FORMOSA ADVANCED TECHNOLOGIES CO., LTD.

FORMOSA ADVANCED TECHNOLOGIES

CO., LTD.

FINANCIAL STATEMENTS AND REVIEW REPORT

OF INDEPENDENT ACCOUNTANTS

MARCH 31, 2019 AND 2018

------------------------------------------------------------------------------------------------------------------------------------

For the convenience of readers and for information purpose only, the auditors’ report and the accompanying

financial statements have been translated into English from the original Chinese version prepared and used in

the Republic of China. In the event of any discrepancy between the English version and the original Chinese

version or any differences in the interpretation of the two versions, the Chinese-language auditors’ report and

financial statements shall prevail.

~1~

REVIEW REPORT OF INDEPENDENT ACCOUNTANTS

PWCR19000051

To the Board of Directors and Stockholders of Formosa Advanced Technologies Co., Ltd.

Introduction

We have reviewed the accompanying balance sheets of Formosa Advanced Technologies Co., Ltd. as at

March 31, 2019 and 2018, and the related statements of comprehensive income, of changes in equity

and of cash flows for the three months then ended, and notes to the financial statements, including a

summary of significant accounting policies. Management is responsible for the preparation and fair

presentation of these financial statements in accordance with “Regulations Governing the Preparation of

Financial Reports by Securities Issuers” and International Accounting Standard 34, “Interim Financial

Reporting” as endorsed by the Financial Supervisory Commission. Our responsibility is to express a

conclusion on these financial statements based on our reviews.

Scope of Review

We conducted our reviews in accordance with the Statement of Auditing Standards No. 65 “Review of

Financial Information Performed by the Independent Auditor of the Entity” in the Republic of China. A

review of financial statements consists of making inquiries, primarily of persons responsible for financial

and accounting matters, and applying analytical and other review procedures. A review is substantially

less in scope than an audit and consequently does not enable us to obtain assurance that we would

become aware of all significant matters that might be identified in an audit. Accordingly, we do not

express an audit opinion.

~2~

Conclusion

Based on our reviews, nothing has come to our attention that causes us to believe that the accompanying

financial statements do not present fairly, in all material respects, the financial position of the Formosa

Advanced Technologies Co., Ltd. as at March 31, 2019 and 2018, and of its financial performance and

its cash flows for the three months then ended in accordance with “Regulations Governing the

Preparation of Financial Reports by Securities Issuers” and International Accounting Standard 34,

“Interim Financial Reporting” as endorsed by the Financial Supervisory Commission.

Wu, Han-Chi Chou, Chien-Hung

For and on behalf of PricewaterhouseCoopers, Taiwan

May 3, 2019

------------------------------------------------------------------------------------------------------------------------------------------------- The accompanying financial statements are not intended to present the financial position and results of operations and cash flows in accordance with accounting principles generally accepted in countries and jurisdictions other than the Republic of China. The standards, procedures and practices in the Republic of China governing the audit of such financial statements may differ from those generally accepted in countries and jurisdictions other than the Republic of China. Accordingly, the accompanying financial statements and report of independent accountants are not intended for use by those who are not informed about the accounting principles or auditing standards generally accepted in the Republic of China, and their applications in practice.

FORMOSA ADVANCED TECHNOLOGIES CO., LTD. BALANCE SHEETS

(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS) (THE BALANCE SHEETS AS OF MARCH 31, 2019 AND 2018 ARE REVIEWED, NOT AUDITED)

~3~

March 31, 2019 December 31, 2018 March 31, 2018 Assets Notes AMOUNT % AMOUNT % AMOUNT %

Current assets

1100 Cash and cash equivalents 6(1) $ 1,536,819 11 $ 1,267,335 10 $ 2,935,293 23 1110 Financial assets at fair value

through profit or loss - current

6(2)

255,732 2 479,490 4 630,700 5 1120 Current financial assets at fair

value through other

comprehensive income

6(3)

2,081,525 15 1,956,437 15 1,856,153 14 1140 Current contract assets 6(14) 907,388 7 788,643 6 582,646 5 1150 Notes receivable, net 6(4) - - 6,802 - 3,796 - 1170 Accounts receivable, net 6(4) 466,140 4 581,885 5 561,153 4 1180 Accounts receivable - related

parties

6(4) and 7

1,052,731 8 1,006,359 8 945,539 7 1200 Other receivables 3,058 - 6,077 - 11,063 - 130X Inventories, net 6(5) 463,657 3 514,453 4 461,566 4 1470 Other current assets 127,064 1 184,962 2 218,458 2 11XX Total current assets 6,894,114 51 6,792,443 54 8,206,367 64 Non-current assets

1517 Non-current financial assets at

fair value through other


6(3)

482,027 4 431,684 3 724,484 5 1600 Property, plant and equipment,

net

6(6) and 7

5,371,821 40 5,238,086 41 3,840,622 30 1755 Right-of-use assets 6(7) 555,667 4 - - - - 1840 Deferred income tax assets 6(17) 12,398 - 12,910 - 13,507 - 1900 Other non-current assets 177,544 1 199,451 2 106,483 1 15XX Total non-current assets 6,599,457 49 5,882,131 46 4,685,096 36 1XXX TOTAL ASSETS $ 13,493,571 100 $ 12,674,574 100 $ 12,891,463 100

(Continued)

FORMOSA ADVANCED TECHNOLOGIES CO., LTD. BALANCE SHEETS

(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS) (THE BALANCE SHEETS AS OF MARCH 31, 2019 AND 2018 ARE REVIEWED, NOT AUDITED)

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

~4~

March 31, 2019 December 31, 2018 March 31, 2018 Liabilities and Equity Notes AMOUNT % AMOUNT % AMOUNT %

Current liabilities

2150 Notes payable $ 159 - $ 28,062 - $ 22,575 - 2170 Accounts payable 335,511 3 393,346 3 388,196 3 2180 Accounts payable - related

parties

7

36,028 - 35,862 1 38,041 1 2200 Other payables 6(8) and 7 385,229 3 534,240 4 519,367 4 2230 Current income tax liabilities 297,802 2 234,740 2 154,897 1 2280 Current lease liabilities 34,644 - - - - - 2300 Other current liabilities 5,505 - 5,565 - 7,381 - 21XX Total current liabilities 1,094,878 8 1,231,815 10 1,130,457 9 Non-current liabilities

2580 Non-current lease liabilities 525,051 4 - - - - 2600 Other non-current liabilities 85,518 1 86,280 - 82,086 - 25XX Total non-current

liabilities

610,569 5 86,280 - 82,086 - 2XXX TOTAL LIABILITIES 1,705,447 13 1,318,095 10 1,212,543 9 Share Capital 6(9)

3110 Share capital - common stock 4,422,222 33 4,422,222 35 4,422,222 34 Capital Surplus 6(10)

3200 Capital surplus 2,411,190 18 2,411,190 19 2,411,161 19 Retained Earnings 6(11)

3310 Legal reserve 1,199,419 9 1,199,419 10 1,060,111 8 3350 Unappropriated retained

earnings

3,449,816 25 3,193,602 25 3,303,087 26 Other Equity Interest 6(12)

3400 Other equity interest 305,477 2 130,046 1 482,339 4 3XXX TOTAL EQUITY 11,788,124 87 11,356,479 90 11,678,920 91 Contingent liabilities and

commitments

8

3X2X TOTAL LIABILITIES AND

EQUITY

$ 13,493,571 100 $ 12,674,574 100 $ 12,891,463 100

FORMOSA ADVANCED TECHNOLOGIES CO., LTD. STATEMENTS OF COMPREHENSIVE INCOME

(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS, EXCEPT FOR EARNINGS PER SHARE AMOUNTS) (REVIEWED, NOT AUDITED)


~5~

Three months ended March 31, 2019 2018

Items Notes AMOUNT % AMOUNT %

4000 Operating Revenue 6(14) and 7 $ 2,172,966 100 $ 2,047,736 100 5000 Operating Costs 6(5)(15)(16) and

7 ( 1,827,647) ( 84) ( 1,658,343) ( 81) 5900 Net Operating Margin 345,319 16 389,393 19 Operating Expenses 6(15)(16) and 7 6100 Selling expenses ( 5,005) - ( 4,648) - 6200 General and administrative

expenses

( 13,441) ( 1) ( 13,874) ( 1) 6300 Research and development

expenses

( 22,636) ( 1) ( 17,719) ( 1) 6000 Total Operating Expenses ( 41,082) ( 2) ( 36,241) ( 2) 6900 Operating profit 304,237 14 353,152 17 Non-Operating Income and

Expenses

7010 Other income 6,029 - 9,403 - 7020 Other gains and losses 11,322 1 ( 9,694) - 7050 Finance costs ( 1,423) - - - 7000 Total Non-Operating

Income and Expenses

15,928 1 ( 291) - 7900 Profit before income tax 320,165 15 352,861 17 7950 Income tax expense 6(17) ( 63,951) ( 3) ( 70,572) ( 3) 8200 Profit for the period $ 256,214 12 $ 282,289 14 Other Comprehensive Income Components of other

comprehensive income that

will not be reclassified to

profit or loss

8316 Unrealised gain on financial

assets measured at fair value

through other comprehensive

income

6(13) $ 175,431 8 $ 212,988 10 8500 Total comprehensive income

for the period

$ 431,645 20 $ 495,277 24 Basic earnings per share 6(18)

Before tax $ 0.72 $ 0.80 After tax $ 0.58 $ 0.64 Diluted earnings per share 6(18)

Before tax $ 0.72 $ 0.80 After tax $ 0.58 $ 0.64

FORMOSA ADVANCED TECHNOLOGIES CO., LTD. STATEMENTS OF CHANGES IN EQUITY

(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS) (REVIEWED, NOT AUDITED)

Retained Earnings Other Equity Interest

Notes

Share capital - common stock

Total capital surplus,

additional paid-in capital

Legal reserve

Unappropriated retained earnings

Unrealised gains (losses) from

financial assets measured at fair value through

other comprehensive

income

Unrealised gains (losses) on

available-for-sale financial assets

Total equity


~6~

Three months ended March 31, 2018

Balance at January 1, 2018 $ 4,422,222 $ 2,411,161 $ 1,060,111 $ 2,505,930 $ - $ 682,069 $ 11,081,493 Effect of retrospective application and retrospective

restatement - - - 511,608 269,351 ( 682,069 ) 98,890

Balance at January 1 after adjustments 4,422,222 2,411,161 1,060,111 3,017,538 269,351 - 11,180,383 Net income for the period - - - 282,289 - - 282,289 Other comprehensive income for the period 6(13) - - - - 212,988 - 212,988 Total comprehensive income for the period - - - 282,289 212,988 - 495,277 Disposal of equity instruments at fair value through

other comprehensive income - - - 3,260 - - 3,260

Balance at March 31, 2018 $ 4,422,222 $ 2,411,161 $ 1,060,111 $ 3,303,087 $ 482,339 $ - $ 11,678,920Three months ended March 31, 2019

Balance at January 1, 2019 $ 4,422,222 $ 2,411,190 $ 1,199,419 $ 3,193,602 $ 130,046 $ - $ 11,356,479 Net income for the period - - - 256,214 - - 256,214 Other comprehensive income for the period 6(13) - - - - 175,431 - 175,431 Total comprehensive income for the period - - - 256,214 175,431 - 431,645 Balance at March 31, 2019 $ 4,422,222 $ 2,411,190 $ 1,199,419 $ 3,449,816 $ 305,477 $ - $ 11,788,124

FORMOSA ADVANCED TECHNOLOGIES CO., LTD.

STATEMENTS OF CASH FLOWS

(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS)

(REVIEWED, NOT AUDITED)

Three months ended March 31,

Notes 2019 2018


~7~

CASH FLOWS FROM OPERATING ACTIVITIES Profit before tax $ 320,165 $ 352,861 Adjustments Adjustments to reconcile profit (loss) Depreciation 6(6)(15) 393,377 202,640 Amortisation 6(15) 30,520 10,444 Gain on disposal and scrap of property, plant and equipment ( 349 ) ( 2,445 ) Net gain on financial assets and liabilities at fair value

through profit or loss ( 410 ) ( 702 )

Interest expense 1,423 - Interest income ( 3,860 ) ( 3,659 ) Changes in operating assets and liabilities Changes in operating assets Notes receivable, net 6,802 4,507 Accounts receivable 115,745 ( 38,757 ) Accounts receivable - related parties ( 46,372 ) 18,491 Current contract assets ( 118,745 ) 26,191 Other receivables 3,019 ( 3,845 ) Inventories 50,796 ( 144,035 ) Other current assets 57,898 ( 110,983 ) Changes in operating liabilities Notes payable ( 27,903 ) 21,573 Accounts payable ( 57,835 ) 73,892 Accounts payable - related parties 166 ( 6,231 ) Other payables ( 132,749 ) ( 65,082 ) Other current liabilities ( 60 ) ( 1,090 ) Other non-current liabilities ( 762 ) ( 824 ) Cash inflow generated from operations 590,866 332,946 Interest received 3,860 3,659 Interest paid ( 1,423 ) - Income tax paid ( 377 ) ( 375 ) Net cash flows from operating activities 592,926 336,230 CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from disposal of financial assets at fair value through

profit or loss

224,168 - Acquisition of financial assets at fair value through other


- ( 28,533 ) Proceeds from disposal of financial assets at fair value through

other comprehensive income

- 62,420 Acquisition of property, plant, and equipment 6(19) ( 534,092 ) ( 905,618 ) Proceeds from disposal of property, plant and equipment 358 2,445 Increase in other non-current assets ( 8,613 ) ( 11,003 ) Net cash flows used in investing activities ( 318,179 ) ( 880,289 ) CASH FLOWS FROM FINANCING ACTIVITIES Payment of lease liabilities 6(7) ( 5,263 ) - Net cash flows used in financing activities ( 5,263 ) - Net increase (decrease) in cash and cash equivalents 269,484 ( 544,059 ) Cash and cash equivalents at beginning of period 1,267,335 3,479,352 Cash and cash equivalents at end of period $ 1,536,819 $ 2,935,293

~8~

FORMOSA ADVANCED TECHNOLOGIES CO., LTD.

NOTES TO THE FINANCIAL STATEMENTS

THREE MONTHS ENDED MARCH 31, 2019 AND 2018

(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS,

EXCEPT AS OTHERWISE INDICATED)

(REVIEWED, NOT AUDITED)

1. HISTORY AND ORGANISATION

Formosa Advanced Technologies Co., Ltd. (the “Company”) was incorporated on September 11, 1990.

The Company was originally established in Hsinchu Science Park, in Hsinchu, Taiwan. The major

operations of the Company are the production and sales of molybdenum films. In 1996, the integrated

packaging center and testing plant were established in Douliu, Yunlin County, and head office was

moved to Douliu, Yunlin County. Presently, the Company’s major operations include the packaging,

testing, processing, and research and development of integrated chips (“IC”).

The stocks of the Company were officially listed on the Taiwan Stock Exchange (“TWSE”) on November

29, 2007. Formosa Taffeta Co., Ltd. is the Company’s parent company, and Formosa Chemicals & Fiber

Corp. is the ultimate parent company.

2. THE DATE OF AUTHORISATION FOR ISSUANCE OF THE FINANCIAL STATEMENTS AND

PROCEDURES FOR AUTHORISATION

These financial statements were reported to the Board of Directors on May 3, 2019.

3. APPLICATION OF NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS

(1) Effect of the adoption of new issuances of or amendments to International Financial Reporting

Standards (“IFRS”) as endorsed by the Financial Supervisory Commission (“FSC”)

New standards, interpretations and amendments as endorsed by the FSC effective from 2019 are as

follows:

Except for the following, the above standards and interpretations have no significant impact to the

Company’s financial condition and financial performance based on the Company’s assessment.

New Standards, Interpretations and Amendments

Effective date by

International

Accounting

Standards Board

Amendments to IFRS 9, ‘Prepayment features with negative compensation’ January 1, 2019

IFRS 16, ‘Leases’ January 1, 2019

Amendments to IAS 19, ‘Plan amendment, curtailment or settlement’ January 1, 2019

Amendments to IAS 28, ‘Long-term interests in associates and joint ventures’ January 1, 2019

IFRIC 23, ‘Uncertainty over income tax treatments’ January 1, 2019

Annual improvements to IFRSs 2015-2017 cycle January 1, 2019

~9~

A. IFRS 16, ‘Leases’

(a) IFRS 16, ‘Leases’, replaces IAS 17, ‘Leases’ and related interpretations and SICs. The standard

requires lessees to recognise a ‘right-of-use asset’ and a lease liability (except for those leases

with terms of 12 months or less and leases of low-value assets). The accounting stays the same

for lessors, which is to classify their leases as either finance leases or operating leases and

account for those two types of leases differently. IFRS 16 only requires enhanced disclosures

to be provided by lessors.

(b) The Company has elected to apply IFRS 16 by not restating the comparative information

(referred herein as the ‘modified retrospective approach’) when applying “IFRSs” effective in

2019 as endorsed by the FSC. Accordingly, the Company increased both ‘right-of-use asset’

and ‘lease liability’ by $564,958 with respect to the lease contracts of lessees on January 1,

2019.

(c) The Company has used the following practical expedients permitted by the standard at the date

of initial application of IFRS 16:

i. Reassessment as to whether a contract is, or contains, a lease is not required, instead, the

application of IFRS 16 depends on whether or not the contracts were previously identified

as leases applying IAS 17 and IFRIC 4.

ii. The use of a single discount rate to a portfolio of leases with reasonably similar

characteristics.

iii. The exclusion of initial direct costs for the measurement of ‘right-of-use asset’.

iv. The use of hindsight in determining the lease term where the contract contains options to

extend or terminate the lease.

(d) The Company calculated the present value of lease liabilities by using the weighted average

incremental borrowing interest rate of 1.0127%.

(e) The Company recognised lease liabilities which had previously been classified as ‘operating

leases’ under the principles of IAS 17, ‘Leases’. The reconciliation between operating lease

commitments under IAS 17 measured at the present value of the remaining lease payments,

discounted using the lessee’s incremental borrowing rate and lease liabilities recognised as of

January 1, 2019 is as follows:

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

the Company

None.

Operating lease commitments disclosed by applying IAS 17 as

at December 31, 2018 612,842$

Total lease contracts amount recognised as lease liabilities by

applying IFRS 16 on January 1, 2019 612,842

Incremental borrowing interest rate at the date of initial application 1.0127%

Lease liabilities recognised as at January 1, 2019 by applying IFRS 16 564,958$

~10~

(3) IFRSs issued by IASB but not yet endorsed by the FSC

New standards, interpretations and amendments issued by IASB but not yet included in the IFRSs as

endorsed by the FSC are as follows:

The above standards and interpretations have no significant impact to the Company’s financial

condition and financial performance based on the Company’s assessment.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies adopted are consistent with Note 4 in the financial statements for the

year ended December 31, 2018, except for the compliance statement, basis of preparation and additional

policies as set out below. These policies have been consistently applied to all the periods presented,

unless otherwise stated.

(1) Compliance statement

A. The financial statements of the Company have been prepared in accordance with the “Regulations

Governing the Preparation of Financial Reports by Securities Issuers” and IAS 34, ‘Interim

Financial Reporting’ as endorsed by the FSC.

B. The financial statements should be read together with the financial statements for the year ended

December 31, 2018.

(2) Basis of preparation

A. Except for the following items, these financial statements have been prepared under the historical

cost convention:

(a) Financial assets and financial liabilities (including derivative instruments) at fair value through

profit or loss.

(b) Financial assets at fair value through other comprehensive income measured at fair value.

(c) Defined benefit liabilities recognised based on the net amount of pension fund assets less

present value of defined benefit obligation.

B. The preparation of financial statements in conformity with International Financial Reporting

Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations as

endorsed by the FSC (collectively referred herein as the “IFRSs”) requires the use of certain

critical accounting estimates. It also requires management to exercise its judgment in the process

New Standards, Interpretations and Amendments

Effective date by

International Accounting

Standards Board

Amendments to IAS 1 and IAS 8, ‘Disclosure Initiative-Definition of

Material’

January 1, 2020

Amendments to IFRS 3, ‘Definition of a business’ January 1, 2020

Amendments to IFRS 10 and IAS 28, ‘Sale or contribution of assets

between an investor and its associate or joint venture’

To be determined by

International Accounting

Standards BoardIFRS 17, ‘Insurance contracts’ January 1, 2021

~11~

of applying the Company’s accounting policies. The areas involving a higher degree of judgment

or complexity, or areas where assumptions and estimates are significant to the financial statements

are disclosed in Note 5.

(3) Leasing arrangements (lessee)－right-of-use assets/ lease liabilities

Effective 2019

A. Leases are recognised as a right-of-use asset and a corresponding lease liability at the date at

which the leased asset is available for use by the Company. For short-term leases or leases of

low-value assets, lease payments are recognised as an expense on a straight-line basis over the

lease term.

B. Lease liabilities include the net present value of the remaining lease payments at the

commencement date, discounted using the incremental borrowing interest rate.

Lease payments are comprised of fixed payments, less any lease incentives receivable.

The Company subsequently measures the lease liability at amortised cost using the interest

method and recognises interest expense over the lease term. The lease liability is remeasured and

the amount of remeasurement is recognised as an adjustment to the right-of-use asset when there

are changes in the lease term or lease payments and such changes do not arise from contract

modifications.

C. At the commencement date, the right-of-use asset is stated at cost comprising the amount of the

initial measurement of lease liability.

The right-of-use asset is measured subsequently using the cost model and is depreciated from the

commencement date to the earlier of the end of the asset’s useful life or the end of the lease term.

When the lease liability is remeasured, the amount of remeasurement is recognised as an

adjustment to the right-of-use asset.

(4) Employee benefits

Except for the following explanations, accounting policies on employee benefits are consistent with

Note 4 in the 2018 financial statements.

Pension cost for the interim period is calculated on a year-to-date basis by using the pension cost rate

derived from the actuarial valuation at the end of the prior financial year, adjusted for significant

market fluctuations since that time and for significant curtailments, settlements, or other significant

one-off events. Also, the related information is disclosed accordingly.

(5) Income taxes

Except for the following explanations, accounting policies on income taxes are consistent with Note

4 in the 2018 financial statements.

A. The interim period income tax expense is recognised based on the estimated average annual

effective income tax rate expected for the full financial year applied to the pretax income of the

interim period, and the related information is disclosed accordingly.

B. If a change in tax rate is enacted or substantively enacted in an interim period, the Company

recognised the effect of the change immediately in the interim period in which the change occurs.

~12~

The effect of the change on items recognised outside profit or loss is recognised in other

comprehensive income or equity while the effect of the change on items recognised in profit or

loss is recognised in profit or loss.

5. CRITICAL ACCOUNTING JUDGEMENTS, ESTIMATES AND KEY SOURCES OF

ASSUMPTION UNCERTAINTY

Accounting estimation, assumptions and management judgement are adjusted based on historical

experience and subsequent assessment, there is a possibility to have difference between the estimations

and actual results. Information in relation to the estimations and judgements of causing a material risk to

the carrying amounts of assets and liabilities is addressed below:

(1) Revenue recognition

For fixed-price contracts, revenue is recognised based on the actual service provided to the end of the

reporting period as a proportion of the total services to be provided. This is determined based on the

actual cost spent relative to the total cost.

(2) Evaluation of inventories

As inventories are stated at the lower of cost and net realizable value, the Company must determine

the net realizable value of inventories on balance sheet date using judgements and estimates. Due to

the rapid technology innovation, the Company evaluates the amounts of normal inventory

consumption, obsolete inventories or inventories without market selling value on balance sheet date,

and writes down the cost of inventories to the net realizable value. Such an evaluation of inventories

is principally based on the demand for the products within the specified period in the future. Therefore,

there might be material changes to the evaluation.

6. DETAILS OF SIGNIFICANT ACCOUNTS

(1) Cash and cash equivalents

A. The Company transacts with a variety of financial institutions all with high credit quality to

disperse credit risk, so it expects that the probability of counterparty default is remote.

B. The Company has no cash and cash equivalents pledged to others.

March 31, 2019 December 31, 2018 March 31, 2018

Cash on hand and revolving funds 90$ 90$ 90$

Checking accounts and demand

deposits 545,575 627,719 128,741

Cash equivalents

Time deposits 215,740 215,005 334,707

Short-term notes and bills 775,414 424,521 2,471,755

1,536,819$ 1,267,335$ 2,935,293$

~13~

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

A. Amounts recognised in profit or loss in relation to financial assets at fair value through profit or

loss are listed below:

B. The Company has no financial assets at fair value through profit or loss pledged to others as

collateral.

(3) Financial assets at fair value through other comprehensive income

A. The Company has elected to classify investments that are considered to be steady dividend income

as financial assets at fair value through other comprehensive income.

Item March 31, 2019 December 31, 2018 March 31, 2018

Current items:

Beneficiary certificates 250,000$ 466,353$ 619,504$

Valuation adjustment 5,732 13,137 11,196

255,732$ 479,490$ 630,700$

2019 2018

Equity instruments 410$ 702$


Item March 31, 2019 December 31, 2018 March 31, 2018

Current items:

Equity instruments

Listed (TSE and OTC) stocks 1,582,218$ 1,582,218$ 1,411,110$

Valuation adjustments 499,307 374,219 445,043

2,081,525$ 1,956,437$ 1,856,153$

Non-current items:

Equity instruments

Listed (TSE and OTC) stocks 576,482$ 576,482$ 587,813$

Unlisted stocks 99,375 99,375 99,375$

Valuation adjustments 193,830)( 244,173)( 37,296

482,027$ 431,684$ 724,484$

~14~

B. Amounts recognised in profit or loss and other comprehensive income in relation to the financial

assets at fair value through other comprehensive income are listed below:

C. The Company has no financial assets at fair value through other comprehensive income pledged

to others as collateral.

(4) Notes and accounts receivable (including related parties)

A. The ageing analysis of accounts receivable that were past due but not impaired is as follows:

The above ageing analysis was based on past due date.

B. Information relating to credit risk is provided in Note 11(2).

(5) Inventories

2019 2018

Equity instruments at fair value through

other comprehensive income

Fair value change recognised in other

comprehensive income 175,431$ 216,248$

Cumulative gains reclassified to

retained earnings due to derecognition -$ 3,260$



Notes receivable -$ 6,802$ 3,796$

Accounts receivable 472,919 588,664 567,636

Accounts receivable - related

parties

1,052,731 1,006,359 945,539

Less: Allowance for bad debts 6,779)( 6,779)( 6,483)(

1,518,871$ 1,595,046$ 1,510,488$


Up to 30 days 6,717$ 15,558$ 12,902$

31 to 90 days - 3,423 3,259

91 to 180 days - 1,428 -

6,717$ 20,409$ 16,161$

Allowance for

Cost valuation loss Book value

Raw materials 326,612$ 9,552)($ 317,060$

Materials 85,309 916)( 84,393

Work in process 8,131 - 8,131

Finished goods 27,237 8,284)( 18,953

Inventory in transit 35,120 - 35,120

482,409$ 18,752)($ 463,657$

March 31, 2019

~15~

Note 1: The Company recognised gain on reversal of market price as a result of inventory clearance.

Note 2: The Company provides allowance for inventory valuation losses due to the market price

decrease.

Allowance for

Cost valuation loss Book value

Raw materials 324,034$ 9,195)($ 314,839$

Materials 75,543 622)( 74,921

Work in process 8,328 - 8,328

Finished goods 26,846 7,625)( 19,221


531,895$ 17,442)($ 514,453$

December 31, 2018

Cost

Allowance for

valuation loss Book value

Raw materials 322,364$ 15,683)($ 306,681$

Materials 71,125 374)( 70,751$

Work in progress 11,875 - 11,875

Finished goods 33,098 10,879)( 22,219


488,502$ 26,936)($ 461,566$

March 31, 2018

2019 2018

Cost of inventories sold 1,839,615$ 1,682,552$

Gain on inventory valuation (Note 1) - 10,013)(

Loss on inventory valuation (Note 2) 1,310 -

Revenue from sales of scraps 13,305)( 14,338)(

Others 27 142

1,827,647$ 1,658,343$


~16~

(6) Property, plant and equipment

Land

improvements

Machinery

and equipment

Transportation

equipment Other equipment

Construction in

progress and

equipment to be

inspected Total

At January 1, 2019

Cost 860$ 21,904,920$ 38,453$ 3,867,132$ 760,632$ 26,571,997$

Accumulated

depreciation and

impairment 860)( 17,559,109)( 28,259)( 3,745,683)( - 21,333,911)(

-$ 4,345,811$ 10,194$ 121,449$ 760,632$ 5,238,086$

Opening net book amount -$ 4,345,811$ 10,194$ 121,449$ 760,632$ 5,238,086$

Additions - - - - 517,830 517,830

Disposals - - - 9)( - 9)(

Reclassifications - 515,371 1,981 5,134 522,486)( -

Depreciation charge - 363,665)( 1,391)( 19,030)( - 384,086)(

Closing net book amount -$ 4,497,517$ 10,784$ 107,544$ 755,976$ 5,371,821$

At March 31, 2019

Cost 860$ 22,420,292$ 39,395$ 3,869,530$ 755,976$ 27,086,053$

Accumulated

depreciation and

impairment 860)( 17,922,775)( 28,611)( 3,761,986)( - 21,714,232)(

-$ 4,497,517$ 10,784$ 107,544$ 755,976$ 5,371,821$


~17~

Land

improvements

Machinery

and equipment

Transportation

equipment Other equipment

Construction in

progress and

equipment to be

inspected Total

At January 1, 2018

Cost 860$ 19,421,580$ 38,453$ 3,894,996$ 947,299$ 24,303,188$

Accumulated

depreciation and

impairment 860)( 17,485,737)( 22,475)( 3,682,526)( - 21,191,598)(

-$ 1,935,843$ 15,978$ 212,470$ 947,299$ 3,111,590$

Opening net book amount -$ 1,935,843$ 15,978$ 212,470$ 947,299$ 3,111,590$

Additions - - - - 931,672 931,672

Reclassifications - 600,863 - 4,842 605,705)( -

Depreciation charge - 171,640)( 1,582)( 29,418)( - 202,640)(

Closing net book amount -$ 2,365,066$ 14,396$ 187,894$ 1,273,266$ 3,840,622$

At March 31, 2018

Cost 860$ 19,646,681$ 38,453$ 3,882,400$ 1,273,266$ 24,841,660$

Accumulated

depreciation and

impairment 860)( 17,281,615)( 24,057)( 3,694,506)( - 21,001,038)(

-$ 2,365,066$ 14,396$ 187,894$ 1,273,266$ 3,840,622$


~18~

(7) Leasing arrangements－lessee

Effective 2019

A. The Company leases various assets including land, plant and building. Rental contracts are

typically made for periods of 10 to 20 years. Lease terms are negotiated on an individual basis

and contain a wide range of different terms and conditions. The lease agreements do not impose

covenants, but leased assets may not be used as security for borrowing purposes.

B. The carrying amount of right-of-use assets and the depreciation charge are as follows:

C. The information on income and expense accounts relating to lease contracts is as follows:

D. For the three months ended March 31, 2019, the Company’s total cash outflow for leases was

$6,686.

(8) Other payables

(9) Pensions

A. (a) The Company has a non-contributory and funded defined benefit pension plan in accordance

with the Labor Standards Law, covering all regular employees. Under the defined benefit

pension plan, two units are accrued for each year of service for the first 15 years and one unit

for each additional year thereafter, subject to a maximum of 45 units. Pension benefits are

based on the number of units accrued and the average monthly salaries and wages of the last

6 months prior to retirement. The Company contributes monthly an amount equal to 2% of the

employees’ monthly salaries and wages to the retirement fund deposited with the Trust

Department of Bank of Taiwan, the trustee, under the name of the independent retirement fund

committee. Also, the Company would assess the balance in the aforementional labor pension

March 31, 2019 Three months ended March 31, 2019

Carrying amount Depreciation charge

Land 2,441$ 37$

Buildings 553,226 9,254

555,667$ 9,291$


Items affecting profit or loss

Interest expense on lease liabilities $ 1,423


Dividends payable 472$ 488$ 342$

Wages and salaries payable 150,055 211,787 192,098

Processing fees payable 69,481 104,322 128,565

Payables on equipment 44,784 61,046 99,655

Employees' compensation and

directors' and supervisors'

remuneration payable 8,749 46,371 9,792

Others 111,688 110,226 88,915

385,229$ 534,240$ 519,367$

~19~

reserve account by December 31 every year. If the account balance is not enough to pay the

pension calculated by the aforementioned method to employees expected to qualify for

retirement in the following year, the Company will make contribution for the deficit by next

March.

(b)For the aforementioned pension plan, the Company recognised pension costs of $421 and $417

for the three months ended March 31, 2019 and 2018, respectively.

(c)Expected contributions to the defined benefit pension plan of the Company for the year ending

December 31, 2020 amount to $1,685.

B. (a)Effective July 1, 2005, the Company has established a defined contribution pension plan (the

“New Plan”) under the Labor Pension Act (the “Act”), covering all regular employees with

R.O.C. nationality. Under the New Plan, the Company contributes monthly an amount based

on 6% of the employees’ monthly salaries and wages to the employees’ individual pension

accounts at the Bureau of Labor Insurance. The benefits accrued are paid monthly or in lump

sum upon termination of employment.

(b)The pension costs under the defined contribution pension plan of the Company for the three

months ended March 31, 2019 and 2018 were $14,172 and $13,752, respectively.

(10) Capital stock

As of March 31, 2019, the Company’s authorised capital was $5,000,000, and the paid-in captial

was $4,422,222, consisting of 442,222 thousand shares with a par value of $10 per share. All

proceeds from shares issued have been collected.

(11) Capital surplus

Pursuant to the R.O.C. Company Act, capital surplus arising from paid-in capital in excess of par

value on issuance of common stocks and donations can be used to cover accumulated deficit or to

issue new stocks or cash to shareholders in proportion to their share ownership, provided that the

Company has no accumulated deficit. Further, the R.O.C. Securities and Exchange Law requires

that the amount of capital surplus to be capitalised mentioned above should not exceed 10% of the

paid-in capital each year. Capital surplus should not be used to cover accumulated deficit unless the

legal reserve is insufficient.

(12) Retained earnings

A. Under the Company's Articles of Incorporation, the current year's earnings, if any, shall first be

used to pay all taxes and offset prior years’ operating losses and then 10% of the remaining

amount shall be set aside as legal reserve. Appropriation of the remainder shall be proposed by

the Board of Directors and resolved by the stockholders.

The Company operates in a volatile business environment and is in the stable growth stage. In

response to the business scale expansion, the Company’s dividend policy involves three

alternatives which include cash dividend distribution, the use of earnings to increase capital, and

the use of additional paid-in capital to increase capital. Assuming the Company has surplus

earnings, it shall first be set aside as legal reserve and special reserve, then the Company shall

~20~

appropriate no less than 50% of the remaining amount as dividends, and this will first be

distributed in the form of cash dividends. In case of the excessive increase in capital which

decreases dividend payout ratio, the amount of earnings and capital surplus to be capitalised

shall not exceed 50% of the total dividends distributed.

B. Except for covering accumulated deficit or issuing new stocks or cash to shareholders in

proportion to their share ownership, the legal reserve shall not be used for any other purpose.

The use of legal reserve for the issuance of stocks or cash to shareholders in proportion to their

share ownership is permitted, provided that the distribution of the reserve is limited to the portion

in excess of 25% of the Company’s paid-in capital.

C. In accordance with the regulations, the Company shall set aside special reserve from the debit

balance on other equity items at the balance sheet date before distributing earnings. When debit

balance on other equity items is reversed subsequently, the reversed amount could be included

in the distributable earnings.

D. The appropriations of earnings of 2018 and 2017 had been approved by the Board of Directors

and the shareholders during their meeting on February 27, 2019 and June 22, 2018, respectively.

Details are as follows:

The aforementioned information on the appropriation of the Company’s earnings as resolved by

the Board of Directors and approved by the stockholders will be posted in the “Market

Observation Post System” at the website of the Taiwan Stock Exchange.

E. For the information relating to employees’ compensation and directors’ and supervisors’

remuneration, please refer to Note 6(16).

(13) Other equity items

Dividends Dividends

per share per share

Amount (in dollars) Amount (in dollars)

Legal reserve 142,029$ 139,308$

Cash dividends 1,105,556 2.5$ 1,105,556 2.5$

1,247,585$ 1,244,864$

Years ended December 31,

2018 2017

2019

Unrealised gains (losses)

on valuation

At January 1 130,046$

Revaluation 175,431

At March 31 305,477$

~21~

(14) Operating revenue

A. The Company’s IC revenue arises from providing packaging and testing services of integrated

circuit, which are transferred over time.

B. Contract assets

The Company has recognised the following IC revenue-related contract assets:

C. The Company’s contracts in relation to packaging and testing services of integrated circuit are

for periods of one year or less. As permitted under IFRS 15, the transaction price allocated to

these unsatisfied contracts is not disclosed.

(15) Expenses by nature

2018

Unrealised gains (losses)

on valuation

At January 1 -$

Adjustments under IFRS 9 269,351

Revaluation 216,248

Revaluation transferred to retained earnings 3,260)(

At March 31 482,339$

2019 2018

IC revenue 1,982,048$ 1,934,484$

Module revenue 190,918 113,252

2,172,966$ 2,047,736$



Contract assets－revenue $ 907,388 $ 788,643 $ 582,646

2019 2018

Employee benefit expense 378,676$ 381,070$

Depreciation charges on property, plant

and equipment 393,377 202,640

Amortisation 30,520 10,444

802,573$ 594,154$


~22~

(16) Employee benefit expense

A. The Company shall appropriate 0.1%~2.45% and shall not appropriate higher than 0.5% of

pretax income before employees’ compensation and directors’ remuneration of the current year

as employees’ compensation and directors’ remuneration, respectively, if the Company has profit

in the current year. But, if the Company has accumulated deficit, the profit shall first be offset

against the deficit.

B. For the three months ended March 31, 2019 and 2018, employees’ compensation was accrued at

$7,723, and $8,885, respectively; while directors’ and supervisors’ remuneration was accrued at

$756 and $907, respectively. The aforementioned amounts were recognised in salary expenses,

and were estimated and accrued based on distributable profit of current year as of the end of

reporting period.

Employees’ compensation and directors’ and supervisors’ remuneration for 2018 as resolved by

the Board of Directors were in agreement with those amounts recognised in the 2018 financial

statements.

Information about employees’ compensation and directors’ and supervisors’ remuneration of the

Company as resolved by the Board of Directors will be posted in the “Market Observation Post

System” at the website of the Taiwan Stock Exchange.

2019 2018

Wages and salaries 323,256$ 329,300$

Labor and health insurance fees 34,503 32,099

Pension costs 14,593 14,169

Other personnel expenses 6,324 5,502

378,676$ 381,070$


~23~

(17) Income tax

A. Income tax

Components of income tax expense:

B. The Company’s income tax returns through 2016 have been assessed and approved by the Tax

Authority.

C. Under the amendments to the Income Tax Act which was promulgated by the President of the

Republic of China on February 7, 2018, the Company’s applicable income tax rate will be raised

from 17% to 20% effective from January 1, 2018. The Company has assessed the impact of

income tax for this change in income tax rate.

(18) Earnings per share

2019 2018

Current tax:

Current tax on profit for the period 63,439$ 70,938$

Prior year income tax estimation - -

Total current tax 63,439$ 70,938$

Deferred tax:

Origination and reversal of temporary

differences 512$ 1,953$

Impact of change in tax rate - 2,319)(

Total deferred tax 512 366)(

Income tax expense 63,951$ 70,572$


Weighted average

number of ordinary

shares outstanding

Before tax After tax (shares in thousands) Before tax After tax

Basic earnings per share

Net income 320,165$ 256,214$ 442,222 0.72$ 0.58$

Net income 320,165$ 256,214$ 442,222

Assumed conversion of

all dilutive potential

ordinary shares

Employees’

　 compensation - - 1,032

Profit attributable to

ordinary shareholders

of the parent plus assumed

conversion of all dilutive

potential ordinary shares 320,165$ 256,214$ 443,254 0.72$ 0.58$


Earnings per share

Amount ( in thousands) (in dollars)

Diluted earnings per share

~24~

(19) Supplemental cash flow information

Investing activities with partial cash payments:

Weighted average

number of ordinary

shares outstanding

Before tax After tax (shares in thousands) Before tax After tax

Basic earnings per share

Net income 352,861$ 282,289$ 442,222 0.80$ 0.64$

Net income 352,861$ 282,289$ 442,222

Assumed conversion of

all dilutive potential

ordinary shares

Employees'

　 compensation - - 1,421

Profit attributable to

ordinary shareholders

of the parent plus assumed

conversion of all dilutive

potential ordinary shares 352,861$ 282,289$ 443,643 0.80$ 0.64$


Earnings per share

Amount ( in thousands) (in dollars)

Diluted earnings per share

2019 2018

Purchase of property, plant and

equipment 517,830$ 931,672$

Add: Opening balance of payable on

equipment 61,046 73,601

Less: Ending balance of payable on

equipment 44,784)( 99,655)(

Cash paid during the period 534,092$ 905,618$


~25~

7. RELATED PARTY TRANSACTIONS

(1) Parent and ultimate controlling party

The Company is controlled by Formosa Taffeta Co., Ltd., which owns 46.68% of the Company’s

shares. The ultimate parent of the Company is Formosa Chemicals & Fiber Corp.

(2) Names of related parties and relationship

(3) Significant related party transactions

A. Operating revenue:

The Company packages, tests, and processes various types of IC as requested by Nan Ya

Technology Corp. The selling prices to Nan Ya Technology Corp. and other related parties are

based on the pricing model agreed by both parties, and accounts receivable due are collected

within 60 days or 90 days.

B. Purchases:

Names of related parties Relationship with the Group

Formosa Taffeta Co., Ltd. and Subsidiaries Parent company

Nan Ya Technology Corp. Other related party

Nan Ya PCB Corp. Other related party

Nan Ya Plastics Corp. Other related party

Nan Ya Photonics Inc. Other related party

Formosa Petrochemical Corp. Other related party

Nan Ya PCB (Kun Shan) Corp. Other related party

Formosa Plastics Transport Corp. Other related party

PieceMakers Technology, Inc.

(It became a non-related party starting from

February 2018)

Other related party

Chang Gung Biotechnology Corp. Other related party

NKFG Corp. Other related party

2019 2018

Sales of goods:

‒ Other related parties

Nan Ya Technology Corporation 1,625,320$ 1,401,038$

Others 11,944 6,702

1,637,264$ 1,407,740$


2019 2018

Purchases of goods:

‒ Other related parties 84,604$ 81,215$

‒ Parent company 28 55

84,632$ 81,270$


~26~

The purchase prices from related parties are based on the pricing model agreed by both parties,

and accounts payable are remitted 30 to 45 days after acceptance. The terms between the Company

and the related parties have no significant difference from other arm’s length transactions.

C. Receivables from related parties:

The receivables from related parties arise mainly from sale transactions. The receivables are due

2~3 months after the date of sale. The receivables are unsecured in nature and bear no interest.

There are no provisions held against receivables from related parties.

D. Payables to related parties:

The payables to related parties arise mainly from purchase transactions and are due two months

after the date of purchase. The payables bear no interest.

E. Lease transactions－lessee

(a) The Company leases buildings on No. 329, No. 319 and No. 331 Henan St., Douliu City,

Yunlin County, land on No. 497-1, Neilin Section, and No. 132 and No. 136, Meilin Creek

Section from Formosa Taffeta Co., Ltd. from October 1, 2016 to August 31, 2027, October 1,

2016 to December 31, 2036, November 1, 2015 to October 31, 2035, and December 28, 2018

to September 30, 2036, respectively. Rents are paid at the beginning of the following month.

Since June 1998, the Company also leases employee dormitory from Formosa Taffeta Co., Ltd.

The amount of rental payable was determined based on the prevailing market price from the

local real estate market. Rents are paid at the beginning of the following month.

(b) Acquisition of right-of-use assets:

On January 1, 2019 (the date of initial application of IFRS 16), the Company increased right-

of-use assets by $564,958.

(c) Rent expense (shown as cost of goods sold and operating expense):

Rent expense paid to related parties for the three months ended March 31, 2019 and 2018 are

as follows:


Accounts receivable:

‒ Other related parties

Nan Ya Technology

Corporation 1,047,131$ 1,006,359$ 945,290$

Others 5,600 - 249

1,052,731$ 1,006,359$ 945,539$


Accounts payable:

‒ Other related parties 36,000$ 35,834$ 38,012$

‒ Parent company 28 28 29

36,028$ 35,862$ 38,041$

~27~

The Company pays the lessor at the beginning of each month. As of March 31, 2019, December

31, 2018 and March 31, 2018, rental payable (shown as expense payable) were $0, $3,108 and

$3,074, respectively.

(d) Lease liabilities

(i) Outstanding balance:

(ii) Interest expense:

F. Other transactions:

Related parties have prepaid the garbage cleaning fees, steam fees, hydro and electricity fees for

the Company. The details as of and for the three months ended March 31, 2019 and 2018 are as

follows:

(4) Key management compensation

8. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNISED CONTRACT

COMMITMENTS

(1) Commitments

The Company is responsible for the custody of all types of processed goods for IC testing and shall

be liable for any losses incurred. As of March 31, 2019, the quantity of processed goods under the

Company’s custody are as follows:

2019 2018

Rent expense:

‒ Parent company 402$ 9,731$


March 31, 2019

Ultimate parent 559,695$

Ultimate parent


1,423$

2019 2018

Operating expense:

‒ Parent company 4,471$ 5,051$



Expense payable:

‒ Parent company 1,057$ 1,731$ 1,464$

2019 2018

Salaries and other short-term benefits 6,869$ 6,595$

Post-employment benefits 27 26

6,896$ 6,621$


~28~

Quantity Market value Quantity Market value Quantity Market value Quantity Market value

(Unit : PC) (per PC) (Unit : PC) (per PC) (Unit : PC) (per PC) (Unit : PC) (per PC)

A. Work in process

LED 6,722,372 NTD 0.015 ~ 0.825 - - - - - -

FBGA 48,733,771 USD 0.75 ~ 15 - - - - - -

TSOP 4,329,851 USD 0.2 ~ 0.6 - - - - - -

LED assembly 4,378,465 NTD 0.35 ~ 10.87 - - - - 1,180 NTD 25 ~ 1,320

MODULE 1,245,848 USD 0.2 ~ 15 - - 89,228 USD 21.48 ~ 259.57 - -

MICRO-SD 495,737 USD 1.42 ~ 4.911 - - - - - -

OTHERS 30,281 USD 1.45 ~ 3.8 1,856 USD 1,500 - - - -

65,936,325 1,856 89,228 1,180

Quantity Market value Quantity Market value Quantity Market value Quantity Market value

(Unit : PC) (per PC) (Unit : PC) (per PC) (Unit : PC) (per PC) (Unit : PC) (per PC)

B. Finished goods

LED 1,079,043 NTD 0.015 ~ 0.825 - - - - - -

FBGA 173,981,814 USD 0.75 ~ 15 - - - - - -

TSOP 6,218,268 USD 0.2 ~ 0.6 - - - - - -

LED assembly 7,343,692 NTD 0.35 ~ 10.87 - - - - 592 NTD 25 ~ 1,320

MODULE 474,678 USD 0.2 ~ 15 - - 46,617 USD 21.48 ~ 259.57 - -

MICRO-SD 158,540 USD 1.42 ~ 4.911 - - - - - -

OTHERS 11,121 USD 1.45 ~ 3.8 401 USD 1,500 - - - -

189,267,156 401 46,617 592

March 31, 2019

~29~

(2) Operating lease agreement

The Company leases factory from Formosa Taffeta Co., Ltd. The lease expense estimated to be

incurred is as follows:

(3) Outstanding letters of credit are as follows:

9. SIGNIFICANT DISASTER LOSS

None.

10. SIGNIFICANT EVENTS AFTER THE BALANCE SHEET DATE

None.

11. OTHERS

(1) Capital management

There were no significant changes during the period. Please refer to Note 11 of the consolidated

financial statements for the year ended December 31, 2018.

(2) Financial instruments

A. Financial instruments by category

Note: Financial assets at amortised cost include cash and cash equivalents, accounts and notes

receivable and other receivables; financial liabilities at amortised cost including accounts

and notes payable and other payables.


Less than 1 year 40,117$ 40,117$ 36,884$

Between 1 and 5 years 160,470 160,470 147,534

Over 5 years 402,225 412,255 398,686

602,812$ 612,842$ 583,104$

Currency (thousands) March 31, 2019

USD 1,637$

JPY 1,510,085


Financial assets

Financial assets at fair value through

profit or loss 255,732$ 479,490$ 630,700$

Financial assets at fair value through

other comprehensive income 2,563,552 2,388,121 2,580,637

Financial assets at amortised cost 3,058,748 2,868,458 4,456,844

5,878,032$ 5,736,069$ 7,668,181$


Financial liabilities

Financial liabilities at amortised cost 756,927$ 991,510$ 968,179$

756,927$ 991,510$ 968,179$

~30~

B. Financial risk management policies

There were no significant changes during the period. Please refer to Note 11 of the consolidated

financial statements for the year ended December 31, 2018.

C. Significant financial risks and degrees of financial risks

There was no significant change in the reporting period. Please refer to Note 11 of the

consolidated financial statements for the year ended December 31, 2018, except for the items

explained below:

(a) Market risk

Foreign exchange risk

i. The Company’s businesses involve some non-functional currency operations. The

information on assets and liabilities denominated in foreign currencies whose values would

be materially affected by the exchange rate fluctuations is as follows:

Foreign currency

amount Book value

(in thousands) Exchange rate (NTD)

(Foreign currency:

functional currency)

Financial assets

Monetary items

USD:NTD 56,442$ 30.820$ 1,739,544$

JPY:NTD 20 0.2783 6


Monetary items

USD:NTD 4,354 30.820$ 134,186

JPY:NTD 111,647 0.2783 31,071

March 31, 2019

Foreign currency

amount Book value


(Foreign currency:


Financial assets

Monetary items

USD:NTD 56,462$ 30.715 1,734,223$

JPY:NTD 849 0.2782 236


Monetary items

USD:NTD 3,951 30.715 121,354

JPY:NTD 83,152 0.2782 23,133

December 31, 2018

~31~

ii. Total exchange gain (loss), including realised and unrealised arising from significant

foreign exchange variation on the monetary items held by the Company for three months

ended March 31, 2019 and 2018, amounted to $10,657 and ($12,768), respectively.

iii. Analysis of foreign currency market risk arising from significant foreign exchange

variation:

Foreign currency

amount Book value


(Foreign currency:


Financial assets

Monetary items

USD:NTD 44,653$ 29.105 1,299,622$

JPY:NTD 1,263 0.2739 346


Monetary items

USD:NTD 4,741 29.105 137,997

JPY:NTD 126,904 0.2739 34,759

March 31, 2018

Effect on other

Degree of Effect on profit comprehensive

variation or loss income

(Foreign currency:


Financial assets

Monetary items

USD:NTD 1% 17,395$ -$

JPY:NTD 1% - -$


Monetary items

USD:NTD 1% 1,342 -

JPY:NTD 1% 311 -


Sensitivity analysis

~32~

Price risk

i. The Company’s equity securities, which are exposed to price risk, are the held financial

assets at fair value through profit or loss and financial assets at fair value through other

comprehensive income. To manage its price risk arising from investments in equity

securities, the Company diversifies its portfolio. Diversification of the portfolio is done

in accordance with the limits set by the Company.

ii. Shares and open-end funds issued by the domestic companies. The prices of equity

securities would change due to the change of the future value of investee companies. If

the prices of these equity securities had increased/decreased by 1% with all other variables

held constant, post-tax profit for the three months ended March 31, 2019 and 2018 would

have increased/decreased by $2,046 and $5,046, respectively, as a result of gains/losses

on equity securities classified as at fair value through profit or loss. Other components of

equity would have increased/decreased by $20,508 and $20,645, respectively, as a result

of other comprehensive income classified as equity investment at fair value through other

comprehensive income.

(b) Credit risk

i. Credit risk refers to the risk of financial loss to the Company arising from default by the

clients or counterparties of financial instruments on the contract obligations. The main

factor is that counterparties could not repay in full the accounts receivable based on the

agreed terms.

ii. The Company established the management of credit risk. For banks and financial

institutions, only rated parties with a minimum rating of 'A' are accepted. According to

the Company’s credit policy, each local entity in the Company is responsible for

managing and analyzing the credit risk for each of their new clients before standard

Effect on other

Degree of Effect on profit comprehensive

variation or loss income

(Foreign currency:


Financial assets

Monetary items

USD:NTD 1% 12,996$ -$

JPY:NTD 1% 3 -


Monetary items

USD:NTD 1% 1,380 -

JPY:NTD 1% 348 -


Sensitivity analysis

~33~

payment and delivery terms and conditions are offered. Internal risk control assesses the

credit quality of the customers, taking into account their financial position, past

experience and other factors. Individual risk limits are set based on internal or external

ratings in accordance with limits set by the Board of Directors. The utilisation of credit

limits is regularly monitored.

iii. If the contract payments were past due over 30 days based on the terms, there has been a

significant increase in credit risk on that instrument since initial recognition. The default

occurs when the contract payments are past due over 90 days.

iv. The Company assesses expected credit loss on individual significant default accounts

receivable, while the Company classifies customer’s accounts receivable in accordance

with customer types. The Company uses different loss rate methodology or provision

matrix to estimate expected credit loss on different groups.

v. The Company wrote-off the financial assets, which cannot be reasonably expected to be

recovered, after initiating recourse procedures. However, the Company will continue

executing the recourse procedures to secure their rights.

vi. The Company used the forecastability to adjust historical and timely information to

assess the default possibility of accounts receivable. According to abovementioned

consideration and information, the Company does not expect to have significant loss to

generate any significant allowance loss of accounts receivable.

vii. Movements in relation to the Company applying the simplified approach to provide loss

allowance for accounts receivable are as follows:

(c)Liquidity risk

i. Cash flow forecasting is performed in the operating entities of the Company and

aggregated by Company treasury. Company treasury monitors rolling forecasts of the

Company’s liquidity requirements to ensure it has sufficient cash to meet operational

needs while maintaining sufficient headroom on its undrawn committed borrowing

facilities at all times so that the Company does not breach borrowing limits or covenants

(where applicable) on any of its borrowing facilities. Such forecasting takes into

consideration the Company’s debt financing plans, covenant compliance, and compliance

with internal balance sheet ratio targets.

Accounts receivable Contract assets Notes receivable

At March 31 (beginning

and ending balance) 6,779$ -$ -$

2019

Accounts receivable Contract assets Notes receivable

At March 31 (beginning

and ending balance) 6,483$ -$ -$

2018

~34~

ii. Surplus cash held by the operating entities over and above balance required for working

capital management are transferred to the Company treasury. The Company treasury

invests surplus cash in interest bearing current accounts, deposit account, short-term

bonds and marketable securities, choosing instruments with appropriate maturities or

sufficient liquidity to provide sufficient headroom as determined by the abovementioned

forecasts. As at March 31, 2019, December 31, 2018 and March 31, 2018, the Company

held money market position of $4,063,421, $3,598,716 and $5,489,838, respectively that

are expected to readily generate cash inflows for managing liquidity risk.

iii. The Company’s non-derivative financial liabilities and net-settled or gross-settled

derivative financial liabilities into relevant maturity groupings based on the remaining

period at the balance sheet date to the contractual maturity date for non-derivative

financial liabilities and to the expected maturity date for derivative financial liabilities.

As of March 31, 2019, December 31, 2018 and March 31, 2018, the maturity dates of the

Company’s non-derivative financial liabilities (including notes payable, accounts payable

(including related parties) and other payables) all were less than 1 year.

(3) Fair value information

A. The different levels that the inputs to valuation techniques are used to measure fair value of

financial and non-financial instruments have been defined as follows:

Level 1: Inputs that are quoted prices (unadjusted) in active markets for identical assets or

liabilities. A market is regarded as active if it meets all the following conditions: the

items traded in the market are homogeneous; willing buyers and sellers can normally

be found at any time; and prices are available to the public. The fair value of the

Company’s investment in listed stocks and beneficiary certificates is included in Level

1.

Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset

or liability, either directly (that is, as prices) or indirectly (that is, derived from

prices).The fair value of the Company’s investment in derivative instruments is

included in Level 2.

Level 3: Inputs for the asset or liability that are not based on observable market data The fair

value of the Company’s investment in equity investment without active market is

included in Level 3.

B. The carrying amounts of cash and cash equivalents, notes receivable, accounts receivable

(including related parties), other receivables (including related parties), guarantee deposits paid,

notes payable, accounts payable (including related parties) and other payables are approximate

to their fair values.

~35~

C. The related information of financial instruments measured at fair value by level on the basis of

the nature, characteristics and risks of the assets and liabilities are as follows:

(a) The related information of the nature of the assets and liabilities is as follows:

(b)The methods and assumptions the Company used to measure fair value are as follows:

i. The financial instruments the Company used market quoted prices as their fair values (that

is, Level 1) are listed below by characteristics:

March 31, 2019 Level 1 Level 2 Level 3 Total

Financial assets:

Recurring fair value measurements

Financial assets at fair value

through profit or loss

　Equity securities 255,732$ -$ -$ 255,732$


through other comprehensive income

　Equity securities 2,534,425 - 29,127 2,563,552

2,790,157$ -$ 29,127$ 2,819,284$

December 31, 2018 Level 1 Level 2 Level 3 Total

Financial assets:








2,841,619$ -$ 25,992$ 2,867,611$

March 31, 2018 Level 1 Level 2 Level 3 Total

Financial assets:








3,178,805$ -$ 32,532$ 3,211,337$

Listed shares Open-end fund

Market quoted price Closing price Net asset value

~36~

ii.Except for financial instruments with active markets, the fair value of other financial

instruments is measured by using valuation techniques or by reference to counterparty

quotes. The fair value of financial instruments measured by using valuation techniques

method can be referred to current fair value of instruments with similar terms and

characteristics in substance, discounted cash flow method or other valuation methods,

including calculated by applying model using market information available at the balance

sheet date.

iii. The output of valuation model is an estimated value and the valuation technique may not be

able to capture all relevant factors of the Company’s financial and non-financial instruments.

Therefore, the estimated value derived using valuation model is adjusted accordingly with

additional inputs, for example, model risk or liquidity risk and etc. In accordance with the

Company’s management policies and relevant control procedures relating to the valuation

models used for fair value measurement, management believes adjustment to valuation is

necessary in order to reasonably represent the fair value of financial and non-financial

instruments at the balance sheet. The inputs and pricing information used during valuation

are carefully assessed and adjusted based on current market conditions.

iv. The Company takes into account adjustments for credit risks to measure the fair value of

financial and non-financial instruments to reflect credit risk of the counterparty and the

Company’s credit quality.

C. For the three months ended March 31, 2019 and 2018, there was no transfer between Level 1

and Level 2.

D. The following chart is the movement of Level 3 for the three months ended March 31, 2019

and 2018:

E. For the three months ended March 31, 2019 and 2018, there was no transfer into or out from

Level 3.

F. Company treasury is in charge of valuation procedures for fair value measurements being

categorised within Level 3, which is to verify independent fair value of financial instruments.

Such assessment is to ensure the valuation results are reasonable by applying independent

information to make results close to current market conditions, confirming the resource of

information is independent, reliable and in line with other resources and represented as the

2019 2018

At January 1 25,992$ 29,831$

Gains and losses recognised in other comprehensive income

Recorded as unrealised gains on valuation of

investments in equity instruments measured at fair value

through other comprehensive income 3,135 2,701

At March 31 29,127$ 32,532$

Non-derivative equity instrument

~37~

exercisable price, and frequently calibrating valuation model, performing back-testing, updating

inputs used to the valuation model and making any other necessary adjustments to the fair value.

G. The following is the qualitative information of significant unobservable inputs and sensitivity

analysis of changes in significant unobservable inputs to valuation model used in Level 3 fair

value measurement:

Fair value at

March 31,

2019

Valuation

technique

Significant

unobservable

input

Range

(weighted average)

Relationship of

inputs to fair value

Unlisted

shares

29,127$ Market comparable

companies

Discount for lack

of marketability

20% The higher the

discount for lack of

marketability, the

lower the fair value

Non-derivative equity instrument:

Fair value at

December 31,

2018

Valuation

technique

Significant

unobservable

input

Range

(weighted average)

Relationship of


Unlisted

shares


companies

Discount for lack

of marketability

20% The higher the


marketability, the



Fair value at

March 31,

2018

Valuation

technique

Significant

unobservable

input

Range

(weighted average)

Relationship of


Unlisted

shares


companies

Discount for lack

of marketability

20% The higher the


marketability, the



~38~

H. The Company has carefully assessed the valuation models and assumptions used to measure fair

value. However, use of different valuation models or assumptions may result in different

measurement. The following is the effect of profit or loss or of other comprehensive income

from financial assets categorised within Level 3 if the inputs used to valuation models have

changed:

12. SUPPLEMENTARY DISCLOSURES

(1) Significant transactions information

A. Loans to others: None.

B. Provision of endorsements and guarantees to others: 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. Acquisition or sale of the same security with the accumulated cost exceeding NT$300 million or

20% of the Company’s paid-in capital: None.

E. Acquisition of real estate reaching NT$300 million or 20% of paid-in capital or more: None.

Input

Change

Favourable

change

Unfavourable

change

Favourable

change

Unfavourable

change

Financial assets

Equity

instrument

Discount for

marketability±1%

$ - $ - $ 364 $ (364)

March 31, 2019

Recognised in profit or loss

Recognised in other


Input

Change

Favourable

change

Unfavourable

change

Favourable

change

Unfavourable

change

Financial assets

Equity

instrument

Discount for

marketability±1% $ - $ - $ 325 $ (325)

December 31, 2018


Recognised in other


Input

Change

Favourable

change

Unfavourable

change

Favourable

change

Unfavourable

change

Financial assets

Equity

instrument

Discount for

marketability±1% $ - $ - $ 407 $ (407)

March 31, 2018


Recognised in other


~39~

F. Disposal of real estate reaching NT$300 million or 20% of paid-in capital or more: None.

G. Purchases or sales of goods from or to related parties reaching NT$100 million or 20% of paid-

in capital or more: Please refer to table 2.

H. Receivables from related parties reaching NT$100 million or 20% of paid-in capital or more:

Please refer to table 3.

I. Trading in derivative instruments undertaken during the reporting periods: None.

J. Significant intragroup transactions during the reporting periods: None.

(2) Information on investees

Names, locations and other information of investee companies (not including investees in Mainland

China): None.

(3) Information on investments in Mainland China

A. Basic information: None.

B. Significant transactions, either directly or indirectly through a third area, with investee companies

in the Mainland Area: None.

13. SEGMENT INFORMATION

(1) General information

Management has determined the operating segments based on the type of service provided. The

Company’s operating segments are integrated-chips (“IC”) department and module department.

Operations of the IC department include the packaging, testing, processing, and research and

development of integrated chips. Operations of the module department include the assembly, testing,

and research and development of module pieces.

There is no material change in the basis for formation of entities and division of segments in the

Company or in the measurement basis for segment information during this period.

(2) Information on segment profit and loss, assets and liabilities

IC Dept Module Dept Other Dept Adjustment Total

Revenue

From external sources 2,025,605$ 147,361$ -$ -$ 2,172,966$

Inter-departmental - 43,557 - 43,557)( -

Total 2,025,605$ 190,918$ -$ 43,557)($ 2,172,966$

Segment profit (loss) 301,803$ 16,225$ 2,137$ -$ 320,165$

IC Dept Module Dept Other Dept Adjustment Total

Revenue

From external sources 1,986,531$ 61,205$ -$ -$ 2,047,736$

Inter-departmental - 52,047 - 52,047)( -

Total 1,986,531$ 113,252$ -$ 52,047)($ 2,047,736$

Segment profit (loss) 331,147$ 7,057$ 14,657$ -$ 352,861$



~40~

(3) Reconciliation for segment profit and loss, assets and liabilities

The profit and loss of each operating segment of the Company is based on pre-tax operating income

measured as a basis for assessing performance. Inter-departmental sales are carried out at arm’s

length. Revenue from external sources reported to the chief operating decision-maker is measured

in a manner consistent with that in the income statement.

Number of shares Book value Ownership (%) Fair value

Formosa Advanced

Technologies Co., Ltd.

Formosa Plastics Corporation -

Stocks

Other related parties Financial asset at fair value


income-current

146,388 16,029$ 0.00 16,029$ Not pledged〞 Nan Ya Plastics

Corporation - Stocks

Other related parties 〞 2,907,512 229,403 0.04 229,403 Not pledged〞 Formosa Chemicals & Fiber


Parent company 〞 15,249,000 1,707,888 0.26 1,707,888 Not pledged〞 Formosa Petrochemical


Other related parties 〞 1,110,000 128,205 0.01 128,205 Not pledged〞 Nan Ya Technology


Other related parties Financial asset at fair value


income-noncurrent

7,376,215 452,900 0.24 452,900 Not pledged〞 Nan Ya Photonics Inc. - Stocks Other related parties 〞 2,130,721 27,894 4.77 27,894 Not pledged〞 Syntronix Corporation - Stocks - 〞 59,945 1,233 0.15 1,233 Not pledged〞 Mega Diamond Money Market

Fund

- Financial assets at fair value

through profit or loss - current

20,396,748 255,732 - 255,732 Not pledged

FootnoteSecurities held by Marketable securities

Relationship with the securities

issuer General ledger account

As of March 31, 2019

(Except as otherwise indicated)

Formosa Advanced Technologies Co., Ltd.

Holding of marketable securities at the end of the period (not including subsidiaries, associates and joint ventures)


Table 1 Expressed in thousands of NTD

Table 1, Page 1

Purchases

(sales) Amount

Percentage of

total purchases

(sales) Credit term Unit price Credit term Balance

Percentage of

total

notes/accounts

receivable

(payable)

Formosa Advanced Technologies

Co., Ltd.

Nan Ya Technology Corporation Other related

parties(Sales) $ 1,625,320 (75%)

60 days after

monthly billings- - $ 1,047,131 69% -

FootnotePurchaser/seller Counterparty

Relationship

with the

counterparty

Transaction

Compared to third party

transactions Notes/accounts receivable (payable)



Purchases or sales of goods from or to related parties reaching NT$100 million or 20% of paid-in capital or more


Table 2 Expressed in thousands of NTD

Table 2, Page 1

Table 3

Amount Action taken

Formosa Advanced Technologies

Co., Ltd.

Nan Ya Technology Corporation Other related parties $ 1,047,131 6.33 $ - - $ 498,074 $ -

Amount collected

subsequent to the

balance sheet date

Allowance for

doubtful accountsCreditor Counterparty

Relationship with the

counterparty

Balance as at

March 31, 2019 Turnover rate

Overdue receivables


Receivables from related parties reaching NT$100 million or 20% of paid-in capital or more


Expressed in thousands of NTD


Table 3, Page 1

FORMOSA ADVANCED TECHNOLOGIES CO., LTD.

Documents

Transcript of FORMOSA ADVANCED TECHNOLOGIES CO., LTD.