% or more of the Company's net worth as specified in the latest financial statements. (III) The balance of the Company and its subsidiaries' loans to a single company reaches NT$10 million and the carrying amount of investments recognized under the equity method and the total balance of loans reach 30% or more of the Company's net worth as specified in the latest financial statements. (IV) The new endorsements andguarantees of the	occurrence of such events: (I) The balance of the Company and its subsidiaries' endorsements and guarantees reaches 50% or more of the Company's net worth as specified in the latest financial statements. (II) The balance of the Company and its subsidiaries' endorsements and guarantees for a single company reaches 20% or more of the Company’s net worth as specified in the latest financial statements. (III) The balance of the Company and its subsidiaries' endorsements and guarantees for a single company reaches NT$10 million and the endorsements and guarantees for the Company,long-term investments, and the total balance of loans reach 30% or more of the Company's net worth as specified in the latest financial statements. (IV) The new endorsements andguarantees of the	competent authority.

	Company and its subsidiaries reach NT$30 million or 5% or more of the Company's net worth as specified in the latest financial statements. The date of occurrence refers to, the earliest of, the signing date, payment date, the Board of Directors' resolution date or any other dates when the transaction counterparty and the amount of the endorsements and guaranteescan be verified with certainty. III. In the event that the subsidiary is not a publicly listed company, the Company shall, on behalf of the subsidiary, carry out relevant information announcement and reporting as stipulated in Subparagraph 4 above, if necessary. IV. The Company shall evaluate the conditions of the endorsements and guarantees. It shall also disclose related information on losses in the Financial Report and provide related information to the CPA for implementation of necessary auditing procedures.	Company and its subsidiaries reach NT$30 million or 5% or more of the Company's net worth as specified in the latest financial statements. The date of occurrence refers to, the earliest of, the transactioncontract signing date, payment date, the Board of Directors' resolution date or any other dates when the transactioncounterparty and thetransactionamount can be verified with certainty. III. In the event that the subsidiary is not a publicly listed company, the Company shall, on behalf of the subsidiary, carry out relevant information announcement and reporting as stipulated in Subparagraph 4 above, if necessary. IV. The Company shall evaluate the conditions of the endorsements and guarantees. It shall also disclose related information on losses in the Financial Report and provide related information to the CPA for implementation of necessary auditing procedures.
Article 12	Implementation and revision These Procedures, after resolution in the Board of Directors' meeting,	Implementation and revision These Procedures, after resolution in the Board of Directors' meeting,	Amended in accordance with

	shall be submitted to the shareholders' meeting for approval. If there is any objection raised by a Director and such objections have been recorded or made in writing, the Company shall submit the objection to the shareholders' meeting for discussion. The same shall apply to amendments.		shall be submitted to the shareholders' meeting for approval. The opinions of Independent Directors shall be taken into full consideration in discussions in the Board of Directors meeting and their specific opinions for approval or objection and reasons for the objection shall be included in the meeting minutes of the Board of Directors. If there is any objection raised by a Director and such objections have been recorded or made in writing, the Company shall submit the objection to the shareholders' meeting for discussion. The same shall apply to amendments.	amendments to Article 11 of the "Regulations Governing the Acquisition and Disposal of Assets by Public Companies" promulgated by the competent authority.
Article 13	The Procedures were established on June 3, 2003. The first amendment was on May 27, 2009. The second amendment was on June 9, 2010. The third amendment was on May 31, 2012. The fourth amendment was on May 31, 2013. The fifth amendment was on June 9, 2015. The sixth amendment was on June 19,2019.		The Procedures were established on June 3, 2003. The first amendment was on May 27, 2009. The second amendment was on June 9, 2010. The third amendment was on May 31, 2012. The fourth amendment was on May 31, 2013. The fifth amendment was on June 9, 2015.	Added the amendment date.

Sunonwealth Electric Machine Industry Co., Ltd.

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SUNON — AGM Information 2019

52070_rns_2019-06-25_920524d2-fd3d-4fda-9934-48943aa20d90.pdf

Sunonwealth Electric Machine Industry Co., Ltd. Agenda for the 2019 General Shareholders Meeting

[Report items]

[Proposed Resolutions]

[Discussion items]

2. The amendment is hereby filed for resolution.

[Extraordinary motions]

Sunonwealth Electric Machine Industry Co., Ltd.

Statement of Shares Held by Directors

國富浩華聯合會計師事務所

INDEPENDENT AUDITORS’ REPORT

Opinion

Basis for Opinion

Key Audit Matters

Valuation of inventory

Description of key audit matter:

Revenue recognition

Other Matters

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

Auditors' Responsibilities for the Audit of the Consolidated Financial Statements

SUNONWEALTH ELECTRIC MACHINE INDUSTRY CO., LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

SUNONWEALTH ELECTRIC MACHINE INDUSTRY CO., LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

國富浩華聯合會計師事務所

INDEPENDENT AUDITORS’ REPORT

Opinion

Basis for Opinion

Key Audit Matters

Valuation of inventory

Description of key audit matter:

Revenue recognition

Description of key audit matter:

Other Matters

Responsibilities of Management and Those Charged with Governance for the Parent Company Only Financial Statements

Auditors' Responsibilities for the Audit of the Parent Company Only Financial Statements

SUNONWEALTH ELECTRIC MACHINE INDUSTRY CO., LTD. PANENT COMPANY ONLY STATEMENTS OF COMPREHENSIVE INCOME (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

SUNONWEALTH ELECTRIC MACHINE INDUSTRY CO., LTD. PARENT COMPANY ONLY STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

Sunonwealth Electric Machine Industry Co., Ltd. Shareholders' Meeting Policy

Sunonwealth Electric Machine Industry CO., LTD.

Articles of Incorporation

SECTION I: General Principals

SECTION II: Shares

SECTION IV: Director

SECTION V: Manager

SECTION VI: ACCOUNTING

SECTION VII: Appendix

Sunonwealth Electric Machine Industry Co., Ltd. 2018 Business Report

I. Business Performance

industry.

II. Production status

III. Research and development status

Audit Committee's Audit Report

Comparison Table of the "Procedures for the Acquisition or Disposal of Assets" before and after the amendment

Comparison Table of the "Procedures for Loaning of Funds to Others" before and after the amendment

Comparison Table of the "Procedures for Making Endorsements and Guarantees" before and after the amendment

More from SUNON

SUNON AGM Information 2019