TXC — Annual Report 2018

Nov 14, 2018

TXC Corporation and Subsidiaries

Consolidated Financial Statements for the Years Ended December 31, 2018 and 2017 and Independent Auditors’ Report

DECLARATION OF CONSOLIDATION OF FINANCIAL STATEMENTS OF AFFILIATES

The companies required to be included in the consolidated financial statements of affiliates in accordance with the “Criteria Governing Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises” for the year ended December 31, 2018 are all the same as the companies required to be included in the consolidated financial statements of parent and subsidiary companies as provided in International Financial Reporting Standards 10 “Consolidated and Separate Financial Statements”. Relevant information that should be disclosed in the consolidated financial statements of affiliates has all been disclosed in the consolidated financial statements of parent and subsidiary companies. Hence, we do not prepare a separate set of consolidated financial statements of affiliates.

Very truly yours,

TXC CORPORATION

By

PAUL LIN Chairman March 27, 2019

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INDEPENDENT AUDITORS’ REPORT

The Board of Directors and Stockholders TXC Corporation

Opinion

We have audited the accompanying consolidated financial statements of TXC Corporation and its subsidiaries (the Group), which comprise the consolidated balance sheets as of December 31, 2018 and 2017, and the consolidated statements of comprehensive income, changes in equity and cash flows for the years then ended, and the notes to the consolidated financial statements, including a summary of significant accounting policies.

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

Basis for Opinion

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

Key Audit 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, and we do not provide a separate opinion on these matters.

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

Key Audit Matter

Inventory of the Group as of December 31, 2018 was NT$1,816,896 thousands, accounted for 14% of the total assets in the consolidated financial statements. The valuation of inventory is subjected to fluctuation of market demand and technology changing rapidly. It may result in the impairment of inventory. The management determines the inventory book value and the allowance for inventories at lower of cost or net realize value in accordance with IAS 2 “Inventory”. Since the value of inventory is subject to management’s judgement and significant in the consolidated financial statements, the inventory valuation is identified as a key audit matter.

Refer to Notes 4, 5 and 15 for a summary of the significant accounting policies.

Our key audit procedures performed in respects of the above area included the following:

1. Tested the net realized value of inventories on the balance sheet date. Sampled testing the price on the latest purchase order and sales order to verify whether the net realized value of inventories is reasonable.

2. Verified the accuracy of the inventory aging report by testing the inventory’s aging details. Obtained the list of inferior goods and spoilage to understand the slow moving inventory and evaluate whether the impairment for inventories is appropriate.

3. Performing physical count, in order to assess the appropriateness regarding write-downs of the inventories.

Other Matter

We have audited the accompanying financial statements of TXC Corporation as of 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 International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), IFRIC Interpretations (IFRIC), and SIC Interpretations (SIC) endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China, 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, including the audit committee, are responsible for overseeing the Group’s financial reporting process.

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Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements

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

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

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

2. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.

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

4. Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Group to cease to continue as a going concern.

5. Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

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

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

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

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements for the year ended December 31, 2018 and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partners on the audit resulting in this independent auditors’ report are Yi-Hui Lin and Po-Jen Weng.

Deloitte & Touche Taipei, Taiwan Republic of China March 27, 2019

Notice to Readers

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

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

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TXC CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2018 AND 2017

(In Thousands of New Taiwan Dollars)

ASSETS CURRENT ASSETS Cash and cash equivalents (Note 6) Financial assets at fair value through profit or loss - current (Note 7) Available-for-sale financial assets - current (Note 10) Held-to-maturity financial assets - current (Note 11) Financial assets at amortized cost - current (Note 9) Notes receivable (Note 14) Trade receivables (Note 14) Trade receivables from related parties (Notes 14 and 33) Other receivables Other receivables from related parties (Note 33) Current tax assets(Note 28) Inventories (Note 15) Prepayment for lease (Note 21) Non-current Assets Held for Sale(Note 16) Debt investments with no active market - current (Note 13) Other current assets Total current assets NON-CURRENT ASSETS Financial assets at fair value through profit or loss - non-current (Note 7) Financial assets at fair value through other comprehensive income - non-current (Note 8) Available-for-sale financial assets - non-current (Note 10) Financial assets measured at cost - non-current (Note 12) Investments accounted for using equity method (Note 18) Property, plant and equipment (Note 19) Investment properties (Note 20) Other intangible assets Deferred tax assets (Note 28) Prepayment for equipment Long-term prepayment for lease (Note 21) Other noncurrent assets Total noncurrent assets TOTAL LIABILITIES AND EQUITY CURRENT LIABILITIES Short-term loans (Note 22) Financial liabilities at fair value through profit or loss - current (Note 7) Notes payable Trade payables Trade payables to related parties (Note 33) Other payables (Note 23) Other payables to related parties (Note 33) Current tax liabilities (Note 28) Current portion of long-term borrowings and bonds payable (Note 22) Other current liabilities Total current liabilities NON-CURRENT LIABILITIES Long-term borrowings (Note 22) Deferred income tax liabilities (Note 28) Net defined benefit liabilities - non-current (Note 24) Guarantee deposits received Total non-current liabilities Total liabilities EQUITY ATTRIBUTABLE TO OWNERS OF THE PARENT (Note 25) Share capital Ordinary shares Capital surplus Retained earnings Legal reserve Special reserve Unappropriated earnings Total retained earnings Other equity Exchange differences on translating foreign operations Unrealized gain on Financial assets at fair value through other comprehensive income Unrealized loss on available-for-sale financial assets Total other equity Total equity attributable to owners of the company NON-CONTROLLING INTERESTS Total equity TOTAL		2018 Amount % $ 1,305,402 10 902,869 7 - - - - 189,588 2 85,661 1 2,631,163 21 8,995 - 112,451 1 796 - 5,245 - 1,816,896 15 2,323 - - - - - 55,900 - 7,117,289 57 30,975 - 494,242 4 - - - - 396,390 3 4,110,722 33 160,088 1 21,831 - 36,574 - 87,174 1 93,868 1 12,573 - 5,444,437 43 $ 12,561,726 100 $ 30,715 - - - - - 1,326,822 11 97 - 563,676 4 3,117 - 3,647 - 139,020 1 21,766 - 2,088,860 16 1,482,346 12 145,490 1 68,033 1 26,157 - 1,722,026 14 3,810,886 30 3,097,570 25 1,665,116 13 1,349,083 11 222,793 2 2,671,184 21 4,243,060 34 (359,923) (3) 105,017 1 - - (254,906) (2) 8,750,840 70 - - 8,750,840 70 $ 12,561,726 100		2017
				Amount % $ 2,331,366 18 1,007,122 8 39,657 - 45,680 - - - 65,656 1 2,578,552 19 6,735 - 147,077 1 772 - - - 1,504,066 11 2,371 - 60,816 1 39,200 - 154,122 1 7,983,192 60 - - - - 512,967 4 197,202 1 96,189 1 4,369,810 33 49,957 - 8,013 - 48,199 - 23,139 - 98,184 1 15,947 - 5,419,607 40 $ 13,402,799 100 $ 549 - 1,265 - 276 - 1,226,991 9 24 - 700,743 6 1,821 - 30,043 - 286,362 2 28,728 - 2,276,802 17 1,696,875 13 182,393 1 62,024 1 20,114 - 1,961,406 15 4,238,208 32 3,097,570 23 1,665,224 12 1,252,818 9 222,793 2 2,767,383 21 4,242,994 32 (264,137) (2) - - 381,048 3 116,911 1 9,122,699 68 41,892 - 9,164,591 68 $ 13,402,799 100

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

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TXC CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

SALES (Note 26) COST OF GOODS SOLD (Note 27) GROSS PROFIT OPERATING EXPENSES (Note 27) Selling and marketing expenses General and administrative expenses Research and development expenses Expected credit loss reversed on trade receivables Total operating expenses PROFIT FROM OPERATIONS NON-OPERATING INCOME AND EXPENSES Other income (Note 27) Other gains and losses (Note 27) Finance costs (Note 27) Share of profits of associates and joint venture (Note 18) Total non-operating income and expenses PROFIT BEFORE INCOME TAX INCOME TAX EXPENSE (Note 28) NET PROFIT FOR THE YEAR OTHER COMPREHENSIVE INCOME (LOSS) Item that will not be reclassified subsequently to profit or loss: Remeasurement of defined benefit plans Unrealized loss on investments in equity instruments at fair value through other comprehensive income Share of the other comprehensive income of associates accounted for using the equity method		2018 Amount % $ 8,156,268 100 (6,328,642) (77) 1,827,626 23 442,479 6 332,453 4 519,906 6 (513) - 1,294,325 16 533,301 7 145,629 2 64,841 1 (20,400) (1) 10,126 - 200,196 2 733,497 9 (89,248) (1) 644,249 8 (10,620) - (140,093) (2) (257) - (150,970) (2)		2017
				Amount % $ 8,781,552 100 (6,595,475) (75) 2,186,077 25 466,267 6 377,505 4 540,249 6 - - 1,384,021 16 802,056 9 109,835 1 173,361 2 (21,937) - 11,618 - 272,877 3 1,074,933 12 (123,916) (1) 951,017 11 (15,255) - - - (187) - (15,442) - (Continued)

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TXC CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

Item that maybe reclassified subsequently to profit or loss: Exchange differences on translating foreign operations Unrealized loss on available-for-sale financial assets Share of the other comprehensive income of associates accounted for using the equity method Other comprehensive loss for the year, net of income tax TOTAL COMPREHENSIVE INCOME FOR THE YEAR NET PROFIT ATTRIBUTABLE TO: Owners of the Company Non-controlling interests TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO: Owners of the Company Non-controlling interests EARNINGS PER SHARE (Note 29) From continuing and discounted operations Basic Diluted		2018 Amount % $ (94,043) (1) - - (1,743) - (95,786) (1) (246,756) (3) $ 397,493 5 $ 644,350 8 (101) - $ 644,249 8 $ 397,594 5 (101) - $ 397,493 5 $2.08 $2.06		2017
				Amount % $ (101,905) (1) (573,997) (7) (944) - (676,846) (8) (692,288) (8) $ 258,729 3 $ 962,655 11 (11,638) - $ 951,017 11 $ 270,367 3 (11,638) - $ 258,729 3 $3.11 $3.07

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

(Concluded)

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TXC CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars)

BALANCE AT JANUARY 1, 2017 Appropriation of 2016 earnings Legal reserve Cash dividends distributed by the company Net profit for the year ended December 31, 2017 Other comprehensive income (loss) for the year ended December 31, 2017, net of income tax Total comprehensive income (loss) for the year ended December 31, 2017 BALANCE AT DECEMBER 31, 2017 Effect of retrospective application and retrospective restatement BALANCE AT JANUARY 1, 2018 AS RESTATED Appropriation of 2017 earnings Legal reserve Cash dividends distributed by the company Net profit for the for the year ended December 31, 2018 Other comprehensive loss for the for the year ended December 31, 2018, net of income tax Total comprehensive income (loss) for the for the year ended December 31, 2018 Other changes in capital surplus Actual disposal or acquisition of interest in subsidiaries Disposal of equity instruments at fair value through other comprehensive income Changes in capital surplus from investment in associates and joint ventures accounted for using the equity method BALANCE AT DECEMBER 31, 2018			Equity Attributable to Owners of the Parent	Equity Attributable to Owners of the Parent	Non-controlling Total Interests $ 9,719,652 $ 53,530 - - (867,320) - 962,655 (11,638) (692,288) - 270,367 (11,638) 9,122,699 41,892 5,048 - 9,127,747 41,892 - - (774,393) - 644,350 (101) (246,756) - 397,594 (101) - (41,791) - - - - (108) - $ 8,750,840 $ -	Total Equity $ 9,773,182 - (867,320) 951,017 (692,288) 258,729 9,164,591 5,048 9,169,639 - (774,393) 644,249 (246,756) 397,493 (41,791) - - (108) $ 8,750,840
		Shares (In Thousands) Share Capital Capital Surplus 309,757 $ 3,097,570 $ 1,665,224 - - - - - - - - - - - - - - - 309,757 3,097,570 1,665,224 - - - 309,757 3,097,570 1,665,224 - - - - - - - - - - - - - - - - - - - - - - - - - - (108) 309,757 $ 3,097,570 $ 1,665,116	Retained Earnings Unappropriated Legal Reserve Special Reserve Earnings $ 1,151,202 $ 222,793 $ 2,789,106 101,616 - (101,616) - - (867,320) - - 962,655 - - (15,442) - - 947,213 1,252,818 222,793 2,767,383 - - 102,957 1,252,818 222,793 2,870,340 96,265 - (96,265) - - (774,393) - - 644,350 - - (10,792) - - 633,558 - - - - - - - - 37,944 - - - $ 1,349,083 $ 222,793 $ 2,671,184	Others Unrealized Gain (Loss) on Exchange Financial Assets Unrealized Differences on at Fair Value Gain (Loss) on Translating Through Other Available-for- Foreign Comprehensive sale Financial Operations Income Assets $ (161,346) $ - $ 955,103 - - - - - - - - - (102,791) - (574,055) (102,791) - (574,055) (264,137) - 381,048 - 283,139 (381,048) (264,137) 283,139 - - - - - - - - - - (95,786) (140,178) - (95,786) (140,178) - - - - - - - - (37,944) - - - - $ (359,923) $ 105,017 $ -

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

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TXC CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars)

CASH FLOWS FROM OPERATING ACTIVITIES Income before income tax Adjustments for: Depreciation expenses Depreciation expenses of investment properties Amortization expenses Amortization of prepayments for lease Expected credit loss reversed on trade receivables Impairment loss reversed on accounts receivables Net gain on fair value change of financial assets and liabilities at fair value through profit or loss Finance costs Interest income Dividend income Share of profit of associates and joint ventures Loss on disposal of property, plant and equipment Gain on disposal of investment property Gain on disposal of non-current assets held for sales Gain on disposal of investment Impairment loss recognized on financial assets Write-down of inventories Impairment loss reversed on property, plant and equipment Changes in operating assets and liabilities Financial assets mandatorily classified as at fair value through profit or loss Financial asset held for trading Notes receivable Trade receivables Trade receivables from related parties Other receivables Other receivables from related parties Inventories Other current assets Financial liabilities held or trading Financial liabilities mandatorily classified as at fair value through profit or loss Notes payable Trade payables Trade payables to related parties Other payables Other payables to related parties Other current liabilities Net defined benefit liabilities Cash generated from operations	2018 $ 733,497 788,289 25,742 2,121 2,354 (513) - (29,802) 20,400 (21,088) (1,527) (10,126) (2,016) (26,629) (3,152) - - 6,763 (2,961) 123,407 - (20,006) (51,997) (2,288) (5,282) (24) (319,450) 52,241 - (1,265) (276) 99,831 73 (136,822) 1,296 (6,962) (4,611) 1,209,217	2017 $ 1,074,933 808,352 3,973 2,722 2,338 - (2,437) (47,211) 21,937 (18,607) (2,288) (11,618) (1,754) (50,061) - (228,666) 9,971 - (3,202) - 306,430 (14,414) 447,529 2,914 (1,914) (63) 16,241 (37,444) (13,445) - (480) (168,666) (1,578) (174,648) 849 (16,272) (9,542) 1,893,879 (Continued)

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TXC CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars)

Interest paid Income tax paid Net cash generated from operating activities CASH FLOWS FROM INVESTING ACTIVITIES Purchase of financial assets at fair value through profit or loss Proceeds from sale of financial assets at fair value through profit or loss Proceeds from sale of financial assets at fair value through other comprehensive income Purchase of financial assets at amortized cost Proceeds from financial assets at amortized cost Proceeds from sale of debt investments with no active market Proceeds from sale of available-for-sale financial assets Purchase of sale of financial assets measured at cost Proceeds from sale of financial assets measured at cost Purchase of investment accounted for using equity method Payments for property, plant and equipment Proceeds from Investment property Proceeds from disposal of property, plant and equipment Payments for intangible assets Decrease in other noncurrent assets Increase in prepayment for equipment Proceeds from disposal of non-current assets held for sale Interest received Dividends received from associates Other dividends received Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from short-term borrowings Repayments of short-term borrowings Proceeds from long-term borrowings Repayments of long-term borrowings Proceeds from guarantee deposits received Refund of guarantee deposits received Dividends paid to owners of the Company Decrease in non-controlling Net cash used in financing activities EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS	2018 $ (20,645) (120,099) 1,068,473 - - 53,886 (191,646) 89,480 - - - - (294,842) (774,529) 38,897 58,136 (15,994) 3,374 (15,126) 97,837 21,701 3,205 1,527 (924,094) 30,166 - 409,611 (776,604) 6,043 - (774,393) (41,791) (1,146,968) (23,375)	2017 $ (21,902) (208,503) 1,663,474 (2,246,052) 2,824,366 - - - (39,200) 214,181 (161,587) 87,237 (26,540) (997,727) 56,653 7,312 (1,281) 3,972 - - 18,685 6,067 2,288 (251,626) - (19,731) 500,000 (693,535) - (21,079) (867,320) - (1,101,665) (71,714) (Continued)

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TXC CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars)

2018 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $ (1,025,964) CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR 2,331,366 CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR $ 1,305,402 The accompanying notes are an integral part of the consolidated financial statements.	2017 $ 238,469 2,092,897 $ 2,331,366 (Conclude

(Concluded)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

TXC CORPORATION AND SUBSIDIARIES

1. GENERAL INFORMATION

TXC Corporation (the “Company”) was incorporated in the Republic of China (“ROC”) on December 28, 1983.

TXC specializes in producing high quality Quartz Unite Crystal, Automotive Crystal, Crystal Oscillator (CXO), and Timing Module (TM) as well as develops a variety of sensors by core technology to satisfy the market demand. Sensors are applied to various applications including mobile communication, wearable device, Internet of Things and vehicle electronics, etc.

On August 26, 2002, TXC’s shares began to be traded on the Taiwan Stock Exchange.

The functional currency of the Company is New Taiwan dollars. The consolidated financial statements are presented in New Taiwan dollars.

In order to ensure investors’ rights and interests, the Company had applied to Taiwan Corporate Governance Association for corporate governance assessment certification. The Company has acquired (CG6005 general version of corporate governance assessment and authentication) and (CG6008 advanced version of corporate governance assessment and authentication), on March 23, 2011 and June 27, 2013, respectively. The Company will continue to strengthen corporate governance functions in order to work with international standards and to protect public interests.

2. APPROVAL OF FINANCIAL STATEMENTS

The consolidated financial statements were approved by the Company’s board of directors on March 22, 2019.

3. APPLICATION OF NEW, AMENDED AND REVISED STANDARDS AND INTERPRETATIONS

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

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

1) IFRS 9 “Financial Instruments” and related amendments

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. Refer to Note 4 for information relating to the relevant accounting policies.

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Classification, measurement and impairment of financial assets

On the basis of the facts and circumstances that existed as of January 1, 2018, the Group has performed an assessment of the classification of recognized financial assets and has elected not to restate prior reporting periods.

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

Financial Assets Equity securities Mutual funds Structured deposits Debt securities Time deposits with original maturity of more than 3 months	MeasurementCategory IAS 39 IFRS 9 Available‑for‑sale - non-current Fair value through other comprehensive income (i.e. FVTOCI) - equity instruments Financial assets measured at cost Fair value through other comprehensive income (i.e. FVTOCI) - equity instruments Available‑for‑sale - current FVTPL - current Designated as at FVTPL Mandatorily at FVTPL Held-to-maturity financial assets - current Amortized cost Debt investments with no active markets Amortized cost	Carrying Amount IAS 39 IFRS 9 Remark $ 512,967 $ 512,967 a) 197,202 202,250 a) 39,657 39,657 b) 864,946 864,946 d) 45,680 45,680 c) 39,200 39,200 c)

IAS 39 Carrying Amount as of January 1, 2018 R FVTOCI $ - Equity instruments Add: Reclassification from available-for-sale - non-current (IAS 39) 512,967 Add: Reclassification from financial assets measured at cost (IAS 39) 197,202 710,169 FVTPL 1,007,122 Add: Reclassification from available-for-sale - current (IAS 39) 39,657 1,046,779 Amortized cost - Add: Reclassification from held-to-maturity - current (IAS 39) 45,680 Add: Reclassification from investments in debt security with no active market (IAS 39) 39,200 84,880 $ 1,841,828	eclassifications $ 710,169 (512,967 ) (197,202 ) - 39,657 (39,657 ) - 84,880 (45,680 ) (39,200 ) - $ -	Remea- surements IFRS 9 Carrying Amount as of January 1, 2018 Retained Earnings Effect on January 1, 2018 Other Equity Effect on January 1, 2018 Remark $ 5,048 $ 715,217 $ 103,300 $ (98,252 ) a) - - - - a) - - - - a) 5,048 715,217 103,300 (98,252) - 1,046,779 (343 ) 343 a) - - - - b) - 1,046,779 (343) 343 - 84,880 - - c) - - - - c) - - - - (c) - 84,880 - - $ 5,048 $ 1,846,876 $ 102,957 $ (97,909)

• a) The Group elected to designate all its investments in equity securities previously classified as available-for-sale under IAS 39 as at FVTOCI under IFRS 9, because these investments are not held for trading. As a result, the related other equity - unrealized loss on available-for-sale financial assets of $381,048 thousand was reclassified to other equity - unrealized loss on financial assets at FVTOCI.

Investments in unlisted shares previously measured at cost under IAS 39 have been designated as at FVTOCI under IFRS 9 and were remeasured at fair value. Consequently, an increase of $5,048 thousand was recognized in both financial assets at FVTOCI and other equity - unrealized gain on financial assets at FVTOCI on January 1, 2018.

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The Group recognized under IAS 39 impairment loss on certain investments in equity securities previously classified as available-for-sale and measured at cost and the loss was accumulated in retained earnings. Since those investments were designated as at FVTOCI under IFRS 9 and no impairment assessment is required, an adjustment was made that resulted in a decrease of $103,300 thousand in other equity - unrealized gain on financial assets at FVTOCI and an increase of $103,300 thousand in retained earnings on January 1, 2018.

• b) Mutual funds previously classified as available-for-sale under IAS 39 were classified mandatorily as at FVTPL under IFRS 9, because the contractual cash flows are not solely payments of principal and interest on the principal outstanding and they are not equity instruments. The retrospective adjustment resulted in an increase of $343 thousand in other equity - unrealized gain (loss) on available-for-sale financial assets and a decrease of $343 thousand in retained earnings on January 1, 2018.

• c) Debt investments previously classified as held-to-maturity financial assets and debt investments with no active market and measured at amortized cost under IAS 39 were classified as measured at amortized cost with an assessment of expected credit losses under IFRS 9, because on January 1, 2018, the contractual cash flows were solely payments of principal and interest on the principal outstanding and these investments were held within a business model whose objective is to collect contractual cash flows.

• d) Structured deposits were designated as at FVTPL under IAS 39 because they were hybrid instruments. They have been classified as mandatorily measured at FVTPL in their entirety under IFRS 9 since they contain host contracts that are assets within the scope of IFRS 9.

• 2) IFRS 15 “Revenue from Contracts with Customers” and related amendments

IFRS 15 establishes principles for recognizing revenue that apply to all contracts with customers and supersedes IAS 18 “Revenue”, IAS 11 “Construction Contracts” and a number of revenue-related interpretations. Refer to Note 4 for related accounting policies.

• b. Amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), Interpretations of IFRS (IFRIC) and Interpretations of IAS (SIC) (collectively, the “IFRSs”) endorsed by the FSC for application starting from 2019

New, Amended or Revised Standards and Interpretations (the“New IFRSs”) Annual Improvements to IFRSs 2015-2017 Cycle Amendments to IFRS 9 “Prepayment Features with Negative Compensation” IFRS 16 “Leases” Amendments to IAS 19 “Plan Amendment, Curtailment or Settlement” Amendments to IAS 28 “Long-term Interests in Associates and Joint Ventures” IFRIC 23 “Uncertainty over Income Tax Treatments”	Effective Date Announced by IASB (Note 1)
	January 1, 2019 January 1, 2019 (Note 2) January 1, 2019 January 1, 2019 (Note 3) January 1, 2019 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 FSC permits the election for early adoption of the amendments starting from 2018.

• Note 3: The Group shall apply these amendments to plan amendments, curtailments or settlements occurring on or after January 1, 2019.

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• 1) IFRS 16 “Leases”

IFRS 16 sets out the accounting standards for leases that will supersede IAS 17 and a number of related interpretations.

Definition of a lease

Upon initial application of IFRS 16, the Group will elect to apply IFRS 16 only to contracts entered into (or changed) on or after January 1, 2019 in order to determine whether those contracts are, or contain, a lease. 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, the Group will recognize right-of-use assets, or investment properties if the right-of-use assets meet the definition of investment properties, and lease liabilities for all leases on the consolidated balance sheets except for those whose payments under low-value and short-term leases will be recognized as expenses on a straight-line basis. 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; interest is computed using the effective interest method. On the consolidated statements of cash flows, cash payments for the principal portion of lease liabilities will be classified within financing activities; cash payments for the interest portion will be classified within operating activities. Currently, payments under operating lease contracts, including property interest qualified as investment properties, are recognized as expenses on a straight-line basis. Prepaid lease payments for land use rights of land located in China are recognized as prepayments for leases. The difference between the actual payments and the expenses, as adjusted for lease incentives, is recognized as prepayments for leases. Cash flows for operating leases are classified within operating activities on the consolidated statements of cash flows. Leased assets and finance lease payables are recognized for contracts classified as finance leases.

The Group anticipates applying IFRS 16 retrospectively with the cumulative effect of the initial application of this standard recognized on January 1, 2019. Comparative information will not be restated.

The Group as lessor

The Group will not make any adjustments for leases in which it is a lessor and will account for those leases with the application of IFRS 16 starting from January 1, 2019.

Anticipated impact on assets, liabilities and equity

	Carrying	Carrying	Adjustments	Adjusted
	Amount as of		Arising from	Carrying
	December	31,	Initial	Amount as of
	2018		Application	January 1, 2019
Right-of-use assets - building	$	-	$ 1,397	$ 1,397
Lease liabilities - current		-	1,397	1,397
Lease liabilities - non-current		-	-	-

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• 2) IFRIC 23 “Uncertainty over Income Tax Treatments”

IFRIC 23 clarifies that when there is uncertainty over income tax treatments, the Group should assume that the taxation authority will have full knowledge of all related information when making related examinations. If the Group concludes that it is probable that the taxation authority will accept an uncertain tax treatment, the Group should determine the taxable profit, tax bases, unused tax losses, unused tax credits or tax rates consistently with the tax treatments used or planned to be used in its income tax filings. If it is not probable that the taxation authority will accept an uncertain tax treatment, the Group should make estimates using either the most likely amount or the expected value of the tax treatment, depending on which method the Group expects to better predict the resolution of the uncertainty. The Group has to reassess its judgments and estimates if facts and circumstances change.

• 3) Amendments to IAS 28 “Long-term Interests in Associates and Joint Ventures”

The amendments clarified that IFRS 9 shall be applied to account for other financial instruments in an associate or joint venture to which the equity method is not applied. These included long-term interests that, in substance, form part of the Group’s net investment in an associate or joint venture.

• 4) Amendments to IFRS 9 “Prepayment Features with Negative Compensation”

IFRS 9 stipulated that if a contractual term of a financial asset permits the issuer (i.e. the debtor) to prepay a debt instrument or permits the holder (i.e. the creditor) to put a debt instrument back to the issuer before maturity and the prepayment amount substantially represents unpaid amounts of the principal and interest on the principal amount outstanding, which may include reasonable compensation for early termination, the financial asset has contractual cash flows that are solely payments of principal and interest on the principal amount outstanding. The amendments further explain that reasonable compensation may be paid or received by either of the parties, i.e. a party may receive reasonable compensation when it chooses to terminate the contract early.

5) Annual Improvements to IFRSs 2015-2017 Cycle

Several standards, including IFRS 3, IFRS 11, IAS 12 and IAS 23 “Borrowing Costs”, were amended in this annual improvement. IAS 23 was amended to clarify that, if any specific borrowing remains outstanding after the related asset is ready for its intended use or sale, the related borrowing costs shall be included in the calculation of the capitalization rate on general borrowings.

• 6) Amendments to IAS 19 “Plan Amendment, Curtailment or Settlement”

The amendments stipulate that, if a plan amendment, curtailment or settlement occurs, the current service cost and the net interest for the remainder of the annual reporting period are determined using the actuarial assumptions used for the remeasurement of the net defined benefit liabilities (assets). In addition, the amendments clarify the effect of a plan amendment, curtailment or settlement on the requirements regarding the asset ceiling. The Group will apply the above amendments prospectively.

Except for the above impacts, as of the date the consolidated financial statements were authorized for issue, the Group continues assessing other possible impacts that application of the aforementioned amendments and the related amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers will have on the Group’s financial position and financial performance and will disclose these other impacts when the assessment is completed.

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

Effective Date New IFRSs Announced by IASB (Note 1) Amendments to IFRS 3 “Definition of a Business” January 1, 2020 (Note 2) Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets To be determined by IASB between An Investor and Its Associate or Joint Venture” IFRS 17 “Insurance Contracts” January 1, 2021 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.

• 1) Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets between an Investor and its Associate or Joint Venture”

The amendments stipulate that, when the Group sells or contributes assets that constitute a business (as defined in IFRS 3) to an associate or joint venture, the gain or loss resulting from the transaction is recognized in full. Also, when the Group loses control of a subsidiary that contains a business but retains significant influence or joint control, the gain or loss resulting from the transaction is recognized in full.

Conversely, when the Group sells or contributes assets that do not constitute a business to an associate or joint venture, the gain or loss resulting from the transaction is recognized only to the extent of the Group’s interest as an unrelated investor in the associate or joint venture, i.e. the Group’s share of the gain or loss is eliminated. Also, when the Group loses control of a subsidiary that does not contain a business but retains significant influence or joint control over an associate or a joint venture, the gain or loss resulting from the transaction is recognized only to the extent of the Group’s interest as an unrelated investor in the associate or joint venture, i.e. the Group’s share of the gain or loss is eliminated.

• 2) Amendments to IFRS 3 “Definition of a Business”

The amendments clarify that, to be considered a business, an acquired set of activities and assets must include, at a minimum, an input and a substantive process applied to the input that together significantly contribute to the ability to create outputs. The amendments narrow the definitions of outputs by focusing on goods and services provided to customers, and the reference to an ability to reduce costs is removed. Moreover, the amendments remove the assessment of whether market participants are capable of replacing any missing inputs or processes and continuing to produce outputs. In addition, the amendments introduce an optional concentration test that permits a simplified assessment of whether an acquired set of activities and assets is not a business.

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

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4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

• a. Statement of compliance

These interim consolidated financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and IAS 34 “Interim Financial Reporting” as endorsed and issued into effect by the FSC. Disclosure information included in these interim consolidated financial statements is less than the disclosure information required in a complete set of annual financial statements.

• b. Basis of preparation

The consolidated financial statements have been prepared on the historical cost basis except for financial instruments which are measured at fair value.

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

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

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

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

• c. Classification of current and noncurrent assets and liabilities

Current assets include:

• 1) Assets held primarily for the purpose of trading;

• 2) Assets expected to be realized within 12 months after the reporting period; and

• 3) Cash and cash equivalents unless the asset is restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period.

Current liabilities include:

• 1) Liabilities held primarily for the purpose of trading;

• 2) Liabilities due to be settled within 12 months after the reporting period, even if an agreement to refinance, or to reschedule payments, on a long-term basis is completed after the reporting period and before the consolidated financial statements are authorized for issue; and

• 3) Liabilities for which the Group does not have an unconditional right to defer settlement for at least 12 months after the reporting period. 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.

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

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d. Basis of consolidation

Principles for preparing consolidated financial statements

The consolidated financial statements incorporate the financial statements of the Company and the entities controlled by the Company (i.e. its subsidiaries).

Income and expenses of subsidiaries acquired or disposed of during the period are included in the consolidated statement of profit or loss and other comprehensive income from the effective date of acquisition up to the effective date of disposal, as appropriate.

When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by the Company.

All intra-group transactions, balances, income and expenses are eliminated in full upon consolidation. Total comprehensive income of subsidiaries is attributed to the owners of the Company and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.

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

• e. Foreign currencies

In preparing the financial statements of each individual group 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. Exchange differences on monetary items arising from settlement or translation are recognized in profit or loss.

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

Non-monetary items that are measured at historical cost in a foreign currency are not retranslated.

For the purpose of presenting consolidated financial statements, the functional currencies of the Company and the Group entities (including subsidiaries, associates, joint ventures and branches in other countries that use currency different from the currency of the Company) are translated into the presentation currency - the New Taiwan dollar as follows: Assets and liabilities are translated at the exchange rates prevailing at the end of the reporting period; income and expense items are translated at the average exchange rates for the period. The resulting currency translation differences are recognized in other comprehensive income (attributed to the owners of the Company and non-controlling interests as appropriate).

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On the disposal of a foreign operation (i.e. a disposal of the Company’s entire interest in a foreign operation, or a disposal involving the loss of control over a subsidiary that includes a foreign operation, or a partial disposal of an interest in a joint arrangement or an associate that includes a foreign operation of which the retained interest becomes a financial asset), all of the exchange differences accumulated in equity in respect of that operation are reclassified to profit or loss.

In relation to a partial disposal of a subsidiary that does not result in the Company losing control over the subsidiary, the proportionate share of accumulated exchange differences is re-attributed to the non-controlling interests of the subsidiary but is not recognized in profit or loss. For all other partial disposals, the proportionate share of the accumulated exchange differences recognized in other comprehensive income is reclassified to profit or loss.

f. Inventories

Inventories consist of raw materials, supplies, finished goods and work-in-process and are stated at the lower of cost or net realizable value. Inventory write-downs are made by item, except where it may be appropriate to group similar or related items. Net realizable value is the estimated selling price of inventories less all estimated costs of completion and costs necessary to make the sale. Inventories are recorded at the specific identification of cost on the balance sheet date.

For a contract where an owner of land provides land for construction of buildings by a property developer in exchange for a certain percentage of the buildings, no exchange gain or loss is recognized if the buildings acquired are classified as properties held for sale. Revenue is recognized when the properties held for sale are sold to third parties.

g. Investments in associates

An associate is an entity over which the Group has significant influence and which is neither a subsidiary nor an interest in a joint venture. A joint venture is a joint arrangement whereby the Group and other parties that have joint control of the arrangement have rights to the net assets of the arrangement.

The Group uses the equity method to account for its investments in associates and joint ventures.

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

Any excess of the cost of acquisition over the Group’s share of the net fair value of the identifiable assets and liabilities of an associate or a joint venture at the date of acquisition is recognized as goodwill, which is included within the carrying amount of the investment and is not amortized. Any excess of the Group’s share of the net fair value of the identifiable assets and liabilities over the cost of acquisition, after reassessment, is recognized immediately in profit or loss.

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

• 21 -

to capital surplus, but the capital surplus recognized from investments accounted for using the equity method is insufficient, the shortage is debited to retained earnings.

When the Group’s share of losses of an associate and a joint venture equals or exceeds its interest in that associate and joint venture (which includes any carrying amount of the investment accounted for using the equity method and long-term interests that, in substance, form part of the Group’s net investment in the associate and joint venture), the Group discontinues recognizing its share of further losses. Additional losses and liabilities are recognized only to the extent that the Group has incurred legal obligations, or constructive obligations, or made payments on behalf of that associate and joint venture.

The entire carrying amount of an investment (including goodwill) is tested for impairment as a single asset by comparing its recoverable amount with its carrying amount. Any impairment loss recognized forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognized to the extent that the recoverable amount of the investment subsequently increases.

The Group discontinues the use of the equity method from the date on which its investment ceases to be an associate and a joint venture. Any retained investment is measured at fair value at that date, and the fair value is regarded as the investment’s fair value on initial recognition as a financial asset. The difference between the previous carrying amount of the associate and the joint venture attributable to the retained interest and its fair value is included in the determination of the gain or loss on disposal of the associate and the joint venture. The Group accounts for all amounts previously recognized in other comprehensive income in relation to that associate and joint venture on the same basis as would be required if that associate had directly disposed of the related assets or liabilities. If an investment in an associate becomes an investment in a joint venture or an investment in a joint venture becomes an investment in an associate, the Group continues to apply the equity method and does not remeasure the retained interest.

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

• h. Property, plant and equipment

Property, plant and equipment are stated at cost, less subsequent accumulated depreciation and subsequent accumulated impairment loss.

Properties in the course of construction for production, supply or administrative purposes are carried at cost, less any recognized impairment loss. Cost includes professional fees and borrowing costs eligible for capitalization. Such properties are depreciated and classified to the appropriate categories of property, plant and equipment when completed and ready for intended use.

Freehold land is not depreciated.

Depreciation on property, plant and equipment (including assets held under finance leases) is recognized using the straight-line method. Each significant part is depreciated separately. If the lease term is shorter than the useful lives, assets are depreciated over the lease term. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.

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

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i. Investment properties

Investment properties are properties held to earn rentals and/or for capital appreciation (including property under construction for such purposes). Investment properties 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.

j. Intangible assets

1) Intangible assets acquired separately

Intangible assets with finite useful lives that are acquired separately are initially measured at cost and subsequently measured at cost less accumulated amortization and accumulated impairment loss. Amortization is recognized on a straight-line basis. 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 estimates accounted for on a prospective basis. Intangible assets with indefinite useful lives that are acquired separately are measured at cost less accumulated impairment loss.

• 2) Derecognition of intangible assets

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

k. Impairment of tangible and intangible assets other than goodwill

At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible assets, excluding goodwill, to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. When it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Corporate assets are allocated to the individual cash-generating units on a reasonable and consistent basis of allocation.

Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually and whenever there is an indication that the asset may be impaired.

The recoverable amount is the higher of fair value less costs to sell and value in use. If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the asset or cash-generating unit is reduced to its recoverable amount, with the resulting impairment loss recognized in profit or loss.

When an impairment loss is subsequently reversed, the carrying amount of the asset or cash-generating unit is increased to the revised estimate of its recoverable amount, but only to the extent of the carrying amount that would have been determined had no impairment loss been recognized for the asset or cash-generating unit in prior years. A reversal of an impairment loss is recognized in profit or loss.

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• l. Noncurrent assets held for sale

Noncurrent assets are classified as held for sale if their carrying amounts will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the noncurrent asset is available for immediate sale in its present condition. To meet the criteria for the sale being highly probable, the appropriate level of management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within 1 year from the date of classification.

Noncurrent assets classified as held for sale are measured at the lower of their previous carrying amount and fair value less costs to sell. Recognition of depreciation of those assets would cease.

m. Financial instruments

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

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

1) Financial assets

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

a) Measurement categories

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.

i. Financial assets at FVTPL

Financial assets are classified as at FVTPL when such a financial asset is mandatorily classified 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 at FVTPL are subsequently measured at fair value, with any gains or losses arising on remeasurement recognized in profit or loss. The net gain or loss recognized in profit or loss does not incorporate any dividends or interest earned on such a financial asset. Fair value is determined in the manner described in Note 32.

• ii. Financial assets at amortized cost

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

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

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

Subsequent to initial recognition, financial assets at amortized cost, including cash and cash equivalents, trade receivables at amortized cost and debt investments with no active market, are measured at amortized cost, which equals the gross carrying amount determined by the effective interest method less any impairment loss. Exchange differences are recognized in profit or loss.

Interest income is calculated by applying the effective interest rate to the gross carrying amount of such a financial asset, except for:

• i) Purchased or originated credit-impaired financial assets, for which interest income is calculated by applying the credit-adjusted effective interest rate to the amortized cost of such financial assets; and

• ii) Financial assets that have subsequently become credit-impaired, for which interest income is calculated by applying the effective interest rate to the amortized cost of such financial assets.

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

• iii. Investments in equity instruments at FVTOCI

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

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

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

2017

Financial assets are classified into the following categories: Financial assets at fair value through profit or loss, held-to-maturity investments, available-for-sale financial assets, and loans and receivables.

• i. Financial assets at fair value through profit or loss

Financial assets are classified as at fair value through profit or loss when such financial assets are either held for trading or designated as at fair value through profit or loss.

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A financial asset may be designated as at fair value through profit or loss upon initial recognition if:

• i) Such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or

• ii) The financial asset forms part of a group of financial assets or financial liabilities or both, which is managed and has performance evaluated on a fair value basis in accordance with the Company’s documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or

• iii) The contract contains one or more embedded derivatives so that the entire hybrid (combined) contract can be designated as at fair value through profit or loss.

Financial assets at fair value through profit or loss are stated at fair value, with any gains or losses arising on remeasurement recognized in profit or loss. The net gain or loss recognized in profit or loss incorporates any dividends or interest earned on such a financial asset. Fair value is determined in the manner described in Note 32.

• ii. Held-to-maturity investments

Corporate bonds, which have credit ratings above a specific credit rating and which the Group has a positive intent and ability to hold to maturity, are classified as held-to-maturity investments.

Subsequent to initial recognition, held-to-maturity investments are measured at amortized cost using the effective interest method less any impairment.

• iii. Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated as available-for-sale or are not classified as loans and receivables, held-to-maturity investments or financial assets at fair value through profit or loss.

Available-for-sale financial assets are measured at fair value. Changes in the carrying amount of available-for-sale monetary financial assets relating to changes in foreign currency exchange rates, interest income calculated using the effective interest method and dividends on available-for-sale equity investments are recognized in profit or loss. Other changes in the carrying amount of available-for-sale financial assets are recognized in other comprehensive income and will be reclassified to profit or loss when the investment is disposed of or is determined to be impaired.

Dividends on available-for-sale equity instruments are recognized in profit or loss when the Group’s right to receive the dividends is established.

Available-for-sale equity investments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured and derivatives that are linked to and must be settled by delivery of such unquoted equity investments are measured at cost less any identified impairment loss at the end of each reporting period and are presented in a separate line item as financial assets carried at cost. If, in a subsequent period, the fair value of the financial assets can be reliably measured, the financial assets are remeasured at fair value. The difference between carrying amount and fair value is recognized in other comprehensive income on financial assets. Any impairment losses are recognized in profit and loss.

• 26 -

iv. Loans and receivables

Loans and receivables (including trade receivables and cash and cash equivalent) are measured at amortized cost using the effective interest method, less any impairment, except for short-term receivables when the effect of discounting is immaterial.

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

• b) Impairment of financial assets

2018

The Group recognizes a loss allowance for expected credit losses on financial assets at amortized cost (including trade receivables), investments in debt instruments that are measured at FVTOCI, lease receivables, as well as contract assets.

The Group always recognizes lifetime expected credit losses (i.e. ECLs) for trade receivables, lease receivables. For all other financial instruments, the Group recognizes lifetime ECLs when there has been a significant increase in credit risk since initial recognition. If, on the other hand, the credit risk on a financial instrument has not increased significantly since initial recognition, the Group measures the loss allowance for that financial instrument at an amount equal to 12-month ECLs.

Expected credit losses reflect the weighted average of credit losses with the respective risks of default occurring as the weights. Lifetime ECLs represent the expected credit losses that will result from all possible default events over the expected life of a financial instrument. In contrast, 12-month ECLs represent the portion of lifetime ECLs that is expected to result from default events on a financial instrument that are possible within 12 months after the reporting date.

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 such a financial asset.

2017

Financial assets, other than those at fair value through profit or loss, are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired when there is objective evidence, as a result of one or more events that occurred after the initial recognition of the financial asset, that the estimated future cash flows of the investment have been affected.

For financial assets carried at amortized cost, such as trade receivables and held-to-maturity financial assets, such assets are assessed for impairment on a collective basis even if they were assessed not to be impaired individually. Objective evidence of impairment for a portfolio of receivables could include the Group’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period, as well as observable changes in national or local economic conditions that correlate with a default on receivables.

• 27 -

For financial assets carried at amortized cost, the amount of the impairment loss recognized is 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.

For financial assets measured at amortized cost, 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 was recognized, the previously recognized impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortized cost would have been had the impairment not been recognized.

For available-for-sale equity investments, a significant or prolonged decline in the fair value of the security below its cost is considered to be objective evidence of impairment.

For all other financial assets, objective evidence of impairment could include significant financial difficulty of the issuer or counterparty, breach of contract, such as a default or delinquency in interest or principal payments, it becoming probable that the borrower will enter bankruptcy or financial re-organization, or the disappearance of an active market for that financial asset because of financial difficulties.

When an available-for-sale financial asset is considered to be impaired, cumulative gains or losses previously recognized in other comprehensive income are reclassified to profit or loss in the period.

In respect of available-for-sale equity securities, impairment loss previously recognized in profit or loss are not reversed through profit or loss. Any increase in fair value subsequent to an impairment loss is recognized in other comprehensive income. In respect of available-for-sale debt securities, the impairment loss is subsequently reversed through profit or loss if an increase in the fair value of the investment can be objectively related to an event occurring after the recognition of the impairment loss.

For financial assets that are carried at cost, the amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment loss will not be reversed in subsequent periods.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables where the carrying amount is reduced through the use of an allowance account. When a trade receivable and other receivables are considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognized in profit or loss except for uncollectible trade receivables that are written off against the allowance account.

c) Derecognition of financial assets

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

On derecognition of a financial asset in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognized in other comprehensive income is recognized in profit or loss.

• 28 -

• n. Revenue recognition

2018

The Group identifies contracts with customers, allocates the transaction price to the performance obligations and recognizes revenue when performance obligations are satisfied.

• Revenue from the sale of goods

Revenue from the sale of goods comes from sales of crystals frequency control devices and sensors. Sales of crystals frequency control devices and sensors are recognized as revenue when the goods are delivered to the customer’s specific location, the goods are shipped and the goods are picked up by customers because it is the time when the customer has full discretion over the manner of distribution and price to sell the goods, has the primary responsibility for sales to future customers and bears the risks of obsolescence. Trade receivables are recognized concurrently.

2017

Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated customer returns, rebates and other similar allowances. Allowances for sales returns and liabilities for returns are recognized at the time of sale based on the seller’s reliable estimate of future returns and based on past experience and other relevant factors.

• 1) Revenue from the sale of goods

Revenue from the sale of goods is recognized when all the following conditions are satisfied:

• a) The Group has transferred to the buyer the significant risks and rewards of ownership of the goods;

• b) The Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;

• c) The amount of revenue can be measured reliably;

• d) It is probable that the economic benefits associated with the transaction will flow to the Group; and

• e) 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 the materials’ ownership.

Revenue from the sale of property in the ordinary course of business is recognized when the construction is completed and the property is transferred to the buyer. Until such revenue is recognized, deposits and installment payments received from sales of properties are carried in the consolidated balance sheets under current liabilities.

• 2) Dividend and interest income

Dividend income from investments is recognized when a shareholder’s right to receive payment has been established and provided that it is probable that the economic benefits will flow to the Group and that the amount of income can be measured reliably.

• 29 -

Interest income from a financial asset is recognized when it is probable that the economic benefits will flow to the Group and the amount of income can be measured reliably. Interest income is accrued on a time basis with reference to the principal outstanding and at the applicable effective interest rate.

• o. Leasing

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.

• 1) The Group as lessor

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

• 2) The Group as lessee

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

• p. 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.

Other than stated above, all other borrowing costs are recognized in profit or loss in the period in which they are incurred.

• q. Government grants

Government grants are not recognized until there is reasonable assurance that the Group will comply with the conditions attaching to them and that the grants will be received.

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. Specifically, government grants whose primary condition is that the Group should purchase, construct or otherwise acquire noncurrent assets are recognized as a deduction from the carrying amount of the relevant asset and recognized in profit or loss on a systematic and rational basis over the useful lives of the related assets.

Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Group with no future related costs are recognized in profit or loss in the period in which they become receivable.

r. Employee benefits

• 1) Short-term employee benefits

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

• 30 -

2) Retirement benefits

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

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

Net defined benefit liability (asset) represents the actual deficit (surplus) in the Group’s defined benefit plan. Any surplus resulting from this calculation is limited to the present value of any refunds from the plans or reductions in future contributions to the plans.

• s. Taxation

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

1) Current tax

According to the Income Tax Law, an additional tax at 10% of unappropriated earnings is provided for as income tax in the year the shareholders approve to retain the earnings.

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

• 2) Deferred tax

Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities and the corresponding tax bases used in the computation of taxable profit.

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

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

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

• 31 -

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

• 3) Current and deferred tax for the year

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

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION

UNCERTAINTY

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

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

Write-down of Inventory

The net realizable value of inventories is the estimated selling price in the ordinary course of business less the estimated costs of completion and disposal. The estimation of net realizable value was based on current market conditions and historical experience with product sales of a similar nature. Changes in market conditions may have a material impact on the estimation of the net realizable value.

6. CASH AND CASH EQUIVALENTS

Cash on hand Demand deposits Checking accounts Cash equivalents (investments with original maturities less than three months) Time deposits Repurchase agreements collateralized by bonds		December 31	December 31
		2018 $ 1,260 1,301,939 2,203 - - $ 1,305,402	2017 $ 920 1,823,081 2,717 119,648 385,000 $ 2,331,366

• 32 -

The market rate intervals of cash in bank repurchase agreements collateralized by bonds at the end of the reporting period were as follows:

Bank balance Repurchase agreements collateralized by bonds	December 31
	2018 2017 2%-4.3% 0.6%-1.9% - 0.34%-0.36%

7. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS

Financial assets at FVTPL-current Financial assets designated as at FVTPL Structured deposit (a) Financial assets held for trading Derivative financial instruments (not under hedge accounting) Foreign exchange forward contracts (b) Non-derivative financial assets Mutual funds Financial assets mandatorily classified as at FVTPL Derivative financial instruments (not under hedge accounting) Foreign exchange forward contracts (b) Exchange contracts (b) Non-derivative financial assets Mutual funds Hybrid financial assets Structured deposits (a) Financial assets at FVTPL-non-current Financial assets mandatorily classified as at FVTPL Non-derivative financial assets Domestic listed shares Financial liabilities at FVTPL-current Financial liabilities held for trading Derivative financial liabilities (not under hedge accounting) Foreign exchange forward contracts (b) Exchange contracts (b)		December 31	December 31
		2018 $ - - - $ - $ 1,757 76 1,833 559,068 341,968 901,036 $ 902,869 $ 30,975 $ - - $ -	2017 $ 864,946 3,336 138,840 $ 1,007,122 $ - - - - - - $ - $ - $ 323 942 $ 1,265

• 33 -

• a. The Group entered into short-term structured time deposit contracts with a bank from January 1, to December 31, 2018 and 2017. The structured time deposit contract includes an embedded derivative instrument which is not closely related to the host contract. The contract was designated as at FVTPL under IAS 39. But under IFRS 9, the entire contract is assessed and classified mandatorily as at FVTPL since it contained a host that is an asset within the scope of IFRS 9.

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

			Contract Amount
	Currency	Maturity Date	(In Thousands)
December 31, 2018
Sell	USD/RMB	2019.01.04-2019.02.11	USD5,500/RMB38,107
Knock-out forward	USD/JPY	2019.01.15	USD1,000/JPY114,000
Knock-out forward	USD/NTD	2019.01.10-2019.02.20	USD9,000/NTD279,020
Foreign exchange forward	USD/NTD	2019.01.10-2019.01.24	USD6,000/NTD186,950
contracts
Exchange contracts	USD/NTD	2019.01.07-2019.02.20	USD10,000/NTD308,227
December 31, 2017
Buy	USD/JPY	2018.01.04	USD1,000/JPY112,980
Sell	USD/RMB	2018.01.08-2018.04.04	USD7,000/RMB46,414
Knock-out forward	USD/JPY	2018.02.07-2018.03.12	USD4,500/JPY513,225
Foreign exchange forward	USD/NTD	2018.01.09-2018.02.23	USD4,000/NTD120,450
contracts
Foreign exchange forward	USD/JPY	2018.01.31	USD2,000/JPY226,700
contracts
Exchange contracts	USD/NTD	2018.01.08-2018.02.23	USD4,000/JPY120,199

The Group entered into foreign exchange forward contracts during the years ended December 31, 2018 and 2017 to manage exposures due to exchange rate fluctuations of foreign currency denominated assets and liabilities. However, those contracts did not meet the criteria of hedge effectiveness and therefore were not accounted for by using hedge accounting.

8. FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME - 2018

December 31, 2018 Non-current Investments in equity instruments at FVTOCI $ 494,242

• 34 -

Investments in Equity Instruments at FVTOCI

	December 31,	December 31,
		2018
Non-current
Domestic investments
Unlisted shares
Win Precision Technology Company Limited	$	14,256
Marson Technology Company Limited.		4,773
UPI Semiconductor Corp.		61,198
		80,227
Foreign investments
Listed shares
Guandong Failong Crystal Technology Company Limited		250,698
Unlisted shares
Zhejiang Bright Semiconductor Technology Company Limited		163,317
		414,015
	$	494,242

These investments in equity instruments are not held for trading. Instead, they are held for medium to long-term strategic purposes. Accordingly, the management elected to designate these investments in equity instruments as at FVTOCI as they believe that recognizing short-term fluctuations in these investments’ fair value in profit or loss would not be consistent with the Group’s strategy of holding these investments for long-term purposes. These investments in equity instruments were classified as available-for-sale and measured at cost under IAS 39. Refer to Note 3, Note 10 and Note 12 relating to their reclassification and comparative information for 2017.

In June and December 2018, the Group sold its 1,402 thousand shares in Guandong Failong Crystal Technology Company Limited in order to manage concentration risk. The sold shares had a fair value of $53,886 thousand and the Group transferred a gain of $37,944 thousand from other equity to retained earnings.

9. FINANCIAL ASSETS AT AMORTIZED COST - 2018

	December 31,
	2018
Current
Domestic investments
Pledge deposits (a)	$ 149,233
Foreign investments
Debt investments - Westpac Banking Corp. (b)	40,355
	$ 189,588

• a. Financial assets at amortized cost pledged as collateral for bank borrowings is set out in Note 34.

• b. In May 23, 2018, the Group bought one-year corporate bonds issued by Westpac Banking Corporation at value of RMB9,116 thousand with a coupon rate of 4.35%, an effective interest rate of 3.60% and a maturity date of March 29, 2019. The bonds were classified as held-to-maturity financial assets under IAS 39. Refer to Note 3 and 11 for information relating to their reclassification and comparative information for 2017.

• 35 -

10. AVAILABLE-FOR-SALE FINANCIAL ASSETS - 2017

	December 31,	December 31,
		2017
Current
Domestic investments
Mutual funds	$	39,657
Noncurrent
Domestic investments
Listed shares and emerging market shares (a)	$	21,498
Foreign investments
Listed shares (b)		491,469
	$	512,967

The Group disposed of 2,000 thousand shares of Guandong Failong Crystal Technolog Company's stock in the year of 2017, which generated a disposal investment gain of $181,773 thousand.

11. HELD-TO-MATURITY FINANCIAL ASSETS - 2017

	December 31,
	2017
Current
Domestic investments
Corporate bonds - Chinatrust*	$ 45,680

• In February 2015, the Group bought a unsecured 3-year corporate bonds issued by Cayman Ton Yi with a coupon rate and an effective interest rate of 4.2%, at a par value of RMB10,000 thousand and a maturity date of February 2018. The redemption price was $48,401 thousand.

12. FINANCIAL ASSETS MEASURED AT COST - 2017

	December 31,	December 31,
		2017
Noncurrent
Domestic unlisted ordinary shares	$	37,322
Foreign unlisted ordinary shares		159,880
	$	197,202
Classified according to financial asset measurement categories
Available-for-sale financial assets	$	197,202

• 36 -

The Group has assessed the recoverable amount of the financial assets measured at cost and recognized impairment loss of $9,971 thousand during the period of years ended December 31, 2017.

Management believed that the above unlisted equity investments held by the Group, whose fair value cannot be reliably measured, because the range of reasonable fair value estimates was so significant. Therefore they were measured at cost less impairment at the end of reporting period.

13. OTHER FINANCIAL ASSETS - 2017

December 31, 2017 Current Time deposits with original maturity more than 3 months $ 39,200

The market interest rates of the time deposits with original maturity more than 3 months were 0.77%-0.78% per annum as of December 31, 2017.

14. NOTES RECEIVABLE, TRADE RECEIVABLES AND OTHER RECEIVABLES

Notes receivable Notes receivable - operating Less: Allowance for impairment loss Notes receivable - operating Trade receivables At amortized cost Gross carrying amount Less: Allowance for impairment loss		**December 31 **	**December 31 **
		2018 $ 85,667 (6) $ 85,661 $ 85,661 $ 2,653,706 (13,548) $ 2,640,158	2017 $ 65,662 (6) $ 65,656 $ 65,656 $ 2,599,422 (14,135) $ 2,585,287

In 2018

The average credit period of sales of goods was 60 to 120 days. No interest was charged on trade receivables. In order to minimize credit risk, the management of the Company has delegated a team responsible for determining credit limits, credit approvals and other monitoring procedures to ensure that follow-up action is taken to recover overdue debts. In addition, the Group reviews the recoverable amount of each individual trade debt at the end of the reporting period to ensure that adequate allowance is made for possible irrecoverable amounts. In this regard, the management believes the Group’s credit risk was significantly reduced.

• 37 -

The Group applies the simplified approach to providing for expected credit losses prescribed by IFRS 9, which permits the use of lifetime expected loss provision for all trade receivables. The expected credit losses on trade receivables are estimated using a provision matrix by reference to past default experience of the debtor and an analysis of the debtor’s current financial position, adjusted for general economic conditions of the industry in which the debtors operate and an assessment of both the current as well as the forecast direction of economic conditions at the reporting date. As the Group’s historical credit loss experience does not show significantly different loss patterns for different customer segments, the provision for loss allowance based on past due status is not further distinguished according to the Group’s different customer base.

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. For trade receivables that have been written off, the Group continues to engage in enforcement activity to attempt to recover the receivables due. Where recoveries are made, these are recognized in profit or loss.

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

December 31, 2018

Not Past Due 31 to 90 Days Gross carrying amount $ 2,729,830 $ 9,543 Loss allowance (Lifetime ECL) (13,468) (86) Amortized cost $ 2,716,362 $ 9,457	91 to 150 Days $ - - $ -	151 to 180 Days $ - - $ -	Over 180 Days $ - - $ -	Total $ 2,739,373 (13,554) $ 2,725,819

The expected credit loss rate for each above range of the Group is not more than 1% within and within 90 days of the overdue period; 5% or less within the overdue period from 91 to 180 days; and 5%-100% when the overdue period exceeds 180 days.

Balance at January 1, 2018 per IAS 39 Adjustment on initial application of IFRS 9 Balance at January 1, 2018 per IFRS 9 Less: Impairment losses reversed Foreign exchange gains and losses Balance at December 31, 2018	2018 $ 14,141 - 14,141 (513) (74) $ 13,554

December 31, 2017

The Group applied the same credit policy in 2018 and 2017. Historical experience shows that the Group recognized an allowance in accordance with the proportion of trade receivables of each customers, not the aging schedule.

• 38 -

The aging of receivables that were past due was as follows:

	December 31,	December 31,
		2017
31- 60 days	$	235
61-90 days		-
91-365 days		1,431
	$	1,666

The above aging schedule was based on the past due days from end of credit term.

The movements of the allowance for doubtful trade receivables were as follows:

Individually Assessed for Impairment Collectively Assessed for Impairment Balance at January 1, 2017 $ $ 16,595 Add: Impairment losses reversed - (2,431) Foreign exchange translation gains and losses - (29) Balance at December 31, 2017 $ - $ 14,135	Total $ 16,595 (2,431) (29) $ 14,135

The movements of the allowance for doubtful notes receivable were as follows:

Individually Assessed for Impairment Collectively Assessed for Impairment Balance at January 1, 2017 $ - $ 12 Less: Impairment losses reversed - (6) Balance at December 31, 2017 $ - $ 6	Total $ 12 (6) $ 6

15. INVENTORIES

Finished goods Work in process Raw materials Supplies and spare parts Merchandise Land to be development		December 31	December 31
		2018 $ 417,239 297,709 351,707 88,308 342,011 319,922 $ 1,816,896	2017 $ 350,089 324,357 272,154 64,404 284,231 208,831 $ 1,504,066

Prepayment for land purchases is the payment made by Chongqing All Sum to acquire the land use right in Chongqing Gao-Shing District to develop and sell real estate. Chongqing All Sum has acquired real estate certificate issued by Chongqing Association of land and real estate resources during 2013.

• 39 -

The cost of inventories recognized as cost of goods sold in the years ended December 31, 2018 and 2017 included $6,328,642 thousand and $6,595,475 thousand, respectively, which include $6,763 thousand, due to write-downs of inventories in the year ended December 31, 2018.

The details of the land to be development site are as follows:

December 31, 2018 Area Prepaid Land Rights Project Cost Total Jinfeng Group C Division $ 199,285 $ 120,637 $ 319,922 December 31, 2017 Area Prepaid Land Rights Project Cost Total Jinfeng Group C Division $ 201,837 $ 6,994 $ 208,831 16. NONCURRENT ASSETS CLASSIFIED AS HELD FOR SALE December 31 2018 2017 Equipment held for sale $ - $ 60,816	December 31, 2018	December 31, 2018	December 31, 2018
	Prepaid Land Rights Project Cost $ 199,285 $ 120,637 December 31, 2017			Total $ 319,922
		Project Cost Total $ 6,994 $ 208,831 December 31
			2018 $ -		2017 $ 60,816

The disposal of the equipment classified as held for sale in 2017 was complete as of March 31, 2018. The proceeds on disposal is $3,152 thousand. Refer to Note 27 for the disposal.

17. SUBSIDIARIES

Subsidiary Included in Consolidated Financial Statements

The detail information of the subsidiaries at the end of reporting period was as follows:

Investor Investee Business Nature TXC Corporation Taiwan Crystal Technology International Limited (TCTI) Investment holding TXC Technology, Inc. Marketing activities TXC Japan Corporation Marketing activities Taiwan Crystal Technology (HK) Limited (TCT-HK) Investment holding TXC Optec Corporation Manufacture and sales of electronic products TXC EUROPE GMBH Marketing activities Taiwan Crystal Technology Growing Profits Trading Ltd. (GPT) International trading International Limited TXC (Ningbo) Corporation (NGB) Manufacture and sales of electronic products

Percentage of Ownership at December 31 2018 2017 Note 100.00 100.00 a 100.00 100.00 b 100.00 100.00 c 100.00 100.00 f - 88.90 j 100.00 - l 100.00 100.00 d 100.00 100.00 e (Continued)

• 40 -

Investor Investee Business Nature TXC (Ningbo) Corporation TXC (Chongqing) Corporation (Chongqing) Manufacture and sales of electronic products Chongqing All Sun Company Limited (Chongqing All sun) Marketing activities Ningbo Jingyu Company Limited (Ningbo Jingyu) Purchasing and selling electronic component Ningbo Meishan Bonded Port Area Dingkai Investment Management (Ding Kai Investment) Investment Management Taiwan Crystal Technology (HK) Limited TXC (Chongqing) Corporation (Chongqing) Manufacture and sales of electronic products

Percentage of Ownership at December 31 2018 2017 Note 100.00 66.40 g 100.00 100.00 h 100.00 100.00 i 100.00 100.00 k - 33.60 g

(Concluded)

• a. Taiwan Crystal Technology International Limited was incorporated on December 23, 1998 in Samoa.

• b. TXC Technology, Inc. was incorporated on December 1, 2000 in California, U.S.A.

• c. TXC Japan Corporation was incorporated on September 13, 2005 in Yokohama, Japan.

• d. Growing Profits Limited was incorporated on March 9, 1999 in the British Virgin Islands.

• e. TXC (Ningbo) Corporation was incorporated on March 12, 1999 in Ningbo, China.

• f. Taiwan Crystal Technology (HK) Limited was incorporated on July 6, 2010 in Hong Kong Special Administrative Region, China.

• g. TXC (Chongqing) Corporation was incorporated on October 11, 2010 in Chongqing, China. In the first quarter of 2018, Taiwan Crystal Technology (HK) Limited transferred its entire equity holding of TXC (Chongqing) Corporation to TXC (Ningbo) Corporation with a consideration of RMB86,600 thousand.

• h. Chongqing All Sun Corporation was incorporated on February 14, 2011 in Chongqing, China.

• i. Ningbo Jingyu Company Limited was incorporated on September 7, 2011 in Ningbo, China.

• j. TXC Optec Corporation was established on April 22, 2015 in Taiwan. On August 24, 2017, it was resolved by the resolution of the shareholders meeting. It was clear that the liquidation process had not been completed as of December 31, 2017, completed the liquidation on April 9, 2018.

• k. Ningbo Meishan Bonded Port Area Dingkai Investment Management Co., Ltd. was incorporated on May 12, 2017 in Beilun District, Ningbo, China.

• l. TXC EUROPE GMBH was founded in Germany on August 17, 2018.

18. INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD

Investments in associates		**December 31 **	**December 31 **
		2018 $ 337,385	2017 $ 96,189

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a. Investment in associates

Associates that are not individually material The Group’s share of: Profit from continuing operations Other comprehensive income Total comprehensive income for the year		December 31	December 31
	2018 $ 337,385 For the Year Ended		2017 $ 96,189 December 31
		2018 $ 12,207 (2,000) $ 10,207	2017 $ 11,618 (1,131) $ 10,487

Refer to the Table “name, locations, and related information of investees on which the Company exercises significant influence” for the nature of activities, principal place of business and country of incorporation of the associates.

The TXC has power to govern the financial and operating policies of Tai-Shing due to part of directors of TXC are the same as Tai-Shing. As a result, Tai-Shing is accounted for using the equity method.

In 2018, the Group subscribed for 4,242 thousand shares of the ordinary shares of Tai-Shing for cash of $196,202 thousands; after the subscription, the Group’s percentage of ownership in Tai-Shing was 26.19%. The Group recognized goodwill of $104,996 thousand as cost of Investments in associates.

In May 2018, the Group subscribed for 2,350 thousand shares of the ordinary shares of Godsmith Sensor Inc. for cash of $38,100 thousands; after the subscription, the Group’s percentage of ownership in Godsmith Sensor Inc. was 34.96% and the Group was able to exercise significant influence over Godsmith Sensor Inc. The Group recognized goodwill of $20,832 thousand as cost of Investments in associates.

b. Investment joint venture

Joint ventures that are not individually material		**December **	**31 **
		2018 $ 59,005	2017 $ -

Refer to Table 6“name, locations, and related information of investees on which the Company exercises significant influence” and Table 7 “information on investment in Mainland China” for the nature of activities, principal place of business and country of incorporation of the joint venture.

The Group and LFC SEMICONDUCTOR LIMITED founded a joint venture named Ningbo Longying Semiconductor Co., LTD. for $60,540 thousand. After the subscription, the Group’s percentage of ownership in Ningbo Longying Semiconductor Co., LTD was 40% and able to exercise significant influence over Ningbo Longying Semiconductor Co., LTD.

The Group’s share of: Profit from continuing operations Other comprehensive income Total comprehensive income for the year	**For the Year Ended December 31 **	**For the Year Ended December 31 **	**For the Year Ended December 31 **
		2018 $ (2,081) - $ (2,081)	2017 $ - - $ -

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19. PROPERTY, PLANT AND EQUIPMENT

F Cost Balance at January 1, 2017 Additions Disposals Effect of foreign currency exchange differences Transfer from investment property Transfer to investment property Transfer to assets classified as held for sale Prepayments, buildings, land operating purpose Reclassifications Balance at December 31, 2017 Accumulated depreciation and impairment Balance at January 1, 2017 Disposals Depreciation expense Transfer from investment property Transfer to investment property Reclassifications Impairment losses reversed Effect of foreign currency exchange differences Balance at December 31, 2017 Carrying amounts at December 31, 2017 Cost Balance at January 1, 2018 Additions Disposals Effect of foreign currency exchange differences Transfer to investment property Reclassifications Balance at December 31, 2018 Accumulated depreciation and impairment Balance at January 1, 2018 Disposals Depreciation expense Transfer to investment property Impairment losses reversed Effect of foreign currency exchange differences Balance at December 31, 2018 Carrying amounts at December 31, 2018	reehold Land Land Improvements $ 598,145 $ 920 - - - - - - - - - - - - - - - - $ 598,145 $ 920 $ - $ 153 - - - 132 - - - - - - - - - - $ - $ 285 $ 598,145 $ 635 $ 598,145 $ 920 - 395 - - - - - - - - $ 598,145 $ 1,315 $ - $ 285 - - - 178 - - - - - - $ - $ 463 $ 598,145 $ 852	Buildings Machinery and Equipment Transportation Equipment $ 2,421,579 $ 6,704,359 $ 19,417 111,761 806,350 35 (9,904 ) (558,250 ) (1,440 ) (15,247 ) (57,597 ) (314 ) 3,573 - - (4,160 ) - - (53,276 ) - - 84,457 - (120) 85 - $ 2,507,482 $ 6,926,128 $ 17,698 $ 876,558 $ 4,629,247 $ 11,810 (1,747 ) (465,860 ) (384 ) 135,636 649,237 2,620 1,236 - - (1,917 ) - - - 22 - - (3,202 ) - (4,711) (37,946) (177) $ 1,005,055 $ 4,771,498 $ 13,869 $ 1,502,427 $ 2,154,630 $ 3,829 $ 2,507,482 $ 6,926,128 $ 17,698 16,907 715,005 2,794 (14,981 ) (376,733 ) (3,063 ) (20,039 ) (86,007 ) (330 ) (277,957 ) - - - 55,450 - $ 2,211,412 $ 7,233,843 $ 17,099 $ 1,005,055 $ 4,771,498 $ 13,869 (6,426 ) (329,522 ) (3,063 ) 110,838 650,375 2,471 (128,873 ) - - - (2,961 ) - (7,218) (57,361) (264) $ 973,376 $ 5,032,029 $ 13,013 $ 1,238,036 $ 2,201,814 $ 4,086	Office Equipment $ 227,457 43,643 (6,597 ) (2,370 ) - - - - 35 $ 262,168 $ 177,248 (6,162 ) 20,727 - - (22 ) - (2,286) $ 189,505 $ 72,663 $ 262,168 39,428 (13,587 ) (2,842 ) - (18,244) $ 266,923 $ 189,505 (13,233 ) 24,427 - - (1,565) $ 199,134 $ 67,789	Property in Construction $ 1,044 35,938 - 499 - - - - - $ 37,481 $ - - - - - - - - $ - $ 37,481 $ 37,481 - - (275 ) (37,206) $ - $ - - - - - - $ - $ -	Total $ 9,972,921 997,727 (576,191 ) (75,029 ) 3,573 (4,160 ) (53,276 ) 84,457 - $ 10,350,022 $ 5,695,016 (474,153 ) 808,352 1,236 (1,917 ) - (3,202 ) (45,120) $ 5,980,212 $ 4,369,810 $ 10,350,022 774,529 (408,364 ) (109,493 ) (277,957 ) - $ 10,328,737 $ 5,980,212 (352,244 ) 788,289 (128,873 ) (2,961 ) (66,408) $ 6,218,015 $ 4,110,722

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

Land improvements 6 years Buildings Industrial building 35-61 years Electrical power systems 4-10 years Engineering systems 1-17 years Equipment Major production equipment 1-5 years Temperature control systems 4-7 years Transportation equipment 4-7 years Transportation equipment 3-8 years Office equipment 2-6 years

Property, plant and equipment pledged as collateral for bank borrowings were set out on Note 34.

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20. INVESTMENT PROPERTIES

Completed investment property Cost Balance at January 1, 2017 Disposals Transferred from property, plant and equipment Transfer to real estate, plant and equipment Effect of foreign currency exchange differences Balance at December 31, 2017 Accumulated depreciation and impairment Balance at January 1, 2017 Disposals Transferred from property, plant and equipment Depreciation expense Transfer to real estate, plant and equipment Effect of foreign currency exchange differences Balance at December 31, 2017 Cost Balance at January 1, 2018 Disposals Transferred from property, plant and equipment Effect of foreign currency exchange differences Balance at December 31, 2018 Accumulated depreciation and impairment Balance at January 1, 2018 Disposals Transferred from property, plant and equipment Depreciation expense Effect of foreign currency exchange differences Balance at December 31, 2018		December 31
		2018 2017 $ 160,088 $ 49,957 Completed Investment Property $ 103,492 (10,709) 4,160 (3,573) (1,760) $ 91,610 $ (41,769) 4,117 (1,917) (3,973) 1,236 653 $ (41,653) $ 49,957 $ 91,610 (26,894) 277,957 (1,720) $ 340,953 $ (41,653) 14,626 (128,873) (25,742) 777 $ (180,865) $ 160,088

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The investment properties held by the Group were depreciated using the straight-line method over their useful lives of 5-61 years.

The fair value of the Group’s investment properties as of December 31, 2018 and 2017 was $530,915 thousand and $408,123 thousand, respectively. The fair value valuation had not been performed by independent qualified professional valuers; however, management of the Group used the valuation model that market participants would use in determining the fair value the valuation was arrived at by reference to market evidence of transaction prices for similar properties.

All of the Group’s investment property was held under freehold interests. The investment properties pledged as collateral for bank borrowing were set out in Note 34.

21. PREPAYMENTS FOR LEASE

Current asset (included in prepayments for leases) Noncurrent asset		December 31	December 31
		2018 $ 2,323 93,868 $ 96,191	2017 $ 2,371 98,184 $ 100,555

As of December 31, 2018 and 2017, prepaid lease payments include land use right, which are located in Mainland China.

The prepayment for lease pledged as collateral for bank borrowing were set out in Note 34.

22. BORROWINGS

• a. Short-term borrowings

Unsecured borrowings Bank loans (1) Letters of credit (2)		**December **	**31 **
		2018 $ 30,715 - $ 30,715	2017 $ - 549 $ 549

• 1) The interest rate on the bank loans was 0.6% per annum as of December 31, 2018.

• 2) The interest rate on the letters of credit was 2.86% per annum as of December 31, 2017.

• 45 -

b. Long-term borrowings

Secured borrowings (Note 34) Bank loans* Unsecured borrowings Bank loans Less: Current portions Long-term borrowings The borrowings of the Group were as follows:		December 31	December 31
		2018 $ 56,361 1,565,005 (139,020) $ 1,482,346	2017 $ 109,375 1,873,862 (286,362) $ 1,696,875

Maturity Date Floating rate borrowings Secured bank borrowing denominated in NT$ 2019.09.01 Secured bank borrowing denominated in RMB 2021.09.04 Unsecured bank borrowing denominated in NT$ 2020.08.27 Unsecured bank borrowing denominated in NT$ 2020.09.06 Unsecured bank borrowing denominated in NT$ 2019.06.02 Unsecured bank borrowing denominated in NT$ 2020.01.25 Unsecured bank borrowing denominated in NT$ 2020.09.04 Unsecured bank borrowing denominated in NT$ 2020.09.06 Unsecured bank borrowing denominated in NT$ 2021.12.12 Unsecured bank borrowing denominated in NT$ 2021.12.19 Unsecured bank borrowing denominated in US$ 2020.02.26 Unsecured bank borrowing denominated in US$ 2020.05.28 Unsecured bank borrowing denominated in US$ 2019.09.01 Less: Current portions		**December 31 **	**December 31 **
		2018 $ 46,875 9,486 200,000 200,000 - 250,000 200,000 200,000 100,000 200,000 61,430 61,430 92,145 (139,020) $ 1,482,346	2017 $ 109,375 - - 300,000 200,000 250,000 400,000 200,000 100,000 200,000 59,696 74,621 89,545 (286,362) $ 1,696,875

The range of interest rate on bank loans was 0.86%-6.18% and 0.85%-3.2% per annum as of December 31, 2018 and 2017 respectively.

• 46 -

23. OTHER LIABILITIES

Current Other payables Payable for bonus to employees and directors Payable for commission Payable for salaries Payable for bonus Payable for annual leave Payable for purchase of equipment Others		December 31	December 31
		2018 $ 85,014 24,640 98,292 190,419 28,199 32,022 105,090 $ 563,676	2017 $ 125,404 33,669 99,893 215,833 29,309 85,073 111,562 $ 700,743

24. RETIREMENT BENEFIT PLANS

a. Defined contribution plans

The Company and TXC Optec Corporation of the Group adopted a pension plan under the Labor Pension Act (the “LPA”), which is a state-managed defined contribution plan. Under the LPA, an entity makes monthly contributions to employees’ individual pension accounts at 6% of monthly salaries and wages.

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

b. Defined benefit plans

The defined benefit plan adopted by the Company of the Group in accordance with the Labor Standards Law is operated by the government. Pension benefits are calculated on the basis of the length of service and average monthly salaries of the 6 months before retirement. The Company contribute amounts equal to 4% of total monthly salaries and wages to a pension fund administered by the pension fund monitoring committee. Pension contributions are deposited in the Bank of Taiwan in the committee’s name. Before the end of each year, the Group assesses the balance in the pension fund. If the amount of the balance in the pension fund is inadequate to pay retirement benefits for employees who conform to retirement requirements in the next year, the Group is required to fund the difference in one appropriation that should be made before the end of March of the next year. The pension fund is managed by the Bureau of Labor Funds, Ministry of Labor (“the Bureau”); the Group has no right to influence the investment policy and strategy.

• 47 -

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

Present value of defined benefit obligation Fair value of plan assets Net defined benefit liability		December 31	December 31
		2018 $ 165,146 (97,113) $ 68,033	2017 $ 153,518 (91,494) $ 62,024

Movements in net defined benefit liability (asset) were as follows:

	Present Value
	of the Defined		Net Defined
	Benefit	Fair Value of		Benefit
	Obligation	the Plan Assets	Liability (Asset)
Balance at January 1, 2017	$ 141,977	$ (85,666)	$	56,311
Service cost
Current service cost	2,066	-		2,066
Net interest expense (income)	1,221	(673)		548
Recognized in profit or loss	3,287	(673)		2,614
Remeasurement
Return on plan assets (excluding amounts
included in net interest)	-	(149)		(149)
Actuarial (gain) loss - changes in
demographic assumptions	13,390	-		13,390
Actuarial (gain) loss - changes in financial
assumptions	(1,703)	-		(1,703)
Actuarial (gain) loss - experience
adjustments	6,841	-		6,841
Recognized in other comprehensive income	18,528	(149)		18,379
Contributions from the employer		(15,280)		(15,280)
Benefits paid	(10,274)	10,274		-
Balance at December 31, 2017	153,518	(91,494)		62,024
Service cost
Current service cost	1,956	-		1,956
Past service cost and loss on settlements	617	-		617
Net interest expense (income)	1,475	(794)		681
Recognized in profit or loss	4,048	(794)		3,254
Remeasurement
Return on plan assets (excluding amounts
included in net interest)	-	(2,783)		(2,783)
Actuarial (gain) loss - changes in
demographic assumptions	11,053	-		11,053
Actuarial (gain) loss - changes in financial
assumptions	2,042	-		2,042
Actuarial (gain) loss - experience
adjustments	6,479	-		6,479
Recognized in other comprehensive income	19,574	(2,783)		16,791
Contributions from the employer	-	(14,036)		(14,036)
Benefits paid	(11,994)	11,994		-
Balance at December 31, 2018	$ 165,146	$ (97,113)	$	68,033

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

Cost of goods sold Selling and marketing expenses General and administrative expenses Research and development expenses	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 1,608 341 553 752 $ 3,254	2017 $ 1,268 341 495 510 $ 2,614

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

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

• 2) Interest risk: A decrease in the (government/corporate) 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 plan’s debt investments.

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

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

Discount rate(s) Expected rate(s) of salary increase	**December 31 **
	2018 2017 1.125% 1.25% 2.00% 2.00%

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 decrease/increase) as follows:

Discount rate(s) 0.25% increase 0.25% decrease Expected rate(s) of salary increase 0.25% increase 0.25% decrease		December	31
		2018 $ (4,625) $ 4,814 $ 4,683 $ (4,523)	2017 $ (4,002) $ 4,159 $ 4,038 $ (3,905)

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The sensitivity analysis presented above may not be representative of the actual change in the present value of 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.

The expected contributions to the plan for the next year The average duration of the defined benefit obligation		**December **	**31 **
		2018 $ 14,036 11.6 years	2017 $ 15,280 10.7 years

25. EQUITY

• a. Share capital

Ordinary shares

Numbers of shares authorized (in thousands) Shares authorized Number of shares issued and fully paid (in thousands) Shares issued		**December 31 **	**December 31 **
		2018 500,000 $ 5,000,000 309,757 $ 3,097,570	2017 500,000 $ 5,000,000 309,757 $ 3,097,570

Fully paid ordinary shares, which have a par value of $10, carry one vote per share and carry a right to dividends.

30,000 thousand shares of the Company’s shares authorized were reserved for the issuance of convertible bonds and employee share options.

b. Capital surplus

May be used to offset a deficit, distributed as cash dividends, or transferred to share capital* Issuance of ordinary shares Conversion of bonds Overdue options The difference between consideration received or paid and the carrying amount of the subsidiaries’ net assets during actual disposal or acquisition Share of changes in capital surplus of associates or joint venture		December 31	December 31
		2018 $ 611,776 977,028 73,377 331 2,604 $ 1,665,116	2017 $ 611,776 977,028 73,377 331 2,712 $ 1,665,224

• Such capital surplus may be used to offset a deficit; in addition, when the Company has no deficit, such capital surplus may be distributed as cash dividends or transferred to share capital (limited to a certain percentage of the Company’s capital surplus and once a year).

• 50 -

• c. Retained earnings and dividend policy

Under 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 or reversing a special reserve in accordance with the laws and regulations, and then any remaining profit together with any undistributed retained earnings shall be used by the Company’s board of directors as the basis for proposing a distribution plan, which should be resolved in the shareholders’ meeting for distribution of dividends and bonus to shareholders. For the policies on distribution of employees’ compensation and remuneration of directors and supervisors before and after amendment, please refer to employee benefits expense in Note 27(g).

Dividends are recommended by the board of directors in accordance with the Corporation’s dividend policy. Under this policy, industry trend and growth should be evaluated, investment opportunities should be fully understood, and proper capital adequacy ratios should be considered in determining the dividend to be distributed. In addition, cash dividends should not be less than 20% of the total dividends to be appropriated.

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

Items referred to under Rule No. 1010012865, Rule No. 1010047490 and Rule No. 1030006415 issued by the FSC and the directive titled “Questions and Answers for Special Reserves Appropriated Following Adoption of IFRSs” should be appropriated to or reversed from a special reserve by the Company.

The appropriations of earnings for 2017 and 2016 had been approved in the shareholders’ meetings on June 5, 2018 and June 8, 2017, respectively. The appropriations and dividends per share were as follows:

Legal reserve Cash dividends	Appropriation of Earnings For Fiscal For Fiscal Year 2017 Year 2016 $ 96,265 $ 101,616 774,393 867,320	Dividends Per Share (NT$)
		For Fiscal For Fiscal Year 2017 Year 2016 $ - $ - 2.5 2.8

The appropriations of earnings for 2018 annual surplus distribution on April 25, 2019 was as follows:

			Dividends Per	Dividends Per
	Appropriation			Share
	of	Earnings		(NT$)
Legal reserve	$	64,435	$	-
Cash dividends		619,514		2

The appropriation of earnings for 2018 are subject to the resolution of the shareholders’ meeting to be held on June 12, 2019.

• 51 -

d. Others equity items

• 1) Exchange differences on translating the financial statements of foreign operations

Balance at January 1 Exchange differences on translating financial statements of foreign operations Share of exchange differences of associates accounted for using the equity method Balance at December 31 2) Unrealized gain/(loss) on available-for-sale financial assets Balance at January 1, 2017 Recognized for the year Unrealized gain arising on revaluation of available-for-sale financial assets Share of unrealized gain on revaluation of available-for-sale financial assets of associates accounted for using the equity method Reclassification adjustment Cumulative (gain)/loss reclassified to profit or loss on sale of available-for-sale financial assets Other comprehensive income recognized for the year Balance at December 31 , 2017 Balance at January 1, 2018 per IAS 39 Adjustment on initial application of IFRS 9 Balance at January 1, 2018 per IFRS 9 Balance at January 1, 2018 per IAS 39 Adjustment on initial application of IFRS 9 Balance at January 1, 2018 per IFRS 9	**For the Year Ended **	**For the Year Ended **	**December 31 **
		2018 2017 $ (264,137) $ (161,346) (94,043) (101,905) (1,743) (886) $ (359,923) $ (264,137) For the Year Ended December 31, 2017 $ 955,103 (423,470) (58) (150,527) (574,055) $ 381,048 $ 381,048 (381,048) $ - $ 381,048 (381,048) $ -

• 52 -

• 3) Unrealized gain (loss) on financial assets at FVTOCI

	For the Year	For the Year
		Ended
	December 31,
		2018
Balance at January 1 per IAS 39	$	-
Adjustment on initial application of IFRS 9		283,139
Balance at January 1 per IFRS 9		283,139
Effect of change in tax rate		(13,626)
Recognized during the period
Unrealized loss - equity instruments		(126,427)
Share from associates accounted for using the equity method		(85)
Other comprehensive income recognized in the period		(140,178)
Cumulative unrealized gain/(loss) of equity instruments transferred to retained
earnings due to disposal		(37,944)
Balance at December 31	$	105,017

26. REVENUE

Revenue from contracts with customers Revenue from sale of goods Trade receivables (Note 14) Contract liabilities Sale of goods Contract liabilities - current	**For the Year Ended December 31 **	**For the Year Ended December 31 **
		2018 2017 $ 8,156,268 $ 8,781,552 For the Year Ended December 31, 2018 $ 2,640,158 $ 10,853 $ 10,853

The contract liabilities were unearned sales revenue and accounted for other current liabilities.

• 53 -

27. NET PROFIT AND OTHER COMPREHENSIVE INCOME (LOSS) FROM CONTINUING OPERATIONS

Net profit from continuing operations was attributable to:

a. Other income

Interest income Income from government grants Dividends income Revenue from planning of equipment Others	For the Year Ended	For the Year Ended	December 31
		2018 $ 21,088 61,005 1,527 22,098 39,911 $ 145,629	2017 $ 18,607 42,779 2,288 - 46,161 $ 109,835

• b. Other gains and losses

Gain on disposal of property, plant and equipment Gain on disposal of investment property Gain on disposal of investment Available-for-sale financial assets Financial assets measured at cost Fair value changes of financial assets and financial liabilities Financial assets mandatorily at FVTPL Financial assets designated as at FVTPL Net foreign exchange gains (loss) Gain on disposal of non-current assets classified as held for sale Impairment loss on financial assets Impairment loss reversed on property, plant and equipment Others	**For the Year Ended **	**For the Year Ended **	**December 31 **
		2018 $ 2,016 26,629 - - 29,802 - 18,693 3,152 - 2,961 (18,412) $ 64,841	2017 $ 1,754 50,061 181,429 47,237 - 47,211 (131,962) - (9,971) 3,202 (15,600) $ 173,361

c. Impairment loss on financial assets

Financial assets measured at cost Finance costs Interest on bank loans	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
	2018 2017 $ - $ (9,971) For the Year Ended December 31
		2018 $ (20,400)	2017 $ (21,937)

d. Finance costs

• 54 -

e. Depreciation and amortization

Property, plant and equipment Intangible assets An analysis of deprecation by function Operating costs Operating expenses An analysis of amortization by function Operating expenses f. Employee benefits expense Post-employment benefits (see Note 24) Defined contribution plans Defined benefit plans Other employee benefits Payroll expense Labor and health insurance Others An analysis of employee benefits expense by function Operating costs Operating expenses	For the Year Ended	For the Year Ended	For the Year Ended	December 31
	2018 $ 788,289 2,121 $ 790,410 $ 674,649 113,640 $ 788,289 $ 2,121 For the Year Ended			2017 $ 808,352 2,722 $ 811,074 $ 685,543 122,809 $ 808,352 $ 2,722 December 31
		2018 $ 71,158 3,254 74,412 1,476,012 92,640 35,747 1,604,399 $ 1,678,811 $ 1,014,388 664,423 $ 1,678,811	2017 $ 67,670 2,614 70,284 1,499,460 94,900 35,444 1,629,804 $ 1,700,088 $ 978,787 721,301 $ 1,700,088

• 55 -

• Employees’ compensation and remuneration of directors for 2018 and 2017

The Company accrued employees’ compensation and remuneration of directors at the rates no less than 3% and no higher than 2%, respectively, of net profit before income tax, employees’ compensation, and remuneration of directors. The employees’ compensation and remuneration of directors for the years ended December 31, 2018 and 2017 which have been approved by the Company’s board of directors on March 22, 2019 and March 15, 2018, respectively, were as follows:

Accrual rate

Employees’ compensation Remuneration of directors	**For the Year Ended December 31 **
	2018 2017 9% 9% 1.5% 1.5%

Amount

Employees’ compensation Remuneration of directors	For the Year Ended December 31	For the Year Ended December 31
	2018 Cash Share $ 69,072 $ - 11,512 -	2017
		Cash Share $ 103,140 $ - 17,190 -

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.

There was no difference between the actual amounts of employees’ compensation and remuneration of directors paid and the amounts recognized in the consolidated financial statements for the years ended December 31, 2017 and 2016.

Information on the employees’ compensation and remuneration of directors resolved by the Company’s board of directors in 2019 and 2018 is available at the Market Observation Post System website of the Taiwan Stock Exchange.

28. INCOME TAXES RELATING TO CONTINUING

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

Current tax In respect of the current period Income tax of unappropriated earnings Adjustments for prior year Deferred tax In respect of the current period Change in tax rate Income tax expense recognized in profit or loss	**For the Year Ended **	**For the Year Ended **	**December 31 **
		2018 $ 61,191 7,656 6,418 75,265 69 13,914 13,983 $ 89,248	2017 $ 160,202 2,845 5,426 168,473 (44,557) - (44,557) $ 123,916

• 56 -

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

Profit before tax from continuing operations Income tax expense calculated at the statutory rate Tax effect of adjusting items: Nondeductible expenses in determining taxable income Tax-exempt income Tax-exempt income for five years Additional income tax on unappropriated earnings Unrecognized temporary differences Unrecognized loss carryforwards Investment tax credit Additional income tax under the Alternative Minimum Tax Act Deferred tax effect of earnings of subsidiaries Effect of different tax rate of group entities operating in other jurisdictions Change in tax rate Adjustment for prior years’ tax Other Income tax expense recognized in profit or loss	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 733,497 $ 146,699 1,289 (4,285) (8,118) 7,656 (21,655) 2,662 (34,621) - 2,019 (20,822) 13,914 6,418 (108) $ 89,248	2017 $ 1,074,933 $ 182,739 1,246 (23,852) (9,182) 2,845 (20,896) 19,633 (34,336) 1,713 10,271 (11,524) - 5,426 (167) $ 123,916

In 2017, the applicable corporate income tax rate used by the group entities in the ROC is 17%. However, the Income Tax Act in the ROC was amended in 2018, and the corporate income tax rate was adjusted from 17% to 20%, effective in 2018. In addition, the rate of the corporate surtax applicable to the 2018 unappropriated earnings will be reduced from 10% to 5%. The applicable tax rate used by subsidiaries in China is 15%-25%. Tax rates used by other group entities operating in other jurisdictions are based on the tax laws in those jurisdictions.

As the status of 2019 appropriations of earnings is uncertain, the potential income tax consequences of 2018 unappropriated earnings are not reliably determinable.

• b. Income tax expense recognized in other comprehensive income

Deferred tax In respect of the current year Fair value changes of financial assets at FVTOCI Fair value changes of available-for-sale financial assets Remeasurement of defined benefit plans Reclassification adjustment Disposal of equity instruments at fair value through other comprehensive income Effect of change in tax rate Remeasurement of defined benefit plans Fair value changes of financial assets at FVTOCI	For the Year Ended	For the Year Ended	December 31
		2018 $ (37,377) - (3,358) (9,486) (2,813) 13,626 $ (39,408)	2017 $ - (118,528) (3,124) - - - $ (121,652)

• 57 -

• c. Current tax assets and liabilities

Current tax assets Income tax receivable Current tax liabilities Income tax payable		December	31
		2018 $ 5,245 $ 3,647	2017 $ - $ 30,043

d. Deferred tax assets and liabilities

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

For the year ended December 31, 2018

Opening Balance Recognize in Profit or Loss Recognize in Other Comprehen- sive Income Deferred tax assets Unrealized loss on inventories $ 6,481 $ 2,846 $ - Unrealized exchange loss 1,716 (1,716) - Financial assets at fair value through profit or loss 215 (215) - Payable for annual leave 4,409 550 - Determine benefit obligation 12,553 (2,753) 6,171 Property, plant and equipment 1,607 177 - Allowance for impaired receivables 535 - - Investment subsidiary 18,621 (18,621) - Others 2,062 2,083 - $ 48,199 $ (17,649) $ 6,171 Deferred tax liabilities Unrealized exchange gain $ - $ 17 $ - Associates 105,179 (3,683) - AFS financial assets 77,214 - (33,237) $ 182,393 $ (3,666) $ (33,237) For the year ended December 31, 2017 Opening Balance Recognize in Profit or Loss Recognize in Other Comprehen- sive Income Deferred tax assets Unrealized loss on inventories $ 8,834 $ (2,319) $ - Unrealized exchange loss - 1,716 - Financial assets at fair value through profit or loss 2,286 (2,071) - Payable for annual leave 4,141 286 - Determine benefit obligation 11,582 (2,153) 3,124 Property, plant and equipment 2,133 (480) -

Exchange Differences Closing Balance $ (21) $ 9,306 - - - - (26) 4,933 - 15,971 (27) 1,757 (10) 525 - - (63) 4,082 $ (147) $ 36,574 $ - $ 17 - 101,496 - 43,977 $ - $ 145,490 Exchange Differences Closing Balance $ (34) $ 6,481 - 1,716 - 215 (18) 4,409 - 12,553 (46) 1,607 (Continued)

• 58 -

Allowance for impaired receivables Investment subsidiary Others Deferred tax liabilities Unrealized exchange gain Associates AFS financial assets	Opening Balance Recognize in Profit or Loss Recognize in Other Comprehen- sive Income $ 366 $ 173 $ - - 18,621 - 1,794 277 - $ 31,136 $ 14,050 $ 3,124 $ 11,250 $ (11,250) $ - 124,436 (19,257) - 195,742 - (118,528) $ 331,428 $ (30,507) $ (118,528)	Exchange Differences $ (4) - (9) $ (111) $ - - - $ -	Closing Balance $ 535 18,621 2,062 $ 48,199 $ - 105,179 77,214 $ 182,393

(Concluded)

• e. As of December 31, 2018, profits attributable to the following expansion projects were exempted from income tax for 5 year period

Expansion of Construction Project

Tax-exemption Period

2009 2014-2018

• f. Income tax assessments

The tax returns had been assessed by the tax authorities before in 2016.

29. EARNINGS PER SHARE

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

Net Profit for the Year

Profit for the period attributable to owners of the Company Effect of dilutive potential ordinary shares: Convertible bonds Earnings used in the computation of diluted earnings per share	For the Year Ended	For the Year Ended	December 31
		2018 $ 644,350 - $ 644,350	2017 $ 962,655 - $ 962,655

• 59 -

Weighted average number of ordinary shares outstanding (in thousand shares):

Weighted average number of ordinary shares in computation of basic earnings per share Effect of dilutive potential ordinary shares: Convertible bonds Employees’ compensation Weighted average number of ordinary shares used in the computation of diluted earnings per share	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 309,757 2,658 312,415	2017 309,757 - 3,443 313,200

If the Group was able to settle the compensation paid to employees by cash or shares, the Group presumed that 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, if the shares had a dilutive effect. Such dilutive effect of the potential shares was included in the computation of diluted earnings per share until the shareholders resolve the number of shares to be distributed to employees at their meeting in the following year.

30. OPERATING LEASE ARRANGEMENTS

a. The Group as lessee

Operating leases relate to leases of warehouse in trade zone with lease terms 3 years. All operating lease contracts contain clauses for 3-yearly market rental reviews. The Group does not have a bargain purchase option to acquire the leased land at the expiry of the lease periods.

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

Not later than 1 year Later than 1 year and not later than 5 years		December	31
		2018 $ 1,400 - $ 1,400	2017 $ 2,800 1,400 $ 4,200

b. The Group as lessor

Operating leases relate to the investment property owned by the Group with lease terms between 1 to 2 years. All operating lease contracts contain market review clauses in the event that the lessee exercises its option to renew. The lessee does not have a bargain purchase option to acquire the property at the expiry of the lease period.

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

Not later than 1 year Later than 1 year and not later than 5 years		**December **	**31 **
		2018 $ 4,402 1,892 $ 6,294	2017 $ 1,437 - $ 1,437

• 60 -

31. CAPITAL MANAGEMENT

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

The capital structure of the Group consists of net debt (borrowings offset by cash and cash equivalents) and equity attributable to owners of the Company (comprising issued capital, reserves, retained earnings and other equity).

The Group is not subject to any externally imposed capital requirements.

32. FINANCIAL INSTRUMENTS

• a. Fair value of financial instruments

• 1) Fair value of financial instruments that are not measured at fair value

The management believes the carrying amounts of financial assets and financial liabilities recognized in the consolidated financial statements approximate their fair values.

• 2) Fair value of financial instruments that are measured at fair value on a recurring basis

• a) Fair value hierarchy

December 31, 2018

Financial assets at FVTPL Domestic listed shares and emerging market shares Forward foreign exchange contracts Exchange contracts Mutual funds Structured deposits Financial assets at FVTOCI Unlisted securities - ROC Equity securities Securities listed in other countries Securities unlisted in foreign countries	Level 1 $ 30,975 - - 559,068 - $ 590,043 $ - 250,698 - $ 250,698	Level 2 $ - 1,757 76 - 341,968 $ 343,801 $ - - - $ -	Level 3 $ - - - - - $ - $ 80,227 - 163,317 $ 243,544	Total $ 30,975 1,757 76 559,068 341,968 $ 933,844 $ 80,227 250,698 163,317 $ 494,242

• 61 -

December 31, 2017

Financial assets at FVTPL Forward foreign exchange contracts Mutual funds Structured deposits Available-for-sale financial assets Unlisted securities - ROC Equity securities Securities listed in foreign countries Equity securities Mutual funds Financial liabilities at FVTPL Forward exchange contracts Exchange contracts	Level 1 $ - 138,840 - $ 138,840 $ - 491,469 39,657 $ 531,126 $ - - $ -	Level 2 $ 3,336 - 864,946 $ 868,282 $ - - - $ - $ 323 942 $ 1,265	Level 3 $ - - - $ - $ 21,498 - - $ 21,498 $ - - $ -	Total $ 3,336 138,840 864,946 $ 1,007,122 $ 21,498 491,469 39,657 $ 552,624 $ 323 942 $ 1,265

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

b) Reconciliation of Level 3 fair value measurements of financial assets

For the year ended December 31, 2018

Financial assets Balance at January 1, 2018 (IAS 39) Effect of retrospective application and retrospective restatement Balance at January 1, 2018 (IFRS 9) Recognized in other comprehensive income Exchange differences on translating the financial statements of foreign operations Balance at December 31, 2018	Unrealized Gain on Financial Assets at Fair Value Through Other Comprehensive Income	Unrealized Gain on Financial Assets at Fair Value Through Other Comprehensive Income
	I	Equity nstruments $ 21,498 202,250 223,748 23,041 (3,245) $ 243,544

• 62 -

For the year ended December 31, 2017 Financial assets Balance at January 1, 2017 Recognized in other comprehensive income Balance at December 31, 2017	Available-for- sale Financial Assets
	Equity Instruments $ 17,148 4,350 $ 21,498

• c) Valuation techniques and inputs applied for the purpose of measuring Level 2 fair value measurement

Financial Instruments Derivatives - foreign currency forward contracts Structured deposits	Valuation Techniques and Inputs
	Discounted cash flow. Future cash flows are estimated based on observable forward exchange rates at the end of the reporting period and contract forward rates, discounted at a rate that reflects the credit risk of various counterparties. Discounted cash flow. The products had short matured period, therefore the fair value is reasonable to be estimated based on the book value.

• d) Valuation techniques and inputs applied for the purpose of measuring Level 3 fair value measurement

The Group uses price-book ratio approach, comparing the net value per share with other public companies among the similar industries or evaluating stock price based on average price-book ratio of other competitors, to capture the present value of the expected future economic benefits to be derived from the ownership of these investees.

The fair values of unlisted equity securities - ROC were determined using income approach. In this approach, the discounted cash flow method was used to capture the present value of the expected future economic benefits to be derived from the ownership of these investees. The significant unobservable inputs used are listed on the table below. An increase in long-term revenue growth rates or long-term pre-tax operating margin or a decrease in WACC or discount for lack of marketability used in isolation would result in increase in fair value.

	December 31,
	2017
Long-term revenue growth rates	12.89%
Long-term pre-tax operating margin	4.34%
WACC	10.96%
Discount for lack of marketability	30.24%

• 63 -

b. Categories of financial instruments

Financial assets FVTPL Designated as at FVTPL (1) Mandatorily at FVTPL (1) Loans and receivables (2) Held-to-maturity investments (3) Available-for-sale financial assets (4) Financial assets at amortized cost (5) Financial assets at FVTOCI Equity instruments Financial liabilities FVTPL Designated as at FVTPL (6) Amortized cost (7)	December 31
	2018 2017 $ - $ 1,007,122 933,844 - - 5,169,358 - 45,680 - 749,826 4,334,056 - 494,242 - - 1,265 3,545,793 3,913,641

• 1) The balances included the carrying amount of mutual fund, foreign exchange forward contracts and structured deposits.

• 2) The balances included loans and receivables measured at amortized cost, which comprise cash and cash equivalents, notes receivable, trade and other receivables, debt investments with no active market.

• 3) The balances included the carrying amount of financial debt investment.

• 4) The balances included the carrying amount of available-for-sale financial assets measured at cost.

• 5) The balances include financial assets measured at amortized cost, which comprise cash and cash equivalents, notes receivable, trade receivables, financial debt investment and other receivables.

• 6) The balances included the carrying amount of foreign exchange forward contracts and exchange contracts.

• 7) The balances included financial liabilities measured at amortized cost, which comprise short-term and long-term loans, notes payable, trade and other payables.

• c. Financial risk management objectives and policies

The Group’s major financial instruments included equity and debt investments, bonds payable, borrowings. The Group’s corporate treasury function provides services to the business, coordinates access to domestic and international financial markets, monitors and manages the financial risks relating to the operations of the Group through internal risk reports which analyze exposures by degree and magnitude of risks. These risks include market risk (including currency risk, interest rate risk and other price risk), credit risk and liquidity risk.

• 64 -

The Group sought to minimize the effects of these risks by using derivative financial instruments to hedge risk exposures. The use of financial derivatives was governed by the Group’s policies approved by the board of directors, which provided written principles on foreign exchange risk, interest rate risk, credit risk, the use of financial derivatives and non-derivative financial instruments, and the investment of excess liquidity. Compliance with policies and exposure limits was reviewed by the internal auditors on a continuous basis. The Group did not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes.

The corporate treasury function reported quarterly to the Group’s risk management committee, an independent body that monitors risks and policies implemented to mitigate risk exposures.

1) Market risk

The Group’s activities exposed it primarily to the financial risks of changes in foreign currency exchange rates (see (a) below) and interest rates (see (b) below). The Group entered into a variety of derivative financial instruments to manage its exposure to foreign currency risk and interest rate risk, including:

a) Foreign currency risk

Several subsidiaries of the Company had foreign currency sales and purchases, which exposed the Group to foreign currency risk.

The carrying amounts of the Group’s foreign currency denominated monetary assets and monetary liabilities (including those eliminated on consolidation) at the end of the reporting period (see Note 34).

Sensitivity analysis

The Group was mainly exposed to the USD and JPY.

The following table details the Group’s sensitivity to a 1% increase and decrease in New Taiwan dollars (the functional currency) against the relevant foreign currencies. 1% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis included only outstanding foreign currency denominated monetary items and foreign currency forward contracts designated as cash flow hedges, and adjusts their translation at the end of the reporting period for a 1% change in foreign currency rates. The sensitivity analysis included external loans/borrowings as well as loans/borrowings to foreign operations within the Group where the denomination of the loan is in a currency other than the functional currency of the lender or the borrower. A positive number below indicates an increase in pre-tax/post-tax profit and other equity associated with New Taiwan dollars strengthen 1% against the relevant currency. For a 1% weakening of New Taiwan dollars against the relevant currency, there would be an equal and opposite impact on post-tax profit and other equity and the balances below would be negative.

Profit or loss	USD Impact For the Year Ended December 31 2018 2017 $ 23,015 $ 25,362	JPY Impact
		For the Year Ended December 31
		2018 2017 $ (3,169) $ (1,929)

i. This was mainly attributable to the exposure outstanding on USD receivables and payables, which were not hedged at the end of the reporting period.

• 65 -

• ii. This was mainly attributable to the exposure to outstanding JPY payables, which were not hedged, at the end of the reporting period.

• b) Interest rate risk

The Group was exposed to interest rate risk because the Group’s bank deposits and the Group borrowed funds at floating interest rates.

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

Fair value interest rate risk Financial assets Financial liabilities Cash flow interest rate risk Financial assets Financial liabilities Sensitivity analysis	**December 31 **
	2018 2017 $ 40,355 $ 543,848 - - 1,451,172 1,823,081 1,652,081 1,983,786

The sensitivity analyses below were determined based on the Group’s exposure to interest rates for both derivatives and non-derivative instruments at the end of the reporting period. For floating rate liabilities, the analysis was prepared assuming the amount of the liability outstanding at the end of the reporting period was outstanding for the whole year. A 0.25% basis point increase or decrease was used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the reasonably possible change in interest rates.

If interest rates had been 0.25% basis points higher/lower and all other variables were held constant, the Group’s pre-tax profit for the years ended December 31, 2018 and 2017 would decrease by $502 thousand and $402 thousand, which was mainly attributable to the Group’s exposure to interest rates on its floating rate bank deposits and bank borrowings.

c) Other price risk

The Group was exposed to equity price risk through its investments in listed equity securities. Equity investments are held for strategic rather than trading purposes. The Group does not actively trade these investments. The Group’s equity price risk was mainly concentrated on equity instruments operating in Shenzhen stock exchange, growth enterprise.

Sensitivity analysis

The sensitivity analyses below were determined based on the exposure to equity price risks at the end of the reporting period.

If equity prices had been 1% higher/lower, other comprehensive income for the years ended December 31, 2018 and 2017 would increase/decrease by $2,507 thousand and $4,915 thousand, respectively.

• 66 -

2) Credit risk

Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in financial loss to the Group. As at the end of the reporting period, the Group’s maximum exposure to credit risk which will cause a financial loss to the Group due to failure to discharge an obligation by the counterparties and financial guarantees provided by the Group is arising from:

The carrying amount of the respective recognized financial assets as stated in the balance sheets.

• 3) Liquidity risk

The Group manages liquidity risk by monitoring and maintaining a level of cash and cash equivalents deemed adequate to finance the Group’s operations and mitigate the effects of fluctuations in cash flows. In addition, management monitors the utilization of bank borrowings and ensures compliance with loan covenants.

The Group relies on bank borrowings as a significant source of liability. As of December 31, 2018 and 2017, the Group had available unutilized overdraft and short-term bank loan facilities of approximately $5,544,897 thousand and $5,261,301 thousand, respectively.

• Liquidity and interest risk rate tables

The following table details the Group’s remaining contractual maturity for its non-derivative financial liabilities with agreed repayment periods. The tables had been drawn up based on the undiscounted cash flows of financial liabilities from the earliest date on which the Group can be required to pay. The tables included both interest and principal cash flows.

To extend that interest flows are floating rate, the undiscounted amount was derived from the interest rate curve at the end of the reporting period.

December 31, 2018

	Weighted
	Interest
	Average
	Effective Rate	Less Than
	(%)	1 Year	2-3 Years		4-5 Years		5+ Years		Total
Non-derivative financial
liabilities
Trade payables		$ 1,326,919	$	-	$	- $		-	$ 1,326,919
Other payables		566,793		-		-		-	566,793
Other current liabilities		21,766		-		-		-	21,766
Variable interest rate
(liabilities)	0.6-6.18	169,735	1,482,346			-		-	1,652,081
December 31, 2017
	Weighted
	Interest
	Average
	Effective Rate	Less Than
	(%)	1 Year	2-3 Years		4-5 Years		5+ Years		Total
Non-derivative financial
liabilities
Trade payables	-	$ 1,227,291	$	-	$	- $		-	$ 1,227,291
Other payables	-	702,564		-		-		-	702,564
Other current liabilities	-	28,728		-		-		-	28,728
Variable interest rate
(liabilities)	0.85-3.2	286,911	1,696,875			-		-	1,983,786

• 67 -

The amounts included above for variable interest rate instruments for both non-derivative financial assets and liabilities was subject to change if changes in variable interest rates differ from those estimates of interest rates determined at the end of the reporting period.

The following table detailed the Group’s liquidity analysis for its derivative financial instruments. The table was based on the undiscounted contractual net cash inflows and outflows on derivative instruments that settle on a net basis, and the undiscounted gross inflows and outflows on those derivatives that require gross settlement.

December 31, 2018

On Demand or Less Than 1 Month 1-3 Months 3 Months to 1 Year Net settled Foreign exchange forward contracts $ - $ (394) $ - December 31, 2017 On Demand or Less Than 1 Month 1-3 Months 3 Months to 1 Year Net settled Foreign exchange forward contracts $ (856) $ (409) $ -	1-5 Years $ - 1-5 Years $ -	5+ Years $ -
		5+ Years $ -

33. RELATED-PARTY TRANSACTIONS

Balances and transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation and are not disclosed in this note. Details of transactions between the Group and other related parties are disclosed below.

Related Party Name Tai-Shing Electronics Components Corporation Liang Shing Eclife Corp. (“Eclife”) Ningbo Xingmao Electron Technology Co., Ltd. GODSMITH SENSOR INC.	Relationship with the Company
	Associate Other associate Associate Associate

• a. Sales of goods

Associates Other associate	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 32,965 33 $ 32,998	2017 $ 21,710 - $ 21,710

• 68 -

b. Purchase of goods

Other associates	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 188	2017 $ 47

• c. Operating expenses

Other associates	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 722	2017 $ 830

• d. Commission revenue

Associates	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 2,567	2017 $ 2,039

e. Rental revenue

Related Party Location Rent Collection Other associates 1F., No. 189, Huangshan W. Rd., Beilun Dist., Ningbo City Based on contract, and paid on a monthly basis		For the Year Ended	For the Year Ended	December 31
		2018 Amount % to Total Account Balance $ 3,265 -		2017
				Amount % to Total Account Balance $ 3,242 -

Selling prices to related parties were similar to those for third parties.

• f. Trade receivables from related parties

Associates Less: Allowance for impairment loss		December	31
		2018 $ 9,062 (67) $ 8,995	2017 $ 6,776 (41) $ 6,735

g. Trade payables to related parties

Other associates

	December	31
	2018 $ 97	2017 $ 24

• 69 -

h. Other receivables from related parties

Associates Other payables to related parties Associates Other associates		December	31
		2018 $ 796 December	2017 $ 772 31
		2018 $ 1,760 1,357 $ 3,117	2017 $ - 1,821 $ 1,821

• i. Other payables to related parties

• j. Acquisition of property, plant and equipment

Other associates	Acquisition Amounts	Acquisition Amounts	Acquisition Amounts
	**For the Year Ended December 31 **
		2018 $ 1,299	2017 $ 1,691

• k. Compensation of key management personnel

Short-term benefits Post-employment benefits	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 61,628 3,054 $ 64,682	2017 $ 91,141 3,323 $ 94,464

The remuneration of directors and key executives was determined by the remuneration committee having regard to the performance of individuals and market trends.

34. ASSETS PLEDGED AS COLLATERAL OR FOR SECURITY

The following assets were provided as collateral for bank borrowings:

Land and land improvement Building equipment, net Investment property Land to be developed Pledge deposits Prepayments for leases		December 31	December 31
		2018 $ 573,080 848,918 135,344 319,922 149,233 12,383 $ 2,038,880	2017 $ 573,770 925,175 22,019 - - 13,026 $ 1,533,990

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35. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED COMMITMENTS

In addition to those disclosed in other notes, significant commitments and contingencies of the Group as of December 31, 2018 and 2017 were as follows:

• a. Unused letters of credit amounted to approximately JPY2,450 thousand and JPY8,292 thousand as of December 31, 2018 and 2017.

• b. As of December 31, 2018, the Company unrecognized commitments are as follows:

Acquisition of equipment Acquisition of buildings Acquisition of equipment Acquisition of equipment Acquisition of equipment	Contract Amount Paid Amount Unpaid Amount $ 62,742 $ 30,767 $ 31,975 $ 7,180 $ 2,154 $ 5,026 US$ 3,395 US$ - US$ 3,395 RMB 574 RMB - RMB 574 JPY 40,000 JPY - JPY 40,000

36. SIGNIFICANT EVENTS AFTER REPORTING PERIOD: NONE

37. EXCHANGE RATE OF FINANCIAL ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

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

December 31, 2018

		Foreign		Carrying
	Currencies		Exchange Rate	Amount
Financial assets
Monetary items
USD	$	84,664	30.715 (USD:NTD)	$ 2,600,455
USD		29,325	6.8632 (USD:RMB)	900,717
JPY		432,583	0.2782 (JPY:NTD)	120,345
JPY		159,616	0.0622 (JPY:RMB)	44,405
Financial liabilities
Monetary items
USD		28,484	30.715 (USD:NTD)	874,886
USD		10,573	6.8632 (USD:RMB)	324,750
JPY		1,168,067	0.2782 (JPY:NTD)	324,956
JPY		563,363	0.0622 (JPY:RMB)	156,728

• 71 -

December 31, 2017

		Foreign		Carrying
	Currencies		Exchange Rate	Amount
Financial assets
Monetary items
USD	$	88,327	29.848 (USD:NTD)	$ 2,636,384
USD		38,845	6.5342 (USD:RMB)	1,159,446
JPY		359,244	0.2649 (JPY:NTD)	95,164
JPY		145,623	0.058 (JPY:RMB)	38,576
Financial liabilities
Monetary items
USD		31,922	29.848 (USD:NTD)	952,808
USD		10,280	6.5342 (USD:RMB)	306,837
JPY		744,028	0.2649 (JPY:NTD)	197,093
JPY		489,148	0.058(JPY:RMB)	129,575

For the years ended December 31, 2018 and 2017, unrealized net foreign exchange gains were $18,693 thousand and $(131,962) thousand, respectively. It is impractical to disclose net foreign exchange gains (losses) by each significant foreign currency due to the variety of the foreign currency transactions and functional currencies of the group entities.

38. SEPARATELY DISCLOSED ITEMS

• a. Information on significant transactions and information on investees:

• 1) Lending funds to others. (None)

• 2) Providing endorsements or guarantees for others. (Table 1)

• 3) Holding of securities at the end of the period. (Table 2)

• 4) Aggregate purchases or sales of the same securities reaching NT$300 million or 20 percent of paid-in capital or more. (Table 3)

• 5) Acquisition of real estate reaching NT$300 million or 20 percent of paid-in capital or more. (None)

• 6) Disposal of real estate reaching NT$300 million or 20 percent of paid-in capital or more. (None)

• 7) Purchases or sales of goods from or to related parties reaching NT$100 million or 20 percent of paid-in capital or more. (Table 4)

• 8) Trade receivables from related parties reaching NT$100 million or 20 percent of paid-in capital or more. (Table 5)

• 9) Trading in derivative instruments. (Note 7)

• 10) Others: The business relationship between the parent and the subsidiaries and between each subsidiary, and the circumstances and amounts of any significant transactions between them. (Table 9)

• 72 -

• 11) Information on investees. (Table 6)

• b. Information on investments in mainland China

• 1) Information on any investee company in mainland China, showing the name, principal business activities, paid-in capital, method of investment, inward and outward remittance of funds, shareholding ratio, investment gain or loss, carrying amount of the investment at the end of the period, repatriated investment gains, and limit on the amount of investment in the mainland China area. (Table 7)

• 2) Any of the following significant transactions with investee companies in mainland China, either directly or indirectly through a third area, and their prices, payment terms, and unrealized gains or losses. (Table 8)

  • a) The amount and percentage of purchases and the balance and percentage of the related payables at the end of the period.

  • b) The amount and percentage of sales and the balance and percentage of the related receivables at the end of the period.

  • c) The amount of property transactions and the amount of the resultant gains or losses.

  • d) The balance of negotiable instrument endorsements or guarantees or pledges of collateral at the end of the period and the purposes.

  • e) The highest balance, the end of period balance, the interest rate range, and total current period interest with respect to financing of funds.

  • f) Other transactions that have a material effect on the profit or loss for the period or on the financial position, such as the rendering or receiving of services.

39. SEGMENT INFORMATION

Information reported to the chief operating decision maker for the purpose of resource allocation and assessment of segment performance focuses on the types of goods or services delivered or provided. Specifically, the Group’s reportable segments under IFRS 8 “Operating Segments” were as follows:

Crystal Optec

• a. Segment revenues and results

Crystal Optec		Segment Revenue For the Year Ended December 31 2018 2017 $ 8,156,268 $ 8,645,931 - 135,621 $ 8,156,268 $ 8,781,552		Segment Profit	Segment Profit
				For the Year Ended **December 31 **
		2018 $ 8,156,268 - $ 8,156,268		2018 $ 533,301 - 533,301	2017 $ 894,601 (92,545) 802,056 (Continued)

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Other income Other gains and losses Financial costs Share of profit or loss of subsidiaries, associates and joint ventures Profit before tax (continuing operations)	Segment Revenue For the Year Ended December 31 2018 2017		Segment Profit	Segment Profit
			For the Year Ended **December 31 **
			2018 $ 145,629 64,841 (20,400) 10,126 $ 733,497	2017 $ 109,835 173,361 (21,937) 11,618 $ 1,074,933 (Concluded)

Segment revenue reported above represents revenue generated from external customers. There were no inter-segment sales for the years ended December 31, 2018 and 2017.

Segment profit represented the profit before tax earned by each segment without allocation of central administration costs and directors’ salaries, share of profits of associates, gain recognized on the disposal of interest in former associates, rental revenue, interest income, gain or loss on disposal of property, plant and equipment, gain or loss on disposal of financial instruments, exchange gain or loss, valuation gain or loss on financial instruments, finance costs and income tax expense. This was the measure reported to the chief operating decision maker for the purpose of resource allocation and assessment of segment performance.

• b. Revenue from major products and services

Crystal Optec	2018 $ 8,156,268 - $ 8,156,268	2017 $ 8,645,931 135,621 $ 8,781,552

Assets and liabilities not used by the chief operating decision maker in the allocation of resources and assessment of performance of segments are not disclosed.

c. Geographical information

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

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

Taiwan China Others		Revenue from External Customers December 31 2018 2017 $ 6,612,774 $ 7,253,687 1,424,853 1,453,781 118,641 74,084 $ 8,156,268 $ 8,781,552		Noncurrent Assets	Noncurrent Assets
				December 31
		2018 $ 6,612,774 1,424,853 118,641 $ 8,156,268		2018 $ 2,061,966 2,423,601 689 $ 4,486,256	2017 $ 2,256,455 2,307,011 1,584 $ 4,565,050

Noncurrent assets included property, plant and equipment, intangible assets and other assets but excluded deferred tax assets and financial instruments.

d. Major customer information

Major customer did not account for 10% or more of sales in 2018 and 2017.

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TABLE 1

TXC CORPORATION AND SUBSIDIARIES

ENDORSEMENTS/GUARANTEES PROVIDED FOR THE YEAR ENDED DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

No. (Note 1)	Endorser/Guarantor	Endorsee/Guarantee	Endorsee/Guarantee	Limit on Endorsement/ Guarantee Given on Behalf of Each Party (Note 3)	Maximum Amount Endorsed/ Guaranteed During the Period	Outstanding Endorsement/ Guarantee at the End of the Period	Actual Borrowing Amount	Amount Endorsed/ Guaranteed by Collateral	Ratio of Accumulated Endorsement/ Guarantee to Net Equity in Latest Financial Statements (%)	Aggregate Endorsement/ Guarantee Limit	Note
		Name	Relationship (Note 2)
1	TXC (Ningbo) Corporation	Chongqing All Sun Company Limited	Subsidiary with equity method	$ 2,482,217	$ 358,024	$ 358,024	$ 12,978	$ -	7.21	$ 4,964,433

Note 1: The total amount of TXC (Ningbo) Corporation endorsements and guarantees provided shall not exceed 100% of the amount of the net value of TXC (Ningbo) Corporation; and the amount of individual entity endorsements shall not exceed 5% of the amount of the net value of the individual entity. However, the amount of individual entity endorsements is permitted with 100% of net value of subsidiary.

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TABLE 2

TXC CORPORATION AND SUBSIDIARIES

MARKETABLE SECURITIES HELD DECEMBER 31, 2018

(In Thousands of New Taiwan Dollars)

Holding Company Name	Type and Name of Marketable Securities	Relationship with the Holding Company	Financial Statement Account			December	31, 2018			Note
				Shares		Carrying Amount	Percentage of Ownership		Shares
TXC Corporation TXC (Ningbo) Corporation	Stock listed overseas Guandong Failong Crystal Technology Co., Ltd. Stock-unlisted company Marson Technology Co., Ltd. Win Win Precision Technology Co., Ltd. UPI Semiconductor Corp. Stock-listed company Fubon B special stock Cathay B special stock Financial bonds Westpac Banking Corp. Structured deposits China Everbright Bank Bank of Communication HengFeng Bank Mutual fund GF Fund ABC Monetary Fund China Monetary Fund Taijing No. 1 Monetary Fund	None None None Chairman is a direct of the Company None None None None ″ ″ None 〃 〃 〃	Financial assets at fair value through other comprehensive income - non-current Financial assets at fair value through other comprehensive income - non-current ″ ″ Financial assets at fair value through profit or loss - non-current 〃 Financial assets at amortized cost - current Financial assets at fair value through profit or loss - current ″ ″ Financial assets at fair value through profit or loss - current 〃 〃 〃	6,693 523 1,365 1,516 250 250 RMB 9,000 RMB 36,245 RMB 30,088 RMB 10,079 RMB 5,080 RMB 26,260 RMB 10,030 RMB 33,460		$ 250,698 $ 4,773 14,256 61,198 $ 80,227 $ 15,500 15,475 $ 30,975 $ 40,355 $ 162,208 134,654 45,106 $ 341,968 $ 22,735 117,523 44,889 149,742 $ 334,889	4 4 3 2 - -		$ 250,698 $ 4,773 14,256 61,198 $ 80,227 $ 15,500 15,475 $ 30,975 $ 40,355 $ 162,208 134,654 45,106 $ 341,968 $ 22,735 117,523 44,889 149,742 $ 334,889

(Continued)

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Holding Company Name	Type and Name of Marketable Securities	Relationship with the Holding Company	Financial Statement Account			**December **	31, 2018			Note
				Shares		Carrying Amount	Percentage of Ownership		Shares
TXC (Chongqing) Limited Ningbo Jingyu Company Limited Chongqing All Sun Company Limited Ding Kai Investment Management Company Limited	Mutual fund Southern Currency Fund B Southern Currency Fund E Southern Currency Fund A E Fund Monetary Fund A E Fund Monetary Fund B Mutual fund Southern Cash Fund Mutual fund Southern Currency Fund B Stock unlisted overseas Zhejiang Boland Semiconductor Technology Co., Ltd.	None ″ ″ ″ ″ None None None	Financial assets at fair value through profit or loss - current ″ ″ ″ ″ Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through other comprehensive income - non-current	RMB 19,542 RMB 8,346 RMB 2,004 RMB 2,057 RMB 10,023 RMB 60 RMB 8,061 RMB 7,000		$ 87,455 37,351 8,970 9,208 44,854 $ 187,838 $ 267 $ 36,074 $ 163,317	6		$ 87,455 37,351 8,970 9,208 44,854 $ 187,838 $ 267 $ 36,074 $ 163,317

(Concluded)

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TABLE 3

TXC CORPORATION 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 FOR THE YEAR ENDED DECEMBER 31, 2018

(In Thousands of New Taiwan Dollars)

Company Name	Marketable Securities Type andName	Financial Statement Account	Counterparty	Relationship	Beginning Balance	Beginning Balance	Acquisition	Acquisition		Disposal	Disposal		Equity in Net Gain (Loss)	Ending	Balance
					Shares	Amount	Shares	Amount	Shares	Amount	Carrying Amount	Gain (Loss) on Disposal		Shares	Amount
TXC (Chongqing) Limited TXC (Ninbo) Limited	Mutual Fund Structured deposits	Financial instruments at FVTPL - current Financial instruments at FVTPL - current	Southern Currency Fund B Agricultural Bank of China Limited	None None	- -	$ 117,791 160,436	- -	$ 307,932 272,065	- -	$ (337,721) (301,598)	$ (337,721) (301,598)	$ - -	$ (547) 3,751	- -	$ 87,455 134,654

• 79 -

TABLE 4

TXC CORPORATION AND SUBSIDIARIES

TOTAL PURCHASES FROM OR SALES TO RELATED PARTIES OF AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL FOR THE YEAR ENDED DECEMBER 31, 2018

(In Thousands of New Taiwan Dollars)

Buyer	Related Party	Relationship		Transaction Details	Transaction Details	Transaction Details	Abnormal Transaction	Abnormal Transaction	Notes/Accounts Payable or Receivable	Notes/Accounts Payable or Receivable	Note
			Purchase/ Sale	Amount	% to Total	Payment Terms	Unit Price	Payment Terms	Ending Balance	% to Total
TXC Corporation TXC (Ningbo) Corporation	TXC (Ningbo) Corporation TXC (Chongqing) Limited Growing Profit Trading Ltd. Growing Profit Trading Ltd. TXC (Chongqing) Limited	Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary	Purchase Sale Purchase Purchase Purchase Purchase	$ 1,663,711 (297,164) 731,936 133,329 166,868 259,549	33 (5) 15 3 9 14	Note ″ ″ ″ ″ ″	Its trading price depends on its function within the Group ″ ″ ″ ″ ″	Note ″ ″ ″ ″ ″	$ (423,140) 98,303 (178,878) (33,855) (34,631) (88,568)	(35) 4 (15) (3) (6) (14)

Note: The terms of purchases from related parties were not significantly different from those with third parties.

• 80 -

TABLE 5

TXC CORPORATION AND SUBSIDIARIES

RECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL DECEMBER 31, 2018

(In Thousands of New Taiwan Dollars)

Company Name	Related Party	Relationship	Ending Balance	Turnover Rate	Overdue	Overdue	Amount Received in Subsequent Period	Allowance for Impairment Loss
					Amount	**Actions Taken **
TXC (Ningbo) Corporation TXC (Chongqing) Corporation	TXC Corporation TXC Corporation	Parent entity Parent entity	$ 423,140 178,878	3.9 4.1	$ - -	- -	$ 422,493 178,878	$ - -

• 81 -

TABLE 6

TXC CORPORATION AND SUBSIDIARIES

NAMES, LOCATIONS, AND RELATED INFORMATION OF INVESTEES ON WHICH THE COMPANY EXERCISES SIGNIFICANT INFLUENCE DECEMBER 31, 2018

(In Thousands of New Taiwan Dollars or U.S. Dollars)

Investor Company	Investee Company	Location	Main Businesses and Products	Original Investment Amount	Original Investment Amount	Balance	as of December 31, 2018	as of December 31, 2018	Net Income (Losses) of the Investee	Equity in the Earnings (Losses)	Note
				December 31, 2018	December 31, 2017	Shares (In Thousands)	Percentage of Ownership	Carrying Value
TXC Corporation Taiwan Crystal Technology International Ltd. TXC (Ningbo) Corporation Taiwan Crystal Technology International (HK) Limited	Taiwan Crystal Technology International Ltd. TXC Technology Inc. TXC Japan Corporation Taiwan Crystal Technology International (HK) Limited TXC EUROPE GNBH Tai-Shing Electronics Components Corporation TXC Optec Corporation Godsmith Sensor Inc. Growing Profit Trading Ltd. TXC (Ningbo) Corporation TXC (Chongqing) Corporation Chongqing All Sun Company Limited Ningbo Jingyu Company Limited Ningbo Free Trade Zon Ding Kai Investment Management Company Ningbo Longying Semiconductor Co., LTD. TXC (Chongqing) Limited	Western Samoa U.S.A. Japan Hong Kong Germany Taiwan Taiwan Taiwan B.V.I. Ningbo Chongqing Chongqing Ningbo Ningbo Ningbo Chongqing	Investment Marketing activities Marketing activities Investment Marketing activities Manufacture and sales of electronics products Manufacture and sales of sapphire Manufacture of equipment International trading Manufacture and sales of electronics products Manufacture and sales of electronics products Market activities International trading Investment management Research and development in integrated circuit Manufacture and sales of electronics products	$ 1,390,461 9,879 6,172 1,958 1,746 282,306 - 38,100 1,691 1,487,211 1,003,222 426,259 7,090 160,043 60,540 -	$ 1,390,461 9,879 6,172 298,362 - 86,104 444,718 - 1,691 1,487,211 604,152 312,644 7,090 160,043 - 298,362	42,835 300 2 80 50 6,913 - 2,350 50 45,835 133,825 111,000 2,500 35,050 2,400 -	100.00 100.00 100.00 100.00 100.00 26.19 - 34.96 100.00 100.00 100.00 100.00 100.00 100.00 40.00 -	$ 5,128,270 15,572 27,806 93,053 2,130 302,443 - 34,942 175,348 4,964,433 1,234,396 483,670 4,077 163,464 59,005 -	$ 295,809 732 4,918 612 369 99,379 (909) (12,958) 2,661 284,108 94,527 (8,294) (2,350) (1) (5,200) 94,527	$ 295,563 732 4,918 612 369 15,257 (808) (3,050) 2,661 284,108 92,985 (8,294) (2,350) (1) (2,081) 1,542	Difference from upstream transactions $(246) thousand Note 1 Note 2

Note 1: TXC Optec Corporation. was cleared and cleared by resolution of the shareholders meeting on August 24, 2017. And completed the liquidation on April 9, 2018.

Note 2: In the first quarter of 2018, Taiwan Crystal Technology (HK) Limited transferred its entire equity holding of TXC (Chongqing) Corporation to TXC (Ningbo) Corporation with a consideration of RMB86,600 thousand.

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TABLE 7

TXC CORPORATION AND SUBSIDIARIES

INFORMATION ON INVESTMENT IN MAINLAND CHINA FOR THE YEAR ENDED DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars or U.S. Dollars)

1. Name of the investees in Mainland China, main businesses and products, paid-in capital, method of investment, information on inflow or outflow of capital, percentage of ownership, investment income or loss, ending balance of investment, dividends remitted by the investee, and the limit of investment in Mainland China:

Investee Company	Main Businesses and Products	Main Businesses and Products	Total Amount of Paid-in Capital	Method of Investment	Method of Investment	Accumulated Outflow of Investment from Taiwan as of January 1, 2018 (US$ in Thousand)	Investment Flows	Investment Flows	Accumulated Outflow of Investment from Taiwan as of December 31, 2018 (US$ in Thousand)	Investee Company Current Net Income	Percentage of Ownership	Investment Income (Loss) Recognized	Carrying Amount as of December 31, 2018	Accumulated Inward Remittance of Earnings as of December 31, 2018
							Outflow	Inflow
TXC (Ningbo) Corporation Guandong Failong Crystal Technology Co., Ltd. TXC (Chongqing) Corporation Chongqing All Suns Company Limited Ningbo Jingyu Company Limited Ningbo Longying Semiconductor Co., LTD. Ningbo Free Trade Zon Ding Kai Investment Management Company	Manufacturing and sales of crystal and crystal oscillator Manufacturing and sales of new electronic components Manufacturing and sales of electronic devices and hardware components Real estate intermediary service, real estate management and electronic product wholesale Purchasing and selling electronic component Research and development in integrated circuit Investment Management		$ 1,487,211 580,947 902,514 312,644 7,090 183,180 160,043	Indirect investment of the Corporation in Mainland China through the Corporation’s subsidiary in a third region Direct investment of the Corporation in Mainland China Indirect investment of the Corporation in Mainland China through the Corporation’s subsidiary in a third region Other investment of the Corporation Mainland China Other investment of the Corporation Mainland China Other investment of the Corporation Mainland China Other investment of the Corporation Mainland China		$ 1,427,630 46,478 298,362 - - - -	$ - - - - - - -	$ - - 298,362 - - - -	$ 1,427,630 46,478 - - - - -	$ 284,108 80,132 94,527 (8,294) (2,350) (5,200) (1)	100 4 100 100 100 40 100	$ 284,108 - 92,985 (8,294) (2,350) (2,081) (1)	$ 4,964,433 250,698 1,234,396 483,670 4,077 59,005 163,464	$ 256,146 252,022 306,500 - - - -
Investment limits in Mainland China:
Accumulated Investment in Mainland China as of December 31, 2018		Investment Amounts Authorized by Investment Commission, MOEA			Upper Limit on the Amount of Investment Stipulated by Investment Commission, MOEA
$1,474,108		$1,832,878			$ -

1. Investment limits in Mainland China:

Note: The investment in Mainland China has no maximum limitation since TXC Corporation had acquire the approval by the Industrial Development Bureau of the Company’s establishment of operating head quarters in Taiwan.

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TABLE 8

TXC CORPORATION AND SUBSIDIARIES

SIGNIFICANT TRANSACTIONS WITH INVESTEE COMPANIES IN MAINLAND CHINA, EITHER DIRECTLY OR INDIRECTLY THROUGH A THIRD AREA, AND THEIR PRICES, PAYMENT TERMS, AND UNREALIZED GAINS OR LOSSES

FOR THE YEAR ENDED DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars)

1. Significant direct or indirect transactions with the investees, prices and terms of payment, unrealized gain or loss:

Company Name	Related Party	Transaction Type			Transaction Details	Transaction Details		Accounts/Notes Receivable/Payable	Accounts/Notes Receivable/Payable	Unrealized Gain or Loss
			Amount	Percentage (%)	Price	Payment Term	Compared with Terms of Third Parties	Balance	%
TXC Corporation Growing profits Trading Ltd.	TXC (Ningbo) Corporation TXC (Ningbo) Corporation TXC (Chongqing) Corporation TXC (Ningbo) Corporation	Purchase Sale Purchase Sale	$ 1,633,711 297,164 731,936 166,868	33 5 15 27	Its trading price depends on its function within the Group ″ ″ ″	Similar with third parties ″ ″ ″	Its trading price depends on its function within the Group ″ ″ ″	$ (423,140) 98,303 (178,878) 34,631	(35) 4 (15) 20	$ 6,601 452 3,725 -

1. Endorsements guarantees or collateral directly or indirectly provided to the investees: None.

2. Financings directly or indirectly provided to the investees: None.

3. The maximum balance of funds, the ending balance, the interest rate range and the total amount of current interest: None.

4. Other transactions that significantly impacted current year’s profit or loss or financial position: None.

5. 84 -

TABLE 9

TXC CORPORATION AND SUBSIDIARIES

INTERCOMPANY RELATIONSHIPS AND SIGNIFICANT INTERCOMPANY TRANSACTIONS FOR THE YEAR ENDED DECEMBER 31, 2018

(In Thousands of New Taiwan Dollars)

For the year ended December 31, 2018

No.	Company Name	Counterparty	Natural of Relationship (Note 1)		Intercompany Transactions	Intercompany Transactions
				Accounts	Amount	Terms (Note 2)	Percentage of Consolidated Total Gross Sales or Total Assets (%)
0	TXC Corporation	TXC Technology, Inc. TXC Japan Corporation TXC (Ningbo) Corporation TXC (Chongqing) Corporation Growing profits Trading Ltd.	a a a a	Other expense - consulting expense Other expense - consulting expense Purchase Sales Sales Purchase Trade receivables Other receivables Trade payables Purchase Trade payables Purchase Trade payables	$ 69,758 32,787 5,494 8,185 297,164 1,663,711 98,303 6,143 423,140 731,936 178,878 133,329 33,855	1 1 1 1 1 1 1 1 1 1 1 1 1	1 - - - 4 20 1 - 3 9 1 2 -
1	TXC (Ningbo) Corporation	Growing profits Trading Ltd. TXC (Chongqing) Corporation	c c	Purchase Trade payables Sales Purchase Trade receivables Trade payables	166,868 34,631 74,954 259,549 11,143 88,568	3 3 3 3 3 3	2 - 1 3 - 1

Note 1: a. Represent the transactions from parent company to subsidiary.

• c. Represent the transactions between subsidiaries.

Note 2: In 2018, the selling price and purchasing price were not significantly different from those with third parties, except those for TXC (Ningbo) Corporation, TXC (Chongqing) Limited and Growing profits Trading Ltd which is depends on its function within the Group.

• 85 -