ZERO ONE - Audit Report / Information 2018

Code ： 3029

ZERO ONE TECHNOLOGY CO., LTD.

PARENT COMPANY ONLY FINANCIAL STATEMENTS FOR THE THE YEARS ENDED DECEMBER 31, 2018 AND 2017 AND INDEPENDENT AUDITORS’ REPORT

Address: 10F., No.8, Ln. 360, Sec. 1, Neihu Rd., Taipei City. Dial: +886 2 2656 5656

§TABLE OF CONTENTS§

Contents 1`、`Cover 2`、`Table of Contents 3`、`Independent Auditors’ Review Report 4`、`Parent company only Balance Sheets 5`、`Parent company only Statements of Comprehensive Income 6`、`Parent company only Statements of Changes in Equity 7`、`Parent company only Statements of Cash Flows 8`、`Notes to Parent company only Financial Statements (1) General (2) The date and procedures of authorization of financial statements (3);Application of new and revised standards and interpretations (4) Summary of significant accounting policies (5) Critical Accounting judgements and key sources of estimation and uncertainty (6) Explanation of significant accounts (7) Related parties transactions (8) Pledged assets (9) Significant contingent liabilities and unrecognized commitments (10)Foreign-currency-denominated assets and liabilities that have significant influence (11) Separately disclosed items A. Information on significant transactions B. Information on investees C. Information on investment in Mainland China 9`、`List of major account tiles	Page No. 1 2 3`～`5 6 7`～`8 9 10`～`11 12 12 12`～`15 16`～`26 26 27`～`48 49 50 50 50 51`、` 52`～`54 51`、`55 51 56~70	Financial Report’s Note No. - - - - - - - 1 2 3 4 5 6`～`27 28 29 30 31 32 32 32 -

INDEPENDENT AUDITORS' REPORT

The board of directors and Shareholders Zero One Technology Company Limited

Opinion

We have audited the accompanying parent company only financial statements of zero one technology company limited, which comprise the parent company only balance sheets as of december 31, 2018 and 2017, and the parent company only statements of comprehensive income, changes in equity and cash flows for the years then ended december 31, 2018 and 2017, and the notes to the parent company only financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying parent company only financial statements present fairly, in all material respects, the parent company only financial position of the company as of december 31, 2018 and 2017, and its parent company only financial performance and its parent company only cash flows for the years then ended december 31, 2018 and 2017.

Basis for Opinion

We conducted our audits in accordance with the Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants and auditing standards generally accepted in the republic of china. our responsibilities under those standards are further described in the auditors' responsibilities for the audit of the parent company only financial statements section of our report. we are independent of the company in accordance with the norm of professional ethics for certified public accountant of the republic of china and we have fulfilled our other ethical responsibilities in accordance with these requirements. we believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

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

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

Valuation of allowance for uncollectible accounts

Key Audit Matters

As indicated in Note 5 and Note 13 for judgements, the management of the Company assesses the collectability of accounts receivable and valuation of allowance for uncollectible accounts, based on the regulations of IFRS 9, and recognizes allowance for uncollectible accounts by lifetime expected credit losses. As the estimation of allowance for uncollectible accounts is subject to judgement of the management, we consider the valuation of allowance for uncollectible accounts a key audit matter.

We access the policy of valuation of allowance for uncollectible accounts, assure reasonability of the rate of expected credit losses, and require reasons for insuring that credit losses of individuals with delinquent accounts are expected.

The following audit procedures

Our procedure includes understanding and testing controls of allowance for uncollectible accounts by the management in line with periodic review, predicting and managing differences as tracked for losses, design and execution of relevant controls. We also obtain an Aging report of trade receivable for calculation the allowance for uncollectible accounts on the balance sheet date, and perform the procedure of sampling and auditing for testing the correctness of the aging report, and calculate for evaluating the amount is recognized by allowance for uncollectible accounts in line with the Company’s accounting policy for recording.

Allowance for inventory valuation loss

Key Audit Matters

The valuation of the inventory of the Company includes the estimate of net realizable value and the allowance for inventory valuation loss regarding with the outdated and obsolete inventory. Net realizable valuation, based on the historical data of market situation and similar products, of the inventory is the carrying amounts calculated by the estimate sales price deducts the estimate of input costs, and cost of goods sold, during the ordinary course of business. The material influence of market condition will affect the amount of net realizable valuation. Besides, the ratio of the allowance for inventory valuation loss is valued by inventory aging and the allowance for the actual loss We consider the estimate of net realizable valuation, and the ratio of the allowance for inventory impairment loss of the outdated and obsolete inventories a key audit matter, based on management's professional estimation.

The following audit procedures

Our procedure includes understanding the accounting policies, valuation methods, and citation information originality for the inventory of the Company, obtaining information of the year-end allowance for inventory valuation loss and inventory aging reports, drawing samples to ensure the reasonableness of the inventory as valued by net realizable value method and the inventory aging, and the carrying amount of the year-end allowance for inventory valuation loss fitting the Company’s accounting policy for allowance.

Responsibilities of Management and Those Charged with Governance for the Parent company only Financial Statements

Management is responsible for the preparation and fair presentation of the parent company only financial statements in accordance with the regulations governing the preparation of financial reports by securities issuers and the ifrs, ias, ifric, and sic endorsed and issued into effect by the financial supervisory commission of the republic of china, and for such internal control as management determines is necessary to enable the preparation of parent company only financial statements that are free from material misstatement, whether due to fraud or error.

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

Those charged with governance (including members of the supervisors) are responsible for overseeing the Company's financial reporting process.

Auditors' Responsibilities for the Audit of the Parent company only Financial Statements

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

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

;Identify and assess the risks of material misstatement of the parent company only financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
4 -
;Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control.
;Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company 's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors' report to the related disclosures in the parent company only financial statements or, if such disclosures are inadequate, to modify our opinion. our conclusions are based on the audit evidence obtained up to the date of our auditors' report. however, future events or conditions may cause the Company to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the parent company only financial statements, including the disclosures, and whether the parent company only financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
;Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the company to express an opinion on the parent company only financial statements. we are responsible for the direction, supervision and performance of the company audit. we remain solely responsible for our audit opinion.

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

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

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the parent company only financial statements 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 Wen Chin Lin and Hsin Wei Tai.

Deloitte & Touche

Taipei, Taiwan Republic of China

February 27, 2019

Notice to Readers

The accompanying parent company only financial statements are intended only to present the parent company only 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 parent company only financial statements are those generally applied in the republic of china.

For the convenience of readers, the independent auditors' report and the accompanying parent company only 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 parent company only financial statements shall prevail.

ZERO ONE TECHNOLOGY CO., LTD.

PARENT COMPANY ONLY BALANCE SHEETS DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars)

ASSETS CURRENT ASSETS Cash and cash equivalents(Note 4&6) Financial assets at fair value through profit or loss - current(Note 4&7) Financial assets at fair value through other comprehensive income - current(Note 4&8) Available-for-sale financial assets - current(Note 4&10) Financial assets at amortized cost - current(Note 4&9) Debt investments with no active market - current(Note 12) Notes receivable(Note 4&13) Trade receivables(Note 4, 5, 13&28) Inventories(Note 4, 5&14) Other current assets Total current assets NON-CURRENT ASSETS Financial assets at fair value through profit or loss - non-current(Note 4&7) Financial assets at fair value through other comprehensive income - non-current(Note 4&8) Available-for-sale financial assets - non-current(Note 4&10) Financial assets at amortized cost - non-current(Note 4, 9&29) Financial assets measured at cost - non-current(Note 4&11) Debt investments with no active market - non-current(Note 12&29) Investments accounted for using the equity method(Note 4&15) Property, plant and equipment(Note 4,16&29) Other intangible assets(Note 4) Deferred tax assets(Note 4, 5&23) Refundable deposits Total non-current assets TOTAL LIABILITIES AND EQUITY CURRENT LIABILITIES Short-term borrowings(Note 17) Trade payables(Note 28) Other payables(Note 18) Current tax liabilities(Note 4&23) Current portion of bonds payable(Note 4&19) Other current liabilities Total current liabilities NON-CURRENT LIABILITIES Deferred tax liabilities(Note 4&23) Net defined benefit liabilities - non-current(Note 4&20) Other noncurrent liabilities Total non-current liabilities Total liabilities EQUITY(Note 21) Share capital Ordinary shares Capital surplus Retained earnings Legal reserve Special reserve Unappropriated earnings Total retained earnings Other equity Total equity TOTAL		December 31, 2018 Amount % $ 201,754 5 47,473 1 7,865 - - - 560,236 13 - - 160,573 4 1,718,368 39 934,052 21 22,495 1 3,652,816 84 14,846 - 137,138 3 - - 76,828 2 - - - - 136,129 3 312,926 7 902 - 37,321 1 1,677 - 717,767 16 $ 4,370,583 100 $ 100,000 2 1,644,365 38 239,136 6 56,683 1 5,085 - 105,902 2 2,151,171 49 736 - 21,579 1 800 - 23,115 1 2,174,286 50 1,228,965 28 446,515 10 159,438 4 15,501 - 362,722 8 537,661 12 (16,844) - 2,196,297 50 $ 4,370,583 100		December 31, 2017	December 31, 2017
		Amount $ 201,754 47,473 7,865 - 560,236 - 160,573 1,718,368 934,052 22,495 3,652,816 14,846 137,138 - 76,828 - - 136,129 312,926 902 37,321 1,677 717,767 $ 4,370,583 $ 100,000 1,644,365 239,136 56,683 5,085 105,902 2,151,171 736 21,579 800 23,115 2,174,286 1,228,965 446,515 159,438 15,501 362,722 537,661 (16,844) 2,196,297 $ 4,370,583		Amount $ 624,337 51,338 - 13,709 - 205,866 185,228 1,457,385 465,673 6,068 3,009,604 - - 68,565 - 510 9,016 139,432 308,819 893 18,529 1,484 547,248 $ 3,556,852 $ - 1,204,547 130,998 32,423 9,733 73,733 1,451,434 434 20,922 90 21,446 1,472,880 1,224,804 434,135 139,840 16,723 283,971 440,534 (15,501) 2,083,972 $ 3,556,852	%
					18 2 - - - 6 5 41 13 - 85 - - 2 - - - 4 9 - - - 15 100 - 34 4 1 - 2 41 - - - - 41 35 12 4 - 8 12 - 59 100

ZERO ONE TECHNOLOGY CO., LTD.

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

OPERATING REVENUE(Note 4&28) Net sales OPERATING COSTS(Note 14&28) Cost of goods sold GROSS PROFIT OPERATING EXPENSES(Note 22) Selling and marketing expenses General and administrative expenses Expected credit loss reversed on trade receivables Total operating expenses PROFIT FROM OPERATIONS NON-OPERATING INCOME AND EXPENSES(Note 22) Other income Other gains and losses Finance costs Share of profit or loss of subsidiaries, associates and joint ventures(Note 15) Total non-operating income and expenses PROFIT BEFORE INCOME TAX INCOME TAX EXPENSE(Note 23) NET PROFIT		2018	% 100 90 10 4 2 - 6 4 1 - - - 1 5 1 4		2017
		Amount $ 6,551,970 5,902,692 649,278 278,359 104,773 (16,494) 366,638 282,640 32,172 2,828 (358) (1,805) 32,837 315,477 62,538 $ 252,939			Amount $ 5,836,451 5,263,781 572,670 218,141 112,207 - 330,348 242,322 16,717 610 (361) (13,978) 2,988 245,310 49,327 $ 195,983	%
						100 90 10 4 2 - 6 4 - - - - - 4 1 3

(Continued)

ZERO ONE TECHNOLOGY CO., LTD.

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

2018	2017
Amount ($ 1,183) (2,289) 674 (2,798) - (4,375) (4,375) (7,173) $ 245,766 $ 2.06 $ 2.03	Amount ($ 737) - 125 (612) 2,183 (961) 1,222 610 $ 196,593 $ 1.61 $ 1.58	%
($		- - - - - - - - 3




$	$

(Concluded)

ZERO ONE TECHNOLOGY CO., LTD.

PARENT COMPANY ONLY STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

BALANCE, JANUARY 1, 2017 Appropriation of 2016 earnings Legal reserve Reversal of special reserve Cash dividends - NT$1.2 per share 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 Convertible bonds converted to capital stock Share based payment transaction - employee stock option Issuance of ordinary shares under employee share options BALANCE, DECEMBER 31, 2017 Effect of retrospective application and retrospective restatement BALANCE, JANUARY 1, 2018 AS RESTATED Appropriation of the 2017 earnings Legal reserve Special reserve Cash dividends - NT$1.3 per share Net profit for the year ended December 31, 2018 Other comprehensive income (loss) for the year ended December 31, 2018, net of income tax Total comprehensive income (loss) for the year ended December 31, 2018 Convertible bonds converted to capital stock Share based payment transaction - employee stock option Issuance of ordinary shares under employee share options Disposals of investments in equity instruments designated as at fair value through other comprehensive income BALANCE AT DECEMBER 31, 2018		Share Capital Shares (In Thousand) Issued Capital Capital Surplus 121,265 $ 1,212,655 $ 421,421 - - - - - - - - - - - - - - - - - - 1,188 11,879 7,267 - - 5,342 27 270 105 122,480 1,224,804 434,135 - - - 122,480 1,224,804 434,135 - - - - - - - - - - - - - - - - - - 311 3,111 1,681 - - 10,252 105 1,050 447 - - - 122,896 $ 1,228,965 $ 446,515		Retained Earnings	Total $ 391,853 - - (146,690 ) 195,983 (612) 195,371 - - - 440,534 4,955 445,489 - - (159,484 ) 252,939 (509) 252,430 - - - (774) $ 537,661	Other Equity	Total $ (16,723 ) - - - - 1,222 1,222 - - - (15,501 ) 4,547 (10,954 ) - - - - (6,664) (6,664) - - - 774 $ (16,844)	Total Equity $ 2,009,206 - - (146,690 ) 195,983 610 196,593 19,146 5,342 375 2,083,972 9,502 2,093,474 - - (159,484 ) 252,939 (7,173) 245,766 4,792 10,252 1,497 - $ 2,196,297
						Unrealized Gain (Loss) on Financial Assets at Fair Unrealized Gain Value Through (Loss) on Other Available-for-sale Comprehensive Financial Assets Income $ (16,723 ) $ - - - - - - - - - 1,222 - 1,222 - - - - - - - (15,501 ) - 15,501 (10,954) - (10,954 ) - - - - - - - - - (6,664) - (6,664) - - - - - - - 774 $ - $ (16,844)
		Shares (In Thousand) 121,265 - - - - - - 1,188 - 27 122,480 - 122,480 - - - - - - 311 - 105 - 122,896		Unappropriated Legal Reserve Special Reserve Earnings $ 117,432 $ 22,876 $ 251,545 22,408 - (22,408 ) - (6,153 ) 6,153 - - (146,690 ) - - 195,983 - - (612) - - 195,371 - - - - - - - - - 139,840 16,723 283,971 - - 4,955 139,840 16,723 288,926 19,598 - (19,598 ) - (1,222 ) 1,222 - - (159,484 ) - - 252,939 - - (509) - - 252,430 - - - - - - - - - - - (774) $ 159,438 $ 15,501 $ 362,722

ZERO ONE TECHNOLOGY CO., LTD.

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

CASH FLOWS FROM OPERATING ACTIVITIES Profit before income tax Adjustments for: Write-down (reversal of write-down) of inventories Impairment loss recognized (reversed) on trade receivable Expected credit loss recognized (reversed) on trade receivables Interest income Depreciation expenses Compensation costs of employee share options Dividend income Net (gain) loss on foreign currency exchange Share of loss of subsidiaries, associates and joint ventures accounted for using the equity method Amortization expenses Disposal of associates Finance costs Net loss (gain) on fair value change of financial assets/liabilities at fair value through profit or loss Loss (gain) on disposal of property, plant and equipment Net loss on disposal of available-for-sale financial assets Changes in operating assets and liabilities Financial assets held for trading Financial assets mandatorily classified as at fair value through profit or loss Notes receivable Trade receivables Inventories Other current assets Trade payable Other payable Other current liabilities Net defined benefit liabilities Cash generated from operations Income tax paid Net cash generated from operating activities		2018 $ 315,477 73,836 - (16,494) (16,502) 10,688 10,252 (5,092) (2,530) 1,805 626 49 358 247 2 - - 3,185 24,655 (244,155) (548,874) (13,611) 436,155 107,876 32,169 (526) 169,596 (56,094) 113,502		2017
				$ 245,310 (4,943) 26,696 - (9,592) 6,144 5,342 (710) 22,486 13,978 821 - 361 (5,498) (2) 434 38,012 - (78,874) 34,031 (25,278) 65,427 115,180 (13,863) 3,755 (650) 438,567 (38,902) 399,665

(Continued)

10 -

ZERO ONE TECHNOLOGY CO., LTD.

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

CASH FLOWS FROM INVESTING ACTIVITIES Purchase of financial assets at amortized cost Purchase of financial assets at fair value through other comprehensive income Interest received Payments for property, plant and equipment Other dividends received Proceeds from sale of financial assets at fair value through other comprehensive income Payments for intangible assets Net cash inflow on disposal of associates Increase in refundable deposits Proceeds from disposal of property, plant and equipment Proceeds from disposal of intangible assets Acquisition of investments accounted for using the equity method Proceeds from sale of debt investments with no active market Purchase of available-for-sale financial assets Dividend received from subsidiaries Proceeds from sale of available-for-sale financial assets Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Dividends paid Increase in short-term borrowings Exercise of employee share options Increase in guarantee deposits Interest paid Payments of financial lease liabilities Repayment of long-term borrowings Net cash used in financing activities EFFECTS OF EXCHANGE RATE CHANGES ON THE BALANCE OF CASH AND CASH EQUIVALENTS HELD IN FOREIGN CURRENCIES NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR		2018 ($422,182) (73,883) 13,800 (8,217) 5,092 1,195 (700) 340 (193) 79 65 - - - - - (484,604) (159,484) 100,000 1,497 710 (196) - - (57,473) 5,992 (422,583) 624,337 $ 201,754		2017
				$- - 9,309 (11,232) 710 - (633) - (332) 50 - (109,450) 67,145 (18,822) 3,500 598 (59,157) (146,690) - 375 - (41) 4,000 (4,000) (146,356) (19,744) 174,408 449,929 $ 624,337

(Concluded)

11 -

ZERO ONE TECHNOLOGY CO., LTD.

NOTES TO PARENT COMPANY ONLY FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2018 and 2017

(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)

1. GENERAL

ZERO ONE TECHNOLOGY CO., LTD. (ZOTC) was incorporated as a company limited by shares under the provisions of the Company Law of the Republic of China in June 27, 1980. On January 21, 2000, ZOTC’s Shares were listed on Taipei Exchange(TPEX). On August 26, 2002, ZOTC’s shares were listed on the Taiwan Stock Exchange(TWSE). ZOTC is a dedicated foundry in the technology industry which engages mainly in the design, manufacturing, packaging, selling, consulting and services of electronic information, computer software, hardware, accessories, components and Chinese data processing, etc.

The parent company only financial statements are expressed by the functional currency (new taiwan dollars) of the company.

2. THE DATE AND PROCEDURES OF AUTHORIZATION OF FINANCIAL STATEMENTS

The accompanying parent company only financial statements were approved by the board of directors and issued on february 27, 2019.

3. ;APPLICATION OF NEW AND REVISED STANDARDS AND INTERPRETATIONS

(1)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), IFRIC Interpretations (IFRIC), and SIC Interpretations (SIC) (collectively, “IFRSs”) endorsed and issued into effect by the Financial Supervisory Commission (FSC).

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 for application would not have a significant effect on the Group’s accounting policies:

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. Please refer to Note 4 for information relating to the relevant accounting policies.

Classification, measurement and impairment of financial assets

On the basis of the facts and circumstances that existed as at January 1, 2018, the Company has performed an assessment of the classification of recognized financial assets and has elected not to restate prior reporting periods. The impact on measurement categories, carrying amounts and any changes when retrospectively applying IAS 39 and IFRS 9 on January 1, 2018 is detailed below:

The types of financial assets	Measurement Category	Measurement Category	Carrying	Amount	Re- mark
	IAS 39	IFRS 9	IAS 39	IFRS 9
Cash and cash equivalents Stock investments Time deposits with original maturity of more than 3 months Note, trade and other receivable Refundable deposits	Loans and receivables Available`‑`for`‑` sale financial assets Available`‑`for`‑` sale financial assets Debt investments with no active market Loans and receivables Loans and receivables	Amortized cost Mandatorily at FVTPL Investments in equity instruments measured at FVTOCI Amortized cost Amortized cost Amortized cost	$624,337 14,416 68,368 214,882 1,643,283 1,484	$624,337 14,416 74,604 214,882 1,643,283 1,484	A A B C

12 -

Financial Assets measured at FVTPL Add:Reclassification from available-for -sale financial assets (IAS 39) `－`mandatorily reclassification Financial Assets measured at FVTOCI `－`Equity instruments Add:Reclassification from available-for sale financial assets (IAS 39) Total	Carrying Amount as of January 1, 2018 (IAS 39)	Carrying Amount as of January 1, 2018 (IAS 39)		Reclassifi- cations	Remea- surements	Remea- surements	Carrying Amounts as of January 1, 2018 (IFRS 9)	Carrying Amounts as of January 1, 2018 (IFRS 9)	Retained Earnings Effect on January 1, 2018	Retained Earnings Effect on January 1, 2018	Other Equity Effect on January 1, 2018	Other Equity Effect on January 1, 2018	Re- mark
		$ - - $ -		$14,416 68,368 $82,784		$ - 6,236 $ 6,236		$14,416 74,604 $89,020		$ 449 1,240 $ 1,689	(	$ 449) 4,996 $ 4,547	A A

A. As stock investments that were previously classified as available -for-sale financial assets under IAS 39, the Company elected to designate all of these investments as at and FVTPL and FVTOCI under IFRS 9. As a result, the related other equity-unrealized gain/loss on available -for-sale financial assets of 449 and （ 14,989 ） thousand is reclassified to retained earnings and other equity - unrealized gain/loss on financial assets at FVTOCI.

As stock investments of private company stock previously measured at cost under IAS 39 are remeasured at fair value, being classified as measured at FVTOCI, based on IFRS 9, an increase in other equity-unrealized gain/loss on financial assets measured at FVTOCI of 6,236 thousand on January 1, 2018.

For those equity investments previously classified as measured at cost financial assets under IAS 39, the impairment losses that the Company had recognized have been accumulated in retained earnings. Since these investments were designated as at FVTOCI under IFRS 9 and no impairment assessment is required, the adjustments would result in a decrease in other equity - unrealized gain/loss on financial assets at FVTOCI of NT$1,240 thousand and an increase in retained earnings of NT$1,240 thousand on January 1, 2018.

B.;Debt investments with no active market and bond investments measured at amortized cost previously recognized under IAS 39 by contractual cash flows from interests paid calculated by principal and principal outstanding, and the Company assesses operating models for receiving contractual cash flows, and then classifies the above investments as measured at amortized cost under IFRS 9 with an assessment of expected credit losses, classifying on the basis of the facts and circumstances of investments on January 1, 2018.
C. ;Notes receivable, trade receivable, and other receivable previously classifying as loans and receivables under IAS 39, were classified as measured at amortized cost with an assessment of expected credit losses under IFRS 9.
D.; As for investments accounted for using the equity method applying IFRS 9 retrospectively, The other equity-unrealized gain/loss on available -for-sale financial assets of （ 961 ） thousand is reclassified to other equity - unrealized gain/loss on financial assets at FVTOCI. The adjustments would result in a decrease in other equity - unrealized gain/loss on financial assets at FVTOCI of NT$961 thousand and an increase in retained earnings of NT$3,266 thousand.
13 -
(2) the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the IFRSs endorsed by the FSC for application starting from 2019

by the FSC for application starting from 2019
New,Revised,Amended Standards and Interpretations	Effective Date Issued bythe IASB(Note 1)
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”	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, Revised, Amended Standards or Interpretations 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 January 1, 2018.
Note 3: The Company shall apply these amendments to plan amendments, curtailments or settlements occurring on or after January 1, 2019.

IFRS 16 “Leases”

IFRS 16 sets out the accounting standards for leases , and applicable accounting policy between lessor and lessee that will supersede IAS 17 ”Leases”, IFRIC 4 ”Determining whether an Arrangement contains a Lease” and a number of related interpretations.

Definition of a lease

Upon initial application of IFRS 16, the Company 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 Company as lessee

Upon initial application of IFRS 16, the Company will recognize right-of-use assets and lease liabilities for all leases o n the parent company only 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 parent company only statements of comprehensive income, the company will present the depreciation expense charged on right-of-use assets separately from the interest expense accrued on lease liabilities; interest is computed using the effective interest method. on the parent company only 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 are recognized as expenses on a straight -line basis under ifrs 16. cash flows for operating leases are classified within operating activities on the parent company only statements of cash flows.

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

Leases agreements classified as operating leases under IAS 17, except for leases of low-value asset and short-term leases, will be measured at the present value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate on January 1, 2019. Right-of-use assets are measured at an amount equal to the lease liabilities, adjusted by the amount of any prepaid or accrued lease payments. Right-of-use assets are subject to impairment testing under IAS 36.

14 -

The Company expects to apply the following practical expedients:

a) The Company will apply a single discount rate to a portfolio of leases with reasonably similar characteristics to measure lease liabilities.
b) The Company will account for those leases for which the lease term ends on or before December 31, 2019 as short -term leases.
c) The Company will use hindsight, such as in determining lease terms, to measure lease liabilities.

The Company as lessor

Except for sublease transactions, The Company 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 as of January 1, 2019.

Right-of-use assets Total effect on assets Lease liabilities - current Total effect on liabilities Retained earnings Total effect on equity	Carrying Amount as of December 31, 2018 $ - - 537,661	Adjustments Arising from Initial Application $ 3,536 $ 3,536 $ 3,536 $ 3,536 $ - $ -	Adjusted Carrying Amount as of January1,2019
			$ 3,536 3,536 537,661

Except for the above impact, as of the date the parent company only financial statements were authorized for issue, the company is continuously assessing the possible impact that the application of other standards and interpretations will have on the company’s financial position and financial performance .

(3)New IFRSs in issue by the IASB but not yet endorsed and issued into effect by the FS C

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

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

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

As of the date the parent company only financial statements were authorized for issue, the company is continuously assessing the possible impact that the application of above standards and interpretations will have on the company’s financial position and financial performance, and will d isclose the relevant impact when the assessment is completed.

15 -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1)Statement of compliance

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

(2)Basis of preparation

The Parent company only financial statements have been prepared on the historical cost basis except for financial instr uments which are measured at fair value, and present value of defined benefits plans deducts net defined benefit liabilities 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:

  - A.; Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities, which can be acquired during measurement date;

B. 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);
- C. Level 3 inputs are unobservable inputs for the asset or liability.
(3)Classification of current and non-current assets and liabilities Current assets include:
- A.;Assets held primarily for the purpose of trading;
- B.; Assets expected to be realized within twelve months after the reporting period; and
- C. ;Cash and cash equivalents unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.

Current liabilities include:

A.; Liabilities held primarily for the purpose of trading;
B. Liabilities due to be settled within twelve 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 parent company only financial statements are authorized for issue; and
C. Liabilities for which the Company does not have an unconditional right to defer settlement for at least twelve months after the reporting period, unless issuing equities to defer settlement wouldn’t affect classification, depending on liabilities conditions.

Assets and liabilities that are not classified as current are classified as non -current.

(4)Foreign currencies

In preparing the financial statements of each indivi dual 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 denomin ated 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 in the period.

Non-monetary items measured at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Exchange differences arising on 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 case, 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.

16 -

(5)Inventories

Inventories are stated at the lower of cost or net realizable value. Inventory write -downs are made by item, except where it may be appropriate to group similar or related items. 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 standard cost and adjusted to approximate weighted-average cost on the reporting period.

(6)Investment in subsidiaries

The Company uses the equity method to account for its investments in subsidiaries.

Subsidiaries are the entities controlled by the Company.

Under the equity method, the investment is initially recognized at cost and the carrying amount is increased or decreased to recognize the Company’s share of the profit or loss and other comprehensive income of the subsidiary after the date of acquisition. Besides, the Company also recognizes the Company’s share of the change in other equity of the subsidiary.

Changes in the Company’s ownership interests in subsidiaries that do not result in the Company’s loss of control over the subsidiaries are accounted for as equity transactions . Any difference between the carrying amounts of the investment and the fair value of the consideration paid or received is recognized directly in equity.

When the Company’s share of losses of a subsidiary equals or exceeds its interest in that subsidiary (which includes any carrying amount of the investment in subsidiary accounted for by the equity method and long -term interests that, in substance, form part of the Company’s net investment in the subsidiary), the Company continues recognizing its share of further losses.

Any excess of the cost of acquisition over the Company’s share of the net fair value of the identifiable assets and liabilities of a subsidiary at the date of acquisition is recognized as goodwill, which is included within the carrying am ount of the investment and is not amortized. Any excess of the Company’s share of the net fair value of the identifiable assets and liabilities over the cost of acquisition is recognized immediately in profit or loss.

The Company assesses its investment for any impairment by comparing the carrying amount with the estimated recoverable amount as assessed based on the entire financial statements of the invested company. Impairment loss is recognized when the carrying amount exceeds the recoverable amount. If the recoverable amount of the investment subsequently increases, the Company recognizes the reversal of the impairment loss; the adjusted post-reversal carrying amount should not exceed the carrying amount that would have been recognized (net of amortizat ion or depreciation) had no impairment loss been recognized in prior years. An impairment loss recognized on goodwill cannot be reversed in a subsequent period.

When the Company loses control of a subsidiary, it recognizes the investment retained in the former subsidiary at its fair value at the date when control is lost. The difference between the fair value of the retained investment plus any consideration received and the carrying amount of the previous investment at the date when control is lost is rec ognized as a gain or loss in profit or loss. Besides, the Company accounts for all amounts previously recognized in other comprehensive income in relation to that subsidiary on the same basis as would be required if the Company had directly disposed of the related assets or liabilities.

Unrealized profits and losses from upstream transactions with a subsidiary are eliminated in full. profits and losses from downstream between the company and subsidiaries are recognized in the company’ parent company only financial statements in the scope of the Company’s equities are not relevant to subsidiaries.

(7)Investment in associates

An associate is an entity over which the Company has significant influence and that is neither a subsidiary nor an interest in a jo int venture.

The Company uses the equity method to account for its investments in associates.

Under the equity method, investments in an associate are initially recognized in the parent company only balance sheet at cost and adjusted thereafter to rec ognize the company’s share of the profit or loss and other comprehensive inco me of the associate.

17 -

The Company also recognizes the changes in the equity of associates attributable to the Company.

When the Company subscribes for additional new shares of t he associate at a percentage different from its existing ownership percentage, the resulting carrying amount of the investment differs from the amount of the Company’s proportionate interest in the associate. The Company records such a difference as an adj ustment to investments with the corresponding amount charged or credited to capital surplus. If the Company’s ownership interest is reduced due to the additional subscription of the new shares of associate, the proportionate amount of the gains or losses p reviously recognized in other comprehensive income in relation to that associate is reclassified to profit or loss on the same basis as would be required if the investee had directly disposed of the related assets or liabilities. When the adjustment should be debited to capital surplus, but the capital surplus recognized from investments accounted for by the equity method is insufficient, the shortage is debited to retained earnings

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

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

The Company discontinues the use of the equity method from the date on which its investment ceases to be an associate. Any retained investment is me asured at fair value at that date and the fair value is regarded as its fair value on initial recognition as a financial asset. The difference between the previous carrying amount of the associate attributable to the retained interest and its fair value is included in the determination of the gain or loss on disposal of the associate. The Company accounts for all amounts previously recognized in other comprehensive income in relation to that associate on the same basis as would be required if that associate had directly disposed of the related assets or liabilities. If the investment of associates becomes the investment of joint ventures, or visa versa, the Company will continue to evaluate investment accounted for by the equity method, other than remeasure retained equities.

Profits and losses, resulting from upstream, downstream, reciprocal transactions should be between the Company and associates, are recognized on parent company only financial statements in the scope of the Company’s equities are not relevant to associates.

(8)Property, plant and equipment

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

Depreciation is recognized using the straight -line method. Each significant part is depreciated separately. 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.

Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognized in profit or loss.

(9)Intangible assets

Intangible assets with finite useful lives that are acquired separately are initially measured at cost and subsequently measured at cost less accumulated amortization and accumulated impairment loss. Amortization is recognized on a straight -line basis. The estimated useful life, residual value, and amortization method are reviewed at the end of

18 -

each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.

On de-recognition of an intangible asset, the difference between the net disposal proceeds and the carrying amount of the asset are recognized in profit or loss.

(10)Impairment of tangible and intangible assets

At the end of each reporting period, the Company reviews the carrying amounts of its tangible and intangible assets, excludin g 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 Company estimates the recoverable amount of the cash -generating unit to which the asset belongs. Corporate assets are also allocated to individual cash-generating units; otherwise they are allocated to the smallest group of 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 annual ly, and whenever there is an indication that the asset may be impaired.

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, without amortization or depreciation, been recognized for the ass et or cash-generating unit in prior years. A reversal of an impairment loss is recognized in profit or loss.

(11)Financial instruments

Financial assets and financial liabilities are recognized on parent company only balance sheets when a group entity becomes a party to the contractual provisions of the instruments.

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.

a. A.Financial assets

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

a. Measurement category 2018

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

(a)Financial assets at FVTPL

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

19 -

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 excludes any dividend or in terest earned on the financial asset. Fair value is determined in the manner described in Note 27.

(b)Financial assets at amortized cost

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

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

Subsequent to initial recognition, financial assets at amortized cost, including cash and cash equivalents, trade receivable and refundable deposits are measured at amortized cost, which equals to gro ss 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 multiple the gross carrying amount of a financial asset.

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

(c)Investments in equity instruments at FVTOCI

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

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

Dividends on these investments in equity instruments at FVTOCI are recognized in profit or loss when the Company’s right to receive the dividends is established, unless the 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, available -for-sale financial assets, and loans and receivables.

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

Financial asset is classified in this category if it is classified as held for trading or is designated as FVTPL.

Financial assets are classified as being designated on initial recognition at fair value through profit or loss as follows:

20 -
a).possible for elimination or a significant decrease of inconsistency by measurement or recognition; or
b).Performance of a set of or both of financial assets and losses are valuated by based management of fair values, based on the written strategy of risk management and investment. And, the Company shall provide information regarding the investment portfolio, at fair value, to internal management; or
c).A single or a component of an emb edded derivative for a hybrid contract is designated as such.

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 i n profit or loss without incorporating any dividend or interest earned on the financial asset. Fair value is determined in the manner described in Note 2 7.

(b) ; 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 Company’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 the carrying amount and fair value is recognized in other comprehensive income on financial assets. Any impairment losses are recognized in profit and loss.

(c)Loans and receivables
Loans and receivables (including notes receivable, trade receivable, cash and cash equivalent, debt instrument investments with no active market, and refundable deposits) are measured at amortized cost using the effective interest method, less any impairment, except for interests of short -term receivables recognized is immaterial.

Cash equivalent includes 3 months’ portion of time deposits with highly liquid, readily convertible to a known amount of cash and be subject to an insignificant risk of changes in value of deposits in the bank and repurchase bonds. These cash equivalents are held for meeting short-term cash commitments.

b. Impairment of financial assets 2018

The Company recognizes a loss allowance for expected credit losses on financial assets at amortized cost (including trade receivable).

21 -

The Company always recognizes the loss allowance by lifetime Expected Credit Loss (i.e. ECL) for trade receivable. For all other financial instruments, the Company recognizes lifetime ECL when there has been a significant increase in credit risk since initial recognition. If, on the other hand, the credit risk on the financial instrument has not increased significantly since initial recognition, the Company measures the loss allowance at an amount equal to 12 -month ECL.

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

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

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 that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected.

For financial assets carried at amortized cost, such as trade receivable, 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 Company’s experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period of days, as well as observable changes in national or local economic conditions that correlate with default on receivables.

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

For any 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 impairmen t 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 becomes probable that the borrower will enter bankruptcy or financial re -organization, or the disappearance of an active market for those financial assets because of financial difficulties.

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

In respect of available-for-sale equity securities, impairment loss previously recognized in profit or loss is 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,

22 -

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 measured at cost, the amount of the impairment loss is measured as the difference between such an 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 a financial asset is red uced by the impairment loss directly for all financial assets, where the carrying amount is reduced through the use of an allowance account of trade receivable. When trade receivable is considered uncollectible, they are written off against the allowance a ccount. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account is recognized in profit or loss except for uncollectible trade receivable that is written off against the allowance account.

c. De-recognition of financial assets

The Company 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.

Before 2017, 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. From 2018, on derecognition of a financial asset at amortized cost in its entirety, the difference between the asset’s carrying amount and the sum of the c onsideration received and receivable is recognized in profit or loss. On derecognition of an investment in a debt instrument at FVTOCI, 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. However, on derecognition of an investment in an equity instrument at FVTOCI, the difference between the asset’s carrying amount and the sum of the consideration received and receivable is recognized in profit or loss, and the cumulative gain or loss that had been recognized in other comprehensive income is transferred directly to retained earnings, without recycling through profit or loss.

B. Financial liabilities

(a)Subsequent measurement

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

(b)De-recognition of financial liabilities

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

C. Convertible bonds

The component parts of compound instruments (convertible bonds) issued by the Company are classified separately as financial liabilities and equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

On initial recognition, the fair value of the liability component is es timated using the prevailing market interest rate for similar non -convertible instruments. This amount is recorded as a liability on an amortized cost basis using the effective interest method until extinguished upon conversion or the instrument’s maturity date. Any non-equity embedded derivative liability is measured at fair value.

23 -

The conversion option classified as equity is determined by deducting the amount of the liability component from the fair value of the compound instrument as a whole. This is recognized and included in equity, net of income tax effects, and is not subsequently remeasured. In addition, the conversion option classified as equity will remain in the liability and equity until the conversion option is exercised, in which case, the balance recognized in equity will be transferred to capital surplus - share premium. When the conversion option remains unexercised at maturity, the balance recognized in equity will be transferred to capital surplus - share premium.

Transaction costs that relate to the issue of the convertible bonds are allocated to the liability and equity components in proportion to the allocation of the gross proceeds.

(12)Revenue recognition

2018

The Company identifies the contract with the customers, allocates the t ransaction price to the performance obligations, and recognizes revenue when performance obligations are satisfied.

Revenue from sale of goods

Revenue from sale of goods comes from sales of computer software, hard ware, accessories, equipment, and components, etc. Customers have the right of quotation and user, and the responsibility of resale as goods after shipment and taking risks of losses of obsolete goods. The Company recognizes revenues and trade receivable as goods after shipment.

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 are recognized at the time of sale to access the seller’s reliable estimate of future returns, based on past experience and other relevant factors.

A.Sale of goods
Revenue from the sale of goods is recognized when all the following conditions are satisfied:
a. The Company has transferred to the buyer the significant risks a nd rewards of ownership of the goods;
b. The Company retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;
c. The amount of revenues 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.
B.Revenues from dividends & Interest income

Revenues from dividends from investments in shares that are accounted for at equity are recognized when revenues can be stated, under the premise that the Company acquires economic benefits regarding with transactions.

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

(13)Leases

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

A. The Company as lessor

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

24 -

B. The Company as lessee

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

(14)Costs of loans

All Costs of loans as incurred shall be recognized profits and losses at the current period.
(15)Employee benefit

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

Defined benefit costs (including service cost, net interest and remeasurement) under the defined benefit retirement benefit plans are determined using the projected unit credit method. Service cost (including current service cost as well as past service cost, and net interest on the net defined benefit liability (asset) are recognized as employee benefits expense in the period they occur, or when the plan amendment or curtailment occurs/when the settlement 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 they occur. 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 Company’s defined benefit plan. Net defined benefit asset shall not exceed the return contribution or the present value possibly calculated after reducing future contribution.

(16)Share-based payment arrangements

Equity-settled share-based payments to employees are measured at the fair value of the equity instruments at the grant date. The fair value and expected estimate amounts of the stock options determined at the grant date of the stock options is expensed on a straight-line basis over the vesting period, based on the Company’s estimate of stock options that will eventually vest, with a corresponding increase in capital surplus - stock options. The fair value determined at the grant date of the stock options is recognized as an expense in full at the grate date when the stock options granted vest immediately.

At the end of each reporting period, the Company revises its estimate of the number of stock options expected to vest. The impact of the revision of the original estimates is recognized in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to the capital surplus - stock options.

(17)Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax. A. Current tax

An additional profit-seeking income tax shall be levied at the rate of ten percent on such undistributed surplus earnings for income tax e xpenses by a shareholder resolution, according to Income Tax Act.

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

B. Deferred tax
Deferred tax is recognized on temporary differences between the ca rrying amounts of assets and liabilities in the parent company only financial statements 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, net operating loss carryforwards and tax credits for research and development expenses to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized.

25 -

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 deferred tax asset to be recovered. The deferred tax assets which originally not recognized is also reviewed at the end of each reporting period and recognized to the extent that it is probable that sufficient taxable profits will be available to allow all or part of the deferred tax asset to be recovered.

Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the year in which the liability is settled or the asset is 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 Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

C. 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.

5. ;CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION AND UNCERTAINTY

In the application of the aforementioned Company’s accounting policies, the Company is required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily ap parent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be 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 year in which the estimate is revised if the revision affects only that year, or in the year of the revision and future years if the revision affects both current and future years.

(1)Estimated impairment of financial assets － 2018

The provision for impairment of trade receivables and investments in debt instruments is based on the Group’s assumptions about risk of default and expected loss rates. The Company uses judgment in making these assumptions a nd in selecting the inputs to the impairment calculation, based on the Company’s past history, existing market conditions as well as forward looking estimates at the end of each reporting period. For details of the key assumptions and inputs used, see Note s 13. Where the actual future cash inflows are less than expected, a material impairment loss may arise.

(2)Evaluation of impairment losses of trade receivable － 2017

When there is objective evidence of impairment loss, the Company takes into consideration the estimation of future cash flows. The amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows(excluding possible future credit losses) discounted at the financial asset’s original effective interest rate. Where the actual future cash flows are less than expected, a material impairment loss may arise.

(3)Write-down of inventory

Net realizable value of inventory is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. The estimation of net realizable value was based on c urrent market conditions and the historical experience of selling products of a similar nature. Changes in market conditions may have a material impact on the estimation of net realizable value.

(4)Income tax

The realizable deferred tax assets depend on f uture earnings and temporarily differences of tax payable. If actual profits are less than the expected, a reversal of material deferred tax assets could be incurred, and then recognized in profits or losses.

26 -

6. CASH AND CASH EQUIVALENTS

7.	December 31, 2018 December 31, 2017 Cash on hand and revolving funds $ 142 $ 157 Checking accounts and demand deposits 22,421 430,577 Cash equivalents Time deposits in banks 179,191 148,925 Repurchase Bond - 44,678 $ 201,754 $ 624,337 As the end of reporting period, the interest rate at market of deposits and repurchase bonds is as follows`：` December 31, 2018 December 31, 2017 Bank deposits 0.01%~0.46% 0.01%~0.46% Time deposits 3.00%~3.30% 1.53%~2.13% Repurchase Bond - 1.90% FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS December 31, 2018 December 31, 2017 Financial assets`－`current Held-to-maturity `－`Domestic convertible bonds $ - $ 51,009 `－`Redemption & sell right for convertible bonds - 4 `－`Domestic public offering securities - 325 - 51,338 Mandatorily measured at FVTPL `－`Domestic convertible bonds 46,556 `－`Redemption & sell right for convertible bonds 1 - `－`Foreign Exchange Forward Contract (1) 916 - 47,473 - $ 47,473 $ 51,338 Financial assets`－`non-current Mandatorily measured at FVTPL `－`Domestic public offering securities $ 14,846 $ -	December 31, 2018 December 31, 2017 Cash on hand and revolving funds $ 142 $ 157 Checking accounts and demand deposits 22,421 430,577 Cash equivalents Time deposits in banks 179,191 148,925 Repurchase Bond - 44,678 $ 201,754 $ 624,337 As the end of reporting period, the interest rate at market of deposits and repurchase bonds is as follows`：` December 31, 2018 December 31, 2017 Bank deposits 0.01%~0.46% 0.01%~0.46% Time deposits 3.00%~3.30% 1.53%~2.13% Repurchase Bond - 1.90% FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS December 31, 2018 December 31, 2017 Financial assets`－`current Held-to-maturity `－`Domestic convertible bonds $ - $ 51,009 `－`Redemption & sell right for convertible bonds - 4 `－`Domestic public offering securities - 325 - 51,338 Mandatorily measured at FVTPL `－`Domestic convertible bonds 46,556 `－`Redemption & sell right for convertible bonds 1 - `－`Foreign Exchange Forward Contract (1) 916 - 47,473 - $ 47,473 $ 51,338 Financial assets`－`non-current Mandatorily measured at FVTPL `－`Domestic public offering securities $ 14,846 $ -	December 31, 2018 December 31, 2017 Cash on hand and revolving funds $ 142 $ 157 Checking accounts and demand deposits 22,421 430,577 Cash equivalents Time deposits in banks 179,191 148,925 Repurchase Bond - 44,678 $ 201,754 $ 624,337 As the end of reporting period, the interest rate at market of deposits and repurchase bonds is as follows`：` December 31, 2018 December 31, 2017 Bank deposits 0.01%~0.46% 0.01%~0.46% Time deposits 3.00%~3.30% 1.53%~2.13% Repurchase Bond - 1.90% FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS December 31, 2018 December 31, 2017 Financial assets`－`current Held-to-maturity `－`Domestic convertible bonds $ - $ 51,009 `－`Redemption & sell right for convertible bonds - 4 `－`Domestic public offering securities - 325 - 51,338 Mandatorily measured at FVTPL `－`Domestic convertible bonds 46,556 `－`Redemption & sell right for convertible bonds 1 - `－`Foreign Exchange Forward Contract (1) 916 - 47,473 - $ 47,473 $ 51,338 Financial assets`－`non-current Mandatorily measured at FVTPL `－`Domestic public offering securities $ 14,846 $ -
		Financial assets`－`current Held-to-maturity `－`Domestic convertible bonds `－`Redemption & sell right for convertible bonds `－`Domestic public offering securities Mandatorily measured at FVTPL `－`Domestic convertible bonds `－`Redemption & sell right for convertible bonds `－`Foreign Exchange Forward Contract (1) Financial assets`－`non-current Mandatorily measured at FVTPL `－`Domestic public offering securities

(1)At the end of the reporting period, outstanding forward exchange contracts not under hedge accounting are as follows:

December 31, 2018

December 31, 2018
Buy Foreign exchange contracts	Currency USD/NTD	MaturityDate 2019.02.25 2019.02.25 2019.04.03 2019.03.25 2019.04.25 2019.04.25	Notional Amount (In Thousands)
			USD 2,000/NTD 61,660 USD 1,000/NTD 30,640 USD 830/NTD 25,366 USD 3,100/NTD 94,931 USD 1,490/NTD 45,445 USD 1,390/NTD 42,356

The Company entered into forward exchange contracts to manage risk exposures due to exchange rate fluctuations of foreign currency denominated assets and liabilities.

27 -

8. Financial assets measured at FVTOCI -2018

Financial assets measured at FVTOCI-2018
Current Investments in equity instruments at FVTOCI Non-current Investments in equity instruments at FVTOCI Investments in equity instruments at FVTOCI Current Domestic Publicly traded preference shares Non-current Domestic Publicly traded and emerging ordinary shares Publicly traded preference shares Non-publicly traded stock	December 31, 2018
	$ 7,865 $ 137,138 December 31, 2018
		$ 7,865 $ 60,544 $ 72,329 4,265 $ 137,138

These long-term investments in equity instruments are held for receiving profits, under medium to long-term business development strategic purposes. Accordingly, The Group’s 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 Company’s strategy of holding these investments for long-term purposes. These investments in equity instruments were classified as available-for-sale under IAS 39. Refer to Note 3, Note 10 and Note 11 for information relating to their reclassification and comparative information for 2017.

The Company acquired ordinary and preferred shares, respectively, and recognized these investment as financial assets measured at FVTOCI, held for medium to long -term business development strategic purposes.

As of January and March, 2018, the Company sold shares of common stocks for NT$339 and NT$856 thousand of ASLAN PHARMACEUTICALS LIMITED(ASLAN -KY), and Chunghwa Precision Test Tech. Co., Ltd. (CHPT) for decreasing investment risks. The related other equity-unrealized gain or loss on financial assets at FVTOCI of NT$(774) thousand were transferred to retained earnings.

The Company has recognized the above NT 5,092 thousand of impairment losses of financial assets in 2018.

9. FINANCIAL ASSETS AT AMORTIZED COST -2018

FINANCIAL ASSETS AT AMORTIZED COST-2018
Current Domestic investment Time deposits with original maturities more than three months(1) Non-current Domestic investment Pledged Time Deposit (2) Yuanta Securities Asia Financial Services Limited 2018 Non-secured USD-denominated Private Fixed Rate Notes (3)	December 31, 2018
		$ 560,236 $ 15,398 61,430 76,828 $ 637,064

(1) As of December 31, 2018, the market interest rate of time deposit over 3 months portion is 1.01%~3.30%, respectively. Time deposit over 3 months portion previously was classified as debt investments with no active market under IAS 39. Please refer to Note 3 and 12 for information relating to their reclassification and comparative information for 2017.

28 -
(2) Please refer to Note 29 for more details on financial assets at amortized cost under pledge.
(3) The Company purchased Yuanta Securities Asia Financial Services Limited issued 5-year Non-secured Fixed Rate Notes, with the face value of USD 2,000 thousand and a coupon rate of 4.10%, on August, 2018.

10. AVAILABLE -FOR - SALE FINANCIAL ASSETS -2017

11.	Domestic Publicly traded ordinary shares Publicly traded preference shares Current portion Non-current portion FINANCIAL ASSETS CARRIED AT COST-2017 Non-current Domestic unlisted shares Distinguished by the assessing types of financial assets Available-for-sale financial asset	December 31, 2017	December 31, 2017
		$ 67,858 14,416 $ 82,274 $ 13,709 $ 68,565 December 31, 2017
			$ 510 $ 510

The above investments in the equity instruments of unlisted entities are measured at cost as the key management personnel considers the fair value of these investments are not reliably measurable due to the fact that the variability in the range of reasonable fair value measurements is significant for that investment and that the probabilities of the various estimates within the range cannot be reasonably assessed and used when measuring fair value.

12. DEBT INVESTMENTS WITH NO ACTIVE MARKET-2017

DEBT INVESTMENTS WITH NO ACTIVE MARKET-2017
Current Time deposit over 3 months’ portion (1) Non-current Pledged Time Deposit (2)	December 31,2017
		$ 205,866 $ 9,016

(1) On December 31, 2017, the market interest rate of time deposit over 3 months portion is 1.01% ～ 2.13%, respectively.
(2) Please refer to Note 29 for more details on debt investments with no active market under pledge.

13. NOTES AND TRADE RECEIVABLE

under pledge. NOTES AND TRADE RECEIVABLE
Notes receivable Measured at amortized cost Gross carrying amount Deduct: Allowance for bad debts Trade receivable Measured at amortized cost Gross carrying amount Deduct: Allowance for bad debts		December 31, 2018 $ 160,573 - $ 160,573 $ 1,739,414 21,046) $ 1,718,368		December 31, 2017
	(		(	$ 185,228 - $ 185,228 $ 1,494,925 37,540) $ 1,457,385

(1)TRADE RECEIVABLE
2018
29 -

The average credit period of sales of goods of the Company was 60-90 days, and no interest was charged on trade receivable.

In order to minimize credit risk, the Company’s management 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 receivables. In addition, the Company reviews the recoverable amount of each individual trade receivable at the end of the reporting period to ensure that adequate allowance is made for possible irrecoverable amounts. In this regard, the Company’s management believes the Company’s credit risk was significantly reduced.

The Company 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 receivable. The expected credit losses of trade receivable on durable are estimated using a provision matrix by reference to past default experience of the debtor and an analysis of the debtor’s past experience of receivable and current financial position, expectation of GDP and prospect of the industry, deciding the rate of the expected credit losses by the different levels of credit limits of customers and actual conditions, based on the degree of doubtful accounts triggered by customers of different industries.

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

The following table details the loss allowance of trade receivable: December 31, 2018

December 31, 2018
Not Past Due 1-30 Days Past Due Expected credit loss rate 0.27 % 23.71 % Gross carrying amount $1,684,832 $ 14,013 Loss allowance (Lifetime ECLs) (4,614) ( 3,323) Amortized cost $1,680,218 $ 10,690 The movements of the loss allowance of Balance at January 1, 2018 (IAS 39) Effect of retrospective application of IFRS 9 Balance at January 1, 2018 (IFRS 9) Less: Reversal of doubtful accounts Balance at December 31, 2018 2017	Not Past Due	1-30 Days Past Due	31-60 Days Past Due	61-90 Days Past Due	More Than 90 Days Past Due
					e
						$
						re a
						(

In principle, the payment term granted to customers is due 60 days from the 90 days of when the invoice is issued, without being asked to repay interests, by evaluating the change in credit risk from the starting period of loan applicat ion to the end of the reporting period. The allowance for bad debts is assessed by reference to the collectability of receivables by performing the credit limit, historical experience and current financial condition of customers.

30 -

Aging analysis of trade receivable, net ：

g analysis of trade receivable, net`：`
0～60 days 61～90 days 91～120 days Over 121 days Total	December 31,2017
		$ 796,626 291,987 247,394 158,918 $ 1,494,925

The above aging analysis was based on the beginning booked date.

As of December 31, 2017, the Company’s trade receivable hadn’t been past due and impaired amounted.

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

14.	Balance at January 1, 2017 Add: Impairment losses/ bad debt expenses recognized on receivables Less: Amounts written off Balance at December 31, 2017 INVENTORIES Commodities	Trade receivable uncollectible receivable $ 10,844 $ 337 26,696 - - ( 337) $ 37,540 $ - December 31, 2018 $ 934,052	Trade receivable uncollectible receivable $ 10,844 $ 337 26,696 - - ( 337) $ 37,540 $ - December 31, 2018 $ 934,052	Trade receivable uncollectible receivable $ 10,844 $ 337 26,696 - - ( 337) $ 37,540 $ - December 31, 2018 $ 934,052	Trade receivable uncollectible receivable $ 10,844 $ 337 26,696 - - ( 337) $ 37,540 $ - December 31, 2018 $ 934,052			Total
						$ 11,181 26,696 ( 337) $ 37,540 December 31, 2017

							$ 465,673

Cost of goods sold for inventories in the amount of NT$ 5,902,692 thousand and NT$5,263,781 thousand, respectively, for the years ended December 31, 201 8 and 2017. Allowance for inventory valuation and obsolescence loss, and increase in net realizable value of inventories in the amount of NT$73,836 thousand and NT$4,943 thousand. The increase in net realizable value of inventories is recognized by the realized price losses of commodities.

15. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD

Investments in subsidiaries Investments in associates (1) Investments in subsidiaries Zotech Co., Ltd. Zerone Win Investment Co., Ltd. Name of subsidiaries Zotech Co., Ltd. Zerone Win Investment Co., Ltd.	December 31, 2018 December 31, 2017 $ 136,129 $ 134,986 - 4,446 $ 136,129 $ 139,432 December 31, 2018 December 31, 2017 $ 44,426 $ 39,440 91,703 95,546 $ 136,129 $ 134,986 Percentage Of owners' equityand votingright	December 31, 2017
		$ 134,986 4,446 $ 139,432 December 31, 2017
	December 31, 2018 85.37% 100%	December 31, 2017
		85.37% 100%

31 -

The Company invested and established Zerone Win Investment Co., Ltd., which engages in investments, in April, 2017, with investment amount to 100,000 thousand and shareholding ratio of 100%.

Profits and losses and other comprehensive income of investments in subsidiaries accounted for using the equity method recognized in the financial statements and audited by CPA in 2018 and 2017.

(2) Investments in associates

Insignificant associates Trident Pacific Co., Ltd. Chi-Ta International Co., Ltd. ERCENTAGE Trident Pacific Co., Ltd. Chi-Ta International Co., Ltd.	December 31, 2018 December 31, 2017 $ - $ 4,446 - - $ - $ 4,446 Percentage Of owners' equityand votingright	December 31, 2017
	December 31, 2018 - 30.00%	December 31, 2017
		29.53% 30.00%

Aggregate information of associates that are not individually material was summarized as follows:

as follows:
the Group’s share of: Loss from continuing operations Other comprehensive income		2018 $ 4,057) $ 4,057)		2017
	( (		( (	$ 7,506) $ 7,506)

The group invested and founded Chi -Ta International Co., Ltd., that engaged mainly in researching and manufacturing hardware of auto -used electronic equipment, with investment amount to 10,000 thousand, and share -holding ratio of 30% in March, 2014, since it kept net losses, foresaw decrease in future cash flows, evaluated recognized NT 7,243 thousand of impairment losses thousand in 2015, and recognized book value of 0 thousand after recognized deficits.

The group invested Trident Pacific technology, Co., Ltd., engaging in researching, developing and packaging of space flight equipment, with investment amount to NT 9,450 thousand, and share-holding ratio of 29.53% in March, 2017. The group disposed of all shares for NT 340 thousand, recognized NT 49 thousand in profits and losses in November, 2018.

Investments for equity method as well as profit(loss), and other comprehensive income of the Group, haven’t been calculated by reviewed financial report of CPAs, beside the management personnel of the Group considers no material influence as financial statements of the above investees haven’t been reviewed by CPAs.

32 -

16. PROPERTY, PLANT AND EQUIPMENT

Cost Balance at January 1, 2017 Additions Disposals Reclassification Balance at December 31, 2017 Accumulated depreciation and impairment Balance at January 1, 2017 Disposals Depreciation Balance at December 31, 2017 Carrying amounts at December 31, 2017 Cost Balance at January 1, 2018 Additions Disposals Reclassification Balance at December 31, 2018 Accumulated depreciation and impairment Balance at January 1, 2018 Disposals Depreciation Balance at December 31, 2018 Carrying amounts at December 31, 2018		Land $234,892 - - - $234,892 $ - - - $ - $234,892 $234,892 - - - $234,892 $ - - - $ - $234,892		Buildings	Machinery and equipment $10,383 - ( 244 ) - $10,139 $10,261 ( 244 ) 118 $10,135 $ 4 $10,139 ( 1,131 ) $ 9,008 $10,135 ( 1,131 ) 4 $ 9,008 $ -	Office equipment $21,426 11,232 ( 102 ) 1,702 $34,258 $16,870 ( 54 ) 3,829 $20,645 $13,613 $34,258 3,394 ( 11,163 ) 455 $26,944 $20,645 ( 11,145 ) 6,575 $16,075 $10,869		Delivery equipment $ - - - - $ - $ - - - $ - $ - $ - 2,458 - - $ 2,458 $ - - 492 $ 492 $ 1,966	Other equipment $ 1,141 - - - $ 1,141 $ 602 - 380 $ 982 $ 159 $ 1,141 2,365 ( 1,141 ) 6,204 $ 8,569 $ 982 ( 1,078 ) 1,801 $ 1,705 $ 6,864		Total $396,027 11,232 ( 346 ) 1,702 $408,615 $93,950 ( 298 ) 6,144 $99,796 $308,819 $408,615 8,217 ( 13,435 ) 6,659 $410,056 $99,796 ( 13,354 ) 10,688 $97,130 $312,926
				$128,185 - - - $128,185 $ 66,217 - 1,817 $ 68,034 $ 60,151 $128,185 - - - $128,185 $ 68,034 - 1,816 $ 69,850 $ 58,335

Depreciation expenses were depreciated on a straight -line basis over the estimated useful life of the asset:

eciation expenses were depreciated on he asset:	a straight -line basis over the
Buildings	7-50 Years
Machinery equipment	3 Years
Office equipment	3-5 Years
Delivery equipment	5 Years
Other equipment	3 Years

Please refer to Note 29 for more details on property, plant and equipment under pledge.

33 -

17. ; SHORT-TERM LOANS

18.; 19.;	December 31, 2018 Unsecured loans `－`Line of credit loans $ 100,000 Interest rate of bank loans is 0.94% on December 31, 2018. OTHER PAYABLE December 31, 2018 Salaries and bonuses payable $ 63,414 Employees', directors', and supervisors' compensation payable 20,137 Others 155,585 $ 239,136 BOND PAYABLE December 31, 2018 Unsecure domestic convertible bonds $ 5,300 Less: Discounted bond payable ( 215) Total of bond payable 5,085 Less: due components in a year ( 5,085) Total $ -	December 31, 2017	December 31, 2017
		$ - December 31, 2017
		$ 52,288 15,658 63,052 $ 130,998 December 31, 2017
		( (	$ 10,000 267) 9,733 9,733) $ -

On May 19, 2014, ZOTC issued no any interest unsecured convertible bonds (the second tranche). The bonds had an aggregate face value of $500,000 thousand, with each unit having a face value of NT$100 thousand, and the offering price was $100.2 0% of the face value, and its conversion period is 5 years from June 20, 2014 to May 9, 2019. The conversion price was $20 per share on issuance date.

Within the period between one month after the issuance date and 40 days before the last convertible date, if the closing price of ZOTC common shares on the TWSE for a period of 30 consecutive trading days before redemption h as been at least 30% of the conversion price in effect on each such trading day, or in the event that the principal amount of the convertible bonds originally outstanding is 10% lower than the issued amount of the bonds, ZOTC may redeem all bonds at face v alue by cash.

The convertible bonds issued over 3 years, the holder could ask the Company to redeem bonds at face value by cash.

The convertible bonds include liabilities and equity. The equity components were accounted for ZOTC as paid-in capital –option. The effective interest rate of liability components recognized is 2.0618%.

Balance on January 1, 2017, liability components Interest (2.0618%) Convertible bonds changed into ordinary shares ( Balance on December 31, 2017, liability components Balance on January 1, 2018, liability components Interest (2.0618%) Convertible bonds changed into ordinary shares ( Balance on December 31, 2018, liability components	$ 28,563 320 19,150) $ 9,733 $ 9,733 147 4,795) $ 5,085

34 -

20. RETIREMENT BENEFIT PLANS

(1)Defined contribution plans

The plan under the R.O.C. Labor Pension Act (the “Act”) is deemed a defined contribution plan. Pursuant to the Act, the Company has made monthly contributions equal to 6% of each employee’s monthly salary to employees’ pensio n accounts.

(2)Defined benefit plans

The Company has defined benefit plans under the R.O.C. Labor Standards Law that provide benefits based on an employee’s length of service and average monthly salary for the six-month period prior to retirement. The Company contributes an amount equal to 2% of salaries paid each month to their respective pension funds (the Funds), which are administered by the Labor Pension Fund Supervisory Committee (the Committee) and deposited in the Committee’s name in the Bank of Taiwan. Before the end of each year, the Company assesses the balance in the Funds. If the amount of the balance in the Funds is inadequate to pay retirement benefits for employees who conform to retirement requirements in the next year, the Company is required to fund the difference in one appropriation that should be made before the end of March of the next year. The Funds are operated and managed by the government’s designated authorities; as such, the Company does not have any right to intervene in the investments of the Funds.

Amounts recognized in respect of these defined benefit plans in the parent company only balance sheets were as follows:

Present value of defined benefit obligation Fair value of plan assets Contribution Net defined benefit liability	December 31,2018 $ 55,117 ( 33,538) 21,579 $ 21,579	December 31,2017	December 31,2017
	(	(	$ 52,105 31,183) 20,922 $ 20,922

Movements in net defined benefit liabilities/assets are as follows:

For the year ended January 1, 2017 Service cost Current service cost Interest expense (income) Recognized in profits or losses Remeasurements Return on plan assets (excluding amounts included in interest, net) Actuarial loss arising from changes in demographic assumptions Actuarial loss (gain) arising from changes in financial assumptions Actuarial loss arising from experience adjustments Recognized in other comprehensive income Contribution from employer For the year ended December 31, 2017	Present value of defined benefit obligations $ 50,457 387 568 955 - 567 1,168 ( 1,042) 693 - $ 52,105		Fair value of plan assets $ 29,622) - 337) 337) 44 - - - 44 1,268) $ 31,183)		Net defined benefit liability/Assets
	(	( ( ( ( (		( (	$ 20,835 387 231 618 44 567 1,168 1,042) 737 1,268) $ 20,922

35 -

For the year ended January 1, 2018 Service cost Current service cost Interest expense (income) Recognized in profits or losses Remeasurements Return on plan assets (excluding amounts included in interest, net) Actuarial loss arising from changes in demographic assumptions Actuarial loss (gain) arising from changes in financial assumptions Actuarial loss arising from experience adjustments Recognized in other comprehensive income Contribution from employer For the year ended December 31, 2018	$ 52,105 ( 352 586 ( 938 ( - ( 513 633 928 2,074 ( - ( $ 55,117 (	$ 31,183) - 356) 356) 891 ) ( - - - 891) 1,108) ( $ 33,538)	$ 20,922 352 230 582 891 ) 513 633 928 1,183 1,108) $ 21,579

The pension costs of the aforementioned defined benefit plans were recognized in profit or loss by the following categories:

Selling expenses General and administrative expenses		2018 $ 250 332 $ 582		2017
				$ 317 301 $ 618

Through the defined benefit plans under the R.O.C. Labor Standards Law, the Company is exposed to the following risks:

a. Investment risk: The pension funds are invested in equity and debt securities, bank deposits, etc. The investment is conducted at the discretion of the government’s designated authorities or under the mandated management. However, under the R.O.C. Labor Standards Law, the rate of return on the Group’s assets shall not be less than the average interest rate on a two -year time deposit published by the local banks and the government is responsible for any shortfall in the event that the rate of return is less than the required rate of return.
b. Interest risk: A decrease in the government bond interest rate will increase the present value of the defined benefit obligation; however, this will be partially offset by an increase in the return on the debt investments of the pla n assets.
c. Salary risk: The present value of the defined benefit obligation is calculated by reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the present value of the defined benefit obligation.

The actuarial valuations of the present value of the defined benefit obligation were carried out by qualified actuaries. The principal assumptions at the measurement date were as follows:

date were as follows:
Discount rate Future salary increase rate	December 31,2018 1.000% 2.750%	December 31,2017
		1.125% 2.750%

;If main actuarial assumption variates within a reasonable extent, as for other assumption remaining unchanged, the present value of defined benefit obligation increases/decreases shall be as follows:

36 -

Discount rate increases by 0.25% decreases by 0.25% Future salary increase rate increases by 0.25% decreases by 0.25%	December 31,2018 ($ 1,265) $ 1,314 $ 1,272 ($ 1,232)	December 31,2017	December 31,2017
	( (	( (	$ 1,208) $ 1,257 $ 1,218 $ 1,177)

Because actuarial assumptions may be correlative with one another, and a single assumption may not variate, the above sensitive analysis cannot indicate actual changes of the present value of defined benefit obligatio n.

Contribution amounts within 1 year Average due period of the defined benefit obligation	December 31,2018 $ 630 9.4 Years	December 31,2017	December 31,2017
			$ 985 9.5 Years

21. EQUITY

(1)Ordinary Shares

Ordinary Shares
Authorized shares (in thousands) Authorized capital Issued and paid shares (in thousands) Issued capital	December 31,2018 150,000 $ 1,500,000 122,896 $ 1,228,965	December 31,2017
			150,000 $ 1,500,000 122,480 $ 1,224,804

The change in share capital is mainly due to bo nds payable that changes into ordinary shares, and employee stock options exercised.

(2)Capital Surplus

May be used to offset a deficit, distributed as cash dividends, or transferred to share capital (A) Premium on shares issued above par value Treasury stock transactions Only be used to offset a deficit From shares of changes in equities of subsidiaries (B) Invalid employees stock options May not be used for any purpose Stock options Employees stock options	December 31,2018 $ 399,648 25,343 2,481 300 433 18,310 $ 446,515	December 31,2017	December 31,2017
			$ 396,486 25,343 2,481 300 850 8,675 $ 434,135

A. 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 paid-in capital surplus and once a year).
B. The capital surplus from share of unrealized changes in equiti es of subsidiaries not acquired or disposed is an affective recognized by changes in equity of subsidiaries, or the Company recognizes subsidiaries’ capital surplus adjustments for equity method.
37 -

(3)Retained earnings and dividend policy

The Company’s Articles of Incorporation provide that, when allocating the net profits for each fiscal year, ZOTC shall first pay taxes and offset its losses in previous years and then set aside the legal capital reserve at 10% of the profits left over, and then set aside or reverse the legal capital reserve. Any balance left over shall be added accumulated undistributed earnings of the previous year and allocated according to the resolution, provided from the board meeting, of the shareholders’ meeting. Please reference the distribution policy regulated by the Company’s Articles of Incorporation of employees’, directors’ and supervisors’ compensation for Note 2 2-6.

Distribution of earnings shall be made preferably by way of surplus cash dividend, according to future capital budget plan, and operating fund requirements. The Company considers its influences on diluted earning per shares and return on equity, but the ratio for cash dividend shall not exceed 10% of the total distribution.

The appropriation for legal capital res erve shall be made until the reserve equals the Company’s paid-in capital. The reserve may be used to offset a deficit, or be distributed as dividends in cash for the portion in excess of 25% of the paid -in capital if the Company incurs no loss.

Under Rule No. 1010012865 and Rule No. 1010047490 issued by the FSC and the directive titled “Questions and Answers for Special Reserves Appropriated Following Adoption of IFRSs”, the Company shall appropriate or reverse to a special reserve.

The appropriations of 2017 and 2016 earnings have been approved by ZOTC’s shareholder’s meeting held on June 11, 2018 and June 14, 2017, respectively, were as follows:

shareholder’s meeting held follows:	on June 11, 2018 and June 14,	2017, respectively, were as	2017, respectively, were as
Legal capital reserve Special reserve Cash dividends	Appropriation of Earnings For Fiscal Year 2017 For Fiscal Year 2016 $ 19,598 $ 22,408 ( 1,222 ) ( 6,153 ) 159,484 146,690	Dividends Per Share(NT$)
	For Fiscal Year 2017 $ 19,598 ( 1,222 ) 159,484	For Fiscal Year 2017 $ 1.3	For Fiscal Year 2016
			$ 1.2

The appropriations of earnings for 2018 had been proposed b y the Company’s board of directors on February 27, 2019. The appropriations and dividends per share were as follows:

were as follows:
Legal reserve Special reserve Cash dividends	Appropriation of Earnings $ 25,294 1,343 184,603	Dividends Per Share (NT$)
		$ 1.5

The appropriations of earnings for 2018 are subject to the resolution of the shareholders’ meeting to be held on June 13, 2019.

(4)Other equity

A. Unrealized Gain/Loss from Available -for sale Financial Assets

Balance at January 1, 2017 ( In respect of the current period Unrealized profits and losses Share of profit of subsidiaries accounted for using the equity method ( Reclassification adjustments Disposal of available-for-sale financial assets Balance at December 31, 2017 ( Balance at January 1, 2018 (IAS 39) ( Effect of retrospective application of IFRS 9 Balance at January 1, 2018 (IFRS 9)	$ 16,723 ) 1,749 961 ) 434 $ 15,501) $ 15,501 ) 15,501 $ -

38 -

B. Unrealized Gain/Loss from financial assets measured at FVTOCI

Balance at January 1, 2018`（`IAS 39`）` Effect of retrospective application of IFRS 9 Balance at January 1, 2018`（`IFRS 9`）` In respect of the current period Unrealized profits and losses`－`equity instruments Cumulative unrealized gain (loss) of equity instruments transferred to retained earnings due to disposal Balance at December 31, 2018		2018
	( ( ( (	$ - 10,954) 10,954 ) 6,664 ) 774 $ 16,844)

22. NET INCOME

(1)Other income

Other income
Interest income Dividend income Rental income Others		2018 $ 16,502 5,092 1,769 8,809 $ 32,172		2017
				$ 9,592 710 1,060 5,355 $ 16,717

(2)Other gains and losses

Other gains and losses
Losses(gains) on disposal of available-for-sale financial assets Losses(gains) on financial assets/liabilities at FVTPL Net foreign currency exchange gains (losses) Losses(gains) on disposal of Property, plant and equipment Losses on disposal of investment accounted for using the equity method Financial costs Interests on bank borrowings Interests on convertible bonds Total Depreciation & amortization Property, plant and equipment Intangible assets An analysis of depreciation by function Operating expenses An analysis of amortization by function Operating expenses		2018 $ - 247 ) 3,126 2 ) 49) $ 2,828 2018 $ 211 147 $ 358 2018 $ 10,688 626 $ 11,314 $ 10,688 $ 626		2017
	( ( (		( (	$ 434 ) 5,498 4,456 ) 2 - $ 610 2017
				$ 41 320 $ 361 2017
				$ 6,144 821 $ 6,965 $ 6,144 $ 821

(3)Financial costs

(4)Depreciation & amortization
39 -

(5)Employee benefits expense

5)Employee benefits expense	5)Employee benefits expense	5)Employee benefits expense	5)Employee benefits expense
Post-employment benefits Defined contribution plans Defined benefit plans`（`Note 20`）` Share-Based Payment Equity Swap Other employee benefits Salaries expense Labor and health insurance expenses Others Total Employee benefits expense summarized by function Recognized in operating expenses 2018 Operating costs Operating Expenses Salaries expense $ - $214,664 Labor and health insurance expenses - 14,313 Pension expenses - 7,566 Directors’ remuneration - 5,300 Other employee benefits - 13,574 Total $ - $255,417				2018 $ 6,984 582 7,566 10,252 209,712 14,313 13,574 237,599 $ 255,417 $ 255,417 Total Operating costs $214,664 $ - 14,313 - 7,566 - 5,300 - 13,574 - $255,417 $ -				2017
							$ 6,380 618 6,998 5,342 180,735 13,286 13,464 207,485 $ 219,825 $ 219,825 2017

	Operating costs		Operating Expenses	Total	Operating costs		Operating Expenses		Total
		$ - - - - - $ -	$214,664 14,313 7,566 5,300 13,574 $255,417	$214,664 14,313 7,566 5,300 13,574 $255,417		$ - - - - - $ -	$181,933 13,286 6,998 4,144 13,464 $219,825		$181,933 13,286 6,998 4,144 13,464 $219,825

The Company’s average number of employees is 201 and 188 (persons) in 2018 and 2017, including average number of directors, who act as an employees of the Company, is 5(persons). The calculation basis of average number of employees is the same as that of employee benefits expenses.

(6)Employees’, directors, and supervisors’ compensation

ZOTC shall allocate compensation to employees’, Director’s, and Supervisor’s of ZOTC not less than 1%~15% and not more than 3% of annual profits during the period, respectively, and the amount of employees’, Director’s, and Supervisor’s compensation for the years ended December 31, 2018 and 2017, with resolution of the board of directors on Feb. 27, 2019 and Feb. 26, 2018, is as follows:

Estimate Rate

Estimate Rate
2018 Employee compensation 4.00% Director’s & Supervisor’s compensation 2.00% Amount 2018 Cash Stock Employee compensation $ 13,425 $ - Director’s & Supervisor’s compensation 6,712 -	2018		2017
			4.00% 2.00% 2017
		Cash $ 10,439 5,219		Stock
				$ - -

If changes in the very amount after the end of the reporting period, it will be booked next year, based on accounting estimate regulations.

The distribution amount of employees’, director’s, and supervisor’s compensation in 2017, and 2016 has no difference compared to the recognized amount of the parent company only financial statements in 2017 and 2016.

;Please search for relevant information about employees’, director’s, and supervisor’s compensation, resolved by the board of directors in 2019 and 2018, on the website of “Market Observation Post System” of TWSE.

40 -
(7)Foreign exchange gain (loss)

Foreign exchange gain (loss)
Foreign exchange gain Foreign exchange loss Gain (loss), net		2018 $ 13,990 10,774) $ 3,216		2017
	(		( (	$ 46,413 50,869) $ 4,456)

23. INCOME TAXES

(1)Income tax recognized in profit or loss

The major components of tax expenses were as follows:

OME TAXES ncome tax recognized in profit or loss The major components of tax expenses were as follows:
2018 Current tax In respect of the current year $ 78,602 Surtax on Undistributed Retained Earnings 1,751 Adjustments for previous years 1 80,354 Deferred tax Changes in tax rates ( 2,756 ) In respect of the current year ( 15,060) ( Income tax expense recognized in profit or loss $ 62,538 A reconciliation of accounting profit and inco me tax expense and tax rate were as follows: 2018 Accounting profit before tax from continuing operations $ 315,477 Income tax expense calculated at the statutory rate $ 63,095 Tax-exempt income ( 1,493 ) ( Tax effect of expenses not deductible for tax 4,134 Others ( 2,194 ) Additional Surtax on Undistributed Retained Earnings 1,751 Changes in tax rates ( 2,756 ) The adjustment of current income tax expenses in the past year 1 Total income tax expense recognized in profit or loss $ 62,538		2017
		$ 45,105 5,867 - 50,972 - 1,645) $ 49,327 the applicable 2017
	(	$ 245,310 $ 41,703 1,029 ) 2,480 306 5,867 - - $ 49,327

In 2017, the applicable corporate income tax rate used by the Company entities in the ROC is 17%. The Income Tax Act in the ROC was amended in February, 2018 and the corporate income tax rate was adjusted from 17% to 20% effective in 2018. The change in tax rate on deferred tax losses was recognized as the change in tax rate incurred at the current period. In addition, the rate of the corporate surtax applicable to 2018 unappropriated earnings will be reduced from 10% to 5%.

As the status of the 2019 appropriation of earnings is uncertain, the potential income tax consequences of 5% surtax of unappropriated earnings in 2018 are not reliably determinable.

(2)Income tax expense recognized in other comprehensive income

Deferred tax Changes in tax rates In respect of the current period `－`Remeasurement of defined benefit plans Total income tax expense recognized in other comprehensive income		2018 $ 438 236 $ 674		2017
				$ - 125 $ 125

41 -

(3)Deferred tax balances

Movements of deferred tax assets and deferred tax liabilities were as follows:

2018

2018
D e f e r r e d t a x a s s e t s Temporary differences Allowance for loss on decline in value of inventory Allowance for bad debts Defined benefit plans Others Deferred tax liabilities Temporary differences 2017 D e f e r r e d t a x a s s e t s Temporary differences Allowance for loss on decline in value of inventory Allowance for bad debts Financial instruments measured at cost Defined benefit plans Unrealized foreign exchange losses Others Deferred tax liabilities Temporary differences Unrealized foreign exchange profits	Opening Balance $ 6,784 3,525 3,557 4,663 $ 18,529 $ 434 Opening Balance $ 7,624 - 2,573 3,542 489 2,097 $ 16,325 $ -	Recognized in Profit or Loss $ 15,964 917 85 1,152 $ 18,118 $ 302 Recognized in Profit or Loss ( $ 840 ) 3,525 - ( 110 ) ( 489 ) ( 7) $ 2,079 $ 434	Recognized in Other Comprehensive Income $ - - 674 - $ 674 $ - Recognized in Other Comprehensive Income $ - - - 125 - - $ 125 $ -	Closing Balance
				$ 22,748 4,442 4,316 5,815 $ 37,321 $ 736 Closing Balance
		( ( ( (		$ 6,784 3,525 2,573 3,557 - 2,090 $ 18,529 $ 434

(4)Income tax assessment

The Company’s tax returns through 2016 had been assessed by the tax authorities.

24. EARNINGS PER SHARE

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

;Net Profit for the Period

Net Profit for the Period
Net Profit for the Period Effect of potentially dilutive ordinary shares: Effect of convertible bonds after tax Earnings in computation of diluted earnings per share		2018 $ 252,939 148 $ 253,087		2017
				$ 195,983 317 $ 196,300

42 -

Shares (Units: thousand shares)

Weighted average number of ordinary shares outstanding in computation of basic earnings per share Effect of potentially dilutive ordinary shares`：` Convertible bonds Employee compensation Employee stock options Weighted average number of ordinary shares outstanding in computation of diluted earnings per share		2018 122,660 486 871 634 124,651		2017
				122,088 997 806 181 124,072

If the Company will distribute bonus to employees and the bonus will be settled in cash or shares, the Company will assume that the entire amount of the compensation or bonus will be settled in shares and the resulting potential shares are included in the weighted average number of shares outstanding used in the computation of diluted earnings per share, if the effect is dilutive. Such dilutive effect of the potential shares is included and considered in the computation of diluted earnings per share until the number of shares to be distributed to employees is resolved in the following year.

The exercise price of the second issued employee stock options is higher than average market price of shares in 2017. Owing to anti-diluted, it doesn’t be calculated in each diluted earnings per share.

The exercise price of the third and fourth issued employee stock options is higher than average market price of shares in 2018. Owing to anti-diluted, it doesn’t be calculated in each diluted earnings per share.

25. ;SHARE -BASED PAYMENT ARRANGEMENTS

In August 2015, September 2016, January 2018, and September 2018, 1,000, 1,860, 2000, and 2,000 options were granted to q ualified employees of the Company, and each option entitles the holder to subscribe for 1,000 thousand ordinary shares of the Company when exercisable. The options granted are valid for 6 years and shall be exercised a portion of them after two years from the date of grant. The options were granted at an exercise price equal to the fair value of the Company’s ordinary shares on the grant date. For any subsequent changes in the Company’s ordinary shares, the exercise price of options will be adjusted by the regulated formula, accordingly.

Information about employees’ stock options was as follows:

Employee Stock options Balance, beginning of period Options vested Options exercised Invalid options Outstanding options at the end of the period Options exercised at the end of the period Weighted-average fair value of options vested(NT$)	2018 Number of Options (In Thousands) Weighted Average Exercise Price (NT$) 2,633 $ 15.23 4,000 19.73 ( 105 ) 14.25 ( 60) 14.05 6,468 17.68 912 $ 6.73	2017	2017
	Number of Options (In Thousands) 2,633 4,000 ( 105 ) ( 60) 6,468 912 $ 6.73	Number of Options (In Thousands) 2,860 - ( 27 ) ( 200) 2,633 183 $ -	Weighted Average Exercise Price (NT$)
	( (	( (	$ 16.50 - 13.90 15.00 15.23

43 -

Information about outstanding options at the end of reporting period was as follows:

December 31,2018 Range of Exercise Price(US$) Weighted- Over-Age Remaining Contractual Life(Years) $ 13.10`（`Note`）` 2.67 15.00`（`Note`）` 3.68 18.80`（`Note`）` 5.01 20.65`（`Note`）` 5.67	December 31,2017	December 31,2017
Range of Exercise Price(US$) $ 13.10`（`Note`）` 15.00`（`Note`）` 18.80`（`Note`）` 20.65`（`Note`）`	Range of Exercise Price(US$) $ 13.90`（`Note`）` 15.90`（`Note`）`	Weighted- Over-Age Remaining Contractual Life(Years)
		3.67 4.68

Note: The Issued price will be adjusted by methods of issuance.

The Company adopts BOPM and Black-Scholes price model to evaluate inputs of stock options in September 2018, January 2018, September 2016 and August 2015 as follows:

follows:
Securities price of the vested date Exercised price Foreseeable volatility rate Duration Foreseeable dividend rate No risk rates	September,2018 20.65 Dollars 20.65 Dollars 32.96% 6 Years 0% 0.72%	January,2018	September,2016	August,2015
		19.85 Dollars 19.85 Dollars 33.81% 6 Years 0% 0.74%	16.95 Dollars 16.95 Dollars 38.26% 6 Years 0% 0.56%	15.65 Dollars 15.65 Dollars 39.14%~40.47% 4~5 Years 0% 0.77%~0.87%

The compensation cost recognized were $10,252 thousand and $5,342 thousand for the years ended December 31, 2018 and 2017, respectively.

26. CAPITAL RISK MANAGEMENT

The Company engages mainly in the agent of software, without any plans of imposed capital requirements at present and in the future. The Company manages its capital to ensure requirements of operating funds and dividend expenses, based on growth and development of scale of enterprise and prospective of the industry. The Company periodically reviews the policy of capital risk management, for seeking a steady and conservative policy.

The capital structure of the Company consists of net debt and equity (comprising share capital, capital reserves, retained earnings and other equity).

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

27. FINANCIAL INSTRUMENTS

(1)Information about Fair value of financial instruments that are not measured at fair value

Except as detailed in the following table, the management believes the carrying amounts of financial liabilities not measured at fair value recognized in the parent company only financial statements approximate or cannot be measured their fair values:

Financial Assets Measured at amortized cost -domestic corporate bonds Financial liabilities Convertible bonds	December 31, 2018 Carrying Amount Fair Value $ 61,430 $ 60,778 5,085 6,273	December 31, 2017	December 31, 2017
	Carrying Amount $ 61,430 5,085	Carrying Amount $ - 9,733	Fair Value
			$ - 12,600

44 -
(2)Information about fair value of financial instruments measured at fair value on a recurring basis.
A.Fair value hierarchy

December 31, 2018

Fair value hierarchy December 31, 2018
Financial assets at FVTPL Convertible bonds Domestic public offering and emerging stock Derivatives Total Financial assets at FVTOCI Equity investments `－`Domestic public offering and emerging stock `－`Domestic private company stock December 31, 2017 Financial assets at FVTPL Convertible bonds Domestic public offering stock Derivatives Total Available-for-sale financial assets Equity investments `－`Domestic public offering and emerging stock	Level 1 $ 46,556 14,846 - $ 61,402 $ 131,897 - $ 131,897 Level 1 $ 51,009 325 - $ 51,334 $ 82,274	Level 2 $ - - 917 $ 917 $ 8,841 4,265 $ 13,106 Level 2 $ - - 4 $ 4 $ -	Level 3 $ - - - $ - $ - - $ - Level 3 $ - - - $ - $ -	Total
				$ 46,556 14,846 917 $ 62,319 $ 140,738 4,265 $ 145,003 Total
				$ 51,009 325 4 $ 51,338 $ 82,274

There were no transfers between Level 1 and Level 2 in 2018 and 2017, respectively.

B. Valuation techniques and inputs applied for the purpose of measuring Level 2 fair value measurement
Financial Instruments Valuation Techniques and Inputs Derivatives—Foreign exchange forward Discounted Cash Flow Method: Using exchange rate at contract the end period evaluates future cash flow through the contract. Disclosing the discount rate of credit risks in each counterpart should be separately discounted.

Derivatives—Redemption & sell right of convertible bonds

Valuation model of binomial tree of convertible bond: Using securities prices, no risk rate, and risk discount rate evaluates fair values of financial assets of convertible bonds.
Private company stock In reference to valuation compared with the some industry, market approach is adopted to evaluate its fair values of private company stock.
45 -

(3)Categories of financial instruments

Categories of financial instruments
Financial assets Financial assets measured at FVTPL Held for trading Mandatorily measured at FVTPL Loans and receivables (Note 1) Available-for-sale financial assets `（`Note 2`）` Financial assets measured at amortized cost (Note 3) Financial assets measured at FVTOCI`－` Investments in equity instruments Financial liabilities Measured at amortized cost(Note 4)	December 31,2018 $ - 62,319 - - 2,723,198 145,003 1,989,386	December 31,2017
		$ 51,338 - 2,483,986 82,784 - - 1,345,368

Note 1:The balances included loans and receivable s measured at amortized cost, which comprise cash and cash equivalents, debt instruments with no active market, note receivable, trade receivable, other receivable , and refundable deposits.
Note 2:The balances included available-for-sale financial assets measured at cost.
Note ; 3:The balances included financial assets measured at amortized cost, which comprise cash and cash equivalents, investments in debt instruments, notes receivable, trad e receivable, other receivable and refundable depo sits .
Note 4:The balances included financial liabilities measured at amortized cost, which comprise short-term loans, trade payable, other payable, and current portion of bonds payable.
(4)Financial risk management objectives and policies

The Company’s principal financial risk management objective is to manage the market risk, credit risk and liquidity risk based on related protocols and internal control procedures. The Company’s financial department measures the aforementioned risks based on the Company’s risk appetite, and reports to the board of directors for carrying out relevant policies at any time.

A. ;Market risk

The Company’s activities exposed it primarily to the financial risks of changes in foreign currency exchange rates.

(a)Foreign currency risk

The Company’s purchases and investments are denominated in foreign currencies. Consequently, the Company is exposed to foreign currency risks. To protect against reductions in value of foreign currency denominated assets and the volatility of future cash flows caused by changes in foreign exchange rates, the Company utilizes derivative financial instruments, such as forward exchange contracts and options, for avoiding foreign currency risks.

The carrying amounts of the Company’s foreign currency denominated monetary assets and monetary liabilities of non -functional currency calculated (including those eliminated on consolidation) at the end of the reporting period are set out in Note 31.

Sensitivity analysis

The Company’s exchange rate exposure was in the exchange rate of U.S. dollars.

The sensitivity analysis included only outstanding foreign currency denominated monetary items and adjusts their translation at the end of the reporting period for a 5% change in foreign currency rates. If interest rat es had been 5% higher/lower, the Company’s net profit in 2018 and 2017 would increase/decrease by 14,309 thousand and $6,575 thousand, respectively.

46 -

(b)Interest rate risk

The Company exposed to the risk of interest rate at fair value, since holding the fixed-rate loan, accessing the interest rate of the bank loan regularly, observing influences on profits or losses from fluctuation range of the interest rate, keeping contact with the bank based on the actual requirement, and acquiring the best interest rate of the loan.

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

period were as follows:
Interest rate risks at fair value `－`Financial assets `－`Financial liabilities Interest rate risks at cash flows `－`Financial assets	December 31, 2018 $ 667,837 100,000 170,838	December 31, 2017
		$ 332,705 - 506,357

Sensitivity analysis

The sensitivity analyses below were determined based on the Company’s exposure to interest rates for non-derivative instruments at the end of the reporting period.

If interest rates had been 50 basis points higher/lower and all other variables were held constant, the Company’s pre-tax profit in 2018 and 2017 would increase/ decrease by $854 thousand and $2,532 thousand, respectively. Exposure is triggered by risks of cash flows of the Company’s variable interest rates of deposits.

(c)Other price risk

The Company is exposed to equity price risks arising from equi ty investments of public offering securities. Equity investments should be approved by the management, for controlling risks by holding different investment portfolios.

Sensitivity analysis

The following sensitivity analysis is based on risk exposure of equity prices at the end of the reporting period.

Assuming a hypothetical increase/decrease of 5% in prices of the equity investments, increased/decreased by NT$3,070 thousand, because of the change in fair value of financial assets at FVTPL, respectivel y., at the end of the reporting period in 2018, the other comprehensive income would have increased/decreased by NT$7,250 thousand, because of the change in fair value of financial assets at FVTOCI, respectively, at the end of the reporting period in 2018.

Assuming a hypothetical increase/decrease of 5% in prices of the equity investments, increased/decreased by NT$2,567 thousand, because of the change in fair value of investments held for trading, respectively, at the end of the reporting period in 2017, the other comprehensive income would have increased/decreased by NT$4,114 thousand, because of the change in fair value of available-for-sale financial assets, respectively.

B.;Credit risk

Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in financial loss to the Company. As at the end of the reporting period, the Company’s maximum exposure to credit risk which will cause a financial loss to the Company due to failure to discharge an obligation by the counterparties is arising from the carrying amount of the respective recognized financial assets as stated in the parent company only balance sheets.

The Company adopted a policy of only dealing with creditworthy counterparties. Credit exposure is controll ed by counterparty limits that are reviewed and approved by the financial department regularly.

47 -

To decrease a credit risk, the key management personnel of the Company is responsible for decision of rating criteria, credit limits approval, and other censor procedure, etc., in order to collect delinquent trade receivable. Otherwise, the Company reviews each trade receivable to assure allowance of impairment losses of uncollectable bad debts, hence the key management personnel considers credit concentration risk of trade receivable is insignificant.

The credit concentration risk of the current fund is insignificant, since the Company only transacts with financial institutions with good rating.

Trade receivable consisted of a large number of customers. Ongoing credit evaluation is performed on the financial condition of certain customer’s trade receivable. If necessary, purchasing insurance for credit enhancing procedures is a must.

The credit risk of the Company concentrates on top 5 customers of the Company. As of December 31, 2018 and 2017, the Company’s five largest customers accounted for 33% and 36% of trade receivable, respectively.

C. ; Liquidity risk

The Company manages and maintains sufficient cash and cash equivalents so as to cope with its operations and mitigate the effects of fluctuations in cash flows. The Company’s management supervises financing line of the banking facilities and ensures compliance with the terms of loan agreements.

Liquidity & interest rate risk table

;The table below summarizes the due analysis of the maturity profile of the Company’s non-derivative financial liabilities, enacted by contractual undiscounted payments of cash flow of financial liabilities, according to remaining contracts on the earliest date on which the Company may be required to pay, including interest and principal of cash flows.

;The following tables detail the bank loans are listed on the earliest date on which the Company may be required to pay without considering the probability of the lending bank executing its rights; other non-derivative financial liabilities are listed at their contract repayment dates.

;December 31, 2018

;December 31, 2018
Non-derivative financial liabilities No Interest-bearing liabilities Fixed rate instruments ;December 31, 2017 Non-derivative financial liabilities No Interest-bearing liabilities	Less than 1 Year $ 1,888,601 100,000 $ 1,988,601 Less than 1 Year $ 1,345,545	1-5 Years $ - - $ - 1-5 Years $ -	5+ Years
			$ - - $ - 5+ Years
			$ -

The operating fund of the Company are sufficient to meet cash flow demand; If the demand exists, it shall be short -term. Thus, bank loans within 1 year are the maximum amounts with available limit of credit. After considering the financia l position of the Company, the management does not think the banks will execute their rights of requiring the Company to repay the bank loans.

As of December 31, 2018 and 2017, the Company’s unused short-term credit of limit of the bank were 670,000 thousand and 1,005,000 thousand, respectively.

The Company’s cash and cash equivalents are sufficient to meet the demand of operating demands; the Company does not apply for the overdraft limit from the bank.

48 -

28. RELATED PARTIES TRANSACTIONS

(1) The Names and Relationships of Related -parties

The Names and Relationships of Related -parties	The Names and Relationships of Related -parties	The Names and Relationships of Related -parties
Name of the relatedparties Relationshipwith the Company Zotech Co., Ltd. Subsidiaries Zerone Win Investment Co., Ltd. Subsidiaries Petacom Technology Co., Ltd.) Subsidiaries Wing Will International Co., Ltd. Subsidiaries Chi-Ta International Co., Ltd. Associates K Way information corporation. Related-parties Ijoing, Inc. Related-parties Operating revenue Line Items Types of relatedparties 2018 2017 Sales revenue Subsidiaries $ 1,824 $ 43 Other related parties 165 357 $ 1,989 $ 400 Services revenue Subsidiaries $ 2,243 $ 1,080
		2017
		$ 43 357 $ 400 $ 1,080

(2)Operating revenue

Prices and payment terms for transactions with related parties and third parties were similar.

(3)Purchases(not including loans to related parties and contract asset)

Purchases(not including loans to related parties	Purchases(not including loans to related parties	and contract asset)
Types of relatedparties Subsidiaries Receivables from related parties Line Items Types of relatedparties Trade receivable Subsidiaries		2018 $ 8,966 December 31,2018 $ 397		2017
Subsidiaries Receivables from related Line Items Trade receivable		$	$ 6,910 December 31,2017

	Subsidiaries			$ 263

(4)Receivables from related parties

For the year ended December 31, 2018 and 2017, no impairment loss was recognized for trade receivables from related parties.

(5)Payables to related parties

Line Items Trade payable Other payable	Types of relatedparties Subsidiaries Subsidiaries		December 31, 2018 $ 9,543 10 $ 9,553		December 31, 2017
					$ 1,583 - $ 1,583

(6)Non-operating income

Line Items Types of relatedparties 2018 Rental income Subsidiaries $ 1,595 Compensation of key management personnel 2018 Short-term employee benefits $ 26,798		2018			2017
					$ 540 2017
					$ 23,473

(7)Compensation of key management personnel

;Salaries of the boarders and other key management personnel are decided by personal performance and economic market trend through the compensation committee.

49 -

29. PLEDGED ASSETS

;The following assets of the Company are guaranteed by the assets pledged for loans of the bank and broker, as well as tariff of importing commodities.

Property, plant and equipment, Net Pledged Time Deposits(Financial assets at amortized cost`－`non-current)	December 31, 2018 $ 293,227 15,398 $ 308,625	December 31, 2017	December 31, 2017
			$ 295,043 9,016 $ 304,059

SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED COMMITMENTS
(1)As of December 31, 2018, the Company opens NT 87,000 thousand of cashier order for payment guaranteed for Microsoft Taiwan Corporation.
(2)As of December 31, 2018, the Company opens NT 50,000 thousand of cashier order for payment guaranteed for Microsoft Regional Sales Corporat ion.

31. ; FOREIGN - CURRENCY- DEMONINATED ASSETS AND LIABILITIES THAT HAVE SIGNIFICANT INFLUENCE

The significant financial assets and liabilities denominated in foreign currencies were as follows:

December 31, 2018

Foreign Currencies Exchange Rate Carrying Amount Financial assets Monetary items USD $ 28,142 30.715`（`USD:NTD`）` $ 864,382 Financial liabilities Monetary items USD 37,459 30.715`（`USD:NTD`）` $ 1,150,553 December 31, 2017 Foreign Currencies Exchange Rate Carrying Amount Financial assets Monetary items USD $ 18,159 29.785`（`USD:NTD`）` $ 540,866 Financial liabilities Monetary items USD 22,574 29.785`（`USD:NTD`）` $ 672,367 The material foreign exchange profit/loss(realized and unrealized) was as follows: 2018 2017 Foreign currencies Exchange Rate Net Foreign exchange profit(loss) Exchange Rate Net Foreign exchange profit(loss) USD 30.149`（`USD:NTD`）` $ 3,126 30.432`（`USD:NTD`）` ($ 4,456)	Carrying Amount	Carrying Amount	Carrying Amount
	$ 864,382 $ 1,150,553 Carrying Amount
Exchange Rate 30.432`（`USD:NTD`）`			Net Foreign exchange profit(loss)
		(	$ 4,456)

50 -

32. SEPARATELY DISCLOSED ITEMS

Information on (1) significant transactions and (2) investees:

A.; Financing provided to others: None.
B.;Endorsements/guarantees provided: None.
C. ;Holding of marketable securities at the end of the period (not including subsidiaries, associates and joint ventures): Please refer to Table 1.
D.; Marketable securities acquired and disposed at costs or prices at least NT$300 million or 20% of the paid-in capital: None.
E.; Acquisition of individual real estate at costs of at least NT$300 million or 20% of the paid-in capital: None.
F. ;Disposal of individual real estate at prices of at least NT$300 million or 20% of the paid-in capital: None.
G.;Total purchases from or sales to related parties amounting to at least NT$100 million or 20% of the paid-in capital: None.
H.;Trade receivable from related parties amounting to at least NT$100 million or 20% of the paid-in capital: None.
I.;;Trading in derivative instruments: Please refer appendix 7.
J.;Information on investees: Table 2.
(3)Information on investment in Mainland China ： None.
51 -

ZERO ONE TECHNOLOGY CO., LTD. MARKETABLE SECURITIES HELD FOR THE YEAR ENDED DECEMBER 31, 2018

Table 1					(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)
Holding Company	Marketable Securities Type and Issuer’s Name `（`Note 1`）`	Security Issuer’s Relationship with the Holding Company	Financial Statement Account		December 31,2018			Note
				Shares/Units	Carrying Values	Percentage of Ownership (%)	Market Prices/ Net value of equities
The company	Corporate bond Walton Advanced Engineering, Inc.－2 Giga Solar Materials Corp.－2 China Airlines－6 ShunSin Technology Holdings Ltd.－1 Regent Hotels Group－2 Elite Material Co., Ltd.－4 GIGASTORAGE Corp.－4 SINTRONIC Technology.－3 EVA Airways.－3 Yang Ming Marine Transport Corporation －5 Great Tree Pharmacy Co., Ltd.－1 Tong Ming Enterprise Co., Ltd. －1st domestic unsecured convertible corporate bonds Merry Electronics Co., Ltd.`－`2	`－` `－` `－` `－` `－` `－` `－` `－` `－` `－` `－` `－` `－`	Financial assets at FYTPL－ current Financial assets at FYTPL－ current Financial assets at FYTPL－ current Financial assets at FYTPL－ current Financial assets at FYTPL－ current Financial assets at FYTPL－ current Financial assets at FYTPL－ current Financial assets at FYTPL－ current Financial assets at FYTPL－ current Financial assets at FYTPL－ current Financial assets at FYTPL－ current Financial assets at FYTPL－ current Financial assets at FYTPL－ current	40`（`Units`）` 150`（`Units`）` 30`（`Units`）` 30`（`Units`）` 20`（`Units`）` 10`（`Units`）` 50`（`Units`）` 5`（`Units`）` 30`（`Units`）` 40`（`Units`）` 7`（`Units`）` 10`（`Units`）` 20`（`Units`）`	$ 4,016 11,850 3,048 2,925 1,996 1,023 5,125 498 3,243 4,062 708 950 2,064	- - - - - - - - - - - - -	$ 4,016 11,850 3,048 2,925 1,996 1,023 5,125 498 3,243 4,062 708 950 2,064
								`（`Continued`）`

52 -

Marketable Securities Type and Issuer’s Name `（`Note 1`）`	Security Issuer’s Relationship with the Holding Company	Financial Statement Account		December 31,2018	December 31,2018
			Shares/Units	Carrying Values	Percentage of Ownership (%)	Market Prices/ Net value of equities
Corporate bond Shin Kong Financial Holding Co., Ltd.`－`5 Yuanta Securities Asia Financial Services Limited－2018 Non-secured USD- denominated Private Fixed Rate Notes Securities Cathay Financial Holdings Preferred Stock A Union Bank of Taiwan Preferred Stock A Global Mixed-mode Technology Inc. ASLAN Pharmaceuticals, Ltd. Chunghwa Precision Test Tech. Co., Ltd . K Way Information Corp. China Electric Mfg. Corp. ASIX Electronics Corp.	`－` `－` `－` `－` `－` `－` `－` The supervisor of the Company `－` `－` `－` `－` `－` `－` `－` `－` `－`	Financial assets at FYTPL－ current Financial assets at amortized cost`－`non-current Financial assets at FYTPL－ non-current Financial assets at FYTPL－ non-current Financial assets at FVTOCI`－` current Financial assets at FVTOCI`－` current Financial assets at FVTOCI`－` current Financial assets at FVTOCI`－` non-current Financial assets at FVTOCI`－` non-current Financial assets at FVTOCI`－` non-current Financial assets at FVTOCI`－` non-current Financial assets at FVTOCI`－` non-current Financial assets at FVTOCI`－` non-current Financial assets at FVTOCI`－` non-current Financial assets at FVTOCI`－` non-current Financial assets at FVTOCI`－` non-current Financial assets at FVTOCI`－` non-current	50`（`Units`）` 20`（`Units`）` 166,000 80,000 50,000 60,000 6,000 490,000 3,320,000 260,074 1,075,601 175,000 34,000 50,000 400,000 240,000 90,000	$ 5,048 61,430 10,574 4,272 3,230 1,515 3,120 13,696 30,179 7,828 8,841 4,265 2,166 2,670 24,800 12,768 5,688	- - 0.02 0.04 0.06 0.04 0.02 1.60 0.83 0.48 2.72 1.68 - 0.03 0.06 0.05 0.03	$ 5,048 60,778 10,574 4,272 3,230 1,515 3,120 13,696 30,179 7,828 8,841 4,265 2,166 2,670 24,800 12,768 5,688
Promaster Technology Corp. Unex Technology Corp.
Cathay Financial Holding Co., Ltd. Preferred Stock A Union Bank of Taiwan Preferred Stock A Fubon Financial Holding Co., Ltd. Preferred Shares B Taishin Financial Holding Co., Ltd. Preferred Stock E CTBC Financial Holding Co., Ltd. Preferred Shares B

（ Continued ）

53 -

Holding Company	Marketable Securities Type and Issuer’s Name `（`Note 1`）`	Security Issuer’s Relationship with the Holding Company	Financial Statement Account		December 31,2018	December 31,2018		Note
				Shares/Units	Carrying Values	Percentage of Ownership (%)	Market Prices/ Net value of equities
ZeroneWin PetaCom	Cathay Financial Holding Co., Ltd. Preferred Stock B	`－` `－` `－` `－` `－` `－` `－` `－` `－`	Financial assets at FVTOCI`－` non-current Financial assets at FVTOCI`－` non-current Financial assets at FVTOCI`－` non-current Financial assets at FVTOCI`－` non-current Financial assets at FVTOCI`－` non-current Financial assets at FVTOCI`－` non-current Financial assets at FYTPL－ non-current Financial assets at FVTOCI`－` current Financial assets at FYTPL－ current	230,000 200,000 2,500,000 10,000 796,250 500,000 7,000 7,000 2,750,000	$ 14,237 10,000 - $ - - - 27,501 3,640 37,145	0.03 0.16 3.45 0.27 16.94 10.00 - 0.02 -	$ 14,237 10,000 8 Note 3 6,382 263 27,501 3,640 37,145	Recognized as impairment losses Recognized as impairment losses Recognized as impairment losses Recognized as impairment losses
	Kwong Lung Enterprise Co., Ltd. Preferred Stock A Miiicasa Holdings (Cayman) Inc. Duofu Co., Ltd. Jotangi Technology Co., Ltd. Ijoing, Inc. Beneficiary certifications Yuanta Diamond Funds SPC Securities Chunghwa Precision Test Tech. Co., Ltd . Beneficiary certifications Taishin 1699 Money Market Fund

（ Concluded ）

Note 1 ： Securities, indicated by the above table, are derivative from stock, bonds, beneficiary certificates, and the above items, ba sed on IFRS 9 “Financial Instruments”. Note 2 ： Relevant information about Investments in equity of subsidiaries, associates, see Table 2. Note 3 ： As the end of reporting period, net value of equities of the Company hasn’t been acquired.

54 -

ZERO ONE TECHNOLOGY CO., LTD. INFORMATION ON INVESTEES FOR THE YEAR ENDED DECEMBER 31, 2018

Table 2 (In Thousands of New Taiwan Dollars)

Investor Company	Investee Company	Location	Main Businesses	Investment Amount	Investment Amount	As of December 31,2018	As of December 31,2018	As of December 31,2018	Net Income (Loss) of the Investee	Share of Profits/Losses of Investee	Note
				December 31, 2018	December 31, 2017	Number of Ownership	Percentage of Ownership	Carrying Values
The Company ZeroneWin Investment Co., Ltd.	Zotech Technology Co., Ltd.	Taipei City Taipei City Hsinchu City Taipei City Taipei City Taipei City	Services of telecommunication apparatus Services of telecommunication apparatus Service of air material Investment Services of cloud information software Services of information product agent	$ 35,000 10,000 - 100,000 7,000 50,000	$ 35,000 10,000 9,450 100,000 7,000 50,000	3,500,000 597,960 - 10,000,000 700,000 5,000,000	85.37 30.00 - 100.00 70.00 100.00	$ 44,426 - - 91,703 1,581 46,301	$ 5,840 ( 184 ) ( 13,602 ) ( 2,734 ) ( 5,855 ) ( 1,749 )	$ 4,986 - ( 4,057) ( 2,734 ) ( 4,099 ) ( 1,749 )	Subsidiary The Company had sold it in November, 2018 Subsidiary Sub-subsidiary Sub-subsidiary
	Chi-Ta International Co., Ltd.
	Trident Pacific Inc. ZeroneWin Investment Co., Ltd. WingWill International Co., Ltd. PetaCom technology Co.,Ltd.

55 -

§THE CONTENTS OF STATEMENTS OF MAJOR ACCOUNTING ITEMS§

ITEMS NO. ／ INDEX MAJOR ACCOUNTING ITEMS IN ASSETS, LIABILITIES AND EQUITY STATEMENT OF CASH AND CASH Statement 1 EQUIVALENTS STATEMENT OF FINANCIAL ASSETS AT FYTPL Statement 2 － CURRENT STATEMENT OF FINANCIAL ASSETS AT Statement 3 － FVTOCI CURRENT STATEMENT OF FINANCIAL ASSETS AT Note 9 AMORTIZED COST STATEMENT OF NOTES RECEIVABLE Statement 4 STATEMENT OF TRADE RECEIVABLE Statement 5 STATEMENT OF INVENTORIES Statement 6 STATEMENT OF FINANCIAL ASSETS AT FYTPL Statement 7 － NON-CURRENT STATEMENT OF FINANCIAL ASSETS AT Statement 8 － FVTOCI NON-CURRENT STATEMENT OF FINANCIAL ASSETS AT Note 9 － AMORTIZED COST NON-CURRENT STATEMENT OF CHANGES IN Statement 9 INVESTMENTSACCOUNTED FOR USING THE EQUITY METHOD STATEMENT OF CHANGES IN PROPERTY, Note 16 PLANT AND EQUIPMENT STATEMENT OF CHANGES IN ACCUMULATED Note 16 DEPRECIATION OF PROPERTY, PLANT AND EQUIPMENT STATEMENT OF DEFERRED INCOME TAX Note 23 ASSETS STATEMENT OF TRADE PAYABLES Statement 10 STATEMENT OF OTHER PAYABLES Note 18 STATEMENT OF OTHER CURRENT LIABILITIES Statement 11 MAJOR ACCOUNTING ITEMS IN PROFIT OR LOSS STATEMENT OF OPERATING REVENUE Statement 12 STATEMENT OF OPERATING COST Statement 13 STATEMENT OF OPERATING EXPENSES Statement 14 STATEMENT OF EMPLOYEE BENEFITS, Note 22 DEPRECIATION, DEPLETION AND AMORTIZATION BY FUNCTION

56 -

ZERO ONE TECHNOLOGY CO., LTD.

STATEMENT OF CASH AND CASH EQUIVALENTS FOR THE YEAR ENDED DECEMBER 31, 2018

STATEMENT 1 (In Thousands of New Taiwan Dollars)

Item Demand deposits Foreign currency time deposit cash on hand and revolving funds Checking deposits	Description New Taiwan dollar USD 29 thousand`＠`30.175 USD 5,834 thousand@ 30.715; yearly interest rates at 3.00% ~3.30%; Expired by 2019.2.20		Amount
			$ 21,534 886 179,191 142 1 $ 201,754

57 -

ZERO ONE TECHNOLOGY CO., LTD.

STATEMENT OF FINANCIAL ASSETS AT FYTPL `－` CURRENT

FOR THE YEAR ENDED DECEMBER 31, 2018

Statement 2

(In Thousands of New Taiwan Dollars, Except Earnings Per Share)

Name of financial instruments Walton Advanced Engineering, Inc.`－`2 Giga Solar Materials Corp.`－`2 China Airlines`－`6 ShunSin Technology Holdings Ltd.`－`1 Regent Hotels Group`－`2 Elite Material Co., Ltd.`－`4 GIGASTORAGE Corp.`－`4 SINTRONIC Technology.`－`3 EVA Airways.`－`3 Yang Ming Marine Transport Corporation`－`5 Great Tree Pharmacy Co., Ltd.`－`1 Tong Ming Enterprise Co., Ltd.`－`1 Merry Electronics Co., Ltd.`－`2 Shin Kong Financial Holding Co., Ltd.`－`5 Derivatives Forward exchange contracts Add`（`Less`）：`Valuation adjustment	Description Convertible bond Convertible bond Convertible bond Convertible bond Convertible bond Convertible bond Convertible bond Convertible bond Convertible bond Convertible bond Convertible bond Convertible bond Convertible bond Convertible bond	Units 40`（`Units`）` 150`（`Units`）` 30`（`Units`）` 30`（`Units`）` 20`（`Units`）` 10`（`Units`）` 50`（`Units`）` 5`（`Units`）` 30`（`Units`）` 40`（`Units`）` 7`（`Units`）` 10`（`Units`）` 20`（`Units`）` 50`（`Units`）`	Par value`（`Dollars`）` 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000	Total $ 4,000 15,000 3,000 3,000 2,000 1,000 5,000 500 3,000 4,000 700 1,000 2,000 5,000 - -	Acquisition Cost $ 4,020 14,672 3,006 3,015 2,006 1,010 5,100 505 3,009 4,048 700 1,005 2,010 5,015 - - 49,121 ( 1,648) $ 47,473	Fair value	Fair value
						Units`（`Dollars`）` 100.4 79 101.6 97.5 99.8 102.25 102.5 99.7 108.1 101.55 101.2 95 103.2 100.95		Total
					(			$ 4,016 11,850 3,048 2,925 1,996 1,023 5,125 498 3,243 4,062 708 950 2,064 5,048 1 916 $ 47,473

58 -

ZERO ONE TECHNOLOGY CO., LTD.

STATEMENT OF FINANCIAL ASSETS AT FVTOCI `－` CURRENT

FOR THE YEAR ENDED DECEMBER 31, 2018

Statement 3

(In Thousands of New Taiwan Dollars, Except Earnings Per Share)

Name of financial instruments Global Mixed-mode Technology Inc. ASLAN Pharmaceuticals, Ltd. Chunghwa Precision Test Tech. Co., Ltd . Add`（`Less`）：`Valuation adjustment	Description Ordinary shares Ordinary shares Ordinary shares	Units 50,000 60,000 6,000	Par value`（`Dollars`）`	Total $ 500 600 60	Acquisition Cost $ 3,370 2,324 8,015 13,709 ( 5,844) $ 7,865	Fair value	Fair value
						Units`（`Dollars`）` Units`（`Dollars`）`
			10 10 10		(	64.60 25.25 520.00	$ 3,230 1,515 3,120 $ 7,865

59 -

ZERO ONE TECHNOLOGY CO., LTD.

STATEMENT OF NOTES RECEIVABLE FOR THE YEAR ENDED DECEMBER 31, 2018

Statement 4 (In Thousands of New Taiwan Dollars)

The firm name Non-related parties Sanfran Technologies Inc. Ecom Software Inc. Stark Technology Inc. Stark Inforcom Inc. Key Win Computer Co., Ltd. SECDigit Technology Co., Ltd. APEX FONG YI Technology Co., Ltd. Others (Note) Less: Allowance for doubtful accounts	Description Payment Payment Payment Payment Payment Payment Payment Payment		Amount
			$ 11,044 15,801 30,477 8,796 10,904 9,363 10,459 63,729 160,573 __ - $ 160,573

Note ： The amount of individual company included in others does not exceed 5% of the account balance.

60 -

ZERO ONE TECHNOLOGY CO., LTD.

STATEMENT OF TRADE RECEIVABLE

FOR THE YEAR ENDED DECEMBER 31, 2018

Statement 5 (In Thousands of New Taiwan Dollars)

The Company’s name HwaCom Systems Inc. Genesis Technology Inc. Kinmax Technology Inc. Dynasafe Technologies Inc. Others (Note) Less: Allowance for doubtful accounts Total	Description Payment for goods Payment for goods Payment for goods Payment for goods Payment for goods	Amount	Amount
			$ 138,953 153,812 149,832 94,293 1,202,524 1,739,414 21,046 $ 1,718,368

Note ： The amount of individual company included in others does not exceed 5% of the account balance.

61 -

ZERO ONE TECHNOLOGY CO., LTD.

STATEMENT OF INVENTORIES

FOR THE YEAR ENDED DECEMBER 31, 2018

Statement 6 Items Commodities	(In Thousands of New Taiwan Dollars) Book value Market value `（`Note`）` $ 934,052 $ 939,424

Note ： Market value shall be net realizable value.

62 -

ZERO ONE TECHNOLOGY CO., LTD.

STATEMENT OF FINANCIAL ASSETS AT FYTPL `－` NON-CURRENT

FOR THE YEAR ENDED DECEMBER 31, 2018

Statement 7 Name Cathay Financial Holding Co., Ltd. Preferred Stock A Union Bank of Taiwan Preferred Stock A	BeginningBalance Shares Book value - $ - - - $ -	BeginningBalance Shares Book value - $ - - - $ -		Effect of retrospective application and retrospective restatement $ 10,408 4,008 $ 14,416	Addition Shares Amount - $ - - - $ -	(In Thousands of New Taiwan Dollars, Except Earnings Per Share) Decrease Balance,December 31,2018 Shares Amount Valuation for the currentyear Shares Book value Remark - $ - $ 166 - $ 10,574 - - 264 - 4,272 $ - $ 430 $ 14,846	(In Thousands of New Taiwan Dollars, Except Earnings Per Share) Decrease Balance,December 31,2018 Shares Amount Valuation for the currentyear Shares Book value Remark - $ - $ 166 - $ 10,574 - - 264 - 4,272 $ - $ 430 $ 14,846	(In Thousands of New Taiwan Dollars, Except Earnings Per Share) Decrease Balance,December 31,2018 Shares Amount Valuation for the currentyear Shares Book value Remark - $ - $ 166 - $ 10,574 - - 264 - 4,272 $ - $ 430 $ 14,846
	Shares - -				Shares	Shares	Amount $ - - $ -	Amount
					- -	- -

63 -

ZERO ONE TECHNOLOGY CO., LTD.

STATEMENT OF FINANCIAL ASSETS AT FVTOCI `－` NON-CURRENT

FOR THE YEAR ENDED DECEMBER 31, 2018

Statement 8

(In Thousands of New Taiwan Dollars)

Name K Way Information Corp. China Electric Mfg. Corp. ASIX Electronics Corp. Promaster Technology Corp. Unex Technology Corp. Cathay Financial Holding Co., Ltd. Preferred Stock A Union Bank of Taiwan Preferred Stock A Fubon Financial Holding Co., Ltd. Preferred Shares B Taishin Financial Holding Co., Ltd. Preferred Stock E CTBC Financial Holding Co., Ltd. Preferred Shares B Cathay Financial Holding Co., Ltd. Preferred Stock B Kwong Lung Enterprise Co., Ltd. Preferred Stock A Miiicasa Holdings (Cayman) Inc. Duofu Co., Ltd. Jotangi Technology Co., Ltd. Ijoing, Inc.	BeginningBalance Shares Book value - $ - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - $ -	BeginningBalance Shares Book value - $ - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - $ -	Effect of retrospective application and retrospective restatement Shares Amount 490,000 $ 9,065 3,040,000 30,309 260,074 7,685 1,000,000 10,450 175,000 3,386 - - - - - - - - - - - - - - 2,500,000 - 10,000 - 796,250 - 500,000 - $ 60,895	Effect of retrospective application and retrospective restatement Shares Amount 490,000 $ 9,065 3,040,000 30,309 260,074 7,685 1,000,000 10,450 175,000 3,386 - - - - - - - - - - - - - - 2,500,000 - 10,000 - 796,250 - 500,000 - $ 60,895	Addition Shares Amount - $ - 280,000 2,649 - - 75,601 - - - 34,000 2,198 50,000 2,571 400,000 24,078 240,000 12,994 90,000 5,566 230,000 13,827 200,000 10,000 - - - - - - - - $ 73,883	Addition Shares Amount - $ - 280,000 2,649 - - 75,601 - - - 34,000 2,198 50,000 2,571 400,000 24,078 240,000 12,994 90,000 5,566 230,000 13,827 200,000 10,000 - - - - - - - - $ 73,883	Decrease Shares Amount - $ - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - $ -	Decrease Shares Amount - $ - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - $ -		Valuation for the currentyear $ 4,631 2,779 ) 143 1,609 ) 879 32 ) 99 722 226 ) 122 410 - - - - - $ 2,360	Balance,December 31,2018 Shares Book value 490,000 $ 13,696 3,320,000 30,179 260,074 7,828 1,075,601 8,841 175,000 4,265 34,000 2,166 50,000 2,670 400,000 24,800 240,000 12,768 90,000 5,688 230,000 14,237 200,000 10,000 2,500,000 - 10,000 - 796,250 - 500,000 - $ 137,138	Balance,December 31,2018 Shares Book value 490,000 $ 13,696 3,320,000 30,179 260,074 7,828 1,075,601 8,841 175,000 4,265 34,000 2,166 50,000 2,670 400,000 24,800 240,000 12,768 90,000 5,688 230,000 14,237 200,000 10,000 2,500,000 - 10,000 - 796,250 - 500,000 - $ 137,138	Remark
	Shares - - - - - - - - - - - - - - - -		Shares 490,000 3,040,000 260,074 1,000,000 175,000 - - - - - - - 2,500,000 10,000 796,250 500,000		Shares - 280,000 - 75,601 - 34,000 50,000 400,000 240,000 90,000 230,000 200,000 - - - -		Shares				Shares 490,000 3,320,000 260,074 1,075,601 175,000 34,000 50,000 400,000 240,000 90,000 230,000 200,000 2,500,000 10,000 796,250 500,000
							- - - - - - - - - - - - - - - -		( ( ( (

64 -

ZERO ONE TECHNOLOGY CO., LTD.

STATEMENT OF CHANGES IN INVESTMENTSACCOUNTED FOR USING THE EQUITY METHOD FOR THE YEAR ENDED DECEMBER 31, 2018

Statement 9 Name ZeroneWin Investment Co., Ltd. Zotech Technology Co., Ltd. Trident Pacific Inc. Chi-Ta International Co., Ltd.	BeginningBalance Shares Amount 10,000,000 $ 95,546 3,500,000 39,440 945,000 4,446 597,960 - $ 139,432	BeginningBalance Shares Amount 10,000,000 $ 95,546 3,500,000 39,440 945,000 4,446 597,960 - $ 139,432	Effect of retrospective application and retrospective restatement $ 3,266 - - - $ 3,266	Addition Shares Amount - $ - - - - - - - $ -	Decrease Shares Amount - $ - ( - - 945,000 389 - - $ 389 (	Unrealized gains (losses) on financial instruments $ 4,375 ) ( - - ( - $ 4,375) (	(In Thousands of New Taiwan Dollars, Except Investment gain(loss) Balance,December 31,2018 Shares Percentage of ownership`％` Amount $ 2,734 ) 10,000,000 100 $ 91,703 4,986 3,500,000 85.37 44,426 4,057 ) - - - - 597,960 30 - $ 1,805) $ 136,129	Earnings Per Share) Net value of equity Collateral/ Pledge $ 91,703 None 44,426 None - None - None	Earnings Per Share) Net value of equity Collateral/ Pledge $ 91,703 None 44,426 None - None - None
	Shares 10,000,000 3,500,000 945,000 597,960			Shares - - - -	Shares - - 945,000 -
									None None None None

65 -

ZERO ONE TECHNOLOGY CO., LTD.

STATEMENT OF TRADE PAYABLES

FOR THE YEAR ENDED DECEMBER 31, 2018

Statement 10 (In Thousands of New Taiwan Dollars)

The Company’s name CISCO SYSTEMS INTERNATIONAL B.V. Trend Micro Inc. Net App, Inc. Others`（`Note`）`		Amount
		$ 764,311 216,585 70,252 593,217 $ 1,644,365

Note ： The amount of individual company included in others does not exceed 5% of the account balance.
66 -

ZERO ONE TECHNOLOGY CO., LTD.

STATEMENT OF OTHER CURRENT LIABILITIES FOR THE YEAR ENDED DECEMBER 31, 2018

Statement 11	(In Thousands of New Taiwan Dollars)
Items	Amount
receipts under custody	$ 88,213
Contract liability—current	13,112
temporary receipts	4,577
	$ 105,902

67 -

ZERO ONE TECHNOLOGY CO., LTD.

STATEMENT OF OPERATING REVENUE

FOR THE YEAR ENDED DECEMBER 31, 2018

Statement 12 Items Sales revenue Other operating revenues Less: sales returns Less:sales discounts	(In Thousands of New Taiwan Dollars) Description Amount Selling the software suite $ 6,531,299 36,969 6,568,268 8,594 7,704 $ 6,551,970

68 -

ZERO ONE TECHNOLOGY CO., LTD.

STATEMENT OF OPERATING COST

FOR THE YEAR ENDED DECEMBER 31, 2018

Statement 13

(In Thousands of New Taiwan Dollars)

Items Costs of goods sold Initial inventory Add`：`Purchases Ending inventory Less`：`Rewards of purchases Others Total costs of sales and purchases Gain from price recovery of inventory Losses on disposal of scrap inventories	Amount
	$ 505,576 7,435,246 ( 1,047,792 ) ( 1,025,387 ) ( 44,896) 5,822,747 73,836 6,109 $ 5,902,692

Note ： The above statement indicates that the amount of all items regarding inventories is recognized by original costs of inventories, with no deduction of allowance for inventory valuation losses.

69 -

ZERO ONE TECHNOLOGY CO., LTD.

STATEMENT OF OPERATING EXPENSES FOR THE YEAR ENDED DECEMBER 31, 2018

Statement 14

(In Thousands of New Taiwan Dollars)

Items Payroll Expenses Entertainment expense Insurance expense Reversal for expected credit losses Depreciation expense Others`（`Note`）`		Selling and marketing expenses $ 160,305 31,473 15,762 - 3,490 67,329 $ 278,359	General and administrative expenses $ 67,225 1,031 5,197 ( 16,494 ) 7,198 24,122 $ 88,279	Total
				$ 227,530 32,504 20,959 ( 16,494 ) 10,688 91,451 $ 366,638

Note ： The amount of each item in others does not exceed 5% of the account balance.

70 -

AI assistant

ZERO ONE — Audit Report / Information 2018

52262_rns_2018-11-26_0cb90340-7a11-4a95-a965-1a7035c2dba2.pdf

§TABLE OF CONTENTS§

INDEPENDENT AUDITORS' REPORT

Opinion

Basis for Opinion

Key Audit Matters

Valuation of allowance for uncollectible accounts

Key Audit Matters

The following audit procedures

Allowance for inventory valuation loss

Key Audit Matters

The following audit procedures

Responsibilities of Management and Those Charged with Governance for the Parent company only Financial Statements

Auditors' Responsibilities for the Audit of the Parent company only Financial Statements

Deloitte & Touche

Taipei, Taiwan Republic of China

Notice to Readers

ZERO ONE TECHNOLOGY CO., LTD.

PARENT COMPANY ONLY BALANCE SHEETS DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars)

ZERO ONE TECHNOLOGY CO., LTD.

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

ZERO ONE TECHNOLOGY CO., LTD.

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

ZERO ONE TECHNOLOGY CO., LTD.

PARENT COMPANY ONLY STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

ZERO ONE TECHNOLOGY CO., LTD.

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

ZERO ONE TECHNOLOGY CO., LTD.

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

1. GENERAL

2. THE DATE AND PROCEDURES OF AUTHORIZATION OF FINANCIAL STATEMENTS

3. ;APPLICATION OF NEW AND REVISED STANDARDS AND INTERPRETATIONS

IFRS 9 “Financial Instruments” and related amendments

Classification, measurement and impairment of financial assets

Definition of a lease

The Company as lessee

The Company as lessor

(5)Inventories

2017

2017

c. De-recognition of financial assets

B. Financial liabilities

C. Convertible bonds

2018

Revenue from sale of goods

2017

B. The Company as lessee

(14)Costs of loans

5. ;CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION AND UNCERTAINTY

6. CASH AND CASH EQUIVALENTS

8. Financial assets measured at FVTOCI -2018

9. FINANCIAL ASSETS AT AMORTIZED COST -2018

10. AVAILABLE -FOR - SALE FINANCIAL ASSETS -2017

12. DEBT INVESTMENTS WITH NO ACTIVE MARKET-2017

13. NOTES AND TRADE RECEIVABLE

15. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD

16. PROPERTY, PLANT AND EQUIPMENT

17. ; SHORT-TERM LOANS

20. RETIREMENT BENEFIT PLANS

(1)Defined contribution plans

(2)Defined benefit plans

21. EQUITY

(3)Retained earnings and dividend policy

B. Unrealized Gain/Loss from financial assets measured at FVTOCI

22. NET INCOME

(3)Financial costs

(6)Employees’, directors, and supervisors’ compensation

Estimate Rate

23. INCOME TAXES

(3)Deferred tax balances

24. EARNINGS PER SHARE

;Net Profit for the Period

25. ;SHARE -BASED PAYMENT ARRANGEMENTS

26. CAPITAL RISK MANAGEMENT

27. FINANCIAL INSTRUMENTS

(b)Interest rate risk

Sensitivity analysis

Liquidity & interest rate risk table

ZERO ONE Audit Report / Information 2018

STATEMENT OF FINANCIAL ASSETS AT FYTPL `－` CURRENT

STATEMENT OF FINANCIAL ASSETS AT FVTOCI `－` CURRENT

STATEMENT OF FINANCIAL ASSETS AT FYTPL `－` NON-CURRENT

STATEMENT OF FINANCIAL ASSETS AT FVTOCI `－` NON-CURRENT