Skip to main content

AI assistant

Sign in to chat with this filing

The assistant answers questions, extracts KPIs, and summarises risk factors directly from the filing text.

Sign up Log in

SUNON Annual Report 2018

Jun 25, 2019

52070_rns_2019-06-25_08e27216-e47b-40f5-bdea-208e258fcde4.pdf

Annual Report

Open in viewer

Opens in your device viewer

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

Printed on April 21, 2019

Company Website: http://www.sunon.com

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

I. Name, job title, contact phone number and email of the Company's spokesperson and acting spokesperson

Spokesperson: William Li Title: Vice President Tel: (07)8135888 Email: [email protected]

Acting Spokesperson: Ling-Wen Huang Title: Special Assistant, Secretariat of the Board Tel: (07)8135888 Email: [email protected]

II. Addresses and telephone numbers of the head office, branch offices, and factories.

Head Office: No. 30, Ln. 296, Xinya Rd., Qianzhen Dist., Kaohsiung City 806, Taiwan(R.O.C.) Tel: (07)8135888

Taipei Office: 4F., No. 356, Sec. 1, Neihu Rd., Neihu Dist., Taipei City 114, Taiwan (R.O.C.) Tel: (02)27992383

Kunshan Plant: NO.168 Nanbang Road Kunshan , Jiangsu ,China Tel: +86-512-57700108

Foshan Plant: NO.5 Xianan 2Road Pingzhou, Nanhai District Foshan City, Guangdong Tel: +86-757-88390388

Beihai Plant:No.6 Block B, Beihai Export Processing Zone Beihai Guanxi Chain Tel: +86-779-6666888

III. Name, address, website, and telephone number of stock transfer agent

Grand Fortune Securities Co., Ltd. Stock Transfer Agent Address: 6F., No. 6, Sec. 1, Zhongxiao W. Rd., Zhongzheng Dist., Taipei City 100, Taiwan (R.O.C.) Tel: (02) 2371-1658 (Stock Transfer Department mainline) Website: www.gfortune.com.tw

IV. Names of certified accountants, address, website, and telephone number of the accounting firm auditing the Company's latest financial report in the most recent year

CPAs: Ching-Lin Li, Shu-Man Tsai Name of firm: Crowe (TW) CPAs Address: 27F.-1, No. 6, Siwei 3rd Rd., Lingya Dist., Kaohsiung City 802, Taiwan Tel: (07)3312133 Website: www.crowe.tw

  • V. Overseas securities listing exchange and information:None
  • VI. Company website

http://www.sunon.com

Table of Contents

A. Letter to Shareholders--------------------------------------------------------------------------------------
B. Company Profile---------------------------------------------------------------------------------------------
I. Date of establishment----------------------------------------------------------------------------------
II. Company history----------------------------------------------------------------------------------------
C. Corporate Governance Report----------------------------------------------------------------------------
I. Organization system------------------------------------------------------------------------------------
II. Profile of Directors, Supervisors, President, Vice Presidents, Assistant Vice Presidents, and
Department Directors------------------------------------------------------------------------------------
III. Remunerations to Directors, Supervisors, President, and Vice Presidents in recent years---
IV. Implementation of corporate governance------------------------------------------------------------
V. Information on Fees to CPA---------------------------------------------------------------------------
VI. Information on Replacement of CPAs----------------------------------------------------------------
VII. The Chairman, President and Financial or Accounting Managerial Officer of the Company
who had worked for the Independent CPA or the affiliate in the past year----------------------
VIII. Share transfer by directors, supervisors, managerial officers and shareholders holding more
than 10% equity and changes to share pledging by them-------------------------------------------
IX. Information on the relationship between any of the top ten shareholders (related party,
spouse, or kinship within the second degree)--------------------------------------------------------
X. The shareholding of the Company, Director, Supervisor, Managerial Officers and an
enterprise that is directly or indirectly controlled by the Company in the invested company
and the calculation of the consolidated shareholding percentage----------------------------------
D. Funding Status------------------------------------------------------------------------------------------------
I. Share capital source-------------------------------------------------------------------------------------
II. Shareholders----------------------------------------------------------------------------------------------
III. Shareholding Distribution Status----------------------------------------------------------------------
IV. List of major shareholders------------------------------------------------------------------------------
V. Market price per share, net worth, earnings, dividends, and the related information for the
last two years---------------------------------------------------------------------------------------------
VI. Dividend policy and implementation status----------------------------------------------------------
VII. The effects of the stock dividends proposed by the shareholders' meeting on the Company's
business performances and earnings per share-------------------------------------------------------
VIII. Remuneration of employees, directors and supervisors--------------------------------------------
IX. Buyback of treasury stock------------------------------------------------------------------------------
X. Corporate bond issuance status------------------------------------------------------------------------
XI. Issuance of preferred stocks----------------------------------------------------------------------------
XII. Issuance of global depositary receipts (GDR)-------------------------------------------------------
XIII. Exercise of employee stock option plan (ESOP)----------------------------------------------------
XIV.Restricted stock awards---------------------------------------------------------------------------------
XV. Mergers, acquisitions or issuance of new shares for acquisition of shares of other
companies---------------------------------------------------------------------------------------------
83
XVI.Implementation of capital allocation plan--------------------------------------------------------
83
E. Business Overview----------------------------------------------------------------------------------------
84
I. Business activities-----------------------------------------------------------------------------------
84
II. Market, production and sales-----------------------------------------------------------------------
89
III. Employee information------------------------------------------------------------------------------
97
IV. Environmental protection expenditure information---------------------------------------------
97
V. Employer/employee relations----------------------------------------------------------------------
98
VI. Important contracts----------------------------------------------------------------------------------
98
F. Financial Overview---------------------------------------------------------------------------------------
99
I. Condensed balance sheet and statement of income for the last five years-------------------
99
II. Financial analysis for the last five years----------------------------------------------------------
108
III. Audit Committee's review report in the most recent fiscal year-------------------------------
114
IV. Financial statements of the most recent year-----------------------------------------------------
115
V. Individual financial statements of the most recent year-----------------------------------------
217
VI. Financial turnover status encountered by the Company and affiliates that have material
impact on the financial status of the Company---------------------------------------------------
339
G. Financial Summary, Financial Performance and Risk Analysis---------------------------------
340
I. Financial summary-----------------------------------------------------------------------------------
340
II. Financial performance-------------------------------------------------------------------------------
341
III. Cash flows---------------------------------------------------------------------------------------------
342
IV. The effects that significant capital expenditures have on financial operations in the recent
year -----------------------------------------------------------------------------------------------------
343
V. Investment policy in the past year, profit/loss analysis, improvement plan, and investment
plan for the coming year-----------------------------------------------------------------------------
344
VI. Risk management and evaluation-------------------------------------------------------------------
345
VII. Other important matters------------------------------------------------------------------------------
352
H. Special Disclosures-----------------------------------------------------------------------------------------
353
I. Profiles of affiliates and subsidiaries---------------------------------------------------------------
353
II. Progress of private placement of securities--------------------------------------------------------
357
III. Holding or disposal of stocks of the Company by subsidiaries---------------------------------
357
IV. Other supplemental information---------------------------------------------------------------------
357
Corporate events with material impact on shareholders' equity or stock prices set forth in Article
36, Paragraph 3, Subparagraph 2 of Securities and Exchange Act-------------------------------------
358

A. Letter to Shareholders

Dear Shareholders,

This summer, we embrace the annual shareholders' meeting with joy and gratitude as we report the results of our operations in the past year to shareholders and share our vision for future development with you all. 2018 was a precarious year. We faced wave after wave of challenges starting from the appreciation of the NTD at the beginning of the year to the significant increase in wages and price of materials in China. The price of passive components and IC materials, in particular, skyrocketed and suppliers were unable to provide materials in a timely manner. Starting from the second half of the year, the trade war between China and the United States quickly reduced demand for industrial and medical equipment, appliances, and demand in the Chinese market. Faced with a series of challenges in our business environment, it is fortunate that the Company's business development strategy for focusing on cloud computing, communication equipment, and automotive applications had paid off. With our hard-earned advantages in products and market share, we have achieved the highest growth in revenue in four years. However, our profitability has been affected by the exchange rate and rising cost of labor and materials and suffered a decline from the previous year. The exacerbation of changes in the external environment has caused tremendous pressure on overall operating costs. In addition to continuing to integrate passive heat dissipation and active heat dissipation technology in our cooling solutions to strengthen new products and develop new markets, the Company also invests in professional DC and EC motors as well as home and industrial ventilation equipment. The Company shall consolidate and develop our existing market share in the cooling market and open a motor and ventilation market compatible to future environmental protection and energy efficiency trends to create a more glorious 40 years.

Comparison of the 2018 Business Plan and actual achievements
Business Actual Completi Growth
Plan Results Difference on Rate 2017 Rate
Quantity 134 million 140 million 6 million 104.48% 136 million 2.94%
shipped units units units units
Consolidated NT\$11.573 NT\$119.65 NT\$392 103.39% NT\$10.947 9.30%
total revenue billion billion million billion
Consolidated NT\$ 3.91 NT\$ 3.12 NT\$ -0.79 79.80% NT\$ 3.36 -7.14%
EPS before tax
Consolidated NT\$ 2.94 NT\$ 2.41 NT\$ -0.53 81.97% NT\$ 2.62 -8.02%
EPS after tax

Results of Business Operations in the Previous Year

The Company's business plan achievement status in 2018 is as follows:

Note: The 2018 Business Plan figure was not audited by the CPA.

In terms of the achievement status of the Company's 2018 Business Plan, the Company benefited from substantial growth in the server and communication market as it successfully accomplished goals for shipment and consolidated total revenue which exceeded targets by 4.48% and 3.39% and grew by 2.94% and 9.3% from the previous year. In terms of profitability, the Company was affected by the appreciation of the NTD, significant increase in wages and labor expenses in China, and significant price increase in materials such as passive components, electronic components, steel, copper, plastic, and packaging materials. The Company only achieved 79.8% and 81.97% of its pre-tax and after-tax profitability goals and experienced a high-level decline within 10% from the previous year. Although we have achieved our goals in the Business Plan for shipments and consolidated revenue, we suffered more significant impact on the cost side and could not reach our goals. Fortunately, the price of materials has stabilized and labor cost issues have gradually been overcome by automated production technology which would reduce the impact on cost. In terms of income and expenditures, the net cash inflow in the fiscal year amounted to NT\$25.16 million and the closing cash and cash equivalents amounted to NT\$447 million; The cash flow on the consolidated financial statements showed a net cash outflow of NT\$242 million and closing cash and cash equivalents of NT\$1.145 billion. The Company's funding status remains healthy. The Company invested NT\$416 million in research and development expenditures in the fiscal year and invested NT\$690 million in R&D based on the consolidated financial statements. Both figures have increased from the previous year. The Company has completed projects commissioned by customers in six major sectors (IT and office equipment, servers and communication, industrial and medical equipment, appliances, automobiles, and LED) as well as the development of the next-generation home ventilation equipment and large-scale industrial HVLS fans.

2019 Business Plan Overview

2019 will be a year of challenges. In addition to the shortage of CPUs in the IT market which inhibits growth, the development of the trade war between the United States and China will continue to affect growth of the two major economies and even expand into the biggest global threat in 2019. China's regional economic growth rate is continuously reduced in forecasts amid credit risk hikes. Europe is trapped by political risks as both France and the United Kingdom face challenges to their administrations. The Company must adopt a careful and conservative view on the prospects of growth this year and should not expand based on overtly optimistic assumptions. In terms of product portfolio, we shall focus on the development of servers, communication equipment, and the automobile industry. The Company shall strengthen development in these sectors and use the margins in these applications to enhance overall profitability. The Company has adopted three important measures for cost control which include lowering the cost of materials, increasing the proportion of automatic product, lowering labor cost, and shifting parts of the production capacity to low-cost regions. After adjustments for production and sales and changes implemented in response to the market, products, customers, and sales strategy, the Company plans to ship 142.7 million units this year.

Future Development Strategy

The Company's future development strategy will focus on product and market development, reduction of operating cost, and increase of R&D performance. Product and market development: We shall strengthen sales deployment in regional markets such as Germany and India. In terms of the main course of development, we shall strengthen servers and communication products for the 5G market and the automotive applications market and actively expand market share. We shall strengthen the development of new products for the EC series, home appliances, HVAC products, and large-scale industrial HVLS fans. Lowering operating cost: In terms of the cost of materials, we shall improve structural design to reduce the use of materials and pay constant attention to the market price of materials to respond to needs. In terms of labor cost, we shall adopt automated production to reduce our dependence on manual labor. We shall transfer parts of the production capacity to low-cost areas to reduce operating cost. Improving work efficiency: We shall optimize efficiency and monitor R&D investment to increase the output of R&D investment. In addition, we shall expand joint participation in customer's NRE research to protect technology resources and intellectual property rights. We shall adopt a diverse range of development strategies and continue to improve our business development and profitability.

Impact of the Competitive Environment, Regulatory Environment, and Overall Business Environment

In terms of the competitive environment, the Company still retains advantages in technology and

B. Company Profile

I. Date of establishment

Date of establishment and registration: October 25, 1980.

II. Company history

  1. 1980

The Company was established with a capital of NT\$1,000,000. It focused on the R&D, product, and sales of small precision motors and cooling fans.

  1. 1981

The Company obtained the SUNON trademark certificate issued by the Bureau of Standards, Metrology and Inspection and established the Taipei Factory.

  1. 1983

Obtained UL certification in the United States, increased capital to NT\$5 million, and reorganized into a company limited by shares.

  1. 1984

Established the Kaohsiung Factory.

  1. 1986

Increased capital to NT\$10,000,000.

  1. 1987

Obtained the first patent certificate.

  1. 1988

Increased capital to NT\$21,000,000.

  1. 1989

Purchased office building in Kaohsiung City. Increased capital to NT\$149,530,000.

  1. 1990

Completed the construction of the Gangshan Factory.

  1. 1991

Successfully developed the DC brushless cooling fan and increased capital to NT\$171,959,500.

  1. 1993

Conducted capital increase by converting earnings to capital in September and increased the capital to NT\$201,200,000.

  1. 1994

Purchased Kaohsiung Factory and increased capital to NT\$300,000,000 in December.

  1. 1995

Passed ISO 9002 certification in July. Established Hong Kong Office. Conducted capital increase by converting earnings to capital in August. The capital is increased to NT\$360,000,000. Purchased office building in Taipei in November.

  1. 1996

Officially established the Singapore Office in January and passed ISO 9001 certification in February. Established the Europe Office in the Netherlands in August. Conducted capital increase by converting earnings to capital in September and increased the capital to NT\$470,300,000.

15. 1997

Successfully developed the spindle motor for the 12X and 16X-speed CD drive in March; Won the Taiwan Excellence Award in April; Conducted capital increase by converting earnings to capital in May and increased the paid-in capital to NT\$565,559,000. Established the Tainan Factory in June; Established the US Office in November.

16. 1998

Conducted capital increase by converting earnings to capital in June and increased the paid-in capital to NT\$ 699,700,000. Company stocks are listed on the OTC market in September; Company products won the 6th Taiwan Excellence Award and the Company passed ISO 14001 certification; Conducted capital increase in December and increased the paid-in capital to NT\$ 800,000,000.

17. 1999

The new green motor series was launched in January; Kaohsiung Second Plant was completed in February and the R&D Building was officially launched; Established a subsidiary company in the United States in March; Invested in Sunon Motor Co., Ltd. which focused on the research, development, and production of DVD spindle motors; the Company received the Magnetism Prize for contribution to the industry and research results from Taiwan Association for Magnetic Technology; Conducted capital increase by converting earnings to capital in July and increased the paid-in capital to NT\$ 964,000,000.

18. 2000

The Company was awarded the bronze prize in the corporate division in 9th National Invention and Creation Award and the Golden Award in the Outstanding Enterprise Category and Product Design Category; Established subsidiary companies in France and Japan; Company stocks became listed on TWSE in September; issuance of the first unsecured corporate bonds totaling NT\$400 million. Increased capital to NT\$ 1,209,820,000.

19. 2001

Awarded the bronze prize in the corporate division in 10th National Invention and Creation Award; launched the world's first brushless DC vibration motor. Increased capital to NT\$ 1,611,187,190.

Began the expansion of the phase 2 plant of Sunon Electronic (Kunshan) Co., Ltd.; launched the Power Motor series; won the Silver Award and Industrial Technology Development Excellence Award in the 10th Taiwan Excellence Award. Increased capital to NT\$ 1,809,005,170.

21. 2003

Completed the expansion of the phase 2 plant of Sunon Electronic (Kunshan) Co., Ltd.; Awarded the Enterprise Role Model Award for "Root in Taiwan for Global Development" in the first Golden Root Award; awarded Sony Certificate of SONY Green Partner; awarded "Contribution to the Magnetic Technology Industry" in the 16th Magnetism Prize for from Taiwan Association for Magnetic Technology; Awarded the fourth Industrial Sustainable Excellence Award (machinery and transportation industries) by the Ministry of Economic Affairs; Global Operation Head Office application approved by the Ministry of Economic Affairs; Invention and Innovation Center application approved by the Ministry of Economic Affairs; issuance of the first unsecured international convertible corporate bonds valued at US\$10 million. Increased capital to NT\$ 1,960,000,610 and elected the 10th-term Directors and Supervisors.

20. 2002

22. 2004

Inauguration ceremony of the Operation Head Office and the phase 2 plant of Sunon Electronic (Kunshan) Co., Ltd.; Chairman Yin-Su Hong received an honorary PhD degree for management from Sun Yat-sen University; Awarded the silver prize in the First National Invention and Creation Award of the Ministry of Economic Affairs; awarded the 2004 Technology Management Prize (enterprise and group category) from the Chinese Society for Management of Technology; Ranked 48th in the world and 4th in Taiwan in terms of technical strength by the MIT Technology Review; launched the magnetic levitating motor AC fans. Capital was maintained at NT\$ 1,960,000,610.

23. 2005

The Company passed OHSAS18001 certification and provides products that fully comply with the RoHS directive; completed the development of the PMD 4028 high air volume fans and magnetic levitating motor fans 7020 series; received the 13th Taiwan Excellence Award and the "2005 Taiwan Good Brands" from the Ministry of Economic Affairs; received awards including SAMSUNG Eco-Partner certification and Inventec's 2005 Diamond Supplier Award; Ranked 4th in the Top 100 Companies in Taiwan in the components category by Business Weekly in 2005. Increased capital to NT\$ 1,998,600,620.

24. 2006

Passed ISO/TS 16949 quality assurance system certification; received the 14th Taiwan Excellence Award and the "2006 Taiwan Good Brands" from the Ministry of Economic Affairs; received the Best Innovation and Business Management Award in the third Taiwanese Enterprise Awards presented by China Times; received Canon Green Activity environmental protection certification; launched the Waturbo cooling module; issuance of the second unsecured corporate bonds totaling NT\$400 million. Increased capital to NT\$ 2,057,658,640 and elected the 11th-term Directors and Supervisors. Established "Sunon Electronic (Foshan) Co., Ltd." in China.

25. 2007

Launched the world's smallest/slimmest nano-tech fans and drum fans; received the Silver Award in the 15th Taiwan Excellence Award and Taiwan Excellence Award from the Ministry of Economic Affairs; "Ministry of Economic Affairs Pilot Information Application Development Program - Sunonwealth Smart Patented Value-Added System Project" passed the review by the Ministry of Economic Affairs and was recommended as an "outstanding pilot company"; Won recognition as the best supplier of Emerson in 2007; Ranked 1st in the Top 100 Companies in Taiwan in the power/transportation equipment category by Business Weekly in 2007. Completed the relocation and production line expansion of Sunon Electronic (Foshan) Co., Ltd.; Increased capital to NT\$ 2,313,064,460. Merged the wholly owned "Chien Heng Precision Co., Ltd." and the Board of Directors resolved to liquidate the investee "Pingnan Sunonwealth Electrical Product Factory" in China.

26. 2008

The Company's innovative invention "Mighty Mini Fan", the smallest in the world, was exhibited at the "Taiwan Number One Special Exhibition" organized by the Taiwan Historica of Academia Historia; The innovative technology used in the Mighty Mini Fan was awarded the "Industrial Innovation Award" organized by the Industrial Development Bureau of the Ministry of Economic Affairs and it won the 17th Taiwan Excellence Award; launched the new product ultra-quiet fan, next-generation magnetic levitating motor fan ME series, and indoor LED light bulb cooling module; passed IECQ QC080000 certification; entered the new Netbook products supply chain; Increased capital for the two plants in China; increased the registered capital of Sunon Electronic (Kunshan) Co., Ltd. to US\$28,500,000 and increased the registered capital of Sunon Electronic (Foshan) Co., Ltd. to US\$19,420,000; increased the Company's capital to NT\$ 2,457,986,300.

27. 2009

The world's slimmest 1cm nano-tech fans and drum fans received the Silver Award in the 18th Taiwan Excellence Award and Taiwan Excellence Award from the Ministry of Economic Affairs; awarded the contribution prize in the 2009 National Invention and Creation Award; "Slim fan" invention patent awarded the Silver Prize for Invention in the 2009 National Invention and Creation; ranked 75th in the 2008 "Top 100 Domestic Institutions in Total Number of Patent Certificates" by the Intellectual Property Office and ranked 73rd in the "Top 100 Domestic Institutions in Number of Invention Patent Certificates"; SUNON ranked first in terms of market share in the global AC/DC axial fans in the market research report published by Fuji Keizai. Election of the Company's 12th-term Directors and Supervisors; Sunon Electronic (Foshan) Co., Ltd. merged Nanhai Guangyuan Electronic (Foshan) Co., Ltd. and increased its capital to US\$20,620,000; the Company merged its wholly-owned subsidiary "Sunon Motor Co., Ltd."; increased the Company's capital to NT\$ 2,579,297,320.

28. 2010

Environmental-friendly Energy-saving Cooling Fans for LED MR16 and LED Street Lamp both received the 19th Taiwan Excellence Award; The Company was ranked 347th in the 2009 "Top 1000 manufacturing companies in Taiwan" in the 446th issue of Commonwealth Magazine. launched the smart forward and backward-rotating dusting fan and LED lighting cooling module series; ranked 67th in the 2009 "Top 100 Domestic Institutions in Total Number of Patent Certificates", 56th in the "Top 100 Domestic Institutions in Invention Patent Applications", and 89th in the "Top 100 Domestic Institutions in Number of Invention Patent Certificates"; SUNON ranked first in terms of market share in the global AC/DC axial fans in 2010 in the market research report published by Fuji Keizai. Sunon Electronic (Kunshan) Co., Ltd. expanded the new factory and increased the registered capital to US\$33,000,000.

  1. 2011

Launched the IP-68 maximum protection products and LED projection light cooling modules; The Lightweight & Ultra-thin Cooling Fan received the 20th Taiwan Excellence Award from the Ministry of Economic Affairs; SUNON brand became one of the "Top 100 Brands in Taiwan"; The Company was ranked 361st in the 2010 Top 2000 Manufacturing Companies in Taiwan by Commonwealth Magazine. ranked 85th in the 2010 "Top 100 Domestic Institutions in Number of Patent Applications"; ranked 65th in the "Top 100 Domestic Institutions in Invention Patent Applications" and 75th in the "Top 100 Domestic Institutions in Number of Invention Patent Certificates"; SUNON ranked first in terms of global DC axial fans in the "Small Fan World Scale Market Research" published by Yano Research Institute in Japan in 2011. The Company established Sunon Electronic (Bei Hai) Co., Ltd. and the paid-in registered capital was US\$6,000,000.

30. 2012

The Company was ranked 373rd in the 2011 Top 1000 Manufacturing Companies in Taiwan by Commonwealth Magazine; Lightweight & Ultra-thin Cooling Fan won the Silver Award in the 20th Taiwan Excellence Award. "High-Lumen LED Spotlight active cooling module series" and "high performance cooling fan for hand-held micro projector" won the 21st Taiwan Excellence Award; the registered capital of Sunon Electronic (Bei Hai) Co., Ltd. was increased to US\$10,000,000. the Company established Sunon Electronic (He Fei) Co., Ltd. The Company reduced shares by buying back treasury stock and reduced the capital to NT\$2,509,297,320.

  1. 2013

The Company was ranked 361st in the 2012 Top 2000 Manufacturing Companies in Taiwan by Commonwealth Magazine. The Company launched the Ultra Micro Cooling Device Series, High-Lumen LED MR16 lamp Active Cooling Modules Series, and the Dust proof, Water proof, IP68 Cooling Fan which won the 22nd Taiwan Excellence Award.

  1. 2014

The Company launched 400W high-wattage LED lighting cooling solution and ECO DC variable frequency air fan, and other new products; The mobile phone cooling case and automobile fragrance system air fan received the 23rd Taiwan Excellence Award; LED Lighting Ventilation Fan received the iF Product Design Award in Germany in 2015; The Company was ranked 348th in the 2013 Top 2000 Manufacturing Companies in Taiwan by Commonwealth Magazine.

33. 2015

Launched the ultra-energy-efficient DC ventilation fan; The Company was ranked 313th in the 2014 Top 2000 Manufacturing Companies in Taiwan by Commonwealth Magazine. LED Lighting Ventilation Fan received the 24th Taiwan Excellence Award; received the 2015 TTQS Gold Prize. The Mighty Mini Fan product line was adopted in computer sticks, drones, electronic breathing masks, and virtual reality wearable devices.

  1. 2016

Launched the Flow2 One-AHR Ventilation Fan, IP68 high protection fans for LED lighting, Energy Saving EC Axial Fan, and ATEX explosion prevention fans; The Company was ranked 281st in the 2015 Top 2000 Manufacturing Companies in Taiwan by Commonwealth Magazine. LED Lighting Ventilation Fan received the Silver Award in the 24th Taiwan Excellence Award; Obtained 6,934㎡ of land for the Kaohsiung Factory.

  1. 2017

Launched the Type 25 side-suction ventilation fan and VF high-performance fans for commercial use; The Company was ranked 272nd in the 2016 Top 2000 Manufacturing Companies in Taiwan by Commonwealth Magazine. The Flow2 One AHR Ventilation Fan and Energy Saving EC Axial Fan received the Silver Award in the 26th Taiwan Excellence Award.

36. 2018

Launched DC Axial Fan VF dual fans; The Company was ranked 279th in the 2017 Top 2000 Manufacturing Companies in Taiwan by Commonwealth Magazine. The sidesuction ventilation fan received the 2018 Taiwan Excellence Award. Merged the whollyowned subsidiary Sunon SMT Co., Ltd. Sold 100% of shares in Hefei Hua Zhun Electronics Co., Ltd.

C. Corporate Governance Report

I. Organization system

(I) Organization structure

Note: The organization structure became effective on January 1, 2019.

(II) Major business units and their key businesses

Department Name Main Businesses
General Manager The General Manager is responsible for the execution of the
Company's operations. The General Manager establishes
business strategic goals and directs and manages subordinates
in business operations to achieve the Company's goals.
GM Office The GM Office assists the General Manager in business
operations, plans for the Company's medium and long-term
goals and strategies, and improves the performance of
execution units.; the GM Office is also responsible for the
management, assistance, and audit of investee businesses for
strengthening the comprehensive performance of affiliated
enterprises; it also manages legal and intellectual property
rights.
GS Business Unit The GS Business Unit is responsible for technical support and
product development for strategic applications and strategic
customers; it also follows up on customer demands in projects
and provide customers with solutions. The GS Business Unit
manages marketing channels across the globe and strategic
customers. It formulates product and marketing strategies to
expand the market, maintain customer relations, and improve
customer satisfaction. It also manages overseas subsidiaries
for sales.
Thermal
Business
Unit		 It is responsible for the production of cooling fans and motors
as well as comprehensive quality; it also provides customers
with high-quality products and prompt delivery.
Cooling
Module
Business Unit		 It is responsible for the research, development, design, sales,
production, and comprehensive quality of cooling module
products;
it
is
also
responsible
for
customer
relations
management for laptop computer customers and providing
customers with comprehensive solutions.
Automated
Intelligence
Division		 It is responsible for the development of production processes
for fans and motors as well as the R&D and design of various
automated production equipment and tools to improve overall
production efficiency.
Operating
Management
Division		 It is responsible for formulating KPI for all departments of the
Group
as
well
as
their
evaluations
and
follow-up
improvement; it is responsible for the coordination and
improvement of system procedures as well as the development
of the management system tools.
Strategic
Purchasing
Department		 It is responsible for developing suppliers of materials and
control of procurement prices; it also implements a qualified
supplier system and priority supplier system.
Global
Human
Resource Division		 It is responsible for the human resources development of all
subsidiaries across the globe and the administrative affairs of
the parent company; its goal is to improve employee
satisfaction.
Department Name Main Businesses
IT Division It
is
responsible
for
the
establishment
of
a
corporate
information
system
and
the
maintenance
of
stability,
timeliness, confidentiality, and security of the system and
information communication.
Finance Division It is responsible for maintaining records on the Company's
business activities, formulating financial information and
management
reports,
providing
analytical
data
and
suggestions for improvement in business decision-making,
and controlling budgets.
Kaohsiung Factory It is responsible for the production and quality assurance of the
Mighty Mini Fan and high-efficiency motors; it also manages
shipping activities for materials factories in Taiwan and China.

II. Profile of Directors, Supervisors, President, Vice Presidents, Assistant Vice Presidents, and Department Directors (I)Director information

Director information

i
Ap
r		 l
2
1,		 2
0
1
9
(Note 1)
Title		 Nationality or place of
registration
Name		 Gender Date elected (appointed) Term Date first elected(Note 2) ha
S
res
r
lec
t
e		 d du
he
l
ing
ion		 be
Nu
m
ha
s
nt
cu
rre		 f
r o
res
ly
he
l
d		 Cu
rre
ha
he
s
res
sp
ou
se
de
un
h
i
l
dr
c		 nt
l
d
by
d
an
rag
e
en		 ha
S
re
by
no
arr
an
g		 ho
l
d
ing
ine
m
e
ent
em		 du
ion
E
t
ca
d w
k
an
or		 O
he
it
ion
it
h
in
t
t p
r c
urr
en
os
s w		 Sp
ou
sec
los
c
ire
D
c
t
or
o		 la
se
re
or
d
de
on
g
t
er
ac
Su
tor
s,
p
he
de
r
p
he
ds
a		 ive
f
t
s o
ree
or
ing
as
iso
erv
rs,
tm
t
ar
en
Number of
shares		 Shareholding
ratio		 Number of
shares		 Shareholding
ratio		 Number of
shares		 Shareholding
ratio		 Number of
shares		 Shareholding
ratio		 ien
ex
ce (
p
er
No
3
)
te		 he
Co
t
mp
an
y		 it
le
T		 Na
me		 Relationship
ic of C
ubl
Rep
hin
a		 201
8.5
.30		 3 200
9.5
.27		 14,8
02,
000		 5.9
0
%		 14,8
25,
000		 5.9
1%		 - - - - - - - - -
Representative
Yo Yuan Investment Corporation		 ubl
ic
Rep
hin
of C
a		 Cha
irm
in
an Y
Su
Ho
ng		 le
Ma		 201
8.5
.30		 3 198
0.1
0.2
5		 10,4
57,
000		 4.1
7%		 10,4
57,
000		 4.1
7 %		 14,6
70,
000		 5.8
5%		 - - Ho
nor
ary
Do
in
ctor
ate
ent
ma
nag
em
,
Nat
ion
al S
Yat
un

Un
iver
sity
sen		 Chi
ef T
ech
nol
Of
fice
ealt
h
r, S
ogy
uno
nw
Ele
ctri
ach
ine
Ind
d
c M
Co.
, Lt
ustr
y
Cha
irm
Sun
Ele
nic
(
Ku
nsh
an)
ctro
an,
on
Co.
, Lt
d.
Dir
r, S
n E
lect
ic (
Fos
han
)
Co.
ecto
uno
ron
,
Ltd
Cha
irm
. (
ited
tes)
Sun
Inc
Un
Sta
an,
on
Cha
irm
S (
)
Sun
SA
Fra
an,
on
nce		 Dir
ecto
r
Dir
ecto
r
Dir
ecto
r		 Fu-
Ing
Ho
ng
Che
n
Chi
ng
She
n
Ho
ng
Li-J
u
Che
n		 Spo
use
Fath
er-s
on
ghte
r-in
Dau

law
Rep
ubl
ic
of C
hin
a		 Dir
r Fu
-Ing
ecto
Ho
Che
ng
n		 Fem
ale		 201
8.5
.30		 3 198
0.1
0.2
5		 15,2
70,
000		 6.0
9%		 14,6
70,
000		 5.8
5%		 10,4
57,
000		 4.1
7 %		 - - Gra
dua
ted
fro
m
Yan
cha
o
Ele
nta
me
ry
Sch
ool		 Sen
ior
Spe
cial
ist,
Sun
ealt
h E
lect
ric
onw
Ma
chin
e In
dus
Co.
, Lt
d
try
Dir
r, S
c. (
ited
Sta
tes)
n In
Un
ecto
uno
isor
Ele
nic
(
han
)
Sup
, Su
Fos
Co.
ctro
erv
non
,
Ltd
Cha
irm
Gu
Sh
Inv
estm
ent
an,
ang
eng
Cor
atio
por
n
Cha
irm
Yo
Yua
n In
tme
nt
an,
ves
Cor
atio
por
n		 Cha
irm
an
Dir
ecto
r
Dir
ecto
r		 Yin
-Su
Ho
ng
Chi
ng
She
n
Ho
ng
Li-J
u
Che
n		 Spo
use
Mot
her-
son
ghte
r-in
Dau

law
ubl
ic
Rep
of C
hin
a		 Dir
hin
r C
ecto
g
She
n H
ong		 le
Ma		 201
8.5
.30		 3 200
9.5
.27		 3,0
00,
000		 1.20
%		 3,0
00,
000		 1.20
%		 26
7,0
00		 0.1
1%		 - - of Ele
Dep
artm
ent
ctri
cal
Eng
ine
erin
Ku
g,
n
Sha
n U
niv
ersi
ty
Gra
dua
ted
fro
m
the
Dep
artm
ent
of B
usin
ess
Imp
ort/
Exp
ort
Ma
ent
nag
em
,
Van
cou
ver
Com
nity
mu
Col
leg
e		 side
ealt
h E
lect
ric
chin
Pre
Sun
Ma
nt,
onw
e
Ind
d.
Co.
, Lt
ustr
y
Dir
r, S
n E
lect
ic (
Ku
nsh
an)
Co
ecto
uno
ron
.,
Ltd
Cha
irm
Sun
Ele
nic
(
han
)
Co.
Fos
ctro
an,
on
,
Ltd
Cha
irm
Ele
nic
(
Bei
i)
Sun
Ha
Co.
ctro
an,
on
,
Ltd
Dir
r, S
n In
c. (
Un
ited
Sta
tes)
ecto
uno		 Cha
irm
an
Dir
ecto
r
Dir
ecto
r		 Yin
-Su
Ho
ng
Fu-
Ing
Ho
ng
Che
n
Li-J
u
Che
n		 Fath
er-s
on
Mot
her-
son
Spo
use
(Note 1)
Title		 Nationality or place of
registration		 Name Gender Date elected (appointed) Term Date first elected(Note 2) ha
S
res
r
lec
t
e		 d du
he
l
ing
ion		 be
Nu
m
ha
s
nt
cu
rre		 f
r o
res
ly
he
l
d		 Cu
rre
ha
he
s
res
sp
ou
se
de
un
h
i
l
dr
c		 nt
l
d
by
d
an
rag
e
en		 ha
S
re
by
no
arr
an
g		 ho
l
d
ing
ine
m
e
ent
em		 du
ion
E
t
ca
d w
k
an
or
ien		 O
he
it
ion
it
h
in
t
t p
en
r c
urr
os
s w
he
Co		 Sp
ou
sec
los
c
ire
D
c
t
or
o		 la
se
or
re
d
de
on
g
t
er
ac
Su
tor
s,
p
he
de
r
p
he
ds
a		 ive
f
t
s o
ree
or
ing
as
iso
erv
rs,
tm
t
ar
en
Number of
shares		 Shareholdi
Number of
Shareholdi
ng ratio
ng ratio
shares
0.1
1%
267
,00
0
0.1
1%		 Number of
Shareholdi
Number of
ng ratio
ng ratio
shares
shares		 Shareholdi ex
ce (
p
er
No
3
)
te		 t
mp
an
y		 it
le
T		 Na
me		 Re
io ns
la
t
h
ip
ubl
ic
Rep
of C
hin
a		 Dir
i-Ju
r L
ecto
Che
n		 ale
Fem		 201
8.5
.30		 3 201
8.5
.30		 267
,00
0		 3,0
00,
000		 1.20
%		 - - dua
ted
fro
Gra
m
the
Dep
artm
ent
of I
nfo
tion
rma
Ma
ent
nag
em
,
Que
en's
Co
lleg
e
(
Can
ada
)		 Dir
r of
the
ivis
ion
Hu
n R
es D
ecto
ma
eso
urc
,
Sun
ealt
h
Ele
ctri
c M
ach
ine
Ind
ustr
onw
y
Co.
, Lt
d.		 Cha
irm
an
Dir
ecto
r
Dir
ecto
r		 Yin
-Su
Ho
ng
Fu-
Ing
Ho
ng
Che
n
Chi
ng
She
n
Ho
ng		 Dau
ghte
r-in

law
ghte
r-in
Dau

law
Spo
use
Rep
nta
rese
tive
of
Nic
e
rise
Ent
erp
Co.
, Lt
d.		 Rep
ubl
ic
of C
hin
a
ubl
ic
Rep
of C
hin
a		 Dir
r C
hin
ecto
g
Lia
Che
ng
n		 le
Ma		 201
8.5
.30
201
8.5
.30		 3
3		 199
7.4
.3
201
2.5
.25		 4,5
06,
813
-		 1.80
%
-		 4,0
06,
813
-		 1.
60
%
-		 -
-		 -
-		 -
-		 -
-		 -
Gra
dua
ted
fro
m the
Dep
artm
ent
of P
ubl
ic A
ffai
rs,
Nat
ion
al C
hun
g
Hsi
Un
iver
sity
ng		 -
side
Nic
ise
Co.
d.
Pre
e E
, Lt
nt,
nter
pr
isor
iwa
irst
Bi
chn
olo
Sup
, Ta
n F
ote
erv
gy
Cor
p.
Cha
irm
Tai
Fo
od
Ind
Co.
, Lt
d.
ustr
an,
wan
y
Cha
irm
Ho
Din
Inte
tion
al
an,
g
rna		 -
-		 -
-		 -
-
Dir
ecto
r		 ubl
ic
Rep
of C
hin
a		 Che
Tse
ng-
ng
Lin		 le
Ma		 201
8.5
.30		 3 201
5.6
.9		 - - - - - - - - dua
ted
fro
Gra
m
the
Dep
artm
ent
of B
usin
ess
Ad
min
istr
atio
n,
Inte
tion
al
rna
ine
ss C
olle
Bus
ge		 Dev
elop
nt C
Ltd
me
o.,
Cha
irm
tion
Sum
an C
an,
orp
ora
Cha
irm
Fu
Fon
Inte
tion
al C
Ltd
an,
g
rna
o.,
Dir
r, H
n B
io-T
ech
Co
., L
td.
ecto
em
oge		 - - -
(Note 1)
Title		 Nationality or place of
registration		 Name Gender Date elected (appointed) Term Date first elected(Note 2) ha
S
res
r
lec
t
e		 d du
he
l
ing
ion		 be
Nu
m
ha
s
nt
cu
rre		 f
r o
res
ly
he
l
d		 Cu
rre
ha
he
s
res
sp
ou
se
de
un
h
i
l
dr
c		 nt
l
d
by
d
an
rag
e
en		 S
ha
re
by
no
arr
an
g		 ho
l
d
ing
ine
m
e
ent
em		 E
du
ion
t
ca
d w
k
an
or
ien
ex
er		 he
it
ion
it
h
in
O
t
t p
r c
urr
en
os
s w
he
Co
t
an		 Sp
ou
sec
los
c
D
ire
c
t
or
o		 la
se
or
re
d
de
on
g
t
er
ac
Su
tor
s,
p
he
de
r
p
he
ds
a		 ive
f
t
s o
ree
or
ing
as
iso
erv
rs,
tm
t
ar
en
Number of
shares		 Shareholdi
ng ratio		 Number of
shares		 Shareholdi
ng ratio		 Number of
shares		 Shareholdi
ng ratio		 Number of
shares		 Shareholdi
ng ratio		 ce (
p
No
3
)
te		 mp
y		 T
it
le		 Na
me		 io ns
la
Re
t
h
ip
Independent Director ic of C
ubl
Rep
hin
a		 Chu
in
n-H
ao X		 le
Ma		 201
8.5
.30		 3 201
5.6
.9		 - - - - 156
,51
0		 0.0
6%		 - - 's d
Ma
ster
ee, Inst
egr
f Bus
itut
e o
ine
ss Ma
, I- Sho
ent
nag
em
u U
niv
ersi
ty Dir
r-G
ral,
ecto
ene
hsiu
Kao
ng Cou
Re
nty
ue Ser
ven
vic
e B
ure
au		 Ind
nde
irec
and
mb
f th
nt D
tor
epe
me
er o
e
dit
and
atio
mit
of
Au
Re
n C
tee
mu
ner
om
Cha
Wa
h E
lect
ials
Inc
ater
ng
rom		 - - -
Independent Director Rep
ubl
ic
of C
hin
a		 Me
i-H
sian
Pai
g		 Fem
ale		 201
8.5
.30		 3 201
5.6
.9		 24,
128		 0.
01%		 24,
128		 0.
01%		 - - - - Ma
of
ster
Sci
enc
e,
Gra
dua
nsti
te I
tute
of M
edic
al
Sci
Cha
enc
es,
ng
Jun
Chr
isti
g
an
Un
iver
sity
MB
A, N
atio
nal
Sun
Ya
t-se
n
iver
sity
Un		 Sup
isor
, A
dva
d In
atio
nal
tern
erv
nce
ltite
ch C
Ltd
Mu
o.,
Dir
ich
in I
tion
al C
r, R
Fou
ecto
nta
nte
rna
orp		 - - -
Independent Director Rep
ubl
ic
of C
hin
a		 Chi
h-M
ing
Che
n		 Ma
le		 201
8.5
.30		 3 201
5.6
.9		 - - - - - - - - Gra
dua
ted
fro
m
the
Sch
ool
of
, So
och
Law
ow
iver
sity
Un
's d
Ma
ster
egr
ee,
Inst
itut
f
e o
Ma
inla
nd
Chi
na
Stu
die
s, N
atio
nal
Sun
Ya
t-se
n
iver
sity
Un
Jud
hsiu
Kao
ge,
ng
Dis
tric
t C
t
our		 Ma
ing
Pa
r, C
hih
-M
ing
At
rtne
torn
nag
eys

at-L
aw		 - - -

* The Company organized an election of Directors on May 30, 2018 and the results were as follows: Dismissal of Hsuan-Wei Huang and appointment of Li-Ju Chen.

Note 1: The names and representatives of institutional shareholders shall be listed separately (those who represent institutional shareholders should indicate corporate names) and fill in Table 1 below. Note 2: Fill in the time when the individual first served as the Company's Director or Supervisor. Any interruptions should be indicated.

Note 3: Work experiences of anyone in the table above that are related to their current roles, such as previous employment at CPA firms or employment in affiliated companies, should be disclosed along with job titles and responsibilities.

March 31, 2019
Name of institutional
shareholder(Note 1)		 Major shareholders of institutional
shareholders(Note 2)		 Shareholding
ratio (%)
Fu-Ing Hong Chen 36.50
Yin-Su Hong 26.00
Ching-Shen Hong 16.00
Yo Yuan Investment
Corporation		 Sheng-Tai Hong 5.00
Li-Ju Chen 3.50
Chia-Chun Hong 6.50
Chia-Wei Hong 6.50
AGV PRODUCTS CORP. 27.98
Ho Yuan Investment Corporation 20.06
TAIWAN FIRST BIOTECHNOLOGY CORP. 10.37
TAIWAN NJC CORPORATION 6.41
NICE ENTERPRISE CO., Ho Ding International Development Co., Ltd. 4.21
LTD. Leshan Investment Development Co., Ltd. 3.09
Yu-Ying Hong 3.06
Zhi-Hong Chen 2.66
English International Consultancy Co., Ltd. 2.38

Table 1: Major shareholders of institutional shareholders

Note 1: For directors and supervisors who are the representatives of institutional shareholders, the names of the institutional shareholders shall be disclosed.

Note 2: Fill in the names of main shareholders of the institutional shareholder (the top ten shareholders in terms of shareholding ratio) and their shareholding ratio. If the major shareholder is a juristic person, his/her name should be filled in Table 2 below.

CUNYUAN HEYE CO., LTD. 2.32

Table 2: Table 1 Major shareholders in Table 1 who are institutional shareholders and their major shareholders

March 31, 2019
Name of institutional
shareholder(Note 1)		 Major shareholders of institutional
shareholders(Note 2)		 Shareholding
ratio(%)
Ho Yuan Investment Corporation 6.70
NICE ENTERPRISE CO., LTD. 4.20
Kuo Pao Pen Investment and Development Co., Ltd. 1.63
Kuo Pen Investment and Development Co., Ltd. 1.60
JPMorgan Chase in its capacity as Master Custodian
for Vanguard Emerging Stock Market Index Fund		 1.43
AGV PRODUCTS CORP. Citibank Taiwan in its capacity as Master Custodian
for Dimension Emerging Market Evaluation Fund		 1.00
(2018.4.30) Citibank Taiwan in its capacity as Master Custodian
for DFA Emerging Markets Portfolio investment
account		 0.94
JPMorgan Chase in its capacity as Master Custodian
for Vanguard Total International Stock Index Fund		 0.89
Ho Ding International Development Co., Ltd.
Zhe-Fang Chen 0.82
Name of institutional
shareholder(Note 1)		 Major shareholders of institutional
shareholders(Note 2)		 Shareholding
ratio(%)
Ho Yuan Investment Corporation Zhi-Hong Chen
English International Consultancy Co., Ltd.
Su-Mei Yuan
Yu-Ying Hong
Chih-Chan Chen
Chih-Lun Chen
Chang-Chiao Hu
Wen-Na Yang
Jeam-Tan Chen
Zhi-Yu Zhang		 23.03
19.00
15.63
11.83
5.71
5.71
4.45
2.22
2.10
1.75
Taiwan First Biotechnology Corp. AGV Products Corp.
Paolyta Co., Ltd.
BHL Taipei Limited
Ta Tai Investment Corporation
Nice Plaza Co., Ltd.
Ho Yuan Investment Corporation
Nice Plaza Co., Ltd.
Chun Te Investment Corporation
Yun Gu
Lei Ying Security Co., Ltd.		 39.31
8.00
8.00
4.00
5.79
3.62
1.41
1.51
1.57
1.47
Ho Ding International
Development Co., Ltd.		 Nice Enterprise Co., Ltd.
AGV Products Corp.
Ho Tien International Development Co., Ltd.
Chang-Chiao Hu
Zhi-Hong Chen
Yu-Ying Hong
Su-Mei Yuan
Kuo Pen Investment and Development Co., Ltd.		 49.07
48.98
0.53
0.29
0.29
0.29
0.29
0.26
Leshan Investment Development
Co., Ltd.		 Ya-Xin Zheng
Xuan-Hui Chen
Lan-Xin Ye
Guan-Hao Chen
Su-Mei Yuan
Guan-Hua Chen
Bai-Ye Chen
Qi-Rui Chen
Xin-He Li
Xin-Jia Li		 24.00
24.00
16.00
8.00
4.00
4.00
4.00
4.00
4.00
4.00
English International Consultancy
Co., Ltd.		 Yu-Ying Hong
Guan-Ru Chen
Guan-Han Chen
Guan-Zhou Chen
Yu-Nu Hong
Qiu-Wen Li		 31.60
24.00
24.00
19.60
0.40
0.40
Name of institutional
shareholder(Note 1)		 Major shareholders of institutional
shareholders(Note 2)		 Shareholding
ratio(%)
New Japan Chemical Co., Ltd. 43.72
Taiwan First Biotechnology Corp. 19.86
Nice Enterprise Co., Ltd. 15.78
Tai Food Industry Co., Ltd. 7.67
Yi-Yan Chen 3.45
Taiwan NJC Corporation Mountain Music Production Co., Ltd. 0.70
Ho Yuan Investment Corporation 0.58
Leshan Investment Development Co., Ltd. 0.40
Cunyuan Heye Co., Ltd. 0.40
Jia-En Zhang 0.37
Chang-Chiao Hu 20.00
Zhi-Hong Chen 28.00
Chih-Chan Chen 15.00
Cunyuan Heye Co., Ltd. Chih-Lun Chen 15.00
Yuan-Hui Wang 13.50
Xiao-Ci Chen 2.84
Xiao-He Chen 2.83
Xiao-Wei Chen 2.83

Note 1: If the major shareholders in the preceding Table1 are institutional shareholders, the name of the institutional shareholder shall be disclosed.

Note 2: Fill in the names of main shareholders of the institutional shareholder (the top ten shareholders in terms of shareholding ratio) and their shareholding ratio.

Director information

Has at least 5 years of work experience and Meets the independence criteria Nu
ser
vin
mb
meet one of the following professional (Note 2) g a
er
of
qualifications s a
oth
n i
Criteria
Name
(Note 1)		 A lecturer or
higher
position in a
Department of
Commerce,
Law, Finance,
Accounting,
or other
academic
department
related to the
business needs
of the
Company in a
public or
private junior
college,
college or
university		 A judge, public
prosecutor,
attorney,
certified public
accountant, or
other
professional or
technical
specialist who
has passed a
national
examination
and been
awarded a
certificate in a
profession
necessary for
the business of
the company.		 Have work
experience in
the area of
commerce,
law, finance,
or accounting,
or otherwise
necessary for
the business of
the Company		 1 2 3 4 5 6 7 8 9 10 nd
er
ep
Ta
en
iw
de
an
nt
ese
Di
pu
rec
bli
tor
c c
om
pa
nie
s c
on
cu
rre
ntl
y
Yo Yuan Investment
Corporation 0
Representative:
Yin-Su Hong
Yo Yuan Investment
Corporation 0
Representative:
Fu-Ing Hong Chen
Yo Yuan Investment
Corporation 0
Representative:
Ching-Shen Hong
Yo Yuan Investment
Corporation
Representative: 0
Li-Ju Chen
Nice Enterprise Co.,
Ltd. 0
Representative:
Ching-Liang Chen
Tseng-Cheng Lin		 0
Chun-Hao Xin 1
Mei-Hsiang Pai 0
Chih-Ming Chen 0

April 21, 2019

Note 1: Please add more rows to accommodate additional entries.

Note 2: If the director or supervisor meets any of the following criteria in the two years before being elected or during the term of office, please check "" the corresponding boxes:

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

(2) Not a Director or Supervisor of the Company of any of its affiliates (excluding Independent Directors set up by the Company, its parent company or subsidiaries in compliance of the local regulations).

(3) Not a natural-person shareholder who holds shares, together with those held by the person's spouse, minor children, or held by the person under others' names, in an aggregate amount of one percent or more of the total number of issued shares of the Company or ranks as one of its top ten shareholders;

  • (4) Not a spouse, relative within the second degree of kinship, or lineal relative within the third degree of kinship, of any of the above persons in the preceding three subparagraphs;
  • (5) Not a director, supervisor, or employee of a corporate/institutional shareholder that directly holds five percent or more of the total number of issued shares of the Company or ranks as one of its top five shareholders;
  • (6) Not a director, supervisor, managerial officer, or a shareholder that holds more than 5% of shares at a company or institution that has financial or business exchanges with the Company.
  • (7) Not a professional individual or owner, partner, director (member of the governing board), supervisor (member of the supervising board), or managerial officer of a sole proprietorship, partnership, company, or institution that provides commercial, legal, financial, accounting, or consultation services to the company or to any affiliate enterprise, or spouse thereof; excluding members of remuneration committee who exercise power in accordance with Article 7 of the Regulations Governing the Appointment and Exercise of Powers by the Remuneration Committee of a Company Whose Stock is Listed on the Stock Exchange or Traded Over the Counter.
  • (8) Not having a marital relationship, or a relative within the second degree of kinship to any other Director of the Company.
  • (9) Not been a person of any conditions defined in Article 30 of the Company Act.
  • (10) Not a governmental, juridical person or its representative as defined under Article 27 of the Company Act.

(II)Profile of the President, Vice Presidents, Assistant Vice Presidents, and Department Directors

April 21, 2019

ha
he
S
res		 l
d		 ha
he
S
res
sp
ou
se
der
un
ag
e c		 l
d
by
d
an
h
i
l
dre
n		 ha
S
re
by
no
arr
an
g		 ho
l
d
ing
ine
m
e
ent
em		 Ma
na
g
a s
p
ou
it
h
w		 ia
l o
f
f
ice
er
se
or
a r
in
d
sec
on
f
k
ins
h
o		 ho
is
r w
lat
ive
e
de
g
ree
ip
it
le
(
)
T
No
1
te		 ion
l
ity
Na
t
a		 Name Gender Da
te ele
d (ap
cte
int
ed)
po		 Number of shares Shareholding
ratio		 Number of shares Shareholding
ratio		 Number of shares Shareholding
ratio		 E
du
ion
d w
k
cat
an
or
ien
exp
er
ce
(
)
No
2
te		 Cu
j
b p
it
ion
in
he
nt
ot
rre
o
os
r
ies
com
p
an		 Title Name Relationship
20 i
den
Pre
t
s		 f C
b
l
ic
Re
pu
o
h
ina		 Ching-Shen Hong Male 2
0
1
1.
3.
4		 3,
0
0
0,
0
0
0		 1.
2
0
%		 2
6
0
0
0
7,		 0.
1
1
%		 - - De
f
art
nt
p
me
o
E
lec
ica
l
En
ine
ing
tr
g
er
S
ha
ive
ity
Ku
Un
n
n
rs
Gr
du
d
fro
he
ate
t
a
m
f
De
art
nt
p
me
o
ine
Bu
s
ss
/
Im
Ex
ort
ort
p
p
Ma
ent
na
g
em
,
Va
nc
ou
ver
ity
l
leg
Co
Co
mm
un
e		 D
ire
Su
lt
h
E
lec
ic
cto
tr
r,
no
nw
ea
,
Ma
h
ine
In
du
Co
Lt
d.
str
c
y
.,
ire
Su
lec
ic
(
ha
)
D
E
Ku
cto
tro
r,
no
n
n
ns
n
Co
d.
Lt
.,
C
ha
irm
Su
lec
ic
(
ha
)
E
Fo
tro
an
no
n
n
s
n
,
Co
d.
Lt
.,
ha
irm
lec
ic
(
i
i
)
C
Su
E
Be
Ha
tro
an
no
n
n
,
d.
Co
Lt
.,
ire
(
ite
d
)
D
Su
Inc
Un
Sta
cto
tes
r,
no
n		 Chief Technology
Officer		 Yin-Su Hong Father-son
C
h
ie
f
Te
hn
log
c
o
y
O
f
f
ice
r		 Re
b
l
ic
f
pu
o
C
h
ina		 Yin-Su Hong Male 2
0
1
1.
3.
4		 1
0,
4
0
0
0
5
7,		 4.
1
%
7		 1
4,
6
0,
0
0
0
7		 8
%
5.
5		 - - Ho
Do
in
cto
rat
no
rar
y
e
Na
ion
ent
t
ma
na
g
em
a
,
Su
Ya
Un
ive
ity
t-s
n
en
rs		 C
ha
irm
Su
lt
h
E
lec
ic
tr
an
no
nw
ea
,
l
Ma
h
ine
In
du
Co
Lt
d.
str
c
y
.,
C
ha
irm
Su
E
lec
ic
tro
an
no
n
n
,
(
Ku
ha
)
Co
Lt
d.
ns
n
.,
ire
Su
lec
ic
(
ha
)
D
E
Fo
cto
tro
r,
no
n
n
s
n
Co
d.
Lt
.,
C
ha
irm
Su
(
ite
d
Sta
)
Inc
Un
tes
an
no
n
,
C
ha
irm
Su
S
A
S
(
)
Fra
an
no
n
nc
e
,		 President Ching-Shen Hong Father-son
V
ice
Pre
i
den
d
t a
s
n
D
ire
f t
he
cto
r o
ina
F
nc
e
De
art
nt
p
me		 Re
b
l
ic
f
pu
o
h
ina
C		 William Li Male 2
0
0
6.
1.
1		 - - - - - - Ma
f
In
du
ia
l
ste
str
r o
Ma
Na
ion
l
ent
t
na
g
em
a
,
Ta
iw
Un
ive
ity
f
an
rs
o
Sc
ien
d
ce
an
Te
hn
log
c
o
y		 - - - -
Pre
i
den
f t
he
t o
s
Bu
ine
s
ss
De
art
nt
p
me		 Re
b
l
ic
f
pu
o
h
ina
C		 Chien-Yuan
Tseng		 Male 2
0
1
8.
4.
2
4		 - - - - - - Ma
De
f
ste
art
nt
r,
p
me
o
Op
ics
d
P
ho
ics
t
ton
an
,
ion
l
Ce
l
Na
t
ntr
a
a
ive
ity
Un
rs		 Ge
l
Ma
f
De
lta
ne
ra
na
g
er
o
E
lec
ics
Inc
d
Su
lt
h
tro
n
. an
no
nw
ea
,
Op
ica
l
lan
P
t
t
Str
ic
Pro
Ma
ate
ent
g
cur
em
na
g
er,
h
i
l
ip
lec
ics
Co
d.
P
E
Lt
tro
s
n
.,		 - - -
S
ha
res		 he
l
d		 S
ha
he
res
sp
ou
se
der
un
ag
e c		 l
d
by
d
an
h
i
l
dre
n		 S
ha
re
by
no
arr
an
g		 ho
l
d
ing
ine
m
e
ent
em		 Ma
na
g
a s
p
ou
it
h
w		 ia
l o
f
f
ice
er
se
or
a r
in
d
sec
on
f
k
ins
h
o		 ho
is
r w
lat
ive
e
de
g
ree
ip
T
it
le
(
No
1
)
te		 Na
ion
l
ity
t
a		 Name Gender Da
te ele
d (ap
cte
int
ed)
po		 Number of shares Shareholding
ratio		 Number of shares Shareholding
ratio		 Number of shares Shareholding
ratio		 E
du
ion
d w
k
cat
an
or
ien
exp
er
ce
(
No
2
)
te		 Cu
j
b p
it
ion
in
he
nt
ot
rre
o
os
r
ies
com
p
an		 Title Name Relationship
Pre
i
den
f t
he
t o
s
Bu
ine
s
ss
De
art
nt
p
me		 b
l
ic
Re
f
pu
o
h
ina
C		 Chuan Peng
Hung		 Male 2
0
1
8.
1
0.
1		 - - - - - - Ma
f
Bu
ine
ste
r o
s
ss
A
dm
in
istr
ion
at
,
Na
ion
l
C
hen
h
i
t
a
g
c
ive
ity
Un
rs		 Se
ior
D
ire
De
lta
E
lec
ics
cto
tro
n
r,
n
,
Inc
B
G
Ge
l
Ma
Be
Q
ne
ra
na
g
er,
n
Co
ion
t
rp
ora		 - - -
ice
i
den
f
V
Pre
t o
s
he
ine
Bu
t
s
ss
De
art
nt
p
me		 b
l
ic
f
Re
pu
o
C
h
ina		 Chen-Hsueh
Li		 Male 2
0
1
4.
2
7.
5		 1
2,
2
9
9		 0.
0
1
%		 - - - - De
f
art
nt
p
me
o
ha
ica
l
Me
c
n
ine
ing
ion
l
En
Na
t
g
er
a
,
ip
i
itu
f
Ta
Ins
t
te
e
o
hn
log
Te
c
o
y		 - - - -
21 V
ice
Pre
i
den
f
t o
s
he
Bu
ine
t
s
ss
De
art
nt
p
me		 Re
b
l
ic
f
pu
o
C
h
ina		 Tsui-Wen
Hsiao		 Female 2
0
1
6.
1.
1		 - - - - - - f
De
art
nt
p
me
o
Int
ion
l
Bu
ine
at
ern
a
s
ss
A
dm
in
istr
ion
d
at
an
Cu
ltu
l
Ex
ha
ra
c
ng
e,
We
Ur
l
ine
nz
ao
su
Co
l
leg
f
La
e o
ng
ua
g
es		 - - - -
ice
i
den
f
V
Pre
t o
s
he
Bu
ine
t
s
ss
De
art
nt
p
me		 Re
b
l
ic
f
pu
o
C
h
ina		 Ming Juan
Shao		 Male 2
0
1
6.
2.
1		 8
3
4		 0.
0
0
%		 - - - - f
De
art
nt
p
me
o
In
du
ia
l
En
ine
ing
str
g
er
,
Sz
Ha
i
Co
l
leg
f
e
e o
Te
hn
log
c
o
y		 - - - -
ice
i
den
f
V
Pre
t o
s
he
Bu
ine
t
s
ss
De
art
nt
p
me		 b
l
ic
f
Re
pu
o
C
h
ina		 Tzu Wu
Chin		 Male 2
0
1
9.
2.
1
2		 - - - - - - f
De
art
nt
p
me
o
Ge
C
h
ine
rm
an
se
,
Cu
ltu
Un
ive
ity
re
rs		 - - - -
ice
i
den
f
V
Pre
t o
s
he
ine
Bu
t
s
ss
De
art
nt
p
me		 b
l
ic
f
Re
pu
o
h
ina
C		 Cheng-Hsin
Su		 Male 2
0
1
9.
2.
1
1		 - - - - - - ion
l
E
M
B
A,
Na
t
a
h
iao
ive
ity
C
Tu
Un
ng
rs		 ice
i
den
A
b
lep
int
hn
log
V
Pre
Te
t,
s
r
c
o
y
d.
Co
Lt
.,
ior
ire
ite
hn
log
Se
D
L
-O
Te
cto
n
r,
n
c
o
y
ion
Co
t
rp
ora
ire
ite
ion
D
L
-O
I
T
Co
cto
t
r,
n
rp
ora		 - - -

Note 1: Information regarding the President, Vice Presidents, Assistant Vice Presidents, Heads of Departments and Branches should be included, whereas information regarding positions equivalent to President, Vice Presidents, Assistant Vice Presidents should be disclosed regardless of job title.

Note 2: Work experiences of anyone in the table above that are related to their current roles, such as previous employment at CPA firms or employment in affiliated companies, should be disclosed along with job titles and responsibilities.

III. Remunerations to Directors (including Independent Directors), Supervisors, President, and Vice Presidents in recent years (I)Director's remuneration

Remuneration paid to directors (including independent directors) (range of remuneration with name disclosure)

Dir
or's
ect		 rem
un
era		 tion tio
Ra		 of
al
tot		 Pay cei
re		 ved
as
an
em
p		 loy
ee		 Per
cen
of
the		 tag
e
al
tot
Re
mu
(
(
No		 atio
ner
n
A)
)
te 2		 Re
pen		 tire
nt
me
sio
n
(
B)		 Dir
ect
rem
un
(
(
No		 or's
tion
era
C)
te 3
)		 Fee
con
bu
(
(
No		 s fo
r
duc
tin
g
sin
ess
D)
)
te 4		 com
pen
(
A+
B+
in
net
com
(
No
te		 ion
sat
C+
D)
to
e (
%)
10)		 Sal
ary
,
and
all
(
(
No		 bon
use
s
ow
anc
es
E)
)
te 5		 tire
Re
pen
(		 nt
me
sio
n
F)		 Re
mu		 atio
ner
(
(
No		 f em
loy
n o
p
G)
)
te 6		 ees sum
B,
C,
nd
F, a
the
ne
(
No		 f A
s o
,
D,
E,
G o
n
ofi
t pr
t
10)
te
Title Na
me		 Th
e C
om		 pan
y		 All
co
mp
Fin
anc
(
No		 ani
in t
he
es
ial
Re
t
por
te 7
)		 (Note 11)
The Company All companies in the Financial Report
(Note 7)		 The Company All companies in the Financial Report
(Note 7)		 The Company All companies in the Financial Report
(Note 7)		 The Company All companies in the Financial Report
(Note 7)		 The Company All companies in the Financial Report
(Note 7)		 The Company All companies in the Financial Report
(Note 7)		 The Company All companies in the Financial Report
(Note 7)		 Cash value Share value Cash value Share value The Company All companies in the Financial Report
(Note 7)		 Compensation from investments other than subsidiaries
Chairman Yo
Yua
n
Inv
estm
ent
Cor
atio
por
n
Rep
tive
nta
rese
:
Yin
-Su
Ho
ng
Fu-
Ing
Ho
ng
Che
n
Chi
She
ng-
n
Ho
ng
Li-J
u C
hen		 4,
20
1		 4,
480		 - - 9
500
,		 9,
500		 6
20		 6
20		 2.3
7%		 2.4
1%		 19,
715		 2
1,
886		 - - 5
833
,		 - 5
833
,		 - 6.5
9%		 6.9
9%		 -
Director Nic
e
En
rise
terp
Co
Ltd
.,
tati
Re
pre
sen
ve:
Ch
ing
-Li
ang
Ch
en
Director Tse
Che
ng-
ng
Lin
Director Hs
-W
ei
uan
Hu
ang
Independent Director Ch
Ha
un-
o
Xin
Independent Director i-H
sia
Me
ng
Pai
Independent Director Ch
ih-
Mi
ng
Ch
en
he
T

 E
xce
p		 ize
d a
lec
ion
f
ire
d t
he
lts
fo
l
low
ism
iss
l o
f
i
d a
int
f
i-
he
Co
D
Ma
3
0,
2
0
1
8 a
D
Hs
We
Hu
L
Ju
C
t
cto
nt
mp
any
or
g
an
n e
o
rs
on
y
n
re
su
we
re
as
s:
a
ua
n-
an
g
an
p
p
o
me
o
n.
di
scl
d a
bov
tion
cei
ved
by
di
s in
th
e la
ar f
bal
e sh
rvi
(e
ing
loy
sul
t) r
end
d to
th
e C
No
t as
tor
tes
t ye
eet
act
tan
ose
e, r
em
un
era
re
rec
or
on-
anc
se
ces
.g.
as
a n
on-
em
p
ee
con
ere
om
pan
y:
ne
N
am
e o		 f
ire
D
to
c
r
io
le
l
ic
b
le
he
Re
t
to
t
m
un
er
a
n
sc
a
ap
p
a		 To
l a
fo
he
4
ta
t
t
m
ou
n
r
p
(
A
B
+		 d
in
io
t
re
ce
g
re
m
un
er
a
ns
)
C
D
+
+		 To
l a
fo
he
7
ta
t
t
m
ou
n
r
(
A
B
C
+
+
+		 d
in
io
t
p
re
ce
g
re
m
un
er
a
ns
)
D
E
F
G
+
+
+
Co
's
D
ire
to
m
p
an
y
c
rs		 he
Co
T
m
p
an
y
(
)
N
8
te
o		 l
l c
ie
in
he
A
t
om
p
an
s
F
in
ia
l
Re
t
an
c
p
or
(
9
)
N
H
te
o		 he
Co
T
m
p
an
y
(
)
N
8
te
o		 l
l c
ie
in
he
A
t
om
p
an
s
F
in
ia
l
Re
t
an
c
p
or
(
9
)
N
I
te
o
low
\$
Be
N
T
2,
0
0
0,
0
0
0		 ive
f
Re
Yo
Yu
ta
t
p
res
en
o
an
Inv
Co
ion
tm
t
t
es
en
rp
or
a
Fu
-In
Ho
C
he
g
ng
n
ive
f
Re
Yo
Yu
ta
t
p
res
en
o
an
Co
ion
Inv
tm
t
t
es
en
rp
or
a
C
h
ing
-S
he
Ho
n
ng
ive
f
Re
Yo
Yu
ta
t
p
res
en
o
an
ion
Inv
Co
tm
t
t
es
en
rp
or
a
i-
C
he
L
Ju
n
Re
ive
f
N
ice
En
ise
ta
t
ter
p
res
en
o
p
r
Co
Lt
d.
C
h
ing
-L
ian
C
he
g
n
.,
he
in,
i
Ts
C
L
Hs
W
en
g-
ng
ua
n-
e
Hu
C
hu
Ha
X
in,
an
g,
n-
o
M
i-
Hs
ian
Pa
i,
C
h
i
h-
M
ing
C
he
e
g
n		 Re
ive
f
Yo
Yu
ta
t
p
res
en
o
an
Co
ion
Inv
tm
t
t
es
en
rp
or
a
Fu
-In
Ho
C
he
g
ng
n
ive
f
Re
Yo
Yu
ta
t
p
res
en
o
an
Inv
Co
ion
tm
t
t
es
en
rp
or
a
h
ing
he
C
-S
Ho
n
ng
ive
f
Re
Yo
Yu
ta
t
p
res
en
o
an
Inv
Co
ion
tm
t
t
es
en
rp
or
a
L
i-
Ju
C
he
n
ive
f
ice
ise
Re
N
En
ta
t
ter
p
res
en
o
p
r
Co
d.
C
h
ing
ian
C
he
Lt
-L
g
n
.,
C
he
in,
i
Ts
L
Hs
W
en
g-
ng
ua
n-
e
Hu
C
hu
Ha
X
in,
an
g,
n-
o
i-
ian
i,
C
h
i
h-
ing
C
he
M
Hs
Pa
M
e
g
n		 ive
f
ice
ise
Re
N
En
ta
t
ter
p
res
en
o
p
r
Co
Lt
d.
C
h
ing
-L
ian
C
he
g
n
.,
C
he
in,
i
Ts
L
Hs
W
en
g-
ng
ua
n-
e
Hu
C
hu
Ha
X
in,
an
g,
n-
o
i-
ian
i,
h
i
h-
ing
he
M
Hs
Pa
C
M
C
e
g
n		 ive
f
ice
ise
Re
N
En
ta
t
ter
p
res
en
o
p
r
Co
Lt
d.
C
h
ing
-L
ian
C
he
g
n
.,
C
he
in,
i
Ts
L
Hs
W
en
g-
ng
ua
n-
e
Hu
C
hu
Ha
X
in,
an
g,
n-
o
i-
ian
i,
h
i
h-
ing
he
M
Hs
Pa
C
M
C
e
g
n
\$
(
inc
lus
ive
)
\$
N
T
2,
0
0
0,
0
0
0
N
T
5,
0
0
0,
0
0
0
to
(
lus
ive
)
ex
c		 ive
f
Re
Yo
Yu
ta
t
p
res
en
o
an
Inv
Co
ion
tm
t
t
es
en
rp
or
a
in-
Su
Y
Ho
ng		 ive
f
Re
Yo
Yu
ta
t
p
res
en
o
an
Inv
Co
ion
tm
t
t
es
en
rp
or
a
in-
Su
Y
Ho
ng		 ive
f
Re
Yo
Yu
ta
t
p
res
en
o
an
Inv
Co
ion
tm
t
t
es
en
rp
or
a
C
he
Fu
-In
Ho
g
ng
n
ive
f
Re
Yo
Yu
ta
t
p
res
en
o
an
Inv
Co
ion
tm
t
t
es
en
rp
or
a
i-
C
he
L
Ju
n		 ive
f
Re
Yo
Yu
ta
t
p
res
en
o
an
Inv
Co
ion
Fu
-In
tm
t
t
es
en
rp
or
a
g
C
he
Ho
ng
n
ive
f
Re
Yo
Yu
ta
t
p
res
en
o
an
Inv
Co
ion
L
i-
Ju
tm
t
t
es
en
rp
or
a
C
he
n
\$
\$
N
T
5,
0
0
0,
0
0
0
(
inc
lus
ive
)
N
T
1
0,
0
0
0,
0
0
0
to
(
lus
ive
)
ex
c
\$
N
T
1
0,
0
0
0,
0
0
0
(
inc
lus
ive
)
to
\$
N
T
1
5,
0
0
0,
0
0
0
(
lus
ive
)
ex
c		 Re
ive
f
Yo
Yu
ta
t
p
res
en
o
an
Inv
Co
ion
tm
t
t
es
en
rp
or
a
h
ing
he
C
-S
Ho
n
ng
Re
ive
f
Yo
Yu
ta
t
p
res
en
o
an
ion
Inv
Co
tm
t
t
es
en
rp
or
a
Y
in-
Su
Ho
ng		 Re
ive
f
Yo
Yu
ta
t
p
res
en
o
an
Inv
Co
ion
tm
t
t
es
en
rp
or
a
h
ing
he
C
-S
Ho
n
ng
Re
ive
f
Yo
Yu
ta
t
p
res
en
o
an
ion
Inv
Co
tm
t
t
es
en
rp
or
a
Y
in-
Su
Ho
ng

Range of remuneration table

\$
N
T
1
5,
0
0
0,
0
0
0
(
inc
lus
ive
)
to
\$
N
T
3
0,
0
0
0,
0
0
0
(
lus
ive
)
ex
c
\$
3
0,
0
0
0,
0
0
0
(
inc
lus
ive
)
N
T
to
\$
(
lus
ive
)
N
T
5
0,
0
0
0,
0
0
0
ex
c
\$
\$
0,
0
0
0,
0
0
0
(
inc
lus
ive
)
1
0
0,
0
0
0,
0
0
0
N
T
5
N
T
to
(
lus
ive
)
ex
c
\$
Gr
ha
N
T
1
0
0,
0
0
0,
0
0
0
ter
t
ea
n
l
To
ta		 1
0 p
ers
on
s		 1
0 p
ers
on
s		 1
0 p
ers
on
s		 1
0 p
ers
on
s

Note 1: The names of the directors must separately list (for institutional shareholders, the names of institutional shareholders and representatives should be listed respectively) the various payment amounts using the summary disclosure method. If a director concurrently serves as a general manager or deputy general manager, his/her name and the amount of remuneration paid to him/her should be listed in Table (3-1) or (3-2) below.

  • Note 2: Remuneration to Directors in the most recent year (include Director salary, additional duty payments, severance pay, various bonuses, or incentive payments).
  • Note 3:The amount is the proposed remuneration to directors approved by the Board of Directors for the most recent fiscal year.
  • Note 4: Refers to the related business expenses of Directors in the past year (including transportation allowance, special allowance, stipends, dormitory, and car). If housing, vehicle and other modes of transportation or personal expenses are provided, the nature and cost of the assets provided, the rental fees and fuel cost calculated based on the actual amount or fair market value, and other payments should be disclosed. If a driver is provided, please indicate the amount of compensation paid to the driver by the company, excluding remuneration, in a separate note.
  • Note 5: All payments to Directors who are also employees of the Company (including the position of President, Vice President, other managerial officer and staff), including salary, additional pay, severance pay, bonuses, rewards, transportation allowance, special allowance, stipends, dormitory, and car. If housing, vehicle and other modes of transportation or personal expenses are provided, the nature and cost of the assets provided, the rental fees and fuel cost calculated based on the actual amount or fair market value, and other payments should be disclosed. If a driver is provided, please indicate the amount of compensation paid to the driver by the company, excluding remuneration, in a separate note. Furthermore, any compensation recognized in the IFRS 2 Share-Based Payment section, including issuance of employee stock options, new restricted employee shares and capital increase by stock subscription, should be included in the calculation of remuneration.
  • Note 6: For directors concurrently serving as employees (including the president, vice presidents, other managers and employees) who receive employee rewards (including shares and cash), the amount of employee rewards that have been approved by the Board of Directors and are distributed to them in the most recent fiscal year shall be disclosed. If the amount of rewards cannot be estimated, the amount of rewards in the current fiscal year shall be calculated based on the ratio of the amount of rewards distributed in the previous fiscal year, and this amount shall also be filled in Table 1-3.
  • Note 7:Total pay to Directors from all companies in the consolidated statements (including the Company).

25

  • Note 8: The name of each Director shall be disclosed in the range of remuneration corresponding to the amount of all the remuneration paid to the Director by the Company.
  • Note 9: The total amount of all the remuneration paid to each Director of the Company by all the companies (including the Company) listed in its consolidated financial statements shall be disclosed. The name of each Director shall be disclosed in the range of remuneration corresponding to the total amount mentioned in the preceding sentence.
  • Note 10: The after-tax net profit refers to the after-tax net profit in the most recent fiscal year; For companies that have adopted IFRSs, the after-tax net profit refers to the after-tax net profit in the parent company only or individual financial report in the most recent year.
  • Note 11: a. The amount of remuneration received from subsidiaries other than investee companies by the Company's Directors shall be stated clearly in this column.
  • b. If a Director of the Company receives remuneration from investee companies other than subsidiaries, the amount of remuneration received by the director from investee companies other than subsidiaries shall be combined into Column I of the table for ranges of remuneration, and this column shall be renamed as "All Investee Companies".
  • c. Remuneration refers to pay, compensation (including compensation of employees, directors and supervisors) and remuneration for conducting business received by a director of the Company serving as a director, supervisor or managerial officer of an investee of the Company other than subsidiaries.

*The content of the remuneration disclosed in this Table is different in concept from the income in the Income Tax Act, therefore the purpose of the table is to disclose information and not for taxation.

(II)Remunerations to President and Vice President

Un
i
ho
t:
t		 \$;
d
N
T
%
us
an
Sa
lar
(
No		 (
A
)
y
2
)
te		 ire
Re
t
p
en
s		 nt
me
ion
(
B
)		 Bo
nu
l
low
a
an
ce
(
No		 d
ses
an
(
C
)
tc.
s,
e
)
3
te		 Em loy
p
ee
re
(
No		 ion
t
mu
ne
ra
4
)
te		 (
)
D		 Ra
io
t
co
mp
(
A+
C
B+
inc
om
(
No		 f t
l
ta
o
o
ion
t
en
sa
)
+D
to
t
ne
(
%
)
e
8
)
te		 Co
ion
sat
mp
en
fro
m
inv
est
nts
me
T
it
le		 Na
me		 he
T
Co
mp
an
y		 A
l
l
ies
co
mp
an
in
he
t
F
ina
ia
l
nc		 he
T
Co
mp
an
y		 A
l
l
ies
co
mp
an
in
he
t
F
ina
ia
l
nc		 he
T
Co
mp
an
y		 A
l
l
ies
co
mp
an
in
he
t
F
ina
ia
l
nc		 he
Co
T		 mp
an
y		 A
l
l c
om
he
F
t
Re
(
No		 ies
in
p
an
ina
ia
l
nc
t
p
or
5
)
te		 T
he
Co
mp
an
y		 A
l
l
ies
co
mp
an
in
he
t
F
ina
ia
l
nc		 he
ha
ot
r t
n
bs
i
d
iar
ies
su
(
No
9
)
te
Re
t
p
or
(
No
5
)
te		 Re
t
p
or
(
No
5
)
te		 Re
t
p
or
(
No
5
)
te		 Ca
h
s
lue
va		 S
ha
re
lue
va		 Ca
h
s
lue
va		 S
ha
re
lue
va		 Re
t
p
or
(
No
5
)
te
i
de
Pr
t
es
n		 h
ing
hen
C
-S
Ho
ng
f Te
C
h
ie
hn
lo
y O
c
o
g
f
f
ice
r		 in-
Su
Y
Ho
ng
ice
i
de
V
Pr
t
es
n		 i
l
l
iam
i
W
L		 1
4,
0
4
6		 1
6,
1
2
1		 - - 1
0
7,
5		 8,
6
6
4		 9
5,
7
7		 - 9
5,
7
7		 - 4.
2
%
5		 0
%
5.
5		 -
Pr
i
de
f
he
t o
t
es
n
in
Bu
s
es
s
De
tm
t
p
ar
en		 h
ien
C
-Yu
an
Tse
ng
i
de
he
Pr
f
t o
t
es
n
in
Bu
s
es
s
De
tm
t
p
ar
en		 hu
Hu
-C
ng
an
Pe
ng

Remunerations to President and Vice President (range of remuneration with name disclosure)

* Regardless of job titles, positions that are equivalent to general manager, deputy general manager (such as president, chief executive director and director) shall be disclosed.

f r
io
i
d
i
de
d
ic
Ra
Pr
V
t
to
ts
e o
em
un
er
a
n
a
es
n
an
e		 f
i
de
N
Pr
am
e o
es
n		 d
ic
i
de
V
Pr
t a
ts
n
e
es
n
ng
p
i
de
Pr
ts
es
n		 he
(
)
T
Co
N
6
te
m
p
an
y
o		 l
l c
ie
in
he
in
ia
l
A
F
Re
t
t
om
p
an
s
an
c
p
or
(
)
N
7
E
te
o
lo
\$
Be
N
T
2,
0
0
0,
0
0
0
w		 hu
H
C
Pe
un
g-
an
ng		 hu
H
C
Pe
un
g-
an
ng
\$
(
in
lu
iv
)
\$
(
lu
iv
)
N
T
2,
0
0
0,
0
0
0
N
T
5,
0
0
0,
0
0
0
to
c
s
e
ex
c
s
e		 i
l
l
iam
i,
h
ien
W
L
C
-Y
Ts
ua
n
en
g		 i
l
l
iam
i,
h
ien
W
L
C
-Y
Ts
ua
n
en
g
\$
\$
0
0
0,
0
0
0
(
in
lu
iv
)
1
0,
0
0
0,
0
0
0
(
lu
iv
)
N
T
5,
N
T
to
c
s
e
ex
c
s
e		 C
h
in
S
he
in
-S
H
Y
H
g-
n
on
g,
u
on
g
\$
\$
1
0,
0
0
0,
0
0
0
(
in
lu
iv
)
1
0
0
0,
0
0
0
N
T
N
T
5,
to
c
s
e		 C
h
in
S
he
in
-S
H
Y
H
g-
n
on
g,
u
on
g
(
lu
iv
)
ex
c
s
e
\$
(
in
lu
iv
)
\$
N
T
1
5,
0
0
0,
0
0
0
N
T
3
0,
0
0
0,
0
0
0
to
c
s
e
(
lu
iv
)
ex
c
s
e
\$
\$
(
in
lu
iv
)
N
T
3
0,
0
0
0,
0
0
0
N
T
5
0,
0
0
0,
0
0
0
to
c
s
e
(
lu
iv
)
ex
e
c
s
\$
\$
0,
0
0
0,
0
0
0
(
in
lu
iv
)
1
0
0,
0
0
0,
0
0
0
N
T
5
N
T
to
c
s
e
(
lu
iv
)
ex
c
s
e
\$
Gr
ha
1
0
0,
0
0
0,
0
0
0
N
T
te
t
ea
r
n
l
To
ta		 5 p
er
so
ns		 5 p
er
so
ns

Range of remuneration table

Note 1: The names of President and Vice Presidents shall be listed separately and the amounts paid shall be disclosed in a summary. If a Director concurrently serves as the President or Vice President, his/her name and the amount of remuneration paid to him/her should be listed in Table (1-1) or (1-2) above.

Note 2: Salary, additional pay, and severance pay received by the President or Vice President in the past year.

Note 3: Bonus, reward, transportation allowance, special allowance, stipends, dormitory, car and other payments received by the President or Vice President in the past year. If housing, vehicle and other modes of transportation or personal expenses are provided, the nature and cost of the assets provided, the rental fees and fuel cost calculated based on the actual amount or fair market value, and other payments should be disclosed. If a driver is provided, please indicate the amount of compensation paid to the driver by the company, excluding remuneration, in a separate note. Furthermore, any compensation recognized in the IFRS 2 Share-Based Payment section, including issuance of employee stock options, new restricted employee shares and capital increase by stock subscription, should be included in the calculation of remuneration.

Note 4: Fill the amount of employee rewards (including shares and cash) that have been approved by the Board of Directors and are distributed to the general manager and vice president in the most recent fiscal year. If the amount of rewards cannot be estimated, the amount of rewards in the current fiscal year shall be calculated based on the ratio of the amount of rewards distributed in the previous fiscal year, and this amount shall also be filled in Table 1-3. The after-tax net profit refers to the after-tax net profit in the most recent fiscal year; for companies that have adopted IFRSs, the after-tax net profit refers to the after-tax net profit in the parent company only or individual financial report in the most recent year.

Note 5: The total pay to the President or Vice President from all companies in the consolidated statements (including the Company).

Note 6: The names and remuneration of President and Vice Presidents paid by the Company shall be disclosed in their respective remuneration range.

Note 7: The names of the President and Vice Presidents paid by all companies in the consolidated statements (including the Company) shall be disclosed in their respective remuneration range.

Note 8: The after-tax net profit refers to the after-tax net profit in the most recent fiscal year; For companies that have adopted IFRSs, the after-tax net profit refers to the after-tax net profit in the parent company only or individual financial report in the most recent year.

Note 9: a. This field shows the amount of remuneration the President or Vice President of the Company receives from investees other than subsidiaries of the Company.

  • b. If the President or Vice President of the Company received remuneration from investees other than subsidiaries of the Company, the remuneration received by the President or Vice President of the Company from investees other than subsidiaries of the Company shall be included in E column of the Remuneration Range Table and the name of the field shall be changed to "All Investee Companies".
  • c. Remuneration refers to pay, compensation (including compensation distributed to employees, directors and supervisors) and remuneration for conducting business received by the Company's President and Vice Presidents who serve as directors, supervisors or managerial officers at subsidiaries other than investee companies.

* The content of the remuneration disclosed in this Table is different in concept from the income in the Income Tax Act, therefore the purpose of the table is to disclose information

and not for taxation.

(III) Managerial officer's name and the distribution of employee bonus

Title
(Note 1)		 Name
(Note 1)		 Share value Cash value Total Percentage of total
bonuses
to
net
profit after tax(%)
President Ching-Shen
Hong
Chief Technology
Officer		 Yin-Su
Hong
Vice President
and Director of the
Finance
Department		 William Li
President of the
Business		 Hung-Chuan
Peng
M
an
ag		 President of the
Business		 Chien-Yuan
Tseng
er
ia
l O
ffi		 Vice President of
the Business
Department		 Chen-Hsueh
Li		 - 6,791 6,791 1.12 %
ce
r		 Vice President of
the Business
Department		 Tsui-Wen
Hsiao
Vice President of
the Business
Department		 Shao-Ming
Juan
Vice President of
the Business
Department		 Chin-Tzu
Wu
Vice President of
the Business
Department		 Cheng-Hsin
Su

April 21, 2019 Unit: NT\$1,000

Note 1: Names and positions should be listed individually, and the amount of profit distributed should be disclosed collectively.

  • Note 2: Fill the amount of employee rewards (including shares and cash) that have been approved by the Board of Directors and are distributed to the managerial officers in the most recent fiscal year. If this amount of rewards cannot be estimated, the amount of rewards in the current fiscal year shall be calculated based on the ratio of the amount of rewards distributed in the previous fiscal year. The after-tax net profit refers to the after-tax net profit in the most recent fiscal year; For companies that have adopted IFRSs, the after-tax net profit refers to the after-tax net profit in the parent company only or individual financial report in the most recent year.
  • Note 3: The scope of application for the term "managerial officer" shall be pursuant to the FSC's Tai-Cai-Zheng-3 No. 0920001301 Order dated March 27, 2003. Its scope of application shall be as follows:
  • (1) The President and those with equivalent powers
  • (2) Vice Presidents and those with equivalent powers
  • (3) Assistant Vice Presidents and those with equivalent powers

(4) Head of the Finance Department

  • (5) Head of the Accounting Department
  • (6) Other individuals with the authority of managing company affairs and signatory rights
  • Note 4: Directors, Presidents, and Vice Presidents who receive employee rewards (including shares and cash) should be listed not only in Table 1-2, but also in this table.

(IV) Comparison of compensation paid by the Company and all the consolidated entities in the last two years to the company's Directors, Supervisors, President and Vice Presidents as a percentage to the net income after tax. Explanation on remuneration policies, standards and combination of the procedures in determining remuneration, and association with business performance and future risks:

The analysis of remunerations to the Company's Directors, Supervisors, President and Vice Presidents as a percentage of net profit after tax in the most recent year is provided in the table below:

Total remuneration paid to
Directors, Supervisors, the
President, and Vice Presidents
(NT\$1,000)		 Total remuneration as a
percentage of profit after tax
(%)
Year The
Company		 All companies
in the
Consolidated
Financial
Report		 The Company All companies
in the
Consolidated
Financial
Report
2017 43,056 50,789 6.55% 7.73%
2018 48,018 51,527 7.94% 8.52%

The Company's regular remuneration for Directors, the President, and Vice Presidents are based on prevailing rates in the industry and do not incur future risks. The distribution of earnings and the sequence of distribution are specified in the Articles of Incorporation and the approval of the shareholders' meeting shall be required before distribution. The remuneration is tied to the business performance and the Company's long-term development factors have been considered for the payment of remuneration and included in the review of the Remuneration Committee. Therefore, they do not incur future risks.

IV. Implementation of corporate governance

(I) Board of Directors operating status

Board of Directors operating status

A total of 7 (A) meetings of the Board of Directors were held in the most recent year (2018).

The attendance of Directors was as follows:

Attendance At
ten
pr		 Attendance (voting
Title Name (voting and da
ox
nc		 and non-voting) in Remarks
(Note 1) non-voting) y
e b		 person rate(%)
in person B y 【B/A】(Note 2)
Chairman Yo Yuan Investment
Corporation
Representative:
Yin-Su Hong		 7 0 100% None
Director Yo Yuan Investment
Corporation
Representative:
Fu-Ing Hong Chen		 7 0 100% None
Director Yo Yuan Investment
Corporation
Representative:
Ching-Shen Hong		 7 0 100% None
Director Yo Yuan Investment
Corporation
Representative:
Li-Ju Chen		 3 0 100% Appointed on May 30,
2018
Director Nice Enterprise Co.,
Ltd.
Representative:
Ching-Liang Chen		 7 0 100% None
Director Tseng-Cheng Lin 7 0 100% None
Director Hsuan-Wei Huang 4 0 100% Dismissed on May
30, 2018
Independent
Director		 Chun-Hao Xin 7 0 100% None
Independent
Director		 Mei-Hsiang Pai 7 0 100% None
Independent
Director		 Chih-Ming Chen 7 0 100% None

Other matters required to be recorded:

I. Should any of the following take place in a board meeting, the date and number of the meeting, the content of proposal, Independent Director's opinions and the Company's response to such opinions should be recorded:

(I) Items specified in Article 14-3 of the Securities and Exchange Act: None.

(II) Aside from the above matters, other resolutions adopted by the Board of Directors to which an Independent Director has a dissenting or qualified opinion that is on record or stated in a written statement: None.

II. The Directors' avoidance of interest motion should indicate the names of the Directors, content of the

motion and reasons of avoidance of interest as well as the involvement in voting: 16th meeting of the 14th Board of Directors on February 7, 2018

Agenda item #2

Agenda: Acknowledgment of the Company's budget for donations in 2018. Description:

  • I. The Company plans to make the following donations to charity organizations in 2018: (I) Donation of NT\$1 million to Shehng-Yuan Children Development and Adult Support
  • Services Center (II) Sponsorship of charity events organized by the Sunonwealth Charity Foundation. The Company shall donate rice within a budget of NT\$1 million in the entire year. II. The proposal is hereby filed for resolution.

Resolution: With the exception of the Chairman Yin-Su Hong who recused himself due to conflicts of interest, other Directors in attendance passed the proposal unanimously.

16th meeting of the 14th Board of Directors on February 7, 2018 Agenda item #4

Agenda: Discussion of the Company's 2017 year-end bonus for managerial officers. (Proposed by the Remuneration Committee)

Description:

  • I. The Company's 2017 year-end bonus for managerial officers was reviewed by all members of the Remuneration Committee who found the proposal to be appropriate and passed it unanimously (refer to Attachment 5 for details).
  • II. The proposal is hereby filed for resolution.

Resolution: With the exception of the Chairman Yin-Su Hong, Director Fu-Ing Hong Chen, and Director Ching-Shen Hong who recused themselves due to conflicts of interest, other Directors in attendance passed the proposal unanimously.

17th meeting of the 14th Board of Directors on March 12, 2018

Agenda item #8

Agenda: Discussion of the Company's 2017 employee remuneration for managerial officers. (Proposed by the Remuneration Committee)

Description:

  • I. The Company's 2017 employee remuneration for managerial officers (refer to Attachment 7).
  • II. The proposal was reviewed by all members of the Remuneration Committee who found it to be appropriate and passed it unanimously.
  • III. The proposal is hereby filed for resolution.
  • Resolution: With the exception of the Chairman Yin-Su Hong, Director Fu-Ing Hong Chen, and Director Ching-Shen Hong who recused themselves due to conflicts of interest, other Directors in attendance passed the proposal unanimously.

4th meeting of the 15th Board of Directors on January 22, 2019 Agenda item #2

Agenda: Discussion of the Company's 2018 year-end bonus for managerial officers. (Proposed by the Remuneration Committee)

Description:

  • I. The Company's 2018 year-end bonus for managerial officers was reviewed by members of the Remuneration Committee who found the proposal to be appropriate and passed it unanimously (refer to Attachment 4 for details).
  • II. The proposal is hereby filed for resolution.
  • Resolution: With the exception of the Director Ching-Shen Hong and Director Li-Ju Chen who recused themselves due to conflicts of interest, other Directors in attendance passed the proposal unanimously.

5th meeting of the 15th Board of Directors on March 14, 2019 Agenda item #11 Agenda: Discussion of the Company's budget for donations in 2019.

Description:

  • I. The Company plans to make the following donations to charity organizations in 2019:
  • (I) Donation of NT\$1 million to Shehng-Yuan Children Development and Adult Support Services Center

  • (II) Sponsorship of charity events organized by the Sunonwealth Charity Foundation. The Company shall donate rice within a budget of NT\$1 million in the entire year.

  • II. The donation budget has been reviewed by the Audit Committee.

  • III. The proposal is hereby filed for resolution.
  • Resolution: With the exception of the Chairman Yin-Su Hong, Director Fu-Ing Hong Chen, Director Ching-Shen Hong, and Director Li-Ju Chen who recused themselves due to conflicts of interest, other Directors in attendance passed the proposal unanimously.

5th meeting of the 15th Board of Directors on March 14, 2019 Agenda item #13 Agenda: Discussion of the Company's 2018 employee remuneration for managerial officers. (Proposed by the Remuneration Committee) Description:

  • I. Please refer to Attachment 7 for the Company's 2018 employee remuneration for managerial officers.
  • II. The proposal was reviewed by all members of the Remuneration Committee who found it to be appropriate and passed it unanimously.
  • III. The proposal is hereby filed for resolution.
  • Resolution: With the exception of the Chairman Yin-Su Hong, Director Fu-Ing Hong Chen, Director Ching-Shen Hong, and Director Li-Ju Chen who recused themselves due to conflicts of interest, other Directors in attendance passed the proposal unanimously.
  • III. Programs this year and in the most recent year in strengthening the functionality of the Board (for example, set up an auditing committee, improve transparency, etc.) and execution evaluation. The Company converted the supervisor system to the Audit Committee system on June 9, 2015. The audit and finance managers report the operations of audits and financial status to the Audit Committee each quarter. They maintain smooth communication and operations.

Note 1: For Directors and Supervisors who are institutions, the name of institutional shareholders and their representatives shall be disclosed.

  • Note 2:(1) Where a Director resigns before the end of the fiscal year, the "remark" column should be filled with the Director's resignation date, whereas his/her percentage of attendance in person (%) should be calculated based on the number of Board of Directors' meetings held and the actual attendance in person during the period during his/her term of office.
  • (2) If Directors or Supervisors are re-elected before the end of the fiscal year, incoming and outgoing Directors or Supervisors shall be listed accordingly, and the Remark column shall indicate whether the status of a Director is "outgoing", "incoming" or "re-elected", and the date of re-election. The Director's percentage of attendance in person (%) should be calculated based on the number of Board of Directors' Meetings held and the actual attendance in person during his/her term of office.

(II) Audit Committee operating status

Audit Committee operating status

The Audit Committee convened a total of 5 meetings (A) in the most recent year (2018). The attendance of Independent Directors was as follows:

Title Name Attendance in
person
(B)		 Attendance by
proxy		 Attendance in
person rate (%)
(B/A) (Note)		 Remarks
Independent
Director		 Chun-Hao Xin 5 0 100% None
Independent
Director		 Mei-Hsiang Pai 5 0 100% None
Independent
Director		 Chih-Ming Chen 5 0 100% None

Other matters required to be recorded:

  • I. The date of the Board meeting, the term, contents of the proposals, resolutions of the Audit Committee, and the Company's handling of the resolutions of the Audit Committee shall be recorded under the following circumstances in the operations of the Audit Committee meeting.
  • (I) Items specified in Article 14-5 of the Securities and Exchange Act: None.
  • (II) In addition to matters above, other resolutions that have not been approved by the Audit Committee but have been passed by a vote of two-thirds or more of the entire Board of Directors: None.
  • II. The Independent Directors' avoidance of interest motion should indicate the names of the Independent Directors, content of the motion and reasons of avoidance of interest as well as the involvement in voting: None.
  • III. Independent Directors' communication with internal auditors and CPAs (including communication over the Company's financial and business status and the methods and results, etc.)

Communication between Independent Directors and internal auditors:

    1. The Audit Plan for the following year shall be approved by the Audit Committee at the end of each fiscal year and filed to the Board of Directors for resolution.
    1. The audit progress shall be reported to Audit Committee each quarter.
    1. After the conclusion of an audit, the internal audit report shall be submitted to the Audit Committee (Independent Directors) for review before the end of the following month.
    1. The Audit Office and internal units shall track and reevaluate items that require improvements as proposed in the audit opinions, discovered discrepancies, and Statement on Internal Control and submit a written report on the improvement status to the Audit Committee.
    1. The evaluation of the effectiveness of the Company's internal control system and the Internal Control System Statement are submitted to the Audit Committee for review. Communication between Independent Directors and CPAs: The CPAs are invited to

attend Independent Directors' review of the Annual Report in meetings of the Audit Committee to communicate and exchange opinions on the contents of the Financial Report.

Note:

  • * Where an Independent Director resigns before the end of the fiscal year, the "remark" column should be filled with the Independent Director's resignation date, whereas his/her percentage of attendance in person (%) should be calculated based on the number of meetings held by the Audit Committee and the actual number of meetings attended during his/her term of office.
  • * If Independent Directors are re-elected before the end of the fiscal year, incoming and outgoing Independent Directors should be listed accordingly, and the "remark" column should indicate whether the status of an independent director is "outgoing", "incoming" or "re-elected", and the date of re-election. The actual attendance rate (%) is calculated based on the number of meetings held by the Audit Committee and the actual number of meetings attended during his/her term of office.

(III) Corporate governance implementation status and deviation from Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies and reasons

lem
io
(
)
Im
N
ta
t
ta
tu
te
p
en
n
s
s
o		 ia
io
fro
D
Co
t
te
ev
ns
m
rp
or
a
A
d
ss
es
se
ar
ea
s		 Ye
s		 N
o		 Su
m
m
ar
y		 G
Be
Pr
ic
t
t
ov
er
na
nc
e
s
ac
e
in
ip
le
fo
S
/
Pr
T
W
E
T
P
Ex
c
s
r
is
d
ie
d
L
Co
te
m
p
an
s a
n
re
as
on
s
I. he
d
d
isc
lo
d
H
Co
t
t a
as
m
p
an
y
se
n
se
in
ip
le
fo
ic
in
t
te
p
r
c
s
r p
ra
c
g
co
rp
or
a
d
in
he
Co
to
t
te
g
ov
er
na
nc
e a
cc
or
g
rp
or
a
ic
in
ip
le
G
Be
Pr
Pr
fo
t
t
ov
er
na
nc
e
s
ac
e
c
s
r
S
/
is
d
Co
ie
?
T
W
E
T
P
Ex
L
te
m
p
an
s		 he
ha
b
l
is
he
d
he
T
Co
"C
ta
t
te
m
p
an
s e
s
or
p
or
a
y
ic
in
ip
le
d
d
isc
lo
d
G
Be
Pr
Pr
" a
t
t
ov
er
na
nc
e
s
ac
e
c
s
n
se
he
he
ke
bs
io
d
M
O
Po
Sy
t
t
t
t
t
te
m
o
n
ar
er
va
n
s
s
m
a
n
bs
i
Co
's
te
m
p
an
e
y
w		 de
ia
io
N
t
o
v
n.
I
I.		 he
ha
ho
l
d
in
d
T
Co
's
tru
tu
m
p
an
s
re
g
s
c
re
an
y		 de
ia
io
N
t
o
n.
v
(
)
I		 ha
ho
l
de
' r
ig
h
d
in
ts
te
ts
s
re
rs
an
re
s
he
in
l o
io
H
Co
t
t
te
t
as
m
p
an
se
rn
a
p
er
a
ns
y
du
fo
de
l
in
i
h
ha
ho
l
de
t
p
ro
ce
re
s
r
a
g
w
s
re
r
ls,
do
b
d
isp
d
l
i
ig
io
ts
te
t
t
p
ro
p
os
a
s,
an
a
n
u
u
,
l
l a
im
lem
d
ho
du
te
t
as
w
e
s
p
en
se
p
ro
ce
re
s
hr
h
he
du
?
t
t
ou
g
p
ro
p
er
p
ro
ce
re
s		 (
)
he
ha
b
l
is
he
d
ke
I
T
Co
ta
m
p
an
y
s e
s
a
sp
o
sp
er
so
n
d
in
ke
f
fe
iv
ly
t
te
to
t
an
ac
g
sp
o
sp
er
so
n
sy
s
m
e
c
e
ha
ho
l
de
io
d
isp
t
te
p
ro
ce
ss
s
re
r s
ug
g
es
ns
o
r
s.
u
(
I
I
)		 j
D
he
Co
ha
l
is
f m
t
t o
oe
ve
s
m
p
an
y
a
a
or
ha
ho
l
de
f c
ie
h
ic
h
he
t
s
re
rs
o
om
p
an
s o
ve
r w
ha
l c
l a
d
he
l
is
f
Co
tu
tro
t
t o
m
p
an
s a
c
a
on
n
y
l
im
f
ho
j
t
te
t
u
a
o
w
ne
rs
o
se
m
a
or
ha
ho
l
de
?
s
re
rs		 (
)
he
he
ha
ho
l
de
is
I
I
T
Co
t
te
m
p
an
us
es
s
re
r r
eg
r
y
i
de
d
by
he
k
fe
he
t
to
tra
t
p
ro
s
c
ns
r a
g
en
cy
a
s
v
f
in
fo
io
he
lso
T
Co
t
so
ur
ce
o
rm
a
n.
m
p
an
a
y
io
ke
in
fo
io
d
t
te
t
to
t
t
p
ay
s a
n
n
m
ar
rm
a
n
an
ha
in
he
ha
ho
l
d
in
f
in
i
de
t
ta
tu
c
ng
es
s
re
g
s
s o
s
rs
d
la
ly
d
isc
lo
in
fo
io
j
t
an
re
g
r
se
s
rm
a
n
on
m
a
or
u
ha
ho
l
de
d
he
l
im
l
ler
f
t
t
te
tro
s
re
rs
a
n
a
c
on
s o
u
j
ha
ho
l
de
m
a
or
s
re
rs
(
)
I
I
I		 he
Co
b
l
is
he
d
d
H
t
ta
as
m
p
an
y
es
an
im
lem
d
is
k
l
/m
d
te
tro
t a
p
en
r
co
n
an
ag
em
en
n
f
ire
l
l m
ha
ism
be
i
d
tw
t a
w
a
ec
n
s
ee
n
n		 (
)
he
in
l c
ls
in
lu
de
I
I
I
T
Co
's
te
tro
m
p
an
rn
a
on
c
y
lev
l r
is
k
d
te
t a
co
rp
or
a
e
m
an
ag
em
en
n
-
io
l-
lev
l
bu
in
iv
i
ie
W
t
t
t
op
er
a
na
e
s
es
s a
c
s.
e
b
l
is
he
d
he
la
io
fo
he
"R
ta
t
t
t
es
eg
ns
r
u
is
io
d
f
bs
i
d
iar
ie
Su
M
Su
t o
p
er
n
an
an
ag
em
en
s
v		 "
Im
lem
io
(
N
)
ta
t
ta
tu
te
p
en
n
s
s
o		 D
ia
io
fro
Co
t
te
ev
ns
m
rp
or
a
d
A
ss
es
se
ar
ea
s		 Ye
s		 N
o		 Su
m
m
ar
y		 G
ic
Be
Pr
t
t
ov
er
na
nc
e
s
ac
e
in
ip
le
fo
/
Pr
T
W
S
E
T
P
Ex
c
s
r
is
d
Co
ie
d
L
te
m
p
an
s a
n
re
as
on
s
(
)
I
V		 f
f
i
l
ia
d
ie
?
te
a
co
m
p
an
s
he
Co
ha
in
l
D
t
te
oe
s
m
p
an
y
ve
rn
a
la
io
in
la
i
in
l
t
to
t
ts
te
re
g
ns
p
ce
p
re
ve
n
rn
a
u
f
f
fro
d
in
i
ie
ba
d
ta
tra
t
s
m
g
se
cu
r
s
se
on
in
fo
io
be
b
l
ic
he
t
t
to
t
rm
a
n
e
p
on
y
u
ke
?
t
m
ar		 (
)
I
V		 im
lem
is
k
ha
ism
to
t r
t m
p
en
m
an
ag
em
en
ec
n
s
fo
bs
i
d
iar
ie
d
d
i
io
he
In
t
t
r s
co
m
p
an
s.
a
n,
u
y
d
f
ire
b
l
is
he
d
Co
's
Bo
D
to
ta
m
p
an
ar
o
c
rs
e
s
y
la
io
fo
ha
d
le
t
re
g
ns
r p
ur
c
se
s a
n
sa
s,
u
is
i
io
d
isp
l o
f a
t
ts
ac
q
n
or
os
a
ss
e
u
,
do
d
d
lo
i
h
ts
te
t
en
rs
em
en
an
g
ua
ra
n
es
an
an
s w
,
f
f
i
l
ia
d
ise
te
te
a
en
rp
r
s.
he
b
l
is
he
d
he
h
ic
l
T
Co
E
ta
t
t
m
p
an
es
a
y
in
du
Co
M
Op
Pr
te
t
t
rp
or
a
an
ag
em
en
er
a
g
oc
e
re
s
d
de
f
du
ire
lo
Co
Co
t
to
to
an
o
n
c
re
q
em
p
ee
s
u
y
i
d
f
l
ic
f
in
ha
in
lv
he
ir
ts
te
t
t
t
t
av
o
co
n
o
re
s
vo
e
du
ie
d
he
fro
k
in
t
t
t
ta
s a
n
p
re
ve
n
m
m
g
dv
f u
d
isc
lo
d
in
fo
io
ta
t
a
an
g
e o
n
se
rm
a
n
or
d
isc
lo
in
in
fo
io
he
in
t
to
t
to
s
g
rm
a
n
o
rs
en
g
ag
e
in
i
de
d
in
tra
s
r
g.
Im
lem
io
ta
t
ta
tu
p
en
n
s
s		 D
ia
io
fro
Co
t
te
ev
ns
m
rp
or
a
(
)
N
te
o		 G
ic
Be
Pr
t
t
ov
er
na
nc
e
s
ac
e
d
A
ss
es
se
ar
ea
s:		 Ye
s		 N
o		 Su
m
m
ar
y		 in
ip
le
fo
/
Pr
T
W
S
E
T
P
Ex
c
s
r
is
d
Co
ie
d
L
te
m
p
an
s a
n
re
as
on
s
I
I
I.		 Co
i
io
d
i
b
i
l
i
ie
f
he
t
t
t
m
p
os
n
an
re
sp
on
s
s o
d
f
ire
Bo
D
to
ar
o
c
rs		 N
ia
l
d
isc
te
o
m
a
r
re
p
an
cy
(
)
I		 he
d
ire
de
ise
d
d
H
Bo
f
D
t
to
as
ar
o
c
rs
an
v
im
lem
d
lan
fo
d
iv
te
p
en
a p
r a
m
or
e
er
se
i
io
f
he
d
Bo
?
t
t
co
m
p
os
n
o
ar		 (
)
I		 he
ha
b
l
is
he
d
d
iv
i
T
Co
ta
ty
m
p
an
s e
s
a
er
s
y
l
ic
he
i
io
be
he
fo
f m
f
t
t
t
p
o
r
c
om
p
os
n
o
em
rs
o
y
d
ire
in
he
Bo
f
D
"C
to
t
te
ar
o
c
rs
or
p
or
a
G
Be
Pr
ic
Pr
in
ip
le
".
T
he
t
t
ov
er
na
nc
e
s
ac
e
c
s
Co
le
in
d
iv
i
du
ls
i
h
he
ts
t
t
m
p
an
se
c
a
y
w
kn
le
dg
k
i
l
ls,
d
l
i
ie
fo
t
e,
ec
es
ow
s
an
q
ua
s n
sa
ry
r
he
fo
f
du
ie
in
da
i
h
t
t
t
er
ce
e w
p
rm
an
o
s
a
cc
or
nc
he
ir
fe
io
l
ba
kg
d
d
k
t
p
ro
ss
na
c
ro
un
an
w
or
ien
ex
p
er
ce
T
he
Co
ha
hr
fe
le
D
ire
t
to
m
p
an
y
s
ee
m
a
c
rs
in
lu
d
in
In
de
de
D
ire
Fe
le
t
to
c
g
p
en
n
c
r.
m
a
D
ire
fo
3
3
%
f a
l
l
D
ire
to
t
to
c
rs
a
cc
ou
n
r
o
c
rs
(
)
I
I		 d
d
i
io
b
l
is
h
in
io
In
Re
t
to
ta
t
a
n
e
s
g
a
m
un
er
a
n
Co
i
d
A
d
i
Co
i
t
te
t
t
te
m
m
e a
n
an
u
m
m
e,
h
ic
h
ire
d
by
la
is
he
t
w
ar
e r
eq
u
w
c
om
p
an
y
,
i
l
l
in
lso
lu
i
ly
b
l
is
h
he
to
ta
ta
t
w
g
a
v
o
n
r
e
s
o
r
f
fu
io
l c
i
?
ty
t
t
te
p
es
o
nc
na
om
m
es		 (
I
I
)		 In
d
d
i
io
b
l
is
h
in
hr
In
de
de
t
to
ta
t
t
a
n
e
s
g
ee
p
en
n
D
ire
d
he
Re
io
Co
i
to
t
t
t
te
c
rs
an
m
un
er
a
n
m
m
e,
he
Co
lso
b
l
is
he
d
he
t
ta
t
m
p
an
y
a
e
s
O
io
l
Sa
fe
d
H
l
h
Co
i
t
ty
t
t
te
cc
up
a
na
an
ea
m
m
e
d
he
Em
lo
W
l
fa
Co
i
T
he
t
t
te
an
p
y
ee
e
re
m
m
e.
Co
ha
l
l e
b
l
is
h
he
fu
io
l
ta
t
t
m
p
an
y
s
s
o
r
nc
na
i
in
he
fu
ba
d
t
te
t
tu
co
m
m
es
re
se
on
ire
ts
re
q
u
m
en
(
)
I
I
I		 he
b
l
is
he
d
d
H
t
ta
as
c
om
p
an
y
es
an
im
lem
d
ho
ds
in
he
fo
te
t
t
p
en
m
e
r a
ss
es
s
g
fo
f
he
d
f
ire
d
Bo
D
t
to
p
er
rm
an
ce
o
ar
o
c
rs
a
n
du
d
fo
lu
io
te
t
co
n
c
p
er
rm
an
ce
e
va
a
n
l
ly
?
an
nu
a		 (
I
I
I
)		 T
he
Co
ha
b
l
is
he
d
t y
t e
ta
m
p
an
y
s n
o
e
s
la
io
fo
bo
d
fo
lu
io
t
t
re
g
u
ns
r
ar
p
er
rm
an
ce
ev
a
a
n.
T
he
io
f
he
Bo
d
f
D
ire
t
t
to
o
p
er
a
ns
o
ar
o
c
rs
a
re
in
ic
l
ian
he
Re
la
io
d
tr
t c
to
t
t
s
om
p
ce
g
u
n
an
Pr
du
fo
Bo
d
f
D
ire
M
in
to
t
oc
e
re
r
ar
o
c
rs
ee
g
s
Im
lem
io
ta
t
ta
tu
p
en
n
s
s
(
)
N
te
o		 D
ia
io
fro
Co
t
te
ev
ns
m
rp
or
a
G
ic
Be
Pr
t
t
ov
er
na
nc
e
s
ac
e
d
A
ss
es
se
ar
ea
s:		 Ye
s		 N
o		 Su
m
m
ar
y		 in
ip
le
fo
/
Pr
T
W
S
E
T
P
Ex
c
s
r
is
d
Co
ie
d
L
te
m
p
an
s a
n
re
as
on
s
(
)
I
V		 he
io
d
ic
l
ly
lu
D
t
te
oe
s
c
om
p
an
y
p
er
a
e
va
a
he
lev
l o
f
in
de
de
f
he
C
P
A
?
t
t
e
p
en
nc
e o		 d
lev
law
d
la
io
in
de
t
t
to
an
re
an
s a
n
re
g
u
ns
o
r
r
ise
d
de
d
he
Co
's
ta
t
su
p
er
v
an
un
rs
n
m
p
an
y
io
d
is
in
ia
l
t
t
te
t
op
er
a
ns
an
m
an
ag
e e
x
g
or
p
o
n
is
ks
he
d
lso
in
in
d
T
Bo
ta
r
ar
a
m
a
s g
oo
in
io
i
h
he
fu
l
f
i
l
l
he
te
t
t
t
t
to
t
ra
c
ns
w
m
an
ag
em
en
fu
io
f
he
d
f
ire
Bo
D
t
t
to
nc
ns
o
ar
o
c
rs
he
Co
ha
b
l
is
he
d
he
S
da
d
T
ta
t
ta
m
p
an
y
s e
s
n
r
Op
in
du
fo
i
le
d
by
Pr
Re
F
t
ts
er
a
g
oc
e
re
s
r
q
ue
s
ire
he
lp
ire
he
ir
D
D
to
to
to
t
t
c
rs
c
rs
c
ar
ry
o
u
du
ie
d
im
he
fo
f
he
t
t
t
s a
n
p
ro
ve
p
er
rm
an
ce
o
d
f
ire
Bo
D
to
ar
o
c
rs
(
)
he
Co
in
d
i
fy
in
C
A
ho
I
V
T
P
te
t
m
p
an
y
ap
p
o
ce
r
g
s w
ke
ho
l
de
f
he
Co
he
T
t s
ta
t
ar
e n
o
rs
o
m
p
an
y.
C
A
is
ire
d
h
im
/
he
l
f
i
f
P
to
re
q
u
re
cu
se
rs
e
h
is
/
he
ic
h
im
/
he
l
f
ha
d
ire
t o
r s
er
v
e o
r
rs
e
s a
c
r
ia
l
in
d
ire
la
io
h
ip
i
h
in
te
t r
t
t
te
t
m
a
r
c
e
ns
w
or
re
s
in
he
d.
he
la
f
T
t
t
te
t o
m
a
r c
on
ce
rn
e
re
p
ce
m
en
C
A
is
lso
in
l
ian
i
h
la
d
P
t
te
s
a
c
om
p
ce
w
re
la
io
t
re
g
u
ns
I
V		 he
l
is
d
he
D
Co
T
W
S
E
t
te
t
oe
s
m
p
an
on
or
y
ha
i
f
f
ha
ia
l
iz
(
T
P
Ex
t o
ta
t
t s
ve
a
un
r s
p
ec
es
or
is
in
lv
d
)
in
te
vo
e
c
or
p
or
a
g
ov
er
na
nc
e
(
in
lu
d
in
bu
l
im
i
d
i
d
in
t n
t
te
to
c
g
o
p
ro
v
g
in
fo
io
fo
d
ire
d
t
to
rm
a
n
ne
ce
ss
ar
y
r
c
rs
a
n
iso
he
ir
du
ie
fo
to
t
t
su
p
er
rs
p
er
rm
s,
v
iz
in
bo
d
in
d
l
t
or
g
an
g
ar
m
ee
g
s a
n
g
en
er
a
ha
ho
l
de
in
ha
d
l
in
bu
in
' m
t
s
re
rs
ee
g
s,
n
g
s
es
s		 he
ha
b
l
is
he
d
i
f
f
T
Co
t y
t e
ta
t o
ta
m
p
an
s n
o
e
s
a u
n
r s
y
ha
ia
l
iz
(
is
in
lv
d
)
in
t
t s
te
p
ec
es
or
vo
e
c
or
p
or
a
la
d
f
fa
irs
Re
te
te
g
ov
er
na
nc
e.
co
rp
or
a
g
ov
er
na
nc
e a
a
re
im
lem
d
j
in
ly
by
fu
io
l u
i
h
ic
h
te
t
t
ts
p
en
o
nc
na
n
w
ia
ly
iz
bo
d
in
d
l
te
t
ap
p
ro
p
r
o
rg
an
e
ar
m
ee
g
s a
n
g
en
er
a
ha
ho
l
de
in
ha
d
le
bu
in
is
io
' m
t
tra
t
s
re
rs
ee
g
s,
n
s
es
s r
eg
n
d
ha
f r
is
io
d
he
la
d
tra
t
t
te
an
an
y
c
ng
e o
eg
n,
an
o
r r
e
f
fa
irs
te
co
rp
or
a
g
ov
er
na
nc
e a		 ia
l
d
isc
N
te
o
m
a
r
re
p
an
cy
Im
lem
io
ta
t
ta
tu
p
en
n
s
s
(
)
N
te
o		 D
ia
io
fro
Co
t
te
ev
ns
m
rp
or
a
G
ic
Be
Pr
t
t
ov
er
na
nc
e
s
ac
e
d
A
ss
es
se
ar
ea
s:		 Ye
s		 N
o		 Su
m
m
ar
y		 in
ip
le
fo
/
Pr
T
W
S
E
T
P
Ex
c
s
r
is
d
Co
ie
d
L
te
m
p
an
s a
n
re
as
on
s
is
io
d
ha
f r
is
io
tra
t
tra
t
re
g
n
an
an
y
c
ng
e o
eg
n,
d
i
l
in
in
f
bo
d
in
te
t
an
co
m
p
g
m
u
s o
ar
m
ee
g
s
d
l s
ha
ho
l
de
in
)
' m
?
t
an
g
en
er
a
re
rs
ee
g
s
V he
b
l
is
he
d
ha
ls
fo
H
Co
t
ta
as
m
p
an
es
c
nn
e
r
y
ic
in
i
h
ke
ho
l
de
(
in
lu
d
in
t
t
ta
co
m
m
un
a
g
w
s
rs
c
g
bu
l
im
i
d
ha
ho
l
de
lo
t n
t
te
to
o
s
re
rs
em
p
ee
s,
y
,
d
l
ier
),
de
d
ic
d
to
t u
te
cu
s
m
er
s a
n
su
p
p
s
se
p
a
a
ke
ho
l
de
he
bs
i
ta
t
te
s
r a
re
a o
n
c
om
p
an
e
as
y
w
,
l
l a
ia
ly
de
d
im
te
to
ta
t
w
e
s a
p
p
ro
p
r
re
sp
on
p
or
n
d
ia
l r
i
b
i
l
i
iss
f
te
ty
co
rp
or
a
an
so
c
es
p
on
s
ue
s o
ke
ho
l
de
?
to
ta
co
nc
er
n
s
rs		 he
Co
ha
ig
d
d
i
f
fe
de
T
t
tm
ts
to
m
p
an
y
s a
ss
ne
re
n
p
ar
en
b
l
is
h
ic
io
ha
ls
i
h
d
i
f
fe
ta
t
t
t
es
co
m
m
un
a
n
c
nn
e
w
re
n
i
ie
(
in
lu
d
in
ke
ho
l
de
)
d
ha
t
t
ta
en
s
c
g
s
rs
an
w
e
ve
b
l
is
he
d
ke
ho
l
de
io
he
Co
's
ta
ta
t
t
es
a
s
rs
se
c
n
on
m
p
an
y
bs
i
(
h
/
/w
/
/s
ke
ho
l
de
hp
)
te
t
tp
tw
ta
w
e
:
w
w
.su
no
n.
co
m
r.p
ia
ly
d
im
d
to
te
to
ta
t c
te
ap
p
ro
p
r
re
sp
on
p
or
n
or
p
or
a
a
n
ia
l r
i
b
i
l
i
iss
f c
ty
to
so
c
es
p
on
s
ue
s o
on
ce
rn
ke
ho
l
de
ta
s
rs		 de
ia
io
N
t
o
n.
v
V
I.		 he
Co
h
ire
d
fe
io
l
H
t
as
m
p
an
y
a p
ro
ss
na
ha
d
le
ks
d
iss
la
d
to
ta
te
to
ag
en
cy
n
s
an
ue
s r
e
ho
l
d
in
he
ha
ho
l
de
's
in
?
t
t
g
s
re
r
m
ee
g		 he
Co
ha
in
d
he
fe
A
T
Tr
te
t
m
p
an
y
s a
p
p
o
an
s
r
g
en
cy
d
i
ie
ha
d
le
D
f
Gr
Fo
Se
tm
t o
tu
t
to
ep
ar
en
an
r
ne
cu
r
s
n
ks
d
iss
la
d
iz
in
ha
ho
l
de
's
ta
te
to
s
an
ue
s r
e
o
rg
an
g
s
re
r
in
t
m
ee
g
s.		 de
ia
io
N
t
o
v
n.
V
I
I.
(
)
I		 fo
io
d
isc
lo
In
t
rm
a
n
su
re
he
Co
b
l
is
he
d
H
t
ta
te
as
m
p
an
y
es
a c
or
p
or
a
bs
i
d
isc
lo
in
fo
io
d
in
te
to
t
e
se
rm
a
n
re
g
ar
g
w
he
Co
's
f
in
ia
l,
bu
in
d
t
m
p
an
y
an
c
s
es
s a
n
?
te
ta
tu
co
rp
or
a
g
ov
er
na
nc
e
s
s		 (
)
he
Co
ha
bs
i
I
T
t u
te
m
p
an
y
s s
e
p
a w
e
(
)
d
isc
lo
he
Co
's
to
t
w
w
w
.su
no
n.
co
m
se
m
p
an
y
f
in
bu
in
d
te
an
ce
s
es
s,
an
co
rp
or
a
g
ov
er
na
nc
e
,
in
fo
io
fo
io
is
la
ly
In
t
t
rm
a
n.
rm
a
n
re
g
u
r
in
in
d
d
da
d.
ta
te
m
a
e
an
up		 de
ia
io
N
t
o
n.
v
(
)
I
I		 he
Co
do
d
he
f
H
t
te
t
as
m
p
an
y
a
p
o
r m
ea
ns
o
in
fo
io
d
isc
lo
(
h
t
rm
a
n
su
re
su
c
as
b
l
is
h
in
bs
i
in
En
l
is
h,
ta
te
es
g
a w
e
g
in
in
i
f
ic
l
l
le
t
to
t
ap
p
o
g
sp
ec
p
er
so
nn
e
c
o
c
d
d
isc
lo
in
fo
io
t
an
se
c
om
p
an
y
rm
a
n,
im
lem
in
ke
d
t
te
p
en
g
a
sp
o
sp
er
so
n
sy
s
m
an
,
d
isc
lo
in
he
f
in
t
to
s
g
p
ro
ce
ss
o
ve
s
r		 (
)
he
Co
ha
ig
d
i
ke
I
I
T
t
to
ta
m
p
an
y
s a
ss
ne
a u
n
ha
f c
l
le
in
he
Co
's
t
t
c
rg
e o
o
c
g
m
p
an
y
in
fo
io
d
d
isc
lo
in
la
d
t
te
rm
a
n
an
s
g
re
in
fo
io
he
t
t
te
rm
a
n
on
c
or
p
or
a
g
ov
er
na
nc
e
io
f
he
"M
ke
O
bs
io
Po
t
t
t
t
t
se
c
n
o
ar
er
va
n
s
Sy
"
fo
io
in
in
ha
In
te
t
to
s
m
rm
a
n
on
ve
s
r s
em
ar
s
s

42

lem
io
Im
ta
t
ta
tu
p
en
n
s
s		 ia
io
fro
D
Co
t
te
ev
ns
m
rp
or
a
(
N
)
te
o		 G
Be
Pr
ic
t
t
er
e
e
ov
na
nc
s
ac
A
d
ss
es
se
ar
ea
s:		 in
ip
le
fo
S
/
Pr
T
W
E
T
P
Ex
c
s
r
Ye
s		 N
o		 Su
m
m
ar
y		 is
d
ie
d
L
Co
te
m
p
an
s a
n
re
as
on
s
fe
he
bs
i
)
Co
's
?
t
te
co
n
re
nc
es
o
n
m
p
an
y
w
e		 be
b
l
is
he
d
he
bs
i
Co
's
ta
t
te
en
e
s
on
m
p
an
e
y
w
he
ha
b
l
is
he
d
ke
T
Co
ta
m
p
an
s e
s
a
sp
o
sp
er
so
n
y
d
im
lem
d
he
in
te
te
t
te
sy
s
m
an
p
en
sy
s
m
da
i
h
lev
la
io
t
t r
t
ac
co
r
nc
e w
re
an
eg
ns
u
V
I
I
I.
D
he
Co
ha
he
in
fo
io
t
t
t
oe
s
m
p
an
y
ve
o
r
rm
a
n
ha
is
he
lp
fu
l
fo
de
d
in
i
f
t
t
ta
ts
ta
tu
r u
n
rs
n
g
s
s o		 (
I
)
Em
lo
ig
h
in
d
l
l-
be
in
ts
te
ts
p
y
ee
r
re
s
an
w
e
g
:
,		 N
de
ia
io
t
o
v
n.
(
in
lu
d
in
bu
te
t n
t
co
rp
or
a
g
ov
er
na
nc
e
c
g
o		 he
Co
ha
lw
lu
d
he
T
t
m
p
an
y
s a
ay
s v
a
e
l
im
i
d
lo
ig
h
d
in
te
to
ts
te
ts
em
p
y
ee
r
an
re
s
,		 io
f e
lo
ig
h
d
be
f
i
te
t
ts
ts
p
ro
c
n
o
m
p
ee
r
an
ne
y
lo
l
l-
be
in
in
la
io
to
t
em
p
ee
e
g,
ve
s
r r
e
ns
y
w
,		 d
in
in
ic
io
i
h
ta
t
t
an
w
e m
a
c
om
m
un
a
n
w
l
ier
la
io
ig
h
f
in
d
t
ts
te
te
su
p
p
re
ns
r
o
re
s
,
ie
fu
he
du
io
h
by
t
t
t
t
ar
s,
r
r e
ca
n
so		 lo
l
l a
h
la
in
t
t
em
p
ee
s a
s w
e
s s
m
oo
co
m
p
y
p
ug
ire
d
Su
iso
im
lem
io
D
to
ta
t
c
rs
an
p
er
v
rs
p
en
n
,		 ha
ls
W
d
lo
'
t a
te
t e
c
nn
e
e r
es
p
ec
n
p
ro
c
m
p
y
ee
s
f r
is
k
l
ic
ie
d
is
k
t p
o
m
an
ag
em
en
o
s a
n
r		 in
te
ts
re
s
lu
io
da
ds
im
lem
io
f
t
ta
ta
t
ev
a
a
n
s
n
r
p
en
n
o
,
l
ic
ie
he
k
in
f
l
ia
b
i
l
i
to
t
ta
t o
cu
s
m
er
o
ou		 he
b
l
is
he
d
he
lo
T
Co
Em
ta
t
m
p
an
es
p
ee
y
y
ty
p
s,
g
in
fo
D
ire
d
Su
iso
)
?
to
su
ra
nc
e
r
c
rs
a
n
p
er
v
rs		 l
fa
Co
i
d
he
Se
l
W
t
te
t
e
re
m
m
e a
n
xu
a
la
in
in
i
H
Co
Pr
Co
t
t
t
te
ar
as
sm
en
m
p
oc
es
s
g
m
m
e.
im
lem
io
d
i
de
W
t a
te
e
p
en
p
en
s
n
sy
s
m
an
p
ro
v
in
lo
l s
bs
i
d
ie
tra
g
ro
up
su
ra
nc
e,
em
p
y
ee
ve
u
s,
bo
fo
b
ir
h
da
h
i
l
d
b
ir
h,
ia
t
t
se
e,
nu
s
r
y
s,
c
m
ar
r
g
fu
l,
d
fo
d
bo
d
ne
ra
an
p
er
rm
an
ce
y
ea
r-e
n
nu
s,
an
,
iz
do
iv
i
ie
t
t
t
or
g
an
e o
or
a
c
s.
u
i
de
d
iv
du
io
d
in
in
fo
W
t
tra
e p
ro
v
er
se
e
ca
n
an
g
r
lo
d
ha
b
l
is
he
d
l
in
ta
em
p
y
ee
s a
n
w
e
ve
e
s
an
o
n
e
le
in
la
fo
in
l e
du
io
d
t
te
t
ar
n
g
p
rm
rn
a
ca
n
an
,
in
in
d
bs
i
d
ie
fo
l
in
in
tra
te
tra
g,
an
su
s
r e
x
rn
a
g
lo
dy
to
to
tu
p
ro
g
ra
m
s
en
co
ur
ag
e e
m
p
y
ee
s
s
o
n
he
j
b.
t
o
(
I
I
)		 Em
lo
la
io
To
lo
'
t
te
t e
p
y
ee
re
ns
:
p
ro
c
m
p
y
ee
s
he
l
h,
he
Co
le
l
i
f
ie
d
t
t
ts
a
m
p
an
y
se
c
a q
ua
ho
i
l e
h
i
de
lo
i
h
ta
to
t
sp
ac
ea
r
p
ro
em
p
ee
s w
y
v
y
he
l
h
in
io
d
iz
hy
ic
l
t
t
a
ex
am
a
ns
an
or
g
an
e p
s
a
d
l
he
l
h
in
he
T
Co
ta
t
an
m
en
a
se
m
ar
s.
m
p
an
y
iz
fa
i
ly
da
l
iev
k
ts
to
or
g
an
es
m
y
ev
en
re
e w
or
d
le
lo
'
fa
i
ly
be
t e
p
re
ss
ur
e a
n
m
p
y
ee
s
m
m
em
rs
le
bo
he
d
bu
i
l
d
Co
t
t
ar
n
m
or
e a
m
p
an
an
u
y
he
iv
co
s
en
es
s.
(
)
I
I
I		 la
io
he
i
de
fu
l
l
In
T
Co
to
t
ve
s
r r
e
ns
:
m
p
an
p
ro
s
y
v
in
fo
io
d
isc
lo
he
M
ke
t
t
t
rm
a
n
su
re
o
n
ar
bs
io
d
he
O
Po
Sy
"In
t
t
te
t
to
er
va
n
s
s
m
an
ve
s
r
ic
io
he
bs
i
Se
" s
Co
's
t
t
te
rv
es
ec
n
on
m
p
an
e
y
w
lso
i
de
in
fo
io
f
he
W
ta
t
t
t
e a
p
ro
v
c
on
c
rm
a
n
o
ke
d
in
Co
's
to
m
p
an
sp
o
sp
er
so
n
an
ve
s
r
y
i
l
bo
in
in
ha
io
la
io
to
ta
t
m
a
x
m
a
rm
on
us
re
ns
i
h
ha
ho
l
de
t
w
s
re
rs
(
I
V
)		 Su
l
ier
la
io
T
he
Co
ha
t
p
p
re
ns
:
m
p
an
y
s
b
l
is
he
d
he
"S
l
ier
M
ta
t
t
es
up
p
an
ag
em
en
la
io
d
b
l
is
he
d
l
in
Re
" a
t
ta
g
ns
n
es
an
o
n
e
u
l
ier
la
fo
bu
i
l
d
l
i
d
h
ip
t
to
tn
su
p
p
p
rm
so
p
ar
er
s
s
i
h
l
ier
ba
d
he
in
ip
le
f
t
t
w
su
p
p
s
se
on
p
r
c
s o
l
i
d
ip
i
ty
ty
eq
ua
a
n
re
c
ro
c
(
)
V		 S
ke
ho
l
de
in
he
Co
T
ta
te
ts
r
re
s
:
m
p
an
y
in
in
h
ic
io
ha
ls
ta
t
t
m
a
s s
m
oo
co
m
m
un
a
n
c
nn
e
i
h
lo
in
D
ire
t
to
to
w
em
p
y
ee
s,
ve
s
rs
c
rs
,
,
d
l
ier
d
d
to
t a
cu
s
m
er
s,
an
su
p
p
s a
n
re
sp
ec
n
he
ir
du
in
lso
b
l
is
he
d
W
te
t
t
te
ts
ta
p
ro
c
e
re
s
e a
e
s
ke
d
te
to
to
a
sp
o
sp
er
so
n
sy
s
m
re
sp
on
in
io
i
h
he
im
f p
in
' q
to
t
t
t
te
t
ve
s
rs
ue
s
ns
a
o
ro
c
g
w
he
in
f s
ke
ho
l
de
t
te
ts
ta
re
s
o
rs
(
)
V
I		 lem
io
f c
la
io
Im
ta
t
to
t
p
en
n
o
us
m
er
re
ns
l
ic
ie
T
he
Co
's
bu
in
s:
es
p
o
m
p
an
y
s
s
de
i
de
i
h
lu
io
tm
ts
to
t
t
p
ar
en
p
ro
v
cu
s
m
er
s w
so
ns
fo
du
d
he
iss
d
in
in
ts
t
ta
r p
ro
c
an
o
r
ue
s a
n
m
a
h
ic
io
ha
ls
i
h
t
t
t
sm
oo
co
m
m
un
a
n
c
nn
e
w
to
cu
s
m
er
s.
(
V
I
I
)		 Co
in
in
du
io
f
D
ire
d
t
t
to
n
u
g
e
ca
n
o
c
rs
an
Su
iso
he
Co
's
ire
d
T
D
to
p
er
v
rs
:
m
p
an
y
c
rs
an
de
de
ire
ire
d
d
In
D
t
to
to
t
te
p
en
n
c
rs
a
re
re
q
a
n
u
in
in
du
io
d
t
t
t
co
n
u
g
e
ca
n
co
ur
se
s a
n
m
ee
ire
fo
ts
te
re
q
m
en
r c
ou
rs
es
o
n
co
rp
or
a
u
T
he
Co
in
t
to
g
ov
er
na
nc
e.
m
p
an
y
co
n
ue
ia
in
in
in
te
t
tra
ar
ra
ng
e a
p
p
ro
p
r
c
on
uo
us
g
fo
ire
d
de
de
D
In
to
t
co
ur
se
s
r
c
rs
an
p
en
n
ire
(
le
fe
he
fo
l
lo
in
b
le
D
P
to
to
t
ta
c
rs
as
e r
e
r
w
g
fo
he
f c
in
in
du
io
)
t
ta
tu
t
t
r
s
s o
on
g
e
ca
n
u
(
V
I
I
I
)		 Im
lem
io
f r
is
k
l
ic
ie
ta
t
t p
p
en
n
o
m
an
ag
em
en
o
s
d
is
k
da
ds
he
Co
T
t s
ta
an
r
as
se
ss
m
en
n
r
:
m
p
an
y
ha
b
l
is
he
d
he
du
fo
"P
ta
t
s e
s
ro
ce
re
s
r
Im
lem
io
ta
t
ta
tu
p
en
n
s
s
N
te		 D
ia
io
fro
Co
t
te
ev
ns
m
rp
or
a
G
ic
Be
Pr
t
t
d
A
ss
es
se
ar
ea
s:		 Ye
s		 N
o		 (
)
o
Su
m
m
ar
y		 ov
er
na
nc
e
s
ac
e
in
ip
le
fo
/
Pr
T
W
S
E
T
P
Ex
c
s
r
is
d
Co
ie
d
L
te
m
p
an
s a
n
re
as
on
s
A
is
i
io
D
isp
l o
f
A
",
t
ts
cq
u
n
or
os
a
ss
e
"P
du
fo
k
in
do
d
M
En
ts
ro
ce
re
s
r
a
g
rs
em
en
an
d
du
fo
in
f
Gu
",
"P
Lo
te
ar
an
es
an
ro
ce
re
s
r
an
g
o
ds
O
he
" a
he
ba
is
fo
is
k
Fu
to
t
t
n
rs
s
s
r r
d
fo
he
t a
t
t
m
an
ag
em
en
n
as
se
ss
m
en
r
Co
's
in
i
d
d
i
in
i
t
ts
t
ts
m
p
an
y
op
er
a
g
un
an
au
g
un
in
he
ir
io
f r
la
d
bu
in
t
t
te
ex
ec
u
n
o
e
s
es
se
s.
(
)
f p
ha
f
l
ia
b
i
l
i
in
by
he
I
X
S
ta
tu
ty
t
s o
ur
c
se
o
su
ra
nc
e
Co
fo
ire
d
Su
iso
he
D
T
to
m
p
an
y
r
c
rs
a
n
p
er
v
rs
:
ha
ha
d
l
ia
b
i
l
i
in
Co
ty
m
p
an
s p
ur
c
se
su
ra
nc
e
y
fo
D
ire
In
de
de
D
ire
d
ke
to
t
to
r
c
rs
p
en
n
c
rs
an
y
,
,
ia
l o
f
f
ic
m
an
ag
er
er
s.
le
de
i
be
d
im
in
f
I
X
P
ts
te
t
as
e
sc
r
p
ro
ve
m
en
rm
s o
be
iv
io
i
he
im
to
ty
m
ea
su
re
s
g
en
p
r
r
w
re
p
ro
ve
)
N
p
ro
ce
ss
on
e		 he
l
f
he
lu
io
in
d
d
Co
G
Ev
Sy
ts
t
te
t
te
t y
re
su
o
rp
or
a
ov
er
na
nc
e
a
a
n
s
m
re
ce
n
ea
rs
an
p
ro
p
os
e a
re
as
an
i
l
l
be
de
d.
(
h
is
io
b
lan
k
i
f
he
is
in
lu
de
d
in
he
lu
io
Le
t w
t
t
t
t
t
t
m
en
n
ee
av
e
se
c
n
c
om
p
an
y
no
c
ev
a
a
n

Note: Regardless of whether "Yes" or "No" was selected, explanation shall be provided in the Summary column.

Title Name Date of
course		 Organizer Course name Duration
of the
course
D
ire
ct
or		 Ch
in
H
g-
on
Sh
g
en		 2018/04/25 Taiwan Academy of Banking
and Finance		 Corporate Governance
and Corporate
Sustainable
Development		 3 hours
D
ire
ct
or		 Yi
H
n-
on
Su
g		 2018/04/25 Taiwan Academy of Banking
and Finance		 Corporate Governance
and Corporate
Sustainable
Development		 3 hours
D
ire
ct
or		 Fu
-In
Ch
g
en
H
on
g		 2018/04/25 Taiwan Academy of Banking
and Finance		 Corporate Governance
and Corporate
Sustainable
Development		 3 hours
In
de		 Ch 2018/03/30 Taiwan Corporate
Governance
Association		 Operations and
Responsibilities of the
Board of Directors		 3 hours
pe
nd
en
t D		 un
-H
ao		 2018/04/25 Taiwan Academy of Banking
and Finance		 Corporate Governance
Forum - Family
Business Succession		 3 hours
ire
ct
or		 X
in		 2018/09/27 Taiwan Academy of Banking
and Finance		 Corporate Governance
and Corporate
Sustainable
Development		 3 hours

(1) Status of continuing education of the Company's Directors in 2018

(IV) If the company has set up a remuneration committee, its composition, responsibilities and operations should be disclosed

Has at least 5 years of work experience
and meet one of the following professional
qualifications		 Meets the independence criteria (Note 2) Nu
me
mb
mb
er
er
of
of
the
oth
Identification
Type
(Note 1)		 Criteria
Name		 An instructor
or higher in a
department of
commerce,
law, finance,
accounting, or
other
academic
department
related to the
business
needs of the
company in a
public or
private junior
college,
college, or
university.		 A judge,
public
prosecutor,
attorney,
certified
public
accountant, or
other
professional
or technical
specialist who
has passed a
national
examination
and been
awarded a
certificate in a
profession
necessary for
the business of
the company.		 Have work
experience
in the area
of
commerce,
law,
finance, or
accounting,
or
otherwise
necessary
for the
business of
the
company.		 1 2 3 4 5 6 7 8 ir
er
co
pu
mp
bli
en
c c
sat
om
ion
pa
co
nie
mm
s i
n w
itte
hic
e
h t
he
m
em
be
r a
lso
se
rv
es
as
a		 Re
ma
rk
s
Independent
Director		 Chun-Hao
Xin		 1
Independent
Director		 Mei-Hsiang
Pai		 0
Independent
Director		 Chih-Ming
Chen		 0

Information on members of the Remuneration Committee

Note 1: Fill "Director", "Independent Director" or "Others" in the Title column.

Note 2: If the committee member meets any of the following criteria in the two years before being appointed or during the term of office, please check "v" in the corresponding boxes:

  • (1) Not an employee of the Company or any of its affiliates.
  • (2) Not a Director or Supervisor of the Company or any of its affiliates. Exception shall apply to independent directors established pursuant to the Securities and Exchange Act or local regulations.
  • (3) Not a natural-person shareholder who holds shares, together with those held by the person's spouse, minor children, or held by the person under others' names, in an aggregate amount of one percent or more of the total number of issued shares of the Company or ranks as one of its top ten shareholders;
  • (4) Not a spouse, second degree kin or closer, or a direct blood relative of third degree or closer to anyone listed in the three preceding clauses.
  • (5) Not a director, supervisor, or employee of a corporate/institutional shareholder that directly holds five percent or more of the total number of issued shares of the Company or ranks as one of its top five shareholders;
  • (6) Not a director, supervisor, managerial officer, or a shareholder that holds more than 5% of shares at a company or institution that has financial or business exchanges with the Company.
  • (7) Not a professional person, business owner, partner, Director, Supervisor, or managerial officer any soleproprietorship, partnership, company, or institution providing commercial, legal, financial, or accounting services or consultations to the Company or any of its affiliated companies; nor a spouse of anyone listed herein.

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

Operation of Remuneration Committee

  • I. The Company's Remuneration Committee is comprised of three members.
  • II. Current term for the members: May 30, 2018 May 29, 2021; a total of 2 (A) meetings of the Remuneration Committee were held in the most recent year (2018). The members' qualifications and attendance were as follows:
Title Name Attendance
in
person(B)		 Attendance
by proxy		 Attendance
in person
rate (%)
(B/A)(Note)		 Remarks
Convener Mei-Hsiang Pai 2 0 100% None
Committee member Chun-Hao Xin 2 0 100% None
Committee member Chih-Ming Chen 2 0 100% None

Other matters required to be recorded:

I. In the event the Board of Directors does not adopt or wishes to amend the proposals of the Remuneration Committee, please state the date and number of the Board meeting, the content of the proposals, resolution from the Board of Directors, and the method the opinion from the Remuneration Committee was handled (e.g., if the salaries and compensations approved by the Board was higher than the suggested levels from the Remuneration Committee, please state the differences and reasons): None.

  • II. If a member opposes a resolution the Committee has adopted or has reservations with a written record or a statement, the date and session of the meeting, the resolution, opinions of all the members, and the handling of their opinions shall be indicated: None.
  • III. The Company's Remuneration Committee shall consist of no fewer than three members appointed by resolution of the Board of Directors. One shall serve as the convener. The term of the members of the Remuneration Committee shall be the same as that of the Board of Directors by whom they were appointed. If the size of the Remuneration Committee is reduced below three due to the dismissal of one of the members, the Board of Directors shall convene a meeting and appoint additional Committee members within three months after the shortfall occurs.
  • IV. Roles and Responsibilities of the Remuneration Committee
  • (I) Stipulate and review regularly the compensation policies, systems, standards and structures, and performance of directors and managers.

(II) Regularly review and adjust directors' and managers' remuneration.

Note:

  • (1) When a member of the Remuneration Committee resigns before the end of the year, the remark column shall be annotated with the date of resignation. Actual attendance rate (%) shall be calculated based on the number of meetings held by the Remuneration Committee and the number of actual attendance during the term of service.
  • (2) When an election is held for the Remuneration Committee before end of the year, members of both the incoming and outgoing committee members shall be listed in separate columns and noted as incoming, outgoing or reelected members, along with the elected date, in the "Remarks" column. Actual attendance percentage (%) is calculated based on the number of meetings held by the Remuneration Committee and the actual number of meetings attended during his/her term of office.

(V)Performance of Corporate Social Responsibility

lem
io
(
1
)
Im
N
ta
t
ta
tu
te
p
en
n
s
s
o		 ia
io
fro
Co
D
t
te
ev
ns
m
rp
or
a
A
d
ss
es
se
ar
ea
s:		 Ye
s		 N
o		 Su
(
2
)
N
te
m
m
ar
y
o		 ia
l
i
b
i
l
i
So
Re
Be
ty
t
c
sp
on
s
s
ic
in
ip
le
fo
Pr
Pr
t
ac
e
c
s
r
/
l
is
d
ie
T
W
S
E
T
P
Ex
te
co
m
p
an
s
d
an
re
as
on
s
I. lem
io
f c
Im
ta
t
te
p
en
n
o
or
p
or
a
g
ov
er
na
nc
e		 ia
l
d
isc
N
te
o
m
a
r
re
p
an
cy
(
)
I		 he
ha
ia
l
D
Co
t
te
oe
s
m
p
an
y
ve
a
co
rp
or
a
so
c
i
b
i
l
i
l
ic
in
la
?
Is
ty
te
re
sp
on
s
p
o
y
or
sy
s
m
p
ce
iew
d
la
ba
is
?
p
ro
g
re
ss
re
v
e
on
a
re
g
u
r
s		 (
)
I		 he
ha
b
l
is
he
d
he
T
Co
ta
t
m
p
an
y
s e
s
"C
So
ia
l
Re
i
b
i
l
i
Be
te
ty
t
or
p
or
a
c
sp
on
s
s
ic
in
ip
le
" a
d
d
isc
lo
d
he
Pr
Pr
t
t
ac
e
c
s
n
se
m
o
n
he
ke
bs
io
d
M
O
Po
Sy
t
t
t
t
te
ar
er
va
n
s
s
m
an
Co
's
bs
i
te
m
an
w
e
(
)
I
I		 he
i
de
ia
l r
i
b
i
l
i
D
Co
t
ty
oe
s
m
p
an
p
ro
so
c
es
p
on
s
y
v
in
in
la
ba
is
?
tra
g
on
a
re
g
u
r
s		 (
)
I
I		 p
y
he
i
de
io
l s
fe
T
Co
t
ty
m
p
an
p
ro
s o
cc
up
a
na
a
y
v
d
he
l
h
d
C
S
in
in
d
du
io
R
t
tra
t
an
a
an
g
an
e
ca
n
hr
h
io
in
t
t
ou
g
va
r
us
m
ee
g
s.
50 (
)
I
I
I		 he
Co
ha
i
ha
ia
l
iz
D
t
t
t
t s
oe
s
m
p
an
y
ve
a
un
p
ec
es
(
is
in
lv
d
)
in
ic
he
C
S
R
?
Is
C
S
R
t
t
or
vo
e
p
ra
c
es
i
by
io
ia
l o
f
f
ic
d
t r
un
un
se
n
r m
an
ag
er
er
s a
n
i
he
d
f
ire
?
Bo
D
ts
ts
to
t
to
re
p
or
p
ro
g
re
ss
ar
o
c
rs		 (
)
I
I
I		 io
l u
i
j
in
ly
C
S
d
Fu
R
t
ts
t
te
nc
na
n
o
p
ro
m
o
an
de
d
ic
fu
l
l e
f
fo
he
fo
f
te
ts
to
t
a
r
p
er
rm
an
ce
o
ia
l r
i
b
i
l
i
ie
W
lso
te
t
co
rp
or
a
so
c
es
p
on
s
s.
e a
b
l
is
he
d
he
"S
l
h
C
ha
i
ta
t
t
ty
es
un
on
w
ea
r
da
io
iv
ly
i
de
Fo
"
t
to
t
t c
un
n
a
c
e
p
ro
su
p
p
or
ar
e
v
d
t.
an
su
p
p
or
(
)
I
V		 i
d
he
fo
la
b
le
D
Co
t
te
m
p
an
rm
re
as
on
a
y
u
io
l
ic
ie
in
lo
t
te
te
re
m
un
er
a
n
p
o
s,
g
ra
em
p
y
ee
fo
isa
l s
i
h
C
S
R
te
t
p
er
rm
an
ce
ap
p
ra
s
m
s w
y
l
ic
ie
d
b
l
is
h
f
fe
iv
d
d
ta
t
p
o
s a
n
es
e
c
e r
ew
ar
an
is
hm
?
t s
te
p
un
en
y
s
m
s		 (
)
I
V		 he
b
l
is
he
d
he
io
T
Co
Re
ta
t
t
m
p
an
es
m
un
er
a
n
y
Co
i
d
de
de
ire
In
D
t
te
t
to
m
m
e a
n
p
en
n
c
rs
se
rv
e
i
be
he
i
T
Co
t
te
t
te
as
c
om
m
e m
em
rs
m
m
e
le
im
h
t
t
tw
t
to
co
nv
en
es
a
as
o
es
e
ac
y
ea
r
de
in
he
io
ia
io
te
t
t
t
rm
e
re
m
un
er
a
n
ap
p
ro
p
r
n
io
io
f m
ia
l o
f
f
ic
t
t
ra
re
m
un
er
a
n
o
an
ag
er
er
s,
,
d
io
fo
he
Co
's
t
t
an
p
ro
p
os
e
su
g
g
es
ns
r
m
p
an
y
io
l
ic
t
re
m
un
er
a
n
p
o
y.
he
Co
ha
b
l
is
he
d
T
ta
m
p
an
y
s e
s
he
iv
la
io
in
lu
d
in
t
co
m
p
re
ns
e r
eg
ns
c
g
u
lo
fo
lu
io
t
em
p
y
ee
p
er
rm
an
ce
e
va
a
n,
fo
in
iv
la
io
k
t
t
p
er
rm
an
ce
ce
n
e r
eg
u
ns
w
or
,
Im
lem
io
(
N
1
)
ta
t
ta
tu
te
p
en
n
s
s
o		 D
ia
io
fro
Co
t
te
ev
ns
m
rp
or
a
d
A
ss
es
se
ar
ea
s:		 Ye
s		 N
o		 Su
(
N
2
)
te
m
m
ar
y
o		 So
ia
l
i
b
i
l
i
Re
Be
ty
t
c
sp
on
s
s
ic
in
ip
le
fo
Pr
Pr
t
ac
e
c
s
r
S
/
l
is
d
ie
T
W
E
T
P
Ex
te
co
m
p
an
s
d
an
re
as
on
s
le
d
he
le
d
f
fe
iv
in
iv
t
t
t
ru
s,
an
o
r c
ar
an
e
c
e
ce
n
e
d
d
is
in
iv
t
te
an
ce
n
e
sy
s
m
s.
in
in
b
le
iro
I
I.
Fo
te
ta
t
s
r
g
a
su
s
a
en
v
nm
en
(
)
he
i
d
im
in
he
I
Is
Co
t
t
te
to
t
m
p
an
co
m
m
p
ro
g
y
v
f
f
ic
ie
f
he
io
d
in
t
e
nc
y
o
v
ar
us
r
es
ou
rc
es
a
n
us
g
le
d
ia
ls
h
ic
h
ha
lo
im
te
t o
re
cy
c
m
a
r
w
ve
a
w
p
ac
n
he
iro
?
t
t
en
en
v
nm		 (
)
io
bo
iss
io
I
"E
t
ne
rg
co
ns
er
va
n,
c
ar
n
em
ns
y
du
io
iro
l p
io
d
t
ta
te
t
re
c
n,
en
v
nm
en
ro
c
n,
an
lo
in
he
h
he
ls
" a
Co
's
t
t
t
v
g
e
ar
re
m
p
an
y
g
oa
fo
in
he
h
's
iro
W
te
t
t
t
t.
e
en
en
e
r p
ro
c
g
ar
v
nm
fo
la
lan
i
h
he
&
l
i
R
D
te
t
t
ty
rm
u
p
s w
q
ua
,
du
io
t
t,
as
su
ra
nc
e,
p
ro
c
n,
p
ro
cu
re
m
en
bu
in
d
i
d
t u
ts
s
es
s,
an
m
an
ag
em
en
n
an
w
e
l
l e
lo
ic
ip
in
he
to
t
te
t
en
co
ur
ag
e a
m
p
ee
s
p
ar
a
y
lan
h
iev
fu
l
l
im
lem
io
W
to
ta
t
p
s
a
c
e
p
en
n.
e a
re
i
d
de
lo
in
t
te
to
co
m
m
ve
p
g
g
re
en
iro
l
ly
fr
ien
d
ly
du
i
h
lo
ta
ts
t
en
v
nm
en
p
ro
c
w
w

io
d
ic
i
t
to
ty
to
p
ow
er
c
on
su
m
p
n
an
ze
ro
x
du
he
im
f
he
f v
io
t
t o
t
re
ce
p
ac
u
se
o
ar
us
he
iro
t
t.
re
so
ur
ce
s o
n
en
v
nm
en		 de
ia
io
N
t
o
v
n.
(
)
he
b
l
is
he
d
I
I
H
Co
t
ta
as
m
p
an
es
a
p
ro
p
er
y
iro
l m
ba
d
he
ta
t s
te
t
en
v
nm
en
an
ag
em
en
y
s
m
se
on
ha
is
ic
f
he
in
du
?
te
t
t
try
c
ra
c
r
s o
s		 (
)
he
ha
b
l
is
he
d
he
I
I
T
Co
ta
t
m
p
an
s e
s
y
"E
iro
l
l
h
d
Sa
fe
l
ic
"
H
Po
ta
t
ty
nv
nm
en
ea
an
y
f
fe
iv
ly
in
in
fe
in
he
to
t
ta
ty
t
e
c
e
m
a
sa
iro
d
h
iev
t a
en
v
nm
en
n
ac
e e
ne
rg
y
io
d
bo
iss
io
t
co
ns
er
va
n
an
ca
r
n
em
ns
du
io
ls
W
lso
b
i
de
by
la
d
t
te
re
c
n
g
oa
e a
a
re
la
io
lan
in
iw
d
he
Ou
Ta
t
ts
t
re
g
u
ns
r p
an
an
o
r
ie
ha
d
i
f
ic
io
fo
I
S
O
tr
t
t
co
un
s
ve
p
as
se
ce
r
a
n
r
1
4
0
0
1,
S
O
9
0
0
1,
O
S
A
S
1
8
0
0
1,
A
I
H
I
T
F
d
iro
l
1
6
9
4
9
I
E
C
Q
Q
C
0
8
0
0
0
0
ta
an
en
nm
en
v
l
i
d
t s
te
ty
te
m
an
ag
em
en
y
s
m
q
ua
sy
s
m
an
,
,
ha
do
bs
ta
t s
te
za
r
us
su
nc
e m
an
ag
em
en
s
m
s.
y

51

Im
lem
io
(
N
1
)
ta
t
ta
tu
te
p
en
n
s
s
o		 D
ia
io
fro
Co
t
te
ev
ns
m
rp
or
a
d
A
ss
es
se
ar
ea
s:		 Ye
s		 N
o		 Su
(
N
2
)
te
m
m
ar
y
o		 So
ia
l
i
b
i
l
i
Re
Be
ty
t
c
sp
on
s
s
ic
in
ip
le
Pr
Pr
fo
t
ac
e
c
s
r
S
/
l
is
d
ie
T
W
E
T
P
Ex
te
co
m
p
an
s
d
an
re
as
on
s
52 (
)
he
ke
f
im
I
I
I
H
Co
t
ta
te
t
as
m
p
an
n
no
o
an
p
ac
y
y
l
im
ha
ha
ha
d
i
io
d
te
ts
t
c
a
c
ng
e
s
on
op
er
a
ns
a
n
d
in
in
ho
iss
io
en
g
ag
e
m
ea
su
r
g
g
re
en
us
e g
as
em
ns
,
b
l
is
h
in
io
d
ta
te
t
es
g
a c
or
p
or
a
en
er
g
y
co
ns
er
va
n
an
bo
du
io
l
l a
b
l
is
h
in
t
tra
te
ta
ca
r
n
re
c
n
s
g
y,
as
w
e
s e
s
g
ho
du
io
?
t
tra
te
a g
re
en
us
e g
as
re
c
n
s
g
y		 (
)
he
im
lem
I
I
I
T
Co
ts
m
p
an
p
en
en
er
g
y
y
io
iro
l p
io
d
t
ta
te
t
co
ns
er
va
n,
en
v
nm
en
ro
c
n,
an
l
in
f r
du
he
W
t
re
cy
c
g
o
es
ou
rc
es
e r
e
ce
iss
io
f
C
O
2
d
he
ho
t
em
ns
o
an
o
r g
re
en
us
e g
as
d
iv
ly
in
in
he
h
d
t
t
t
an
ac
e
ve
s
re
se
ar
c
an
de
lo
iro
l
ly
fr
ien
d
ly
t g
ta
ve
p
m
en
re
en
en
v
nm
en
du
in
io
ks
fo
Fo
ts
t
ta
p
ro
c
r
sp
ec
n
s
r
ho
iss
io
ic
ly
tr
t
g
re
en
us
e g
as
em
ns
e
s
w
,
l a
d
ho
tro
co
n
n
m
an
ag
e g
re
en
us
e g
as
iss
io
d
b
l
is
h
ic
in
l
ta
te
t
te
em
ns
an
es
sy
s
m
a
rn
a
do
d
in
io
du
ts
t
to
cu
m
en
an
sp
ec
n
p
ro
ce
re
s
im
lem
f
fe
iv
ho
t m
t
p
en
or
e e
c
e g
re
en
us
e g
as
iss
io
du
io
d
im
t
t
em
ns
re
c
n
an
p
ro
ve
m
en
lu
io
t
so
ns
ho
l
d
in
b
l
ic
in
I
I
I.
U
te
ts
p
g
p
u
re
s
(
I
)
H
he
Co
fo
la
d
ia
t
te
te
as
m
p
an
y
rm
u
ap
p
ro
p
r
l
ic
ie
d
du
d
in
t p
m
an
ag
em
en
o
s a
n
p
ro
ce
re
s a
cc
or
g
lev
la
io
d
he
io
l
i
l
l
In
B
to
t r
t
t
te
t
re
an
eg
ns
an
rn
a
na
u
f
ig
h
?
H
R
ts
o
um
an
(
)
he
Co
lo
ho
l
in
I
I
H
t
t u
t
as
m
p
an
y
se
p
an
em
p
y
ee
e o
r
iev
ha
ism
ha
d
le
la
in
to
ts
g
r
an
ce
m
ec
n
n
co
m
p
ly
?
p
ro
p
er
(
I
)
H
he
Co
fo
la
d
la
d
t
te
te
as
m
p
an
y
rm
u
re
l
ic
ie
d
du
t p
m
an
ag
em
en
o
s a
n
p
ro
ce
re
s
d
in
lev
la
bo
law
d
he
to
t
t
ac
co
r
g
re
an
r
s a
n
io
l
i
l
l o
f
ig
h
In
B
H
R
te
t
ts
to
rn
a
na
um
an
lo
ig
h
d
in
?
te
t e
ts
te
ts
p
ro
c
m
p
ee
r
an
re
s
y
(
)
he
Co
ha
b
l
is
he
d
l
ip
le
I
I
T
ta
t
m
p
an
y
s e
s
m
u
ic
io
ha
ls
h
irr
la
t
co
m
m
un
a
n
c
nn
e
su
c
as
eg
r
u
in
fe
be
lo
t
tw
m
ee
g
s o
r c
on
re
nc
es
ee
n
em
p
y
ee
s
d
lso
i
l
i
de
W
to
an
m
an
ag
er
s.
e a
u
se
em
a
p
ro
v
lo
i
h
d
ire
ha
ls
fo
t
t c
em
p
y
ee
s w
c
nn
e
r
ic
in
he
ir
ds
d
ha
t
t
t
t
co
m
m
un
a
g
ne
e
an
en
su
re
lo
he
i
b
le
ha
l
t
t s
ta
em
p
ee
s c
an
se
m
os
c
nn
e
y
u
u
f
i
le
la
in
da
io
fo
to
ts
t
co
m
p
or
re
co
m
m
en
ns
r
im
he
iv
W
ts
p
ro
ve
m
en
n
e r
ec
e
e a
w		 de
ia
io
N
t
o
v
n.
lem
io
(
)
Im
N
1
ta
t
ta
tu
te
p
en
n
s
s
o		 ia
io
fro
D
Co
t
te
ev
ns
m
rp
or
a
A
d
ss
es
se
ar
ea
s:		 Ye
s		 N
o		 (
)
Su
N
2
te
m
m
ar
y
o		 So
ia
l
Re
i
b
i
l
i
Be
ty
t
c
sp
on
s
s
ic
in
ip
le
fo
Pr
Pr
t
ac
e
c
s
r
/
l
is
d
ie
T
W
S
E
T
P
Ex
te
co
m
p
an
s
d
an
re
as
on
s
(
)
I
I
I		 he
i
de
fe
d
he
l
hy
D
Co
t
t
oe
s
m
p
an
p
ro
a
sa
an
a
y
v
k
in
iro
d
i
de
lo
t a
w
or
g
en
v
nm
en
n
p
ro
v
em
p
y
ee
s
i
h
la
fe
d
he
l
h
in
in
?
t
ty
t
tra
w
re
g
u
r s
a
an
a
g		 (
)
I
I
I		 la
in
ha
l
l c
fu
l
ly
in
ig
he
t,
t
te
t
co
m
p
w
e
s
ar
e
ve
s
a
la
in
d
iv
ly
im
lem
t a
t
t
co
m
p
n
ac
e
p
en
im
d
io
t a
te
t
p
ro
ve
m
en
n
p
ro
c
n
m
ea
su
re
s.
he
b
l
is
he
d
iro
l
T
Co
En
ta
ta
m
p
an
es
an
nm
en
y
v
Sa
fe
Po
l
ic
d
Q
l
i
Po
l
ic
d
ty
ty
y
an
ua
y
an
w
e
iz
la
bo
fe
du
io
d
in
in
ty
t
tra
or
g
an
e
r s
a
e
ca
n
an
g.
W
la
ly
du
f
ire
fe
in
io
t
ty
t
e r
eg
ec
u
r
c
on
c
sa
sp
ns
,
im
lem
f
ire
fe
dr
i
l
ls,
d
i
t
ty
to
p
en
sa
an
m
on
r
io
in
he
k
iro
C
O
2
tra
t
t
t.
co
nc
en
n
or
en
nm
en
w
v
i
de
lo
he
l
h
in
io
W
t
t
e p
ro
v
em
p
y
ee
a
ex
am
a
n
lar
ly
h
d
iz
hy
ic
l
re
g
e
ac
ea
r a
n
or
g
an
e p
s
a
u
y
d
l
he
l
h
in
W
ta
t
an
m
en
a
se
m
ar
s.
e e
nc
ou
ra
g
e
lo
ic
ip
in
lu
b
iv
i
ie
to
t
te
t
t
em
p
ee
s
p
ar
a
c
ac
s
y
d
iz
do
iv
i
ie
fro
im
t
t
t
t
to
an
or
g
an
e o
u
or
a
c
s
m
e
im
i
de
lo
i
h
fe
d
t
to
t
e
p
ro
v
em
p
y
ee
s w
a
sa
a
n
he
l
hy
k
iro
t
t.
en
en
a
w
or
v
nm
(
)
I
V		 he
Co
ha
l
fo
H
t
t u
as
m
p
an
y
se
p
a c
nn
e
r
ic
in
i
h
lo
lar
t
t
co
m
m
un
a
g
em
p
ee
s o
n
a r
eg
w
y
u
ba
is,
d
b
ly
in
fo
lo
f a
s
an
re
as
on
a
rm
em
p
y
ee
s o
ny
ig
i
f
ic
ha
in
io
ha
ha
t c
t
t
t m
s
n
an
ng
es
o
p
er
a
ns
ay
ve
im
he
?
t o
t
an
p
ac
n
m		 (
)
I
V		 he
Co
lo
T
to
m
p
an
y
en
co
ur
ag
es
em
p
y
ee
s
ke
fu
l
l u
f e
lo
ic
io
t
m
a
se
o
m
p
ee
c
om
m
un
a
n
y
ha
ls
d
ire
ly
he
ir
in
io
to
t
t
to
c
nn
e
c
e
xp
re
ss
op
ns
he
he
lo
t
t o
t
m
an
ag
em
en
r u
se
em
p
ee
y
in
io
i
l
bo
i
de
fe
d
ba
k
to
op
n
m
a
x
p
ro
v
e
c
on
a
ny
iss
in
io
l
l
im
A
ta
t
ue
o
r e
xp
re
ss
o
p
ns
p
or
n
iz
io
l o
bu
in
ha
lso
t
or
g
an
a
na
r
s
es
s c
ng
es
a
re
a
b
l
is
he
d
he
la
fo
t
t p
t
to
p
u
on
an
no
un
ce
m
en
rm
ha
be
he
lo
d
te
tw
t
p
ro
m
o
rm
on
y
ee
n
em
p
y
er
an
lo
em
p
y
ee
s.
(
)
V		 he
b
l
is
he
d
f
fe
iv
H
Co
t
ta
t
as
m
p
an
es
an
e
c
e c
ar
ee
r
y
de
lo
d
b
i
l
i
in
in
fo
t a
ty
tra
ve
p
m
en
n
ca
p
a
g
p
ro
g
ra
m
r
lo
?
em
p
ee
s
y		 (
)
V		 he
i
de
d
iv
he
j
b
T
Co
t
m
p
an
p
ro
s
er
se
o
n-
o
y
v
-
in
in
d
le
in
ha
ls
d
tra
g
an
ar
n
g
c
nn
e
an
w
e
iz
in
in
t c
te
tra
or
g
an
e m
an
ag
em
en
om
p
e
nc
g
y

53

Im lem
io
(
)
N
1
ta
t
ta
tu
te
p
en
n
s
s
o		 ia
io
fro
D
Co
t
te
ev
ns
m
rp
or
a
A
d
ss
es
se
ar
ea
s:		 N
o		 (
)
Su
N
2
te
m
m
ar
y
o		 So
ia
l
Re
i
b
i
l
i
Be
ty
t
c
sp
on
s
s
ic
in
ip
le
fo
Pr
Pr
t
ac
e
c
s
r
/
l
is
d
ie
T
W
S
E
T
P
Ex
te
co
m
p
an
s
d
an
re
as
on
s
(
V
I
)		 H
he
Co
b
l
is
he
d
t
ta
as
m
p
an
y
es
an
y
co
ns
um
er
io
ha
ism
d
la
in
te
t
t
p
ro
c
n
m
ec
n
s a
n
co
m
p
du
d
in
R
&
D
ha
in
ce
re
eg
p
ro
s r
ar
g
p
ur
c
s
g,
,
du
io
io
d
ic
?
t
t
p
ro
c
n,
o
p
er
a
n
an
se
rv
e		 (
V
I
)		 d
fe
io
l c
in
in
h
te
tra
an
p
ro
ss
na
om
p
e
nc
y
g
ea
c
im
lo
b
i
l
i
ie
d
' a
to
t
ea
r
p
ro
ve
e
m
p
ee
s
s a
n
y
y
is
lo
in
he
ir
t e
t
as
s
m
p
y
ee
s
ca
re
er
de
lo
t.
ve
p
m
en
T
he
Co
's
de
ha
tm
ts
m
p
an
y
p
ar
en
ve
b
l
is
he
d
la
d
l
ic
ie
d
la
in
ta
te
t
es
re
p
o
s a
n
co
m
p
du
in
d
to
te
t c
te
t a
ce
re
er
re
p
ro
s
p
ro
c
on
su
m
s
n
i
de
i
h
lu
io
fo
to
t
t
p
ro
v
cu
s
m
er
s w
so
ns
r
du
d
he
iss
h
i
le
in
in
in
ts
t
ta
p
ro
c
an
o
r
ue
s w
m
a
g
h
ic
io
ha
ls
i
h
t
t
t
sm
oo
co
m
m
un
a
n
c
nn
e
w
54 (
)
V
I
I
(
)
V
I
I
I		 f
he
ke
in
d
la
be
l
in
f
In
te
t
t
rm
s o
m
ar
g
an
g
o
du
d
ic
ha
he
Co
ts
t
p
ro
c
an
se
rv
es
s
m
p
an
y
,
fo
l
lo
d
lev
law
la
io
d
t
t
w
e
re
an
s,
re
g
u
ns
an
,
in
io
l n
?
te
t
rn
a
na
or
m
s
fo
do
in
bu
in
i
h
l
ier
do
he
Be
t
t
re
g
s
es
s w
su
p
p
s,
es
he
he
he
l
ier
Co
t
t
t
m
p
an
as
se
ss
r o
r n
o
su
p
p
s
y
w
ha
ha
d
io
ds
f n
iv
ly
t
ve
p
re
v
us
re
co
r
o
eg
a
e
f
fe
in
he
iro
ie
?
t
t
t o
ty
a
c
g
en
v
nm
en
r s
oc
(
)
V
I
I
(
V
I
I
I
)		 to
cu
s
m
er
s.
he
Co
ha
fo
l
lo
d
lev
law
T
t
m
p
an
y
s
w
e
re
an
s,
la
io
d
in
io
l n
in
t
te
t
te
re
g
ns
an
rn
a
na
or
m
s
rm
s
u
,
f
he
ke
in
d
la
be
l
in
f p
du
t
t
ts
o
m
ar
g
an
g
o
ro
c
d
ic
an
se
rv
es
N
l
ier
ire
d
he
to
t
ew
re
re
su
p
p
s a
q
u
p
as
s
Co
's
l
ier
lu
io
du
t
m
p
an
y
su
p
p
ev
a
a
n
p
ro
ce
re
s
d
ly
i
h
he
la
d
Co
's
t
t
te
an
co
m
p
m
p
an
re
w
y
iro
l p
io
ire
ta
te
t
ts
en
v
nm
en
ro
c
n
re
q
u
m
en
he
lso
ig
he
le
ic
du
T
E
In
t a
t
tro
try
m
us
s
n
c
n
s
y
C
i
iz
h
ip
Co
l
i
io
(
C
C
)
Co
de
f
E
I
t
t
en
s
a
n
o
du
d
he
de
la
io
f n
f
Co
t a
t
t
n
c
n
c
ra
n
o
on
se
o
-u
f
l
ic
in
ls
d
b
i
de
by
h
t m
co
n
er
a
an
a
su
c
la
io
t
re
g
u
ns
T
he
Co
lu
he
io
f
he
t
te
t
t
m
p
an
y
va
es
p
ro
c
n
o
iro
d
ie
d
im
t a
ty
to
en
v
nm
en
n
so
c
a
n
w
e a
h
iev
h
i
h
l
ier
j
in
ly
t
t
to
t
ac
e g
ro
su
p
p
s
o
w
w
b
l
is
h
ly
ha
in
ta
t
es
a g
re
en
su
p
p
c
m
an
ag
em
en
la
ly
ie
he
l
ier
W
'
te
t
sy
s
m
e r
eg
r
re
su
p
p
s
u
v
w
lem
io
(
)
ia
io
fro
Im
N
1
D
Co
ta
t
ta
tu
te
t
p
en
n
s
s
o
ev
ns
m
rp
or
A
d
ss
es
se
ar
ea
s:		 Ye
s		 N
o		 (
)
Su
N
2
te
m
m
ar
o		 So
ia
l
Re
i
b
i
l
i
Be
ty
t
c
sp
on
s
s
ic
in
ip
le
fo
Pr
Pr
t
ac
e
c
s
r
y /
l
is
d
ie
T
W
S
E
T
P
Ex
te
co
m
p
an
s
d
an
re
as
on
s
( )
he
Co
's
i
h
j
I
X
D
t
tra
ts
t
o
m
p
an
y
co
n
c
w
m
a
or
l
ier
in
lu
de
lau
ha
ha
i
f
he
t
t s
ta
te
t
t
t
su
p
p
s
c
a
c
se
s
l
ier
io
la
ia
l
te
te
su
p
p
v
s o
ur
c
or
p
or
a
so
c
i
b
i
l
i
l
ic
ie
l
in
in
ig
i
f
ic
ty
t
t
re
sp
on
s
p
o
s,
re
su
g
s
n
an
im
he
iro
d
ie
he
ts
to
t
t a
ty
t
en
en
p
ac
v
nm
n
so
c
,
Co
in
he
ig
h
in
he
ta
t
t
to
te
te
t
m
p
an
y
re
s
r
rm
a
im
?
tra
ts
t a
t
co
n
c
a
ny
e		 im
lem
io
in
ia
l a
d
ta
t
ta
tu
p
en
n
s
s
so
c
n
ic
i
b
i
l
i
ie
t
ec
on
om
re
sp
on
s
s.
(
)
he
Co
ha
b
l
is
he
d
he
"S
l
ier
I
X
T
ta
t
m
p
an
y
s e
s
up
p
in
du
M
Op
Pr
"
t
t
to
an
ag
em
en
er
a
g
oc
e
re
s
ha
ia
ls
ha
t
t m
te
t
en
su
re
a
r
w
e p
ur
c
se
m
ee
ire
fo
l
i
d
ts
ty
re
q
u
m
en
r q
ua
a
ss
ur
an
ce
an
bs
f c
he
iro
ta
to
t
t.
es
ce
en
en
su
nc
o
on
rn
v
nm
lso
du
la
f
W
t r
ts
e a
c
on
c
eg
u
r a
ss
es
sm
en
o
l
ier
l
ier
ha
fa
i
l
he
Fo
t
t
to
t
t
su
p
p
s.
r s
up
p
s
m
ee
"S
l
ier
A
d
i
d
Op
in
M
t a
t
t
up
p
u
n
an
ag
em
en
er
a
g
55 ha
in
in
io
d
isc
lo		 la
io
he
in
Re
",
Co
t
t
te
te
g
ns
m
p
an
m
ay
rm
a
u
y
in
d
he
im
t
tra
t a
t a
t
or
re
sc
c
on
c
ny
e.		 ia
l
d
isc
I fo
V
En
t
nc
g
rm
a
n
su
re
(
)
he
d
isc
lo
d
lev
d
I
H
Co
t
t
as
m
p
an
y
se
re
an
an
l
ia
b
le
in
fo
io
d
in
i
t
ts
te
re
rm
a
n
re
g
ar
g
co
rp
or
a
ia
l
i
b
i
l
i
i
bs
i
d
he
ty
ts
te
t
so
c
re
sp
on
s
o
n
w
e
a
n
M
ke
O
bs
io
Po
Sy
?
t
t
t
te
er
ar
va
n
s
s
m		 he
ha
b
l
is
he
d
he
T
Co
Co
t p
t
te
m
p
an
s n
o
rp
or
a
y
u
So
ia
l
Re
i
b
i
l
i
Re
d
ha
l
l c
i
le
ty
t a
c
sp
on
s
p
or
n
w
e
s
om
p
la
d
in
fo
io
fo
d
isc
lo
he
C
S
R
te
t
t
re
rm
a
n
r
su
re
o
n
Co
's
bs
i
d
M
ke
O
bs
io
Po
te
t
t
t
e
er
m
p
an
y
w
a
n
ar
va
n
s
Sy
ba
d
ire
in
he
fu
te
ts
t
tu
s
m
se
on
re
q
u
m
en
re		 N
te
o
m
a
r
re
p
an
cy
f
he
Co
ha
b
l
is
he
d
ia
l r
i
b
i
l
i
in
ip
le
ba
d
"C
So
ia
l
i
b
i
l
i
ic
in
ip
le
V
I
Re
Be
Pr
Pr
t
ta
te
ty
te
ty
t
t
m
p
an
y
s
es
co
rp
or
a
s
oc
es
p
on
s
p
r
c
s
se
on
or
p
or
a
c
sp
on
s
s
ac
e
c
/
is
d
ie
le
de
i
be
d
i
f
fe
be
he
in
ip
le
d
he
ir
im
lem
io
T
W
S
E
T
P
Ex
L
Co
",
te
tw
t
t
ta
t
m
p
an
s
p
as
e
sc
r
a
ny
re
nc
e
ee
n
p
r
c
s a
n
p
en
n:
he
Co
b
i
de
by
i
Co
So
ia
l
i
b
i
l
i
ic
in
ip
le
d
he
ia
l
de
ia
io
he
Co
's
bs
i
d
T
Re
Be
Pr
Pr
T
ts
te
ty
t
t
t
te
t
m
p
an
y
a
s
rp
or
a
c
sp
on
s
s
ac
e
c
s a
n
re
w
as
n
o
m
a
r
v
n.
m
p
an
y
su
im
lem
he
f
he
ia
l
i
b
i
l
i
in
ip
le
in
he
ir
in
l c
l s
d r
la
d
iso
la
Co
's
Co
So
Re
Pr
t
t
t
te
ty
t
te
tro
te
te
p
en
es
se
nc
e o
m
p
an
rp
or
a
c
sp
on
s
c
s
rn
a
on
s
m
s a
n
e
su
p
er
ry
re
g
y
y
v
u
V
I.
O
he
ke
in
fo
io
fu
l
fo
la
in
in
f c
ia
l r
i
b
i
l
i
ic
T
he
C
ha
irm
f
he
Co
fo
de
d
he
"S
he
hn
t
t
ta
tu
te
ty
t
t
t
e
r e
es
es
:
r
y
rm
a
n
us
xp
g
s
s o
or
p
or
a
so
c
p
on
s
p
ra
c
an
o
m
p
an
y
un
C
h
i
l
dr
lo
d
A
du
l
Su
Se
ic
Ce
"
ke
f c
h
i
l
dr
i
h
d
isa
b
i
l
i
ie
d
fo
de
d
he
"S
l
h
Yu
D
t a
t
t
te
to
ta
t
t
t
t
an
en
ev
e
p
m
en
n
p
p
or
rv
es
n
r
c
ar
e o
en
w
se
ve
re
s a
n
un
un
on
w
ea
ha
i
da
io
iz
io
ha
i
(
do
io
he
d
isa
dv
d,
lar
fo
lo
in
ho
ho
l
ds
d
h
i
l
dr
C
Fo
"
's
ty
t
to
ty
ts
t
to
t
ta
r
un
n
o
rg
an
e v
ar
us
c
r
e
ve
n
na
ns
an
g
e
re
g
c
ar
e
r
co
m
e
us
e
an
c
en
u
w
-
l
fa
)
i
bu
ia
l w
l
fa
lso
d
he
's
i
fy
le
's
in
ds
Ou
lo
lso
de
d
ic
H
L
ia
Fa
Fo
Le
to
tr
te
to
te
t
to
te
w
e
re
c
on
so
c
e
re
e a
p
ro
m
o
o-
n
ur
ss
on
s
p
ur
p
eo
p
m
r e
m
p
y
ee
s a
re
a
a
ha
i
iv
i
ie
ty
t
t
c
r
a
c
s.
f
he
ia
l r
i
b
i
l
i
ha
be
i
f
ie
d
by
l
in
i
io
he
ho
l
d
be
lo
l
ic
b
le
V
I
I.
I
N
t
te
ty
ts
t
te
t
tu
t
t
ta
te
t a
c
or
p
or
a
so
c
es
p
on
s
re
p
or
ve
en
c
er
e
rn
a
s
ns
s
s
so
:
o
p
p
a
x
y
u
w

Note 1: Regardless of whether "Yes" or "No" was selected, explanation shall be provided in the Summary column.

Note 2: If the Company has produced a corporate social responsibility report, the Company may reference the CSR report or indicate the page number in the summary.

(VI)Ethical corporate management and measures adopted

Im
p		 lem
io
ta
t
en
n		 f e
h
ic
t
o
a		 l c
te
or
p
or
a		 t
m
an
ag
em
en
-- -- --------- --------------------------------- ------------------------------- --------------------------------- --------------------------------
lem
io
(
1
)
Im
N
ta
t
ta
tu
te
p
en
n
s
s
o		 ia
io
i
h
he
h
ic
l
D
E
t
t
t
t
ev
n
w
a
d
A
ss
es
se
ar
ea
s:		 Ye
s		 N
o		 Su
m
m
ar
y		 Co
M
te
t
rp
or
a
an
ag
em
en
ic
in
ip
le
fo
Be
Pr
Pr
t
t
s
ac
e
c
s
r
/
is
d
T
W
S
E
T
P
Ex
L
te
Co
ie
d
he
t
m
p
an
s,
an
re
as
on
s
fo
he
i
d
de
ia
io
t
t
r
sa
v
n
b
l
is
I.
Es
ta
d
an
ap
p
ro		 hm
f e
h
ic
l c
l
ic
t o
t
te
t p
en
a
or
p
or
a
m
an
ag
em
en
o
y
he
ac
s		 de
ia
io
N
t
o
v
n.
57 (
)
he
I
H
t
as
te
ex
rn
ic
t
p
ra
c
he
Bo
t
i
co
m
m
(
)
I
I
D
t
oe
s
d
is
ho
ne
by
p
ro
d
isc
ip
l		 Co
d
in
i
du
M
ta
te
ts
m
p
an
y
s
em
or
an
m
o
r
l c
de
bo
he
l
ic
ie
d
t
t
a
or
re
sp
on
nc
e a
p
o
s a
n
u
i
ha
in
in
bu
in
in
i
?
A
t
to
ta
te
ty
es
s
m
a
s
es
s
g
r
re
d
f
ire
d
he
ia
l o
f
f
ic
D
to
t
ar
o
c
rs
an
m
an
ag
er
er
s
d
in
fu
l
f
i
l
l
in
h
is
i
?
t
te
t
tm
t
g
co
m
m
en
he
ha
in
Co
t
m
p
an
ve
a
ny
m
ea
su
re
s a
g
a
s
y
du
?
A
he
d
t c
ts
t
te
s
on
c
re
se
m
ea
su
re
s s
up
p
or
du
be
ha
io
l g
i
de
l
in
p
er
p
ro
ce
re
s,
ra
es
v
u
,
in
io
d
la
in
?
t
t s
te
ar
y
ac
ns
an
co
m
p
y
s
m
s
(
)
he
Co
ha
b
l
is
he
d
he
"E
h
ic
l
I
T
ta
t
t
m
p
an
y
s e
s
a
ic
Co
M
Be
Pr
te
t
t
t
rp
or
a
an
ag
em
en
s
ac
e
in
ip
le
" a
d
d
isc
lo
d
he
he
Pr
t
t
c
s
n
se
m
o
n
ke
bs
io
d
M
O
Po
Sy
t
t
t
te
ar
er
va
n
s
s
m
an
Co
's
bs
i
he
d
f
ire
T
Bo
D
te
to
m
p
an
y
w
e
ar
o
c
rs
d
i
d
he
t a
t
te
to
t
an
m
an
ag
em
en
re
c
om
m
f
fe
iv
im
lem
io
f e
h
ic
l
t
ta
t
t
e
c
e
p
en
n
o
a
l
ic
ie
d
te
t p
co
rp
or
a
m
an
ag
em
en
o
s a
n
fo
du
in
in
l m
t
te
t
en
rc
em
en
r
g
rn
a
an
ag
em
en
iv
i
ie
d
bu
in
iv
i
ie
t
t
t
t
ac
s a
n
s
es
s a
c
s.
(
)
he
la
he
lev
I
I
T
Co
te
t
t
m
p
an
re
g
s
re
an
y
u
in
du
de
f c
du
t
t,
op
er
a
g
p
ro
ce
re
s,
co
o
on
c
is
hm
fo
io
la
io
d
he
l
t
t
t
p
un
en
r v
n,
an
ap
p
ea
in
da
i
h
i
"E
h
ic
l
te
t
ts
t
sy
s
m
a
cc
or
nc
e w
a
in
Co
M
Op
te
t
t
rp
or
a
an
ag
em
en
er
a
g
du
d
Co
de
f
Co
du
" a
d
Pr
t
oc
e
re
s a
n
o
n
c
n
la
d
in
l r
la
io
l
l r
la
io
A
te
te
t
t
re
rn
a
eg
ns
eg
ns
u
u
ha
be
im
lem
d.
te
ve
en
en
(
)
he
I
I
I
H
t
as
oc
cu
rre
7,
Pa
ra
M
an
ag
T
W
S
E
du
co
n
c		 ke
Co
ta
te
to
t
m
p
an
n
s
p
s
p
re
ve
n
y
l
is
d
in
l
l s
bp
hs
de
A
ic
le
te
t
nc
es
a
u
ar
ag
ra
p
u
n
r
r
h
f
he
h
ic
l
2
"E
Co
t
t
te
g
ra
p
o
a
rp
or
a
Be
Pr
ic
Pr
in
ip
le
fo
t
t
t
em
en
s
ac
e
c
s
r
/
is
d
ie
bu
in
T
P
Ex
-L
Co
" o
te
m
p
an
s
r
s
es
s
ha
in
i
is
ks
?
t
t
t a
to
te
ty
re
p
ro
ne
g
r
r		 p
(
)
he
b
l
is
he
d
la
d
I
I
I
T
Co
ta
te
m
p
an
y
es
re
la
io
h
ic
t r
t
to
t u
t
em
en
eg
re
ve
ne
m
an
ag
u
ns
p
n
a
du
d
le
ly
ip
la
he
h
ic
l
t a
t
te
t
t
co
n
c
n
c
ar
s
u
e
a
da
ds
fo
lo
he
he
ta
t
s
n
r
r e
m
p
ee
s w
n
en
g
ag
e
y
y
in
bu
in
iv
i
ie
t
t
an
y
s
es
s a
c
s.		 l
Im
lem
io
(
N
1
)
ta
t
ta
tu
te
p
en
n
s
s
o		 D
ia
io
i
h
he
E
h
ic
l
t
t
t
t
ev
n
w
a
Co
M
te
t
rp
or
a
an
ag
em
en
A
d
ss
es
se
ar
ea
s:		 ic
in
ip
le
fo
Be
Pr
Pr
t
t
s
ac
e
c
s
r
Ye
s		 N
o		 Su
m
m
ar
y		 S
/
is
d
T
W
E
T
P
Ex
L
te
ie
d
he
Co
t
m
p
an
s,
an
re
as
on
s
fo
he
i
d
de
ia
io
t
t
r
sa
v
n
I
I.
I		 l
l
lem
io
f
h
ic
l
in
ip
le
Fu
Im
E
M
Pr
ta
t
t
t
p
en
n
o
a
an
ag
em
en
c
s
he
lu
he
in
i
f a
l
D
Co
t
te
t
te		 I he
la
la
d
h
ic
T
Co
t
te
te
t		 ia
l
d
isc
N
te
o
m
a
r
re
p
an
cy
(
)		 l
ty
oe
s
m
p
an
ev
a
a
g
r
o
y
ie
i
ha
bu
in
la
io
h
ip
i
h
?
te
t
t
t
t		 (
)		 ip
l
m
p
an
s
s r
e
e
a
y
u
lau
in
ig
d
i
h
tra
ts
t
to
co
un
rp
ar
s
s
s
es
s r
e
ns
s w
he
in
i
lau
in
he
i
A
t
te
ty
t
ts
t
re
re
an
r
c
se
s
a
re
em
en		 c
se
s
c
on
c
s
ne
w
cu
s
m
er
s
d
l
ier
he
d
Co
to
t
t
an
su
s
re
ve
n
m
an
an
y
g
g
ig
i
h
bu
in
?
t
tn
s
ns
w
s
es
s p
ar
er
s		 p
p
p
p
y
i
lo
l
ier
d
ts
to
em
p
y
ee
s,
cu
s
m
er
s,
su
p
p
s,
an
ke
ho
l
de
fro
in
in
br
i
be
ta
s
rs
m
en
g
ag
g
ry
,
is
io
f
i
l
le
l p
l
i
ic
l
do
io
t
t
p
ro
n
o
g
a
o
a
na
ns
v
,
in
ia
ha
i
do
io
te
ty
t
ap
p
ro
p
r
c
r
na
ns
o
r
h
ip
i
d
in
in
t
sp
on
so
rs
p
ro
g
or
a
cc
ep
g
v
,
b
le
ho
i
l
i
he
ts
ta
ty
t
un
re
as
on
a
p
re
se
n
sp
o
r o
r
,
58 im
be
f
i
ts
p
ro
p
er
ne
(
I
I
)		 D
he
Co
ha
i
ha
ia
l
iz
(
is
t
t
t
t s
oe
s
m
p
an
y
ve
a
un
p
ec
es
or		 (
I
I
)		 A
l
ho
h
he
Co
ha
i
t
t
t s
t u
t
ug
m
p
an
y
s n
o
e
p
a u
n
in
lv
d
)
in
bu
in
in
i
h
is
i
?
D
te
ty
t
t r
t
vo
e
s
es
s
g
r
oe
s
un
ep
or		 ha
ia
l
iz
(
is
in
lv
d
)
in
in
t
t s
t
p
ec
es
or
vo
e
p
ro
m
o
g
i
he
Bo
d
f
D
ire
lar
ts
to
t
to
p
ro
g
re
ss
ar
o
c
rs
o
n
a r
eg
u		 h
ic
l c
d
t
te
t a
ts
to
e
a
or
p
or
a
m
an
ag
em
en
n
re
p
or
ba
is
?
s		 he
d
f
ire
he
Co
's
Bo
D
t
to
t
ar
o
c
rs
m
p
an
y
,
fe
io
l m
ia
l o
f
f
ic
fo
p
ro
ss
na
an
ag
er
er
s p
er
rm
he
ir
du
ie
in
da
i
h
he
t
t
t
t
s
a
cc
or
nc
e w
ho
iz
io
d
ha
b
l
is
he
d
t
t
ta
au
r
a
n
an
e
ve
e
s
w
lo
k
le
h
ic
l
Em
W
Ru
to
t e
t
ee
or
s
m
ee
a
p
y
ire
t r
ts
m
an
ag
em
en
eq
m
en
u
(
)
I
I
I		 he
Co
b
l
is
he
d
l
ic
ie
H
t
ta
to
t
as
m
p
an
y
es
p
o
s
p
re
ve
n		 (
I
I
I		 )
he
Co
b
l
is
he
d
he
la
d
T
ta
t
te
m
p
an
y
es
re
f
l
ic
f
in
im
lem
d
h
l
ic
ie
ts
te
ts
te
co
n
o
re
s
p
en
su
c
p
o
s,
,		 l
ic
ie
in
he
h
ic
l
"E
Co
t
t
te
p
o
s
a
rp
or
a
d
i
de
d
de
ha
ls
f
te
an
p
ro
v
a
q
ua
c
nn
e
o		 M
Op
in
Pr
du
d
t
t
an
ag
em
en
er
a
g
oc
e
re
s a
n
ic
io
?
t
co
m
m
un
a
ns		 Co
de
f
Co
du
".
lo
Em
t
t
to
o
n
c
p
y
ee
s m
ay
re
p
or
he
ir
im
d
ia
d
in
t
te
m
e
m
an
ag
er
s r
eg
ar
g
f
l
ic
f
in
d
he
ir
ts
te
t a
t
co
n
o
re
s
n
ex
p
re
ss
in
io
hr
h
he
lo
in
io
t
t
op
ns
ou
g
em
p
ee
o
p
n
y
i
l
bo
he
f a
f
l
ic
f
in
In
t
t o
t o
te
t
m
a
x.
e
ve
n
c
on
re
s
lem
io
(
1
)
Im
N
ta
t
ta
tu
te
p
en
n
s
s
o		 ia
io
i
h
he
h
ic
l
D
E
t
t
t
t
ev
n
w
a
Co
M
te
t
rp
or
a
an
ag
em
en
A
d
es
se
ea
s:
ss
ar		 ic
in
ip
le
fo
Be
Pr
Pr
t
t
s
ac
e
c
s
r
Ye
s		 N
o		 Su
m
m
ar
y		 /
is
d
T
W
S
E
T
P
Ex
L
te
Co
ie
d
he
t
m
p
an
s,
an
re
as
on
s
fo
he
i
d
de
ia
io
t
t
r
sa
n
v
in
da
i
in
he
d
f
ire
Bo
D
te
t
to
a
g
en
m
s
ar
o
c
rs
,
ire
d
de
de
ire
ha
l
l
D
In
D
to
t
to
c
rs
an
p
en
n
c
rs
s
lso
b
i
de
by
he
in
i
da
t
te
t a
a
a
re
s
vo
nc
e
in
ip
le
d
fra
in
fro
d
isc
io
he
t
p
r
c
s a
n
re
m
us
s
ns
y
,
ha
l
l a
lso
le
he
in
d
fra
in
fro
t
t
s
av
e
m
ee
g
an
re
m
in
t
vo
(
)
I
V		 he
Co
b
l
is
he
d
f
fe
iv
in
H
t
ta
t
t
as
m
p
an
es
e
c
e a
cc
ou
n		 (
)
I
V		 g.
he
im
lem
io
f e
h
ic
l
To
t
ta
t
t
en
su
re
p
en
n
o
a
y
g
d
in
l c
l s
fo
fo
in
te
te
tro
te
sy
s
m
s a
n
rn
a
on
s
m
s
r e
n
rc
g
y		 he
ha
Co
te
t,
t
co
rp
or
a
m
an
ag
em
en
m
p
an
s
y
h
ic
l c
?
A
la
d
i
t
te
t
ts
e
a
or
p
or
a
m
an
ag
em
en
re
re
g
u
r a
u		 b
l
is
he
d
in
du
d
ta
t
es
ac
co
un
g
p
ro
ce
re
s a
n
ie
d
by
he
in
l a
d
i
i
Co
's
t
t
te
t u
t o
ca
rr
ou
m
p
an
rn
a
n
r
y
u		 in
l c
l p
du
d
la
d
te
tro
te
rn
a
on
ro
ce
re
s a
n
re
iss
io
d
C
A
?
P
to
co
m
m
ne
a		 l a
lso
in
ler
fo
h
ic
l
t
t
p
er
so
nn
e
re
m
a
o
n
a
r u
ne
a
du
lo
Em
t.
t a
co
n
c
p
y
ee
s m
ay
re
p
or
ny
h
ic
l c
du
he
ha
d
isc
d.
t
t
t
un
e
a
on
c
y
ve
ov
er
e
he
A
d
i
lar
ly
d
i
he
T
D
t
tm
t r
ts
t
u
ep
ar
en
eg
u
au
io
d
he
l
Co
's
t
ts
t
ts
m
p
an
op
er
a
ns
an
re
p
or
re
su
y
f
he
d
i
he
d
f
ire
he
Bo
D
T
t
t
to
t
to
o
au
ar
o
c
rs
lso
de
de
D
In
tm
t a
ts
t
ep
ar
en
re
q
ue
s
p
en
n
ire
iew
he
d
Cr
D
to
to
t
ts
c
rs
re
v
re
p
or
an
ow
e
h
lar
iew
he
H
T
W
(
)
ly
t
t
or
a
re
g
re
s
w
u
v
Co
's
f
in
ia
l s
ta
te
ts
m
m
(
)
V		 i
d
he
io
d
ic
l
ly
i
de
in
l a
d
D
Co
t
te
m
an
er
a
ro
v
rn
a
n		 (
)
V		 p
an
y
an
c
en
he
ha
b
l
is
he
d
la
d
h
ic
l
T
Co
ta
te
t
m
an
s e
s
re
e
a
p
y
p
p
l
in
in
in
i
te
tra
te
ty
ex
rn
a
g
p
ro
g
ra
m
s o
n
g
r		 p
y
lau
in
he
W
k
Ru
le
d
im
lem
d
t
te
c
se
s
or
s a
n
p
en
?
t
m
an
ag
em
en		 he
iv
in
in
fo
i
tra
ts
to
co
m
p
re
ns
e
g
r n
ew
re
cr
u
in
l
iz
he
h
ic
l c
te
t
t
te
t
rn
a
e
e
a
or
p
or
a
m
an
ag
em
en
in
ip
le
in
he
Co
's
l
d
t
tu
p
r
c
s
m
p
an
y
cu
re
an
im
lem
h
ic
l c
t e
t
te
t.
p
en
a
or
p
or
a
m
an
ag
em
en
he
Co
ig
la
d
h
ic
l
T
te
t
m
p
an
y
s
ns
re
e
a
is
io
i
h
d
l
ier
d
t
to
p
ro
ns
cu
s
m
er
s a
n
su
p
p
s a
n
v
w

59

Im
lem
io
(
N
1
)
ta
t
ta
tu
te
p
en
n
s
s
o		 D
ia
io
i
h
he
E
h
ic
l
t
t
t
t
ev
n
w
a
Co
M
te
t
rp
or
a
an
ag
em
en
ic
in
ip
le
fo
Be
Pr
Pr
t
t
s
ac
e
c
s
r
A
d
ss
es
se
ar
ea
s:		 Ye
s		 N
o		 Su
m
m
ar
y		 S
/
is
d
T
W
E
T
P
Ex
L
te
ie
d
he
Co
t
m
p
an
s,
an
re
as
on
s
fo
he
i
d
de
ia
io
t
t
r
sa
v
n
la
d
la
io
fo
h
ic
l
te
te
t
t
p
ro
m
o
s r
e
re
g
u
ns
r e
a
te
t.
co
rp
or
a
m
an
ag
em
en
I
I
I.		 lem
io
f
he
h
is
le
b
lo
in
Im
Co
's
ta
t
t
t
p
en
n
o
m
p
an
g
y
w
w
te
sy
s
m		 de
ia
io
N
t
o
n.
v
(
)
I		 he
b
l
is
he
d
H
Co
t
ta
te
as
m
p
an
y
es
co
nc
re		 (
)
he
ha
b
l
is
he
d
I
T
Co
ta
te
m
p
an
y
s e
s
co
nc
re
h
is
le
b
lo
in
d
d
d
ha
t
te
re
ve
w
w
g
an
w
ar
sy
s
m
a
n
a		 h
is
le
b
lo
in
d
d
in
he
t
te
t
re
w
w
g
an
w
ar
sy
s
m
ien
in
ha
l
in
la
d
ig
t r
t
co
nv
en
ep
or
g
c
nn
e
p
ce
an
as
s
n
an
,		 "E
h
ic
l
Co
Op
in
M
t
te
t
t
a
rp
or
a
an
ag
em
en
er
a
g
ia
ic
i
h
he
te
to
te
t
t
ap
p
ro
p
r
p
er
so
n
c
om
m
un
a
w		 du
d
de
f
du
iv
ly
Pr
Co
Co
"
t
to
t
oc
e
re
s a
n
o
n
c
a
c
e
d
?
ac
cu
se		 h
ic
l c
du
i
de
ien
t u
t
t,
t
p
re
ve
n
ne
a
on
c
p
ro
v
c
on
ve
n
in
ha
ls,
d
ig
d
ia
t
te
re
p
or
g
c
nn
e
an
as
s
ne
ap
p
ro
p
r
lo
ic
i
h
he
d.
to
te
t
t
m
60 (
)
I
I		 he
b
l
is
he
d
da
d
in
H
Co
t
ta
ta
t
as
m
p
an
es
s
n
r
op
er
a
g
y		 em
p
y
ee
s
c
om
un
a
w
a
cc
us
e
(
)
he
ha
im
lem
d
in
ig
io
I
I
T
Co
te
t
t
m
p
an
s
p
en
ve
s
a
n
y
du
fo
in
ig
in
d
d
t
t
te
p
ro
ce
re
s
r
ve
s
a
g
re
p
or
ca
se
s a
n		 du
d
f
i
de
ia
l
i
in
he
t
ty
t
p
ro
ce
re
s a
n
co
n
n
m
ea
su
re
s
la
d
f
i
de
ia
l
i
ha
ism
?
te
t
ty
re
co
n
n
m
ec
n		 k
le
fo
ha
d
l
in
d
W
Ru
te
or
s
r
n
g
re
p
or
lp
ic
t
m
a
ra
c
es
(
)
I
I
I		 he
Co
do
d
fo
in
H
t
te
te
t
as
m
p
an
y
a
p
m
ea
su
re
s
r p
ro
c
g		 (
)
he
Co
is
i
b
le
fo
in
he
I
I
I
T
te
t
t
m
p
an
y
re
sp
on
s
r p
ro
c
g
he
h
is
le
b
lo
in
im
t
t
t
tre
tm
t o
er
a
g
a
s
p
ro
p
er
a
en
r
w
w
l
ia
io		 h
is
le
b
lo
in
he
d
ha
l
l
t
t
er
p
ro
ce
ss
an
e
s
w
w
w
in
in
he
f
i
de
ia
l
i
f w
h
is
le
b
lo
?
ta
t
re
n		 ta
t
t
ty
t
m
a
c
on
n
o
w
er
s
d
he
f
he
ir
he
t
te
ts
t
ts
to
te
t
t
an
c
on
n
o
re
or
ro
c
m
p
p
fro
in
ia
d
isc
ip
l
in
io
te
t
m
ap
p
ro
p
r
ar
y
ac
ns
I
V		 ha
in
in
fo
io
d
isc
lo
En
t
nc
g
rm
a
n
su
re		 ia
l
d
isc
N
te
o
m
a
r
re
p
an
cy
(
)
I		 he
d
isc
lo
d
i
in
i
in
ip
le
d
H
Co
t
ts
te
ty
as
m
p
an
se
g
r
p
r
c
s a
n
y		 he
ha
b
l
is
he
d
he
h
ic
l
T
Co
"E
Co
ta
t
t
te
m
p
an
s e
s
a
rp
or
a
y
i
bs
i
d
M
ke
O
bs
io
Po
to
ts
te
t
t
t
p
ro
g
re
ss
o
n
w
e
a
n
ar
er
va
n
s		 M
Be
Pr
ic
Pr
in
ip
le
" a
d
d
isc
lo
d
t
t
t
an
ag
em
en
s
ac
e
c
s
n
se
Sy
?
te
s
m		 he
he
ke
bs
io
d
M
O
Po
Sy
t
t
t
t
t
te
m
o
n
ar
er
va
n
s
s
m
a
n
Co
's
bs
i
te
m
an
w
e
V f
he
Co
ha
b
l
is
he
d
h
ic
l
Co
I
E
M
t
ta
t
te
m
p
an
y
s e
s
a
rp
or
a
an		 ag
em
en		 in
Pr
t		 p
y
ip
le
in
da
i
h
"E
h
ic
l
Co
M
t
t
te
c
s
ac
co
r
nc
e w
a
rp
or
a
an
ag		 ic
in
ip
le
Be
Pr
Pr
t
t
t
em
en
s
ac
e
c
s
fo
/
is
d
ie
de
i
be
d
i
f
fe
T
W
S
E
T
P
Ex
L
Co
",
te
r
m
p
an
s
sc
r
re
nc		 i
t
e w		 h
he
t
p		 in
ip
le
d
im
lem
io
N
ta
t
ta
tu
r
c
s a
n
p
en
n
s
s:
on
e.
lem
io
(
)
Im
N
1
ta
t
ta
tu
te
p
en
n
s
s
o		 ia
io
i
h
he
h
ic
l
D
E
t
t
t
t
ev
n
a
w
Co
M
te
t
rp
or
a
an
ag
em
en
A
d		 ic
in
ip
le
fo
Be
Pr
Pr
t
t
s
ac
e
c
s
r
ss
es
se		 ar
ea
s:
Ye		 N
s
o		 Su
m
m
ar
y		 S
/
is
d
T
W
E
T
P
Ex
L
te
ie
d
he
Co
t
m
p
an
s,
an
re
as
on
s
fo
he
i
d
de
ia
io
t
t
r
sa
v
n
V
I.
O
he
im
in
fo
t
ta
t
t
r
p
or
n
rm
a		 io
fa
i
l
i
be
de
d
to
ta
te
t
te
ta
n
c
a
r u
n
rs
n		 in
f
t
g
o		 he
Co
's
im
lem
io
f e
h
ic
l c
ta
t
t
te
m
p
an
y
p
en
n
o
a
or
p
or
a
m		 (
Su
h
he
t:
t
ta
tu
an
ag
em
en
c
as
s
s
f
he
f
fo
Co
's
t
ts
o
m
p
an
y
e
r		 iew
d
i
in
ip
le
Pr
to
t
ts
re
v
an
co
rre
c
c		 fo
H
s
r		 in
ic
)
Bu
Pr
N
t
t
on
es
s
es
s
ac
es
on
e.

Note 1: Regardless of whether "Yes" or "No" was selected, explanation shall be provided in the Summary column.

61

  • (VII) If the Company has established corporate governance principles and related bylaws, their query methods shall be disclosed: The Company has established the Corporate Governance Best Practice Principles and related regulations. Please refer to the Company's website under Investor Relations/Corporate Governance/Related Regulations (www.sunon.com.tw).
  • (VIII) Critical information that can enhance the understanding of the Company's corporate governance practices shall also be disclosed: Please refer to page 32 of the Annual Report (IV. Implementation of corporate governance).

(IX) Status of implementation of internal control system 1. Internal Control System Statement

Sunonwealth Electric Machine Industry Co., Ltd. Internal Control System Statement

Date: March 14, 2019

The Company states the following with regard to its internal control system during fiscal year 2018, based on the findings of a self-evaluation:

  • I. The Company is fully aware that the establishment, implementation and maintenance of its internal control system is the responsibility of the Board of Directors and managerial officers. In this regard the Company has already established such a system aimed at providing reasonable assurance of the achievement of objectives in the effectiveness and efficiency of operations (including profits, performance, and safeguard of asset security), reliability of reporting, and compliance with applicable laws and regulations.
  • II. There are inherent limitations to even the most well-designed internal control system. As such, an effective internal control system can only reasonably ensure the achievement of the aforementioned goals. Moreover, the operating environment and situation may change and impact the effectiveness of the internal control system. However, self-supervision measures were implemented within the Company's internal control policies to facilitate immediate rectification once procedural flaws have been identified.
  • III. The Company judges the design and operating effectiveness of its internal control system based on the criteria provided in the Regulations Governing the Establishment of Internal Control Systems by Public Companies (hereinafter referred to as the "Regulations"). The internal control system judgment criteria adopted by the Regulations divide internal control into five elements based on the process of management control: 1. Control environment, 2. Risk assessment, 3. Control operation, 4. Information and communication, and 5. Monitoring. Each element further contains several items. For more information on the abovementioned items, please refer to the Regulations.
  • IV. The Company has evaluated the design and operating effectiveness of its internal control system according to the aforesaid criteria.
  • V. Based on the findings of the evaluation mentioned in the preceding paragraph, the Company believes that as of December 31, 2018 its internal control system (including its supervision and management of subsidiaries), encompassing internal controls for knowledge of the degree of achievement of operational effectiveness and efficiency objectives, reliability of reporting, and compliance with applicable laws and regulations, is effectively designed and operating, and reasonably assures the achievement of the above-stated objectives.
  • VI. This Statement will become a major part of the content of the Company's Annual Report and Prospectus, and will be made public. Any falsehood, concealment, or other illegality in the content made public will entail legal liability under Articles 20, 32, 171, and 174 of the Securities and Exchange Act.
  • VII. This Statement has been passed by the Board of Directors Meeting of the Company held on

  1. If the Company engages an accountant to examine its internal control system, disclose the CPA audit report: None.

  2. (X) Penalty on the Company and its personnel or punishment imposed by the Company on personnel in violation of internal control system regulations, major deficiencies and improvement in the past year and up to the date of report: None.

  3. (XI) Important resolutions adopted in shareholders' meeting and Board of Directors' meeting in the past year and up to the date of report

  4. Resolutions of all shareholders in attendance in the general shareholders' meeting on

May 30, 2018 and the status of implementation

Resolution Implementation status
Passed the 2017 Business Report and
Financial Statements.		 Passed and ratified the 2017 Business Report
and Financial Statements.
Passed the Company's 2017 earnings
distribution proposal.		 Established June 26, 2018 as the ex-dividend
date and completed all earnings distribution
on the issuance date on July 12, 2018. (Cash
dividend per share was NT\$2.3)
  1. Important resolutions adopted by the Board of Directors in 2018 and up to the publication of the Annual Report on April 21, 2019
Date of meeting Resolution
February 7, 2018 II.
Passed the Company's 2018 Business Plan.
III.
Passed the Company's budget for donations in 2018.
IV.
Passed the proposal for appointments.
V.
Passed the Company's 2017 year-end bonus for managerial
officers.
March 12, 2018 I.
Passed the 2017 Business Report and Financial Statements.
II.
Passed the Company's 2017 remuneration distribution proposal for
board members and employees.
III.
Passed the Company's 2017 earnings distribution proposal.
IV.
Passed the proposal for the time and location of the 2018 general
shareholders' meeting.
V.
Passed the 2017 of Internal Control System Statement.
VI.
Passed the proposal for the election of the Company's Directors.
VII.
Passed the proposal for the nomination and review of candidates
for Directors.
VIII.Passed the Company's 2017 employee remuneration for managerial
officers.
April 19, 2018 I.
Reported the status of nomination of Directors (including
Independent Directors).
II.
Passed the proposal to waive the non-compete clause for newly
Date of meeting Resolution
appointed Directors.
III. Passed the proposal for appointments.
May 4, 2018 I. Passed the proposal for endorsement and guarantee for Sunon
Electronic (Bei Hai) Co., Ltd.
May 30, 2018 I. Passed the election of the Director Yin-Su Hong (representative of
Yo Yuan Investment Corporation) as the Chairman.
II. Passed the appointment of new members of the Remuneration
Committee
August 8, 2018 I. Passed the merger of the Company and the Company's wholly
owned subsidiary company Sunon SMT Co., Ltd.
November 2, 2018 I. Passed the proposal for appointments.
II. Passed the 2019 Audit Plan.
III. Passed the proposal for endorsement and guarantee for Sunon
Electronic (Bei Hai) Co., Ltd.
January 22, 2019 I. Passed the Company's 2019 Business Plan.
II. Passed the Company's 2018 year-end bonus for managerial
officers.
Date of meeting Resolution
March 14, 2019 I.
Passed the 2018 Business Report and Financial Statements.
II.
Passed the Company's 2018 remuneration distribution proposal
for board members and employees.
III.
Passed the Company's 2018 earnings distribution proposal.
IV.
Passed the proposal for the time and location of the 2019 general
shareholders' meeting.
V.
Passed the amendment of the "Articles of Incorporation".
VI.
Passed the Company's 2018 Internal Control System Statement.
VII.
Passed the amendments of the "Procedures for Acquisition or
Disposal of Assets".
VIII.Passed the amendments of the "Procedures for Loaning of Funds
to Others".
IX.
Passed the amendments of the "Procedures for Making
Endorsements and Guarantees".
X.
Passed the amendments of the "Corporate Governance Best
Practice Principles".
XI.
Passed the Company's budget for donations in 2019.
XII.
Passed the establishment of the "Standard Operating Procedures
for Requests Filed by Directors".
XIII.Passed the Company's 2018 employee remuneration for
managerial officers.
  • (XII) Dissenting or qualified opinion of Directors or Supervisors against an important resolution passed by the Board of Directors that is on record or stated in a written statement in the past year and up to the date of report: None.
  • (XIII) Resignation and dismissal of professional managerial officers related to the financial report including Chairman, President, Chief Accounting Officer, Chief Financial Officer, Chief R&D Officer and Chief Internal Auditor, in the past year and up to the date of report: None.

V. Information on fees to CPA

(I) When the non-audit fees paid to the Certified Public Accountants, their firm, and its affiliated companies account for one quarter or more to the audit fees, the amount of audit fees and non-audit fees and the content of non-audit service must be disclosed:

Name of the CPA
Firm		 Name of CPAs Duration of audit Remarks
Crowe Horwath
(TW)		 Ching-Lin Li Shu-Man Tsai) 2018.1.1-2018.12.31

Table on the range of fees of the CPA

Unit: thousand NT\$

Professional Fee
Amount range		 Audit fees Non-audit fees Total
1 Below NT\$2,000,000
2 NT\$2,000,000 (inclusive) - NT\$4,000,000
3 NT\$4,000,000 (inclusive) - NT\$6,000,000
4 NT\$6,000,000 (inclusive) - NT\$8,000,000
5 NT\$8,000,000 (inclusive) - NT\$10,000,000
6 Over NT\$10,000,000 (inclusive)

Information on fees to CPA

Unit: thousand NT\$

Name of
CPAs		 Audit
fees		 Non-audit fees
Name of the
CPA Firm		 Sy
de
ste
sig
m
n		 re
Bu
gi
str
sin
ati
es
on
s		 re
Hu
so
m
ur
an
ce
s		 (N
Ot
ot
he
e 2
rs
)		 Su
bt
ot
al		 CPA's
duration of
audit		 Remarks
Crowe
Horwath
(TW)		 Ching-Lin
Li
Shu-Man
Tsai		 3,345 0 0 0 205 205 2018.1.1-
2018.12.31		 Non-audit fees included
typing fees and seal
certification fees for
financial reports.

Note 1: If the Company has replaced the CPAs or accounting firm in the current fiscal year, the audit period should be listed separately, and the reason for replacement should be stated in the "remark" column. Information regarding the audit and non-audit fees paid should also be disclosed in order.

  • Note 2: Non-audit fees shall be listed by service item. If the Others column under Non-Audit Fees reaches 25% of the total non-audit fees, the service items associated with this column shall be listed in the Remarks column.
  • (II) If the Company changes accounting firm and the amount of audit fee paid in the year of change is less than that in the year before, information shall be disclosed: None.

  • (III) If the audit fee is more than 15% less than that paid in the previous year, information shall be disclosed: None.

  • VI. Information on replacement of CPAs: None.

  • VII. The Chairman, President and Financial or Chief Finance or Accounting Officer of the Company who had worked for the Independent CPA or the affiliate in the past year: None.

VIII. Share transfer by Directors, Supervisors, managers and shareholders holding more than 10% interests and changes to share pledging by them

2018 2019 up to April 21
Title
(Note 1)		 Name Increase
(decrease) in
shares held		 Increase
(decrease) in
shares pledged		 Increase
(decrease) in
shares held		 Increase
(decrease) in
shares pledged
Director Yo Yuan Investment
Corporation
Institutional shareholder
representative:
Yin-Su Hong
Fu-Ing Hong Chen
Ching-Shen Hong
Li-Ju Chen		 23,000 - - -
Director Nice Enterprise Co., Ltd.
Institutional shareholder
representative:
Ching-Liang Chen		 (500,000) - - (1,000,000)
Director Tseng-Cheng Lin - - - -
Independent
Director		 Chun-Hao Xin - - - -
Independent
Director		 Mei-Hsiang Pai - - - -
Independent
Director		 Chih-Ming Chen - - - -
Chairman Yin-Su Hong - - - -
President Ching-Shen Hong - 2,000,000 - -
Vice President
and Director of the
Finance
Department		 William Li - - - -
President of the
Business
Department		 Chien-Yuan Tseng - - - -
President of the
Business
Department		 Hung-Chuan Peng - - - -
Vice President of
the Business
Department		 Chen-Hsueh Li - - - -
Vice President of
the Business
Department		 Tsui-Wen Hsiao - - - -
Vice President of
the Business
Department		 Shao-Ming Juan - - - -

(I) Change in the shares held by the Directors, Supervisors, managerial officers and major shareholders

2018 2019 up to April 21
Title Name Increase Increase Increase Increase
(Note 1) (decrease) in (decrease) in (decrease) in (decrease) in
shares held shares pledged shares held shares pledged
Vice President of
the Business Chin-Tzu Wu - - - -
Department
Vice President of
the Business Cheng-Hsin Su - - 4,000 -
Department

Note 1: Shareholders with over 10% of the Company's total share shall be classified as major shareholders and listed separately.

Note 2: Information regarding the transfer of shares or shares pledged to the counterparty being the related party shall be filled in the following Table.

(II) Share transfer information:

Share equity transfer information for Directors, Supervisors, managerial officers, and shareholders with the shareholding ratio of 10% or greater of Sunonwealth Electric Machine Industry Co., Ltd.

Name Reason for
transfer of
shares		 Transaction
date		 Transaction counterparty Relationship between
the counterparty and
the Company, its
Directors, Supervisors
and shareholders with
shareholding
percentage exceeding
10%		 Number of
shares		 Transaction
price
Fu-Ing
Hong Chen		 Gift 2018/11/30 Sunonwealth Charity
Foundation		 None 300,000 -
Fu-Ing
Hong Chen		 Gift 2018/11/30 Sunonwealth Charity
Foundation		 None 300,000 -

(III) Share pledge information:

Share pledge information for Directors, Supervisors, managerial officers, and shareholders with the shareholding ratio of 10% or greater of Sunonwealth Electric Machine Industry Co., Ltd.

Name Reason
for
of
shares		 Date of
Transaction
pledging
change
counterparty		 Relationship between the
counterparty and the
Company, its directors,
supervisors and
shareholders with
shareholding percentage
exceeding 10%		 Number of
shares		 Shareholding
ratio		 Pledge
ratio		 Pledge
(redemption)
amount
Ching
Shen Hong		 Pledged
shares		 2018/10/17 E-Sun Bank
Qixian Branch		 - 2,000,000 0.8 0.8 -
Date: April 21, 2019
Name Shares held by the
person		 Shares held by
spouse and
underage children		 sh
arr
ar
no
eh
an
To
m
ol
ge
tal
in
din
m
ee
en
g b
t
y		 Titles, names and
relationships between
top 10 shareholders
(related party, spouse,
or kinship within the
second degree).
(Note 3)		 Re
m
(Note 1) Nu
m
be
r o
f s
ha
re
s		 Sh
ar
ra
eh
tio
ol
din
g		 Nu
m
be
r o
f s
ha
re
s		 Sh
ar
ra
eh
tio
ol
din
g		 Nu
m
be
r o
f s
ha
re
s		 Sh
ar
eh
ol
din
g r
ati
o		 (o
r n
Ti
tle
am
e)		 Re
lat
ion
sh
ip		 ark
s
Guang Sheng Investment
Corporation		 20,100,000 8.01% - - - - Yo Yuan
Investment
Corporation		 Sh
are
ho
lde
r		 -
Chairman of the Board:
Fu-Ing Hong Chen		 Yin-Su Hong Sp
ou
se		 -
Yo Yuan Investment
Corporation		 Representative of
Guang Sheng
Investment
Corporation		 Sh
are
ho
lde
r		 -
Representative:
Fu-Ing Hong Chen		 14,825,000 5.91% - - - - Yin-Su Hong Sp
ou
se		 -
Representative of
Guang Sheng
Investment
Corporation		 Sh
are
ho
lde
r		 -
Fu-Ing Hong Chen 14,670,000 5.85% 10,457,000 4.17% - - Yo Yuan
Investment
Corporation		 Sh
are
ho
lde
r		 -
Yin-Su Hong Sp
ou
se		 -

IX. Information on the relationship between any of the top ten shareholders

Name Shares held by the
person		 Shares held by
spouse and
ge
underage children		 Titles, names and
relationships between
top 10 shareholders
(related party, spouse,
or kinship within the
second degree).
(Note 3)		 Re
m
(Note 1) Nu
m
be
r o
f s
ha
re
s		 Sh
ar
ra
eh
tio
ol
din
g		 Nu
m
be
r o
f s
ha
re
s		 Sh
ar
ra
eh
tio
ol
din
g		 Nu
m
be
r o
f s
ha
re
s		 Sh
ar
eh
ol
din
g r
ati
o		 (o
r n
Ti
tle
am
e)		 Re
lat
ion
sh
ip		 ark
s
Representative of
Guang Sheng
Investment
Corporation		 Sp
ou
se		 -
Yin-Su Hong 10,457,000 4.17% 14,670,000 5.85% - - Yo Yuan
Investment
Corporation		 Sp
ou
se		 -
Fu-Ing Hong Chen Sp
ou
se		 -
Alliance SOA Global
Investment Management
under the custody of
HSBC		 9,577,000 3.82% - - - - - - -
Capital International
investment account under
the custody of the Bank
of Taiwan		 5,841,000 2.33% - - - - - - -
Aberdeen Asia Small
Business Investment
Trust under the custody
of HSBC		 5,172,000 2.06% - - - - - - -
TransGlobe Life
Insurance Inc.		 4,203,000 1.68% - - - - - - -
China Securities
Investment Trust FOF
investment account under
the custody of HSBC		 4,080,000 1.63% - - - - - - -
Nice Enterprise Co., Ltd. 4,006,813 1.60% - - - - - - -

Note 1: All the top 10 shareholders should be listed. For institutional shareholders, their names and the name of their representatives should be listed separately.

Note 2: Shareholding percentage is calculated separately based on the number of shares held in the name of the person, his/her spouse and minors, and others.

Note 3: Relationships between the aforementioned shareholders, including institutional and natural person shareholders should be disclosed based on the financial reporting standards used by the issuer.

X. The shareholding of the Company, Director, Supervisor, Managerial Officers and an enterprise that is directly or indirectly controlled by the Company in the invested company and the calculation of the consolidated shareholding percentage

December 31, 2018; Unit: share; %
Investee
(Note)		 Investment by the
Company		 enterprises Investments by
Directors,
Supervisors,
managerial officers
and directly or
indirectly controlled		 Comprehensive
investment
Number of
shares		 Sharehold
ing ratio		 Number
of shares		 Sharehold
ing ratio		 Number of
shares		 Shareholdi
ng ratio
Sunon Inc. (United States) 150,000 100.00 - - 150,000 100.00
Sunon SAS (France) 50,000 100.00 - - 50,000 100.00
SUNON DEUTSCHLAND
GMBH		 - - - 100.00 - 100.00
Sunon Corporation (Japan) 4,400 100.00 - - 4,400 100.00
Sunonwealth (Hong Kong) 799,999 99.99 1 0.01 800,000 100.00
SUCCESSFUL CENTURY 33,880,000 100.00 - - 33,880,000 100.00
Sunon Electronic (Kunshan)
Co., Ltd.		 - - - 100.00 - 100.00
BVI Sunon International
Limited		 32,840,000 100.00 - - 32,840,000 100.00
Sunon Electronic (Foshan)
Co., Ltd.		 - - - 100.00 - 100.00
Sunon Electronic (Bei Hai)
Co., Ltd.		 - - - 100.00 - 100.00

Consolidated shareholding percentage

Note: Long-term investment calculated by equity method.

D. Funding Status

I. Source of Capital Shares

(I) Capital Formulation Process

Unit: Share, NTD
Ye Iss Authorized Capital Paid-Up Capital Remarks
ar/
m
on
th		 ue
d P
ric
e		 Number of
shares		 Amount Number of
shares		 Amount Source of
Capital
Shares		 Subscriptions
paid with
property other
than cash		 Other
20
03
.03		 10 200,000,000 2,000,000,000 180,909,906 1,809,099,060 Converted
from
corporate
bonds		 None Note
1
20
03
.08		 10 240,000,000 2,400,000,000 197,443,061 1,974,430,610 Recapitaliza
tion of
retained
earnings		 None Note
2
20
03
.08		 10 240,000,000 2,400,000,000 196,000,061 1,960,000,610 Treasury
stock
liquidation		 None Note
3
20
05
.10		 10 240,000,000 2,400,000,000 199,860,062 1,998,600,620 Recapitaliza
tion of
retained
earnings		 None Note
4
20
06
.08		 10 300,000,000 3,000,000,000 205,765,864 2,057,658,640 Recapitaliza
tion of
retained
earnings		 None Note
5
20
07
.04		 10 300,000,000 3,000,000,000 206,990,989 2,069,909,890 Converted
from
corporate
bonds		 None Note
6
20
07
.07		 10 300,000,000 3,000,000,000 210,011,908 2,100,119,080 Converted
from
corporate
bonds		 None Note
7
20
07
.09		 10 300,000,000 3,000,000,000 223,006,342 2,230,063,420 Recapitaliza
tion of
retained
earnings		 None Note
8
20
07
.10		 10 300,000,000 3,000,000,000 228,854,472 2,288,544,720 Converted
from
corporate
bonds		 None Note
9
Ye Iss Authorized Capital Paid-Up Capital Remarks
ar/
m
on
th		 ue
d P
ric
e		 Number of
shares		 Amount Number of
shares		 Amount Source of
Capital
Shares		 Subscriptions
paid with
property other
than cash		 Other
20
08
.0
1		 10 300,000,000 3,000,000,000 231,306,446 2,313,064,460 Converted
from
corporate
bonds		 None Note
10
20
08
.04		 10 300,000,000 3,000,000,000 230,283,446 2,302,834,460 Treasury
stock
liquidation		 None Note
11
20
08
.09		 10 300,000,000 3,000,000,000 245,123,935 2,451,239,350 Recapitaliza
tion of
retained
earnings		 None Note
12
20
08
.10		 10 300,000,000 3,000,000,000 245,798,630 2,457,986,300 Converted
from
corporate
bonds		 None Note
13
20
09
.02		 10 300,000,000 3,000,000,000 241,265,630 2,412,656,300 Treasury
stock
liquidation		 None Note
14
20
09
.02		 10 300,000,000 3,000,000,000 244,337,901 2,443,379,010 Converted
from
corporate
bonds		 None Note
15
20
09
.03		 10 300,000,000 3,000,000,000 245,006,573 2,450,065,730 Converted
from
corporate
bonds		 None Note
16
20
09
.07		 10 300,000,000 3,000,000,000 245,307,776 2,453,077,760 Converted
from
corporate
bonds		 None Note
17
20
09
.08		 10 300,000,000 3,000,000,000 257,524,671 2,575,246,710 Recapitaliza
tion of
retained
earnings		 None Note
18
20
09
.10		 10 300,000,000 3,000,000,000 257,847,455 2,578,474,455 Converted
from
corporate
bonds		 None Note
19
20
10
.0
1		 10 300,000,000 3,000,000,000 257,929,732 2,579,297,320 Converted
from
corporate
bonds		 None Note
20
Authorized Capital Paid-Up Capital Remarks
Number of
shares		 Amount Number of
shares		 Amount Source of
Capital
Shares		 Subscriptions
paid with
property other
than cash		 Other
20
12
.08		 10 300,000,000 3,000,000,000 250,929,732 2,509,297,320 Treasury
stock
liquidation		 None Note
21

Note 1: Approved in Shou-Shang No. 09201090890 Letter of the Ministry of Economic Affairs dated March 28, 2003. Note 2: Approved in Shou-Shang No. 09201259550 Letter of the Ministry of Economic Affairs dated August 29, 2003. Note 3: Approved in Shou-Shang No. 09201259550 Letter of the Ministry of Economic Affairs dated August 29, 2003. Note 4: Approved in Shou-Shang No. 09401206610 Letter of the Ministry of Economic Affairs dated October 26, 2005. Note 5: Approved in Shou-Shang No. 09501191390 Letter of the Ministry of Economic Affairs dated August 28, 2006. Note 6: Approved in Shou-Shang No. 09601086420 Letter of the Ministry of Economic Affairs dated April 24, 2007. Note 7: Approved in Shou-Shang No. 09601151490 Letter of the Ministry of Economic Affairs dated July 4, 2007. Note 8: Approved in Shou-Shang No. 09601230910 Letter of the Ministry of Economic Affairs dated September 19, 2007. Note 9: Approved in Shou-Shang No. 09601251720 Letter of the Ministry of Economic Affairs dated October 16, 2007. Note 10: Approved in Shou-Shang No. 09601321820 Letter of the Ministry of Economic Affairs dated January 4, 2008. Note 11: Approved in Shou-Shang No. 09701084940 Letter of the Ministry of Economic Affairs dated April 11, 2008. Note 12: Approved in Shou-Shang No. 09701226650 Letter of the Ministry of Economic Affairs dated September 5, 2008. Note 13: Approved in Shou-Shang No. 09701262270 Letter of the Ministry of Economic Affairs dated October 17, 2008. Note 14: Approved in Shou-Shang No. 09801016130 Letter of the Ministry of Economic Affairs dated February 4, 2009. Note 15: Approved in Shou-Shang No. 09801016130 Letter of the Ministry of Economic Affairs dated February 4, 2009. Note 16: Approved in Shou-Shang No. 09801052300 Letter of the Ministry of Economic Affairs dated March 18, 2009. Note 17: Approved in Shou-Shang No. 09801161450 Letter of the Ministry of Economic Affairs dated July 24, 2009. Note 18: Approved in Shou-Shang No. 09801183550 Letter of the Ministry of Economic Affairs dated August 13, 2009. Note 19: Approved in Shou-Shang No. 09801244400 Letter of the Ministry of Economic Affairs dated October 21, 2009. Note 20: Approved in Shou-Shang No. 09901001160 Letter of the Ministry of Economic Affairs dated January 8, 2010. Note 21: Approved in Shou-Shang No. 10101182680 Letter of the Ministry of Economic Affairs dated August 31, 2012. Year/month Issued Price

Note 1: Information of the current year up to the publication date of the annual report shall be provided.

Note 2: For any capital increase, the effective (approval) date and the document number shall be added.

Note 3: Shares traded below par value shall be indicated in a clear manner.

Note 4: Capital increase by currency debts or technology shall be stated and the type and amount of assets involved in such capital increase shall be noted.

Note 5: Private fundraising shall be specified in a prominent manner.

(II) Categories of outstanding shares

April 21, 2019

Authorized Capital
Category of
Shares		 Outstanding Shares
(Listed)		 Unissued shares Total
300,000,000		 Remarks
Registered
Common Shares		 250,929,732 49,070,268 -

Note: Please indicate whether the shares are issued by a company listed on the Taiwan Stock Exchange (TWSE) or the Taipei Exchange (TPEx) (Shares with restrictions on trading on the TWSE or those traded on TPEx shall be noted).

(III) Information on shelf registration: Not applicable.

II. Shareholders

April 21, 2019

Shareholders Foreign
Government Financial Other institutions Total
institutions institutions corporations and Individuals
Quantity foreigners
Persons 2 8 88 123 29,884 30,105
Shares Held
(Shares)		 3,009 6,302,000 52,566,252 62,285,964 129,772,507 250,929,732
Shareholding
Percentage
(%)		 0.00 2.51 20.95 24.82 51.72 100.00

Note: Companies primarily listed on the TWSE or the TPEx shall disclose the proportion of their shares held by investors from Mainland China. Investors from Mainland China refer to natural persons, legal persons, organizations, institutions or companies in areas other than Taiwan and Mainland China that are invested by persons of such identity as defined in Article 3 of the Regulations Governing Investment of Mainland Chinese in Taiwan.

April 21, 2019
Number of Shareholding
Shareholding Classification Shareholders Shares Held (Shares) Percentage
1 to 999 12,912 1,241,795 0.50 %
1,000 to 5,000 13,688 28,447,820 11.34 %
5,001 to 10,000 1,904 15,179,991 6.05 %
10,001 to 15,000 518 6,604,819 2.63 %
15,001 to 20,000 345 6,427,596 2.56 %
20,001 to 30,000 263 6,763,890 2.70 %
30,001 to 40,000 114 4,171,312 1.66 %
40,001 to 50,000 75 3,495,488 1.39 %
50,001 to 100,000 135 9,987,908 3.98 %
100,001 to 200,000 58 8,220,921 3.28 %
200,001 to 400,000 37 10,315,641 4.11 %
400,001 to 600,000 16 8,069,199 3.22 %
600,001 to 800,000 9 6,313,487 2.51 %
800,001 to 1,000,000 3 2,584,000 1.03 %
More than 1,000,001 28 133,105,865 53.04 %
Total 30,105 250,929,732 100.00%

III. Shareholding distribution status

Preferred shares: None.

IV. List of major shareholders

April 21, 2019
Shares
Name of major shareholder		 Shares Held
(Shares)		 Shareholding
Percentage
Kuang Sheng Investment Development Co., Ltd. 20,100,000 8.01%
You Yuan Investment Co., Ltd. 14,825,000 5.91%
Fu-Ing Hong Chen 14,670,000 5.85%
Yin-Su Hong 10,457,000 4.17%
Alliance SOA Global Investment Management under
the custody of HSBC		 9,577,000 3.82%
Capital International investment account under the
custody of the Bank of Taiwan		 5,841,000 2.33%
Aberdeen Asia Small Business Investment Trust
under the custody of HSBC		 5,172,000 2.06%
TransGlobe Life Insurance Inc. 4,203,000 1.68%
China Securities Investment Trust FOF investment
account under the custody of HSBC		 4,080,000 1.63%
Nice Enterprise Co., Ltd. 4,006,813 1.60%
Year As of March 31,
2017 2018 2019
Item (Note 8)
Market price Highest 70.60 61.50 41.35
per share Lowest 26.75 31.45 34.80
(Note 1) Average 45.10 45.10 38.31
Net value per
share		 Before distribution 16.50 16.50 -
(Note 2) After distribution 14.20 - -
Earnings per
share		 Weighted average
number of shares
(in thousands)		 250,930 250,930 250,930
Earnings per share
(Note 3)		 2.62 2.41 0.20
Cash dividends 2.30 (Note 9)
2.00		 -
Dividend per Earnings
Stock
distribution		 - - -
share
(NTD)		 dividends
Capital
surplus		 - - -
Cumulative unpaid
dividends
(Note 4)		 - - -
PE ratio
(Note 5)		 16.50 17.93 -
Return on
investment
analysis		 Price-dividend
ratio
(Note 6)		 18.79 21.61 -
Cash dividend
yield
(Note 7)		 5.32% 4.63% -

V. Market price per share, net worth, earnings, dividends, and the related information for the last two years

*If retained earnings or capital reserves were used for capital increase, the Company shall disclose market prices and cash dividends that were retroactively adjusted based on the number of shares after distribution.

  • Note 1: List the highest and lowest market price of common shares for each fiscal year and calculate the average market price for each fiscal year based on trading value and volume in each fiscal year.
  • Note 2: Please fill these rows based on the number of shares that have been issued at the end of the fiscal year and the distribution plan approved at the shareholders' meeting in the following fiscal year.
  • Note 3: If retroactive adjustments are required due to stock grants, the Company shall list the earnings per share before and after the adjustment.
  • Note 4: If there are any conditions in issuing equity securities that allow for unpaid out dividend for the year to be accumulated to subsequent years in which there is profit, the Company shall separately disclose the accumulated unpaid out dividend up to

that year.

Note 5: P/E Ratio = Average closing price for each share for the year/earnings per share

Note 6: P/D Ratio = Average closing price for each share for the year/cash dividend per share

  • Note 7: Cash dividend yield = cash dividends / average closing price per share for the year.
  • Note 8: Data on net asset value per share and earnings per share from the latest quarter that has been verified by CPAs up to the date of publication of this annual report shall be filled. For all other columns, the Company shall fill information for the current fiscal year until the publication date of this annual report.

The earnings per share for the first quarter of 2019 are provided by the Company. Note 9: The 2018 earning distribution case is to be approved by the shareholders' meeting.

VI. Dividend policy and implementation status

(I) Dividend policy established in the Articles of Incorporation

The Board of Directors shall, pursuant to Article 29 of the Articles of Incorporation, determine the distribution of dividends and formulate appropriate ratios of cash and stock dividends based on requirements for operations and capital expenditures. It shall file a proposal to the shareholders' meeting for approval. However, cash dividends shall not be lower than 20% of the distributed amount in the year.

  • (II) Proposed dividend distribution in the shareholders' meeting this year The Company's 2018 earnings distribution proposal was approved by the Board of Directors on March 14, 2019. The Company shall issue cash dividends of NT\$2.0 per share. The Board of Directors shall be authorized to establish an ex-dividend date.
  • (III) Any expected material changes to the dividend policy shall be explained. There are no material changes to the Company's dividend policy.
  • VII. The effects of the stock dividends proposed by the shareholders' meeting on the Company's business performances and earnings per share

The Company has no plans for granting stocks in this shareholders' meeting and it is not required to compile a financial forecast for 2019. Therefore, it does not have related estimates on the profit or loss, estimated earnings per share, or other mandatory items with which to evaluate the impact on the Company's business performance and earnings per share.

VIII.Remuneration of employees, Directors and Supervisors

(I) Quantity or scope of compensation for employees, Directors, And Supervisors as prescribed by the Articles of Incorporation

In the event the Company makes a profit during the fiscal year, it shall set aside no less than 2% of the profits as employee remuneration and no more than 5% as remuneration for Directors. However, a sum shall be set aside in advance to pay down any outstanding cumulative losses.

The employee, director and supervisor remuneration shall be distributed in the form of stock or cash. The distribution shall be approved with a majority vote at a meeting attended by more than two thirds of the Directors and shall be reported at the shareholders' meeting.

The distribution of employee remuneration in stocks or cash shall include employees of affiliated companies that meet the criteria specified in the Company Act.

(II) The basis for estimating the amount of employee, director, and supervisor remuneration, for calculating the number of shares to be distributed as employee remuneration, and the accounting treatment of the discrepancy, if any, between the actual distributed amount and the estimated figure, for the current period:

The Company appropriates remuneration for employees and Directors proportionally

based on the profitability. As the remuneration for employees and Directors are distributed in cash, the calculation of the number of shares is not required. In addition, there is no difference between the actual number of distributed funds and the estimated amount.

  • (III) Information on the distribution of employees' remuneration passed by the Board of Directors
    1. The distribution of remuneration for employees and Directors passed by the Board of Directors on March 14, 2019 is as follows: (no discrepancy with the estimated amount) Remuneration for employees – cash NT\$16,500,000 Remuneration for employees – stocks NT\$ 0 Remuneration for Directors NT\$9,500,000
    1. The proposed employee stock remuneration allocation as a ratio of the net income for the period and the total employee remuneration: 0
  • (IV) Actual appropriation of remuneration for employees, Directors and Supervisors in the previous year

The actual remuneration for employees - cash of NT\$17,500,000 distributed in the previous year was the same as the estimated amount in the proposal passed by the Board of Directors. The actual remuneration for Directors in cash of NT\$10,000,000 distributed in the previous year was the same as the estimated amount in the proposal passed by the Board of Directors.

  • IX. Buyback of Treasury Stock: None.
  • X. Corporate bond issuance status: None.
  • XI. Issuance of preferred stocks: None.
  • XII. Issuance of global depositary receipts (GDR): None.
  • XIII.Exercise of employee stock option plan (ESOP): None.
  • XIV.Restricted stock awards: None.
  • XV. Mergers, acquisitions or issuance of new shares for acquisition of shares of other companies: None.
  • XVI.Implementation of capital allocation plan: None.

E. Business overview

I. Business activities

  • (I) Business scope
    1. Main businesses
    2. (1) Cooling fans, cooling modules, and drum fans
    3. (2) Related components for fans
    4. (3) Large industrial ceiling fans
    1. Proportion of major business activities
Business category Proportion of 2018
revenue
DC cooling fans, cooling modules, and drum fans 84.09%
AC cooling fans 8.65%
Materials and components 7.26%
Total 100.00%

3 The Company's current products

(1) Fans

DC cooling fans, drum fans

AC cooling fans, drum fans

  • EC fans
  • Mighty Mini Fan

High-grade IP protection fan

Explosion prevention fans

(2) Motors

DC automotive brushless motor

EC high-efficiency motor

(3) Fan Tray products

(4) Cooling module

(5) Green building ventilation fan/Flow2 One-AHR ventilation fan

(6) High-volume low-speed (HVLS) large industrial ceiling fans

  1. New products under development

(1) Low-noise and low-vibration DC fan product development

  • (2) Energy efficient high-volume low-speed (HVLS) large industrial ceiling fans
  • (3) High-efficiency large EC fans

(4) High-power energy-efficient power motor development

(5) Next-generation Flow2 One-AHR ventilation fan

(II) Industry Overview

  1. Current trends and outlook of the industry

As the computing and networking functions of electronic, communication, and

portable products continue to increase, the temperature of these products during use also continues to increase. Under such trends, products have become increasingly compact and equipped with powerful display and processing capacity. The consumers' demand and product development trends have set the stage for the greatest opportunities in the heat dissipation application industry. In addition, the rise of social network websites, ecommerce, communication software, and virtual reality devices in recent years has brought forth strong demand for servers, communication, cloud computing, and cloud storage equipment and micro cooling fans and contributed to substantial growth in the cooling components market. The hardware components of cooling solutions mainly include cooling fans, cooling fins, heat pipes, and thermal pads. The diverse applications for various cooling components include computers, servers, communication, consumer electronics, automotive electronics, industrial equipment, and optoelectronic industry. The computer industry has the highest demand for heat dissipation solutions. Taiwanese companies have obtained most of the OEM purchase orders from the computer and electronic equipment industry. It therefore has advantages in the development of the heat dissipation industry and it has the largest demand and supply of cooling components.

The continuous updates of electronics products have fueled the growth of heat dissipation products as demand continued from computer, communication, servers, and consumer electronics as well as new applications such as automotive electronics, handheld electronics products, virtual reality, IoT, artificial intelligence, and highperformance computing. Heat dissipation component manufacturers therefore actively increase their production scale to expand their market share. In addition, the increase in the speed and performance of electronic products means increased demand for heat dissipation and also pushes companies to continue to enhance R&D capacity and launch high-level heat dissipation products to satisfy functional demands of new applications and products. They also work hard to develop niche products and increase profitability.

  1. Relationships with suppliers in the industry's supply chain

Cooling fans and cooling modules are built with complicated components. Related upstream industries include plastic materials, axles, steel, copper materials, metal stamping, aluminum casting, molds (stamping, die casting, and plastic injection and forming), copper wires, semiconductors, IC, PCBs, and passive components. Downstream applications are also diverse. All spaces that require ventilation would require cooling fans and sectors include the IT industry, network communications equipment, optoelectronics, home video equipment, industrial and commercial equipment, and automotive electronics industries.

Cooling fans are widely used in upstream and downstream industries and there are no strong relations between cooling fans and any singular industry.

    1. Product development trends and competition
  • (1) Product development trends
  • A. Ongoing expansion of applications

The heat dissipation market started with applications for personal computers (including desktop and notebook computers) and network communications equipment. As technology progresses and electronic products continue to improve, applications were expanded to consumer electronic products such as handheld projectors, tablet computers, and virtual reality devices. In automotive electronics applications, the requirements for heat dissipation expanded from the vehicle media entertainment system to the cockpit, power system, headlights, wireless charging board, ADAS, and autonomous driving control systems. As building laws are updated and the air quality issue in Mainland China and nearby areas became the focus of attention, applications in related products for green building and air cleaning began to rise.

B. Enhanced functions and high cooling efficiency

As each generation of CPUs are replaced at ever higher speed, cooling component manufacturers must use design improvements and R&D in materials to develop cooling solutions that can dissipate heat at high watts quickly and provide high efficiency, long durability, low noise, low vibration, low energy consumption, low starting voltage, high torque, high temperature resistance, and dust-proof capabilities to resolve product cooling issues.

C. Slim designs

The product design of cooling components continues pursue the goals of "light, slim, short, and small" and the thickness of mainstream specifications continues to become slimmer. For instance, the thickness of cooling fans for laptop computers has progressed from 10mm to 5.2mm. New models even require less than 3mm and we continue to develop even slimmer cooling components.

D. Environmental protection and energy conservation

Awareness of environmental protection issues has increased and it has become an important trend for product development. In addition to compliance with RoHS standards, certain customers have already stipulated requirements that products main not contain fluorine or halogens. Product power consumption and performance have also become key to future designs. To meet environmental protection requirements, products must meet high-performance, energy-efficient, and lowcarbon emissions standards. More rigorous environmental protection laws in the future will drive customers to adopt more energy efficient components and these trends will power new growth of the Company's products.

(2) Product competition

The competition of heat dissipation components in various application industries is divided into standard products and project products. Competition for standard products is governed by the highest guiding principles of "reliability", "price", and "channel penetration". Standards products have no material differences in terms of performance and customer choose suitable products based on prices and requirements for reliability. The Company maintains a good brand image and product reliability and our products are usually those with the highest customer demand. In terms of channel operations, the Company has more than one thousand sales representatives and distributors across the world to achieve the highest market penetration rate. In terms of project products, "coordinated design capacity", "technical intensification level", and "customer satisfaction" are the highest guiding principles. The Company must design solutions with customers during the initial stages of product design. We usually face unprecedented specifications and technical demands for cooling and our design capabilities and technology intensification have become our best advantages. After products receive customer certification, the key to competition is determined by the Company's production and operation capacity, scale of mass production, and our ability to lower cost and serve customers.

Year
Item		 2018 January 1 to March 31, 2019
R&D expenditures
(NT\$1,000)		 690,164 169,692
Proportion of R&D
expenses in
business revenue 5.8% 7.0%
(%)
Successfully 1. ф45*L70 600W high-power 1. 50W ultra-thin 25mm EC
developed motor for transmission household ceiling fan
technologies and equipment
2. 100W-1500W EC energy		 2. Automotive communication
protocols circuit design and
products efficient industrial ceiling
fans with a diameter of under
7m (inclusive)
3. EC energy-efficient
centrifugal fans with a
diameter of under 250mm
(inclusive)
4. Large EC energy-efficient
industrial fans
5. EC 1/3HP indoor range hood
drum fans
6. Single/dual-outlet air curtains
7. EC 1/3HP HVAC outdoor fan
8. Cooling 1000W 85X85X60
DC Pump
9. Second generation Flow2
One-AHR ventilation fan
10. Low-noise Mighty Mini Fan
for mobile phones		 development
3. Development of AC
industrial fans that meet
UL60730-1 standards

(III) Overview of technology and R&D

(IV) Long- and short-term business plans

  1. Short-term business plan

The rise of new technologies such as cloud computing, blockchain, and big data has contributed to growth in the IoT, IoV, and AI industries in recent years. In response to the advancement of the CPU technologies and advancement of communication equipment from 4G to 5G, the Company's primary goal is to continue to expand operations in the server and communication equipment sector. We shall use the Company's technology advantages and market share in this sector for more active expansion. The next sector consists of automobile applications. Although the overall automobile market in Taiwan does not exhibit growth, the rapid digitalization of vehicle functions has led to rapid increases in the amount of cooling equipment used on each vehicle. Therefore, automobile applications are the second priority for the Company's investment. The Company has entered the automobile supply chain for years. The automobile supply chain has high technical entry barriers and long certification periods. We can use our advantages to expand our lead. In terms of operations in regional markets, the Company shall focus on the deployment of sales resources in India and Germany to expand sales and improve sales performance.

    1. Long-term business development plans
  • (1) The Company shall replenish human resources for sales in all channels and intensify the development of global channels. We shall also implement KPI management and project management for sales personnel and channel distributors to improve project success rates and sales performance.
  • (2) The Company shall strengthen the development of cooling module products and integrate active and passive cooling component technologies. We shall develop water cooling technologies and expand products on a greater level to improve overall competitiveness.
  • (3) The rapid growth in IoT, 5G communications equipment, cloud computing equipment, artificial intelligence, and high-performance computing has filled each sector with development opportunities for new products and new applications. The Company shall expand investment in R&D in these sectors to maintain lead in technologies and products and consolidate our leading position in the market.
  • (4) The Company shall pay attention to opportunities for other applications for core technologies such as market opportunities in green buildings and air cleaning and expand the applications for technologies and products.
  • (5) The Company shall respond to future environmental and energy conservation regulations to demonstrate the superior technologies and advantages of the efficiency of the Company's motors and develop new products and new markets.

II. Market, production and sales

  • (I) Market analysis
    1. Sales regions of main products
Year
Region		 2018 2017
Asia 75.2% 74.4%
Europe 19.1% 19.6%
America 5.4% 5.7%
Others 0.3% 0.3%
Total 100.0% 100.0%

2. Market share and future supply, demand, and growth

(1) Market share

According to the latest "Comprehensive Precision Small Motor Market Survey" published by the Fuji Keizai, the Company ranks among the top three leading brands of all surveyed companies across the world in terms of shipment and market share. The Company is expected to maintain its leading position in the world. In the laptop computer application market, the Company's shipments have culminated in a market share of 25% and we are one of the leading manufacturers. Our market share in high-end gaming laptop computers and desktop computers is also among the top manufacturers. Smart technologies such as big data, IoT, AI, cloud computing, and 5G continue to advance rapidly. The Company's server product applications reached approximately 18-20% in global market share in 2018 and we ranked among the top three manufacturers. Our market share in telecommunication equipment such as routers and switches also grew rapidly to 15%. We are the top three suppliers of the largest network equipment manufacturer in the United States and the main supplier of heat dissipation solutions for the top communication equipment manufacturer with the highest market share in the global 5G market. As countries begin to promote smart and safe city and smart home applications, the Company has reached the top three position in the market share in the global security surveillance equipment and digital TV boxes for digital family entertainment industries. Our market share reached 21-22% in applications such as projectors and we now ranked 3rd in the world.

(2) Future market supply, demand, and future growth

Construction of data centers has increased with rapid development in cloud computing and e-commerce and demand for servers and communications equipment has grown rapidly in recent years. Artificial intelligence fueled growth in high-speed computing and new energy vehicles and ADAS and autonomous driving in various stages have increased the demand for cooling applications. These new applications require more complex and high-efficiency cooling solutions. As technical barriers remain high, there is currently no large-scale supply. In the more mature IT market, the growth in demand from low-end desktop computers and consumer laptop computers remains confined with oversupply. With low prices and low profitability, the Company has gradually shifted its focus from such markets. However, demand for more high-end cooling solutions continues to increase in high-end and ultra-thin business or gaming laptop computers and the demand has increased rapidly. For instance, metal fans that increase heat dissipation performance have contributed to a state of oligopoly supply due to high technology barriers.

    1. Competitive niches
  • (1) Our own brand "SUNON" retains leading market positions and an excellent brand image.
  • (2) The Company retains the most patents and intellectual properties in the industry which increases the entry barriers of the industry.

  • (3) We have strong capacity for coordinated design with system manufacturers, rapid response speed, and strong customized manufacturing capabilities.

  • (4) Our diverse range of products satisfy different demands of different customers.

  • (5) Products have simple structures and are easy to assemble. We have large production scale with high production efficiency and low production costs.
  • (6) Highest level of vertical integration and comprehensive key components and technologies.

  • (7) Dense network of distribution channels to provide the broadest and fastest response to customer demands.

  • Favorable and unfavorable factors to long-term development and response measures

Favorable factors
2. CPU computing performance and energy consumption improvement increase the
products. operating temperature and fuel the demand for high-density high-end cooling
3. Demand for computing and cooling continues to increase and market demand
remains stable and strong.
4.
the development favors those with leading technologies.		 Customers begin to demand slimmer and high-performance cooling products and
5. More rigorous environmental protection and energy conservation laws encourage
customers to switch to more energy-efficient high-performance motors and fans.
6. Development in IoT, AI, 5G communication equipment, and high-performance
computing generate more demand.
7. Update of server platforms to the Purley architecture requires more sophisticated
cooling solutions.
Unfavorable factors
1. The appreciation of the NTD		 Response measures
1-1. It increases the cost of material purchases
affects revenue and margins and
the
amount
of
USD
used
for
settlement
of
operating
expenses
and
offsetting revenue
1-2. Pay close attention to exchange rate trends
and
make
flexible
use
of
exchange
settlement time
2. Increase in labor costs in China 2-1. Speed up the introduction of automated
and high labor turnover increase production equipment and fixture tools
production costs and reduce demand for human labor
2-2. Simplify production line organization and
layout to reduce use of manpower
2-3. Initiate research on actions, time, and
methodology to improve the balance,
efficiency,
and
productivity
on
the
production line
3. Increase in prices of raw materials 3-1. Reduce the number of suppliers and
introduce prioritized supplier name list
system to increase the transaction volume
with suppliers and use quantity to control
prices
3-3. Reduce the number of purchase orders and
3-2. Increase the materials delivery schedules
for suppliers
increase the volume in purchase orders
  • (II) Application and production of main products
    1. Important applications of main products
Applications Application products
Computer and
office equipment
industry		 Mining machines, gaming CPU coolers, DT/AIO CPU coolers,
graphics card/IC coolers, notebook computer coolers, hard disk
boxes, uninterruptible power supply systems, (micro) projectors,
workstations, photocopiers, mini computers
Server and
communication
industry		 Server system/power supply, workstation system/power supply,
telecommunication equipment, network communication
equipment, storage disc arrays
Industrial and
medical
equipment
industry		 Industrial equipment, freezing equipment, measurement
equipment, vending machines, ATMs, public information
stations, cash registers, security surveillance equipment, drones,
medical equipment
Household
electrical
appliance industry		 Game consoles, video streaming devices, STB video converters,
digital video recorders, LCD/LED TVs, stereo equipment,
kitchen equipment, air-conditioning, refrigerators, microwave
ovens, induction cookers
Automotive
electronics
industry		 LED lights, car chiller and air-conditioning systems, car air
conditioning sensors, car seat ventilation systems, car
information, communication, and entertainment equipment,
DC/DC converters in car battery boxes, camera systems, ADAS,
ECU, HUD

2. Production process of main products

Production process chart of cooling fans and cooling modules

Main materials Supply status
Stable source with supply price fluctuations tied to crude oil
Plastic materials prices
Developed in collaboration with IC design companies;
IC stable source with supply prices tied to the semiconductor
industry
Passive components Prices have stabilized and are now gradually declining
Stable source with supply price fluctuations tied to steel
Bearings prices
Stable source with supply price fluctuations tied to copper
Enameled wire prices
Stable source with supply price fluctuations tied to steel
Stamping parts prices
machining equipment parts Stable source with supply price fluctuations tied to steel
prices
Heat pipes Stable source with supply price fluctuations tied to copper
prices
Aluminum casting boards Stable
source
with
supply
price
fluctuations
tied
to
aluminum prices

(III) Supply status of primary raw materials

  • (IV) Customers who accounted for more than 10% of the purchase (sales) in any of the last two year
    1. Suppliers who accounted for more than 10% of the total purchases in any of the last two years: None
    1. Customers who accounted for more than 10% of the total sales in any of the last two years: None
  • (V) Production volume and value for the last two years

Table of production volume and value for the last two years

Production volume
and value
Year		 2017
2018
Main product
(or department)		 Production
capacity		 Production
volume		 Production
value		 Production
capacity		 Production
volume		 Production
value
AC fans 8,208 6,105 688,186 8,100 6,174 698,998
DC fans 192,841 127,736 6,617,686 199,529 132,509 7,053,018
Total 201,049 133,841 7,305,872 207,629 138,683 7,752,016

Unit: 1,000 units/NT\$1,000

Note 1: Production capacity refers to the volume of product that can be produced by the Company using existing production equipment and under normal operation, after taking into consideration factors such as necessary downtime, holiday, etc.

Note 2: Substitutable production capacity may be included in the production capacity and be stated in the note.

(VI) Sales volume and value for the last two years

Table of sales volume and value for the last two years

Unit: 1,000 units/NT\$1,000

Year
Sales volume		 2017 2018
and value Domestic sales Exports Domestic sales
Exports
Main product Volume Value Volume Value Volume Value Volume Value
AC fans 644 74,825 5,486 766,118 511 62,912 5,720 806,160
DC fans 23,098 1,369,033 106,312 8,468,171 23,378 1,412,182 110,821 9,609,285
Sale of materials - 706 - 267,875 - 658 - 74,101
Total 23,742 1,444,564 111,798 9,502,164 23,889 1,475,752 116,541 10,489,546

III. Employee information

Year 2017 2018 As of March 31,
2019
(Note)
Direct employees 5,822 5,601 4,554
Number of Indirect employees 2,161 2,336 2,217
employees Other employees 29 22 19
Total 8,012 7,959 6,790
Average age (year) 29 29 30
Average years of service 2.26 2.82 2.71
PhD 0.1% 0.1% 0.1%
MA 2.1% 2.1% 2.5%
Academic University/College 10.8% 10.4% 11.9%
qualifications Senior High School 22.5% 23.4% 19.2%
Below high school 64.5% 64.0% 66.3%

Employee information for the last two years till the publication date of the Annual Report

Note: Information of the current year up to the publication date of the Annual Report shall be provided.

IV. Environmental protection expenditure information

The Company has not incurred losses, compensation, or penalties as a result of environmental pollution. The Company 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 RoHS directive in terms of the production process and raw materials. We expressly specify regulations on prohibited substances and we the product R&D process must also meet environmental protection requirements.

The Company received ISO 14001, ISO 9001, OHSAS 18001, IECQ QC080000, IATF 16949, and EICC certification for environmental management system and quality systems. We also served as green environmental protection partners for major companies such as Sony, Canon, and Samsung. These records demonstrate the Company's commitment to environmental protection.

V. Employees-employer relations

The Company's labor conditions are processed in accordance with the Labor Standards Act. We established the "Employee Welfare Committee" to organize employee welfare affairs. Certain welfare measures are superior to requirements set forth in the Labor Standards Act. We protect employee interests and there have been no losses as a result of disputes between employees and the employer.

  • (I) Employee welfare measures, continuing education, training, retirement system and their status of implementation, as well as agreements between the employer and employees and measures for protecting employee rights and interests
    1. The Company has comprehensive employee welfare measures and salaries include bonuses for the three Chinese festivals, birthdays, weddings, funerals, childbirth, performance bonus, and year-end bonus. We also provide group insurance, regular health inspections, employee travel subsidies, family day events, and club activities.
    1. With regard to continuing education and training implementation, the Company provides comprehensive training for new recruits to enhance their understanding of company products and related regulations and increase their approval of the corporate culture. We also arrange various professional training courses and management training in accordance with the Company's annual plans to encourage employees and increase their sense of cohesion so that they can grow with the Company and achieve goals together.
    1. With regard to the retirement system and implementation status, the Company follows related regulations in the Labor Standards Act and established the Employee Retirement Regulations. For employees who opt for the old pension system, the Company appropriates pension reserves within 2% of the actual salary and deposit it into the dedicated account in the Central Trust of China. Pension is paid from this account and the Company provides supplementary payment for any shortfall when the pension is paid. For employees who opt for the new pension system, the Company sets aside 6% of the salary as pension. The parts proposed by employees are deposited in accordance with their wishes within the legal specified scope.
    1. Status of agreements between employees and the employer: None.
  • (II) Losses arising as a result of labor disputes in the recent year up until the publication date of this annual report: None.
Nature of the
contract		 Contracting
parties		 Commencement
date/expiration
date		 Main contents Restriction
clauses
Land use rights
assignment
contract		 Kunshan
Economic and
Technological
Development
Zone Agriculture,		 2000.10.27-
2050.09.14		 Land use rights to
48,688 square
meters of land to
the north of
Nanbin Road in		 None
Industry, and
Business
Corporation		 Kunshan
Economic and
Technological
Development
Zone

VI. Important contracts

F. Financial Overview

I. Condensed balance sheet and composite income sheet for the five most recent years

(I) Condensed balance sheet and statements of income

  1. Condensed balance sheet - International Financial Reporting Standards (consolidated financial report)

Unit: NT\$1,000

Financial information for the most recent five years Current year up to
Year (Note 1) March 31, 2019
Item 2014 2015 2016 2017 2018 Financial
information
(Note 3)
(self-assessed)
Current assets 5,212,604 5,447,897 5,925,839 6,256,831 6,378,539 5,892,142
(Note 2) Property, plant, and equipment 1,809,757 1,775,121 2,182,209 2,293,868 2,377,611 2,390,097
Intangible assets 24,438 21,961 19,051 21,988 23,506 22,649
Other assets (Note 2) 10,298 9,582 4,691 2,211 2,968 2,427
Total assets 7,323,610 7,523,184 8,391,141 8,813,469 8,971,556 8,756,510
Current Before
distribution		 3,188,221 3,338,803 3,863,944 4,199,784 4,477,209 3,984,246
liabilities After
distribution		 3,489,337 3,715,198 4,365,803 4,776,922 Note 4 -
Non-current liabilities 175,760 177,147 460,232 439,636 354,976 537,111
Before
distribution		 3,363,981 4,324,176 4,324,176 4,639,420 4,832,185 4,521,357
Total liabilities After
distribution		 3,665,097 4,700,571 4,826,035 5,216,558 Note 4 -
Equity attributable to owners
of parent company		 3,924,994 3,971,525 4,032,486 4,140,211 4,139,371 4,235,153
Capital stock 2,509,297 2,509,297 2,509,297 2,509,297 2,509,297 2,509,297
Capital surplus 344,242 344,242 365,706 365,706 366,903 366,903
Retained Before
distribution		 910,377 1,047,805 1,240,340 1,392,319 1,427,880 1,476,914
earnings After
distribution		 609,261 671,410 738,481 815,181 Note 4 -
Other equity 161,078 108,618 -82,857 -127,111 -164,709 -117,961
Treasury stock - -38,437 - - - -
Item Year Financial information for the most recent five years (Note 1) Current year up to
March 31, 2019
Financial
2014 2015 2016 2017 2018 information
(Note 3)
(self-assessed)
Non-controlling interests 34,635 35,709 34,479 33,838 - -
Before
distribution		 3,959,629 4,066,965 4,066,965 4,174,049 4,139,371 4,235,153
Total equity After
distribution		 3,658,513 3,690,570 3,565,106 3,596,911 Note 4 -

* If the Company has prepared a parent company only financial report, the Company shall prepare parent company only condensed balance sheet and statement of comprehensive income for the most recent five years.

* Companies having adopted IFRS for financial reporting for less than five years should compile additional financial data based on the financial and accounting guidelines of the Republic of China. For details, refer to data of table (2) below.

Note 1: All years that have not been certified by a CPA shall be indicated.

The financial data from 2014 to 2018 have been audited by CPAs. The financial information from the first quarter of 2019 is provided by the Company.

Note 2: The implementation date and reappraised value of assets that have been reappraised in the current year shall be disclosed.

Note 3: As of the publication date of this Annual Report, if financial information of companies whose stocks are traded on TWSE or TPEx was recently audited or reviewed by CPAs, such information shall be disclosed.

Note 4: Please fill in the numbers after distribution based on the circumstances of the shareholders' meetings for the following year.

The 2018 earning distribution case is to be approved by the shareholders' meeting. Therefore, the amounts for after the distribution have not been established.

Note 5: Financial information that has been required by the competent authority to correct or recompile shall be provided with the corrected or recompiled figures and the status and reasons shall be indicated.

  1. Condensed balance sheet - International Financial Reporting Standards (parent company only financial report)
Unit: NT\$1,000
-- -----------------
Financial information for the most recent five years Current year up to
Year (Note 1) March 31, 2019
Item Financial
2014 2015 2016 2017 2018 information
(Note 3)
(self-assessed)
Current assets 2,395,233 2,796,725 2,939,676 3,295,852 3,512,269
Property, plant and equipment
(Note 2) 466,820 491,218 1,004,916 1,027,463 1,062,632
Intangible assets 10,729 9,446 7,076 8,890 12,904
Other assets (Note 2) - - - - -
Total assets 5,908,656 6,353,635 6,907,908 7,097,901 7,385,451
Before
Current distribution 1,828,771 2,223,820 2,430,777 2,532,504 2,893,410
liabilities After
distribution 2,129,887 2,600,215 2,932,636 3,109,642 Note 4
Non-current liabilities 154,891 158,290 444,645 425,186 352,670
Before
Total distribution 1,983,662 2,382,110 2,875,422 2,957,690 3,246,080
liabilities After
distribution 2,284,778 2,758,505 3,377,281 3,534,828 Note 4
Equity attributable to owners Not applicable
of parent company 3,924,994 3,971,525 4,032,486 4,140,211 4,139,371
Capital stock 2,509,297 2,509,297 2,509,297 2,509,297 2,509,297
Capital surplus 344,242 344,242 365,706 365,706 366,903
Before
Retained distribution 920,377 1,047,805 1,240,340 1,392,319 1,427,880
earnings After
distribution 619,261 671,410 738,481 815,181 Note 4
Other equity 161,078 108,618 -82,857 -127,111 -164,709
Treasury stock - -38,437 - - -
Non-controlling interests - - - - -
Before
distribution 3,924,994 3,971,525 4,032,486 4,140,211 4,139,371
Total equity After
distribution 3,623,878 3,595,130 3,530,627 3,563,073 Note 4
  • * If the Company has prepared a parent company only financial report, the Company shall prepare parent company only condensed balance sheet and statement of comprehensive income for the most recent five years.
  • * Companies having adopted IFRS for financial reporting for less than five years should compile additional financial data based on the financial and accounting guidelines of the Republic of China. For details, refer to data of table (2) below.
  • Note 1: All years that have not been certified by a CPA shall be indicated.

The financial data from 103 to 2018 have been audited by CPAs.

  • Note 2: The implementation date and reappraised value of assets that have been reappraised in the current year shall be disclosed.
  • Note 3: As of the publication date of this Annual Report, if financial information of companies whose stocks are traded on TWSE or TPEx was recently audited or reviewed by CPAs, such information shall be disclosed.
  • Note 4: Please fill in the numbers after distribution based on the circumstances of the shareholders' meetings for the following year.

The 2018 earning distribution case is to be approved by the shareholders' meeting. Therefore, the amounts for after the distribution have not been established.

Note 5: Financial information that has been required by the competent authority to correct or recompile shall be provided with the corrected or recompiled figures and the status and reasons shall be indicated.

3. Condensed consolidated income statement - International Financial Reporting Standards (Consolidated Financial Report)

Financial information for the most recent five years Financial data in the
Year (Note 1) current year up to
Item 2014 2015 2016 2017 2018 March 31, 2019
(Note 2)
Operating revenue 9,533,345 10,109,156 10,690,822 10,946,728 11,965,298 2,438,424
Gross profit 1,953,365 2,054,019 2,398,422 2,454,464 2,401,535 472,196
Operating 417,507 438,607 695,434 755,904 601,549 65,964
income/loss
Non-operating 107,812 145,813 137,175 86,181 182,276 -1,461
income and expenses
Net income before 525,319 584,420 832,609 842,085 783,825 64,503
tax
Continuing operations
Current period net 386,250 448,960 578,812 663,416 607,683 49,034
profit
Loss from
discontinued - - - - - -
operations
Net profit of the 386,250 448,960 578,812 663,416 607,683 49,034
term (loss)
Other comprehensive
income of the period 118,164 -56,229 -196,218 -48,262 -32,557 46,748
(Net income after tax)
Total comprehensive 504,414 392,731 382,594 615,154 575,126 95,782
income of the period
Net income
attributable to owners		 379,386 441,793 571,898 657,459 605,120 49,034
of the parent company
Net income (loss)
attributable to non 6,864 7,167 6,914 5,957 2,563 -
controlling interests
Total comprehensive
income attributable
owners of the parent 496,280 386,084 377,455 609,585 572,736 95,782
company
Financial information for the most recent five years Financial data in the
Year (Note 1) current year up to
Item March 31, 2019
2014 2015 2016 2017 2018 (Note 2)
Total comprehensive
income attributable to
non-controlling 8,134 6,647 5,139 5,569 2,390 -
interests
Earnings per share 1.51 1.77 2.28 2.62 2.41 0.20

* If the Company has prepared a parent company only financial report, the Company shall prepare parent company only condensed balance sheet and statement of comprehensive income for the most recent five years.

* Companies having adopted IFRS for financial reporting for less than five years should compile additional financial data

based on the financial and accounting guidelines of the Republic of China. For details, refer to data of table (2) below. Note 1: All years that have not been certified by a CPA shall be indicated.

The financial data from 2014 to 2018 have been audited by CPAs. The financial information from the first quarter of 2019 is provided by the Company.

Note 2: As of the publication date of this Annual Report, if financial information of companies whose stocks are traded on TWSE or TPEx was recently audited or reviewed by CPAs, such information shall be disclosed.

Note 3: The losses of discontinued operations shall be represented by the net value after deducting income tax.

Note 4: Financial information that has been required by the competent authority to correct or recompile shall be provided with the corrected or recompiled figures and the status and reasons shall be indicated.

4. Condensed consolidated income statement - International Financial Reporting Standards (Parent Company Only Financial Report)

Unit: NT\$1,000
-- -----------------
Year Financial information for the most recent five years Financial data in the
(Note 1) current year up to
Item March 31, 2019
2014 2015 2016 2017 2018 (Note 2)
Operating revenue 6,219,143 7,146,551 7,309,691 7,688,919 8,186,530
Gross profit 914,214 1,065,641 1,138,387 1,292,087 1,234,664
Operating income/loss 119,833 256,490 273,566 378,259 283,490
Non-operating income
and expenses 349,686 270,727 402,809 424,484 453,147
Net income before tax 469,519 527,217 676,375 802,743 736,637
Continuing operations
Current period net 379,386 441,793 571,898 657,459 605,120
profit
Loss from
discontinued - - - - -
operations
Net profit of the term 379,386 441,793 571,898 657,459 605,120
(loss)
Other comprehensive Not applicable
income of the period 116,894 -55,709 -194,443 -47,874 -32,384
(Net income after tax)
Total comprehensive 496,280 386,084 377,455 609,585 572,736
income of the period
Net income
attributable to owners - - - - -
of the parent company
Net income (loss)
attributable to non - - - - -
controlling interests
Total comprehensive
income attributable
owners of the parent - - - - -
company
Year Financial information for the most recent five years Financial data in the
(Note 1) current year up to
Item March 31, 2019
2014 2015 2016 2017 2018 (Note 2)
Total comprehensive
income attributable to
non-controlling - - - - -
interests
Earnings per share 1.51 1.77 2.28 2.62 2.41

* If the Company has prepared a parent company only financial report, the Company shall prepare parent company only condensed balance sheet and statement of comprehensive income for the most recent five years.

* Companies having adopted IFRS for financial reporting for less than five years should compile additional financial data based on the financial and accounting guidelines of the Republic of China. For details, refer to data of table (2) below.

Note 1: All years that have not been certified by a CPA shall be indicated.

The financial data from 2014 to 2018 have been audited by CPAs.

Note 2: As of the publication date of this Annual Report, if financial information of companies whose stocks are traded on TWSE or TPEx was recently audited or reviewed by CPAs, such information shall be disclosed.

Note 3: The losses of discontinued operations shall be represented by the net value after deducting income tax.

Note 4: Financial information that has been required by the competent authority to correct or recompile shall be provided with the corrected or recompiled figures and the status and reasons shall be indicated.

Opinions of the CPAs
Year		 Certifying CPA Audit opinion
2014 Crowe Horwath (TW)
Ling-Wen Huang, CPA
Ching-Lin Li, CPA		 Modified unqualified
opinion
2015 Crowe Horwath (TW)
Ling-Wen Huang, CPA
Shu-Man Tsai, CPA		 Modified unqualified
opinion
2016 Crowe Horwath (TW)
Ling-Wen Huang, CPA
Shu-Man Tsai, CPA		 Unqualified opinion
2017 Crowe Horwath (TW)
Ching-Lin Li, CPA
Shu-Man Tsai, CPA		 Unqualified opinion
2018 Crowe Horwath (TW)
Ching-Lin Li, CPA
Shu-Man Tsai, CPA		 Unqualified opinion

(II) Names of certifying CPAs of the most recent five years and their audit opinions:

Note: The changes of the Company's CPAs in 2015 and 2017 were mainly caused by internal organizational adjustment of the certifying CPA firm.

II.Financial analysis for the last five year

(X) Financial analysis- International Financial Reporting Standards (Consolidated Financial Report)

Year (Note 1) Financial analysis for the last five years Current year up to
March 31, 2019
Analytical item (Note 3) 2014 2015 2016 2017 2018 (Note 2)
(self-assessed)
Fin
an		 Debt-to-assets ratio 45.93 46.73 51.53 52.64 53.86 51.63
cia
l s
tru
ctu
re
(%
)		 Long-term capital to
property, plant, and
equipment ratio		 228.51 235.72 207.46 201.13 189.03 199.67
So Current ratio 163.50 163.17 153.36 148.98 142.47 147.89
lve
nc		 Quick ratio 120.18 117.43 116.30 106.07 101.32 106.02
y% Times interest earned 67.63 85.70 46.12 62.10 44.10 10.24
Average collection turnover
(times)		 4.29 4.14 4.03 3.91 4.12 3.45
Days sales outstanding 85.08 88.16 90.57 93.35 88.59 105.80
Op
era		 Average inventory turnover
(times)		 6.08 5.72 5.81 5.44 5.40 4.60
tin
g a		 Average payment turnover
(times)		 4.23 4.01 3.64 3.38 3.66 3.17
bil
ity		 Average inventory turnover
days		 60.03 63.81 62.82 67.09 67.59 79.35
Property, plant and
equipment turnover (times)		 5.26 5.64 5.40 4.89 5.12 4.09
Total assets turnover (times) 1.35 1.36 1.34 1.27 1.35 1.10
Return on assets (%) 5.56 6.12 7.44 7.84 6.99 2.45
Pr
ofi		 Return on equity (%) 10.07 11.27 14.34 16.10 14.62 4.68
tab Pre-tax income to paid-in
capital ratio (%) (Note 7)		 20.93 23.29 33.18 33.56 31.24 10.28
ilit
y		 Net margin (%) 4.05 4.44 5.41 6.06 5.08 2.01
Earnings per share (NT\$) 1.51 1.77 2.28 2.62 2.41 0.20
Ca Cash flow ratio (%) 8.47 29.73 25.15 19.00 17.12 -
sh
flo		 Cash flow adequacy ratio (%) 84.17 78.77 80.85 77.30 77.46 -
w Cash flow reinvestment ratio
(%)		 0.33 11.74 9.64 4.61 2.94 -
Le
ve
rag		 Operating leverage 6.51 5.99 4.43 4.16 5.14 -
e Financial leverage 1.02 1.02 1.03 1.02 1.12 1.05

Please explain reasons for changes in financial ratios in the last two years. (Analysis can be omitted for the change is less than 20%)

    1. Solvency
  • The decrease in times interest earned was attributed to the decrease in pre-tax profit.
    1. Cash flow
  • The decrease in cash reinvestment ratio was caused by the increase of dividends and equipment in 2017 than the previous year.
    1. Leverage

The increase in operating leverage was caused by the increase in operating costs and expenses which decreased operating profits.

* If the Company has prepared a parent company only financial report, an analysis of the Company's individual financial ratios shall be prepared.

* Companies having adopted IFRS for financial reporting for less than five years should compile additional financial data based on the financial and accounting guidelines of the Republic of China. For details, refer to data of table (2) below.

Financial analysis- International Financial Reporting Standards (Parent Company Only Financial Report)

Year (Note 1) Financial analysis for the last five years Current year up to
Analytical item (Note 3) 2014 2015 2016 2017 2018 March 31, 2019
(Note 2)
Fin
an
cia		 Debt-to-assets ratio 33.57 37.49 41.63 41.67 43.95
l s
tru
ctu
re
(%
)		 Long-term capital to
property, plant, and
equipment ratio		 873.97 840.73 445.52 444.34 422.73
So Current ratio 130.98 125.76 120.94 130.14 121.39
lve
nc		 Quick ratio 97.79 92.46 94.35 99.75 90.82
y% Times interest earned 156.68 178.22 180.08 117.53 94.56
Average collection turnover
(times)		 4.58 4.39 4.13 3.97 3.89
Days sales outstanding 79.69 83.14 88.38 91.94 93.83
Op
era		 Average inventory turnover
(times)		 9.11 9.11 8.97 9.13 8.53
tin
g a		 Average payment turnover
(times)		 4.19 3.87 3.39 3.56 3.67 Not applicable
bil
ity		 Average inventory turnover
days		 40.07 40.07 40.69 39.98 42.79
Property, plant and
equipment turnover (times)		 13.09 14.92 9.77 7.57 7.83
Total assets turnover (times) 1.09 1.17 1.10 1.10 1.13
Return on assets (%) 6.70 7.25 8.67 9.47 8.45
Pr Return on equity (%) 9.98 11.19 14.29 16.09 14.62
ofi
tab		 Pre-tax income to paid-in
capital ratio (%) (Note 7)		 18.71 21.01 26.95 31.99 29.36
ilit
y		 Net margin (%) 6.10 6.18 7.82 8.55 7.39
Earnings per share (NT\$) 1.51 1.77 2.28 2.62 2. 41
Ca Cash flow ratio (%) 11.08 22.89 24.52 16.86 19.51
sh
flo		 Cash flow adequacy ratio (%) 84.82 79.31 69.50 70.59 72.69
w Cash flow reinvestment ratio
(%)		 -3.24 15.33 12.92 -3.78 -0.67
Le Operating leverage 5.45 3.15 3.23 2.63 3.20
ve
rag
e		 Financial leverage 1.03 1.01 1.01 1.02 1.03

Please explain reasons for changes in financial ratios in the last two years. (Analysis can be omitted for the change is less than 20%)

  1. Solvency

The decrease in times interest earned was attributed to the decrease in pre-tax profit.

  1. Cash flow

The decrease in cash reinvestment ratio was caused by the increase of dividends and equipment in 2017 than the previous year.

  1. Leverage

The increase in operating leverage was caused by the increase in operating costs and expenses which decreased operating profits.

  • * If the Company has prepared a parent company only financial report, an analysis of the Company's individual financial ratios shall be prepared.
  • * Companies having adopted IFRS for financial reporting for less than five years should compile additional financial data based on the financial and accounting guidelines of the Republic of China. For details, refer to data of table (2) below.

Note 1: All years that have not been certified by a CPA shall be indicated.

The financial data from 2014 to 2018 have been audited by CPAs. The financial information from the first quarter of 2019 is provided by the Company.

Note 2: As of the publication date of this Annual Report, if financial information of companies whose stocks are traded on TWSE or TPEx was recently audited or reviewed by CPAs, such information shall be analyzed.

Note 3: The end of Annual Report shall include the following formulas:

    1. Financial structure
  • (1) Debt-to-asset ratio = total liabilities / total assets.

(2) Long-term fund to property, plant and equipment ratio = (total equity + non-current liabilities) / net amount of real estate properties, plants and equipment.

    1. Solvency
  • (1) Current ratio = current assets / current liabilities.
  • (2) Quick ratio = (current assets inventory prepaid expense) / current liabilities.

(3) Time interest earned = net income before income tax and interest expense / current interest expense. 3. Operating ability

  • (1) Receivables (including accounts receivable arising from operation notes receivable) turnover ratio = net sales / average receivables (including accounts receivable arising from operation notes receivable) balances.
  • (2) Average collection period = 365 / receivables turnover.
  • (3) Inventory turnover ratio = cost of goods sold / average amount of inventory.
  • (4) Payable (including accounts payable arising from operation notes payable) turnover ratio = cost of goods sold / average payables (including accounts payable arising from operation notes payable) balances.
  • (5) Average days of sales = 365 / inventory turnover.
  • (6) Real estate, plant, and equipment turnover ratio = net sales / average net for real estate, plant, and equipment.
  • (7) Fixed assets turnover = net sales / average gross assets.
    1. Profitability
  • (1) Return on assets = [net income + interest expense (1– tax rate)] / average total assets.
  • (2) Return on equity = income after tax/net average equity.
  • (3) Net margin = net income / net sales.

(4) Earnings per share = (income belonging to owner of parent company - stock dividend of preferred stocks)/weighted average number of issued shares. (Note 4)

  1. Cash flow

  2. (1) Cash flow ratio = new cash flows from operating activities / current liabilities.

  3. (2) Net cash flow adequacy ratio = Net cash flow from operating activities for the most recent five years / (capital expenditures + inventory increase + cash dividend) for the most recent five years.
  4. (3) Cash reinvestment ratio = (net cash flows from operating activities –cash dividend) / (gross margin of property, plant and equipment + long-term investment + other non-current assets + working capital). (Note 5)
    1. Leverage:

(1) Operating leverage = (net operating revenues - current operating cost and expense) / operating profit (Note 6).

  • (2) Financial leverage = operating profit / (operating profit interest expenses).
  • Note 4: The following items should be noted for the calculation of earnings per share using the above-mentioned formula:
    1. The calculations shall be based on the average number of the weighted common shares rather than shares issued at the end of the year.
    1. The circulation period shall be considered for cash capital increase or treasury stock traders when calculating the weighted average number of shares.
    1. When calculating annual or semi-annual earnings per share for those with capitalization of retained earnings or capital reserves, capital ratio shall be adjusted retrospectively and the replenishment period issues need not be considered.
    1. If the preferred stock is non-convertible cumulative preferred stock, the dividend of the current year (whether it is distributed) should be deducted from net income or added to net loss. If the preferred shares are not cumulative in nature, the preferred stock dividends shall be deducted from the net income under after-tax net profit conditions. If it is a loss, no adjustment is needed.

Note 5: Special attention shall be paid to the following items during cash flow analysis measurements:

    1. Net cash flow from operating activities shall refer to the net cash inflow from operating activities listed in the cash flow statement.
    1. Capital expenditure shall refer to the annual capital investment cash outflow.
    1. If the inventory increase during the closing is greater than that during the opening and the inventory decreased at the end of the year, it should be calculated as zero.
    1. Cash dividends include common stock and preferred stock cash dividends.
    1. Gross profit for real estate, plant, and equipment shall refer to the total amount for real estate, plant, and equipment before accumulated depreciation is deducted.
  • Note 6: The issuer shall divide the various operating costs and expenses as fixed or changeable based on their natures. If such costs are subject to estimates or subjective judgments, the issuer shall ensure that the methods of deriving those costs are rational and consistent.
  • Note 7: For companies whose stock has no par value or a par value other than NT\$10, the calculation for paid-in capital as prescribed above shall be calculated instead as the equity ratio attributable to the asset balance sheet of the owners of the parent company.

IV. Financial statements of the most recent year

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:

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

    1. 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.
    1. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
    1. 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.
    1. 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 .
    1. 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.

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

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

CONSOLIDATED BALANCE SHEETS

SUNONWEALTH ELECTRIC MACHINE INDUSTRY CO., LTD. AND SUBSIDIARIES

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
2018 2017
Note Amount % Amount %
OPERATING REVENUES 6(24) \$11,965,298 100.0 \$10,946,728 100.0
OPERATING COSTS 6(5) 9,563,763 79.9 8,492,264 77.6
GROSS PROFIT 2,401,535 20.1 2,454,464 22.4
OPERATING EXPENSES
Sales and marketing 531,682 4.4 520,355 4.8
General and administrative 570,707 4.8 527,294 4.8
Research and development 690,164 5.8 650,911 5.9
Expected credit loss (gain) 6(4) 7,433 - - -
Total operating expenses 1,799,986 15.0 1,698,560 15.5
INCOME FROM OPERATIONS 601,549 5.1 755,904 6.9
NON-OPERATING INCOME AND EXPENSES
Other income 6(26) 136,934 1.1 151,542 1.4
Other gains and losses 6(27) 63,530 0.5 (51,580) (0.5)
Finance costs 6(28) (18,188) (0.1) (13,781) (0.1)
Total non-operating income and expenses 182,276 1.5 86,181 0.8
INCOME BEFORE INCOME TAX 783,825 6.6 842,085 7.7
INCOME TAX EXPENSE 6(29) 176,142 1.5 178,669 1.6
NET INCOME 607,683 5.1 663,416 6.1
OTHER COMPREHENSIVE INCOME (LOSS)
Items that will not be reclassified subsequently
to profit or loss:
Remeasurement of defined benefit obligation (6,841) (0.1) (4,365) -
Unrealized gain (loss) on investments in equity 8,985 0.1 - -
instruments at fair value through other comprehensive
income
Income tax benefit related to items that will (2,020) - (741) -
not be reclassified subsequently
Items that may be reclassified subsequently
to profit or loss:
Exchange differences arising on translation (45,335) (0.4) (53,256) (0.5)
of foreign operations
Income tax benefit related to items that may (8,614) (0.1) (8,618) (0.1)
be reclassified subsequently to profit or loss
Total other comprehensive loss, net of income tax 6(30) (32,557) (0.3) (48,262) (0.4)
TOTAL COMPREHENSIVE INCOME \$575,126 4.8 \$615,154 5.7
NET INCOME ATTRIBUTABLE TO:
Owners of the parent 605,120 5.1 657,459 6.0
Non-controlling interests 2,563 - 5,957 0.1
Total 607,683 5.1 663,416 6.1
TOTAL COMPREHENSIVE INCOME
ATTRIBUTABLE TO:
Owners of the parent 572,736 4.8 609,585 5.6
Non-controlling interests
Total		 2,390
\$575,126		 -
\$4.8		 5,569
\$615,154		 0.1
\$5.7
EARNINGS PER SHARE
Basic 6(31) \$2.41 \$2.62

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

SUNONWEALTH ELECTRIC MACHINE INDUSTRY CO., LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY Equity Attributable to Shareholders of the Parent

(In Thousands of New Taiwan Dollars)

Others
Unrealized
Gain (Loss) on
Exchange Financial Assets
Share Capital Retained Earnings Differences on at Fair Value Through
Unappropriated Translating foreign Other Comprehensive Non-controlling Total
Odinary Shares Capital Surplus Legal Reserve Special Reserve Earnings Operations Income Treasury Shares Interests Equity
BALANCE AT JANUARY 1, 2017 \$2,509,297 \$365,706 \$505,950 \$79,155 \$655,235 (\$82,857) -
\$		 -
\$		 \$34,479 \$4,066,965
Appropriations and distributions of prior years' earnings:
Legal reserve - - 57,190 - (57,190) - - - - -
Special reserve - - - 3,702 (3,702) - - - - -
Cash dividends - \$2 per share - - - - (501,860) - - - - (501,860)
Total - - 57,190 3,702 (562,752) - - - - (501,860)
Net income in 2017 - - - - 657,459 - - - 5,957 663,416
Other comprehensive income (loss) in 2017, net of income tax - - - - (3,620) (44,254) - - (388) (48,262)
Total comprehensive income in 2017 - - - - 653,839 (44,254) - - 5,569 615,154
Increase (decrease) in non-controlling interests - - - - - - - - (6,210) (6,210)
BALANCE AT DECEMBER 31, 2017 2,509,297 365,706 563,140 82,857 746,322 (127,111) - - 33,838 4,174,049
Impact of retrospective application and retrospective restatement - - - - - - 3,415 - - 3,415
Adjusted balabce at January 1, 2018
124		 2,509,297 365,706 563,140 82,857 746,322 (127,111) 3,415 - 33,838 4,177,464
Appropriations and distributions of prior years' earnings:
Legal reserve - - 65,746 - (65,746) - - - - -
Special reserve - - - 44,254 (44,254) - - - - -
Cash dividends - \$2.3 per share - - - - (577,138) - - - - (577,138)
Total - - 65,746 44,254 (687,138) - - - - (577,138)
Net income in 2018 - - - - 605,120 - - - 2,563 607,683
Other comprehensive income (loss) in 2018, net of income tax - - - - (4,821) (36,548) 8,985 - (173) (32,557)
Total comprehensive income in 2018 - - - - 600,299 (36,548) 8,985 - 2,390 575,126
Reorganization - 1,050 - - - (1,050) - - - -
Differences between considerations and carrying amounts - 147 - - - - - - - 147
of subsidiaries acquired or disposed
Increase (decrease) in non-controlling interests - - - - - - - - (36,228) (36,228)
Disposal of equity instruments at fair value - - - - 12,400 - (12,400) - - -
through other comprehensive income
BALANCE AT DECEMBER 31, 2018 \$2,509,297 \$366,903 \$628,886 \$127,111 \$671,883 (\$164,709) - - - \$4,139,371

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

SUNONWEALTH ELECTRIC MACHINE INDUSTRY CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

Year Ended December 31
2018 2017
CASH FLOWS FROM OPERATING ACTIVITIES
Income before income tax \$783,825 \$842,085
Adjustment for :
Income and expenses having no effect on cash flows:
Depreciation 285,265 260,181
Amortization 57,248 51,309
Expected credit loss 7,433 -
Provision for (reversal of) allowance for doubtful accounts - (2,056)
Net loss (gain) on financial assets and liabilities at fair value through (4) 40
profit or loss
Interest expense 18,188 13,781
Interest income (31,377) (30,726)
Loss on disposal and retirement of property, plant and equipment 8,229 2,508
Transfer of property, plant and equipment to expenses 1,571 2,214
Gain on disposal of investments (25,547) (3,716)
Impairment loss on non-financial assets - 15,371
Total income and expenses having no effect on cash flows 321,006 308,906
Net changes in operating assets and liabilities
Decerase (increase) in financial assets held for trading - (42,980)
Decerase (increase) in financial assets mandatorily classified as 124,941 -
at fair value through profit or loss
Decerase (increase) in notes receivable (3,962) 19,431
Decrease (increase) in accounts receivable (370,924) 130,136
Decrease (increase) in other receivables 37,815 (30,786)
Decrease (increase) in inventories (47,998) (366,142)
Decrease (increase) in prepayments (29,532) (37,357)
Decrease (increase) in other financial assets 16,679 14,263
Total changes in operating assets (272,981) (313,435)
Net changes in operating liabilities
Increase (decrease) in contract liabilities (25,275) -
Increase (decrease) in accounts payable 121,899 80,323
Increase (decrease) in other payables 18,694 59,441
Increase (decrease) in provisions 2,945 (450)
Increase (decrease) in advance receipts - 33,859
Increase (decrease) in net defined benefit liabilities (4,893) (4,868)
Total changes in operating liabilities 113,370 168,305
Total net changes in operating assets and liabilities (159,611) (145,130)
Total adjustments 161,395 163,776
Year Ended December 31
2018 2017
Cash generated from operations 945,220 1,005,861
Interest received 31,492 30,870
Interest paid (17,778) (24,088)
Income tax paid (192,501) (214,543)
Net cash generated from operating activities 766,433 798,100
CASH FLOWS FROM INVESTING ACTIVITIES
Disposal of financial assets at fair value through 74,400 -
other comprehensive income
Disposal subsidiary 23,330 -
Acquisition of property, plant and equipment (440,705) (427,401)
Proceeds from disposal of property, plant and equipment 17,365 33,246
Increase in refundable deposits (3,225) -
Decrease in refundable deposits - 8,272
Acquisition of intangible assets (15,507) (4,894)
Increase in other financial assets (133,319) -
Increase in other noncurrent assets (7,391) (3,331)
Net cash used in investing activities (485,052) (394,108)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in short-term loans 206,995 182,130
Repayments of long-term loans (100,000) -
Increase in guarantee deposits 646 1,361
Increase in obligation under captial leases 4,817 -
Cash dividends paid (577,138) (501,860)
Increase (decrease) in non-controlling interests (36,081) (6,598)
Net cash used in financing activities (500,761) (324,967)
EFFECT OF EXCHANGE RATE CHANGES ON (22,397) (30,691)
CASH AND CASH EQUIVALENTS
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS		 (241,777) 48,334
CASH AND CASH EQUIVALENTS , BEGINNING
OF PERIOD		 1,386,750 1,338,416
CASH AND CASH EQUIVALENTS , END OF PERIOD \$1,144,973 \$1,386,750

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

1. GENERAL INFORMATION

Sunonwealth Electric Machine Industry Co., Ltd. (collectively as the "Company") was incorporated in October 1980. The Company engages mainly in the manufacturing and selling of AC/DC brushless fans, electric fans, motors and related components, and microcooling fans. The principal operating activities of the Company and its subsidiaries (collectively as the "Group") are described in Note 4(3). In addition, the Company has no ultimate parent company.

The Company's board of directors approved on March 30, 2007 to merge (simplified merger) with Inventor Precision Co., Ltd., and the effective merger date was May 31, 2007. The Company was the surviving company. The merger was for the purpose of reorganization. The Company didn't issue new shares for the consolidation.

Inventor Precision Co., Ltd. was incorporated in March 2000. The main activities were the manufacturing and selling of molds and areo parts, and business consulting.

The Company's board of directors approved on August 25, 2009 to merge by absorption with Sunon Motor Co., Ltd. The Company was the surviving company. The merger was for the purpose of reorganization. The Company didn't issue new shares for the consolidation. The effective merger date was December 31, 2009.

Sunon Motor Co., Ltd. was incorporated in March 1999. The main activities were the manufacturing of other machines, data storage and processing equipment, wholesale of motors and parts, and international trading.

The Company's board of directors approved on August 8, 2018 to merge (simplified merger) with Sunon Smt Co., Ltd., and the effective merger date was October 1, 2018. The Company was the surviving company. The merger was for the purpose of reorganization. The Company didn't issue new shares for the consolidation.

Sunon Smt Co., Ltd. was incorporated in November 2000. The main activities were the manufacting of electronic components, wholesale of information software, electronic materials and molds, business management, processing data and supplying electronic information.

The consolidated financial statements are presented in the Company's functional currency, New Taiwan Dollars.

2. THE AUTHORIZATION OF THE CONSOLIDATED FINANCIAL STATEMENTS The consolidated financial statements were approved and authorized for issue by the board of directors on March 14, 2019.

3.APPLICATION OF NEW AND AMENDED STANDARDS AND INTERPRETATIONS

(1) Effect of the adoption of new issuances of or amendments to International Financial Reporting Standards ("IFRSs") as endorsed by the Financial Supervisory Commission ("FSC"):

Except for the following, the application of the above amendments have no significant effect on the Group's financial condition and financial performance.

A. IFRS 9 "Financial Instruments" and related amendment

IFRS 9 supersedes IAS 39 "Financial Instruments: Recognition and Measurement", with consequential amendments to IFRS 7 "Financial Instruments: Disclosures" and other standards. IFRS 9 sets out the requirements for classification, measurement and impairment of financial assets and hedge accounting. Please refer to Note 4 for information relating to the relevant accounting policies.

The Group elects not to restate prior reporting period when applying the requirements for the classification, measurement and impairment of financial assets and financial liabilities under IFRS 9 with the cumulative effect of the initial application recognized at the date of initial application.

The impact on measurement categories, carrying amount and related reconciliation for each class of the Group's financial assets when retrospectively applying IFRS 9 on January 1, 2018 is detailed below:

Measurement Category Carrying Amount Remark
Financial Assets IAS 39 IFRS 9 IAS 39 IFRS 9
Cash and cash equivalents Loans and receivables Amortized cost \$1,386,750 \$1,386,750 (a)
Mutual funds Held for trading Mandatorily at fair
value through profit
or loss (FVTPL)		 228,965 228,965
Equity securities Financial assets carried
at cost		 Fair value through
other comprehensive
income(FVTOCI)		 62,000 65,415 (b)
Time deposits with original
maturities more than three
month		 Loans and receivables Amortized cost 26,742 26,742 (a)
Notes receivable, accounts
receivable and other
receivables		 Loans and receivables Amortized cost 2,807,695 2,807,695 (a)
Refundable deposits Loans and receivables Amortized cost 26,607 26,607 (a)

The Group classified financial assets at FVTPL and available-for-sale financial assets with their fair value can't be measured reliably as financial assets measured at amortized cost - noncurrent.

FVTOCI Carrying
Amount as of
January 1, 2018
(IAS 39)		 Reclassifications Remeasurements Carrying
Amount as of
January 1, 2018
(IFRS 9)		 Retained
Earnings
Effect on
January 1,
2018		 Other
Equity
Effect on
January 1,
2018		 Remark
- Equity instruments \$
-		 \$
-		 \$
-		 \$
-		 \$
-		 \$
-
Add: From financial
assets carried at
cost (IAS 39)		 - 62,000 3,415 65,415 - 3,415 (b)
Total \$
-		 \$62,000 \$3,415 \$65,415 \$
-		 \$3,415
  • (a) Those financial assets were classified as loans and receivables under IAS 39 are now classified financial assets at amortized cost with no material impact on future lifetime expected credit loss under IFRS 9.
  • (b) Equity investment on unlisted companies originally classified as financial assets carried at cost by IAS 39 were re-designated as financial assets at fair value through other comprehensive income by IFRS9 and were re-measured its fair value to both increase financial asset at fair value through comprehensive income and other equity-unrealized gain or loss of FVTOCI by \$3,415 thousand.
  • B. IFRS 15 "Revenue from Contracts with Customers"

IFRS 15 establishes principles for recognizing revenue that apply to all contracts with customers, and will supersede IAS 18, "Revenue," IAS 11, "Construction Contracts," and a number of revenue-related interpretations. Please refer to Note 4 for information relating to the relevant accounting policies.

The Group currently recognizes revenues of goods sales while (1)significant risk and rewards of ownership were transferred to clients; (2)revenues and costs can be reliably measured; (3)it is probable that the consideration can be received; (4)the Group no longer retains continuing managerial involvement over the goods sold. After initial adoption of IFRS15, the Group will recognize revenue while the client gains control of the goods sold. No impact on revenue recognizing will occur. But to some contracts, the Group had already collect portion of the consideration at the contract establishment. The portion collected which were accounted as advance receipt currently will be accounted as contract liabilities after adoption of IFRS 15.

The impact on assets, liabilities and equity when retrospectively applying IFRS 15 on January 1, 2018 is detailed below:

Carrying Amount as of
January 1, 2018 (IAS 18)		 Adjustments Arising
from Initial Application		 Carrying Amount as of
January 1, 2018
(IFRS 15)
Advance receipts \$97,417 (\$97,417) \$
-
Contract liabilities - current - 97,417 97,417
Total effect on liabilities \$97,417 \$
-		 \$97,417

If the Group continues to adopt IAS 11, IAS 18 and related interpretations in 2018, the impact on the current period of the application of IFRS15 is detailed below:

Impact on Assets, Liabilities and Equity for current period December 31, 2018
Increase (decrease) in assets \$
-
Increase in contract liabilities - current \$72,085
Decrease in advance receipts (72,085)
Increase (decrease) in liabilities \$
-
Increase (decrease) in equity \$
-

No impact on comprehensive income and cash flow item for Year 2018.

(2) Effect of new issuances of or amendments to IFRSs as endorsed by the FSC but not yet adopted by the Group:

The following new standards, interpretations and amendments have been endorsed by the FSC and are effective for annual periods beginning on or after January 1, 2019.

New, Amended or Revised Standards and Interpretations Effective Date Announced
(the "New IFRSs") by IASB (Note 1)
Amendments to IFRS 9 "Prepayment Features with Negative January 1, 2019
Compensation"
IFRS 16 "Leases" January 1, 2019
Amendments to IAS 19 "Plan Amendment, Curtailment or Settlement" January 1, 2019 (Note 2)
Amendments to IAS 28 "Long-term Interests in Associates and Joint January 1, 2019
Ventures"
IFRIC 23 "Uncertainty over Income Tax Treatments" January 1, 2019
Annual Improvements to IFRSs 2015-2017 Cycle January 1, 2019
  • Note 1: Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on or after their respective effective dates.
  • Note 2: The Group shall apply these amendments to plan amendments, curtailments or settlements occurring on or after January 1, 2019.

Except for the following items, the Group believes that the adoption of aforementioned standards or interpretations will not have a significant effect on the Group's accounting policies.

1) IFRS 16 "Leases"

IFRS 16 sets out the accounting standards for leases that will supersede IAS 17 and IFRIC 4, a number of related interpretations. Upon initial application of IFRS 16, the Group will apply the guidance of IFRS 16 in determining whether contracts are, or contain, a lease only to contracts entered into (or changed) on or after January 1, 2019. Contracts identified as containing a lease under IAS 17 and IFRIC 4 will not be reassessed and will be accounted for in accordance with the transitional provisions under IFRS 16.

The Group as lessee

Upon initial application of IFRS 16, except for payments for low-value asset and short-term leases which will be recognized as expenses on a straight-line basis, the Group will recognize right-of-use assets and lease liabilities for all leases on the consolidated balance sheets、However, right-of-use assets which meet the definition of investment property will be presented as investment property. On the consolidated statements of comprehensive income, the Group will present the depreciation expense charged on right-of-use assets separately from the interest expense accrued on lease liabilities and computed using the effective interest method. On the consolidated statements of cash flows, cash payments for the principal portion and the interest portion of lease liabilities are classified within financing activities and operating activities, respectively.

Currently, payments under operating lease contracts are recognized as expenses on a straight-line basis. Cash flows for operating leases are classified within operating activities on the consolidated statements of cash flows. Financial lease contracts are classified within lease assets and obligation under capital leases, respectively.

Under initial application of IFRS 16, the Group anticipates applying retrospectively with the cumulative effect of this standard at the date of initial application, comparative information will not be restated.

Leases agreements on office building and staff dormitory classified as operating leases under IAS 17 will be measured at the present value of the remaining lease payments, discounted using the lessee's incremental borrowing rate on January 1, 2019. Right-of-use assets are measured at an amount equal to the lease liabilities, adjusted by the amount of any prepaid or accrued lease payments.

Right-of-use assets are subject to impairment testing under IAS 36, except for following expediency (2). The Group will apply the following practical expedients to measure right-of-use assets and lease liabilities on January 1, 2019 :

  • (1) The Group will apply a single discount rate to a portfolio of leases with reasonably similar characteristics to measure lease liabilities.
  • (2) The Group will adjust the right-of-use assets in the amount of provision that recognized as onerous leases at the end year of December 31, 2018.
  • (3) The Group will exclude incremental costs of obtaining the lease from the measurement of right-of-use assets on January 1, 2019.
  • (4) The Group will determine lease period (if the contract includes an extension or the option to terminate) base on project status to measure assets.

For the leases classified as financial leases based on IAS17, the carrying amount of the lease assets and liabilities as at December 31, 2018 will be used as the carrying amount as at January 1, 2019.

The Group as lessor

The Group will not make any adjustments for leases in which it is a lessor, and will be accounting for those leases under IFRS 16 starting from January 1, 2019.

If the Group continues to adopt IAS 17 in 2018, the impact on the current period of the application of IFRS16 is detailed below:

Carrying Amount as of
December 31, 2018
(IAS 17)		 Adjustments Arising
from Initial Application		 Adjusted Carrying
Amount as of
January 1, 2019
(IFRS 16)
Prepaid leases - current \$1,659 (\$1,274) \$385
Right-of-use asset - 245,931 245,931
Long-term prepaid rent 18,805 (18,805) -
Total impact on assets \$20,464 \$225,852 \$246,316
Lease liabilities - current \$
-		 \$69,033 \$69,033
Lease liabilities - noncurrent - 156,819 156,819
Total impact on liabilities \$
-		 \$225,852 \$225,852
Total impact on equity \$
-		 \$
-		 \$
-

Except for the above influences, the Group believes that the adoption of aforementioned standards or interpretations will not have a significant effect on the Group's financial position and financial performance as of the date the accompanying consolidated financial statements were issued.

(3) The IFRSs issued by IASB but not yet endorsed and issued into effect by FSC

Effective Date Announced
New, Revised or Amended Standards and Interpretations by IASB (Note 1)
Amendments to IFRS 10 and IAS 28 "Sale or Contribution To be determined by IASB
of Assets between an Investor and its Associate or Joint
Venture"
IFRS 17 "Insurance Contracts" January 1, 2021
Amendments to IFRS 3 "Definition of a Business" January 1, 2020 (Note 2)
Amendments to IAS 1 and IAS 8 "Definition of Material" January 1, 2020 (Note 3)

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

  • Note 2: The Group shall apply these amendments to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after January 1, 2020 and to asset acquisitions that occur on or after the beginning of that period.
  • Note 3: The Group shall apply these amendments prospectively for annual reporting periods beginning on or after January 1, 2020.

The Group continues in evaluating the impact on its financial position and financial performance as a result of the initial adoption of the aforementioned standards or interpretations. The related impact will be disclosed when the Group completes the evaluation.

4.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

(1) Compliance statement

The accompanying consolidated financial statements have been prepared in conformity with the Regulations Governing the Preparation of Financial Reports by Securities Issuers, the IFRSs, IASs, interpretations as well as related guidance endorsed by the FSC with the effective dates.

  • (2) Basis of preparation
  • A.Except for the following items, these consolidated financial statements have been prepared under the historical cost convention:
    • a. Financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss.
    • b. Financial assets and liabilities at fair value through other comprehensive income in 2018.
    • c. Defined benefit liabilities recognised based on the net amount of pension fund assets less present value of defined benefit obligation.
  • B.The preparation of financial statements in compliance with IFRSs requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Group's accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 5.

C. The Group retrospectively applied IFRS 9 and IFRS 15 electing not to prepare comparative consolidated financial report and notes of 2017 and recognized the differences in retained earnings or other equity at January 1, 2018. The consolidated financial report and notes of 2017 were prepared according to IAS 39, IAS 11, IAS 18 and other related explanations.

(3) Basis of consolidation

  • A. Basis for preparation of consolidated financial statements:
  • a. All subsidiaries are included in the Group's consolidated financial statements. Subsidiaries are all entities (including structured entities) controlled by the Group. The Group controls an entity when the Group is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Consolidation of subsidiaries begins from the date the Group obtains control of the subsidiaries and ceases when the Group loses control of the subsidiaries.
  • b. Inter-company transactions, balances and unrealized gains or losses on transactions between companies within the Group are eliminated. Accounting policies of subsidiaries have been adjusted where necessary to ensure consistency with the policies adopted by the Group.
  • c. Profit or loss and each component of other comprehensive income are attributed to the owners of the parent and to the non-controlling interests. Total comprehensive income is attributed to the owners of the parent and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.
  • d. Changes in a parent's ownership interest in a subsidiary that do not result in the parent losing control of the subsidiary (transactions with non-controlling interests) are accounted for as equity transactions, i.e. transactions with owners in their capacity as owners. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognized directly in equity.
  • e. When the Group loses control of a subsidiary, the Group remeasures any investment retained in the former subsidiary at its fair value. That fair value is regarded as the fair value on initial recognition of a financial asset or the cost on initial recognition of the associate or joint venture. Any difference between fair value and carrying amount is recognized in profit or loss. All amounts previously recognized in other comprehensive income in relation to the subsidiary are reclassified to profit or loss or transferred directly to retained earnings as appropriate, on the same basis as would be required if the related assets or liabilities were disposed of. That is, when the Group loses control of a subsidiary, all gains or losses previously recognized in other comprehensive income in relation to the subsidiary should be reclassified from equity to profit or loss, if such gains or losses would be reclassified to profit or loss when the related assets or liabilities are disposed of.
Percentage of Ownership
Investee / Subsidiary Main Businesses December 31, 2018 December 31, 2017
1.Sunonwealth Electric Machine Industry Co., Ltd.
Sunon INC. Manufacturing and 100.00% 100.00%
selling of fans
Sunon SAS. Manufacturing and 100.00% 100.00%
selling of fans
Sunon Corporation Manufacturing and 100.00% 100.00%
selling of fans
Sunonwealth Electric Manufacturing and 99.99% 99.99%
Machine Ind.(H.K.)Ltd. selling of fans
Sunon Smt Co., Ltd. Manufacturing and - 85.00%
wholesale of electronic (prefer to B.(b).I)
parts
Successful Century
Co., Ltd.		 Investments 100.00% 100.00%
BVI Sunon
International		 Investments 100.00% 100.00%
Limited
2.BVI Sunon International Limited
Sunon Electronic Manufacturing and 100.00% 100.00%
(Foshan) Co., Ltd. selling of fans
Sunon Electronic Manufacturing and 100.00% 100.00%
(Bei Hai) Co., Ltd. selling of new type
electronic
parts
3.Successful Century Co., Ltd.
Sunon Electronic Manufacturing and 100.00% 100.00%
(Kunshan) Co., Ltd. selling of fans
4.Sunon Electronic (Kunshan) Co., Ltd.
Hefei Hua Zhun
Electronics Co., Ltd.
[Formerly named
Sunon Electronic (He
Fei) Co., Ltd. ]		 Manufacturing and
selling of new type
electronic parts		 -
(prefer to B.(b).II)		 100.00%

B. The consolidated entities were as follows:

Percentage of Ownership

Investee / Subsidiary Main Businesses December 31, 2018 December 31, 2017
5.Sunon Smt Co., Ltd.
Liyuan Investments Investments - 85.00%
Co., Ltd. (prefer to B.(b).III)
Great Smt Electronics Investments - 85.00%
Co., Ltd. (prefer to B.(b).IV)
6.Liyuan Investments Co., Ltd.
Li Man Electronics Manufacturing and - 85.00%
(Foshan) Co., Ltd. wholesale of electronic (prefer to B.(b).V)
parts
7.Great Smt Electronics Co., Ltd.
Kunshan Guang Ying Manufacturing and - 85.00%
Technology Co., Ltd. wholesale of electronic (prefer to B.(b).VI)
parts
8.Sunon SAS
Sunon Deutschland
GmbH		 selling of fans 100.00% 100.00%
  • a. Some subsidiaries' financial statements contained in the above consolidated financial statements were audited by the other auditors. These subsidiaries' total assets amounted to \$447,337 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 operating revenues amounted \$1,054,511 thousand and \$1,065,868 thousand, representing 8.81% and 9.74% and their total comprehensive income amounted to \$18,793 thousand and \$30,967 thousand , representing 3.27% and 5.03% of the total comprehensive income for the years ended December 31, 2018 and 2017, respectively.
  • b. Changes in subsidiaries:
  • I. The Group's board of directors approved on August 8, 2018 to merge with Sunon Smt Co., Ltd., and the effective merge date was October 1, 2018.
  • II. The Group sold 100% of equity of Hefei Hua Zhun Electronics Co., Ltd. in December, 2018.
  • III. The Group's board of directors approved on August 8, 2018 to merge with BVI Sunon International Limited, and the effective merge date was October 1, 2018.
  • IV. The Group's board of directors approved on August 8, 2018 to merge with

Successful Century Co., Ltd., and the effective merge date was October 1, 2018.

  • V. The Group's board of directs approved on August 8, 2018 to merge with Sunon Electronic (Foshan) Co., Ltd., and the effective merge date was October 1, 2018.
  • VI. The Group's board of directs approved on August 8, 2018 to merge with Sunon Electronic (Kunshan) Co., Ltd., and the effective merge date was October 1, 2018.
  • C. Subsidiaries not included in the consolidated financial reports: none.
  • D. Adjustments for subsidiaries with different balance sheet dates: none.
  • E. Material restrictions: none.
  • F. Contents of of the parent company's securities held by subsidiaries: none.
  • G. Subsidiaries that have non-controlling interest that are material to the Group: none.
  • (4) Foreign currency translation
  • A. Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates (the "functional currency"). The consolidated financial statements are presented in New Taiwan Dollars, which is the Company's functional and the Group's presentation currency.
  • B. In preparing the financial statements of each individual consolidated entity, transactions in currencies other than the entity's functional currency (foreign currencies) are recognized at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Such exchange differences are recognized in profit or loss in the year in which they arise. Non-monetary items measured at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Exchange differences arising on the retranslation of non-monetary items are included in profit or loss for the year except for exchange differences arising on the retranslation of non-monetary items in respect of which gains and losses are recognized directly in other comprehensive income, in which case, the exchange differences are also recognized directly in other comprehensive income. Non-monetary items that are measured in terms of historical cost in foreign currencies are not retranslated.

  • C. For the purposes of presenting consolidated financial statements, the assets and liabilities of the Group's foreign operations are translated into New Taiwan Dollars using exchange rates prevailing at the end of each reporting period. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising, if any, are recognized in other comprehensive income and accumulated in equity (attributed to noncontrolling interests as appropriate).

  • (5) Classification of current and non-current items

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

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

(7) Financial instruments

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

Financial assets and financial liabilities are recognized initially at fair value plus or minus, in the case of investments not at fair value through profit or loss, directly attributable transaction costs. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognized immediately in profit or loss.

  1. Financial assets

The Group adopts trade-date accounting to recognize and derecognize financial assets.

  • (1) Category of financial assets and measurement
  • 2018

Financial assets are classified into the following categories: financial assets at FVTPL, financial assets at amortized cost, and investments in equity instruments at FVTOCI.

A. Financial asset at FVTPL

Financial asset is classified as at FVTPL when the financial asset is mandatorily classified or it is designated as at FVTPL. Financial assets mandatorily classified as at FVTPL include investments in equity instruments which are not designated as at FVTOCI and debt instruments that do not meet the amortized cost criteria or the FVTOCI criteria.

Financial assets are designated initially at FVTPL, if the designation can eliminated or significantly reduces the measurement or recognition of inconsistencies.

Financial assets at FVTPL are subsequently measured at fair value, with any gains or losses arising on remeasurement recognized in profit or loss including relevant dividend or interest income. Fair value is determined in the manner described in Note 12.

B. Financial assets at amortized cost

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

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

Financial assets at amortized cost, which equals to gross carrying amount determined by the effective interest method less any impairment loss. Exchange differences are recognized in profit or loss. Expect for the following two cases, interest income is calculated by applying the effective interest rate to the gross carrying amount of a financial asset.

  • a. Purchased or originated credit-impaired financial assets: for those financial assets, the Group applies the credit-adjusted effective interest rate to the amortized cost of the financial asset from initial recognition.
  • b. Financial assets that are not purchased or originated credit-impaired financial assets but subsequently have become credit-impaired financial assets: for those financial assets, the Group shall apply the effective interest rate to the amortized cost of the financial asset in subsequent reporting periods.
  • C. Investments in equity instruments at FVTOCI

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

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

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

2017

Financial assets are classified into the following specified categories: loans, receivables, and financial assets at FVTPL.

A. Loans and receivables

Accounts receivable

They are created by the entity by selling goods or providing services to customers in the ordinary course of business. Accounts receivable are initially recognized at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. Interest income is recognized by applying the effective interest rate, except for short-term receivables when the effect of discounting is immaterial.

  • B. Financial assets at fair value through profit or loss
  • a. Financial assets at fair value through profit or loss are financial assets held for trading or financial assets designated as at fair value through profit or loss on initial recognition. Financial assets are classified in this category of held for trading if acquired principally for the purpose of selling in the short-term. Derivatives are also categorized as financial assets held for trading unless they are designated as hedges. Financial assets that meet one of the following criteria are designated as at fair value through profit or loss on initial recognition:
    • (a) Hybrid (combined) contracts; or
    • (b) They eliminate or significantly reduce a measurement or recognition inconsistency; or
    • (c) They are managed and their performance is evaluated on a fair value basis, in accordance with a documented risk management or investment strategy.

  • b. On a regular way purchase or sale basis, financial assets at fair value through profit or loss are recognized and derecognized using trade date accounting.

  • c. Financial assets at fair value through profit or loss are initially recognized at fair value. Related transaction costs are expensed in profit or loss. These financial assets are subsequently remeasured and stated at fair value, and any changes in the fair value of these financial assets are recognized in profit or loss. Investments in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured or derivatives that are linked to and must be settled by delivery of such unquoted equity instruments are presented in 'financial assets measured at cost - noncurrent'

  • (2) Impairment of financial assets

2018

  • A. At the end of each reporting period, a loss allowance for expected credit loss is recognized for financial assets at amortized cost (including accounts receivable), investments in debt instruments that are measured at FVTOCI, lease receivable and contract assets.
  • B. The Group always recognize lifetime Expected Credit Loss (i.e. ECL) for accounts receivables. For other financial assets, the Group recognize lifetime ECL when there has been a significant increase in credit risk since initial recognition. If, on the other hand, the credit risk on the financial instrument has not increased significantly since initial recognition, the Group measures the loss allowance for that financial instrument at an amount equaling to 12-month ECL.
  • C. Expected credit losses reflect the weighted average of credit losses with the respective risks of a default occurring as the weights. 12-month ECL represents the portion of lifetime ECL that is expected to result from default events on a financial instrument that are possible within 12 months after the reporting date. In contrast, lifetime ECL represents the expected credit losses that will result from all possible default events over the expected life of a financial instrument.
  • D. The Group recognizes an impairment gain or loss in profit or loss for all financial instruments with a corresponding adjustment to their carrying amount through a loss allowance account, except for investments in debt instruments that are measured at FVTOCI, for which the loss allowance is recognized in other comprehensive income and does not reduce the carrying amount of the financial asset.

2017

  • A. Except for financial asset at FVTPL, the Group assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired as a result of one or more events that occurred after the initial recognition of the asset (a "loss event") and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.
  • B. The criteria that the Group uses to determine whether there is objective evidence of an impairment loss is as follows:
  • a. Significant financial difficulty of the issuer or debtor;
  • b. A breach of contract, such as a default or delinquency in interest or principal payments;
  • c. The Group, for economic or legal reasons relating to the borrower's financial difficulty, granted the borrower a concession that a lender would not otherwise consider;
  • d. It becomes probable that the borrower will enter bankruptcy or other financial reorganisation;
  • e. The disappearance of an active market for that financial asset because of financial difficulties;
  • f. Observable data indicating that there is a measurable decrease in the estimated future cash flows from a group of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial asset in the group, including adverse changes in the payment status of borrowers in the group or national or local economic conditions that correlate with defaults on the assets in the group;
  • g. Information about significant changes with an adverse effect that have taken place in the technology, market, economic or legal environment in which the issuer operates, and indicates that the cost of the investment in the equity instrument may not be recovered;
  • h. A significant or prolonged decline in the fair value of an investment in an equity instrument below its cost.
  • C. When the Group assesses that there has been objective evidence of impairment and an impairment loss has occurred, accounting for impairment is made as follows according to the category of financial assets:
  • a. Loans and receivables

The amount of the impairment loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows discounted at the financial asset's original effective interest rate, and is recognised in profit or loss. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment loss was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the asset does not exceed its amortised cost that would have been at the date of reversal had the impairment loss not been recognised previously.

b. Financial assets measured at cost

The amount of the impairment loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows discounted at current market return rate of similar financial asset, and is recognised in profit or loss. Impairment loss recognised for this category shall not be reversed subsequently.

(3) Derecognition of financial assets

The Group derecognises a financial asset when one of the following conditions is meet:

  • A. The contractual rights to receive cash flows from the financial asset expire.
  • B. The contractual rights to receive cash flows from the financial asset have been transferred and the Group has transferred substantially all risks and rewards of ownership of the financial asset.
  • C. The Group neither retains nor transfers substantially all risks and rewards of ownership of the financial asset; however, it has not retained control of the financial asset.

On derecognition of a financial asset in its entirety, the difference between the financial asset's carrying amount and the sum of the consideration received or receivable and the cumulative gain or loss that had been recognized in other comprehensive income and accumulated in equity is recognized in profit or loss. But for equity instruments at fair value through other comprehensive income under IFRS 9 since 2018, the cumulative profit and loss will be transferred directly to retained earnings without reclassified into profit and loss at disposal.

  1. Equity instruments

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

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

3. Financial liabilities

(1) Subsequent measurement

Financial liabilities other than those held for trading purposes and designated as at fair value through profit or loss are subsequently measured at amortised cost at the end of each reporting periods.

(2) Derecognition of financial liabilities

The Group derecognizes financial liabilities when, and only when, the Group's obligations are discharged, cancelled or they expire. The difference between the carrying amount of the financial liability derecognized and the consideration paid and payable (including any non-cash assets transferred or liabilities assumed) is recognized in profit or loss.

(8) Inventories

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

  • (9) Property, plant and equipment
  • A. Property, plant and equipment are initially recorded at cost. Borrowing costs incurred during the construction period are capitalised.
  • B. Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to profit or loss during the financial period in which they are incurred.
  • C. Land is not depreciated. Other property, plant and equipment apply cost model and are depreciated using the straight-line method to allocate their cost over their estimated useful lives. The assets' residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each balance sheet date. If expectations for the assets' residual values and useful lives differ from previous estimates or the patterns of consumption of the assets' future economic benefits embodied in the assets have changed significantly, any change is accounted for as a change in estimate under IAS 8, "Accounting Policies, Changes in Accounting Estimates and Errors", from the date of the change.

Service lives estimated as follows:

Buildings:

Main building, 20 to 57 years; Others, 2 to 39 years; Machinery and equipment, 1 to 22 years; Other equipment, 1 to 24 years; Leasehold improvement, 1 to 22 years;

  • D.An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the assets. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognized in profit or loss.
  • (10)Leases/The Group as a lessee

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

  • A. Assets held under finance leases are initially recognized as assets of the Group at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the consolidated balance sheets as a finance lease obligation.
  • B. Finance expenses implicit in lease payments for each period are recognized immediately in profit or loss, unless they are directly attributable to qualifying assets, in which case they are capitalized.
  • C. The property, plant and equipment acquired under finance leases are depreciated based on the durability of the assets. If it is not reasonable to determine that the Group will acquire ownership at the end of the lease term, the depreciation is provided based on the short-lived period of the asset and the lease term.

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

(11)Investment properties

Investment properties are properties held to earn rentals and/or for capital appreciation (including property under construction for such purposes), also include land held for a currently undetermined future use.

Investment properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are measured at cost less accumulated depreciation and accumulated impairment loss. Depreciation is recognized using the straight-line method.

Investment properties under construction of which the fair value is not reliably measurable are stated at cost less accumulated depreciation and accumulated impairment loss until either such time as the fair value becomes reliably measureable or construction is completed (whichever comes earlier).

Investment properties in the course of construction are stated at cost less accumulated impairment loss. Cost includes professional fees and borrowing costs eligible for capitalization. Depreciation of these assets commences when the assets are ready for their intended use.

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

(12)Intangible assets

Intangible assets with finite useful lives that are acquired separately are initially measured at cost and subsequently measured at cost less accumulated amortization and accumulated impairment loss. Amortization is recognized on a straight-line basis over the following estimated lives: computer software - 2 to 15 years; trademarks are the economic benefit or contract period. The estimated useful life, residual value, and amortization method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis. Intangible assets with indefinite useful lives that are acquired separately are measured at cost less accumulated impairment loss.

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

(13)Long-term prepaid rent

Long-term prepaid rent is land-use right, which is amortized over 50 years using straight-line mehtod.

(14)Impairment of non-financial assets

The Group assesses at each balance sheet date the recoverable amounts of those assets where there is an indication that they are impaired. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell or value in use. When the circumstances or reasons for recognizing impairment loss for an asset in prior years no longer exist, the impairment loss shall be reversed to the extent of the loss previously recognised in profit or loss.

(15)Provisions

Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, and it is probable that an outflow of economic resources will be required to settle the obligation and the amount of the obligation can be reliably estimated. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation on the balance sheet date, which is discounted using a pre-tax discount rate that reflects the current market assessments of the time value of money and the risks specific to the obligation. When discounting is used, the increase in the provision due to passage of time is recognised as interest expense.Provisions are not recognised for future operating losses.

(16)Employee benefits

A.Short-term employee benefits

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

B.Pensions

a. Defined contribution plans

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

  • b. Defined benefit plans
  • (a) Net obligation under a defined benefit plan is defined as the present value of an amount of pension benefits that employees will receive on retirement for their services with the Group in current period or prior period. The liability recognised in the balance sheet in respect of defined benefit pension plans is the present valueof the defined benefit obligation at the balance sheet date less the fair value of plan assets, together with adjustments for unrecognised past service costs. The defined benefit net obligation is calculated annually by independent actuaries using the projected unit credit method. The rate used to discount is determined by using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension liability; when there is no deep market in high-quality corporate bonds, the Group uses interest rates of government bonds (at the balance sheet date) instead.
  • (b) Actuarial gains and losses arising on defined benefit plans are recognised in other comprehensive income in the period in which they arise and are recorded as retained earnings.
  • (c) Past service costs are recognised immediately in profit or loss.
  • C. Employees' bonus and directors' and supervisors' remuneration Employees' bonus and directors' and supervisors' remuneration are recognised as expenses and liabilities, provided that such recognition is required under legal or

constructive obligation and those amounts can be reliably estimated. However, if the accrued amounts for employees' bonus and directors' and supervisors' remuneration are different from the actual distributed amounts as resolved by the stockholders at their stockholders' meeting subsequently, the differences should be recognised based on the accounting for changes in estimates.

D. Termination benefits

Termination benefits are employee benefits provided in exchange for the termination of employment as a result from either the Group's decision to terminate an employee's employment before the normal retirement date, or an employee's decision to accept an offer of redundancy benefits in exchange for the termination of employment. The Group recognises expense when it can no longer withdraw an offer of termination benefits or it recognises related restructuring costs, whichever is earlier. Benefits that are expected to be due more than 12 months after balance sheet date shall be discounted to their present value.

(17)Share capital and treasury shares

A.Share capital

Ordinary share is classified as equity. The classification of the preferred stock depends on the essence of the agreement. If the preferred stock matches the definition of the financial liability, it is classified as a liability. Otherwise, it is classified as equity. Incremental cost that can be attributed to the issuance of stocks or options is deducted from the capital issued.

B.Treasury Shares

When the Group acquires its outstanding shares that have not been disposed or retired, treasury shares are stated at cost and shown as a deduction in stockholders' equity. When treasury shares are sold, if the selling price is above the book value, the difference should be credited to the capital surplus - treasury share transactions. If the selling price is below the book value, the difference should first be offset against capital surplus from the same class of treasury share transactions, and the remainder, if any, debited to retained earnings. The carrying value of treasury shares is calculated using the weighted-average approach in accordance with the purpose of the acquisition.

When the Group's treasury shares are retired, the treasury share account should be credited, and the capital surplus - premium on stock account and capital stock account should be debited proportionately according to the share ratio. The carrying value of treasury shares in excess of the sum of its par value and premium on stock should first be offset against capital surplus from the same class of treasury share transactions, and the remainder, if any, debited to retained earnings. The sum of the par value and premium on treasury shares in excess of its carrying value should be credited to capital surplus from the same class of treasury share transactions.

(18)Share-based payment transactions

  • A.For the equity-settled share-based payment arrangements, the employee services received are measured at the fair value of the equity instruments granted at the grant date, and are recognised as compensation cost over the vesting period, with a corresponding adjustment to equity. The fair value of the equity instruments granted shall reflect the impact of market vesting conditions and non-market vesting conditions. Compensation cost is subject to adjustment based on the service conditions that are expected to be satisfied and the estimates of the number of equity instruments that are expected to vest under the non-market vesting conditions at each balance sheet date. And ultimately, the amount of compensation cost recognized is based on the number of equity instruments that eventually vest.
  • B.Cash-settle share-based payment arrangements are the fair value of liabilities undertaken recognized in remuneration costs and liabilities in the vesting period and measured by the fair value of equity instruments offered at each balance sheet date and the settlement date. Any changes are recognized in profit or loss.

(19)Income tax

  • A.The tax expense for the period comprises current and deferred tax.Tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or items recognised directly in equity, in which cases the tax is recognised in other comprehensive income or equity.
  • B.The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the Company and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in accordance with applicable tax regulations. It establishes provisions where appropriate based on the amounts expected to be paid to the tax authorities. An additional tax is levied on the unappropriated retained earnings and is recorded as income tax expense in the year the stockholders resolve to retain the earnings.
  • C.Deferred income tax is recognised, using the balance sheet method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income tax is not accounted for if it arises from initial recognition of goodwill or of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date

and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

  • D.Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. At each balance sheet date, unrecognised and recognised deferred income tax assets are reassessed.
  • E.Current income tax assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. Deferred income tax assets and liabilities are offset on the balance sheet when the entity has the legally enforceable right to offset current tax assets against current tax liabilities and they are levied by the same taxation authority on either the same entity or different entities that intend to settle on a net basis or realise the asset and settle the liability simultaneously.
  • F.Tax preference given for expenditures incurred on acquisitions of equipment or technology, research and development, employees" training and equity investments is recorded using the income tax credits accounting.

(20)Revenue Recognition

2018

The Group recognizes revenues based on the following steps:

    1. Identifying the contracts;
    1. Identifying obligations in the contracts;
    1. Determining prices;
    1. Allocating prices into the obligations in the contracts;
    1. Recognizing revenues while fulfilling the obligations.

The Group does not adjust the promised amount of consideration for the effects of a significant financing component if the period between when the Group transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less.

  1. Goods sales

The Group sells fans and other relevant products. Sales revenues are recognized while the control of goods is transferred to the customers since the customers already have the rights to use, set price, take the major responsibility to resell the good and bear the risk of obsoleteness. The Group recognizes revenues and accounts receivable at the point and presents it in net term after deducting sales return, quantity discount and sales allowance.

The Group does not recognize sales revenue on materials delivered to subcontractors because this delivery does not involve a transfer of risks and rewards of materials ownership.

  1. Service revenue

Revenue from technical services is recognized when services are provided that in accordance with the relevant agreements.

2017

  1. Sale of goods

The Group manufactures and sells fans. Revenue is measured at the fair value of the consideration received or receivable taking into account value-added tax, returns, rebates and discounts for the sale of goods to external customers in the ordinary course of the Group's activities. Revenue from the sale of goods is recognized when all the following conditions are satisfied:

  • (1) The Group has transferred to the buyer the significant risk and rewards of ownership of the goods;
  • (2) The Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;
  • (3) The amount of revenue can be measured reliably;
  • (4) It is probable that the economic benefits associated with the transaction will flow to the Group; and
  • (5) The costs incurred or to be incurred in respect of the transaction can be measured reliably.

The Group does not recognize sales revenue on materials delivered to subcontractors because this delivery does not involve a transfer of risks and rewards of materials ownership.

    1. Service revenue, technique service income, rental income, dividend income and interest income
  • (1) Revenues from a contract to provide services are recognized by reference to the stage of completion of the contract. However, if certain work is more important than other work, the recognization of revenue shall be deferred until the completion of the certain work.
  • (2) Revenues from technical services is recognized in accordance with the substance of the relevant agreement provided that it is probable that the economic benefits associated with the transaction flow to the Group and the amount of the revenue can be measured reliably.
  • (3) Rental income from operating leases is recognized on a straight-line basis over the term of the relevant lease.
  • (4) Dividend income from investments is recognized when the shareholder's right to receive payment has been established, provided that it is probable that the

economic benefits will flow to the Group and the amount of income can be measured reliably.

(5) Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable.

(21)Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization.

All borrowing costs other than those stated above are recognized in profit or loss in the period in which they are incurred.

(22)Government grants

Government grants are not recognized until there is reasonable assurance that the Group will comply with the conditions attached to them and will receive the grants. Government grants are recognized in profit or loss on a systematic basis over the periods in which the Group recognizes as expenses the related costs for which the grants are intended to compensate. Government grants related to property, plant and equipment are recognized as non-current liabilities and are amortized to profit or loss over the estimated useful lives of the related assets using to straight-line method.

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

The preparation of the Group's consolidated financial statements is adopting accounting policies based on the following significant judgements, significant accounting estimates and assumptions:

  • (1) Critical judgements in applying accounting policies
  • A. Judgment of financial asset classification (applied to 2018)

The Group assesses the business model of financial assets based on the hierarchy that reflects the Group of financial assets that are jointly managed for specific business purposes. This assessment requires consideration of all relevant evidence, including measures of asset performance, risks affecting performance, and the manner in which the relevant managers are determined, and judgments are required. The Group continues to assess the adequacy of its business model and monitors the financial assets measured by the amortized cost before the maturity date and the debt instrument investments measured at fair value through other comprehensive income. Evaluate whether the disciplinary action has the same goal of business model. If the business model has been changed, the Group delays the adjustment of the subsequent classification of financial assets.

B. Financial assets carried at cost (applied to 2017)

The Group believed that the fair value of the above unlisted equity investments held by the Group cannot be reliably measured due to no recent sufficient information for reasonable fair value estimates, therefore, they were classified as financial assets carried at cost.

C. Revenue recognition

2018

The Group follows IFRS 15 to determine if it controls the specified good or service before that good or service is transferred to the customer, and the Group is acting as a principal or an agent in that transaction. When the Group acts as an agent, revenue is recognized on a net basis.

The Group acts as a principal as that it meets one of the following situations:

  • a. The Group gains control over the goods from the other party before transferring goods to customers.
  • b. The Group controls the right of providing service by the other party in order to control the ability of the party to provide service to customers.
  • c. The Group gain control over goods or service from the other party in order to combine with other goods or services to provide specific goods or services to customers.

The indicators (not limited to) which assist making judgment on whether the Group controls the goods or services before transferring goods or services to customers:

  • a. The Group has primary responsibilities for the goods or services it provides;
  • b. The Group bears inventory risk before transferring the specific goods or services to customer, or after transferring the control to customer. (For example, if the customer has the right to return.)
  • c. The Group has the discretion to set prices.

2017

The sales transaction classified as a principal or agent is pursuant to the type and economic nature of transaction. If the exposure to the risk and reward is material at the sale of goods or service providing, the Group is a principal in that transaction and the revenue is recognized in gross sales amount. Otherwise, the revenue is recognized in net sales amount.

The Group's transaction of manufacturing and selling of precise motors and fans is classified as a principal based on:

  • a. Taking the major responsibility at the sale of goods
  • b. Taking the inventory risk

  • c. Taking the credit risk of the customers

  • (2) Critical accounting estimates and assumptions

  • A. Revenue Recognition

2018

The Group recognizes records a refund for estimated future returns and other allowances in the same period the related revenue is recorded. Refund for estimated sales returns and other allowances is generally made and adjusted at a specific percentage based on historical experience and any known factors that would significantly affect the allowance, and our management periodically reviews the adequacy of the percentage used.

2017

The Group recognizes revenue when performance obligations are satisfied. Revenue is reduced by the amount of estimated customer returns, rebates and other similar allowances. Allowances for sale returned and liabilities for returns are recognized at the time of sale based on the seller's reliable estimate of future returns and base on past experience and other relevant factors.

B. Estimated impairment of financial assets (applied to 2018)

The provision for impairment of trade receivables is based on assumptions about risk of default and expected loss rates. The Group uses judgement in making these assumptions and in selecting the inputs to the impairment calculation, based on the Group's past history, existing market conditions as well as forward looking estimates at the end of each reporting period. Where the actual future cash inflows are less than expected, a material impairment loss may arise.

C. Process of fair value measurement and evaluation (applied to 2018)

When the assets and liabilities at fair value with no active market, the Group determines whether to use outside appraisal and using proper evaluation techniques based on related regulation or its own judgment. If the Level 1 input value is not available while evaluating, the Group refers to the analysis of the investee's financial position and operating outcome, recent trading price, quotes on non-active market of same equity instrument, quotes on active market of similar equity instrument and evaluation multiples of comparable companies. If the future input value is different from expectation, the fair value might change. The Group updates input values quarterly according to the market status in order to moniter if the measurement of fair value is appropriate.

D. Impairment assessment of tangible and intangible assets

The Group assesses impairment based on its subjective judgement and determines the separate cash flows of a specific group of assets, useful lives of assets and the future possible income and expenses arising from the assets depending on how assets are utilised and industrial characteristics. Any changes of economic circumstances or estimates due to the change of Group strategy might cause material impairment on assets in the future.

E. Realisability of deferred income tax assets

Deferred income tax assets are recognized only to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences can be utilised. Assessment of the realisability of deferred income tax assets involves critical accounting judgements and estimates of the management, including the assumptions of expected future sales revenue growth rate and profit rate, tax exempt duration, available tax credits, tax planning, etc. Any variations in global economic environment, industrial environment, laws, and regulations might cause material adjustments to deferred income tax assets.

F. Evaluation of inventories

As inventories are stated at the lower of cost and net realisable value, the Group must determine the net realisable value of inventories on balance sheet date using judgements and estimates. The Group evaluates the amounts of normal inventory comsumption, obsolete inventories or inventories without market selling value on balance sheet date, and writes down the cost of inventories to the net realisable value.

G. Calculation of accrued pension obligations

When calculating the present value of defined pension obligations, the Group must apply judgments and estimates to determine the actuarial assumptions on balance sheet date, including discount rates and future salary growth rate. Any changes in these assumptions could significantly impact the carrying amount of defined pension obligations.

H. Financial assets - fair value measurement of unlisted stocks without active market (applied to 2017)

The fair value of unlisted stocks held by the Group that are not traded in an active market is determined considering those companies' recent fund raising activities and technical development status, fair value assessment of other companies of the same type, market conditions and other economic indicators existing on balance sheet date. Any changes in these judgments and estimates will impact the fair value measurement of these unlisted stocks. Please refer to Note 12(3) for the financial instruments fair value information.

6. CONTENTS OF SIGNIFICANT ACCOUNTS (1) CASH AND CASH EQUIVALENTS

December 31
Item 2018 2017
Cash on hand \$839 \$878
Cash in banks 1,144,134 1,385,872
Total \$1,144,973 \$1,386,750

A. The Group have good credit quality in financial institutions, and the Group's transactions with a number of financial institutions to diversify credit risk that are unlikely to be expected to default.

B. The Group had no cash and cash equivalents pledged to others.

(2) FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS - CURRENT

December 31
Item 2018 2017
Non-derivative financial assets
Beneficiary certificates \$107,831 \$228,965
Total \$107,831 \$228,965

A.The Group recognized net gain (loss) of financial assets at fair value through profit or loss of \$5,574 thousand and \$3,676 thousand for the years ended December 31, 2018 and 2017, respecively.

B.The Group had no financial assets at fair value through profit or loss pledged to others.

(3) NOTES RECEIVABLE, NET

December 31
Item 2018 2017
At amortized cost
Notes receivable \$31,761 \$27,799
Less: Loss allowance (24) (24)
Net \$31,737 \$27,775

A. The Group had no notes receivable pledged to others.

B. The relevant disclosure of loss allowance for notes receivable. Please refer to Note 6(4).

Item December 31
2018 2017
At amortized cost
Accounts receivable \$3,074,385 \$2,704,133
Less: Loss allowance (15,174) (7,847)
Net \$3,059,211 \$2,696,286

(4) ACCOUNTS RECEIVABLE, NET

  • A. The accounts receivable that were neither past due nor impaired was following the Group's credit policy determined by reference to the industry characteristics, operation scale and current financial position of the counterparties. The average credit period on sales of goods was 3-4 months.
  • B. The Group had no account receivable pledged to others.
  • C. To reduce major credit risk, the Group bought credit guarantee insurance. 2018
    1. The Group applies the simplified approach to provisions for expected credit losses prescribed by IFRS 9, which permits the use of a lifetime expected credit losses provision for trade receivables (including other receivables). The expected credit losses on trade receivables are estimated by reference to past account aging records of the debtor, an analysis of the debtor's current financial position, industrial trend. The Group estimates expected credit losses based on the number of days for which receivables are past due. As the Group's historical credit losses experience does not show significantly different loss patterns for different customer segments, the provision for losses based on past due status of receivables is not further distinguished between the Group's different customer base.
    1. The Group measures the loss allowance for notes receivable, accounts receivable and other receivables according to the preparation matrix:
Expected credit Notes Allowance for
December 31, 2018 loss rate receivable doubtful accounts Amortized Cost
No pase due 0.05%-5% \$2,772,586 (\$10,824) \$2,761,762
Past due within 30 days 0.05%-5% 326,691 (1,152) 325,539
Past due 31-90 days 0.05%-5% 46,262 (31) 46,231
Past due over 91 days 0.05%-5% 6,302 (3,191) 3,111
Total \$3,151,841 (\$15,198) \$3,136,643
2018
Balance at January 1, 2018 (IAS 39) \$7,871
Effect of retrospective application of IFRS 9 -
Balance at January 1, 2018 (IFRS 9) \$7,871
Add: Provision for impairment 7,433
Less: Reversal of impairment -
Less: Derecognition -
Less: Write - offs -
Less: Foreign exchange differences (105)
Impact of consolidated individuls reduced (1)
Balance at December 31, 2018 \$15,198
  1. Movements of the loss allowance for notes and accounts receivable (include other receviables) were as follows:

The above provision has already taken into consideration of collateral or other credit enhancement. The other credit enhancement possessed by above receivables was \$930,593 thousand.

The Group writes off a trade receivable when there is information indicating that the debtor is in severe financial difficulty and there is no realistic prospect of recovery of the receivable. For trade receivables that have been written off, the Group continues to engage in enforcement activity to attempt to recover the receivables which are due. Where recoveries are made, these are recognized in profit or loss. The Group's trade receivables for offsetting the contract amount is \$0 thousand in 2018.

  1. Please refer to Note 12 for the relevant credit risk management and assessment method.

2017

  1. The aging analysis of notes and accounts receivable (including other receivables) that were past due but not impaired was as follows:
Item December 31, 2017
Up to 30 days \$222,397
31 to 90 days 16,089
Over 91 days 6,619
Total \$245,105

The above was analyzed on the basis of the past due date.

The Group considered no significant change in credit quality for above mentioned receivables and the amounts were still recoverable.

Year Ended December 31, 2017
Item Individual provision Group provision Total
Beginning balance \$ - \$10,033 \$10,033
Provision for impairment - - -
Reversal of impairment - (2,056) (2,056)
Write-offs - - -
Foreign exchange - (106) (106)
differences
Ending balance \$ - \$7,871 \$7,871
  1. Movements of the allowance for doubtful receivables (including other receivables):

The Group recognized allowance for doubtful accounts for impaired receivables amounting to \$0 thousand as of December 31, 2017.

The aging analysis of notes and accounts receivable that were impaired: None.

(5) INVENTORIES AND OPERATING COSTS

December 31
Item 2018 2017
Raw materials \$787,608 \$755,616
Supplies 41,318 25,642
Work in process 301,969 284,854
Finished goods 827,241 784,166
Subtotal \$1,958,136 \$1,850,278
Less: Valuation allowance (163,767) (105,784)
Net \$1,794,369 \$1,744,494

A. The related inventory gain (loss) recoginzed as operating cost for the years ended December 31, 2018 and 2017 were as follows:

Year Ended December 31
Item 2018 2017
Cost of goods sold \$9,465,618 \$8,448,666
Unallocated overheads and labor cost 31,669 33,512
Gain (loss) on inventory valuation 56,031 (4,707)
Others 10,445 14,793
Total \$9,563,763 \$8,492,264
  • B. The Group recognized inventory valuation gain (loss) of \$56,031 thousand and (\$4,707) thousand for the years ended December 31, 2018 and 2017, respectively, as a result of inventory's write-down to net realizable value and recovery of inventory net realizable value.
  • C. The Group had no inventories pledged to others.

(6) OTHER FINANCIAL ASSETS - CURRENT

December 31
Item 2018 2017
Time deposits with maturity more than \$10,063 \$26,742
three months
Restricted assets 133,319 -
Total \$143,382 \$26,742

(7) FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE IMCOME - NONCURRENT - 2018

    1. The investment in Tongli Indusrtial Co., Ltd is held for medium to long-term purposes. The management of the Group considers that if the short-term fair value fluctuations of the investment is included in the profit or loss and inconsistent with the aforementioned long-term investment plans, therefore such investment is accounted for as FVTOCI. This investment was originally classified by IAS 39 as financial assets measured at cost - noncurrent. Please refer to Note 3 and Note 6(8) for the reclassification and information for 2017.
    1. The Group adjusted its investment position in 2018 to diversify risks, and therefore sold all stocks for \$74,400 thousand. The related other equity - unrealized gain or loss on financial assets at FVTOCI of \$12,400 thousand were transferred to retained earnings.
    1. Please refer to Note 12 for related credit risk management and assessment methods.

(8) FINANCIAL ASSETS CARRIED AT COST - NONCURRENT

Item December 31, 2017
Overseas unlisted stocks \$62,000

A. Since there is a wide range of estimated fair values of the Group's investments in non-publicly traded stocks, the Group concludes that the fair value cannot be reliably measured and therefore they are classified as finanial assets carried at cost - noncurrent.

  • B. The accumulated impairment loss were \$0 thousand as of December 31, 2017.
  • C. The Group had no financial assets carried at cost noncurrent pledged to others.

(9) PROPERTY, PLANT AND EQUIPMENT

December 31
Item 2018 2017
Land \$804,381 \$804,381
Buildings 477,598 479,171
Machinery and equipment 1,543,050 1,547,257
Miscellaneous equipment 1,258,688 1,133,061
Leasehold improvements 312,925 310,895
Equipment to be inspected 134,045 91,454
and construction in progress
Total cost \$4,530,687 \$4,366,219
Less: Accumulated depreciation (2,153,076) (2,072,351)
Accumulated impairment - -
Carrying amount \$2,377,611 \$2,293,868
Inspected and
Machinery and Miscellaneous Leasehold Construction in
Land Buildings Equipment equipment improvement Progress Total
Cost
Balance at January 1, 2018 \$804,381 \$479,171 1,547,257 \$1,133,061 \$310,895 \$91,454 \$4,366,219
Additions - 2,370 109,762 123,458 6,289 181,127 423,006
Disposals - (886) (120,756) (53,495) (1,698) (949) (177,784)
Reclassification - 1,731 51,700 79,393 1,398 (134,222) -
Transfer to expenses - - - - - (1,571) (1,571)
Transferred from other noncurrent - - - - 827 - 827
assets
Impact of consolidated individuals - - (15,528) (3,007) - - (18,535)
reduced
Effect of foreign currency exchange - (4,788) (29,385) (20,722) (4,786) (1,794) (61,475)
difference
Balance at December 31, 2018 \$804,381 \$477,598 \$1,543,050 \$1,258,688 \$312,925 \$134,045 \$4,530,687
Accumulated depreciation
and impairment
Balance at January 1, 2018 \$
-		 \$212,066 \$871,781 \$729,132 \$259,372 \$
-		 \$2,072,351
Depreciation expense - 15,070 125,208 128,427 16,110 - 284,815
Disposals - (531) (108,668) (41,293) (1,698) - (152,190)
Reclassification - - (9,016) 9,016 - - -
Impact of consolidated individuals - - (10,700) (3,000) - - (13,700)
reduced
Effect of foreign currency exchange - (2,264) (18,182) (13,506) (4,248) - (38,200)
difference
Balance at December 31, 2018 \$
-		 \$224,341 \$850,423 \$808,776 \$269,536 \$
-		 \$2,153,076

Equipment to be

Equipment to be
Inspected and
Machinery and Miscellaneous Leasehold Construction in
Land Buildings Equipment equipment improvement Progress Total
Cost
Balance at January 1, 2017 \$804,381 \$476,859 \$1,400,007 \$1,017,418 \$311,072 \$103,050 \$4,112,787
Additions - 6,916 118,357 134,651 3,669 169,099 432,692
Disposals - - (39,461) (70,419) - (6,462) (116,342)
Reclassification - 985 96,917 69,901 1,616 (169,419) -
Transfer to expenses - - - - - (2,214) (2,214)
Transferred from other noncurrent - 143 - - - - 143
assets
Tranter to other noncurrent assets - - - - - (132) (132)
Transfer to intangible assets - - - - - (378) (378)
Transfer to inventories - - - - - (229) (229)
Effect of foreign currency exchange - (5,732) (28,563) (18,490) (5,462) (1,861) (60,108)
difference
Balance at December 31, 2017 \$804,381 \$479,171 \$1,547,257 \$1,133,061 \$310,895 \$91,454 \$4,366,219
Accumulated depreciation
and impairment
Balance at January 1, 2017 \$
-		 \$199,945 \$809,673 \$679,966 \$240,994 \$
-		 \$1,930,578
Depreciation expense - 14,298 114,039 108,923 22,471 - 259,731
Disposals - - (33,405) (47,183) - - (80,588)
Reclassification - - - - - - -
Effect of foreign currency exchange - (2,177) (18,526) (12,574) (4,093) - (37,370)
difference
Balance at December 31, 2017 \$
-		 \$212,066 \$871,781 \$729,132 \$259,372 \$
-		 \$2,072,351

A.The details of interest capitalized: None.

B.Impairment of property, plant and equipment: None.

C.Property, plant and equipment pledged for the borrowings: Please refer to Note 8.

D.Reconciliations of current additions and the acquisition of property, plant and

equipment in statement of cash flows were as follows:

Year Ended December 31
Item 2018 2017
Acquisition of property, plant and equipment \$423,006 \$432,692
Decrease (increase) in equipment payable 17,699 (5,291)
Cash paid for acquisition of property, plant and \$440,705 \$427,401
equipment
December 31
Item 2018 2017
Land \$89,384 \$89,384
Building 26,070 26,070
Total cost \$115,454 \$115,454
Less: Accumulated depreciation (14,385) (13,935)
Accumulated impairment (26,058) (26,058)
Net \$75,011 \$75,461
Cost Land Buildings Total
Balance at January 1, 2018 \$89,384 \$26,070 \$115,454
Additions - - -
Balance at December 31, \$89,384 \$26,070 \$115,454
2018
Accumulated depreciation
and impairment Land Buildings Total
Balance at January 1, 2018 \$26,058 \$13,935 \$39,993
Depreciation expense - 450 450
Balance at December 31, \$26,058 \$14,385 \$40,443
2018
Cost Land Buildings Total
Balance at January 1, 2017 \$89,384 \$26,070 \$115,454
Additions - - -
Disposals - - -
Balance at December 31, \$89,384 \$26,070 \$115,454
2017

(10) INVESTMENT PROPERTIES, NET

Accumulated depreciation
and impairment Land Buildings Total
Balance at January 1, 2017 \$10,687 \$13,485 \$24,172
Depreciation expense - 450 450
Disposals - - -
Provision for impairment 15,371 - 15,371
loss
Balance at December 31, \$26,058 \$13,935 \$39,993
2017

A. Rent income and direct operating expense of investment properties:

Year Ended December 31
Item 2018 2017
Rent income of investment properties \$2,196 \$2,196
Direct operating expense incurred for the \$781 \$777
investment properties with current rent income

B. The fair values of investment properties held by the Group were both \$101,402 thousand as of December 31, 2018 and 2017. The fair value determination was performed by independent qualified professional appraisers. The valuation was based on the comparison method, and the fair value was measured by using Level 3 inputs. Please refer to Note 12(3).

  • C. The accumulated impairment of investment properties were both \$26,058 thousand as of December 31, 2018 and 2017.
  • D. The Group had no investment properties pledged to others.

(11)INTANGIBLE ASSETS

Item December 31
2018 2017
Trademark \$8,449 \$8,284
Computer software 30,105 23,649
Total cost \$38,554 \$31,933
Less: accumulated amortization (15,048) (9,945)
Net \$23,506 \$21,988
Cost Trademark Computer Software Total
Balance on January 1, 2018 \$8,284 \$23,649 \$31,933
Additions - 12,568 12,568
Derecognition - (5,861) (5,861)
Effect of foreign exchange 165 (251) (86)
difference
Balance on December 31, 2018 \$8,449 \$30,105 \$38,554
Accumulated amortization
and impairment Trademark Computer Software Total
Balance on January 1, 2018 \$
-		 \$9,945 \$9,945
Amortization expenses - 11,125 11,125
Derecognition - (5,861) (5,861)
Effect of foreign exchange - (161) (161)
difference
Balance on December 31, 2018 \$ - \$15,048 \$15,048
Cost Trademark Computer Software Total
Balance on January 1, 2017 \$8,716 \$27,472 \$36,188
Additions - 9,941 9,941
Derecognition - (13,883) (13,883)
Transfer from property, - 378 378
plant and equipment
Effect of foreign exchange (432) (259) (691)
difference
Balance on December 31, 2017 \$8,284 \$23,649 \$31,933
Accumulated amortization
and impairment Trademark Computer Software Total
Balance on January 1, 2017 \$
-		 \$17,137 \$17,137
Amortization expenses - 6,847 6,847
Derecognition - (13,883) (13,883)
Effect of foreign exchange
difference		 - (156) (156)
Balance on December 31, 2017 \$ - \$9,945 \$9,945
December 31
Item 2018 2017
Land-use right \$19,417 \$20,384
Less: due within 1 year (612) (623)
Total \$18,805 \$19,761
(13)SHORT-TERM LOANS
December 31, 2018
Borrowings Nature Amout Interest
Unsecured loan \$843,257 0.80%-4.16%
December 31, 2017
Borrowings Nature Amout Interest
Unsecured loan \$636,262 0.83%-3.20%
(14)OTHER PAYABLES
December 31
Item 2018 2017
Accrued payroll \$288,925 \$287,679
Service fee payable 19,426 18,779
R & D payable 32,832 34,322
Bonus to employees and remuneration to 26,000 27,976
directors and supervisors
Equipment payable 63,334 81,033
Others 368,738 352,444
Total \$799,255 \$802,233

(12)LONG-TERM PREPAID RENTS

December 31
Item 2018 2017
Employee benefits \$42,570 \$40,045
Year Ended December 31
Item 2018 2017
Beginning balance \$40,045 \$40,930
Additional provisions recognized 3,465 935
Reversing un-usage balances (520) (1,385)
Effect of foreign exchange difference (420) (435)
Ending balance \$42,570 \$40,045

Provision for employee benefits represents vested short-term service leave entitlements accrued.

(16)LONG-TERM LOANS AND CURRENT PORTION OF LONG-TERM LOANS

December 31
Item 2018 2017
\$320,000
Mortgage loans \$220,000
Less: portion due within - -
one year
Long-term loans \$220,000 \$320,000
Interest rates 1.34% 1.46%

A.Refer to Note 8 for assets pledged as collateral for long-term borrowings.

B.Under the loan agreement, the Group should maintain certain current, debt, interest coverage and net value ratios based on the Group's audited semi-annual and annual consolidated financial statements. As of December 31, 2018, the Group had no irregularities.

(17)OBLIGATION UNDER CAPITAL LEASES

The Group leases information equipment under finance leases. According to the terms of the lease contract, the Group can obtain the ownership of the equipment unconditionally when the contract expires. The rent is priced according to the contract and is paid in half a year. The total amount of the minimum lease payments and their present value as at December 31, 2018 and 2017 are as follows:

December 31, 2018
Future financial
Total Amount expenses Present Value
Current
Under 1 year \$2,500 \$139 \$2,361
Noncurrent
1 year to 5 year \$2,500 \$44 \$2,456
Over 5 years - - -
Subtotal \$2,500 \$44 \$2,456
Total \$5,000 \$183 \$4,817

December 31, 2017: None.

(18)PENSION

A.Defined contribution plans

  • a.The plan under the Labor Pension Act (the "Act") is deemed a defined contribution plan. Pursuant to the Company has made monthly contributions equal to 6% of each employee's monthly salary to employees' pension accounts.
  • b.The employees of the Group's subsidiaries are members of a state-managed retirement benefit plan operated by local government. The subsidiary is required to contribute amounts calculated at a specified percentage of payroll costs to the retirement benefit scheme to fund the benefits. The only obligation of the Group with respect to the retirement benefit plan is to make the specified contributions to the fund.
  • c.The total expenses recognized in the consolidated statement of comprehensive income were \$101,761 thousand and \$88,558 thousand, representing the contributions payable to these plans by the Group at the rates specified in the plans for the years ended December 31, 2018 and 2017, respectively.

B.Defined benefit plans

a.The Company and Sunon Smt Co., Ltd. have defined benefit plans under the Labor Standards Law that provide benefits based on an employee's length of service and average monthly salary for the six-month period prior to retirement. The aforementioned companies contribute an amount equal to 2% of salaries paid each month to their respective pension funds (the Funds), which are administered by the Labor Pension Fund Supervisory Committee (the Committee) and deposited in the Committee's name in the Bank of Taiwan. Before the end of each year, the Company assesses the balance in the Funds. If the amount of the balance in the Funds is inadequate to pay retirement benefits for employees who conform to retirement

requirements in the next year, the Company is required to fund the difference in one appropriation that should be made before the end of March of the next year. The Funds are operated and managed by the government's designated authorities; as such, the Group does not have any right to intervene in the investments of the Funds. b.The amounts arising from the defined benefit obligation of the Group in the consolidated balance sheets were as follows:

December 31
Item 2018 2017
Present value of defined benefit \$94,388 \$97,611
obligation
Fair value of plan assets (18,728) (23,899)
Net defined benefit liabilities \$75,660 \$73,712

c. Movements of the net defined benefit liabilities were as follows:

Year Ended December 31, 2018
Present value of defined Fair value of Net defined benefit
Item benefit obligation plan assets liabilities
Balance, beginning of year \$97,611 (\$23,899) \$73,712
Service cost
Current service cost 120 - 120
Interest expense (income) 1,433 (365) 1,068
Past service cost - - -
Settlement loss (income) (9,769) 10,598 829
Recognized in profit or loss (\$8,216) \$10,233 \$2,017
Remeasurement
Return on plan assets (excluding \$ - (\$497) (\$497)
amounts included in net interest
expense)
Actuarial loss (gain) -
Changes in demographics 1,367 - 1,367
assumptions
Changes in financial assumptions 1,845 - 1,845
Experience adjustments 4,126 - 4,126
Recognized in other comprehensive \$7,338 (\$497) \$6,841
income
Contributions from the employer \$ - (\$6,910) (\$6,910)
Benefits paid from plan assets (2,345) 2,345 -
Balance, end of year \$94,388 (\$18,728) \$75,660
Year Ended December 31, 2017
Present value of defined Fair value of Net defined benefit
Item benefit obligation plan assets liabilities
Balance, beginning of year \$93,086 (\$18,867) \$74,219
Service cost
Current service cost 121 - 121
Interest expense (income) 1,366 (318) 1,048
Past service cost 1,028 - 1,028
Settlement loss (income) - - -
Recognized in profit or loss \$2,515 (\$318) \$2,197
Remeasurement
Return on plan assets (excluding \$ - \$116 \$116
amounts included in net interest
expense)
Actuarial loss (gain)
Changes in demographics 2,403 - 2,403
assumptions
Changes in financial assumptions - - -
Experience adjustments 1,847 - 1,847
Recognized in other comprehensive \$4,250 \$116 \$4,366
income
Contributions from the employer \$ - (\$6,042) (\$6,042)
Benefits paid from plan assets (2,240) 1,212 (1,028)
Balance, end of year \$97,611 (\$23,899) \$73,712
  • D. Through the defined benefit plans under the Labor Standards Law, the Group is exposed to the following risks:
  • a. Investment risk: The pension funds are invested in equity and debt securities, bank deposits, etc. The investment is conducted at the discretion of the government's designated authorities or under the mandated management. However, under the Labor Standards Law, the rate of return on assets shall not be less than the average interest rate on a two-year time deposit published by the local banks and the government is responsible for any shortfall in the event that the rate of return is less than the required rate of return.

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

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

  • E. The actuarial valuations of the present value of the defined benefit obligation were carried out by qualified actuaries. The principal assumptions of the actuarial valuation were as follows:
Measurement Date
Decembe 31, 2018 Decembe 31, 2017
Discount rate 1.375% 0.875%-1.5%
Future salary increase rate 2.00% 1.25%-2.00%
The weighted average duration of the 14.9 years 5.9-14.8 years
defined benefit obligation

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

December 31
Item 2018 2017
Discount Rate
0.25% higher (\$3,433) (\$3,423)
0.25% lower \$3,598 \$3,587
Expected rates of salary increase
0.25% higher \$3,518 \$3,512
0.25% lower (\$3,374) (\$3,370)

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

F. The Group expects to make contributions of \$7,200 thousand to the defined benefit plans for the year ended December 31, 2019.

(19)SHARE CAPITAL

A. Movements in the number of the Group's ordinary shares outstanding were as follows:

Year Ended December 31, 2018
Item Shares (in thousands) Amount
Balance at January 1 250,930 \$2,509,297
Capital increase in cash - -
Capitalization of retained earnings - -
Balance at December 31 250,930 \$2,509,297
Year Ended December 31, 2017
Item Shares (in thousands) Amount
Balance at January 1 250,930 \$2,509,297
Capital increase in cash - -
Capitalization of retained earnings - -
Balance at December 31 250,930 \$2,509,297

B. As of December 31, 2018, the authorized capital are \$3,000,000 thousand, consisting of 300,000 thousand shares.

(20)CAPITAL SURPLUS

December 31
Item 2018 2017
From merger \$18,227 \$18,227
From convertible bonds 326,015 326,015
Treasurry share transactions 21,464 21,464
Reorganization 1,050 -
Differences between considerations and carrying 147 -
amounts of subsidiaries acquired or disposed
Total \$366,903 \$365,706

Under the Company Act, the capital surplus generated from the excess of the issuance price over the par value of capital stock and donations can be used to offset deficit or may be distributed as stock dividends or in cash. Under the regulations of the Security Exchange Law, the maximum amount transferred from the foregoing capital surplus to the Company's capital per year shall not be over 10% of the Company's paid-in capital. Capital surplus can't be used to offset deficit unless legal reserve is insufficient. The capital surplus from longterm investments may not be used for any purpose.

(21)RETAINED EARNINGS AND DIVIDEND POLICY

(1) In accordance with the dividend policy as set forth in the amended Articles, where the Company made profit in a fiscal year, the profit shall be first utilized for paying taxes, offsetting losses of previous years, setting aside as legal reserve 10% of the remaining profit, setting aside a special reserve in accordance with the laws and regulations, and the remainder plus prior year's unappropriated earnings will be recommended by the board of directors and approved through the shareholders' meeting.

stipulates appropriate dividend distribution ratio, and proposes for approval in the shareholders' meeting. However, at least 20% of total dividends should be distributed in cash . In consideration of its operation and capital expenditure demands, the Company

  • distributed in cash. However, legal reserve can be transferred to capital or distributed in cash only when the legal reserve has exceeded 25% of the Company's paid-in capital. (2) Legal reserve may be used to offset a deficit, and be transferred to capital or
  • (3) Special reserve
December 31
Item 2018 2017
Reserve for the dedit balance of other equities \$47,956 \$3,702
Reserve for first-time adoption of IFRS 79,155 79,155
Total \$127,111 \$82,857
  • A. While earning distribution, the earnings can be distributed after appropriation of the equivalent amount of the debit balance of the other equities of the balance sheet.
  • B. Under Rule No.1010012865 issued by the FSC for first-time adoption of IFRS, the special reserve can be reversed while usage, disposal and reclassification of related assets.
  • (4) The appropriation of 2017 and 2016 earnings had been resolved at the shareholders' meeting in May 2018 and June 2017, respectively. Details were summarized below:
Amount Dividends Per Share
Item 2017 2016 2017 2016
Legal reserve \$65,746 \$57,190
Special reserve 44,254 3,702
Cash dividends 577,138 501,860 2.3 2.0
Total \$687,138 \$562,752

(5)The appropriation of 2018 earnings had been proposed by the board of directors on March 14, 2019. Details were summarized below:

Item Amount Dividends Per Share
Legal reserve \$60,512
Special reserve 37,598
Cash dividends 501,860 2.0
  • A. The appropriations of earnings for 2018 are to be presented for approval in the shareholders' meeting to be held in June 2019.
  • B. In the event of repurchase of the Company's shares, transfer, conversion or annulment of treasury stocks, and exercise of employees' stock options, leading to a change in the number of outstanding shares and a consequent change in dividend yield, it is proposed that the chairman is authorized by the Board of Directors to duly adjust stocks and cash payout rates.
  • (6) Information on the earnings appropriation proposed by the Company's Board of Directors and approved by the Company's shareholders is available on the Market Observation Post System website of the Taiwan Stock Exchange.
Unrealized Gain (Loss) on
Exchange Differences Financial Assets at Fair
on Translating Foregin Value Through other
Item Operations Comprehensive Income Total
Balance at January 1, 2018 (\$127,111) \$
-		 (\$127,111)
Impact of retroactive - 3,415 3,415
applications of IFRS 9
Exchange dirrerences arising on (36,548) - (36,548)
translation of foreign operations
Unrealized Gain (loss) on - 8,985 8,985
financial assets at fair value
through other comprehensive
income
Transfer to retained earning - (12,400) (12,400)
on disposal of equity instruments
at fair value through other
comprehensive income
Reorganization (1,050) - (1,050)
Banance at December 31, 2018 (\$164,709) \$
-		 (\$164,709)

(22)OTHERS EQUITY

Unrealized Gain (Loss) on
Exchange Differences Financial Assets at Fair
on Translating Foregin Value Through other
Item Operations Comprehensive Income Total
Balance at January 1, 2017 (\$82,857) \$
-		 (\$82,857)
Exchange dirrerences arising on (44,254) - (44,254)
translation of foreign operations
Banance at December 31, 2017 (\$127,111) \$
-		 (\$127,111)

(23)NON-CONTROLLING INTERESTS

Year Ended December 31
Item 2018 2017
Balance as of January 1 \$33,838 \$34,479
Attributable to non-controlling interests:
Net income 2,563 5,957
Other comprehensive income (173) (388)
Non-controlling interests - dividend (5,254) (6,210)
Non-controlling interests - disposal (30,974) -
Balance as of December 31 \$
-		 \$33,838

(24)OPERATING REVENUES

Year Ended December 31
2018 2017
\$12,100,625 \$11,060,347
(77,901) (76,583)
(57,426) (37,036)
\$11,965,298 \$10,946,728

A. Explain of contract revenue

Sales of fans and other related goods are mainly to system manufacturers and distributors. Please refer to Note 14 for the main sale areas.

B. The Group's timing of recognition is transferred the goods at a certain point of time.

C. Contract balances

The Group recognizes the accounts receivable, contract assets and contract liabilities related to contract revenue as follows:

December 31, 2018
Accounts receivable \$3,059,211
Contract assets -
Total \$3,059,211
Contract liabilities - \$72,085
current
  • a. Significant changes in contract assets and contract liabilities The changes in the contract assets and contract liabilities primarily result from the timing difference between the satisfaction of performance obligation and the customer's payment, and there is no other significant changes.
  • b. Amount from previous period's satisfied performance obligations and beginning contract liabilities recognized in the current period as income were as follows:
Year Ended
Revenue in the current period December 31, 2018
From beginning contract liabilities \$97,417
From previous period's satified performance
obligations \$
-

(25)LABOR COST, DEPRECIAION AND AMORTIZATION

Year ended December 31, 2018
Item Operating cost Total
Labor cost
Salaries \$1,058,339 \$701,739 \$1,760,078
Insurance 57,610 62,746 120,356
Pension 65,762 41,744 107,506
Others 672,603 67,230 739,833
Depreciation 191,260 94,005 285,265
Amortization 24,918 32,330 57,248
Total \$2,070,492 \$999,794 \$3,070,286
Year ended December 31, 2017
Item Operating cost Operating expenses Total
Labor cost
Salaries \$920,444 \$668,027 \$1,588,471
Insurance 52,807 56,864 109,671
Pension 57,548 33,207 90,755
Others 563,438 59,180 622,618
Depreciation 180,384 79,797 260,181
Amortization 16,125 35,184 51,309
Total \$1,790,746 \$932,259 \$2,723,005

1.The Company accrued employees' compensation and remuneration to directors and supervisors at the rates not less than 2% and not higher than 5% of net income before income tax, emoployees' compensation and remuneration to directors and supervisors during the period. If there is a change in the amounts after the annual consolidated financial statements were authorized for issue, the differences are recorded as a change in the accounting estimate.

2.The employees' compensation and remuneration to directors for the years ended December 31, 2018 and 2017 had been approved by the Company's Board of Directors meeting held on March 14, 2019 and March 12, 2018, respectively, and the relevant amounts recognized in the consolidated financial statements were as follows:

2018 2017
Employees'
compensation		 Remmuneration
to directors		 Employees'
compensation		 Remmuneration
to directors
Resolution amount of \$16,500 \$9,500 \$17,500 \$10,000
allotment
Recognized in financial 16,500 9,500 17,500 10,000
statements
Difference \$
-		 \$
-		 \$
-		 \$
-

Year ended December 31

The above mentioned employees' compensation will be paid by cash.

3.Information about the appropriation of employees' compensation and directors' remuneration by the Company as proposed by the Board of Directors and resolved by the shareholders will be posted in the "Market Observation Post System" at the website of the Taiwan Stock Exchange.

(26)OTHER INOCME

Year Ended December 31
Item 2018 2017
Rental income \$6,834 \$5,492
Interest income 31,377 30,726
Others - sample sales 34,683 31,807
Others - subsidy 25,317 22,162
Others 38,723 61,355
Total \$136,934 \$151,542

(27)OTHER GAINS AND LOSSES

Year Ended December 31
Item 2018 2017
Net gain (loss) on financial instruments at FVTPL \$4 (\$40)
Loss on disposal of property, plant and (8,229) (2,508)
equipment
Net currency exchange gain 56,343 (25,720)
Gain on disposal of investments 5,570 3,716
Gain on disposal of investments - disposal of 19,977 -
subsidiaries
Impairment loss on non-financial assets - (15,371)
Others (10,135) (11,657)
Total \$63,530 (\$51,580)

(28)FINANCE COSTS

Year Ended December 31
Item 2018 2017
Interest on loans \$17,680 \$13,116
Others 508 665
Less: capitalized amount for qualified assets - -
Carrying amount \$18,188 \$13,781

Others are interest paid by subsidiaries for corporate income tax and interest on finance leases.

(29)INCOME TAX EXPENSE

A.Income tax recorded in profit or loss.

a.The major components of tax expense were as follows:

Year Ended December 31
Current income tax 2018 2017
Current tax expense \$171,281 \$194,492
Additional tax on unappropriated earnings - 618
Adjustments in tax of prior periods (5,043) (566)
Total \$166,238 \$194,544
Deferred income tax
The origination and reveral of temporary differences \$5,225 (\$15,875)
Effect of tax rate change 4,679 -
Total \$9,904 (\$15,875)
lncome tax expense \$176,142 \$178,669

b.Income tax expense recognized in other comprehensive income was as follows:

Year Ended December 31
Item 2018 2017
Exchange differences on translation of foreign (\$8,614) (\$8,618)
operations
Remeasurement of defined benefit plans (2,020) (741)
Total (\$10,634) (\$9,359)

B. A reconciliation of income before income tax and income tax expense recognized in profit or loss was as follows:

Year Ended December 31
Item 2018 2017
Income before income tax \$783,825 \$842,085
Income tax expense at the statutory rate \$209,203 \$199,372
Tax effect of adjusting items:
Expense not deductible for tax purpose (37,922) (4,880)
Adjustments for prior year's tax adjustments (5,043) (566)
Additional income tax on unappropriated earnings - 618
Deferred income tax expense
Temporary differences 5,225 (15,875)
Effect of tax rate change 4,679 -
Income tax expense recognized in profit or loss \$176,142 \$178,669

The corporate income tax is 17% in 2017. The corpoate income tax rate was adjusted from 17% to 20% starting from 2018. In addition, the tax rate applicable to unappropriated earnings was reduced from 10% to 5%.

Year Ended December 31, 2018
Recognised
Balance, Effect of Recognised in Other Effect of Balance,
Beginning Tax Rate in Profit Comprehensive Exchange End of
of Year Change or Loss Income Rate Changes Year
Deferred income tax assets:
Temporary differences
Loss on investment under \$1,302 \$230 (\$1,147) \$
-		 - \$ \$385
the equity method
Net defined benefit liability 12,531 1,608 (1,027) 2,020 - 15,132
Unrealized loss on 14,174 904 7,636 - (212) 22,502
inventories
Unused compensated 2,162 382 80 - - 2,624
absences
Unrealized exchange loss 86 15 (101) - - -
Others 21,261 1 970 - - 22,232
Operating loss carryforward 3,226 - (256) - (51) 2,919
Subtotal \$54,742 \$3,140 \$6,155 \$2,020 (\$263) \$65,794
Deferred income tax liabilities:
Temporaty differences
Gain on foreign investment \$39,016 \$7,404 \$14,017 (\$9,436) - \$ \$51,001
under the equity method
Unrealized exchange gain 2,350 415 (2,389) - - 376
Others 59 - 272 - 7 338
Subtotal \$41,425 \$7,819 \$11,900 (\$9,436) \$7 \$51,715
Total \$13,317 (\$4,679) (\$5,745) \$11,456 (\$270) \$14,079

C.Amounts of deferred tax assets or liabilities as a result of temporary difference, loss carryfoward and investment tax credit were as follows:

Year Ended December 31, 2017
Recognised
Balance, Recognised in Other Effect of Balance,
Beginning in Profit Comprehensive Exchange End of
of Year or Loss Income Rate Changes Year
Deferred income tax assets:
Temporary differences
Loss on investment under \$2,140 (\$838) \$
-		 \$ - \$1,302
the equity method
Net defined benefit liability 12,617 (828) 742 - 12,531
Unrealized loss on 6,068 8,005 - 101 14,174
inventories
Unused compensated 2,173 (11) - - 2,162
absences
Unrealized exchange loss 2,297 (2,211) - - 86
Others 25,088 (3,549) - (278) 21,261
Operating loss carryforward - 3,190 - 36 3,226
Subtotal \$50,383 \$3,758 \$742 (\$141) \$54,742
Deferred income tax liabilities:
Temporaty differences
Gain on foreign investment \$59,553 (\$11,395) (\$9,142) \$ - \$39,016
under the equity method
Unrealized exchange gain - 2,350 - - 2,350
Others 3,322 (3,072) - (191) 59
Subtotal \$62,875 (\$12,117) (\$9,142) (\$191) \$41,425
Total (\$12,492) \$15,875 \$9,884 \$50 \$13,317

D. Items with no deferred tax assets recognized:

December 31
Item 2018 2017
Deductible temporary differences \$19,027 \$7,590
Unused loss carryforwards 2,919 1,229
Total \$21,946 \$8,819

E. As of December 31, 2018, the tax authorities have ractified Company's income tax returns through Year 2016.

Year Ended December 31, 2018
Other Comprehensive Income Tax Other Comprehensive
Item Income (Loss), Before Tax (Expense) Benefit Income (Loss), Net of Tax
Items that will not be reclassified
subsequently to profit or loss:
Remeasurement of defined (\$6,841) \$2,020 (\$4,821)
benefit obligation
Unrealized gain on 8,985 - 8,985
investments in equity
instruments at fair value throngh
other comprehensive income
Subtotal \$2,144 \$2,020 \$4,164
Items that may be reclassified
subsequently to profit or loss:
Exchange differences arising (\$45,335) \$8,614 (\$36,721)
on translation of foreign
operations
Subtotal (\$45,335) \$8,614 (\$36,721)
Recognized in other (\$43,191) \$10,634 (\$32,557)
comprehensive income (loss)

(30)OTHER COMPREHENSIVE INCOME (LOSS)

Year Ended December 31, 2017

Other Comprehensive Income Tax Other Comprehensive
Item Income (Loss), Before Tax (Expense) Benefit Income (Loss), Net of Tax
Items that will not be reclassified
subsequently to profit or loss:
Remeasurement of defined (\$4,365) \$741 (\$3,624)
benefit obligation
Subtotal (\$4,365) \$741 (\$3,624)
Items that may be reclassified
subsequently to profit or loss:
Exchange differences arising (\$53,256) \$8,618 (\$44,638)
on translation of foreign
operations
Subtotal (\$53,256) \$8,618 (\$44,638)
Recognized in other (\$57,621) \$9,359 (\$48,262)
comprehensive income (loss)

(31)EARNINGS PER SHARE

Year Ended December 31
Item 2018 2017
Net income attributable to owners of the parent \$605,120 \$657,459
Weighted average shares outstanding 250,930 250,930
(in thousands)
Basic earnings per share (after tax) \$2.41 \$2.62
Net income attributable to owners of the parent \$605,120 \$657,459
Effect of potential dilutive ordinary shares - -
Net income used in computation of diluted \$605,120 \$657,459
earning per share
Weighted average shares outstanding \$250,930 \$250,930
(in thousands)
Impact on employees' compensation (Note) 517 437
Weighted average number of ordinary shares \$251,447 \$251,367
outstanding after dilution (in thousands)
Diluted earning per share (after tax) \$2.41 \$2.62

(Note) Since the Group offered to settle compensation paid to employees in cash or shares, the Group assumed the entire amount of the compensation would be settled in shares and the resulting potential shares were included in the weighted average number of shares outstanding used in the computation of diluted earnings per share, as the effect is dilutive. Such dilutive effect of the potential shares is included in the computation of diluted earnings per share until the number of shares to be distributed to employees is resolved in the following year.

(32)TRANSACTIONS WITH NON-CONTROLLING INTERESTS

1.Acquisition of additional interests in subsidiary 2018:

In July 2018, the Company purchased an additional 15% equity of its subsidiary, Sunon Smt Co., Ltd. in cash of \$30,827 thousand, and the shareholding ratio increased from 85% to 100%. As the above transaction did not change the control to subsidiary, the Company treats it as an equity transaction:

Sunon Smt Co., Ltd.
Carrying amount \$30,974
Payment to the non-controlling interest (30,827)
Capital surplus - differences between considerations and \$147
carrying amounts of subsidiaries acquired and disposed

2017: None.

(33)DISPOSAL OF SUBSIDIARY

1.The Group diposed Hefei Hua Zhun Electronics Co., Ltd. [Formerly named Sunon Electronic (He Fei) Co., Ltd.] in December 2018. The analysis of assets and liabilities over which the control lost is as follows:

Date of
Lossing Control
Current assets
Cash and cash equivalents \$15,486
Accounts receivable 670
Other receivables 9
Inventories 15
Prepayments 66
Nocurrent assets
Property, plant and equipment 4,835
Refundable deposits 510
Current liabilities
Accounts payable (668)
Contract liabilities (57)
Other payables (1,441)
Net assets disposed of \$19,425

2.Gain on disposal of subsidiary

Year Ended
December 31, 2018
Net consideration received \$38,816
Net assets disposed of (19,425)
Cumulative exchange difference 586
reclassified from equity to profit or loss
due to loss of control over subsidiary
Gain on disposal \$19,977

3.Net cash inflow on disposal of subsidiary

Year Ended
December 31, 2018
Net consideration received \$38,816
Less: Balance of cash and cash equivalents (15,486)
disposed of
Net cash inflow on disposal of subsidiary \$23,330

7. RELATED PARTY TRANSACTIONS

(1) Parent and ultimate controlling party:

The Group has no parent and ultimate controlling party.

(2) Related party name and category:

Related Party Name Related Party Category
Guang Sheng Investment Corporation Other related parties
Shehng-Yuan Children Development and Other related parties
Adult Support Services Center
Yo Yuan Investment Corporation Other related parties

(3) Significant transactions with related parties:

A. Sales: None.

B. Purchase: None.

C. Contract assets: None.

D. Contract liabilities: None.

E. Balance of receivables (excluding lending to related parties): None.

F. Balance of payables (excluding borrowing from related parties): None.

G. Prepayments: None.

H. Property transactions: None.

  • I. Financing activities lending to related parties: None.
  • J. Financing activities borrowing from related parties : None.
  • K. Guarantee for related parties: None.
  • L. Others:
  • a. Refundable deposits:
December 31
Related Party Category 2018 2017
Other related parties \$26 \$446
b.
Guarantee deposits:
December 31
Related Party Category 2018 2017
Other related parties \$55 \$55
c.
Miscellaneous income:
Year Ended December 31
Related Party Category 2018 2017
Other related parties \$194 \$181
d.
Miscellaneous expenses:		 Year Ended December 31
Related Party Category 2018 2017
Other related parties \$1,756 \$2,812
(3) Key management compensation Year Ended December 31
Item 2018 2017
Salaries and other short-term employee benefits \$49,121 \$47,112
Post-employment benefits 3,728 -
Other long-term employee benefits - -
Termination benefits - -
Share-based payments - -
Total \$52,849 \$47,112

8. PLEDGED ASSETS

December 31
Item 2018 2017
Property, plant and equipment (net) \$496,858 \$496,858

9. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED CONTRACT COMMITMENTS

(1) As of December 31, 2018 and 2017, the Group issued guarantee notes for bank loans amounting to \$2,822,185 thousand and \$2,705,908 thousand, respectively.

(2) Commitments and contingency as of December 31, 2018 and 2017 consisted of the following:

(In thousands)

December 31
Item 2018 2017
L/C Amount USD 520 USD 1,401
NTD 1,484

(3) As of December 31, 2018 and 2017, the note endorsement for material purchase were as follows:

(In thousands)
December 31
Item 2018 2017
USD \$1,979 \$1,409
NTD 1,289 3,896
  • (4) As of December 31, 2018 and 2017, the Group endorsed guarantees for others. Please refer to Note 13 for the information.
  • (5) ADDA Corporation manufactured fan products, which was suspeted infringing the Group's new patents. The related lawsuit details were as follows: The ADDA Corporation manufactured fan products, which was suspeted infringing the Group's new patents for No. I381559, No. I384723 and No. I389429. The Group filed a lawsuit seeking for infringement obviation and requesting compensation from that company and its related parties. However, the Court dismissed the lawsuit. The Group believe that the use of the judgment has been violated and has appealed against the judgment. At present, the Intellectual Property Court is still in the process of judgement.

(6) Significant contract

The Group entered into the land usage right transfer contract with Farms Agribusiness Corporation in Kunshan Economic and Technological Development Zone in Year 2000. The contents of the contract were as below:

A.Transfer object: land usage right of 48,688 square meters at Kunshan Economic and Technological Development Zone for the construction of the plant and dormitory. B.Land usage right period: 50 years.

C.Transfer price of land-usage right: US\$828 thousand (RMB 6,842 thousand).

(7) Operating lease arrangements

The Group entered into a non-cancellable operating lease agreement for the factories and other assets, with the lease term of 2006 - 2023 and renewal options included in the contract. Rent expenses were \$62,833 thousand and \$63,727 thousand for the years ended December 31, 2018 and 2017, respectively.

The future aggregate minimum lease payments under non-cancellable operating leases are as follows: December 31

2018 2017
\$51,073 \$60,526
84,411 128,319
- 2,531
\$135,484 \$191,376

10. SIGNIFICANT DISASTER LOSS: NONE.

11. SIGNIFICANT SUBSEQUENT EVENTS: NONE.

12. OTHERS

(1) Capital risk management

The Group should maintain an adequate capital structure to enable the expansion and enhancement of equipments. Therefore, the Group manages its capital in a manner to ensure that it has sufficient and necessary financial resources to fund its working capital needs, capital asset purchases and debt service requirements associated with its existing operations over the next 12 months.

(2) Financial instruments

A. Financial risk of financial instruments

Financial risk management policies

The Group's activities expose it to a variety of financial risks: market risk (including foreign exchange risk, interest rate risk and price risk), credit risk and liquidity risk. The Group's overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Group's financial position and financial performance.

The plans for material treasury activities are reviewed by board of directors in accordance with procedures required by relevant regulations or internal controls. During the implementation of such plans, the Group Treasury function must comply with certain treasury procedures that provide guiding principles for overall financial risk management and segregation of duties.

Significant financial risks and degrees of financial risks

  • a. Market risk
  • (a) Foreign exchange rate risk

The Group's functional currency is New Taiwan dollars. Many of the Group's operating activities are denominated in foreign currencies. Consequently, the Group is exposed to foreign currency risk. To protect against reductions in value and the volatility of future cash flows caused by changes in foreign exchange rates, the Group raises loans denominated in foreign currency and derivative financial instruments to hedge the currency exposure. These instruments help to reduce, but do not eliminate, the impact of foreign currency exchange rate movements. The net investment in foreign operation is strategic investment. Therefore, the Group does no hedge for it.

December 31, 2018
Sensitivity Analysis
Foreign Exchange Carrying Value Profit and
Currency Rate (NTD) Variation Loss Impact Equity Impact
68,377 30.7150 2,100,202 increase 1% 21,002 -
8,325 35.2000 293,049 increase 1% 2,930 -
70,351 6.8632 2,160,832 increase 1% 21,608 -
1,184 0.8726 36,364 increase 1% 364 -
Financial liabilities
65,606 30.7150 2,015,087 increase 1% (20,151) -
217 35.2000 7,636 increase 1% (76) -
43,254 6.8632 1,328,534 increase 1% (13,285) -
902 0.8726 27,693 increase 1% (277) -
December 31, 2017

(b) Foreign currency risk and sensitivity analysis

Sensitivity Analysis
Foreign Exchange Carrying Value Profit and
Currency Rate (NTD) Variation Loss Impact Equity Impact
Financial assets
Monetary item
USD:NTD 65,385 29.7600 1,945,871 increase 1% 19,459 -
EUR:NTD 7,839 35.5700 278,818 increase 1% 2,788 -
USD:RMB 61,909 6.5342 1,842,415 increase 1% 18,424 -
USD:EUR 1,886 0.8367 56,117 increase 1% 561 -
Financial liabilities
Monetary item
USD:NTD 56,639 29.7600 1,685,576 increase 1% (16,856) -
EUR:NTD 386 35.5700 13,744 increase 1% (137) -
USD:RMB 43,887 6.5342 1,306,070 increase 1% (13,061) -
USD:EUR 1,682 0.8367 50,059 increase 1% (501) -

When New Taiwan dollar appreciates and other variation factors stay unchanged, there will be the same but opposite amount of influence as of December 31, 2018 and 2017.

Year Ended December 31, 2018
Foreign Exchange Gain (Loss)
Foreign Currency
(In thousands) Exchange Rate Carrying Value
Item
Financial Assets
Monetary Item
USD: NTD - 30.1750 (4,310)
EUR: NTD - 35.5900 1,805
USD: RMB (3,842) 6.6174 (17,521)
USD: EUR (8) 0.8479 (287)
Financial Liabilities
Monetary Item
USD: NTD - 30.1750 4,306
EUR: NTD - 35.5900 (3)
USD: RMB 538 6.6174 2,452
USD: EUR 3 0.8479 100

The details of unrealized exchange gain (loss) for montary items due to material exchange rate fluctuation were as follow:

Year Ended December 31, 2017
Foreign Exchange Gain (Loss)
Foreign Currency
(In thousands) Exchange Rate Carrying Value
Item
Financial Assets
Monetary Item
USD: NTD - 30.4100 (19,067)
EUR: NTD - 34.4000 1,996
USD: RMB (5,091) 6.7518 (22,931)
USD: EUR (25) 0.8840 (865)
Financial Liabilities
Monetary Item
USD: NTD - 30.4100 30,579
EUR: NTD - 34.4000 12
USD: RMB 5,776 6.7518 26,017
USD: EUR 25 0.8840 856

b. Price risk

The Group is exposed to equity securities price risk because investments held by the Group are classified on the consolidated balance sheet at fair value through profit or loss and at fair value through other comprehensive income. The Group is exposed to beneficiary certificates and foreign unlisted stocks. If the price of the Group's equity investments in overseas unlisted companies rise 1%, the net income resulting from equity instruments at fair value through profit and loss will increase \$1,078 thousand and \$2,290 thousand for the years ended December 31, 2018 and 2017, respectively; the comprehensive income resulting from financial assets at fair value through other comprehensive income will increase or decrease \$0 thousand for the yeas end December 31, 2018.

c. Interest rate risk

The carrying amount of the financial assets and liabilities that exposed interest rate risk as reporting date was as follow:

Carrying Value
Item December 31, 2018 December 31, 2017
Fair value interest rate risk:
Financial assets \$10,063 \$26,742
Financial liabilities (4,817) -
Net \$5,246 \$26,742
Cash flow interest rate risk:
Financial assets \$1,269,141 \$1,379,149
Financial liabilities (1,063,257) (956,262)
Net \$205,884 \$422,887

(a) Sensitivity analysis of fair value interest rate risk

The Group does not classify any fixed-rate instruments as financial assets at fair value through profit or loss and financial assets at fair value through other comprehensive income. In addition, the Group does not designate derivatives (interest rate swap) as hedge instruments under hedge accounting. Therefore, the change of interest rate at reporting date does not have influence on net income and other comprehensive income.

(b) Sensitivity analysis of cash flow interest rate risk

The Group's financial instruments with variable interest rate are those with floating-rate. If interest rate increases 1%, the net income will increase \$2,059 thousand and \$4,229 thousand for the years ended December 31, 2018 and 2017, respectively.

B. Credit risk

Credit risk is the risk that counterparty will not meet its obligations under a contract leading to a financial loss to the Group. The Group is exposed to credit risk from operating activities, primarily accounts receivables, and from investing activities, primarily deposit and other financial instruments. Credit risk is managed separately for business related and financial related exposures.

a. Business related credit risk

In order to maintain the credit quality of accounts receivables, the Group has established procedures to monitor and limit exposure to credit risk on trade receivables. Credit evaluation is performed in the consideration of the relevant factors which may affects the customer's paying ability such as financial condition , external and internal credit scoring, historical experience, and economic conditions.

b. Financial credit risk

The Group's exposure to financial credit risk which pertained to bank deposits and other financial instruments were evaluated and monitored by Group Treasury function. The Group only deals with creditworthy counterparties, banks, and goverment so that no significant credit risk was identified. In addition, the Group has no financial assets at amortized and investments in debt instruments at fair value through other comprehensive income.

(a) Credit concentration risk:

As of December 31, 2018 and 2017, the Group's ten largest customers accounted for 34.55% and 42.68% of accounts receivable, respectively. The Group believes the concentration of credit risk is insignificant for the remaining accounts receivable. The Group continuously evaluated customers' financial situation. To reduce major credit risk, the Group bought credit guarantee insurance, and asked customers to make payment in advance.

  • (b) Measured in expected credit loss 2018
  • (i) Account receivables adopts a simplified approach, please prefer to Note 6(4).
  • (ii) Identification basis for whether credit risk is significantly increased: None.
  • c. Details of financial effect of exposure amount:

December 31, 2018: None.

Decrease Amount of Credit Risk Maximum Exposure
Net Settlement Other Credit
December 31, 2017 Security Agreement Strengthening
Total
Receivables \$147,769 \$ - \$697,755 \$845,524

C. Liquidity risk

a. Liquidity risk management:

The objective of liquidity risk management is to ensure the Group has sufficient liquidity to fund its business requirements of cash and cash equivalents and the unused of financing facilities associated with existing operations.

b. Financial liabilities with repayment periods:

The following table details the Group's remaining contractual maturity for its non-derivative financial liabilities with agreed repayment periods.

Item Within 1 year 1-2 years 2-5 years Over 5 years Contract Cash Flow Carrying Value
Non-derivative
Financial liabilities
Short-term loans \$843,257 \$ - \$ - \$ - \$843,257 \$843,257
Accounts payable 2,670,802 225 - - 2,671,027 2,671,027
Other payables 798,927 193 135 - 799,255 799,255
Long-term loans - - 220,000 - 220,000 220,000
(Inclusive of current portion)
Obligation under 2,500 2,500 - - 5,000 4,817
capital leases
Guarantee deposits 5,145 - - - 5,145 5,145
Total \$4,320,631 \$2,918 \$220,135 \$ - \$4,543,684 \$4,543,501
December 31, 2017
Item Within 1 year 1-2 years 2-5 years Over 5 years Contract Cash Flow Carrying Value
Non-derivative
Financial liabilities
Short-term loans \$636,262 \$ - \$ - \$ - \$636,262 \$636,262
Accounts payable 2,549,795 - 1 - 2,549,796 2,549,796
Other payables 801,957 84 192 - 802,233 802,233
Long-term loans - - 320,000 - 320,000 320,000
(Inclusive of current portion)
Guarantee deposits 4,499 - - - 4,499 4,499
Total \$3,992,513 \$84 \$320,193 \$ - \$4,312,790 \$4,312,790

December 31, 2018

2. Categories of financial instruments

The carrying value of financial assets and liabilities of the Group as of December 31, 2018 and 2017 was as follow:

December 31
Financial assets 2018 2017
Financial assets measured at amortized cost
Cash and cash equivalents \$1,144,973 \$ -
Notes and accounts receivable 3,090,948 -
Other receivables 45,695 -
Other financial assets-current 143,382 -
Refundable deposits 29,322 -
Loans and receivables
Cash and cash equivalents - 1,386,750
Notes and accounts receivable - 2,724,061
Other receivables - 83,634
Other financial assets-currents - 26,742
Refundable deposits - 26,607
Financial asset at fair value through profit or loss 107,831 228,965
Financial assets carried at cost - noncurrent - 62,000
Financial liabilites
Financial liabilites measured at amortized cost
Short-term loans 843,257 636,262
Notes and accounts payable 2,671,027 2,549,796
Other payables 799,255 802,233
Obligation under capital leases 4,817 -
Long-term loans 220,000 320,000
Guarantee deposits 5,145 4,499

(3) Fair value information

  • A. Details of the fair value of the Group's financial assets and financial liabilities not measured at fair value are provided in Note 12(3)C. Details of the fair value of the Group's investment property measured at cost are provided in Note 6(10).
  • B. The different levels that the inputs to valuation techniques are used to measure fair value of financial and non-financial instruments have been defined as follows: Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. A market is regarded as active where a market in which transactions for the asset or liability take place with sufficient

frequency and volume to provide pricing information on an ongoing basis. The fair value of the Group's investment in listed stocks, beneficiary certificates and others is included in Level 1.

Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. The fair value of the Group's investments in government bonds, corporate bonds, financial debentures, convertible bonds, and most derivative instruments is included in Level 2.

Level 3: Unobservable inputs for the asset or liability. The fair value of the Group's investments in some derivative instruments and equity instruments without active market is included in Level 3.

C. Financial instruments that are not measured at fair value

The Group considers that the carrying amounts of financial instruments cash and cash equivalents, receivables, long-term loans and gurantee deposits that are not measured at fair value approximate their fair values.

D. The related information of financial and non-financial instruments measured at fair value by level on the basis of the nature, characteristics and risks of the assets and liabilities is as follows:

December 31, 2018
Item Level 1 Level 2 Level 3 Total
Assets:
Recurring fair value measurements
Financial assets at fair value
through profit or loss:
- beneficiary certificates \$107,831 \$ - \$ - \$107,831
December 31, 2017
Item Level 1 Level 2 Level 3 Total
Assets:
Recurring fair value measurements
Financial assets at fair value
through profit or loss:
- beneficiary certificates \$228,965 \$ - \$ - \$228,965
  • E. The methods and assumptions the Group used to measure fair value are as follows: Valuation techniques of financial instruments valued at fair value
  • (a) The fair value of financial assets and liabilities traded in an active market is based on the quoted market prices. The quotation, which is published by the main exchange center or that which was deemed to be a public bond by the Treasury Bureau of

Center Bank, is included in the fair value of the listed securities instruments and the debt instruments in active markets with open bid.

A financial instrument is regarded as the quoted price in an active market if the quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service or regulatory agency; and if those prices represent the actual and regularly occurring market transactions on an arm's length basis. Otherwise, the market is deemed to be inactive. Normally, a market is considered to be inactive when the bid ask spread is increasing; or the bid-ask spread varies significantly; or there has been a significant decline in trading volume.

(b) Except for the above-mentioned financial instruments traded in an active market, the fair value is based on the valuation techniques or the quotation from the counterparty. The fair value refers to the current fair value of the other financial instruments with similar conditions and characteristics, using a discounted cash flow analysis or other valuation techniques, such as calculations of using models (for example, applicable yield curve from Taipei Exchange, or average quoted price on interest rate of commercial paper from Reuters), based on the information acquired from the market at the balance sheet date.

When the financial instrument of the Group is not traded in an active market, the fair value is determined based on the ratio of the quoted market price of the comparative company, its book value per share and its operating situation. Also, the fair value is discounted for its lack of liquidity in the market.

  • F. There was no transfer between Level 1 and Level 2 for the years ended December 31, 2018 and 2017.
  • Financial Assets Measured at Fair Value Through Other Comprehensive Income - Unlisted Stock January 1, 2018 Adjustment on initial application of IFRS 9 Acquisition Sale Recognized in profit or loss Recognized in comprehensive income December 31, 2018 Item \$ - \$ - 8,985 - (74,400) - 65,415

  • G. Changes in level 3 instruments as at December 31, 2018:

  • H. The Group's Finance Department is responsible for validating the fair value measurements to ensure that the valuation are in line with market conditions. The Department reviews regularly to ensure the measurement or assessment are reasonable.

  • (4) Transfer of financial assets: None.
  • (5) Offset of financial assets and liabilities: None.

13. SUPPLEMENTARY DISCLOSURES

  • (1) Significant transactions information (before consolidated elimination)
  • A. Financings provided: Table 1
  • B. Endorsement/guarantee provided: Table 2
  • C. Marketable securities held: Table 3
  • D. Marketable securities acquired and disposed of at costs or prices of at least NT\$300 million or 20% of the paid-in capital: Table 4
  • E. Acquisition of individual real estate properties at costs of at least NT\$300 million or 20% of the paid-in capital: None
  • F. Disposal of individual real estate properties at prices of at least NT\$300 million or 20% of the paid-in capital: None
  • G. Total purchases from or sales to related parties of at least NT\$100 million or 20% of the paid-in capital: Table 5
  • H. Receivables from related parties amounting to at least NT\$100 million or 20% of the paid-in capital: Table 6
  • I. Information about the derivative financial instruments transaction: None.
  • J. The business relationship between the parent and the subsidiaries and significant transactions between them: Table 7
  • (2) Information on investees (before consolidated elimination): Table 8
  • (3) Information on investments in Mainland China (before consolidated elimination): Table 9

Table 1

SUNONWEALTH ELECTRIC MACHINE INDUSTRY CO., LTD. AND SUBSIDIARIES

FINANCINGS PROVIDED

DECEMBER 31, 2018

(Amounts in Thousands of New Taiwan Dollars and Foreign Currencies)
Company's
Financing		 Financing
(Note 2)
Amount
Limits
Total		 827,874
Financing
Limits for		 Borrowing
Company
(Note 1)
Each		 413,937
Collateral Item Value -
-
Allowance
for Bad
Debt		 -
Reason for
Financing		 Operating
capital
Transaction
Amounts		 -
Nature for
Financing
(Note 3)		 2
Interest
Rate		 %
1.2
Actually
Amount
Drawn		 -
(Note 4)
Balance
Ending		 -
Balance for
Maximum
the Period		 35,200 (EUR 1,000)
Related
Party		 Yes
Statement Account
Financial		 receivables-related
Other		 parties
Counter
party		 Sunon
SAS
Financing
Company		 Machine
Sunonwealth
Electric		 Industry Co., Ltd.
No. 0

199

Note 1: Financing limits for each borrowing company:

(1) For trading partner:

Shall not be higher than the purchase or sales amount of the most recent year.

(2) For short-term financing:

Shall not exceed 10% of the company's net worth.

  • Note 2: The maximum balance of financing activitives:
  • (1) For trading partner:

Shall not exceed 20% of the company's net worth

(2) For short-term financing:

Shall not exceed 20% of the company's net worth

(3) The policy for loans granted mutually between overseas subsidiaries of which the Company directly or indirectly holds 100% of their voting shares is as follows:

The maximum amount for total loan for individual enterprise shall not exceed 60% of its net worth.。

  • Note 3: The code represents the nature of financing activities as follows:
  • (1) Related to trading partner is "1".
  • (2) Short-term financing is "2".

Note 4: The maximum amount was approved by the Board of Directors' meeting.

Note 5: All the transactions had been eliminated. 200

SUNONWEALTH ELECTRIC MACHINE INDUSTRY CO., LTD. AND SUBSIDIARIES

ENDORSEMENTS/GUARANTEES PROVIDED

DECEMBER 31, 2018

(Amounts in Thousands of New Taiwan Dollars and Foreign Currencies)
endorsements
Provision of
the party in
to		 Mainland
China		 Y Y Y
endorsements
by subsidary
Provision of
to		 company
parent		 N N N
endorsements
Provision of
by parent		 company to
subsidary		 Y Y Y
endorsement
Maximum
amount
of		 (Note 4) 2,069,686 2,069,686 2,069,686
accumulated
amount to
Ratio of
net		 worth of the
Company		 %
6.68		 %
2.23		 5.94%
Balance
secured
by		 collaterals - - -
Actual amount
drawn		 - NTD 92,145 (USD 3,000) NTD 107,840 (USD 3,511)
at December
balance
Ending		 31, 2018 NTD 276,435 (USD 9,000) NTD 92,145 (USD 3,000) NTD 245,720 (USD 8,000)
during the
Highest
balance		 period NTD 337,865 (USD 11,000) NTD 92,145 (USD 3,000) NTD 245,720 (USD 8,000)
Endorsement
for a single
entity
limit		 (Note 3) 1,241,811 1,241,811 1,241,811
Endorsees Relationship
(Note 2)		 3 3 3
Name of
endorsees		 Electronic
Sunon		 (Kunshan)
Co., Ltd		 Electronic
Sunon		 (Foshan)
Co., Ltd		 Electronic
Sunon		 (Bei Hai)
Co., Ltd
Endorsers Sunonwealth
Electric		 Industry Co.,
Machine
Ltd.		 Sunonwealth
Electric		 Industry Co.,
Machine
Ltd.		 Sunonwealth
Electric		 Industry Co.,
Machine		 Ltd.
(Note 1)
No.		 0 201 0 0

Note 1: The description of the number column is as follows:

(1) The issuer is represented in 0.

(2) The investee company is numbered sequentially from Arabic numeral 1.

Note 2: The following code represents the relationship with the Company :

  1. Trading partner.

  2. Majority owned subsidiary

  3. The Company direct and indirect owns over 50% ownership of the investee company.

  4. A subsidiary jointly owned over 90% by the Company.

  5. Guaranteed by the Company according to the construction contract.

  6. An investee company. The guarantees were provided based on the Company's proportionate share in the investee company.

  7. Joint and several guaranteed by the Company according to the pre-contruction contract under Consumer protection Act.

Note 3: Endorsements/guarantees provided by the Company to a single enterprise and a single foreign affiliate shall not exceed 20% and 30% of the Company's net worth, respectively.

Note 4: The maximum amount of the endorsements/guarantees provided by the Company shall not exceed 50% of the Company's net worth.

Table 3

SUNONWEALTH ELECTRIC MACHINE INDUSTRY CO., LTD. AND SUBSIDIARIES MARKETABLE SECURITIES HELD

DECEMBER 31, 2018

Remarks
Fair value 23,164 84,667
(Amounts in Thousands of New Taiwan Dollars) Percentage of
ownership		 - -
Ending balance Book value 23,164 84,667
(in thousands)
Number of
shares		 - -
General ledger
account		 Financial assets at fair value
through profit or loss		 Financial assets at fair value
through profit or loss
Relationship with the issuer None None
Type and name of securities China Resources Yuanda Fund
- Common stock		 China Resources Yuanda Fund
- Common stock
Investor (Foshan) Co., Ltd.
Sunon Electronic		 (Bei Hai) Co., Ltd.
Sunon Electronic
203

SUNONWEALTH ELECTRIC MACHINE INDUSTRY CO., LTD. AND SUBSIDIARIES

MARKETABLE SECURITIES ACQUIRED AND DISPOSED OF AT COSTS OR PRICES OF AT LEAST

NT\$300 MILLION OR 20% OF THE PAID-IN CAPITAL

DECEMBER 31, 2018

Dollars)
New Taiwan		 Ending Balance Amount 23,164 MB 5,176)
(R		 84,667 MB 18,919)
(R
Shares - -
Gain (loss)
on disposal		 3,269 MB 717)
(R		 2,301 MB 505)
(R
Disposal Book
value		 228,374 MB 50,083)
(R		 271,293 MB 59,495)
(R
(Shares in thousands; amounts in Thousands of Selling
price		 231,643 MB 50,800)
(R		 273,594 MB 60,000)
(R
Shares - -
Addition (Note) Amount 159,227 MB 34,991)
(R		 219,306 MB 48,410)
(R
Shares - -
Beginning Balance Amount 92,311 MB 20,268)
(R		 136,654 MB 30,004)
(R
Shares - -
Relationship
the investor
with		 None None
Counter-party China Resources Yuanda Fund Management Co., Ltd. China Resources Yuanda Fund Management Co., Ltd.
General ledger
account		 Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss
Marketable Securities
Type and
Name		 China Resources Yuanda Fund - Common stock China Resources Yuanda Fund - Common stock
Company
Name		 Sunon Electronic (Foshan) Co., Ltd. Sunon Electronic
204		 (Bei Hai) Co., Ltd.

(Note): Including current purchase of \$380,296 thousand, net loss of financial assets at fair value through profit or loss of \$4 thousand and the exchange rate

impact of (\$1,767) thousand.

Table 5

SUNONWEALTH ELECTRIC MACHINE INDUSTRY CO., LTD. AND SUBSIDIARIES TOTAL PURCHASES FROM OR SALES TO RELATED PARTIES OF AT LEAST

NT\$100 MILLION OR 20% OF THE PAID-IN CAPITAL

DECEMBER 31, 2018

(Amounts in Thousands of New Taiwan Dollars)

marks
Re
Total
% to		 %
0.02		 %
14.31		 %
0.25		 %
11.70		 %
6.85		 %
24.12		 %
4.73		 %
4.40		 - -
(Notes/Accounts Payable)
Or Receivable		 Balance
Ending		 367 (292,973) 5,421 (239,620) 146,250 (494,011) 101,059 93,942 - -
mal Transaction ment
ms
Ter
Pay		 - - - - - (Note) - - - -
Abnor Unit Price - - - - - (Note) - - - -
ms
ment Ter
Pay		 months
% 3 to 4		 months
% 2 to 3		 months
% 2 to 3		 months
% 3 to 4		 months
% 2 to 3		 months
% 2 to 3		 months
% 3 to 4		 months
% 2 to 3		 months
% 2 to 3		 months
% 2 to 3		 months
% 2 to 3		 months
% 2 to 3		 months
% 2 to 3
Total
% to		 0.01 27.41 8.31 0.30 0.48 71.82 2.49 27.78 5.04 4.84 0.07 0.05 9.77
Transaction Details mount
A		 663 1,580,065 102,233 24,915 27,541 883,828 204,216 1,601,026 412,990 395,926 3,796 2,597 120,270
Purchases/
Sales		 Sales Purchases processing fee
Outsourcing		 Sales Purchases processing fee
Outsourcing		 Sales Purchases Sales Sales Purchases Purchases processing fee
Outsourcing
Nature of Indirect-subsidiary
Relationships		 Indirect-subsidiary Indirect-subsidiary Subsidiary Subsidiary Subsidiary
me (Kunshan)
Electronic
Co., Ltd.
Sunon		 Electronic
(Foshan)
Co., Ltd.
Sunon		 Electronic
Sunon		 Sunon INC Sunon SAS mt
Sunon S		 Co., Ltd.
mpany Na
Co		 Related Party Sunonwealth
Electric
205		 Machine Industry Co.,
Ltd.

Note 1: It is the transaction that undertakes the transfer of the Company, so it is based on the order price of the Company, and the payment period is 2-3 months.

Note 2: The above-mentioned parent-subsidiary transactions have been eliminated.

SUNONWEALTH ELECTRIC MACHINE INDUSTRY CO., LTD. AND SUBSIDIARIES

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

DECEMBER 31, 2018

mounts in Thousands of New Taiwan Dollar and Foreign Currencies)
(A
Nature of Overdue mounts Received
A		 Allowance
me
mpany Na
Co		 Related Party Relationships Ending Balance Turnover mount
A		 Action Taken Period (Note1)
in Subsequent		 for Bad
Debts
Sunonwealth Electric
Machine Industry
Co., Ltd.		 Hai)
Electronic (Bei
Co., Ltd.
Sunson		 Subsidiary 146,250 4.50 - - 96,154 -
Sunon Electronic Machine
Sunonwealth Electric		 mate
The ulti		 292,973 5.04 - - 292,944 -
(Kunshan) Co., Ltd. Industry Co., Ltd. mpany
parent co		 MB 65,464)
(R		 MB 65,458)
(R
Sunon Electronic Machine
Sunonwealth Electric		 mate
The ulti		 239,619 239,619
(Foshan) Co., Ltd.
206		 Industry Co., Ltd. mpany
parent co		 MB 53,543)
(R		 4.57 - - MB 53,543)
(R		 -
Sunon Electronic Machine
Sunonwealth Electric		 mate
The ulti		 494,009 483,481
(Bei Hai) Co., Ltd. Industry Co., Ltd. mpany
parent co		 MB 110,386)
(R		 5.02 - - MB108,033)
(R		 -

Note 1: Amounts collected as of March 14, 2019.

Note 2: The above-mentioned parent-subsidiary transactions have been eliminated.

Table 7

SUNONWEALTH ELECTRIC MACHINE INDUSTRY CO., LTD. AND SUBSIDIARIES

INTERCOMPANY RELATIONSHIPS AND SIGNIFICANT INTERCOMPANY TRANSACTIONS

DECEMBER 31, 2018

(Amounts in Thousands of New Taiwan Dollars) Revenue or Total Assets
Consolidated Net
Percentage of
(Note 3)		 %
3.31		 %
1.05		 %
3.45		 %
1.13		 %
1.71		 %
1.63		 %
13.81		 %
3.27		 %
7.10		 %
2.67		 %
16.35		 %
5.51		 %
1.04		 %
0.59
mpany Transactions (Note 4)
ms
Ter		 (Note 4) (Note 4) (Note 4) (Note 4) (Note 4) (Note 4) (Note 4) (Note 4)
Interco mount
A		 395,926 93,942 412,990 101,059 204,216 146,250 1,652,335 292,973 849,769 239,619 1,956,654 494,009 124,035 70,131
Account Sales revenues Accounts receivable Sales revenues Accounts receivable Sales revenues Accounts receivable Sales revenues Accounts receivable Sales revenues Accounts receivable Sales revenues Accounts receivable Sales revenues Sales revenues
Relationship
Nature of
(Note 2)		 1 1 1 2 2 2 2 2
Counter Party Sunon SAS Sunon INC Sunon Electronic (Bei Hai) Co., Ltd. Machine
Sunonwealth Electric		 Industry Co., Ltd. Machine
Sunonwealth Electric		 Industry Co., Ltd. Machine
Sunonwealth Electric		 Industry Co., Ltd. Machine
Industry Co., Ltd.
Sunonwealth Electric		 mt Co., Ltd.
Sunon S
me
mpany Na
Co		 Machine Industry Co.,
Sunonwealth Electric		 Ltd. Sunon Electronic
(Kunshan)		 Co., Ltd. Sunon Electronic (Foshan)
Co., Ltd.		 Sunon Electronic (Bei Hai) Co., Ltd. mt Co., Ltd.
Sunon S		 Man Electronics
(Foshan) Co., Ltd.
Li
(Note 1)
No.		 0 207 1 2 3 4 5

(5) The terms between subsidiaries are equivalent to those of the parent company.

Table 8

SUNONWEALTH ELECTRIC MACHINE INDUSTRY CO., LTD. AND SUBSIDIARIES

NAMES, LOCATIONS AND OTHER INFORMATION OF INVESTEE COMPANIES (EXCLUDING INVESTEE IN MAINLAND)

DECEMBER 31, 2018

(Amounts in Thousands of New Taiwan Dollars and Foreign Currencies)

Remarks Note 1 - - - - - -
Profits/Losses
of Investee
Share of		 14,142 15,798 239,896 12,339 3,061 (51) (79) 285,106
(Losses) of the
Net Income
Investee		 15,017 13,742 248,873 14,422 3,035 (51) (79) 294,959
Carrying
Value		 - 1,168,133 1,391,680 63,462 63,347 2,065 2,557 2,691,244
Balance as of December 31, 2018 Percentage of
Ownership		 - 100.00% 100.00% 100.00% 100.00% %
99.99		 100.00%
(In Thousands)
Shares		 - 33,880 - 150 50 800 4
December 31,
As of
2017		 26,017 1,104,025 963,411 49,140 16,127 3,428 4,470
Original Investment Amount December 31,
As of
2018		 - 1,136,933 1,035,677 49,140 16,127 3,428 4,470
Main Businesses
and Products		 and wholesales of
electronic parts
Manufacturing		 Investments Investments and sales of fans
Manufacturing		 and sales of fans
Manufacturing		 and sales of fans
Manufacturing		 and sales of fans
Manufacturing		 Total
Location Taiwan Islands
British
Virgin		 Islands
British
Virgin		 USA France Hong Kong Japan
Investee Company Sunon Smt Co., Ltd. Successful Century Co.,
Ltd.		 BVI Sunon International
Limited		 Sunon INC Sunon SAS Machine Ind.(H.K.) Ltd.
Sunonwealth Electric		 Sunon Corporation
Company
Investor		 209 Sunonwealth
Machine
Electric		 Industry Co.,
Ltd.
Remarks Note 2 Note 3 Note 4 Note 5 - Note 6
Profits/Losses
of Investee
Share of		 4,023 6,380 NTD 4,023
(USD 134)		 NTD 6,381
(USD 213)		 NTD 13,741
(USD 455)		 NTD -7,033
MB -1,542)
(R
(Losses) of the
Net Income
Investee		 4,023 6,380 NTD 4,023
(USD 134)		 NTD 6,381
(USD 213)		 NTD 13,741
(USD 455)		 NTD -7,033
MB -1,542)
(R
Carrying
Value		 - - - - NTD1,179,940
(USD 38,416)		 -
Balance as of December 31, 2018 Percentage
Ownership
of		 - - - - 100.00% -
Thousands)
Shares
(In		 - - - - - -
Original Investment Amount December 31,
As of
2017		 32,908 72,266 (USD1,000)
NTD 32,251		 NTD 72,266
(USD 2,220)		 NTD1,104,025
(USD 33,000)		 NTD 32,994
MB 7,000)
(R
December 31,
As of
2018		 - - - - NTD1,136,276
(USD 34,000)		 -
Businesses and
Products
Main		 Investments Investments and wholesales
Manufacturing
of electronic
parts		 and wholesales
Manufacturing
of electronic
parts		 Manufacturing
and selling of
fans		 Manufacturing
and selling of
electronic
new type
parts
Location British Virgin
Islands		 Republic of
Samoa		 China China China China
Investee Company Electronics
Great Smt
Co ., Ltd.		 Liyuan Investments
Co., Ltd.		 Technology Co.,
Kunshan Guang
Ying
Ltd.		 Man Electronics
(Foshan) Co., Ltd.
Li		 (Kunshan) Co., Ltd.
Sunon Electronic		 Electronics Co., Ltd.
Electronic (He Fei)
[Formerly Sunon
Hefei Hua Zhun
Co., Ltd.]
Company
Investor		 Sunon Smt Co., Ltd. Electronics
Great Smt
Co ., Ltd.		 Investments Co.,
Liyuan
Ltd.
210		 Centurty Co., Ltd.
Successful		 (Kunshan)
Electronic
Co., Ltd.
Sunon
Remarks - - -
Profits/Losses
of Investee
Share of		 NTD 121,068 MB 26,550)
(R		 NTD128,677 MB 28,219)
(R		 NTD 2,080 (EUR 59)
(Losses) of the
Net Income
Investee		 NTD 121,068 MB 26,550)
(R		 NTD128,677 MB 28,219)
(R		 NTD 2,080 (EUR 59)
Balance as of December 31, 2018 Carrying
Value		 NTD 974,761 MB217,809)
(R		 NTD 462,409 MB103,325)
(R		 NTD 5,662 (EUR 161)
Percentage
Ownership
of		 100.00% 100.00% 100.00%
Thousands)
Shares
(In		 - - -
December 31,
As of
2017		 NTD 692,941 MB150,443)
(R		 NTD 293,115 MB63,732)
(R		 NTD 1,027 (EUR 25)
Original Investment Amount
December 31,
As of
2018		 NTD 765,207 MB166,171)
(R		 MB63,732)
NTD 293,115
(R		 NTD 1,027
(EUR 25)
Main Businesses
and Products		 Manufacturing
and selling of		 fans Manufacturing
electronic parts
and selling of
new type		 Sales of fans
Location China China Germany
Investee Company Electronic
Sunon		 (Foshan) Co., Ltd. Electronic
Sunon		 (Bei Hai) Co., Ltd. Sunon Deutschland GmbH
Company
Investor		 BVI Sunon International
Limited		 Sunon SAS

Note 1: Merged with Sunonwealth Electric Machine Industry Co., Ltd. on October 1, 2018. Sunon Smt Co., Ltd. was the dissolved company.

Note 2: Merged with Successful Century Co., Ltd. on October 1, 2018. Great Smt Electronics Co., Ltd. was the dissolved company. 211 Note 3: Merged with BVI Sunon International Limited on October 1, 2018. Liyuan Investments Co., Ltd. was the dissolved company.

Note 4: Merged with Sunon Electronic (Kunshan) Co., Ltd. on October 1, 2018. Kunshan Guang Ying Technology Co., Ltd. was the dissolved company.

Note 5: Merged with Sunon Electronic (Foshan) Co., Ltd. on October 1, 2018. Li Man Electronics (Foshan) Co., Ltd. was the dissolved company.

Note 6: The Company sold entire equity of Hefei Hua Zhun Co., Ltd. on December 3, 2018.

Note 7: The above-mentioned parent-subsidiary transactions have been eliminated.

Table 9

SUNONWEALTH ELECTRIC MACHINE INDUSTRY CO., LTD. AND SUBSIDIARIES

INFORMATION ON INVESTMENT IN MAINLAND CHINA

DECEMBER 31, 2018

(1) Mainland Investment Information:

(Amounts in Thousands of New Taiwan Dollars and Foreign Currencies)

NTD 293,115
(USD 33,880)
(USD 22,840)
(USD 10,000)
NTD1,136,673
NTD 743,663
Investment from
December 31,
Accumulated
Taiwan as of
Outflow of
(Note 8)
2018
-
-
-
(USD2,220)
NTD32,648
NTD72,266
(USD880)
Inflow
Investment Flows
-
-
-
-
(USD2,220)
NTD72,266
NTD32,648
(USD880)
Outflow
-
-
-
-
(USD33,000)
(USD20,620)
(USD10,000)
880)
NTD 72,266
(USD 2,220)
NTD1,104,025
NTD 671,397
NTD 293,115
NTD 32,648
January 1, 2018
Investment from
Accumulated
Taiwan as of
Outflow of
Note 8)
(USD
-
(
Investment
Method of
(Note 1)
(2)
(2)
(2)
(2)
(2)
(3)
NTD1,136,276
(USD 34,000)
NTD 765,207
(USD 23,660)
NTD 293,115
(USD 10,000)
Total Amount of
Paid-in Capital
(Note 5)
(Note 7)
-
-
-
Manufacturing and
Manufacturing and
Manufacturing and
selling of new type
Manufacturing and
Manufacturing and
Manufacturing and
selling of new type
Main Businesses
selling of fans
selling of fans
electronic parts
electronic parts
electronic parts
electronic parts
wholesales of
wholesales of
Products
and
Kunshan Guang Ying
Technology Co., Ltd.
Electronics Co., Ltd.
(Kunshan) Co., Ltd.
Li Man Electronics
Electronic (He Fei)
Co., Ltd. formerly]
Investee Company
(Bei Hai) Co., Ltd.
(Foshan) Co., Ltd.
(Foshan) Co., Ltd.
Hefei Hua Zhun
Electronic
Electronic
Electronic
(Note 5)
(Note 6)
(Note 5)
(Note 6)
[Sunon
Sunon
Sunon
Sunon
212
Carrying Accumulated
(Losses) of the
Net Income		 Percentage of Profits/Losses
Share of		 Amount
as of		 Remittance of
Inward
Company
Investee		 Ownership (Note 2) December 31,
2018		 Earnings as of
December 31,
2018
NTD 13,741 NTD 13,741 1,179,940 NTD 204,545
(USD 455) 100% (USD 455)
(2).B		 (USD 38,416) (USD 6,792)
NTD 121,068 NTD 121,068 974,761 NTD 385,334
(RMB 26,550) 100% (RMB 26,550)
(2).B		 (RMB 217,809) (USD 12,550)
NTD 128,677 NTD 128,677 462,409 NTD419,041
(RMB 28,219) 100% (RMB 28,219)
(2).B		 (RMB 103,325) (USD 13,505)
NTD 4,023 NTD 4,023
(USD 134) - (USD 134)
(2).B		 - -
NTD 6,381 NTD 6,381
(USD 213) - (USD 213)
(2).B		 - -
NTD -7,033
(RMB -1,542)
NTD -7,033		 - (RMB -1,542) - -
(Note 8) (2).B
Accu Mainland China
mber 31, 2017
ment in
as of Dece
mulated Invest		 mission,
mounts
Authorized by
MOEA
m
ment A
ment Co
Invest
Invest		 mit on
ment
Upper Li
Invest		 Subsidiaries (including sale, liquidation,
Mainland
merger, bankruptcy, etc.) at
ment
mount of Invest
the end of the period
m Taiwan for the Disposed
mulative A
dissolution,
The Cu
fro		 merger, bankruptcy, etc.) at the end of the
m
(including sale, liquidation, dissolution,
Mainland Subsidiaries
me fro
ment Inco
period
The Repatriated Invest
The Disposed
NTD 1,136,673(USD 33,880)
NTD 743,663(USD 22,840)
NTD 293,115(USD 10,000)		 USD 34,000
USD 23,660
USD 10,000		 (Note 4) NTD 34,284 NTD 1,024,503
Gain and loss on invest
Note:		 ment are translated using average exchange rates for the year ended Dece US
mber 31, 2018 (		 D
NT
N:
Y
D 1:30.175; C
NT
D:
1:4.5599). Additions and ending balance are translated using the exchange rates as at Dece NT
D:
US
mber 31, 2018 (		 D 1:4.4753)
NT
N:
Y
D 1:30.715; C
methods are divided into the follo
ment
Note 1: The invest		 wing three types:
(1) Investing directly to the Mainland China;
(2) Reinvesting in the Mainland China through third-region co mpanies (please refer to Table 8);
213 (3) Others.
Note 2: In the current period, the invest ment profit and loss colu mn is recognized:
(1) If during incorporation ment inco
with no invest		 me or loss, it should be indicated;
(2) The basis for recognition of invest ment gains and losses divided into the follo which should be indicated:
wing three types,
A. Audited financial state ments by international accounting fir ms with accounting fir
with cooperation relationship		 ms in the Republic of China.
B. Audited financial state mpany's auditors.
ments by parent co
C. Others.

Note 3: The relevant figures in this form should be listed in New Taiwan Dollars.

(2)The Group's major transactions during year 2018 directly or indirectly through the third place and the mpany are listed as follows:
mainland invested co
Sales/ Purchases Transaction Ter ms (Notes/Accounts Payable)
Or Receivables
Investee Co mpany Sales/ Purchases mount
A		 % Price ms
ment Ter
Pay		 mparison with general
transactions
Co		 Balance
Ending		 Total
% to
Sunon Sales 663 %
0.01		 Cost based months
3-4		 Equivalent to sales price with
ordinary clients		 367 %
0.02
Electronic Purchases 1,580,065 %
27.41		 Cost based months
2-3		 Equivalent to purchase price
with ordinary suppliers		 %
14.31
(Kunshan) Co., Ltd. processing fee
Outsourcing		 102,233 %
8.31		 margin
based on cost
Add a certain		 months
2-3		 Equivalent to pricing of other
processors		 (292,973)
Sales 24,915 %
0.30		 Cost based months
3-4		 Equivalent to sales price with
ordinary clients		 5,421 %
0.25
Electronic
Sunon		 Purchases 27,541 %
0.48		 Cost based months
2-3		 Equivalent to purchase price
with ordinary suppliers
(Foshan) Co., Ltd. processing fee
Outsourcing		 883,828 %
71.82		 margin
based on cost
Add a certain		 months
2-3		 Equivalent to pricing of other
processors		 (239,620) %
11.70
Sunon
214		 Sales 204,216 %
2.49		 Cost based months
3-4		 Equivalent to sales price with
ordinary clients		 146,250 %
6.85
(Bei Hai) Co., Ltd.
Electronic		 Purchases 1,601,026 %
27.78		 mpany's order price
as the basis of pricing
According to the
co		 months
2-3		 mpany's
order price as the basis of
According to the Co
pricing		 (494,011) %
24.12
Note 4: Enterprises approved by the Ministry of Econo mic Affairs as the operational headquarters are not subject to the a mount or proportion.

Note 5: Sunon Electronic (Kunshan) Co., Ltd. merged with Kunshan Guang Ying Technology Co., Ltd. on October 1, 2018. Kunshan Guang Ying

Technology Co., Ltd. was the dissolved company. The paid-in capital included Sunon Electronic (Kunshan) Co., Ltd's initial capital USD 33,000 (NTD 1,104,025) thousand and USD 1,000 (NTD 32,251) thousand obtained by merging with Kunshan Guang Ying Technology Co., Ltd. Note 6:The former subsidiary of Sunon Motor, Guanyuan Co., Ltd, which is owned by Innovation Co.,Ltd was transferred at the price of USD 1,200

thousand (refered to Company's net worth) to BVI Sunon International Limited on July 2009, which was seen as an organization restructuring. On December 16, 2009, Sunon Electronic (Foshan) Co., Ltd. merged with Sunon Electronic (Foshan) Co., Ltd. and Nanhai Guangyuan Electronic (Foshan):Co., Ltd. was the dissolved company. Sunon Electronic (Foshan) Co., Ltd. merged with Li Man Electronics (Foshan) Co., Ltd. on October 1, 2018, and Li Man Electronics (Foshan) Co., Ltd. was the dissolved company. Note 7: It included Sunon Electrics's original capital of USD 19,420 thousand, and USD 2,020 thousand obtained by merging with Sun Growth Tranding (at

the purchase price of USD 1,200 thousand). The exchange rate of USD to NTD at the consolidation date is 32.32, and USD 2,220 (NTD 72,266) thousand was obtained by merging with Li Man Electronics Co., Ltd.

Note 8: It is invested by Sunon Electronic (Kunshan) Co., Ltd. In addition, the Company sold entire equity of Hefei Hua Zhun Electronics Co., Ltd. in December 2018.

14.SEGMENT INFORMATION

(1) General information

For management purpose, the Group's reportable segments are listed as follows:

A. Great China: Mainly engaging business in Taiwan and China.

B. Europe and North America: Mainly engaging business in America and Europe.

C. Other: In addition to the above areas.

(2) Measurement Basis

The Group uses profit before income tax as the measurement for segment profit and the basis of performance assessment. There was no material inconsistency between the accounting policies

of the operating segment and the accounting policies described in Note 4.

(3) Segment financial information

(In thousands)
Year 2018 Great China Europe and
North America		 Other Areas Elimination Total
Sales from external
customers		 \$10,910,787 \$1,054,511 \$
-		 \$
-		 \$11,965,298
Sales among inter
segment		 5,661,099 - - (5,661,099) -
Total sales \$16,571,886 \$1,054,511 \$
-		 (\$5,661,099) \$11,965,298
Operating profit (loss) \$1,061,341 \$25,842 (\$81) (\$303,277) \$783,825
Segment assets \$
-		 \$
-		 \$
-		 \$
-		 \$8,971,556
Segment liabilities \$
-		 \$
-		 \$
-		 \$
-		 \$4,832,185

a. Total reporting segment sales should eliminate inter-segment sales of \$5,661,099 thousand.

b. Income tax expense of \$176,142 thousand is not included in segment profit (loss).

(In thousands)
Year 2017 Great China Europe and
North America		 Other Areas Elimination Total
Sales from external
customers		 \$9,880,860 \$1,065,868 \$
-		 \$
-		 \$10,946,728
Sales among inter
segment		 5,388,284 - - (5,388,284) -
Total sales \$15,269,144 \$1,065,868 \$
-		 (\$5,388,284) \$10,946,728
Operating profit (loss) \$1,063,214 \$49,602 (\$72) (\$270,659) \$842,085
Segment assets \$
-		 \$
-		 \$
-		 \$
-		 \$8,813,469
Segment liabilities \$
-		 \$
-		 \$
-		 \$
-		 \$4,639,420

a. Total reporting segment sales should eliminate inter-segment sales of \$5,388,284 thousand.

b. Income tax expense of \$178,669 thousand is not included in segment profit (loss).

(4) Production and service information : No disclosure needed for only single industry in the Group.

(5) Geographic information :

Year ended December 31
2018 2017
\$8,998,545 \$8,148,380
2,284,500 2,146,704
642,980 618,471
39,273 33,173
\$11,965,298 \$10,946,728

(6) Major customers : No revenue from any individual customer exceeds 10% of the Group's total revenues. Therefore, the disclosure is not required.

V. Individual financial statements of the most recent year

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.

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

    1. Identify and assess the risks of material misstatement of the 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.
    1. 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.
    1. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
    1. 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.
    1. 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.
    1. 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 .

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

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

SUNONWEALTH ELECTRIC MACHINE INDUSTRY CO., LTD.

PARENT COMPANY ONLY BALANCE SHEETS

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
2018 2017
Note Amount % Amount %
OPERATING REVENUES 6(21) \$8,186,530 100.0 \$7,688,919 100.0
OPERATING COSTS 6(4) 6,951,866 84.9 6,396,832 83.2
GROSS PROFIT 1,234,664 15.1 1,292,087 16.8
UNREALIZED GROSS PROFIT ON SALES TO
SUBSIDIARIS AND ASSOCIATES		 32,687 0.4 32,758 0.4
REALIZED GROSS PROFIT ON SALES TO
SUBSIDIARIS AND ASSOCIATES		 32,758 0.4 25,807 0.3
OPERATING EXPENSES
Sales and marketing 268,733 3.3 258,383 3.4
General and administrative 263,774 3.2 248,571 3.2
Research and development 416,191 5.1 399,923 5.2
Expected credit loss (gain) 6(3) 2,547 - - -
Total operating expenses 951,245 11.6 906,877 11.8
INCOME FROM OPERATIONS 283,490 3.5 378,259 4.9
NON-OPERATING INCOME AND EXPENSES
Other income 6(23) 92,337 1.1 91,061 1.1
Other gains and losses 6(24) 83,577 1.0 71,001 0.9
Finance costs 6(25) (7,873) (0.1) (6,889) -
Share of profits of subsidiaries, associates and 285,106 3.5 269,311 3.5
joint ventures
Total non-operating income and expenses 453,147 5.5 424,484 5.5
INCOME BEFORE INCOME TAX 736,637 9.0 802,743 10.4
INCOME TAX EXPENSE 6(26) 131,517 1.6 145,284 1.9
NET INCOME 605,120 7.4 657,459 8.5
OTHER COMPREHENSIVE INCOME (LOSS)
Items that will not be reclassified subsequently
to profit or loss:
Remeasurement of defined benefit obligation (6,841) - (4,336) -
Unrealized gain on investments in equity instruments 8,985 0.1 - -
at fair value through other comprehensive income
Share of other comprehensive loss of subsidiaries, - - (21) -
associates and joint ventures
Income tax benefit related to items that will		 (2,020) - (737) -
not be reclassified subsequently
Items that may be reclassified subsequently
to profit or loss:
Share of other comprehensive loss of subsidiaries, (45,162) (0.6) (52,872) (0.7)
associates and joint ventures
Income tax benefit related to items that may (8,614) (0.1) (8,618) (0.1)
be reclassified subsequently to profit or loss
Total other comprehensive loss, net of income tax 6(27) (32,384) (0.4) (47,874) (0.6)
TOTAL COMPREHENSIVE INCOME \$572,736 7.0 \$609,585 7.9
EARNINGS PER SHARE
Basic 6(28) \$2.41 \$2.62

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

SUNONWEALTH ELECTRIC MACHINE INDUSTRY CO., LTD. PARENT COMPANY ONLY STATEMENTS OF CHANGES IN EQUITY (In Thousands of New Taiwan Dollars)

Others

Unrealized
Gain (Loss) on
Exchange Financial Assets Unrealized
Share Capital Retained Earnings Differences on at Fair Value Through Gain (Loss) on
Unappropriated Translating Foreign Other Comprehensive Available-for-sale Total
Ordinary Shares Capital Surplus Legal Reserve Special Reserve Earnings Operations Income Financial Assets Equity
BALANCE AT JANUARY 1, 2017 \$2,509,297 \$365,706 \$505,950 \$79,155 \$655,235 (\$82,857) - - \$4,032,486
Appropriations and distributions of prior years' earnings:
Legal reserve - - 57,190 - (57,190) - - - -
Special reserve - - - 3,702 (3,702) - - - -
Cash dividends - \$2 per share - - - - (501,860) - - - (501,860)
Total - - 57,190 3,702 (562,752) - - - (501,860)
Net income in 2017 - - - - 657,459 - - - 657,459
Other comprehensive income (loss) in 2017, net of income tax - - - - (3,620) (44,254) - - (47,874)
Total comprehensive income in 2017 - - - - 653,839 (44,254) - - 609,585
BALANCE AT DECEMBER 31, 2017 2,509,297 365,706 563,140 82,857 746,322 (127,111) - - 4,140,211
Impact of retrospective application and retrospective restatement
225		 - - - - - - 3,415 - 3,415
Adjusted balabce at January 1, 2018 2,509,297 365,706 563,140 82,857 746,322 (127,111) 3,415 - 4,143,626
Appropriations and distributions of prior years' earnings:
Legal reserve - - 65,746 - (65,746) - - - -
Special reserve - - - 44,254 (44,254) - - - -
Cash dividends - \$2.3 per share - - - - (577,138) - - - (577,138)
Total - - 65,746 44,254 (687,138) - - - (577,138)
Net income in 2018 - - - - 605,120 - - - 605,120
Other comprehensive income (loss) in 2018, net of income tax - - - - (4,821) (36,548) 8,985 - (32,384)
Total comprehensive income in 2018 - - - - 600,299 (36,548) 8,985 - 572,736
Reorganization - 1,050 - - - (1,050) - - -
Differences between considerations and carrying amounts - 147 - - - - - - 147
of subsidiaries acquired or disposed
Disposal of equity instruments at fair value - - - - 12,400 - (12,400) - -
through other comprehensive income -
BALANCE AT DECEMBER 31, 2018 \$2,509,297 \$366,903 \$628,886 \$127,111 \$671,883 (\$164,709) - - \$4,139,371

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

SUNONWEALTH ELECTRIC MACHINE INDUSTRY CO., LTD.

PARENT COMPANY ONLY STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

Year Ended December 31
2018 2017
CASH FLOWS FROM OPERATING ACTIVITIES
Income before income tax \$736,637 \$802,743
Adjustment for :
Income and expenses having no effect on cash flows:
Depreciation 37,209 30,020
Amortization 9,248 5,146
Expected credit loss 2,547 -
Provision for (reversal of) allowance for doubtful accounts - (441)
Interest expense 7,873 6,889
Interest income (7,968) (6,467)
Share of profits of subsidiaries, associates and joint ventures (285,106) (269,311)
Gain on disposal and retirement of property, plant and equipment (114) (582)
Transfer of property, plant and equipment to expenses 445 1,256
Impairment loss on non-financial assets - 15,371
Unrealized gross profit on sales to subsidiaries and associates 32,687 32,758
Realized gross profit on sales to subsidiaries and associates (32,758) (25,807)
Total income and expenses having no effect on cash flows (235,937) (211,168)
Net changes in operating assets and liabilities
Decerase (increase) in notes receivable (3,436) 19,431
Decrease (increase) in accounts receivable (76,720) (211,986)
Decrease (increase) in accounts receivable - related parties 17,978 (39,709)
Decrease (increase) in other receivables 3,486 (3,025)
Decrease (increase) in other receivables - related parties 6,354 6,615
Decrease (increase) in inventories (112,925) (120,333)
Decrease (increase) in prepayments (6,164) (2,174)
Total changes in operating assets (171,427) (351,181)
Net changes in operating liabilities
Increase (decrease) in contract liabilities (9,266) -
Increase (decrease) in accounts payable 88,576 (30,834)
Increase (decrease) in accounts payable - related parties 186,200 (87,942)
Increase (decrease) in other payables (9,366) 35,540
Increase (decrease) in other payables - related parties (431) (1,334)
Increase (decrease) in provisions 399 (94)
Increase (decrease) in advance receipts - 6,521
Increase (decrease) in net defined benefit liabilities (4,974) (4,977)
Total changes in operating liabilities 251,138 (83,120)
Total net changes in operating assets and liabilities 79,711 (434,301)
Total adjustments (156,226) (645,469)
Year Ended December 31
2018 2017
Cash generated from operations 580,411 157,274
Interest received 7,954 6,351
Dividends received 139,540 380,821
Interest paid (7,875) (6,906)
Income tax paid (155,582) (110,611)
Net cash generated from operating activities 564,448 426,929
CASH FLOWS FROM INVESTING ACTIVITIES
Disposal of financial assets at fair value through 74,400 -
other comprehensive income
Acquisition of property, plant and equipment (70,570) (56,694)
Proceeds from disposal of property, plant and equipment 2,922 1,623
Increase in refundable deposits (182) (559)
Decrase in other receivables - related parties 21,342 10,908
Acquisition of intangible assets (11,778) (4,716)
Cash received through merger 48,256 -
Increase in other noncurrent assets (635) (1,690)
Net cash generated from (used in) investing activities 63,755 (51,128)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in short-term loans 100,000 130,000
Repayments of long-term loans (100,000) -
Increase in guarantee deposits 100 280
Increase in obligation under captial leases 4,817 -
Cash dividends paid (577,138) (501,860)
Acquisition of subsidiary equity (30,827) -
Net cash used in financing activities (603,048) (371,580)
NET INCREASE (DECREASE) IN CASH AND CASH 25,155 4,221
EQUIVALENTS
CASH AND CASH EQUIVALENTS , BEGINNING 422,062 417,841
OF YEAR
CASH AND CASH EQUIVALENTS , END OF YEAR \$447,217 \$422,062

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

SUNONWEALTH ELECTRIC MACHINE INDUSTRY CO., LTD. NOTES TO PARENT COMPANY ONLY FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars, Except Stated Otherwise)

1. GENERAL INFORMATION

Sunonwealth Electric Machine Industry Co., Ltd. (collectively as the "Company") was incorporated in October 1980. The Company engages mainly in the manufacturing and selling of AC/DC brushless fans, electric fans, motors and related components, and microcooling fans.

The Company's board of directors approved on March 30, 2007 to merge (simplified merger) with Inventor Precision Co., Ltd., and the effective merger date was May 31, 2007. The Company was the surviving company. The merger was for the purpose of reorganization. The Company didn't issue new shares for the consolidation.

Inventor Precision Co., Ltd. was incorporated in March 2000. The main activities were the manufacturing and selling of molds and areo parts, and business consulting.

The Company's board of directors approved on August 25, 2009 to merge by absorption with Sunon Motor Co., Ltd. The Company was the surviving company. The merger was for the purpose of reorganization. The Company didn't issue new shares for the consolidation. The effective merger date was December 31, 2009.

Sunon Motor Co., Ltd. was incorporated in March 1999. The main activities were the manufacturing of other machines, data storage and processing equipment, wholesale of motors and parts, and international trading.

The Company's board of directors approved on August 8, 2018 to merge (simplified merger) with Sunon Smt Co., Ltd., and the effective merger date was October 1, 2018. The Company was the surviving company. The merger was for the purpose of reorganization. The Company didn't issue new shares for the consolidation.

Sunon Smt Co., Ltd. was incorporated in November 2000. The main activities were the manufacting of electronic components, wholesale of information software, electronic materials and molds, business management, processing data and supplying electronic information.

The parent company only financial statements are presented in the Company's functional currency, New Taiwan Dollars.

2. THE AUTHORIZATION OF THE PARENT COMPANY ONLY FINANCIAL STATEMENTS

The parent company only financial statements were approved and authorized for issue by the board of directors on March 14, 2019.

3.APPLICATION OF NEW AND AMENDED STANDARDS AND INTERPRETATIONS

(1) Effect of the adoption of new issuances of or amendments to International Financial Reporting Standards ("IFRSs") as endorsed by the Financial Supervisory Commission ("FSC"):

Except for the following, the application of the above amendments have no significant effect on the Company's financial condition and financial performance.

A. IFRS 9 "Financial Instruments" and related amendment

IFRS 9 supersedes IAS 39 "Financial Instruments: Recognition and Measurement", with consequential amendments to IFRS 7 "Financial Instruments: Disclosures" and other standards. IFRS 9 sets out the requirements for classification, measurement and impairment of financial assets and hedge accounting. Please refer to Note 4 for information relating to the relevant accounting policies.

The Company elects not to restate prior reporting period when applying the requirements for the classification, measurement and impairment of financial assets and financial liabilities under IFRS 9 with the cumulative effect of the initial application recognized at the date of initial application.

The impact on measurement categories, carrying amount and related reconciliation for each class of the Company's financial assets when retrospectively applying IFRS 9 on January 1, 2018 is detailed below:

Measurement Category Carrying Amount Remark
Financial Assets IAS 39 IFRS 9 IAS 39 IFRS 9
Cash and cash equivalents Loans and receivables Amortized cost \$422,062 \$422,062 (a)
Equity securities Financial assets carried
at cost		 Fair value through
other comprehensive
income		 62,000 65,415 (b)
Notes receivable, accounts
receivable and other receivables		 Loans and receivables Amortized cost 2,104,208 2,104,208 (a)
Refundable deposits Loans and receivables Amortized cost 2,303 2,303 (a)

The Company classified financial assets at FVTPL and available-for-sale financial assets with their fair value can't be measured reliably as financial assets measured at amortized cost - noncurrent.

FVTOCI Carrying
Amount as of
January 1, 2018
(IAS 39)		 Reclassifications Remeasurements Carrying
Amount as of
January 1, 2018
(IFRS 9)		 Retained
Earnings
Effect on
January 1,
2018		 Other
Equity
Effect on
January 1,
2018		 Remark
- Equity instruments \$
-		 \$
-		 \$
-		 \$
-		 \$
-		 \$
-
Add: From financial
assets carried
at cost
(IAS 39)		 - 62,000 3,415 65,415 - 3,415 (b)
Total \$
-		 \$62,000 \$3,415 \$65,415 \$
-		 \$3,415
  • (a) Those financial assets were classified as loans and receivables under IAS 39 are now classified financial assets at amortized cost with no material impact on future lifetime expected credit loss under IFRS 9.
  • (b) Equity investment on unlisted companies originally classified as financial assets carried at cost by IAS 39 were re-designated as financial assets at fair value through other comprehensive income by IFRS9 and were re-measured its fair value to both increase financial asset at fair value through comprehensive income and other equity-unrealized gain or loss of FVTOCI by \$3,415 thousand.
  • B. IFRS 15 "Revenue from Contracts with Customers"

IFRS 15 establishes principles for recognizing revenue that apply to all contracts with customers, and will supersede IAS 18, "Revenue," IAS 11, "Construction Contracts," and a number of revenue-related interpretations. Please refer to Note 4 for information relating to the relevant accounting policies.

The Company currently recognizes revenues of goods sales while (1)significant risk and rewards of ownership were transferred to clients; (2)revenues and costs can be reliably measured; (3)it is probable that the consideration can be received; (4)the Company no longer retains continuing managerial involvement over the goods sold. After initial adoption of IFRS15, the Company will recognize revenue while the client gains control of the goods sold. No impact on revenue recognizing will occur. But to some contracts, the Company had already collect portion of the consideration at the contract establishment. The portion collected which were accounted as advance receipt currently will be accounted as contract liabilities after adoption of IFRS 15.

The impact on assets, liabilities and equity when retrospectively applying IFRS 15 on January 1, 2018 is detailed below:

Carrying Amount as of
January 1, 2018 (IAS 18)		 Adjustments Arising
from Initial Application		 Carrying Amount as of
January 1, 2018
(IFRS 15)
Advance receipts \$20,034 (\$20,034) \$
-
Contract liabilities - current - 20,034 20,034
Total effect on liabilities \$20,034 \$
-		 \$20,034

If the Company continues to adopt IAS 11, IAS 18 and related interpretations in 2018, the impact on the current period of the application of IFRS15 is detailed below:

Impact on Assets, Liabilities and Equity December 31, 2018
Increase (decrease) in assets \$
-
Increase in contract liabilities - current \$10,745
Decrease in advance receipts (10,745)
Increase (decrease) in liabilities \$
-
Increase (decrease) in equity \$
-

No impact on comprehensive income and cash flow item for Year 2018.

(2) Effect of new issuances of or amendments to IFRSs as endorsed by the FSC but not yet adopted by the Company:

The following new standards, interpretations and amendments have been endorsed by the FSC and are effective for annual periods beginning on or after January 1, 2019.

New, Amended or Revised Standards and Interpretations Effective Date Announced
(the "New IFRSs") by IASB (Note 1)
Amendments to IFRS 9 "Prepayment Features with Negative January 1, 2019
Compensation"
IFRS 16 "Leases" January 1, 2019
Amendments to IAS 19 "Plan Amendment, Curtailment or January 1, 2019 (Note 2)
Settlement"
Amendments to IAS 28 "Long-term Interests in Associates and January 1, 2019
Joint Ventures"
IFRIC 23 "Uncertainty over Income Tax Treatments" January 1, 2019
Annual Improvements to IFRSs 2015-2017 Cycle January 1, 2019
  • Note 1: Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on or after their respective effective dates.
  • Note 2: The Company shall apply these amendments to plan amendments, curtailments or settlements occurring on or after January 1, 2019.

Except for the following items, the Company believes that the adoption of aforementioned standards or interpretations will not have a significant effect on the Company's accounting policies.

1) IFRS 16 "Leases"

IFRS 16 sets out the accounting standards for leases that will supersede IAS 17 and IFRIC 4, a number of related interpretations. Upon initial application of IFRS 16, the Company will apply the guidance of IFRS 16 in determining whether contracts are, or contain, a lease only to contracts entered into (or changed) on or after January 1, 2019. Contracts identified as containing a lease under IAS 17 and IFRIC 4 will not be reassessed and will be accounted for in accordance with the transitional provisions under IFRS 16.

The Company as lessee

Upon initial application of IFRS 16, except for payments for low-value asset and short-term leases which will be recognized as expenses on a straight-line basis, the Company will recognize right-of-use assets and lease liabilities for all leases on the parent company only balance sheets. However, right-of-use assets which meet the definition of investment property will be presented as investment property. On the parent company only statements of comprehensive income, the Company will present the depreciation expense charged on right-of-use assets separately from the interest expense accrued on lease liabilities and computed using the effective interest method. On the parent company only statements of cash flows, cash payments for the principal portion and the interest portion of lease liabilities are classified within financing activities and operating activities, respectively.

Currently, payments under operating lease contracts are recognized as expenses on a straight-line basis. Cash flows for operating leases are classified within operating activities on the parent company only statements of cash flows. Financial lease contracts are classified within lease assets and obligation under capital leases, respectively.

Under initial application of IFRS 16, the Company anticipates applying retrospectively with the cumulative effect of this standard at the date of initial application, comparative information will not be restated.

Leases agreements on office building and staff dormitory classified as operating leases under IAS 17 will be measured at the present value of the remaining lease payments, discounted using the lessee's incremental borrowing rate on January 1, 2019. Right-of-use assets are measured at an amount equal to the lease liabilities, adjusted by the amount of any prepaid or accrued lease payments.

Right-of-use assets are subject to impairment testing under IAS 36, except for following expediency (2). The Company will apply the following practical expedients to measure right-of-use assets and lease liabilities on January 1, 2019 :

  • (1) The Company will apply a single discount rate to a portfolio of leases with reasonably similar characteristics to measure lease liabilities.
  • (2) The Company will adjust the right-of-use assets in the amount of provision that recognized as onerous leases at the year ended December 31, 2018.
  • (3) The Company will exclude initial direct costs from the measurement of right-of-use assets on January 1, 2019.
  • (4) The Company will determine lease period (if the contract includes an extension or the option to terminate) base on project status to measure assets.

For the leases classified as financial leases based on IAS17, the carrying amount of the lease assets liabilities as at December 31, 2018 will be used as the carrying amount as at January 1, 2019.

The Company as lessor

The Company will not make any adjustments for leases in which it is a lessor, and will be accounting for those leases under IFRS 16 starting from January 1, 2019.

If the Group continues to adopt IAS 17 in 2018, the impact on the current period of the application of IFRS16 is detailed below:

Carrying Amount as of
December 31, 2018		 Adjustments Arising
from Initial Application		 Adjusted
Carrying Amount as of
January 1, 2019
Prepaid leases - current \$245 (\$18) \$227
Right-of-use asset - 22,263 22,263
Total impact on assets \$245 \$22,245 \$22,490
Lease liabilities - current \$
-		 \$9,229 \$9,229
Lease liabilities - noncurrent - 13,016 13,016
Total impact on liabilities \$
-		 \$22,245 \$22,245
Total impact on equity \$
-		 \$
-		 \$
-

Except for the above influences, the Company believes that the adoption of aforementioned standards or interpretations will not have a significant effect on the Company's financial position and financial performance as of the date the accompanying parent company only financial statements were issued.

(3) The IFRSs issued by IASB but not yet endorsed and issued into effect by FSC

Effective Date Announced
New, Revised or Amended Standards and Interpretations by IASB (Note 1)
Amendments to IFRS 10 and IAS 28 "Sale or Contribution To be determined by IASB
of Assets between an Investor and its Associate or Joint
Venture"
IFRS 17 "Insurance Contracts" January 1, 2021
Amendments to IFRS 3 "Definition of a Business" January 1, 2020 (Note 2)
Amendments to IAS 1 and IAS 8 "Definition of Material" January 1, 2020 (Note 3)
  • Note 1: Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on or after their respective effective dates.
  • Note 2: The Company shall apply these amendments to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after January 1, 2020 and to asset acquisitions that occur on or after the beginning of that period.

Note 3: The Company shall apply these amendments prospectively for annual reporting periods beginning on or after January 1, 2020.

The Company continues in evaluating the impact on its financial position and financial performance as a result of the initial adoption of the aforementioned standards or interpretations. The related impact will be disclosed when the Company completes the evaluation.

4.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

(1) Compliance statement

The accompanying parent company only financial statements have been prepared in conformity with the Regulations Governing the Preparation of Financial Reports by Securities Issuers.

  • (2) Basis of preparation
  • A.Except for the following items, the accompany parent company only financial statements have been prepared under the historical cost convention:
    • a. Financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss.
    • b. Financial assets and liabilities at fair value through other comprehensive income in 2018.
    • c. Defined benefit liabilities recognised based on the net amount of pension fund assets less present value of defined benefit obligation.
  • B.The preparation of financial statements in compliance with IFRSs requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Company's accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the parent company only financial statements are disclosed in Note 5.

  • C. The Company retrospectively applied IFRS 9 and IFRS 15 electing not to prepare comparative parent company only financial report and notes of 2017 and recognized the differences in retained earnings or other equity at January 1, 2018. The parent company only financial report and notes of 2017 were prepared according to IAS 39, IAS 11, IAS 18 and other related explanations.

  • D.When preparing the parent company only financial statements, the Company account for subsidiaries and associates by using the equity method. In order to agree with the amount of net income, other comprehensive income and equity attributable to shareholders of the parent in the consolidated financial statements, the differences of the accounting treatment between the parent company only basis and the consolidated basis are adjusted under the heading of investments accounted for using equity method, share of profits of subsidiaries and associates and share of other comprehensive income of subsidiaries and associates in the parent company only financial statements.

  • (3) Foreign currency translation
  • A. Foreign currency transactions and balance
    • a.Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are remeasured. Foreign exchange gains and losses resulting from the settlement of such transactions are recognized in profit or loss in the period in which they arise.
    • b.Monetary assets and liabilities denominated in foreign currencies at the period end are retranslated at the exchange rates prevailing at the balance sheet date. Exchange differences arising upon re-translation at the balance sheet date are recognized in profit or loss.
    • c.Non-monetary items measured at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Exchange differences arising on the retranslation of non-monetary items are included in profit or loss for the year except for exchange differences arising on the retranslation of non-monetary items in respect of which gains and losses are recognized directly in other comprehensive income, in which case, the exchange differences are also recognized directly in other comprehensive income. Non-monetary items that are measured in terms of historical cost in foreign currencies are not retranslated.

  • B. Translation of foreign operations

    • a.The operating results and financial position of all the Company's subsidiaries, associates and joint ventures that have afunctional currency different from the presentation currency are translated into thepresentation currency as follows:
    • (a) Assets and liabilities for each balance sheet presented are translated at the closing exchange rate at the date of that balance sheet;
    • (b) Income and expenses for each statement of comprehensive income are translated at average exchange rates of that period; and
    • (c) All resulting exchange differences are recognized in other comprehensive income.

  • b.When the foreign operation partially disposed of or sold is an associate or a joint venture, exchange differences that were recorded in other comprehensive income are proportionately reclassified to profit or loss as part of the gain or loss on sale. In addition, even when the Company retains partial interest in the former foreign associate or joint venture after losing significant influence over the former foreign associate or joint venture, such transactions should be accounted for as disposal of all interest in these foreign operations.

  • c.When the foreign operation partially disposed of or sold is a subsidiary, cumulative exchange differences that were recorded in other comprehensive income are proportionately transferred to the non-controlling interest in this foreign operation. In addition, even when the Company retains partial interest in the former foreign subsidiary after losing control of the former foreign subsidiary, such transactions should be accounted for as disposal of all interest in the foreign operation
  • (4) Classification of current and non-current items
  • A. Assets that meet one of the following criteria are classified as current assets; otherwise they are classified as non-current assets:
    • a. Assets arising from operating activities that are expected to be realized, or are intended to be sold or consumed within the normal operating cycle;
    • b. Assets held mainly for trading purposes;
    • c. Assets that are expected to be realized within twelve months from the balance sheet date;
    • d. Cash and cash equivalents, excluding restricted cash and cash equivalents and those that are to be exchanged or used to pay off liabilities more than twelve months after the balance sheet date.
  • B. Liabilities that meet one of the following criteria are classified as current liabilities; otherwise they are classified as non-current liabilities:
    • a. Liabilities that are expected to be paid off within the normal operating cycle;
    • b. Liabilities arising mainly from trading activities;
    • c. Liabilities that are to be paid off within twelve months from the balance sheet date;
    • d. Liabilities for which the repayment date cannot be extended unconditionally to more than twelve months after the balance sheet date. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.
  • (5) Cash and cash equivalents

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

(6) Financial instruments

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

Financial assets and financial liabilities are recognized initially at fair value plus or minus, in the case of investments not at fair value through profit or loss, directly attributable transaction costs. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognized immediately in profit or loss.

1. Financial assets

The Company adopts trade-date accounting to recognize and derecognize financial assets.

(1) Category of financial assets

2018

Financial assets are classified into the following categories: financial assets at FVTPL, financial assets at amortized cost, and investments in equity instruments at FVTOCI.

A. Financial asset at FVTPL

Financial asset is classified as at FVTPL when the financial asset is mandatorily classified or it is designated as at FVTPL. Financial assets mandatorily classified as at FVTPL include investments in equity instruments which are not designated as at FVTOCI and debt instruments that do not meet the amortized cost criteria or the FVTOCI criteria.

Financial assets are designated initially at FVTPL, if the designation can eliminated or significantly reduces the measurement or recognition of inconsistencies.

Financial assets at FVTPL are subsequently measured at fair value, with any gains or losses arising on remeasurement recognized in profit or loss including relevant dividend or interest income. Fair value is determined in the manner described in Note 12.

B. Financial assets at amortized cost

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

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

Financial assets at amortized cost, which equals to gross carrying amount determined by the effective interest method less any impairment loss. Exchange differences are recognized in profit or loss.

Expect for the following two cases, interest income is calculated by applying the effective interest rate to the gross carrying amount of a financial asset.

  • a. Purchased or originated credit-impaired financial assets: for those financial assets, the Company applies the credit-adjusted effective interest rate to the amortized cost of the financial asset from initial recognition.
  • b. Financial assets that are not purchased or originated credit-impaired financial assets but subsequently have become credit-impaired financial assets: for those financial assets, the Company shall apply the effective interest rate to the amortized cost of the financial asset in subsequent reporting periods.

C. Investments in equity instruments at FVTOCI

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

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

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

2017

Financial assets are classified into the following specified categories: loans, receivables, and financial assets at FVTPL.

A. Loans and receivables

Accounts receivable

They are created by the entity by selling goods or providing services to customers in the ordinary course of business. Accounts receivable are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. Interest income is recognized by applying the effective interest rate, except for short-term receivables when the effect of discounting is immaterial.

  • B. Financial assets at fair value through profit or loss
  • a. Financial assets at fair value through profit or loss are financial assets held for trading or financial assets designated as at fair value through profit or

loss on initial recognition. Financial assets are classified in this category of held for trading if acquired principally for the purpose of selling in the short-term. Derivatives are also categorized as financial assets held for trading unless they are designated as hedges. Financial assets that meet one of the following criteria are designated as at fair value through profit or loss on initial recognition:

  • (a) Hybrid (combined) contracts; or
  • (b) They eliminate or significantly reduce a measurement or recognition inconsistency; or
  • (c) They are managed and their performance is evaluated on a fair value basis, in accordance with a documented risk management or investment strategy.
  • b. On a regular way purchase or sale basis, financial assets at fair value through profit or loss are recognized and derecognized using trade date accounting.
  • c. Financial assets at fair value through profit or loss are initially recognized at fair value. Related transaction costs are expensed in profit or loss. These financial assets are subsequently remeasured and stated at fair value, and any changes in the fair value of these financial assets are recognized in profit or loss. Investments in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured or derivatives that are linked to and must be settled by delivery of such unquoted equity instruments are presented in 'financial assets measured at cost - noncurrent'.
  • (2) Impairment of financial assets

2018

  • A. At the end of each reporting period, a loss allowance for expected credit loss is recognized for financial assets at amortized cost (including accounts receivable), investments in debt instruments that are measured at FVTOCI, lease receivable and contract assets.
  • B. The Company always recognize lifetime Expected Credit Loss (i.e. ECL) for accounts receivables. For other financial assets, the Company recognize lifetime ECL when there has been a significant increase in credit risk since initial recognition. If, on the other hand, the credit risk on the financial instrument has not increased significantly since initial recognition, the Company measures the loss allowance for that financial instrument at an amount equaling to 12-month ECL.
  • C. Expected credit losses reflect the weighted average of credit losses with the respective risks of a default occurring as the weights. 12-month ECL represents the portion of lifetime ECL that is expected to result from default events on a

financial instrument that are possible within 12 months after the reporting date. In contrast, lifetime ECL represents the expected credit losses that will result from all possible default events over the expected life of a financial instrument.

D. The Company recognizes an impairment loss in profit or loss for all financial instruments with a corresponding adjustment to their carrying amount through a loss allowance account, except for investments in debt instruments that are measured at FVTOCI, for which the loss allowance is recognized in other comprehensive income and does not reduce the carrying amount of the financial asset.

2017

  • A. Except for financial asset at FVTPL, the Company assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired as a result of one or more events that occurred after the initial recognition of the asset (a "loss event") and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.
  • B. The criteria that the Company uses to determine whether there is objective evidence of an impairment loss is as follows:
  • a. Significant financial difficulty of the issuer or debtor;
  • b. A breach of contract, such as a default or delinquency in interest or principal payments;
  • c. The Company, for economic or legal reasons relating to the borrower's financial difficulty, granted the borrower a concession that a lender would not otherwise consider;
  • d. It becomes probable that the borrower will enter bankruptcy or other financial reorganisation;
  • e. The disappearance of an active market for that financial asset because of financial difficulties;
  • f. Observable data indicating that there is a measurable decrease in the estimated future cash flows from a group of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial asset in the group, including adverse changes in the payment status of borrowers in the group or national or local economic conditions that correlate with defaults on the assets in the group;
  • g. Information about significant changes with an adverse effect that have taken place in the technology, market, economic or legal environment in which the issuer operates, and indicates that the cost of the investment in the equity instrument may not be recovered;

  • h. A significant or prolonged decline in the fair value of an investment in an equity instrument below its cost.

  • C.When the Company assesses that there has been objective evidence of impairment and an impairment loss has occurred, accounting for impairment is made as follows according to the category of financial assets:

  • a. Loans and receivables

The amount of the impairment loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows discounted at the financial asset's original effective interest rate, and is recognised in profit or loss. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment loss was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the asset does not exceed its amortised cost that would have been at the date of reversal had the impairment loss not been recognised previously.

b. Financial assets measured at cost

The amount of the impairment loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows discounted at current market return rate of similar financial asset, and is recognised in profit or loss. Impairment loss recognised for this category shall not be reversed subsequently.

(3) Derecognition of financial assets

The Company derecognises a financial asset when one of the following conditions is meet:

  • A. The contractual rights to receive cash flows from the financial asset expire.
  • B. The contractual rights to receive cash flows from the financial asset have been transferred and the Company has transferred substantially all risks and rewards of ownership of the financial asset.
  • C. The Company neither retains nor transfers substantially all risks and rewards of ownership of the financial asset; however, it has not retained control of the financial asset.

On derecognition of a financial asset in its entirety, the difference between the financial asset's carrying amount and the sum of the consideration received or receivable and the cumulative gain or loss that had been recognized in other comprehensive income and accumulated in equity is recognized in profit or loss. But for equity instruments at fair value through other comprehensive income under IFRS 9 since 2018, the cumulative profit and loss will be transferred directly to retained earnings without reclassified into profit and loss at disposal.

  1. Equity instruments

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

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

    1. Financial liabilities
  • (1) Subsequent measurement

Financial liabilities other than those held for trading purposes and designated as at fair value through profit or loss are subsequently measured at amortised cost at the end of each reporting periods.

(2) Derecognition of financial liabilities

The Company derecognizes financial liabilities when, and only when, the Company's obligations are discharged, cancelled or they expire. The difference between the carrying amount of the financial liability derecognized and the consideration paid and payable (including any non-cash assets transferred or liabilities assumed) is recognized in profit or loss.

(7) Inventories

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

(8) Investments accounted for using equity method / subsidiaries

A.Subsidiaries are all entities (including structured entities) controlled by the Company. The Company controls an entity when the Company is exposed, or has rights, to variable returns from its involvement with the entity and and has the ability to affect those returns through its power over the eniry.

B.Unrealized gains or losses resulting from inter-company transactions with subsidiaries are eliminated. Necessary adjustments are made to the accounting policies of subsidiaries, to be consistent with the accounting policies of the Company.

  • C.After acquisition of subsidiaries, the Company recognizes proportionately the share of profit and loss and other comprehensive income in the income statement as part of the Company's profit and loss and other comprehensive income, respectively. When the share of loss from a subsidiary exceeds the carrying amount of Company's interest in that subsidiary, the Company continues to recognize its share in the subsidiary's loss proportionately.
  • D.As long as the change in shareholding in the subsidiaries does not lead to loss of control, it is to be treated as equity transaction that is to be treated as transactions between the owners. The difference between non-controlling equity adjustment amount and the fair value of payment and receipt is to be recognized as equity
  • E.Changes in the Company's ownership interests in subsidiaries that do not result in the Company losing control over the subsidiaries are accounted for as equity transactions. Any difference between the carrying amount of the subsidiary and the fair value of the consideration paid or received is recognized directly in equity.
  • F.According to "Regulations Governing the Preparation of Financial Statements by Securities Issuers", "Profit for the year" and "Other comprehensive income for the year" reported in an entity's parent company only statement of comprehensive income, shall equal to "profit for the year" and "Other comprehensive income" attributable to owners of the parent reported in that entity's consolidated statement of comprehensive income. Total equity reported in an entity's parent company only financial statements, shall equal to equity attributable to owners of parent reported in that entity's consolidated financial statements.
  • (9) Property, plant and equipment
  • A. Property, plant and equipment are initially recorded at cost. Borrowing costs incurred during the construction period are capitalised.
  • B. Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to profit or loss during the financial period in which they are incurred.
  • C. Land is not depreciated. Other property, plant and equipment apply cost model and are depreciated using the straight-line method to allocate their cost over their estimated useful lives. The assets' residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each balance sheet date. If expectations for the assets' residual values and useful lives differ from previous estimates or the patterns of consumption of the assets' future economic benefits embodied in the assets have changed significantly, any change is accounted for as a

change in estimate under IAS 8, "Accounting Policies, Changes in Accounting Estimates and Errors", from the date of the change.

Service lives estimated as follows:

Buildings:

Main building, 43 to 57 years; Others, 2 to 39 years; Machinery and equipment, 2 to 22 years; Other equipment, 2 to 24 years; Leasehold improvement, 3 to 22 years;

  • D.An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the assets. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognized in profit or loss.
  • (10)Leases/The Company as a lessee

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

  • A. Assets held under finance leases are initially recognized as assets of the Company at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the parent company only balance sheets as a finance lease obligation.
  • B. Finance expenses implicit in lease payments for each period are recognized immediately in profit or loss, unless they are directly attributable to qualifying assets, in which case they are capitalized.
  • C. The property, plant and equipment acquired under finance leases are depreciated based on the durability of the assets. If it is not reasonable to determine that the Company will acquire ownership at the end of the lease term, the depreciation is provided based on the short-lived period of the asset and the lease term.

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

(11)Investment properties

Investment properties are properties held to earn rentals and/or for capital appreciation (including property under construction for such purposes), also include land held for a currently undetermined future use.

Investment properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are measured at cost less accumulated depreciation and accumulated impairment loss. Depreciation is recognized using the straight-line method.

Investment properties under construction of which the fair value is not reliably measurable are stated at cost less accumulated depreciation and accumulated impairment loss until either such time as the fair value becomes reliably measureable or construction is completed (whichever comes earlier).

Investment properties in the course of construction are stated at cost less accumulated impairment loss. Cost includes professional fees and borrowing costs eligible for capitalization. Depreciation of these assets commences when the assets are ready for their intended use.

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

(12)Intangible assets

Intangible assets with finite useful lives that are acquired separately are initially measured at cost and subsequently measured at cost less accumulated amortization and accumulated impairment loss. Amortization is recognized on a straight-line basis over the following estimated lives: computer software - 2 to 15 years; patent are the economic benefit or contract period. The estimated useful life, residual value, and amortization method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis. Intangible assets with indefinite useful lives that are acquired separately are measured at cost less accumulated impairment loss.

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

(13)Impairment of non-financial assets

The Company assesses at each balance sheet date the recoverable amounts of those assets where there is an indication that they are impaired. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell or value in use. When the circumstances or reasons for recognizing impairment loss for an asset in prior years no longer exist, the impairment loss shall be reversed to the extent of the loss previously recognised in profit or loss.

(14)Provisions

Provisions are recognized when the Company has a present legal or constructive obligation as a result of past events, and it is probable that an outflow of economic resources will be required to settle the obligation and the amount of the obligation can be reliably estimated. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation on the balance sheet date, which is discounted using a pre-tax discount rate that reflects the current market assessments of the time value of money and the risks specific to the obligation. When discounting is used, the increase in the provision due to passage of time is recognized as interest expense.Provisions are not recognized for future operating losses.

(15)Employee benefits

A.Short-term employee benefits

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

B.Pensions

a. Defined contribution plans

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

  • b. Defined benefit plans
  • (a) Net obligation under a defined benefit plan is defined as the present value of an amount of pension benefits that employees will receive on retirement for their services with the Company in current period or prior period. The liability recognised in the balance sheet in respect of defined benefit pension plans is the present valueof the defined benefit obligation at the balance sheet date less the fair value of plan assets, together with adjustments for unrecognised past service costs. The defined benefit net obligation is calculated annually by independent actuaries using the projected unit credit method. The rate used to discount is determined by using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension liability; when there is no deep market in high-quality corporate bonds, the Company uses interest rates of government bonds (at the balance sheet date) instead.
  • (b) Actuarial gains and losses arising on defined benefit plans are recognised in other comprehensive income in the period in which they arise and are recorded as retained earnings.
  • (c) Past service costs are recognised immediately in profit or loss.
  • C. Employees' bonus and directors' and supervisors' remuneration Employees' bonus and directors' and supervisors' remuneration are recognised as expenses and liabilities, provided that such recognition is required under legal or constructive obligation and those amounts can be reliably estimated. However, if

the accrued amounts for employees' bonus and directors' and supervisors' remuneration are different from the actual distributed amounts as resolved by the stockholders at their stockholders' meeting subsequently, the differences should be recognised based on the accounting for changes in estimates.

D. Termination benefits

Termination benefits are employee benefits provided in exchange for the termination of employment as a result from either the Company's decision to terminate an employee's employment before the normal retirement date, or an employee's decision to accept an offer of redundancy benefits in exchange for the termination of employment. The Company recognises expense when it can no longer withdraw an offer of termination benefits or it recognises related restructuring costs, whichever is earlier. Benefits that are expected to be due more than 12 months after balance sheet date shall be discounted to their present value.

(16)Share capital and treasury shares

A.Share capital

Ordinary share is classified as equity. The classification of the preferred stock depends on the essence of the agreement. If the preferred stock matches the definition of the financial liability, it is classified as a liability. Otherwise, it is classified as equity. Incremental cost that can be attributed to the issuance of stocks or options is deducted from the capital issued.

B.Treasury Shares

When the Company acquires its outstanding shares that have not been disposed or retired, treasury shares are stated at cost and shown as a deduction in stockholders' equity. When treasury shares are sold, if the selling price is above the book value, the difference should be credited to the capital surplus - treasury share transactions. If the selling price is below the book value, the difference should first be offset against capital surplus from the same class of treasury share transactions, and the remainder, if any, debited to retained earnings. The carrying value of treasury shares is calculated using the weighted-average approach in accordance with the purpose of the acquisition.

When the Company's treasury shares are retired, the treasury share account should be credited, and the capital surplus - premium on stock account and capital stock account should be debited proportionately according to the share ratio. The carrying value of treasury shares in excess of the sum of its par value and premium on stock should first be offset against capital surplus from the same class of treasury share transactions, and the remainder, if any, debited to retained earnings. The sum of the par value and premium on treasury shares in excess of its carrying value should be credited to capital surplus from the same class of treasury share transactions.

  • (17)Share-based payment transactions
  • A.For the equity-settled share-based payment arrangements, the employee services received are measured at the fair value of the equity instruments granted at the grant date, and are recognised as compensation cost over the vesting period, with a corresponding adjustment to equity. The fair value of the equity instruments granted shall reflect the impact of market vesting conditions and non-market vesting conditions. Compensation cost is subject to adjustment based on the service conditions that are expected to be satisfied and the estimates of the number of equity instruments that are expected to vest under the non-market vesting conditions at each balance sheet date. And ultimately, the amount of compensation cost recognized is based on the number of equity instruments that eventually vest.
  • B.Cash-settle share-based payment arrangements are the fair value of liabilities undertaken recognized in remuneration costs and liabilities in the vesting period and measured by the fair value of equity instruments offered at each balance sheet date and the settlement date. Any changes are recognized in profit or loss.

(18)Income tax

  • A.The tax expense for the period comprises current and deferred tax.Tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or items recognised directly in equity, in which cases the tax is recognised in other comprehensive income or equity.
  • B.The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the Company and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in accordance with applicable tax regulations. It establishes provisions where appropriate based on the amounts expected to be paid to the tax authorities. An additional tax is levied on the unappropriated retained earnings and is recorded as income tax expense in the year the stockholders resolve to retain the earnings.
  • C.Deferred income tax is recognised, using the balance sheet method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the parent company only financial statements. However, the deferred income tax is not accounted for if it arises from initial recognition of goodwill or of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference is controlled by the Company and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted

by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

  • D.Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. At each balance sheet date, unrecognised and recognised deferred income tax assets are reassessed.
  • E.Current income tax assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. Deferred income tax assets and liabilities are offset on the balance sheet when the entity has the legally enforceable right to offset current tax assets against current tax liabilities and they are levied by the same taxation authority on either the same entity or different entities that intend to settle on a net basis or realise the asset and settle the liability simultaneously.
  • F.Tax preference given for expenditures incurred on acquisitions of equipment or technology, research and development, employees" training and equity investments is recorded using the income tax credits accounting.
  • (19)Revenue Recognition

2018

The Company recognizes revenues based on the following steps:

    1. Identifying the contracts;
    1. Identifying obligations in the contracts;
    1. Determining prices;
    1. Allocating prices into the obligations in the contracts;
    1. Recognizing revenues while fulfilling the obligations.

The Company does not adjust the promised amount of consideration for the effects of a significant financing component if the period between when the Company transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less.

  1. Goods sales

The Company sells fans and other relevant products. Sales revenues are recognized while the control of goods is transferred to the customers since the customers already have the rights to use, set price, take the major responsibility to resell the good and bear the risk of obsoleteness. The Company recognizes revenues and accounts receivable at the point and presents it in net term after deducting sales return, quantity discount and sales allowance.

The Company does not recognize sales revenue on materials delivered to subcontractors because this delivery does not involve a transfer of risks and rewards of materials ownership.

  1. Service revenue

Revenue from technical services is recognized when services are provided that in accordance with the relevant agreements.

2017

  1. Sale of goods

The Company manufactures and sells fans. Revenue is measured at the fair value of the consideration received or receivable taking into account value-added tax, returns, rebates and discounts for the sale of goods to external customers in the ordinary course of the Company's activities. Revenue from the sale of goods is recognized when all the following conditions are satisfied:

  • (1) The Company has transferred to the buyer the significant risk and rewards of ownership of the goods;
  • (2) The Company retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;
  • (3) The amount of revenue can be measured reliably;
  • (4) It is probable that the economic benefits associated with the transaction will flow to the Company; and
  • (5) The costs incurred or to be incurred in respect of the transaction can be measured reliably.

The Company does not recognize sales revenue on materials delivered to subcontractors because this delivery does not involve a transfer of risks and rewards of materials ownership.

    1. Service revenue, technique service income, rental income, dividend income and interest income
  • (1) Revenues from a contract to provide services are recognized by reference to the stage of completion of the contract. However, if certain work is more important than other work, the recognization of revenue shall be deferred until the completion of the certain work.
  • (2) Revenues from technical services is recognized in accordance with the substance of the relevant agreement provided that it is probable that the economic benefits associated with the transaction flow to the Company and the amount of the revenue can be measured reliably.
  • (3) Rental income from operating leases is recognized on a straight-line basis over the term of the relevant lease.
  • (4) Dividend income from investments is recognized when the shareholder's right to receive payment has been established, provided that it is probable that the

economic benefits will flow to the Company and the amount of income can be measured reliably.

(5) Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable.

(20)Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization.

All borrowing costs other than those stated above are recognized in profit or loss in the period in which they are incurred.

(21)Government grants

Government grants are not recognized until there is reasonable assurance that the Company will comply with the conditions attached to them and will receive the grants. Government grants are recognized in profit or loss on a systematic basis over the periods in which the Company recognizes as expenses the related costs for which the grants are intended to compensate. Government grants related to property, plant and equipment are recognized as non-current liabilities and are amortised to profit or loss over the estimated useful lives of the related assets using to straight-line method.

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

The preparation of the Company's parent company only financial statements is adopting accounting policies based on the following significant judgements, significant accounting estimates and assumptions:

  • (1) Critical judgements in applying accounting policies
  • A. Judgment of financial asset classification (applied to 2018)

The Company assesses the business model of financial assets based on the hierarchy that reflects the Company of financial assets that are jointly managed for specific business purposes. This assessment requires consideration of all relevant evidence, including measures of asset performance, risks affecting performance, and the manner in which the relevant managers are determined, and judgments are required. The Company continues to assess the adequacy of its business model and monitors the financial assets measured by the amortized cost before the maturity date and the debt instrument investments measured at fair value through other comprehensive income. Evaluate whether the disciplinary action has the same goal of business model. If the business model has been changed, the Company delays the adjustment of the subsequent classification of financial assets.

B. Impairment of financial assets - equity instruments (applied to 2017)

Financial assets are assessed to determine whether there is objective evidence that an impairment loss has occurred. Financial assets that are considered to be impaired required significant judgment. The criteria that the Company used is a significant or prolonged decline in the fair value in equity instrument below its cost.

C. Financial assets carried at cost (applied to 2017)

The Company believed that the fair value of the above unlisted equity investments held by the Company cannot be reliably measured due to no recent sufficient information for reasonable fair value estimates, therefore, they were classified as financial assets carried at cost.

D. Revenue recognition

2018

The Company follows IFRS 15 to determine if it controls the specified good or service before that good or service is transferred to the customer, and the Company is acting as a principal or an agent in that transaction. When the Company acts as an agent, revenue is recognized on a net basis.

The Company acts as a principal as that it meets one the of following situations:

  • a. The Company gains control over the goods from the other party before transferring goods to customers.
  • b. The Company controls the right of providing service by the other party in order to control the ability of the party to provide service to customers.
  • c. The Company gain control over goods or service from the other party in order to combine with other goods or services to provide specific goods or services to customers.

The indicators (not limited to) which assist making judgment on whether the Company controls the goods or services before transferring goods or services to customers:

  • a. The Company has primary responsibilities for the goods or services it provides;
  • b. The Company bears inventory risk before transferring the specific goods or services to customer, or after transferring the control to customer. (For example, if the customer has the right to return.)
  • c. The Company has the discretion to set prices.

2017

The sales transaction classified as a principal or agent is pursuant to the type and economic nature of transaction. If the exposure to the risk and reward is material at the sale of goods or service providing, the Company is a principal in that transaction and the revenue is recognized in gross sales amount. Otherwise, the revenue is recognized in net sales amount.

The Company's transaction of manufacturing and selling of precise motors and fans is classified as a principal based on:

  • a. Taking the major responsibility at the sale of goods
  • b. Taking the inventory risk
  • c. Taking the credit risk of the customers

(2) Critical accounting estimates and assumptions

A. Revenue Recognition

2018

The Company recognizes records a refund for estimated future returns and other allowances in the same period the related revenue is recorded. Refund for estimated sales returns and other allowances is generally made and adjusted at a specific percentage based on historical experience and any known factors that would significantly affect the allowance, and our management periodically reviews the adequacy of the percentage used.

2017

The Company recognizes revenue when performance obligations are satisfied. Revenue is reduced by the amount of estimated customer returns, rebates and other similar allowances. Allowances for sale returned and liabilities for returns are recognized at the time of sale based on the seller's reliable estimate of future returns and base on past experience and other relevant factors.

B. Estimated impairment of financial assets (applied to 2018)

The provision for impairment of trade receivables is based on assumptions about risk of default and expected loss rates. The Company uses judgement in making these assumptions and in selecting the inputs to the impairment calculation, based on the Company's past history, existing market conditions as well as forward looking estimates at the end of each reporting period. Where the actual future cash inflows are less than expected, a material impairment loss may arise.

C. Process of fair value measurement and evaluation (applied to 2018)

When the assets and liabilities at fair value with no active market, the Company determines whether to use outside appraisal and using proper evaluation techniques based on related regulation or its own judgment. If the Level 1 input value is not available while evaluating, the Company refers to the analysis of the investee's financial position and operating outcome, recent trading price, quotes on non-active market of same equity instrument, quotes on active market of similar equity instrument and evaluation multiples of comparable companies. If the future input value is different from expectation, the fair value might change. The Company updates input values quarterly according to the market status in order to moniter if the measurement of fair value is appropriate.

D. Impairment assessment of tangible and intangible assets

The Company assesses impairment based on its subjective judgement and determines the separate cash flows of a specific group of assets, useful lives of assets and the future possible income and expenses arising from the assets depending on how assets are utilised and industrial characteristics. Any changes of economic circumstances or estimates due to the change of Company strategy might cause material impairment on assets in the future.

E. Impairment assessment on investment using equity method

The Company assesses the impairment of investments accounted for using the equity method whenever triggering events or changes in circumstances indicate that an investment may be impaired and carrying value cannot be recoverable. The Company assesses the recoverable amount based on a projected future cash flow and receivable cash dividend of the investees, and disposal-generating future cash flow to ensure the reasonableness of such assumptions.

F. Realisability of deferred income tax assets

Deferred income tax assets are recognized only to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences can be utilised. Assessment of the realisability of deferred income tax assets involves critical accounting judgements and estimates of the management, including the assumptions of expected future sales revenue growth rate and profit rate, tax exempt duration, available tax credits, tax planning, etc. Any variations in global economic environment, industrial environment, laws, and regulations might cause material adjustments to deferred income tax assets.

G. Evaluation of inventories

As inventories are stated at the lower of cost and net realisable value, the Company must determine the net realisable value of inventories on balance sheet date using judgements and estimates. The Company evaluates the amounts of normal inventory comsumption, obsolete inventories or inventories without market selling value on balance sheet date, and writes down the cost of inventories to the net realisable value.

H. Calculation of accrued pension obligations

When calculating the present value of defined pension obligations, the Company must apply judgments and estimates to determine the actuarial assumptions on balance sheet date, including discount rates and future salary growth rate. Any changes in these assumptions could significantly impact the carrying amount of defined pension obligations.

I.Financial assets - fair value measurement of unlisted stocks without active market (applied to 2017)

The fair value of unlisted stocks held by the Company that are not traded in an active market is determined considering those companies' recent fund raising activities and technical development status, fair value assessment of other companies of the same type, market conditions and other economic indicators existing on balance sheet date. Any changes in these judgments and estimates will impact the fair value measurement of these unlisted stocks. Please refer to Note 12(3) for the financial instruments fair value information.

6. CONTENTS OF SIGNIFICANT ACCOUNTS (1) CASH AND CASH EQUIVALENTS

December 31
Item 2018 2017
Cash on hand \$453 \$406
Cash in banks 446,764 421,656
Total \$447,217 \$422,062

A. The Company have good credit quality in financial institutions, and the Company's transactions with a number of financial institutions to diversify credit risk that are unlikely to be expected to default.

B. The Company had no cash and cash equivalents pledged to others.

(2) NOTES RECEIVABLE, NET

December 31
Item 2018 2017
At amortized cost
Notes receivable \$31,761 \$27,799
Less: Loss allowance (24) (24)
Net \$31,737 \$27,775

A. The Company had no notes receivable pledged to others.

B. The relevant disclosure of loss allowance for notes receivable. Please refer to Note 6(3).

(3) ACCOUNTS RECEIVABLE, NET

December 31
Item 2018 2017
At amortized cost
Accounts receivable \$2,135,825 \$2,030,077
Less: Loss allowance (8,015) (5,468)
Net \$2,127,810 \$2,024,609

A. The accounts receivable that were neither past due nor impaired was following the Company's credit policy determined by reference to the industry characteristics, operation scale and current financial position of the counterparties. The average credit period on sales of goods was 3-4 months.

B. The Company had no account receivable pledged to others.

C. To reduce major credit risk, the Company bought credit guarantee insurance.

  • D. Please refer to Note 7 for accounts receivable with related parties 2018
    1. The Company applies the simplified approach to provisions for expected credit losses prescribed by IFRS 9, which permits the use of a lifetime expected credit losses provision for trade receivables (including other receivables). The expected credit losses on trade receivables are estimated by reference to past account aging records of the debtor, an analysis of the debtor's current financial position, industrial trend. The Company estimates expected credit losses based on the number of days for which receivables are past due. As the Company's historical credit losses experience does not show significantly different loss patterns for different customer segments, the provision for losses based on past due status of receivables is not further distinguished between the Company's different customer base.
    1. The Company measures the loss allowance for notes receivable, accounts receivable and other receivables according to the preparation matrix (including related parties):
Notes Allowance for
loss rate receivable doubtful accounts Amortized Cost
0.05%-5% \$1,977,79 (\$7,079) \$1,970,711
195,484 (940) 194,544
15,392 (20) 15,372
- - -
\$2,188,666 (\$8,039) \$2,180,627
Expected credit
0.05%-5%
0.05%-5%
0.05%-5%
3.
Movements of the loss allowance for notes and accounts receivable (include other
receviables and related parites) were as follows:
2018
Balance at January 1, 2018 (IAS 39) \$5,492
Effect of retrospective application of IFRS 9 -
Balance at January 1, 2018 (IFRS 9) \$5,492
Add: Provision for impairment 2,547
Less: Reversal of impairment -
Less: Derecognition -
Less: Write - offs -
Less: Other -
Balance at December 31, 2018 \$8,039

The above provision has already taken into consideration of collateral or other credit enhancement. The other credit enhancement possessed by above receivables was \$564,958 thousand.

The Company writes off a trade receivable when there is information indicating that the debtor is in severe financial difficulty and there is no realistic prospect of recovery of the receivable. For trade receivables that have been written off, the Company continues to engage in enforcement activity to attempt to recover the receivables which are due. Where recoveries are made, these are recognized in profit or loss. The Company's trade receivables for offsetting the contract amount is \$0 thousand in 20

  1. Please refer to Note 12 for the relevant credit risk management and assessment method.

2017

  1. The aging analysis of notes and accounts receivable (including other receivables) that were past due but not impaired was as follows:
Item December 31, 2017
Up to 30 days \$157,348
31 to 90 days 4,839
Over 91 days 4,744
Total \$166,931

The above was analyzed on the basis of the past due date.

The Company considered no significant change in credit quality for above mentioned receivables and the amounts were still recoverable.

  1. Movements of the allowance for doubtful receivables (including other receivables):
Year Ended December 31, 2017
Item Individual provision Company provision Total
Beginning balance \$ - \$5,933 \$5,933
Provision for impairment - - -
Reversal of impairment - (441) (441)
Write-offs - - -
Ending balance \$ - \$5,492 \$5,492

The Company recognized allowance for doubtful accounts for impaired receivables amounting to \$0 thousand as of December 31, 2017.

The aging analysis of notes and accounts receivable that were impaired: None.

(4) INVENTORIES AND OPERATING COSTS

December 31
Item 2018 2017
Raw materials \$348,194 \$282,445
Supplies 8,194 6,875
Work in process 123,794 91,127
Finished goods 443,151 410,572
Subtotal \$923,333 \$791,019
Less: Valuation allowance (53,499) (30,148)
Net \$869,834 \$760,871

A. The related inventory gain (loss) recoginzed as operating cost for the years ended December 31, 2018 and 2017 were as follows:

Year Ended December 31
Item 2018 2017
Cost of goods sold \$6,886,775 \$6,354,960
Unallocated overheads and labor cost 31,669 33,512
Gain (loss) on inventory valuation 19,389 (5,547)
Others 14,033 13,907
Total \$6,951,866 \$6,396,832
  • B. The Company recognized inventory valuation gain (loss) of \$19,389 thousand and (\$5,547) thousand for the years ended December 31, 2018 and 2017, respectively, as a result of inventory's write-down to net realizable value and recovery of inventory net realizable value.
  • C. The Company had no inventories pledged to others.

(5) FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE IMCOME - NONCURRENT - 2018

    1. The investment in Tongli Indusrtial Co., Ltd is held for medium to long-term purposes. The management of the Company considers that if the short-term fair value fluctuations of the investment is included in the profit or loss and inconsistent with the aforementioned long-term investment plans, therefore such investment is accounted for as FVTOCI. This investment was originally classified by IAS 39 as financial assets measured at cost - noncurrent. Please refer to Note 3 and Note 6(6) for the reclassification and information for 2017.
    1. The Company adjusted its investment position in 2018 to diversify risks, and therefore sold all stocks for \$74,400 thousand. The related other equity - unrealized gain or loss on financial assets at FVTOCI of \$12,400 thousand were transferred to retained earnings.
    1. Please refer to Note 12 for related credit risk management and assessment methods.

(6) FINANCIAL ASSETS CARRIED AT COST - NONCURRENT

Item December 31, 2017
Overseas unlisted stocks \$62,000

A. Since there is a wide range of estimated fair values of the Company's investments in non-publicly traded stocks, the Company concludes that the fair value cannot be reliably measured and therefore they are classified as finanial assets carried at cost - noncurrent.

  • B. The accumulated impairment loss were \$0 thousand as of December 31, 2017.
  • C. The Company had no financial assets carried at cost noncurrent pledged to others.
December 31
Company Name 2018 2017
Subsidiaries:
Sunon Smt Co., Ltd \$ - \$192,812
Successful Century Co., Ltd 1,168,133 1,113,567
BVI Sunon International Limited 1,391,680 1,184,719
Sunon INC 63,462 48,345
Sunon SAS 63,347 61,102
Sunon Electric Machine Ind (H.K) Ltd. 2,065 2,055
Sunon Corporation 2,557 2,505
Total \$2,691,244 \$2,605,105

(7) INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD

  • A. For more information regarding the subsidiaries of the Company, please refer to Note 4(3) "Basis of consolidation"of the Company and subsidiaries' consolidated financial statement of 2018.
  • B. The investments accounted for by the equity method and the share of profit or loss and other comprehensive income of those investments for the years ended December 31, 2018 and 2017 were based on the subsidiaries' financial statements audited by auditors for the same years, except for Sunon Electric Machine Ind.(H.K) Ltd. and Sunon Coperation. The Company considered no material adjustments had these subsidiaries' financial statements been audited.
  • C. The Company had no investments accounted for using equity method pledged to others as of December 31, 2018 and 2017.
  • D. The Company merged with 100% shareholding subsidiary, Sunon Smt Co., Ltd., on October 1, 2018. Please refer to Note 6(30) for the information.

(8) PROPERTY, PLANT AND EQUIPMENT

December 31
Item 2018 2017
Land \$804,381 \$804,381
Buildings 206,916 202,814
Machinery and equipment 100,093 80,434
Miscellaneous equipment 80,494 62,957
Leasehold improvements 41,212 40,061
Equipment to be inspected 31,797 27,293
and construction in progress
Total cost \$1,264,893 \$1,217,940
Less: Accumulated depreciation (202,261) (190,477)
Accumulated impairment - -
Carrying amount \$1,062,632 \$1,027,463
Equipment to be
Inspected and
Machinery and Miscellaneous Leasehold Construction in
Land Buildings Equipment equipment improvement Progress Total
Cost
Balance at January 1, 2018 \$804,381 \$202,814 80,434 \$62,957 \$40,061 \$27,293 \$1,217,940
Additions - 2,371 6,879 25,337 1,452 33,328 69,367
Disposals - - (11,251) (13,370) (1,698) (1,464) (27,783)
Reclassification - 1,731 18,607 5,180 1,397 (26,915) -
Transfer to expenses - - - - - (445) (445)
Acquisition through merger - - 5,424 390 - - 5,814
Balance at December 31, 2018 \$804,381 \$206,916 \$100,093 \$80,494 \$41,212 \$31,797 \$1,264,893
Accumulated depreciation
and impairment
Balance at January 1, 2018 \$
-		 \$91,860 \$37,012 \$31,612 \$29,993 \$
-		 \$190,477
Depreciation expense - 5,138 11,551 18,309 1,761 - 36,759
Disposals - - (9,907) (13,370) (1,698) - (24,975)
Balance at December 31, 2018 \$
-		 \$96,998 \$38,656 \$36,551 \$30,056 \$
-		 \$202,261
Equipment to be
----------------- -- --
Inspected and
Machinery and Miscellaneous Leasehold Construction in
Land Buildings Equipment equipment improvement Progress Total
Cost
Balance at January 1, 2017 \$804,381 \$194,769 \$68,277 \$63,518 \$39,956 \$20,609 \$1,191,510
Additions - 6,916 5,553 26,080 105 26,098 64,752
Transferred from other - 143 - - - - 143
noncurrent assets
Disposals - - (661) (30,086) - (6,462) (37,209)
Transfer to expenses - - - - - (1,256) (1,256)
Reclassification - 986 7,265 3,445 - (11,696) -
Balance at December 31, 2017 \$804,381 \$202,814 \$80,434 \$62,957 \$40,061 \$27,293 \$1,217,940
Accumulated depreciation
and impairment
Balance at January 1, 2017 \$ - \$87,404 \$28,322 \$42,389 \$28,479 \$
-		 \$186,594
Depreciation expense - 4,456 9,351 14,249 1,514 - 29,570
Disposals - - (661) (25,026) - - (25,687)
Balance at December 31, 2017 \$ - \$91,860 \$37,012 \$31,612 \$29,993 \$
-		 \$190,477

A.The details of interest capitalized: None.

B.Impairment of property, plant and equipment: None.

C.Property, plant and equipment pledged for the borrowings: Please refer to Note 8.

D.Reconciliations of current additions and the acquisition of property, plant and

equipment in statement of cash flows were as follows:

Year Ended December 31
Item 2018 2017
Acquisition of property, plant and equipment \$69,367 \$64,752
Decrease (increase) in equipment payable 1,203 (8,058)
Cash paid for acquisition of property, plant \$70,570 \$56,694
and equipment

(9) INVESTMENT PROPERTIES, NET

December 31
Item 2018 2017
Land \$89,384 \$89,384
Building 26,070 26,070
Total cost \$115,454 \$115,454
Less: accumulated depreciation (14,385) (13,935)
accumulated impairment (26,058) (26,058)
Net \$75,011 \$75,461
Cost Land Buildings Total
Balance at January 1, 2018 \$89,384 \$26,070 \$115,454
Additions - - -
Disposals - - -
Balance at December 31, \$89,384 \$26,070 \$115,454
2018
Accumulated depreciation
and impairment Land Buildings Total
Balance at January 1, 2018 \$26,058 \$13,935 \$39,993
Depreciation expense - 450 450
Disposals - - -
Balance at December 31, \$26,058 \$14,385 \$40,443
2018
Cost Land Buildings Total
Balance at January 1, 2017 \$89,384 \$26,070 \$115,454
Additions - - -
Disposals - - -
Balance at December 31, \$89,384 \$26,070 \$115,454
2017
Accumulated depreciation
and impairment Land Buildings Total
Balance at January 1, 2017 \$10,687 \$13,485 \$24,172
Depreciation expense - 450 450
Disposals - - -
Provision for impairment 15,371 - 15,371
loss
Balance at December 31, \$26,058 \$13,935 \$39,993
2017

A. Rent income and direct operating expense of investment properties:

Year Ended December 31
Item 2018 2017
Rent income of investment properties \$2,196 \$2,196
Direct operating expense incurred for the \$781 \$777
investment properties with current rent income
  • B. The fair values of investment properties held by the Company were both \$101,402 thousand as of December 31, 2018 and 2017. The fair value determination was performed by independent qualified professional appraisers. The valuation was based on the comparison method, and the fair value was measured by using Level 3 inputs. Please refer to Note 12(3).
  • C. The accumulated impairment of investment properties were both \$26,058 thousand as of December 31, 2018 and 2017.
  • D. The Company had no investment properties pledged to others.
(10)INTANGIBLE ASSETS
----------------------- --
December 31
Item 2018 2017
Trademark \$3,126 \$3,126
Computer software 15,727 8,891
Total cost \$18,853 \$12,017
Less: accumulated amortization (5,949) (3,127)
Net \$12,904 \$8,890
Cost Trademark Computer Software Total
Balance on January 1, 2018 \$3,126 \$8,891 \$12,017
Additions - 12,161 12,161
Derecognition - (5,325) (5,325)
Balance on December 31, 2018 \$3,126 \$15,727 \$18,853
Accumulated amortization
and impairment Trademark Computer Software Total
Balance on January 1, 2018 \$ - \$3,127 \$3,127
Amortization expenses - 8,147 8,147
Derecognition - (5,325) (5,325)
Balance on December 31, 2018 \$ - \$5,949 \$5,949
Cost Trademark Computer Software Total
Balance on January 1, 2017 \$3,126 \$13,537 \$16,663
Additions - 6,441 6,441
Derecognition - (11,087) (11,087)
Balance on December 31, 2017 \$3,126 \$8,891 \$12,017
Accumulated amortization
and impairment Trademark Computer Software Total
Balance on January 1, 2017 \$
-		 \$9,587 \$9,587
Amortization expenses - 4,627 4,627
Derecognition - (11,087) (11,087)
Balance on December 31, 2017 \$ - \$3,127 \$3,127

(11)SHORT-TERM LOANS

December 31, 2018
Borrowings Nature Amout Interest
Unsecured loan \$510,000 0.90%-1.15%
December 31, 2017
Borrowings Nature Amout Interest
Unsecured loan \$410,000 0.90%-0.95%

(12)OTHER PAYABLES (INCLUDING RELATED PARTIES)

December 31
Item 2018 2017
Accrued payroll \$120,457 \$124,174
Commission payable 16,412 13,511
Service fee payable 15,384 13,605
R & D payable 17,923 19,979
Bonus to employees and remuneration to 26,000 27,500
directors and supervisors
Equipment payable 23,892 25,095
Others 55,132 60,250
Total \$275,200 \$284,114

Please refer to Note 7 for other payables with related parties.

(13) PROVISIONS - CURRENT

December 31
Item 2018 2017
Employee benefits \$13,120 \$12,636
Year Ended December 31
Item 2018 2017
Beginning balance \$12,636 \$12,730
Additional provisions recognized 399 -
Reversing un-usage balances - (94)
Acquisition through merger 85 -
Ending balance \$13,120 \$12,636

Provision for employee benefits represents vested short-term service leave entitlements accrued.

(14)LONG-TERM LOANS AND CURRENT PORTION OF LONG-TERM LOANS

December 31
Item 2018 2017
Mortgage loans \$220,000 \$320,000
Less: portion due within - -
one year
Long-term loans \$220,000 \$320,000
Interest rates 1.34% 1.46%

A.Refer to Note 8 for assets pledged as collateral for long-term borrowings.

B.Under the loan agreement, the Company should maintain certain current, debt, interest coverage and net value ratios based on the Company's audited semi-annual and annual consolidated financial statements. As of December 31, 2018, the Company had no irregularities.

(15)OBLIGATION UNDER CAPITAL LEASES

The Company leases information equipment under finance leases. According to the terms of the lease contract, the Company can obtain the ownership of the equipment unconditionally when the contract expires. The rent is priced according to the contract and is paid in half a year. The total amount of the minimum lease payments and their present value as at December 31, 2018 and 2017 are as follows:

December 31, 2018
Future financial
Total Amount expenses Present Value
Current
Under 1 year \$2,500 \$139 \$2,361
Noncurrent
1 year to 5 year \$2,500 \$44 \$2,456
Over 5 years - - -
Subtotal \$2,500 \$44 \$2,456
Total \$5,000 \$183 \$4,817

December 31, 2017: None.

(16)PENSION

A.Defined contribution plans

  • a.The plan under the Labor Pension Act (the "Act") is deemed a defined contribution plan. Pursuant to the Company has made monthly contributions equal to 6% of each employee's monthly salary to employees' pension accounts.
  • b.The total expenses recognized in the statement of comprehensive income were \$22,067 thousand and \$20,801 thousand, representing the contributions payable to these plans by the Company at the rates specified in the plans for the years ended December 31, 2018 and 2017, respectively.
  • B.Defined benefit plans
  • a.The Company has defined benefit plans under the Labor Standards Law that provide benefits based on an employee's length of service and average monthly salary for the six-month period prior to retirement. The aforementioned companies contribute an amount equal to 2% of salaries paid each month to their respective pension funds (the Funds), which are administered by the Labor Pension Fund Supervisory Committee (the Committee) and deposited in the Committee's name in the Bank of Taiwan. Before the end of each year, the Company assesses the balance in the Funds. If the amount of the balance in the Funds is inadequate to pay retirement benefits for employees who conform to retirement requirements in the next year, the Company

is required to fund the difference in one appropriation that should be made before the end of March of the next year. The Funds are operated and managed by the government's designated authorities; as such, the Company does not have any right to intervene in the investments of the Funds.

b.The amounts arising from the defined benefit obligation of the Company in the balance sheets were as follows:

December 31
2018 2017
\$94,388 \$92,688
(18,728) (22,058)
\$75,660 \$70,630

c. Movements of the net defined benefit liabilities were as follows:

Year Ended December 31, 2018
Present value of defined Fair value of Net defined benefit
Item benefit obligation plan assets liabilities
Balance, beginning of year \$92,688 (\$22,058) \$70,630
Acquisition through merger 5,033 (1,870) 3,163
Service cost
Current service cost 10 - 10
Interest expense (income) 1,433 (365) 1,068
Past service cost - - -
Settlement loss (income) (9,769) 10,598 829
Recognized in profit or loss (\$8,326) \$10,233 \$1,907
Remeasurement
Return on plan assets (excluding \$ - (\$497) (\$497)
amounts included in net interest
expense)
Actuarial loss (gain) -
Changes in demographics 1,367 - 1,367
assumptions
Changes in financial assumptions 1,845 - 1,845
Experience adjustments 4,126 - 4,126
Recognized in other comprehensive \$7,338 (\$497) \$6,841
income
Contributions from the employer \$ - (\$6,881) (\$6,881)
Benefits paid from plan assets (2,345) 2,345 -
Balance, end of year \$94,388 (\$18,728) \$75,660
Year Ended December 31, 2017
Present value of defined Fair value of Net defined benefit
Item benefit obligation plan assets liabilities
Balance, beginning of year \$88,357 (\$17,086) \$71,271
Service cost
Current service cost - - -
Interest expense (income) 1,325 (302) 1,023
Past service cost 1,028 - 1,028
Settlement loss (income) - - -
Recognized in profit or loss \$2,353 (\$302) \$2,051
Remeasurement
Return on plan assets (excluding \$ - \$118 \$118
amounts included in net interest
expense)
Actuarial loss (gain)
Changes in demographics
assumptions		 2,337 - 2,337
Changes in financial assumptions - - -
Experience adjustments 1,881 - 1,881
Recognized in other comprehensive \$4,218 \$118 \$4,336
income
Contributions from the employer \$ - (\$6,000) (\$6,000)
Benefits paid from plan assets (2,240) 1,212 (1,028)
Balance, end of year \$92,688 (\$22,058) \$70,630
  • D. Through the defined benefit plans under the Labor Standards Law, the Company is exposed to the following risks:
  • a. Investment risk: The pension funds are invested in equity and debt securities, bank deposits, etc. The investment is conducted at the discretion of the government's designated authorities or under the mandated management. However, under the Labor Standards Law, the rate of return on assets shall not be less than the average interest rate on a two-year time deposit published by the local banks and the government is responsible for any shortfall in the event that the rate of return is less than the required rate of return.

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

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

  • E. The actuarial valuations of the present value of the defined benefit obligation were carried out by qualified actuaries. The principal assumptions of the actuarial valuation were as follows:
Measurement Date
Decembe 31, 2018 Decembe 31, 2017
Discount rate 1.375% 1.50%
Future salary increase rate 2.00% 2.00%
The weighted average duration of the 14.9 years 14.8 years
defined benefit obligation

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

December 31
Item 2018 2017
Discount Rate
0.25% higher (\$3,433) (\$3,349)
0.25% lower \$3,598 \$3,510
Expected rates of salary increase
0.25% higher \$3,518 \$3,436
0.25% lower (\$3,374) (\$3,296)

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

F. The Company expects to make contributions of \$7,200 thousand to the defined benefit plans for the year ended December 31, 2019.

(17)SHARE CAPITAL

A. Movements in the number of the Company's ordinary shares outstanding were as follows:

Year Ended December 31, 2018
Item Shares (in thousands) Amount
Balance at January 1 250,930 \$2,509,297
Capital increase in cash - -
Capitalization of retained earnings - -
Balance at December 31 250,930 \$2,509,297
Year Ended December 31, 2017
Item Shares (in thousands) Amount
Balance at January 1 250,930 \$2,509,297
Capital increase in cash - -
Capitalization of retained earnings - -
Balance at December 31 250,930 \$2,509,297

B. As of December 31, 2018, the authorized capital are \$3,000,000 thousand, consisting of 300,000 thousand shares.

(18)CAPITAL SURPLUS

December 31
Item 2018 2017
From merger \$18,227 \$18,227
From convertible bonds 326,015 326,015
Treasurry share transactions 21,464 21,464
Reorganization 1,050 -
Differences between considerations and carryin 147 -
amounts of subsidiaries acquired or disposed
Total \$366,903 \$365,706

Under the Company Act, the capital surplus generated from the excess of the issuance price over the par value of capital stock and donations can be used to offset deficit or may be distributed as stock dividends or in cash. Under the regulations of the Security Exchange Law, the maximum amount transferred from the foregoing capital surplus to the Company's capital per year shall not be over 10% of the Company's paid-in capital. Capital surplus can't be used to offset deficit unless legal reserve is insufficient. The capital surplus from longterm investments may not be used for any purpose.

(19)RETAINED EARNINGS AND DIVIDEND POLICY

(1) In accordance with the dividend policy as set forth in the amended Articles, where the Company made profit in a fiscal year, the profit shall be first utilized for paying taxes, offsetting losses of previous years, setting aside as legal reserve 10% of the remaining profit, setting aside a special reserve in accordance with the laws and regulations, and the remainder plus prior year's unappropriated earnings will be recommended by the board of directors and approved through the shareholders' meeting.

stipulates appropriate dividend distribution ratio, and proposes for approval in the shareholders' meeting. However, at least 20% of total dividends should be distributed in cash . In consideration of its operation and capital expenditure demands, the Company

  • distributed in cash. However, legal reserve can be transferred to capital or distributed in cash only when the legal reserve has exceeded 25% of the Company's paid-in capital. (2) Legal reserve may be used to offset a deficit, and be transferred to capital or
  • (3) Special reserve
December 31
Item 2018 2017
Reserve for the dedit balance of other equities \$47,956 \$3,702
Reserve for first-time adoption of IFRS 79,155 79,155
Total \$127,111 \$82,857
  • A. While earning distribution, the earnings can be distributed after appropriation of the equivalent amount of the debit balance of the other equities of the balance sheet.
  • B. Under Rule No.1010012865 issued by the FSC for first-time adoption of IFRS, the special reserve can be reversed while usage, disposal and reclassification of related assets.
  • (4) The appropriation of 2017 and 2016 earnings had been resolved at the shareholders' meeting in May 2018 and June 2017, respectively. Details were summarized below:
Amount Dividends Per Share
Item 2017 2016 2017 2016
Legal reserve \$65,746 \$57,190
Special reserve 44,254 3,702
Cash dividends 577,138 501,860 2.3 2.0
Total \$687,138 \$562,752

(5)The appropriation of 2018 earnings had been proposed by the board of directors on March 14, 2019. Details were summarized below:

Item Amount Dividends Per Share
Legal reserve \$60,512
Special reserve 37,598
Cash dividends 501,860 2.0
  • A. The appropriations of earnings for 2018 are to be presented for approval in the shareholders' meeting to be held in June 2019.
  • B. In the event of repurchase of the Company's shares, transfer, conversion or annulment of treasury stocks, and exercise of employees' stock options, leading to a change in the number of outstanding shares and a consequent change in dividend yield, it is proposed that the chairman is authorized by the Board of Directors to duly adjust stocks and cash payout rates.
  • (6) Information on the earnings appropriation proposed by the Company's Board of Directors and approved by the Company's shareholders is available on the Market Observation Post System website of the Taiwan Stock Exchange.
Unrealized Gain (Loss) on
Exchange Differences Financial Assets at Fair
on Translating Foregin Value Through Other
Item Operations Comprehensive Income Total
Balance at January 1, 2018 (\$127,111) \$
-		 (\$127,111)
Impact of retroactive - 3,415 3,415
applications of IFRS 9
Exchange dirrerences arising on (36,548) - (36,548)
translation of foreign operations
Unrealized Gain (loss) on - 8,985 8,985
financial assets at fair value
through other comprehensive
income
Transfer to retained earning on
disposal of equity instruments - (12,400) (12,400)
at fair value through other
comprehensive income
Reorganization (1,050) - (1,050)
Banance at December 31, 2018 (\$164,709) \$
-		 (\$164,709)

(20)OTHERS EQUITY

Unrealized Gain (Loss) on
Exchange Differences Financial Assets at Fair
on Translating Foregin Value Through Other
Item Operations Comprehensive Income Total
Balance at January 1, 2017 (\$82,857) \$
-		 (\$82,857)
Exchange dirrerences arising on (44,254) - (44,254)
translation of foreign operations
Banance at December 31, 2017 (\$127,111) \$
-		 (\$127,111)

(21)OPERATING REVENUES

Year Ended December 31
Item 2018 2017
Revenue from contracts with customer
Total revenues \$8,258,807 \$7,736,465
Sales returns (11,940) (15,739)
Sales discount (60,337) (31,807)
Net \$8,186,530 \$7,688,919

A. Explain of contract revenue

Sales of fans and other related goods are mainly to system manufacturers and distributors. Please refer to Note 14 for the main sale areas.

  • B. The Company's timing of recognition is transferred the goods at a certain point of time.
  • C. Contract balances

The Company recognizes the accounts receivable, contract assets and contract liabilities related to contract revenue as follows:

December 31, 2018
Accounts receivable \$2,127,810
Contract assets -
Total \$2,127,810
Contract liabilities - \$10,745
current

a. Significant changes in contract assets and contract liabilities

The changes in the contract assets and contract liabilities primarily result from the timing difference between the satisfaction of performance obligation and the customer's payment, and there is no other significant changes.

b. Amount from previous period's satisfied performance obligations and beginning contract liabilities recognized in the current period as income were as follows:

Year Ended
Revenue in the current period December 31, 2018
From beginning contract liabilities \$20,034
From previous period's satified performance
obligations \$
-

(22)LABOR COST, DEPRECIAION AND AMORTIZATION

Year ended December 31, 2018
Item Operating cost Operating expenses Total
Labor cost
Salaries \$30,881 \$436,646 \$467,527
Insurance 3,646 36,188 39,834
Pension 1,908 22,066 23,974
Remuneration to - 14,321 14,321
directors
Others 2,947 35,710 38,657
Depreciation 5,278 31,931 37,209
Amortization 492 8,756 9,248
Total \$45,152 \$585,618 \$630,770
Year ended December 31, 2017
Item Operating cost Operating expenses Total
Labor cost
Salaries \$39,524 \$428,903 \$468,427
Insurance 4,700 34,186 38,886
Pension 2,395 20,457 22,852
Remuneration to - 14,680 14,680
directors
Others 5,250 30,973 36,223
Depreciation 6,575 23,445 30,020
Amortization 199 4,947 5,146
Total \$58,643 \$557,591 \$616,234
  • 1.The numeber of employees in December 31, 2018 and 2017 were 555 and 583 respectively. The number of directors who were not adjunct employees as of December 31, 2018 and 2017 were both 5.
  • 2.The Company accrued employees' compensation and remuneration to directors and supervisors at the rates not less than 2% and not higher than 5% of net income before income tax, emoployees' compensation and remuneration to directors and supervisors during the period. If there is a change in the amounts after the annual consolidated financial statements were authorized for issue, the differences are recorded as a change in the accounting estimate.
  • 3.The employees' compensation and remuneration to directors for the years ended December 31, 2018 and 2017 had been approved by the Company's Board of Directors meeting held on March 14, 2019 and March 12, 2018, respectively, and the relevant amounts recognized in the parent company only financial statement were as follows:
Year ended December 31
2018 2017
Employees' Remuneration Employees' Remuneration
compensation to directors compensation to directors
Resolution amount of \$16,500 \$9,500 \$17,500 \$10,000
allotment
Recognized in financial 16,500 9,500 17,500 10,000
statements
Difference \$
-		 \$
-		 \$
-		 \$
-

The above mentioned employees' compensation will be paid by cash.

3.Information about the appropriation of employees' compensation and directors' remuneration by the Company as proposed by the Board of Directors and resolved by the shareholders will be posted in the "Market Observation Post System" at the website of the Taiwan Stock Exchange.

(23)OTHER INOCME

Year Ended December 31
Item 2018 2017
Rental income \$3,784 \$2,492
Interest income 7,968 6,467
Others - sample sales 11,923 12,025
Others - subsidy 29,635 27,945
Others 39,027 42,132
Total \$92,337 \$91,061
Year Ended December 31
Item 2018 2017
Loss on disposal of property, plant and \$114 \$582
equipment
Net currency exchange gain 87,799 89,533
Impairment loss on non-financial assets - (15,371)
Others (4,336) (3,743)
Total \$83,577 \$71,001

(24)OTHER GAINS AND LOSSES

(25)FINANCE COSTS

Year Ended December 31
2018 2017
\$7,700 \$6,889
173 -
- -
\$7,873 \$6,889

(26)INCOME TAX EXPENSE

A.Income tax recorded in profit or loss.

a.The major components of tax expense were as follows:

Year Ended December 31
Current income tax 2018 2017
Current tax expense \$120,286 \$150,561
Additional tax on unappropriated earnings - 618
Adjustments in tax of prior periods (608) (324)
Total \$119,678 \$150,855
Deferred income tax
The origination and reveral of temporary difference \$8,794 (\$5,571)
Effect of tax rate change 3,045 -
Total \$11,839 (\$5,571)
lncome tax expense \$131,517 \$145,284
Year Ended December 31
Item 2018 2017
Share of other comprehensive loss of (\$8,614) (\$8,618)
subsidiaries
Remeasurement of defined benefit plans (2,020) (737)
Total (\$10,634) (\$9,355)

b.Income tax expense recognized in other comprehensive income was as follows:

B. A reconciliation of income before income tax and income tax expense recognized in profit or loss was as follows:

Year Ended December 31
Item 2018 2017
Income before income tax \$736,637 \$802,743
Income tax expense at the statutory rate \$147,327 \$136,466
Tax effect of adjusting items:
Loss on investment under equity method (57,021) (45,783)
Expense not deductible for tax purpose 29,980 59,878
Adjustments for prior year's tax adjustments (608) (324)
Additional income tax on unappropriated earnings - 618
Deferred income tax expense
Temporary differences 8,794 (5,571)
Effect of tax rate change 3,045 -
Income tax expense recognized in profit or loss \$131,517 \$145,284

The corporate income tax is 17% in 2017. The corpoate income tax rate was adjusted from 17% to 20% starting from 2018. In addition, the tax rate applicable to unappropriated earnings was reduced from 10% to 5%.

C.Amounts of deferred tax assets or liabilities as a result of temporary difference, loss carryfoward and investment tax credit were as follows:

Year Ended December 31, 2018
Recognized
Balance, Effect of Recognized in Other Effect of Balance,
Beginning Tax Rate Acquisition in Profit Comprehensive Exchange End of
of Year Change Through Merger or Loss Income Rate Changes Year
Deferred income tax assets:
Temporary differences
Loss on investment under
equity method		 \$1,303 \$230 \$
-		 (\$1,149) \$
-		 - \$ \$384
Net defined benefit liability 12,007 1,516 632 (1,043) 2,020 - 15,132
Unrealized loss on
inventories		 5,125 904 - 4,671 - - 10,700
Unused compensated 2,148 379 17 80 - - 2,624
absences
Unrealized exchange loss - - 30 (30) - - -
Subtotal \$20,583 \$3,029 \$679 \$2,529 \$2,020 - \$ \$28,840
Deferred income tax liabilities:
Temporaty differences
Gain on foreign investment
under equity method		 \$29,129 \$5,660 \$11,115 \$13,711 (\$8,614) - \$ \$51,001
Unrealized exchange gain 2,350 414 - (2,388) - - 376
Subtotal \$31,479 \$6,074 \$11,115 \$11,323 (\$8,614) - \$ \$51,377
Total (\$10,896) (\$3,045) (\$10,436) (\$8,794) \$10,634 - \$ (\$22,537)
Year Ended December 31, 2017
Recognized
Balance, Recognized in Other Effect of Balance,
Beginning in Profit Comprehensive Exchange End of
of Year or Loss Income Rate Changes Year
Deferred income tax assets:
Temporary differences
Loss on investment under \$2,141 (\$838) \$
-		 \$
-		 \$1,303
equity method
Net defined benefit liability 12,116 (846) 737 - 12,007
Unrealized loss on 6,068 (943) - - 5,125
inventories
Unused compensated 2,164 (16) - - 2,148
absences
Unrealized exchange loss 2,266 (2,266) - - -
Subtotal \$24,755 (\$4,909) \$737 \$
-		 \$20,583
Deferred income tax liabilities:
Temporaty differences
Gain on foreign investment \$50,577 (\$12,830) (\$8,618) \$
-		 \$29,129
under equity method
Unrealized exchange gain - 2,350 - - 2,350
Subtotal \$50,577 (\$10,480) (\$8,618) \$
-		 \$31,479
Total (\$25,822) \$5,571 \$9,355 \$
-		 (\$10,896)

D. Items with no deferred tax assets recognized:

Item December 31
2018 2017
Loss on investment under the equity method \$577 \$1,952

E. As of December 31, 2018, the tax authorities have ractified Company's income tax returns through Year 2016.

(27)OTHER COMPREHENSIVE INCOME (LOSS)

Year Ended December 31, 2018
Other Comprehensive Income Tax Other Comprehensive
Item Income (Loss), Before Tax (Expense) Benefit Income (Loss), Net of Tax
Items that will not be reclassified
subsequently to profit or loss:
Remeasurement of defined (\$6,841) \$2,020 (\$4,821)
benefit obligation
Unrealized gain on 8,985 - 8,985
investments in equity
instruments at fair value through
other comprehensive income
Subtotal \$2,144 \$2,020 \$4,164
Items that may be reclassified
subsequently to profit or loss:
Share of other comprehensive (\$45,162) \$8,614 (\$36,548)
income (loss) of subsidiaries,
associates and joint ventures
Subtotal (\$45,162) \$8,614 (\$36,548)
Recognized in other (\$43,018) \$10,634 (\$32,384)
comprehensive income (loss)
Other Comprehensive Income Tax Other Comprehensive
Item Income (Loss), Before Tax (Expense) Benefit Income (Loss), Net of Tax
Items that will not be reclassified
subsequently to profit or loss:
Remeasurement of defined (\$4,336) \$737 (\$3,599)
benefit obligation
Share of other comprehensive (21) - (21)
income (loss) of subsidiaries,
associates and joint ventures
Subtotal (\$4,357) \$737 (\$3,620)
Items that may be reclassified
subsequently to profit or loss:
Share of other comprehensive (\$52,872) \$8,618 (\$44,254)
income (loss) of subsidiaries,
associates and joint ventures
Subtotal (\$52,872) \$8,618 (\$44,254)
Recognized in other (\$57,229) \$9,355 (\$47,874)
comprehensive income (loss)

Year Ended December 31, 2017

(28)EARNINGS PER SHARE

Year Ended December 31
Item 2018 2017
Net income \$605,120 \$657,459
Weighted average shares outstanding 250,930 250,930
(in thousands)
Basic earnings per share (after tax) \$2.41 \$2.62
Net income \$605,120 \$657,459
Effect of potential dilutive ordinary shares - -
Net income used in computation of diluted \$605,120 \$657,459
earning per share
Weighted average shares outstanding \$250,930 \$250,930
(in thousands)
Impact on employees' compensation (Note) 517 437
Weighted average number of ordinary shares \$251,447 \$251,367
outstanding after dilution (in thousands)
Diluted earning per share (after tax) \$2.41 \$2.62

(Note) Since the Company offered to settle compensation paid to employees in cash or shares, the Company assumed the entire amount of the compensation would be settled in shares and the resulting potential shares were included in the weighted average number of shares outstanding used in the computation of diluted earnings per share, as the effect is dilutive. Such dilutive effect of the potential shares is included in the computation of diluted earnings per share until the number of shares to be distributed to employees is resolved in the following year.

(29)TRANSACTIONS WITH NON-CONTROLLING INTERESTS

1.Acquisition of additional interests in subsidiary 2018:

In July 2018, the Company purchased an additional 15% equity of its subsidiary, Sunon Smt Co., Ltd. in cash of \$30,827 thousand, and the shareholding ratio increased from 85% to 100%. As the above transaction did not change the control to subsidiary, the Company treats it as an equity transaction:

Sunon Smt Co., Ltd.
Carrying amount \$30,974
Payment to the non-controlling interest (30,827)
Capital surplus - differences between considerations and \$147
carrying amounts of subsidiaries acquired and disposed

2017: None.

(30)BUSINESS COMBINATIONS

The Company's board of directors approved in August 2018 to merge with Sunon Smt Co., Ltd., and the effective merge date was October 1,2018. The Company was the surviving company. The merger was approved by the Investment Commission, Ministry of Economic Affairs on October 4, 2018, and the registration was completed. The amount of assets, liabilities and investments accounted for using equity method that acquired through merger on effective merger date are as follow:

Amount
Current assets
Cash and cash equivalents \$48,256
Notes receivable 526
Accounts receivable - related parties, net 47,006
Other receivables 447
Allowance for inventory valuation and (3,962)
obsolescence losses
Current tax assets 123
Prepayments 4
Nocurrent assets
Investments accounted for using equity 158,154
mentod
Property, plant and equipment 5,814
Deferred income tax assets 679
Total assets \$257,047
Current liabilities
Accounts payable 11,864
Accounts payable - related parties 21,840
Other payables 1,705
Current tax liabilities 2,757
Provisions - current 85
Nocurrent liabilities
Deferred income tax liabilities 11,115
Net defined benefit liabilities - noncurren 3,163
Total liabilities \$52,529
Equity 204,518
Total liabilities and equity \$257,047

7. RELATED PARTY TRANSACTIONS

(1) Parent and ultimate controlling party:

The Company is the ultimate controlling party.

(2) Related party name and category:

Related Party Name Related Party Category
Sunon Smt Co., Ltd. Subsidiary
Sunon SAS Subsidiary
Sunon INC Subsidiary
Sunon Electronic (Kunshan) Co., Ltd. Subsidiary
Sunon Electronic (Foshan) Co., Ltd. Subsidiary
Sunon Electronic (Bei Hai) Co., Ltd. Subsidiary
Guang Sheng Investment Corporation Other related parties
Shehng-Yuan Children Development and Other related parties
Adult Support Services Center
Yo Yuan Investment Corporation Other related parties

(3) Significant transactions with related parties:

A. Sales:

December 31
Related Party Category 2018 2017
Subsidiaries \$1,038,710 \$1,103,321

B. Purchase:

December 31
Related Party Category 2018 2017
Subsidiaries:
Sunon Electronic (Kunshan) Co., Ltd. \$1,580,065 \$1,542,979
Sunon Electronic (Bei Hai) Co., Ltd. 1,601,026 1,329,458
Other 33,934 26,308
Total \$3,215,025 \$2,898,745

C. Contract assets: None.

D. Contract liabilities: None.

December 31
Related Party Category 2018 2017
Accounts receivable:
Subsidiaries \$347,039 \$318,011
Other receivables:
Subsidiaries
Sunon Electronic (Kunshan) Co., Ltd. \$5,474 \$10,973
Sunon Electronic (Foshan) Co., Ltd. 3,538 5,441
Other 2,230 1,182
Total \$11,242 \$17,596

E. Balance of receivables (excluding lending to related parties and contract assets):

F. Balance of payables (excluding borrowing from related parties):

December 31
Related Party Category 2018 2017
Accounts payables:
Subsidiaries
Sunon Electronic (Kunshan) Co., Ltd. \$292,973 \$362,614
Sunon Electronic (Foshan) Co., Ltd. 239,620 132,040
Sunon Electronic (Bei Hai) Co., Ltd. 494,011 284,886
Other - 39,024
Total \$1,026,604 \$818,564
Other payables:
Subsidiaries \$13,440 \$12,190
G. Prepayments: None.
H. Property transactions:
a.Purchase of property, plant and equipment
Year End December 31
Related Party Category 2018 2017
Subsidiaries \$1,687 \$4,678

b.Disposal of property, plant and equipment

Proceeds
Year End December 31
Related Party Category 2018 2017
Subsidiaries \$2,922 \$12,104
Gains
Year End December 31
Related Party Category 2018 2017
Subsidiaries \$114 \$582
I. Financing activities - lending to related parties:
a.Ending balance
Year End December 31
Related Party Category 2018 2017
Subsidiaries
Sunon SAS \$
-		 \$21,342
b.Interest income
Year End December 31
Related Party Category 2018 2017
Subsidiaries
Sunon SAS \$129 \$38
Sunon INC - 540
Total \$129 \$578
Interest rates 1.2% 1.2%-3.5%
J. Financing activities - borrowing from related parties :
December 31
Related Party Category 2018 2017
Subsidiaries USD 20,000 USD 18,000
K. Guarantee for related parties: None.
L. Others:
a.Processing fee
Year End December 31
Related Party Category 2018 2017
Subsidiaries
Sunon Electronic (Foshan) Co., Ltd. \$883,828 \$819,265
Sunon Smt Co., Ltd. 120,270 149,246
Other 102,233 117,984
Total \$1,106,331 \$1,086,495

b. Refundable deposits:

December 31
Related Party Category 2018 2017
Other related parties
Guang Sheng Investment Corporation \$26 \$446
c.
Advance receipts:
December 31
Related Party Category 2018 2017
Subsidiaries \$
-		 \$150
d.
Guarantee deposits:		 December 31
Related Party Category 2018 2017
Other related parties \$55 \$55
e.
Miscellaneous income:		 Year Ended December 31
Related Party Category 2018 2017
Subsidiaries
Sunon Electronic (Kunshan) Co., Ltd. \$13,401 \$12,196
Other 20,128 12,220
Other related parties 194 181
Total \$33,723 \$24,597
f.
Miscellaneous expenses:		 Year Ended December 31
Related Party Category 2018 2017
Subsidiaries
Sunon SAS \$48,499 \$45,332
Sunon INC 28,290 22,295
Others 1,814 2,902
Other related parties 1,756 2,356
Total \$80,359 \$72,885

(4) Key management compensation

Year Ended December 31
Item 2018 2017
Salaries and other short-term employee benefits \$35,791 \$35,765
Post-employment benefits - -
Other long-term employee benefits - -
Termination benefits - -
Share-based payments - -
Total \$35,791 \$35,765

8. PLEDGED ASSETS

December 31
Item 2018 2017
Property, plant and equipment (net) \$496,858 \$496,858

9. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED CONTRACT COMMITMENTS

  • (1) As of December 31, 2018 and 2017, the Company issued guarantee notes for bank loans amounting to \$2,822,185 thousand and \$2,705,908 thousand, respectively.
  • (2) Commitments and contingency as of December 31, 2018 and 2017 consisted of the following:
December 31
Item 2018 2017
L/C Amount USD 520 USD 1,401
NTD 1,484

(3) As of December 31, 2018 and 2017, the note endorsement for material purchase were as follows:

(In thousands)
December 31
Item 2018 2017
USD \$1,979 \$1,409
NTD 1,289 3,896

(4) As of December 31, 2018 and 2017, the Company endorsed guarantees for others. Please refer to Note 13 for the information.

(5) ADDA Corporation manufactured fan products, which was suspeted infringing the Company's new patents. The related lawsuit details were as follows:

The ADDA Corporation manufactured fan products, which was suspeted infringing the Company's new patents for No. I381559, No. I384723 and No. I389429. The Company filed a lawsuit seeking for infringement obviation and requesting compensation from that company and its related parties. However, the Court dismissed the lawsuit. The Company believe that the use of the judgment has been violated and has appealed against the judgment. At present, the Intellectual Property Court is still in the process of judgement.

10. SIGNIFICANT DISASTER LOSS: NONE.

11. SIGNIFICANT SUBSEQUENT EVENTS: NONE.

12. OTHERS

(1) Capital risk management

The Company should maintain an adequate capital structure to enable the expansion and enhancement of equipments. Therefore, the Company manages its capital in a manner to ensure that it has sufficient and necessary financial resources to fund its working capital needs, capital asset purchases and debt service requirements associated with its existing operations over the next 12 months.

(2) Financial instruments

A. Financial risk of financial instruments

Financial risk management policies

The Company's activities expose it to a variety of financial risks: market risk (including foreign exchange risk, interest rate risk and price risk), credit risk and liquidity risk. The Company's overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Company's financial position and financial performance.

The plans for material treasury activities are reviewed by board of directors in accordance with procedures required by relevant regulations or internal controls. During the implementation of such plans, the Company Treasury function must comply with certain treasury procedures that provide guiding principles for overall financial risk management and segregation of duties.

Significant financial risks and degrees of financial risks

  • a. Market risk
  • (a) Foreign exchange rate risk

The Company's functional currency is New Taiwan dollars. Many of the Company's operating activities are denominated in foreign currencies. Consequently, the Company is exposed to foreign currency risk. To protect against reductions in value and the volatility of future cash flows caused by changes in foreign exchange rates, the Company raises loans denominated in foreign currency and derivative financial instruments to hedge the currency exposure. These instruments help to reduce, but do not eliminate, the impact of foreign currency exchange rate movements. The net investment in foreign operation is strategic investment. Therefore, the Company does no hedge for it.

December 31, 2018
Sensitivity Analysis
Foreign Exchange Carrying Value Profit and
Currency Rate (NTD) Variation Loss Impact Equity Impact
Financial assets
Monetary item
USD:NTD 68,377 30.7150 2,100,202 increase 1% 21,002 -
EUR:NTD 8,325 35.2000 293,049 increase 1% 2,930 -
JPY:NTD 24,888 0.2782 6,924 increase 1% 69 -
RMB:NTD 447 4.4753 2,000 increase 1% 20 -
Investments
accounted
for using
equity method
USD:NTD 40,098 30.7150 1,231,595 increase 1% - 12,316
EUR:NTD 1,800 35.2000 63,347 increase 1% - 633
RMB:NTD 310,969 4.4753 1,391,680 increase 1% - 13,917
Financial liabilities
Monetary item
USD:NTD 65,606 30.7150 2,015,087 increase 1% (20,151) -
EUR:NTD 217 35.2000 7,636 increase 1% (76) -
JPY:NTD 146 0.2782 41 increase 1% - -

(b) Foreign currency risk and sensitivity analysis

December 31, 2017
Sensitivity Analysis
Foreign Exchange Carrying Value Profit and
Currency Rate (NTD) Variation Loss Impact Equity Impact
Financial assets
Monetary item
USD:NTD 64,763 29.7600 1,927,335 increase 1% 19,273 -
EUR:NTD 7,839 35.5700 278,818 increase 1% 2,788 -
JPY:NTD 32,000 0.2642 8,454 increase 1% 85 -
RMB:NTD 696 4.5545 3,169 increase 1% 32 -
Investments
accounted
for using
equity method
USD:NTD 39,043 29.7600 1,161,912 increase 1% - 11,619
EUR:NTD 1,718 35.5700 61,102 increase 1% - 611
RMB:NTD 260,121 4.5545 1,184,719 increase 1% - 11,847
Financial liabilities
Monetary item
USD:NTD 55,858 29.7600 1,662,343 increase 1% (16,623) -
EUR:NTD 386 35.5700 13,744 increase 1% (137) -
JPY:NTD 350 0.2642 92 increase 1% (1) -

When New Taiwan dollar appreciates and other variation factors stay unchanged, there will be the same but opposite amount of influence as of December 31, 2018 and 2017.

Year Ended December 31, 2018
Foreign Exchange Gain (Loss)
Foreign Currency
(In thousands) Exchange Rate Carrying Value
- 30.1750 (4,310)
- 35.5900 1,805
- 4.5599 (73)
- 30.1750 4,306
- 35.5900 (3)

The details of unrealized exchange gain (loss) for montary items due to material exchange rate fluctuation were as follow:

Year Ended December 31, 2017

Foreign Exchange Gain (Loss)
Foreign Currency
(In thousands) Exchange Rate Carrying Value
Item
Financial Assets
Monetary Item
USD: NTD - 30.4100 (18,417)
EUR: NTD - 34.4000 1,996
RMB: NTD - 4.5040 (111)
Financial Liabilities
Monetary Item
USD: NTD - 30.4100 30,437
EUR: NTD - 34.4000 12

b. Price risk

The Company does not hold financial instrument which measured by fair value.

c. Interest rate risk

The carrying amount of the financial assets and liabilities that exposed interest rate risk as reporting date was as follow:

Carrying Value
Item December 31, 2018 December 31, 2017
Fair value interest rate risk:
Financial assets \$ - \$21,342
Financial liabilities (4,817) -
Net (\$4,817) \$21,342
Cash flow interest rate risk:
Financial assets \$446,653 \$421,477
Financial liabilities (730,000) (730,000)
Net (\$283,347) (\$308,523)

(a) Sensitivity analysis of fair value interest rate risk

The Company does not classify any fixed-rate instruments as financial assets at fair value through profit or loss and financial assets at fair value through other comprehensive income. In addition, the Company does not designate derivatives (interest rate swap) as hedge instruments under hedge accounting. Therefore, the change of interest rate at reporting date does not have influence on net income and other comprehensive income.

(b) Sensitivity analysis of cash flow interest rate risk

The Company's financial instruments with variable interest rate are those with floating-rate. If interest rate increases 1%, the net income will decerase \$2,833 thousand and \$3,085 thousand for the years ended December 31, 2018 and 2017, respectively.

B. Credit risk

Credit risk is the risk that counterparty will not meet its obligations under a contract leading to a financial loss to the Company. The Company is exposed to credit risk from operating activities, primarily accounts receivables, and from investing activities, primarily deposit and other financial instruments. Credit risk is managed separately for business related and financial related exposures.

a. Business related credit risk

In order to maintain the credit quality of accounts receivables, the Company has established procedures to monitor and limit exposure to credit risk on trade receivables. Credit evaluation is performed in the consideration of the relevant factors which may affects the customer's paying ability such as financial condition , external and internal credit scoring, historical experience, and economic conditions.

b. Financial credit risk

The Company's exposure to financial credit risk which pertained to bank deposits and other financial instruments were evaluated and monitored by Company Treasury function. The Company only deals with creditworthy counterparties, banks, and goverment so that no significant credit risk was identified. In addition, the Company has no financial assets at amortized and investments in debt instruments at fair value through other comprehensive income.

(a) Credit concentration risk:

As of December 31, 2018 and 2017, the Company's ten largest customers accounted for 47.24% and 53.35% of accounts receivable, respectively. The Company believes the concentration of credit risk is insignificant for the remaining accounts receivable. The Company continuously evaluated customers' financial situation. To reduce major credit risk, the Company bought credit guarantee insurance, and asked customers to make payment in advance.

(b) Measured in expected credit loss - 2018

  • (i) Account receivables adopts a simplified approach, please prefer to Note 6(3).
  • (ii) Identification basis for whether credit risk is significantly increased: None.
  • c. Details of financial effect of exposure amount:

December 31, 2018: None.

Decrease Amount of Credit Risk Maximum Exposure
Net Settlement Other Credit
December 31, 2017 Security Agreement Strengthening Total
Receivables \$130,242 \$
-		 \$443,765 \$574,007

C. Liquidity risk

a. Liquidity risk management:

The objective of liquidity risk management is to ensure the Company has sufficient liquidity to fund its business requirements of cash and cash equivalents and the unused of financing facilities associated with existing operations.

b. Financial liabilities with repayment periods:

The following table details the Company's remaining contractual maturity for its non-derivative financial liabilities with agreed repayment periods.

December 31, 2018
Item Within 1 year 1-2 years 2-5 years Over 5 years Contract Cash Flow Carrying Value
Non-derivative
Financial liabilities
Short-term loans \$510,000 \$
-		 \$
-		 \$
-		 \$510,000 \$510,000
Accounts payable 1,021,169 - - - 1,021,169 1,021,169
Accounts payable - 1,026,604 - - - 1,026,604 1,026,604
related parties
Other payables 261,760 - - - 261,760 261,760
Other payables - 13,440 - - - 13,440 13,440
related parties
Long-term loans - - 220,000 - 220,000 220,000
(Inclusive of current portion)
Obligation under 2,500 2,500 - - 5,000 4,817
capital leases
Guarantee deposits 3,177 - - - 3,177 3,177
Total \$2,838,650 \$2,500 \$220,000 \$
-		 \$3,061,150 \$3,060,967
December 31, 2017
Item Within 1 year 1-2 years 2-5 years Over 5 years Contract Cash Flow Carrying Value
Non-derivative
Financial liabilities
Short-term loans \$410,000 \$
-		 \$
-		 \$
-		 \$410,000 \$410,000
Accounts payable 920,729 - - - 920,729 920,729
December 31, 2017
Item Within 1 year 1-2 years 2-5 years Over 5 years Contract Cash Flow Carrying Value
Non-derivative
Financial liabilities
Short-term loans \$410,000 \$ - \$ - \$ - \$410,000 \$410,000
Accounts payable 920,729 - - - 920,729 920,729
Accounts payable - 818,564 - - - 818,564 818,564
related parties
Other payables 271,924 - - - 271,924 271,924
Other payables - 12,190 - - - 12,190 12,190
related parties
Long-term loans - - 320,000 - 320,000 320,000
(Inclusive of current portion)
Guarantee deposits 3,077 - - - 3,077 3,077
Total \$2,436,484 \$ - \$320,000 \$ - \$2,756,484 \$2,756,484

2. Categories of financial instruments

The carrying value of financial assets and liabilities of the Company as of December 31, 2018 and 2017 was as follow:

December 31
Financial assets 2018 2017
Financial assets measured at amortized cost
Cash and cash equivalents \$447,217 \$
-
Notes and accounts receivable 2,159,457 -
(including related parties)
Other receivables 21,080 -
Refundable deposits 2,485 -
Loans and receivables
Cash and cash equivalents - 422,062
Notes and accounts receivable - 2,052,384
(including related parties)
Other receivables - 51,824
Refundable deposits - 2,303
Financial assets carried at cost - noncurrent - 62,000
Financial liabilites
Financial liabilites measured at amortized cost
Short-term loans 510,000 410,000
Notes and accounts payable 2,047,773 1,739,293
(including related parties)
Other payables 275,200 284,114
Obligation under capital leases 4,817 -
Long-term loans 220,000 320,000
Guarantee deposits 3,177 3,077

(3) Fair value information

A. Details of the fair value of the Company's financial assets and financial liabilities not measured at fair value are provided in Note 12(3)C. Details of the fair value of the Company's investment property measured at cost are provided in Note 6(9).

B. The different levels that the inputs to valuation techniques are used to measure fair value of financial and non-financial instruments have been defined as follows: Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. A market is regarded as active where a market in which transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. The fair value of the Company's investment in listed stocks, beneficiary certificates and others is included in Level 1.

Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. The fair value of the Company's investments in government bonds, corporate bonds, financial debentures, convertible bonds, and most derivative instruments is included in Level 2.

Level 3: Unobservable inputs for the asset or liability. The fair value of the Company's investments in some derivative instruments and equity instruments without active market is included in Level 3.

C. Financial instruments that are not measured at fair value

The Company considers that the carrying amounts of financial instruments cash and cash equivalents, receivables, long-term loans and gurantee deposits that are not measured at fair value approximate their fair values.

  • D. The related information of financial and non-financial instruments measured at fair value by level: None.
  • E. The methods and assumptions the Company used to measure fair value are as follows: Valuation techniques of financial instruments valued at fair value
  • (a) The fair value of financial assets and liabilities traded in an active market is based on the quoted market prices. The quotation, which is published by the main exchange center or that which was deemed to be a public bond by the Treasury Bureau of Center Bank, is included in the fair value of the listed securities instruments and the debt instruments in active markets with open bid.

A financial instrument is regarded as the quoted price in an active market if the quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service or regulatory agency; and if those prices represent the actual and regularly occurring market transactions on an arm's length basis. Otherwise, the market is deemed to be inactive. Normally, a market is considered to be inactive when the bid ask spread is increasing; or the bid-ask spread varies significantly; or there has been a significant decline in trading volume.

(b) Except for the above-mentioned financial instruments traded in an active market, the fair value is based on the valuation techniques or the quotation from the counterparty. The fair value refers to the current fair value of the other financial instruments with similar conditions and characteristics, using a discounted cash flow analysis or other valuation techniques, such as calculations of using models (for example, applicable yield curve from Taipei Exchange, or average quoted price on interest rate of commercial paper from Reuters), based on the information acquired from the market at the balance sheet date.

When the financial instrument of the Company is not traded in an active market, the fair value is determined based on the ratio of the quoted market price of the comparative company, its book value per share and its operating situation. Also, the fair value is discounted for its lack of liquidity in the market.

F. There was no transfer between Level 1 and Level 2 for the years ended December 31, 2018 and 2017.

Financial Assets Measured
at Fair Value Through Other
Comprehensive
Item Income - Unlisted Stock
January 1, 2018 \$
-
Adjustment on initial application of IFRS 9 65,415
Acquisition -
Sale (74,400)
Recognized in profit or loss -
Recognized in comprehensive income 8,985
December 31, 2018 \$
-

G. Changes in level 3 instruments as at December 31, 2018 and 2017:

H. The Company's Finance Department is responsible for validating the fair value measurements to ensure that the valuation are in line with market conditions. The Department reviews regularly to ensure the measurement or assessment are reasonable.

  • (4) Transfer of financial assets: None.
  • (5) Offset of financial assets and liabilities: None.

13. SUPPLEMENTARY DISCLOSURES

  • (1) Significant transactions information
  • A. Financings provided: Table 1
  • B. Endorsement/guarantee provided: Table 2
  • C. Marketable securities held: Table 3
  • D. Marketable securities acquired and disposed of at costs or prices of at least NT\$300 million or 20% of the paid-in capital: Table 4
  • E. Acquisition of individual real estate properties at costs of at least NT\$300 million or 20% of the paid-in capital: None
  • F. Disposal of individual real estate properties at prices of at least NT\$300 million or 20% of the paid-in capital: None
  • G. Total purchases from or sales to related parties of at least NT\$100 million or 20% of the paid-in capital: Table 5
  • H. Receivables from related parties amounting to at least NT\$100 million or 20% of the paid-in capital: Table 6
  • I. Information about the derivative financial instruments transaction: None.
  • (2) Information on investees: Table 7
  • (3) Information on investments in Mainland China: Table 8

SUNONWEALTH ELECTRIC MACHINE INDUSTRY CO., LTD.

FINANCINGS PROVIDED

DECEMBER 31, 2018

(Amounts in Thousands of New Taiwan Dollars and Foreign Currencies)
Company's
Financing		 Financing
(Note 2)
Amount
Limits
Total		 827,874
Financing
Limits for		 Borrowing
Company
(Note 1)
Each		 413,937
Collateral Item Value -
-
Allowance
for Bad
Debt		 -
Reason for
Financing		 Operating
capital
Transaction
Amounts		 -
Nature for
Financing
(Note 3)		 2
Interest
Rate		 %
1.2
Actually
Amount
Drawn		 -
(Note 4)
Balance
Ending		 -
Balance for
Maximum
the Period		 35,200 (EUR 1,000)
Related
Party		 Yes
Statement Account
Financial		 receivables-related
Other		 parties
Counter
party		 Sunon
SAS
Financing
Company		 Machine
Sunonwealth
Electric		 Industry Co., Ltd.
No. 0

299

Note 1: Financing limits for each borrowing company:

(1) For trading partner:

Shall not be higher than the purchase or sales amount of the most recent year.

(2) For short-term financing:

Shall not exceed 10% of the company's net worth.

  • Note 2: The maximum balance of financing activities:
  • (1) For trading partner:

Shall not exceed 20% of the company's net worth

(2) For short-term financing:

Shall not exceed 20% of the company's net worth

(3) The policy for loans granted mutually between overseas subsidiaries of which the Company directly or indirectly holds 100% of their voting shares is as follows:

The maximum amount for total loan for individual enterprise shall not exceed 60% of its net worth.

  • Note 3: The code represents the nature of financing activities as follows:
  • (1) Related to trading partner is "1".
  • (2) Short-term financing is "2".

Note 4: The maximum amount was approved by the Board of Directors' meeting. 300 SUNONWEALTH ELECTRIC MACHINE INDUSTRY CO., LTD.

ENDORSEMENTS/GUARANTEES PROVIDED

DECEMBER 31, 2018

(Amounts in Thousands of New Taiwan Dollars and Foreign Currencies)
endorsements
Provision of
the party in
to		 Mainland
China		 Y Y Y
endorsements
by subsidary
Provision of
to		 company
parent		 N N N
endorsements
Provision of
by parent		 company to
subsidary		 Y Y Y
endorsement
Maximum
amount
of		 (Note 4) 2,069,686 2,069,686 2,069,686
accumulated
amount to
Ratio of
net		 worth of the
Company		 %
6.68		 %
2.23		 5.94%
Balance
secured
by		 collaterals - - -
Actual amount
drawn		 - NTD 92,145 (USD 3,000) NTD 107,840 (USD 3,511)
at December
balance
Ending		 31, 2018 NTD 276,435 (USD 9,000) NTD 92,145 (USD 3,000) NTD 245,720 (USD 8,000)
during the
Highest
balance		 period NTD 337,865 (USD 11,000) NTD 92,145 (USD 3,000) NTD 245,720 (USD 8,000)
Endorsement
for a single
entity
limit		 (Note 3) 1,241,811 1,241,811 1,241,811
Endorsees Relationship
(Note 2)		 3 3 3
Name of
endorsees		 Electronic
Sunon		 (Kunshan)
Co., Ltd		 Electronic
Sunon		 (Foshan)
Co., Ltd		 Electronic
Sunon		 (Bei Hai)
Co., Ltd
Endorsers Sunonwealth
Electric		 Industry Co.,
Machine
Ltd.		 Sunonwealth
Electric		 Industry Co.,
Machine
Ltd.		 Sunonwealth
Electric		 Industry Co.,
Machine
Ltd.
(Note 1)
No.		 0 301 0 0

Note 1: The description of the number column is as follows:

(1) The issuer is represented in 0.

(2) The investee company is numbered sequentially from Arabic numeral 1.

Note 2: The following code represents the relationship with the Company :

  1. Trading partner.

  2. Majority owned subsidiary

  3. The Company direct and indirect owns over 50% ownership of the investee company.

  4. A subsidiary jointly owned over 90% by the Company.

  5. Guaranteed by the Company according to the construction contract.

  6. An investee company. The guarantees were provided based on the Company's proportionate share in the investee company.

  7. Joint and several guaranteed by the Company according to the pre-contruction contract under Consumer protection Act.

Note 3: Endorsements/guarantees provided by the Company to a single enterprise and a single foreign affiliate shall not exceed 20% and 30% of the Company's net worth, respectively.

Note 4: The maximum amount of the endorsements/guarantees provided by the Company shall not exceed 50% of the Company's net worth.

SUNONWEALTH ELECTRIC MACHINE INDUSTRY CO., LTD.

MARKETABLE SECURITIES HELD

DECEMBER 31, 2018

Remarks
Fair value 23,164 84,667
(Amounts in Thousands of New Taiwan Dollars) Percentage of
ownership		 - -
Ending balance Book value 23,164 84,667
(in thousands)
Number of
shares		 - -
General ledger
account		 Financial assets at fair value
through profit or loss		 Financial assets at fair value
through profit or loss
Relationship with the issuer None None
Type and name of securities China Resources Yuanda Fund
- Common stock		 China Resources Yuanda Fund
- Common stock
Investor (Foshan) Co., Ltd.
Sunon Electronic		 (Bei Hai) Co., Ltd.
Sunon Electronic
303

SUNONWEALTH ELECTRIC MACHINE INDUSTRY CO., LTD.

MARKETABLE SECURITIES ACQUIRED AND DISPOSED OF AT COSTS OR PRICES OF AT LEAST

NT\$300 MILLION OR 20% OF THE PAID-IN CAPITAL

DECEMBER 31, 2018

Ending Balance Amount
Shares
Gain (loss)
on disposal
Disposal Book
value
Selling
price
Shares
Addition (Note) Amount
Shares
Beginning Balance Amount
Shares
Relationship
the investor
with

(Shares in thousand; amounts in Thousands of New Taiwan Dollars)

Marketable Beginning Balance Addition (Note) Disposal Ending Balance
Company
Name		 Securities
Type and
Name		 General ledger
account		 Counter-party Relationship
the investor
with		 Shares Amount Shares Amount Shares Selling
price		 Book
value		 Gain (loss)
on disposal		 Shares Amount
Electronic
Sunon		 Resources
China		 Financial Resources
China		 None - 92,311 - 159,227 - 231,643 228,374 3,269 - 23,164
(Foshan)
Co., Ltd.		 Yuanda Fund
- Common
stock		 value through
profit or loss
assets at fair		 Yuanda Fund
Management
Co., Ltd.		 MB 20,268)
(R		 MB 34,991)
(R		 MB 50,800)
(R		 MB 50,083)
(R		 MB 717)
(R		 MB 5,176)
(R
Electronic
Sunon
304		 Resources
China		 assets at fair
Financial		 Resources
China		 None - 136,654 - 219,306 - 273,594 271,293 2,301 - 84,667
(Bei Hai)
Co., Ltd.		 Yuanda Fund
- Common
stock		 value through
profit or loss		 Yuanda Fund
Management		 MB 30,004)
(R		 MB 48,410)
(R		 MB 60,000)
(R		 MB 59,495)
(R		 MB 505)
(R		 MB 18,919)
(R
Co., Ltd.

(Note): Including current purchase of \$380,296 thousand, net loss of financial assets at fair value through profit or loss of \$4 thousand and the exchange rate

impact of (\$1,767) thousand.

Table 5

SUNONWEALTH ELECTRIC MACHINE INDUSTRY CO., LTD.

TOTAL PURCHASES FROM OR SALES TO RELATED PARTIES OF AT LEAST NT\$100 MILLION OR 20% OF THE PAID-IN CAPITAL

DECEMBER 31, 2018

(Amounts in Thousands of New Taiwan Dollars)

marks
Re		 % % % % % % % %
(Notes/Accounts Payable)
Or Receivable		 Total
% to		 0.02
367		 14.31 0.25
5,421		 11.70 6.85 24.12 4.73 4.40 - - months.
Balance
Ending		 (292,973) (239,620) 146,250 (494,011) 101,059 93,942 - - ment period is 2-3
mal Transaction ment
ms
Ter
Pay		 - - - - - (Note) - - - -
Abnor Unit Price - - - - - (Note) - - - - mpany, and the pay
ms
ment Ter
Pay		 months
% 3 to 4		 months
% 2 to 3		 months
% 2 to 3		 months
% 3 to 4		 months
% 2 to 3		 months
% 2 to 3		 months
% 3 to 4		 months
% 2 to 3		 months
% 2 to 3		 months
% 2 to 3		 months
% 2 to 3		 months
% 2 to 3		 months
% 2 to 3
Total
% to		 0.01 27.41 8.31 0.30 0.48 71.82 2.49 27.78 5.04 4.84 0.07 0.05 9.77
Transaction Details mount
A		 663 1,580,065 102,233 24,915 27,541 883,828 204,216 1,601,026 412,990 395,926 3,796 2,597 120,270 mpany, so it is based on the order price of the Co
Purchases/
Sales		 Sales Purchases processing fee
Outsourcing		 processing fee
Outsourcing
Purchases
Purchases
Purchases
Sales
Sales
Sales
Sales		 Purchases processing fee
Outsourcing
Nature of Relationships Indirect-subsidiary Indirect-subsidiary Indirect-subsidiary Subsidiary Subsidiary Subsidiary Note : It is the transaction that undertakes the transfer of the Co
me
mpany Na		 Related Party Sunon Electronic (Kunshan)
Co., Ltd.		 Sunon Electronic (Foshan)
Co., Ltd.		 Electronic
Sunon		 (Bei Hai)
Co., Ltd.		 Sunon INC Sunon SAS mt
Sunon S		 Co., Ltd.
Co Sunonwealth
Electric
305		 Machine Industry Co.,
Ltd.

SUNONWEALTH ELECTRIC MACHINE INDUSTRY CO., LTD.

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

DECEMBER 31, 2018

Currencies) Allowance for Bad Debts - - - -
Foreign
Dollar and		 mounts Received
A		 in Subsequent Period (Note1) 96,154 292,944 MB 65,458)
(R		 239,619 MB 53,543)
(R		 483,481 MB108,033)
(R
Taiwan
New		 Overdue Action Taken - - - -
Thousands of mount
A		 - - - -
mounts in
(A		 Turnover 4.50 5.04 4.57 5.02
Ending Balance 146,250 292,973 MB 65,464)
(R		 239,619 MB 53,543)
(R		 494,009 MB 110,386)
(R
Nature of Relationships Subsidiary mate
The ulti		 mpany
parent co		 mate
The ulti		 mpany
parent co		 mate
The ulti		 mpany
parent co
Related Party Hai)
Electronic (Bei
Co., Ltd.
Sunson		 Machine
Sunonwealth Electric		 Industry Co., Ltd. Machine
Sunonwealth Electric		 Industry Co., Ltd. Machine
Sunonwealth Electric		 Industry Co., Ltd.
me
mpany Na
Co		 Sunonwealth Electric
Machine Industry
Co., Ltd.		 Sunon Electronic (Kunshan) Co., Ltd. Sunon Electronic (Foshan) Co., Ltd.
306		 Sunon Electronic (Bei Hai) Co., Ltd.

Note: Amounts collected as of March 14, 2019.

Table 7

SUNONWEALTH ELECTRIC MACHINE INDUSTRY CO., LTD.

NAMES, LOCATIONS AND OTHER INFORMATION OF INVESTEE COMPANIES (EXCLUDING INVESTEE IN MAINLAND)

DECEMBER 31, 2018

(Amounts in Thousands of New Taiwan Dollars and Foreign Currencies)

Remarks Note 1 - - - - - -
Profits/Losses
of Investee
Share of		 14,142 15,798 239,896 12,339 3,061 (51) (79) 285,106
(Losses) of the
Net Income
Investee		 15,017 13,742 248,873 14,422 3,035 (51) (79) 294,959
Carrying
Value		 - 1,168,133 1,391,680 63,462 63,347 2,065 2,557 2,691,244
Balance as of December 31, 2018 Percentage of
Ownership		 - 100.00% 100.00% 100.00% 100.00% %
99.99		 100.00%
(In Thousands)
Shares		 - 33,880 - 150 50 800 4
December 31,
As of
2017		 26,017 1,104,025 963,411 49,140 16,127 3,428 4,470
Original Investment Amount December 31,
As of
2018		 - 1,136,933 1,035,677 49,140 16,127 3,428 4,470
Main Businesses
and Products		 and wholesales of
electronic parts
Manufacturing		 Investments Investments and sales of fans
Manufacturing		 and sales of fans
Manufacturing		 and sales of fans
Manufacturing		 and sales of fans
Manufacturing		 Total
Location Taiwan Islands
British
Virgin		 Islands
British
Virgin		 USA France Hong Kong Japan
Investee Company Sunon Smt Co., Ltd. Successful Century
Co., Ltd.		 International
BVI Sunon
Limited		 Sunon INC Sunon SAS Sunonwealth Electric
Machine Ind.(H.K.)
Ltd.		 Sunon Corporation
Company
Investor		 307 Sunonwealth
Machine
Electric		 Industry Co.,
Ltd.
Remarks Note 2 Note 3 Note 4 Note 5 - Note 6
Profits/Losses
of Investee
Share of		 4,023 6,380 NTD 4,023
(USD 134)		 NTD 6,381
(USD 213)		 NTD 13,741
(USD 455)		 NTD -7,033
MB -1,542)
(R
(Losses) of the
Net Income
Investee		 4,023 6,380 NTD 4,023
(USD 134)		 NTD 6,381
(USD 213)		 NTD 13,741
(USD 455)		 NTD -7,033
MB -1,542)
(R
Carrying
Value		 - - - - NTD1,179,940
(USD 38,416)		 -
Balance as of December 31, 2018 Percentage
Ownership
of		 - - - - 100.00% -
Thousands)
Shares
(In		 - - - - - -
December 31,
As of
2017		 32,908 72,266 (USD1,000)
NTD 32,251		 NTD 72,266
(USD 2,220)		 NTD1,104,025
(USD 33,000)		 NTD 32,994
MB 7,000)
(R
Original Investment Amount December 31,
As of
2018		 - - - - NTD1,136,276
(USD 34,000)		 -
Businesses and
Products
Main		 Investments Investments and wholesales
Manufacturing
of electronic
parts		 and wholesales
Manufacturing
of electronic
parts		 Manufacturing
and selling of
fans		 Manufacturing
and selling of
electronic
new type
parts
Location British Virgin
Islands		 Republic of
Samoa		 China China China China
Investee Company Electronics
Great Smt
Co ., Ltd.		 Liyuan Investments
Co., Ltd.		 Technology Co., Ltd.
Kunshan Guang
Ying		 Man Electronics
(Foshan) Co., Ltd.
Li		 (Kunshan) Co., Ltd.
Sunon Electronic		 Electronics Co., Ltd.
Electronic (He Fei)
[Formerly Sunon
Hefei Hua Zhun
Co., Ltd.]
Company
Investor		 Sunon Smt Co., Ltd. Electronics
Great Smt
Co ., Ltd.		 Investments Co.,
Liyuan
Ltd.
308		 Centurty Co.,
Successful
Ltd.		 (Kunshan)
Electronic
Co., Ltd.
Sunon
Remarks - - -
Profits/Losses
of Investee
Share of		 NTD 121,068 MB 26,550)
(R		 NTD128,677 MB 28,219)
(R		 NTD 2,080 (EUR 59)
(Losses) of the
Net Income
Investee		 NTD 121,068 MB 26,550)
(R		 NTD128,677 MB 28,219)
(R		 NTD 2,080 (EUR 59)
Balance as of December 31, 2018 Carrying
Value		 NTD 974,761 MB217,809)
(R		 NTD 462,409 MB103,325)
(R		 NTD 5,662 (EUR 161)
Percentage
Ownership
of		 100.00% 100.00% 100.00%
Thousands)
Shares
(In		 - - -
December 31,
As of
2017		 NTD 692,941 MB150,443)
(R		 NTD 293,115 MB63,732)
(R		 NTD 1,027 (EUR 25)
Original Investment Amount December 31,
As of
2018		 NTD 765,207 MB166,171)
(R		 NTD 293,115 MB63,732)
(R		 NTD 1,027 (EUR 25)
Main Businesses
and Products		 Manufacturing
and selling of		 fans Manufacturing
and selling of		 electronic parts
new type		 Sales of fans
Location China China Germany
Investee Company Electronic
Sunon		 (Foshan) Co., Ltd. Electronic
Sunon		 (Bei Hai) Co., Ltd. Sunon Deutschland GmbH
Company
Investor		 BVI Sunon International
Limited		 Sunon SAS

Note 1: Merged with Sunonwealth Electric Machine Industry Co., Ltd. on October 1, 2018. Sunon Smt Co., Ltd. was the dissolved company.

Note 2: Merged with Successful Century Co., Ltd. on October 1, 2018. Great Smt Electronics Co., Ltd. was the dissolved company. 309 Note 3: Merged with BVI Sunon International Limited on October 1, 2018. Liyuan Investments Co., Ltd. was the dissolved company.

Note 4: Merged with Sunon Electronic (Kunshan) Co., Ltd. on October 1, 2018. Kunshan Guang Ying Technology Co., Ltd. was the dissolved company.

Note 5: Merged with Sunon Electronic (Foshan) Co., Ltd. on October 1, 2018. Li Man Electronics (Foshan) Co., Ltd. was the dissolved company.

Note 6: The Company sold entire equity of Hefei Hua Zhun Co., Ltd. on December 3, 2018.

Table 8

SUNONWEALTH ELECTRIC MACHINE INDUSTRY CO., LTD.

INFORMATION ON INVESTMENT IN MAINLAND CHINA

DECEMBER 31, 2018

(1) Mainland Investment Information:

(Amounts in Thousands of New Taiwan Dollars and Foreign Currencies)

Accumulated Investment Flows Accumulated Carrying Accumulated
Main Businesses
and		 Total Amount of Method of
Investment		 Investment from
Outflow of		 Investment from
Outflow of		 (Losses) of the
Net Income		 Percentage of Profits/Losses
Share of		 Amount
as of		 Remittance of
Inward
Investee Company Products Paid-in Capital (Note 1) January 1, 2018
Taiwan as of		 Outflow Inflow December 31,
Taiwan as of
2018		 Company
Investee		 Ownership (Note 2) December 31,
2018		 Earnings as of
December 31,
2018
Electronic
Sunon		 Manufacturing and
selling of fans		 NTD1,136,276 NTD1,104,025 NTD32,648 NTD1,136,673 NTD 13,741 NTD 13,741 1,179,940 NTD 204,545
(Kunshan) Co., Ltd.
(Note 5)		 (USD 34,000)
(Note 5)		 (2) (USD33,000) (USD880) - (USD 33,880) (USD 455) 100% (USD 455)
(2).B		 (USD 38,416) (USD 6,792)
Electronic
Sunon		 Manufacturing and
selling of fans		 NTD 765,207 NTD 671,397 NTD72,266 NTD 743,663 NTD 121,068 NTD 121,068 974,761 NTD 385,334
(Foshan) Co., Ltd.
(Note 6)
310		 (USD 23,600)
(Note 7)		 (2) (USD20,620) (USD2,220) - (USD 22,840) (RMB 26,550) 100% (RMB 26,550)
(2).B		 (RMB 217,809) (USD 12,550)
Electronic
Sunon		 Manufacturing and
selling of new type		 NTD 293,115 NTD 293,115 NTD 293,115 NTD 128,677 NTD 128,677 462,409 NTD419,041
(Bei Hai) Co., Ltd. electronic parts (USD 10,000) (2) (USD10,000) - - (USD 10,000) (RMB 28,219) 100% (RMB 28,219)
(2).B		 (RMB 103,325) (USD 13,505)
Kunshan Guang Ying
Technology Co., Ltd.		 Manufacturing and
wholesales of		 NTD 32,648 NTD32,648 NTD 4,023 NTD 4,023
(Note 5) electronic parts - (2) 880)
(USD		 - (USD880) - (USD 134) - (USD 134)
(2).B		 - -
Li Man Electronics
(Foshan) Co., Ltd.
(Note 6)		 Manufacturing and
wholesales of
electronic parts		 - (2) NTD 72,266 - NTD72,266 - NTD 6,381 - (USD 213)
NTD 6,381		 - -
(USD 2,220) (USD2,220) (USD 213) (2).B
Hefei Hua Zhun
Electronics Co.,		 Manufacturing and
selling of new type		 NTD -7,033
Electronic (He Fei)
Ltd .[Sunon		 electronic parts - (3) Note 8)
-
(		 - - (Note 8)
-		 (RMB -1,542)
NTD -7,033		 - (RMB -1,542) - -
Co., Ltd. former]
(Note 8)		 (2).B
Accu Mainland China
mber 31, 2017
ment in
as of Dece
mulated Invest		 mission,
mounts
Authorized by
MOEA
m
ment A
ment Co
Invest
Invest		 mit on
ment
Upper Li
Invest		 Subsidiaries (including sale, liquidation,
Mainland
merger, bankruptcy, etc.) at
ment
mount of Invest
the end of the period
m Taiwan for the Disposed
mulative A
dissolution,
The Cu
fro		 merger, bankruptcy, etc.) at the end of the
m
(including sale, liquidation, dissolution,
Mainland Subsidiaries
me fro
ment Inco
period
The Repatriated Invest
The Disposed
NTD 1,136,673(USD 33,880)
NTD 743,663(USD 22,840)
NTD 293,115(USD 10,000)		 USD 34,000
USD 23,660
USD 10,000		 (Note 4) NTD 34,284 NTD 1,024,503
Gain and loss on invest
Note:		 ment are translated using average exchange rates for the year ended Dece US
mber 31, 2018 (		 D
NT
N:
Y
D 1:30.175; C
NT
D:
1:4.5599). Additions and ending balance are translated using the exchange rates as at Dece NT
D:
US
mber 31, 2018 (		 D 1:4.4753)
NT
N:
Y
D 1:30.715; C
methods are divided into the follo
ment
Note 1: The invest		 wing three types:
(1) Investing directly to the Mainland China;
(2) Reinvesting in the Mainland China through third-region co mpanies (please refer to Table 7);
311 (3) Others.
Note 2: In the current period, the invest ment profit and loss colu mn is recognized:
(1) If during incorporation ment inco
with no invest		 me or loss, it should be indicated;
(2) The basis for recognition of invest ment gains and losses divided into the follo which should be indicated:
wing three types,
A. Audited financial state ments by international accounting fir ms with accounting fir
with cooperation relationship		 ms in the Republic of China.
B. Audited financial state mpany's auditors.
ments by parent co
C. Others.

Note 3: The relevant figures in this form should be listed in New Taiwan Dollars.

mpany's
(2)The Co		 major transactions during year 2018 directly or indirectly through the third place and the mainland invested co mpany are listed as follows:
Sales/ Purchases Transaction Ter ms (Notes/Accounts Payable)
Or Receivables
mpany
Investee Co		 Sales/ Purchases mount
A		 % Price ms
ment Ter
Pay		 mparison with general
transactions
Co		 Balance
Ending		 Total
% to
Sales 663 %
0.01		 Cost based months
3-4		 Equivalent to sales price with
ordinary clients		 367 %
0.02
Electronic
Sunon		 Purchases 1,580,065 %
27.41		 Cost based months
2-3		 Equivalent to purchase price
with ordinary suppliers		 14.31
(Kunshan) Co., Ltd. processing fee
Outsourcing		 102,233 %
8.31		 margin
based on cost
Add a certain		 months
2-3		 Equivalent to pricing of other
processors		 (292,973) %
Sales 24,915 %
0.30		 Cost based months
3-4		 Equivalent to sales price with
ordinary clients		 5,421 %
0.25
Electronic
Sunon		 Purchases 27,541 %
0.48		 Cost based months
2-3		 Equivalent to purchase price
with ordinary suppliers
(Foshan) Co., Ltd. processing fee
Outsourcing		 883,828 %
71.82		 margin
based on cost
Add a certain		 months
2-3		 Equivalent to pricing of other
processors		 (239,620) %
11.70
312 Sunon Sales 204,216 %
2.49		 Cost based months
3-4		 Equivalent to sales price with
ordinary clients		 146,250 %
6.85
(Bei Hai) Co., Ltd.
Electronic		 Purchases 1,601,026 %
27.78		 mpany's order price
as the basis of pricing
According to the
co		 months
2-3		 mpany's
order price as the basis of
According to the Co
pricing		 (494,011) %
24.12
Note 4: Enterprises approved by the Ministry of Econo mic Affairs as the operational headquarters are not subject to the a mount or proportion.

Note 5: Sunon Electronic (Kunshan) Co., Ltd. merged with Kunshan Guang Ying Technology Co., Ltd. on October 1, 2018. Kunshan Guang Ying Technology Co., Ltd. was the dissolved company. The paid-in capital included Sunon Electronic (Kunshan) Co., Ltd's initial capital USD 33,000 (NTD 1,104,025) thousand and USD 1,000 (NTD 32,251) thousand obtained by merging with Kunshan Guang Ying Technology Co., Ltd. Note 6:The former subsidiary of Sunon Motor, Guanyuan Co., Ltd, which is owned by Innovation Co., Ltd. was transferred at the price of USD 1,200 thousand (refered to Company's net worth) to BVI Sunon International Limited on July 2009, which was seen as an organization restructuring. On December 16, 2009, Sunon Electronic (Foshan) Co., Ltd. merged with Sunon Electronic (Foshan) Co., Ltd. and Nanhai Guangyuan Electronic (Foshan):Co., Ltd. was the dissolved company. Sunon Electronic (Foshan) Co., Ltd. merged with Li Man Electronics (Foshan) Co., Ltd. on October 1,

2018, and Li Man Electronics (Foshan) Co., Ltd. was the dissolved company. Note 7: It included Sunon Electrics's original capital of USD 19,420 thousand, and USD 2,020 thousand obtained by merging with Sun Growth Tranding (at the purchase price of USD 1,200 thousand). The exchange rate of USD to NTD at the consolidation date is 32.32, and USD 2,220 (NTD 72,266) thousand was obtained by merging with Li Man Electronics Co., Ltd.

Note 8: It is invested by Sunon Electronic (Kunshan) Co., Ltd. In addition, the Company sold entire equity of Hefei Hua Zhun Electronics Co., Ltd. in December 2018.

14.SEGMENT INFORMATION

The Company has provided the operating segments disclosure in the consolidated financial statements.

STATEMENTS OF MAJOR ACCOUNTING ITEMS

CONTENTS

Item Statement
Index
Major accounting items in assets, liabilities and equity
Statement of cash and cash equivalents P.96
Statement of notes receivable P.97
Statement of accounts receivable P.98
Statement of receivable from related parties P.99
Statement of other receivables P.100
Statement of inventories P.101
Statement of prepayments P.102
Statement of changes in financial assets at fair value through other P.103
comprehensive income - noncurrent
Statement of changes in investments accounted for using equity method P.104
Statement of changes in property, plant and equipment Note 6(8)
Statement of changes in accumulated depreciation of property, plant and Note 6(8)
equipment
Statement of changes in investment properties Note 6(9)
Statement of changes in accumulated depreciation of investment properties Note 6(9)
Statement of changes in accumulated impairment of investment properties Note 6(9)
Statement of changes in intangible assets Note 6(10)
Statement of deferred income tax assets Note 6(26)
Statement of refundable deposits P.105
Statement of short - term loans P.106
Statement of contract liabilities - current P.107
Statement of accounts payables P.108
Statement of payables from related parties P.109
Statement of other payables Note 6(12)
Statement of provisions Note 6(13)
Statement of long-term loans and current portion of long-term loans P.110
Statement of deferred income tax liabilities Note 6(26)
Statement of guarantee deposits P.111
Major accounting items in profit or loss
Statement of net revenue P.112
Statement of cost of revenue P.113
Statement of factory overhead P.115
Statement of sales and marketing expenses P.116
Statement of general and administrative expenses P.117
Statement of research and development expenses P.118
Statement of other gains and losses Note 6(24)
Statement of finance costs Note 6(25)
Statement of labor, depreciation and amortization by function Note 6(22)

SUNONWEALTH ELECTRIC MACHINE INDUSTRY CO., LTD. STATEMENT OF CASH AND CASH EQUIVALENTS DECEMBER 31, 2018

Description Amount Remark
Petty cash \$453 NTD 80
RMB 23
USD 3
EUR 5
\$453
Checking accounts \$111
Demand deposits 81,195
Foreign deposits 336,279 USD 9,002
JPY 20,377
HKD 7
EUR 1,487
RMB 384
Time deposits 29,179 USD 950
\$446,764
\$447,217
(In Thousand of New Taiwan Dollars and Foreign Currencies)
------------------------------------------------------------ -- -- -- -- -- -- -- --
USD:NTD 1:30.715
JPY:NTD 1:0.2782
HKD:NTD 1:3.921
EUR:NTD 1:35.20
CNY:NTD 1:4.4753

SUNONWEALTH ELECTRIC MACHINE INDUSTRY CO., LTD. STATEMENT OF NOTES RECEIVABLE DECEMBER 31, 2018

(In Thousands of New Taiwan Dollars)
Description Amount Remark
Note of trade \$27,464
receivable
Note of trade 1,924
receivable
Under 5% 2,373
\$31,761
(24)
\$31,737

SUNONWEALTH ELECTRIC MACHINE INDUSTRY CO., LTD. STATEMENT OF ACCOUNTS RECEIVABLE DECEMBER 31, 2018

(In Thousands of New Taiwan Dollars)
Client Name Description Amount Remark
Company A Trade receivable \$313,405
Company B Trade receivable 98,518
Others Under 5% 1,376,863
Total \$1,788,786
Less: Allowance for (8,015)
doubtful accounts
Net \$1,780,771

SUNONWEALTH ELECTRIC MACHINE INDUSTRY CO., LTD. STATEMENT OF RECEIVABLE FROM RELATED PARTIES DECEMBER 31, 2018

(In Thousands of New Taiwan Dollars)
Client Name Description Amount Remark
Sunon SAS Trade receivable \$93,942
Sunon Electronic (Bei Hai) Trade receivable 146,250
Co., Ltd.
Sunon INC Trade receivable 101,059
Others Under 5% 5,788
Total \$347,039
Less: Allowance for -
doubtful accounts
Net \$347,039

SUNONWEALTH ELECTRIC MACHINE INDUSTRY CO., LTD. STATEMENT OF OTHER RECEIVABLES DECEMBER 31, 2018

Description Amount Remark
Sample and consumable \$8,211
sale, etc.
Business tax 1,627
\$9,838
Patent revenue \$5,474
Sample fee and
molding fee, etc.		 5,768
\$11,242
\$21,080
(In Thousands of New Taiwan Dollars)

STATEMENT OF INVENTORIES DECEMBER 31, 2018 SUNONWEALTH ELECTRIC MACHINE INDUSTRY CO., LTD.

(In Thousands of New Taiwan Dollars)
Amount
Item Description Cost Fair Value Remark
Raw materials Copper tube/slug, \$348,194 \$337,385
ICR, etc.
Supplies Solder wire, Bar tin, 8,194 8,123
Lubricant, etc.
Work in process Plastic frame, PCB, 123,794 122,924
Bobbins, etc.
Finished goods Fans, etc. 443,151 487,197
Total \$923,333 \$955,629
Less: Allowance for (53,499) -
inventory and
obsolescence losses
Net \$869,834 \$955,629

SUNONWEALTH ELECTRIC MACHINE INDUSTRY CO., LTD. STATEMENT OF PREPAYMENTS DECEMBER 31, 2018

(In Thousands of New Taiwan Dollars)

Item Description Amount Remark
Prepayment for purchase Prepayment for purchase \$50
Prepaid expenses Prepaid insurance, etc. 4,089
Payment on behalf of Payment on behalf of 684
others others, etc.
Other prepaid expenses Overpaid sales tax, etc. 9,768
Total \$14,591
FOR THE YEAR ENDED DECEMBER 31, 2018
(In Thousands of New Taiwan Dollars)
Balance, January 1, 2018 Increase Decrease Balance, December 31, 2018
Shares Shares Shares Shares Market
Item (In Thousands) Amount (In Thousands) Amount (In Thousands) Amount (In Thousands) Amount Collateral Value
Tongli Industrial Co., Ltd. - -
\$		 8,910 \$74,400 8,910 \$74,400 - -
\$		 Nil -
(Hong Kong)
Less: Accumulated impairment - - - -
Net -
\$		 \$74,400 \$74,400 -
\$

SUNONWEALTH ELECTRIC MACHINE INDUSTRY CO., LTD. STATEMENT OF CHANGES IN FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME-NONCURRENT 1.Increase in the amount of \$74,400 thousand includes IFRS 9 adjustment in the amount of \$65,415 thousand and other comprehensive income in the amount of \$8,985 thousand.

2.Decrease in the amount of \$74,400 thousand is current sale.

(In Thousands of New Taiwan Dollars)

Market Value or

Balance, January 1, 2018 Increase in Investment Decrease in Investment Balance, December 31, 22018 Net Assets Value
Names Shares Amount Shares Amount Shares Amount Shares % Amount Unit Price Total Amount Collateral Remark
Sunon Smt Co., Ltd. 9,023 \$192,812 1,592 \$45,116 10,615 \$237,928 - - -
\$		 - -
\$		 Nil
Successful Century Co., 33,000 1,113,567 880 73,926 - 19,360 33,880 100.00 1,168,133 34.83 1,180,099 Nil
Ltd.
BVI Sunon - 1,184,719 - 339,948 - 132,987 - 100.00 1,391,680 - 1,437,828 Nil
International Limited
Sunon INC 150 48,345 - 15,117 - - 150 100.00 63,462 487.19 73,078 Nil
Sunon SAS 50 61,102 - 3,061 - 816 50 100.00 63,347 1,401.74 70,087 Nil
Sunonwealth Electric 800 2,055 - 61 - 51 800 99.99 2,065 2.58 2,065 Nil
Machine Ind. (H.K.) Ltd.
Sunon Corporation 4 2,505 - 131 - 79 4 100.00 2,557 639.25 2,557 Nil
Total \$2,605,105 \$477,360 \$391,221 \$2,691,244 \$2,765,714

Note: 1.It is calculated based on the audited financial statements for the same period, except the financial statements of Sunonwealth Electric Machine Ind. (H.K.)Ltd. and Sunon Corperation. 2.Current increase of \$477,360 thousand includes \$30,827 thousand of acquisition, \$285,236 thousand of share of profits of subsidiaries, associates and joint ventures, \$2,266 thousand of exchange difference arising on translation of foreign operations, \$730 thousand of changes in unrealized inter-company gross profit, and \$147 thousand of capital surplus - differences between considerations and carrying amounts of subsidiaries acquired and disposed. In addition, \$158,154 thousand is acquisition from merger.

3.Current decrease of \$391,221 thousand includes \$130 thousand of share of loss of subsidiaries, associates and joint ventures, \$139,540 thousand of cash dividends received, \$45,855 thousand of exchange difference arising on translation of foreign operations, and \$659 thousand of changes in unrealized inter-company gross profit. In addition, \$205,037 thousand comes

from the simplified merger with the equity method investee.

4.The cost and valuation for using equity method are listed below:

Share of Profit Exchange
or Loss of Differences
Subsidiaries, Arising
associates and Transalation of
Investee Company Cost joint ventures Foreign Operations Others Total
Successful Century Co., Ltd. \$1,136,933 \$1,381 (\$68,643) \$98,462 \$1,168,133
BVI Sunon International Limited 1,035,677 367,747 (90,386) 78,642 1,391,680
Sunon INC 49,140 41,785 (5,278) (22,185) 63,462
Sunon SAS 16,127 69,999 (10,878) (11,901) 63,347
Sunonwealth Electric Machine Ind. 3,428 29 (561) (831) 2,065
(H.K.) Ltd.
Sunon Corporation 4,470 (4,805) (520) 3,412 2,557
Total \$2,245,775 \$476,136 (\$176,266) \$145,599 \$2,691,244

SUNONWEALTH ELECTRIC MACHINE INDUSTRY CO., LTD. STATEMENT OF REFUNDABLE DEPOSITS DECEMBER 31, 2018

(In Thousands of New Taiwan Dollars)
Item Description Amount Remark
Refundable deposits Renting builing and
company car, etc.		 \$2,485
Total \$2,485
w Tai
Ne
(In Thousands of		 wan Dollars)
Creditor Description Beginning Balance Contract Period ments
mit
m
Loan Co		 Collateral mark
Re
Ai Branch
First Bank - Po-		 Unsecured loans \$50,000 20181228-20190125 Note)
D 100,000 (
NT		 Nil
mport Bank of the
The Export - I		 Unsecured loans 50,000 20180126-20190126 D 100,000
NT		 Nil
Kaoshsiung Branch
Republic of China -
Hsing Branch
Hsin
Mega Bank -		 Unsecured loans 40,000 20180808-20190204 Note)
D 250,000 (
NT		 Nil
Kaohsiung Branch
C -
HSB		 Unsecured loans 80,000 20181128-20190527 Note)
D 3,500 (
US		 Nil
N Bank - Dong Ling Branch
A
N
A
U
H		 Unsecured loans 50,000 20181214-20190111 Note)
D 90,000 (
NT		 Nil
N Bank - Chihsien Branck
U
E, S		 Unsecured loans 50,000 20181207-20190104 Note)
D 100,000 (
NT		 Nil
Kaoshsiung Branch
GI Bank -
K		 Unsecured loans 90,000 20180809-20190201 Note)
D 160,000 (
NT		 Nil
Taishin Internation Bank - Linya Branch Unsecured loans 50,000 20181228-20190128 Note)
D 300,000 (
NT		 Nil
D 1,500
US
wan - Chienchen Branch
Bank of Tai		 Unsecured loans 50,000 20181228-20190315 Note)
D 200,000 (
NT		 Nil
D 650
US
Total \$510,000
%)
Range of Interest Rates (		 %
%-1.15
0.90

326

(Note): It is comprehensive commitments.

SUNONWEALTH ELECTRIC MACHINE INDUSTRY CO., LTD. STATEMENT OF SHORT-TERM LOANS DECEMBER 31, 2018

SUNONWEALTH ELECTRIC MACHINE INDUSTRY CO., LTD. STATEMENT OF CONTRACT LIABILITIES - CURRENT DECEMBER 31, 2018

(In Thousands of New Taiwan Dollars)
Client Name Description Amount Remark
Company A Unearned sales revenue \$3,653
Company B Unearned sales revenue 708
Company C Unearned sales revenue 611
Company D Unearned sales revenue 595
Others Under 5% 5,178
Total \$10,745

SUNONWEALTH ELECTRIC MACHINE INDUSTRY CO., LTD. STATEMENT OF ACCOUNTS PAYABLES DECEMBER 31, 2018

(In Thousands of New Taiwan Dollars)
Vendor Name Description Amount Remark
Company A Trade payable \$65,706
Company B Trade payable 66,869
Company C
Others Under 5% 888,372
Subtotal \$1,020,947
Notes payable Accrued expenses \$222
Total \$1,021,169

SUNONWEALTH ELECTRIC MACHINE INDUSTRY CO., LTD. STATEMENT OF PAYABLES FROM RELATED PARTIES DECEMBER 31, 2018

(In Thousands of New Taiwan Dollars)

Vendor Name Description Amount Remark
Sunon Electronic (Kushan) Co., Ltd. Trade payable and \$292,973
processing fee
Sunon Electronic (Bei Hai) Co., Ltd. Trade payable 494,011
Sunon Electronic (Foshan) Co., Ltd. Trade payable and 239,620
processing fee
Total \$1,026,604
Ne
(In Thousands of		 Dollars)
wan
w Tai
Range of
Credior Description mount
A		 Contract Period interest rate Collateral
Kaohsiung Branch
CTBS Bank -		 Guarantee Loan \$220,000 20161014-20211014 %
1.34		 Land
Total \$220,000
m loans
Current portion of long-ter		 -
Year
Balance, End of		 \$220,000

SUNONWEALTH ELECTRIC MACHINE INDUSTRY CO., LTD. STATEMENT OF LONG-TERM LOANS AND CURRENT PORTION OF LONG-TERM LOANS

DECEMBER 31, 2018

330

SUNONWEALTH ELECTRIC MACHINE INDUSTRY CO., LTD. STATEMENT OF GUARANTEE DEPOSITS DECEMBER 31, 2018

(In Thousands of New Taiwan Dollars)
Item Description Amount Remark
Guaratee Deposits Renting building, etc. \$3,177
Total \$3,177

SUNONWEALTH ELECTRIC MACHINE INDUSTRY CO., LTD. STATEMENT OF NET REVENUE FOR THE YEAR ENDED DECEMBER 31, 2018

(In Thousands of New Taiwan Dollars)
Item Quantity (in thousands) Amount Remark
DC fan 84,555 \$6,945,217
AC fan 5,438 714,391
Sales of raw materials, etc. 599,199
Total renvenue \$8,258,807
Sales return 130 (11,940)
Sales discount (60,337)
Nte revenue \$8,186,530

SUNONWEALTH ELECTRIC MACHINE INDUSTRY CO., LTD. STATEMENT OF COST OF REVENUE FOR THE YEAR ENDED DECEMBER 31, 2018

(In Thousands of New Taiwan Dollars)
Item Amount
Raw materials at January 1, 2018 \$282,445
Add: Raw materials purchased 2,273,082
Less: Raw materials at December 31, 2018 (348,194)
Raw materials sold (185,970)
Loss on physical count (1,354)
Transfer to operating expenses (18,625)
Scrapped raw materials (12,747)
Others (584)
Raw materials used \$1,988,053
Supplies at January 1, 2018 \$6,875
Add: Supplies purchased 61,256
Gain on physical count 51
Less: Supplies at Dcecmber 31, 2018 (8,194)
Supplies sold (2,270)
Transfer to operating expenses (37,223)
Scrapped supplies (62)
Supplies used \$20,433
Direct labor 17,061
Factory overhead 90,653
Manufacturing cost \$2,116,200
Add: Work in process at January 1 2018 91,127
Work in process purchased 237,469
Outsource processing 1,230,682
Less: Work in process at December 31, 2018 (123,794)
Work in process sold (390,696)
Loss on physical count (836)
Transfer to operating expenses (9,483)
Scrapped work in process (285)
Cost of finished goods \$3,150,384
Add: Finished goods at January 1 2018 410,572
Finished goods purchased 3,540,781
Less: Finished goods at December 31, 2018 (443,151)
Transfer to operating expenses (1,697)
Scrapped finished goods (322)
Cost of finished goods sold \$6,656,567
Item Amount
Adjustment of cost
Impairment loss on inventories 19,389
Loss on physical count 2,139
Others (336,834)
Unallocated factory overhead 31,669
Cost of product \$6,372,930
Work in process sold 390,696
Raw material sold 185,970
Supplies sold 2,270
Total cost of revenue \$6,951,866

SUNONWEALTH ELECTRIC MACHINE INDUSTRY CO., LTD. STATEMENT OF FACTORY OVERHEAD FOR THE YEAR ENDED DECEMBER 31, 2018

Item Amount
Indirect labor \$18,352
Depreciation expense 5,278
Comsumables 52,774
Processing expense 26,450
Import expense 5,104
Others (Note) 14,364
Unallocated manufacturing expense (31,669)
Total \$90,653

(In Thousands of New Taiwan Dollars)

SUNONWEALTH ELECTRIC MACHINE INDUSTRY CO., LTD. STATEMENT OF SALES AND MARKETING EXPENSES FOR THE YEAR ENDED DECEMBER 31, 2018

Item Amount
Salary and wages \$96,670
Commission 89,687
Others (Note) 82,376
Total \$268,733

(In Thousands of New Taiwan Dollars)

SUNONWEALTH ELECTRIC MACHINE INDUSTRY CO., LTD. STATEMENT OF GERNERAL AND ADMINISTRATIVE EXPENSES FOR THE YEAR ENDED DECEMBER 31, 2018

Item Amount
Salary and wages \$154,782
Professional service fees 31,652
Others (Note) 77,340
Total \$263,774

(In Thousands of New Taiwan Dollars)

SUNONWEALTH ELECTRIC MACHINE INDUSTRY CO., LTD. STATEMENT OF RESEARCH AND DEVELOPMENT EXPENSES FOR THE YEAR ENDED DECEMBER 31, 2018

(In Thousands of New Taiwan Dollars)

Item Amount
Salary and wages \$199,515
Research and derelopment expense 64,704
Depreciation expense 22,288
Others (Note) 129,684
Total \$416,191

VI. Impact on the Company's financial status due to financial difficulties experienced by the company and its affiliated companies in the most recent year and as of the publication date of the Annual Report None.

G. Review, analysis, and risks of financial conditions and performance

I. Financial summary

Main reasons and impact of any material change in the Company's assets, liabilities, or shareholders' equity during the past two years; in the case of material impact, describe future response plans

Unit: thousand NT\$; %
Year December 31, December 31, Change Percentage of
Item 2017 2018 (amount) change (%)
Current assets 6,256,831 6,378,539 121,708 1.95
Property, plant and
equipment		 2,293,868 2,377,611 83,743 3.65
Intangible assets 21,988 23,506 1,518 6.90
Non-current assets 2,556,638 2,593,017 36,379 1.42
Total assets 8,813,469 8,971,556 158,087 1.79
Current liabilities 4,199,784 4,477,209 277,425 6.61
Non-current liabilities 439,636 354,976 -84,660 -19.26
Total liabilities 4,639,420 4,832,185 192,765 4.15
Capital stock 2,509,297 2,509,297 0 0
Capital surplus 365,706 366,903 1,197 0.33
Retained earnings
(Note)		 1,392,319 1,427,880 35,561 2.55
Other equity -127,111 -164,709 37,598 29.58
Total equity 4,174,049 4,139,371 -34,678 -0.83

Where the change is 20%, the reasons shall be analyzed as follows:

  1. The decrease in other equity was due to the disposal of equity instruments in other comprehensive income measured at fair value through profit and loss which was converted into decreased undistributed earnings.

Note: Retained earnings include statutory surplus reserves, special reserve, and undistributed earnings.

II. Financial performance

Indicate the main reasons for any material changes to the operating income, net profit, and net profit before tax as well as the expected sales and its basis, and the possible impact on the Company's future financial operations and response plans

Unit: thousand NT\$; %
Year
Item		 2017 2018 Change
(amount)		 Percentage of
change (%)
Net revenue 10,946,728 11,965,298 1,018, 570 9.30
Operating costs 8,492,264 9,563,763 1,071,499 12.62
Gross profit 2,454,464 2,401,535 -52,929 -2.16
Operating expenses 1,698,560 1,799,986 101,426 5.97
Operating net profit 755,904 601,549 -154,355 -20.42
Non-operating income and
expenses		 86,181 182,276 96,095 111.50
Net income before tax 842,085 783,825 -58,260 -6.92
Income tax expenses 178,669 176,142 -2,527 -1.41
Current period net profit 663,416 607,683 -55,733 -8.40
Other comprehensive
income		 -48,262 -32,557 15,705 32.54
Total comprehensive income
of the period		 615,154 575,126 -40,028 -6.51
Comprehensive income
attributable to
net profit of owners of parent
company		 609,585 572,736 -36,849 -6.04

(I) Main reasons and impact of any material change in the company's operating income, net profit, and net profit before tax in the last two years

Analysis and description for items with changes of over 20% are as follows:

  1. The decrease in net operating profit was caused by the increase in operating costs and expenses which decreased net operating profits.

  2. The increase in non-operating income and expenses was attributed to an increase in foreign exchange gains and the gains from the disposal of subsidiaries.

  3. The increase in other comprehensive income was caused by the decrease in the foreign exchange differences in the conversion of financial statements of foreign operations.

(II) The expected sales and its basis, and the possible impact on the Company's future financial operations

For more information on expected sales and its basis, please refer to the Letter to Shareholders on page 1 for an overview of the Business Plan of this year. If the expected sales volume is reached, it would generate positive effects on the Company's finance and business.

III. Cash flow

(I) Analysis and explanation on the change in cash flow in the most recent year and improvement plans for insufficient liquidity

Unit: %
Item Year 2017 2018 Change (%)
Cash flow ratio 19.00 17.12 9.89
Cash flow adequacy ratio 77.30 77.46 0.21
Cash reinvestment ratio 4.61 2.94 -36.23
The analyses for items with changes of over 20% are as follows:
The decrease in cash reinvestment ratio was caused by the increase of dividends and

equipment in 2017 than the previous year.

(II) Cash flow analysis for the coming year

Unit: thousand NT\$

Cash
balance,
beginning		 Cash flow
from
operating
activities		 Cash flow
from
investing
activities		 Cash flow
from
financing
activities		 Estimated
cash surplus
(deficit)		 Investmen
t plans		 Estimated remedial
measures for cash
inadequacy
Financing
plans
1,144,973 1,000,000 -400,000 -500,000 1,244,973 - -

  1. The estimated cash flow changes in 2019 are analyzed as follows:

  2. (1) Operating activities: The Company expects operating revenue for products and net income after tax to grow and net changes in operating assets and liabilities related to business activities to generate cash inflow. We expect net cash inflow of approximately NT\$1,000,000 thousand.

  3. (2) Investing activities: The Company shall continue to invest in automation equipment and update and maintain certain production facilities and a cash outflow of approximately NT\$400,000 thousand.
  4. (3) Financing activities: The Company expects to pay cash dividends and remuneration for Directors and Supervisors, and repay loans which will lead to a cash outflow of approximately NT\$500,000 thousand.
    1. The expected cash balance is NT\$1,244,973 thousand and there are no instances of cash inadequacy.

IV. The effects that significant capital expenditures have on financial operations in the recent year

In response to long-term production and sales development, the Company acquired two properties on No. 793 and NO. 794, Ren'ai Section, Qianzhen District, Kaohsiung City based on the resolution of the meeting of the Board of Directors on April 12, 2016. The area totals 6,934 square meters and it shall be used for expanding the R&D laboratory and production. The acquisition price totaled NT\$486,626,960. To facilitate adequate use of financial leverage, we planned to use medium to long-term loans as the source of funding. Based on estimates on maximum possible liabilities, the Company's debt ratio will increase from 34.1% to 39.1% (data provided by the Company and not yet audited by CPAs). The financial structure would remain robust. After the completion of the expanded new plants, the Company shall use the automatic production line for the production of high-end products and micro cooling products which will have positive effects on businesses.

Cumulative
investment
amount
(NT\$1,000)		 Investment policy Main reason for
profits or losses		 Improvement plans
Development of Recognized Continue to develop niche new
cooling module NT\$13,741 thousand products, intensify vertical
Sunon products and in profits from integration, and cooperate with
Electronic USD cooperation with investment in 2018 customers in passive cooling
(Kunshan) 34,000 laptop market as customers components.
Co., Ltd. customers launched new
products and
improved revenue.
Provide services Recognized Continue to increase production
to customers in NT\$121,068 efficiency and use automation in
Sunon the Pearl Delta thousand in profits process to improve product
Electronic USD region and build a from investment in design and reduce demand for
(Foshan) Co., 23,660 production base 2018 as productivity human labor. We shall change
Ltd. for direct exports increased and the source and structure of
to customers. profitability human labor to lower costs and
improved. maintain production quality.
Disperse Recognized Expand production scale and
investment risks NT\$128,677 increase cost advantages.
and serve as the thousand in profits
Sunon backup or from investment in
Electronic USD alternate base for 2018 due to the
(Bei Hai) Co., 10,000 the production success of the
Ltd. base in the Pearl economy of scale
Delta area. and increase in
production
efficiency.

V. Investment policy in the past year, profit/loss analysis, improvement plan, and investment plan for the coming year

Note: Cumulative investment amount that exceed 5% of paid-up capital.

The Company's investment plans in Mainland China that have been approved by the Investment Commission have been implemented and we have completed the production and sales plans in Mainland China. There are no material investment plans in the next year.

VI. Risk management and evaluation

  • (I) Impact of interest rate and exchange rate changes and inflation on Company's profit and response measures
    1. Changes in interest rates and response measures

The United States' interest rate increases in 2018 has widened the interest rate gap between the USD and NTD and increased USD indexes which increased interest rate and exchange rate risks from the previous year. The increase in interest rate will continue to increase the cost of loans for the Company's operating funds. To continue to reduce interest rate risks and lower the cost of capital, the Company has adopted measures to reduce loans in USD and use NTD loans instead to control capital costs and reduce the impact of interest rate changes on income. The Company alternates between loans in NTD, USD, and EUR to reduce interest rates. When long-term changes are expected on the interest rate market, we use interest rate exchange contracts to lock in long-term interest rates and avoid material impact caused by interest rate fluctuations.

  1. Impact of interest rates changes and response measures

The appreciation of NTD causes reduces revenue and margins. The appreciation of RMB increases operating costs and decreases margins. The Company prioritizes natural hedging policies to reduce the risks of exchange rate fluctuations. We create USD liability positions for purchases denominated in USD to automatically offset USD foreigncurrency asset positions generated from sales. The natural hedging policy minimizes losses from exchange rates in the event of material foreign exchange rate fluctuations. However, we remain affected by customers' payment customs on the income end for currencies that can be used. We are affected by the place of occurrence of the costs and expenditures and we thus remain exposed to USD net assets and RMB net liabilities positions and we must continue to reduce our exposure to risks associated with these two currencies. In addition, the Company's policies also permit operations in foreign exchange derivatives to reduce risks. Where necessary, the Company can respond accordingly.

  1. Impact of inflation and response measures

Although consumer prices have increased moderately, they have not caused issues of inflation. Overall, inflation has not caused significant impact on the Company's operations and profitability.

(II) Policies, main causes of gain or loss and future response measures with respect to highrisk, high-leveraged investments, lending or endorsement guarantees, and derivatives transactions:

The Company strictly prohibits high-risk investment and high-risk operations in derivatives. Based on the transactions conducted in recent years, the investment products consisted only of investments in repurchase bills with low risks. Transactions were in compliance with the Company's policies and resulted in profits. The Company's derivatives only involved foreign exchange DF and NDF investments with low risks. Transactions were in compliance with the Company's policies and resulted in profits. The Company has not loaned funds to non-wholly-owned affiliated enterprise and the Company only provided loans within the credit limit of US\$1 million to assist the European subsidiary company Sunon SAS in short-term capital requirements for business expansion. In addition, the Company assisted the sub-subsidiaries companies in China, Sunon Electronic (Kunshan) Co., Ltd., Sunon Electronic (Foshan) Co., Ltd., and Sunon Electronic (Bei Hai) Co., Ltd. in obtaining bank loan credits by providing endorsement and guarantee. As the two subsubsidiaries are both wholly-controlled companies, there are no uncontrollable risks. The Company shall maintain a low-risk operation policy to respond to future risks.

Loans provided for others, endorsements and guarantees, and transactions in derivatives are processed in accordance with the Company's "Procedures for Loaning of Funds to Others", "Procedures for Making Endorsements and Guarantees", and "Procedures for Acquisition or Disposal of Assets".

(III) Future R&D programs and expected R&D investment

Term R&D Program Content Expected R&D
expenditures
1. Low-noise and low-vibration DC fan product Annual R&D
expenses will be 5%-
development 8% of business
2. Durable and energy-efficient fan and module revenue
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
Short-term and photography systems
plans 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. Development of EC FHP motors for heat
pumps
15. Industrial/commercial EC Axial Fan & EC
Blowers
16. Development of ventilation equipment and
17. products for household use
Development of ventilation equipment and
products for commercial spaces
18. Development of large-scale ventilation
equipment and products
19. Smart online air quality Flow2 One-AHR
Ventilation Fan product development
20. Micro high-load axial fan film system
development
21. Smart control module development
22. IoT module and motor applications and
23. Industry 4.0 light-weight motor development
24. Automotive communication protocols circuit
design and development
Term R&D Program Content Expected R&D
expenditures
1. Continuous R&D for high-performance heat Annual R&D
dissipation module solutions expenses will be 5%-
8% of business
2. Continuous R&D for high-reliability revenue
component and technologies
3. Continuous &RD for slim and precision
4. Nano heat dissipation technology development
5. R&D for Green energy technologies and
products
Medium 6. Continuous development of heat-resistant
and long cooling materials
term plans 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

(IV) Major changes in government policies and laws at home and broad, the impact on

Company finance and business, and response measures

In the recent trade war between China and the United States, the United States increased import tariffs on products directly produced and sold by China to the United States. As most of the Company's products are produced in Mainland China, a very low percentage (less than 3%) of products are included in the scope of increased tariffs. The Company takes measures to transfer the costs and transferred the cost of increased tariffs to customers. Other products were sold to other customers in Mainland China who assemble our products into other products for sales in the United States. This accounts for a larger portion of sales but as the Company's products account for a low percentage of materials used in the customers' products, the place of production of the Company's products will not affect the designation of the place of production of the customers' products and we therefore do not need to relocate our production site. However, if these customers transfer production back to Taiwan or to Mexico or directly to the United States, the changes would affect the Company's logistics and warehouse storage methods and increase costs marginally. Overall, the tariffs would have little impact on the Company's finance and business and the Company has prepared response measures for all possibilities.

In addition, the Company's related units collect information on important changes to domestic and foreign policies and laws to ensure that all our finance and business activities meet local regulatory requirements and quickly adapt to changes in policies and laws.

(V) Impact of recent technological and market changes on the Company's finance and

business, and response measures

The Company has set up dedicated units to conduct research on changes in upstream and downstream sectors of the electronics industry in Taiwan and abroad. We also participate in domestic and foreign exhibitions and seminars to obtain the latest information on industry development and provide related information to R&D, sales, and management to use as reference for technology development and business strategies. The latest technology development trends are mostly favorable to the Company's development. The new Purley server platform increase demand for high-end cooling solutions. The rise of AI, IoT, and Industry 4.0 applications will bring forth greater and more high-end cooling demand. 5G communication devices will also increase demand for cooling products. The automobile industry's demand for cooling has progressed from luxury and optional devices to standard equipment and devices for computing heat dissipation. These technological advances have increased the sophistication of cooling products and will continue to expand the market which will help the Company's medium and long-term development. The Company shall make full use of our advantages in these technologies and our lead in the market to accelerate market expansion and widen the gap between the Company and competitors.

(V-I)Impact of damage to the information system on the Company's business operations and the response measures

We created a system with high-availability cluster infrastructure and remote backup for the IT system to ensure uninterrupted system services. Remote backup can use high-speed Internet to backup system information to a remote server at reasonable costs. The DR faulttolerant transfer uses virtualization technology and server hardware for mutual backup. In the event of hardware damage or software system collapse, we can painlessly switch to a different server to continue operations and keep system services uninterrupted.

The Company executes various server room disaster response drills and conducts drills for disaster recovery. We restore backup data to verify the feasibility of backups and reduce the risks of system service interruptions due to unforeseen natural disasters or human errors. We also ensure that the required recovery time for system interruptions is within the set goals.

(V-II)Risks and countermeasures for cyberattacks

As cyberattacks continue to grow in terms of the sophistication of the methodology, there are no permanent fixes in the industry. As such, the Company has established the Information Security Policy as the guiding principle for information security protection and established related information security management regulations and operating procedures. The management organize quarterly information security meetings to review the Company's current information security measures and formulate improvement plans. We provide explanation and propose response measures for the following risks that we may encounter in business operations.

1. Virus threats

The sources of computer viruses may be malicious websites, illegitimate attachments, or portable storage media. The Company has therefore established multiple layers of defenses and inspections and installed a reputable anti-virus system in all terminals. We adopt centralized controls for surveillance and protection to reduce the risks of infections and attacks from malicious programs.

2. Cyberattacks

Internet hacker attacks cause the most direct impact on the Company's operations. In addition to establishing necessary protection measures including segmentation of major networks and access authorization control, firewalls, intrusion detection, and mechanisms for blocking attacks, we will also fix the security vulnerabilities based on information security vulnerability reports to minimize loopholes and the possibilities of attacks.

With the exception of a few cases of virus infections in internal equipment in 2018, we have automatically completed appropriate response measures and solutions. There were no material information security incidents that affected the Company's operations in 2018.

(VI) Impact of corporate image change on risk management and response measures

The Company has always maintained a good reputation for high quality and advanced technologies. There were no crisis involving the change of corporate image in the most recent year up to the publication date of the Annual Report.

(VII) Expected benefits and possible risks of mergers and acquisitions as well as the

responding measures

The Company resolved to implement a short-form merger of the Company and the wholly-owned subsidiary company Sunon SMT Co., Ltd. (hereinafter referred to as Sunon SMT) in a resolution of the meeting of the Board of Directors on August 8, 2018. The Company was the surviving company and Sunon SMT was the dissolved company. Sunon SMT's investee in China, Limao Electronic (Foshan) Co., Ltd. (hereinafter referred to as Limao) was merged into the Company's investee in China, Sunon Electronic (Foshan) Co., Ltd. Sunon SMT's investee in China, Guangying Electronic (Kunshan) Co., Ltd. (hereinafter referred to as Guangying) was merged into the Company's investee in China, Sunon Electronic (Kunshan) Co., Ltd. Sunon SMT, Limao, and Guangying were responsible for the Company's outsourced SMT operations. The SMT process is an important process for fan motor activation and control. The merger of Sunon SMT streamlined the Group's investment structure, reduced human resources management costs, reduced production lead time, and reduced inventory. The parent company also organizes production resources and increased the scale and efficiency of production.

(VIII) Expected benefits and possible risks of factory expansions as well as the response measures

The Company resolved in the board meeting on April 12, 2016 to purchase land near the headquarters for future expansion of R&D facilities and production plants. Based on the debts incurred by the cost of the purchase, the overall liability ratio remains within the risk requirements and did not negatively impact the financial structure. After the expansion, the new plant will be used to produce high-end products and it is expected to contribute to the Company's development.

(IX) Risks associated with over-concentration in purchase or sale and response measures

The Company's suppliers and customers are dispersed and we maintain solid long-term relationships with suppliers and customers. There are no cases of over-concentration of purchases or sales.

(X) Impact of mass transfer of equity by or change of directors, supervisors, or shareholders holding more than 10% interest on the Company, associated risks and response measures

There has been no significant transfer of company shares by Directors, Supervisors, or major shareholders with more than 10% of shares in the most recent year and up to the publication date of this Annual Report.

(XI) Effects that change in management has on the Company as well as risk and responding measures

The Company completed the election of a new term of the Directors on May 30, 2018. The Chairman and the President were both reelected without changes and there are no risks of a change of management.

(XII) Litigation or non-litigation events

Certain fan products produced by Risun Expanse Corp. (hereinafter referred to as Risun) allegedly violated the Company's invention patent right. Related lawsuits are

provided as follows:

Certain fan products produced by Risun violated the Company's No. I318559, No. I384723, and No. I389429 invention patents. The Company filed a suit in court to request the termination of the infringement and request joint and several compensation from Risun and related parties. The case was dismissed by the Intellectual Property Court in the 2016 Min-Zhuan-Su No. 9 Judgment. The Company believes that the laws cited in the judgment to be erroneous and has filed an appeal for the judgment. The case is currently being reviewed by the court.

(XIII) Other significant risks and response measures: None.

VII. Other important matters: None.

H. Special disclosures

I.Profiles of affiliates and subsidiaries

(I)Consolidated Business Report of Affiliates

    1. Overview of affiliates
  • (1) Affiliate organization chart

(2) Basic information of the various affiliated enterprises

December 31, 2018; Unit: NT\$1,000

Enterprise name Date of
establishm
ent		 Address Paid-in
capital		 Main business or core products
SUNON INC. 1998.12.24 1075 W. Lambert Rd. Suite A, BREA,CA
92821		 US1,500 Manufacturing
and
assembly
of
electronic components and import and
wholesale of various electronic and
electrical components
SUNON SAS. 1999.12.30 66, avenue des Pepinieres, 94832
FRESNES CEDEX – FRANCE		 EUR500 Import and
wholesale
of
various
electronic and electrical components
SUNON DEUTSCHLAND
GmbH		 2000.09.01 Lebacher Strabe 4 , 66113 Saarbrucken. EUR25 Import
and
wholesale
of
various
electronic and electrical components
Sunon Corporation 2000.07.07 Stork Minami Otsuka 3-53-5, 2 Chome,
Minami Otsuka Toshimaku, Tokyo Japan
170-0005
Post Code 170-0005		 ¥ 15,000 Production and sales of fans
SUNONWEALTH ELECTRIC
MACHINE IND. (H.K.) LTD.		 1992.07.30 Room 1705-1706, Kai Tak Commercial
Building, 317-319 Des Voeux Road Central,
Sheung Wan, Hong Kong		 HKD800 Import and
wholesale
of
various
electronic and electrical components
SUCCESSFUL CENTURY
CO., LTD (BVI)		 2000.07.07 Palm Grove House , P.O.Box438,Road
Town,Tortola,British Virgin Islands.		 US33,880 General investment and trade
Sunon Electronic (Kunshan) Co.,
Ltd.		 2000.09.19 No. 168 Nanbin Road, Kunshan, Jiangsu
Province, China		 US34,000 Production and sales of brushless DC
motors and fans
SUNON INTERNATIONAL
LTD. (BVI)		 1997.01.15 Palm Grove House , P.O.Box438,Road
Town,Tortola,British Virgin Islands.		 US32,840 General investment and trade
Sunon Electronic (Foshan) Co.,
Ltd.		 2006.03.20 No. 5 Xianan 2 Avenue, Guicheng, Nanhai
District, Foshan, Guangdong Province,
China		 US23,660 Production and sales of AC/DC motors
and fans
Sunon Electronic (Bei Hai) Co.,
Ltd.		 2011.04.07 B6, Beihai Export Processing Zone, Beihai
Avenue West, Beihai City, Guangxi
Province, China		 US10,000 Production and sales of AC/DC motors
and fans

Note: The exchange rates for various foreign currencies in the 2018 Balance Sheet are: USD:NTD = 1: 30.715; JPY:NTD = 1: 0.2782;

EUR:NTD = 1: 35.20; RMB:NTD = 1: 4.4753; HKD:NTD = 1: 3.921

(3) Information of common shareholders who are presumed to have a relationship of control and subordination: None.

(4) Businesses covered by the affiliated enterprises' overall operations

  • A. Design, production, and sales of various fans, cooling modules, and motors
  • B. Design, production, and sales of spindle motors
  • C. Production of precision hardware components for fans and motors
  • D. SMT processing
  • E. Molds design and production
  • F. General investment and management consulting

(5) Directors, Supervisors, and Presidents of each affiliated enterprise and the number of shares they hold or the amount of capital they contributed to each enterprise

December 31, 2018
Shares held
Enterprise name Title Name or representative Number
of shares		 Shareholding
ratio (%)
SUNON INC. Director Sunonwealth Electric Machine Industry Co., Ltd. 150,000 100.00%
Representative: Yin-Su Hong, Fu-Ing Hong
Acting Chen, Ching-Shen Hong - -
President Chin-Tzu Wu
SUNON SAS Director Sunonwealth Electric Machine Industry Co., Ltd. 50,000 100.00%
Representative: Yin-Su Hong
President Hao-Sheng Chu - -
SUNON DEUTSCHLAND GMBH Director SUNON SAS - 100.00%
Representative: Hao-Sheng Chu
SUNON CORPORATION Director Sunonwealth Electric Machine Industry Co., Ltd. 4,400 100.00%
Representative: Yin-Su Hong, Ching-Shen Hong
Supervisor Sunonwealth Electric Machine Industry Co., Ltd.
Representative: Fu-Ing Hong Chen
SUNONWEALTH ELECTRIC MACHINE IND. Director Sunonwealth Electric Machine Industry Co., Ltd. 799,999 99.99%
(H.K.) LTD. Representative: Yin-Su Hong, Ching-Shen Hong
SUCCESSFUL CENTURY CO., LTD Director Sunonwealth Electric Machine Industry Co., Ltd. 33,880,000 100.00%
Representative: Yin-Su Hong
SUNON ELECTRONIC (KUNSHAN) CO., Director SUCCESSFUL CENTURY CO., LTD - 100.00%
LTD. Representative: Yin-Su Hong, Fu-Ing Hong
Supervisor Chen, Ching-Shen Hong - -
President Ping-Chun Chang - -
Chien-Yuan Tseng
SUNON INTERNATIONAL LTD. Director Sunonwealth Electric Machine Industry Co., Ltd. - 100.00%
Representative: Yin-Su Hong
SUNON ELECTRONIC (FOSHAN) CO., LTD. Director SUNON INTERNATIONAL LTD. - 100.00%
Representative: Ching-Shen Hong, Yin-Su Hong,
Ping-Chun Chang
Supervisor SUNON INTERNATIONAL LTD.
President Representative: Fu-Ing Hong Chen - -
Kuo-Ching Li
SUNON ELECTRONIC (BEI HAI) CO., LTD. Director SUNON INTERNATIONAL LTD. - 100.00%
Representative: Ching-Shen Hong, Yin-Su Hong,
Ping-Chun Chang
Supervisor SUNON INTERNATIONAL LTD.
President Representative: Fu-Ing Hong Chen - -
Kuo-Ching Li
December 31, 2018; Unit: thousand NT\$
Total Profit or
loss for		 Earnings
Enterprise name Capital value of Total Net worth Operating Operating the per share
assets liabilities revenue profits current
period		 (NT\$)
(after tax)
(after tax)
SUNON INC 49,140 239,100 165,695 73,405 570,650 22,968 14,422 97.52
SUNON SAS. 16,127 211,127 144,546 66,581 485,012 -33,327 3,035 78.22
SUNON DEUTSCHLAND GMBH 1,027 7,141 1,417 5,724 13,246 2,574 2,080 -
SUNON CORPORATION 4,470 2,585 76 2,509 0 -30 -79 -17.95
SUNONWEALTH (HK) 3,428 2,028 0 2,028 0 -52 -51 -0.06
SUCCESSFUL CENTURY CO., 1,136,933 1,159,352 0 1,159,352 0 0 13,742 0.41
LTD.
Sunon Electronic (Kunshan)
Co., Ltd.		 1,136,276 2,542,142 1,339,901 1,202,241 3,516,702 -36,177 13,741 -
SUNON INTERNATIONAL LTD. 1,035,677 1,465,029 20 1,465,009 0 0 248,873 7.58
Sunon Electronic (Foshan) 765,207 1,809,805 816,617 993,188 2,750,790 108,029 121,068 -
Co., Ltd.
Sunon Electronic (Bei Hai)
Co., Ltd.		 293,115 1,048,621 577,471 471,150 1,956,825 124,490 128,677 -

2. Overview of business operations of affiliates

(II) Consolidated financial statement of affiliates

For the 2018 fiscal year (from January 1 to December 31, 2018), companies that should be included in the consolidated financial statement of affiliates as provided by the "Criteria Governing Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises" are the same as what should be included in the consolidated financial statements of parent and subsidiary companies as provided in IFRS No. 10 which was approved by the Financial Supervisory Commission, and the relevant information that should be disclosed in the consolidated financial statements of affiliates has been disclosed in the consolidated financial statements of the parent and its subsidiaries. The Company shall not be required to prepare separate consolidated financial statements of affiliates (please refer to the 2018 Financial Report on page 115 of the Annual Report).

(III) Affiliation Report

The Company is the controlling company of other affiliate companies and is thus not applicable to regulations regarding the disclosure of an affiliation report.

  • II. Progress of private placement of securities during the latest year and up to the date of annual report publication: None.
  • III. Holding or disposal of stocks of the Company by subsidiaries in the past year and up to the date of report: None.
  • IV. Other supplemental information: None.

Corporate events with material impact on shareholders' equity or stock prices set forth in Article 36, Paragraph 3, Subparagraph 2 of Securities and Exchange Act in the past year and up to the date of report shall be specified separately below: None.

TEL:886-7-8135888 FAX:886-7-8122929 Http://www.sunon.com E-mail:[email protected] Sunonwealth Electric Machine Industry Co., Ltd.

More from SUNON

Director's Dealing 2026
Jun 4
Director's Dealing 2026
Jun 4
AGM Information 2026
May 29
Governance Information 2026
May 29
AGM Information 2026
May 29
Regulatory Filings 2026
May 27
Investor Presentation 2026
May 27
Investor Presentation 2026
May 27
Investor Presentation 2026
May 27
Notice of Dividend Amount 2026
May 25
View all filings →