Sunplus Technology Company Limited
Annual Report 2019

Plain-text annual report

Stock code: 2401 LSE：SUPD 2019 Annual Report Sunplus Technology Co., Ltd. Prepared by Search the annual website: http://mops.tse.com.tw Date of publication: May 15th, 2020 PLEASE READ FOLLOWING NOTICE BEFORE USING THIS REPORT Readers are advised that the original version of the report is in Chinese. If there is any conflict between these financial statements and the Chinese version or any difference in the interpretation of the two versions, the Chinese-language report shall prevail. In addition, certain of our financial information have been published in accordance with requirements of the Republic of China Securities and Futures Commission and are presented in conformity with accounting principles generally accepted in the Republic of China. Readers should be cautioned that these accounting principles differ in many material respects from accounting principles generally accepted in other countries. Except as required by law, we undertake no obligation to update any forward-looking statement, whether as a result of new information, future events, or otherwise. The materials and information provided on this report have been issued by Sunplus and are posted solely for informational purposes and is not an offer to buy or sell or a solicitation of an offer to buy or sell any securities issued by us or otherwise. SPOKESPERSON Name: Wayne Shen Title: Vice President Tel: +886-3-5786005 E-mail: IR@sunplus.com DEPUTY SPOKESPERSON Name: Ji-An Zhuang Title: Investor Relations Manager Tel: +886-3-5786005 E-mail: IR@sunplus.com SUNPLUS LOCATION Address: 19, Innovation 1st Road, Hsinchu Science Park, Hsinchu 300, Taiwan Tel: +886-3-5786005 Fax: +886-3-5786006 http://www.sunplus.com COMMON SHARES TRANSFER AGENT Company: China Trust Commercial Bank Corporate Trust Operation and service Department Address: 5F, 83, Sec. 1, Chung-Ching S. Rd. Taipei 100, Taiwan Tel: +886-2-21811911 http://www.chinatrust.com.tw AUDITORS Name: Cheng-Chi Lin, SuJai Huang Company: Deloitte & Touche Tohmatsu Limited Address: 6F, 2, Prosperity Road 1, Hsinchu Science Park, Hsinchu 300, Taiwan Tel: +886-3-5780899 http://www.tw.deloitte.com GDR DEPOSITARY BANK Company: The Bank of New York Address: 101 Barclay Street New York, N.Y. 10286 Tel: +1-212-815-2476 http://www.adrbnymellon.com Please refer to London Stock Exchange official website for Sunplus’ Market Price. http://www.londonstockexchange.com SUNPLUS WEBSITE http://www.sunplus.com TABLE OF CONTENT I. II. III. LETTER TO SHAREHOLDERS ..................................................................................................................................... 1 COMPANY PROFILE.................................................................................................................................................. 4 2.1 Foundation of Sunplus ........................................................................................................................................... 4 2.2 Milestones ............................................................................................................................................................. 4 CORPORATE GOVERNANCE ..................................................................................................................................... 6 3.1 Organization........................................................................................................................................................... 6 3.2 Director, general manager, deputy general manager, associate, department and branch office in charge of information ............................................................................................................................................................ 8 3.3 Corporate Governance Implementation .............................................................................................................. 20 3.4 Audit Fees ............................................................................................................................................................ 48 3.5 Replacement of Auditors ..................................................................................................................................... 48 3.6 Chairman, Presidents, and Managers in Charge of Finance and Accounting Who Held a Position in Sunplus’ Independent Audit Firm or Its Affiliates during the Recent Year ......................................................................... 49 3.7 Net Change in Shareholding and Net Changes in Shares Pledged by Director, Manager, and Shareholders with IV. 10% Shareholding or More .................................................................................................................................. 50 3.8 Top 10 Shareholders & Related Parties ............................................................................................................... 52 3.9 Long-term Investment Ownership ....................................................................................................................... 53 CAPITAL & SHARES ................................................................................................................................................ 54 4.1 Capitalization ....................................................................................................................................................... 54 4.2 Issuance of Corporate Bonds ............................................................................................................................... 61 4.3 Preferred Shares .................................................................................................................................................. 61 4.4 Issuance of GDR ................................................................................................................................................... 62 4.5 Employee Stock Options Plan .............................................................................................................................. 63 4.6 Restricted Employees Stock ................................................................................................................................. 63 4.7 Mergers and Acquisitions .................................................................................................................................... 63 V. FINANCIAL PLAN & IMPLEMENTATION .................................................................................................................. 64 VI. BUSINESS HIGHLIGHT ............................................................................................................................................ 65 6.1 Business Activities ................................................................................................................................................ 65 6.2 Market Status ...................................................................................................................................................... 73 6.3 Personnel Structure ............................................................................................................................................. 80 6.4 Environmental Protection & Expenditures .......................................................................................................... 80 6.5 Employees ............................................................................................................................................................ 82 6.6 Important Contracts ............................................................................................................................................ 83 VII. FINANCIAL STATEMENTS ....................................................................................................................................... 84 7.1 Condensed Financial Statement and Auditors’ Opinions by adopting IFRSs ....................................................... 84 7.2 Financial Analysis for recent 5 years .................................................................................................................... 89 7.3 Report by Audit Commitee .................................................................................................................................. 94 7.4 Consolidated Financial Statements ...................................................................................................................... 95 7.5 Financial Statements-Standalone ...................................................................................................................... 197 7.6 Financial Difficulties ........................................................................................................................................... 288 VIII. FINANCIAL ANALYSIS ........................................................................................................................................... 274 8.1 Financial Status .................................................................................................................................................. 274 8.2 Operational Results............................................................................................................................................ 275 8.3 Cash Flow ........................................................................................................................................................... 276 8.4 Major Capital Expenditure ................................................................................................................................. 277 8.5 Long-Term Investment ....................................................................................................................................... 277 8.6 Risk Management .............................................................................................................................................. 278 8.7 Other Remarks ................................................................................................................................................... 280 SPECIAL NOTES .................................................................................................................................................... 281 9.1 Affiliates ............................................................................................................................................................. 281 9.2 Private Placement Securities ............................................................................................................................. 293 9.3 Status of Sunplus Common Shares/GDRs Acquired, Disposed of, or Held by Subsidiaries ............................... 294 9.4 Special Notes ..................................................................................................................................................... 295 9.5 Any Events Impact to Shareholders’ Equity and Share Price ............................................................................. 295 IX. I. LETTER TO SHAREHOLDERS BUSINESS REPORT 2019 Business Results Sunplus consolidated net operating revenue totaled NT$5,512 million and the gross profit were NT$2,375 million in 2019. While R&D expense totaled NT$1,481 million and the G&A expenses were NT$498 million, marketing expense were NT$263 million, Operating profit was NT$132 million in 2019. Including total non-operating net income NT$112million, the profit before tax were NT$244 million. Excluding the income tax expense NT$69 million, the net profit of the year totaled NT$175 million, attributable to owner of the Company were NT$15 million which the earning per share after tax for 2019 was NT$0.03. The net sales from continuing operations in 2019 decline 9.30% compared to the same period last year. The gross profit margin is about 43% compared with the previous year ’s 40%, a slight increase. 2019 operating net profit increased by 246.72% compared to 2018. Off-line income decreased from 294 million yuan in 2018 to 112 million yuan in 2019, mainly due to the recognition of profits of 171 million yuan by the company in 2018. The IFRS Consolidated Statement exposes other comprehensive gains and losses in 2019, Including the difference between the conversion of financial statements of foreign operating institutions, Unrealized gains and losses on equity instrument investments measured at fair value through other comprehensive income, determine the number of reassessments of the welfare plan, the shareholding of related enterprises recognized by equity method, the total net profit and loss for other consolidated losses in 2019 is NT$102 million. Total after 2019 net profit, the total consolidated profit and loss in 2018 was NT$73 million, the consolidated profit and loss was attributed to the loss of NT$77 million by the owner of the company. PRODUCTS R&D, TECHNOLOGIES AND OUTLOOK Sunplus technology mergers and acquisitions of major individuals, including Sunplus Technology, Generplus Technology, SunplusIT Technology, Jumplux Technology, and mainland subsidiary. Sunplus is currently focuses on the development, in addition to Automotive Infotainment System (Display Audio), advanced driver assistance system (ADAS) automotive chip products and systems platform, has been launched with advanced driving support system function (ADAS) of the wafer platform products, and car information entertainment system (Display Audio), BoomBox, SoundBar, portable entertainment systems and other products. It also introduces the intelligent computing chip Plus1 for AioT applications, and also provides IP authorization such as high-speed interface, data converter and analog. With the popularity of smart phones, the convenience of getting on the car and the car infotainment system, the system has quickly become the standard equipment for the new car. It is expected that the COVID-19 epidemic will drag down global consumption, and the growth momentum of the system may be slightly affected. It is still the main source of growth and revenue for Lingyang Technology. The revolutionary breakthrough of the intelligent computing chip Plus1 greatly reduces the research and development threshold of Edge Computing. It will be the best solution for a small number of diverse AIoT new applications, and related applications will become increasingly popular in the future. 1 Generalplus Technology focuses on consumer electronics chips, product line includes voice, multimedia, and MCU chips, Product development market leadership. The main application products include interactive toys, education and learning, driving Recorder, Sports DV, Gaming Keyboard and Wireless Charging. In 2019, a 16-bit DSP high-sound quality sound synthesis platform integrating a touch unit and a high-resolution PWM broadcasting device will be launched. In terms of multimedia products, we developed a 32-bit SoC handheld open application platform, including image processing, visual processing, and voice processing, combined with deep learning algorithms, which can be used for educational learning, driving records, sports photography, aerial photography and other applications. For MCU, develop 32-bit Cortex-M0 sine wave drive motor control chip. In terms of wireless charging, launched a 15W solution, integrated high and low voltage components and passed WPC EPP certification. Sunplus Innovation Technology focuses on computer peripheral application chip development, including human-machine interface device chips, network camera chips, optical sensors, RF wireless transmission chips, remote control ICs, and more. About 70% of the sales in 2019 will come from PC-related cameras, mouse keyboards, and storage chips, and about 30% will come from high-speed cameras, rear-drive lenses, new retail and remote control chips. 2020 will continue the application of machine vision intelligent imaging applications and expand applications in non-PC applications. In response to the growing demand for automotive electronics and high-speed storage, Jumplux Technology has developed ASICs with system customers. In 2019, the RISC-V is adopted as the core car regulation USB Media Hub IC SPD126, and UFS Bridge IC SPD215, the former supports USB Type-C PD2.0 and WPC wireless charging, and the latter can be used for large-capacity USB flash drives or solid state drives. Subsidiaries in China include Shanghai Sunplus, Sunplus prof-tek, Sunmedia, Sunplus-EHUE and Sunplus APP. Mainly to support the company's mainland customers in the company's engineering services and business promotion. External competition, regulations, and overall economic environment Sunplus Technology focuses on the development of niche-type automotive wafers and intelligent computing chips, continuing its leading position in the audio-visual market, and is beneficial to the competitiveness of automotive audio-visual systems, vehicle-adaptive driving assistance systems, and AIoT Edge Computing. Generplus Technology 2019 due to the closure of the US Toys R Us, the change in sales channels, affecting the number of new products; and the Sino-US trade war, weakening the mainland market demand; resulting in a decline in revenue and profits. Looking ahead to 2020, we will continue to bet on more R & D resources, develop new products, and respond to market changes . In addition to continuing to develop in a more integrated direction, Sunplus Innovation Technology is also Actively develop non-PC smart imaging products to establish a foundation for growth and profitability. Jumplux Technology continues to invest in the development of automotive USB Media Hub and UFS bridge IC, and will build a RISC-V 64-bit development platform and IP. Looking ahead to 2020, the haze of the US-China trade war is still going on, and a COVID-19 epidemic will be added in the first quarter, which will drag down international economic growth. The company will pay close attention to changes in the international economic environment, adjust the pace of product research and development in a timely manner, and meet market demands. Future company development strategy Sunplus Technology includes all of the merged individuals of the Group, will continue to deepen the core competitiveness of various fields, efforts to expand the market, Improve product value and observe market trends, adjust and optimize product lines and investments, Improve industry and industry performance, at the same time actively investing in advanced technology, open up 2 new products and markets, reserve a new wave of growth momentum. Expect to continue to increase profits, return the long-term support of shareholders. All the best, Chairman & CEO, 3 II. COMPANY PROFILE 2.1 Foundation of Sunplus Sunplus was founded in August 3rd 1990 in Hsinchu, Taiwan. 2.2 Milestones For the formation of the Company's share capital, please refer to pages 63-66 of this annual report. Please refer to pages 284 to 295 of this annual report on the relationship between the Company and the investment enterprises. August 1990 Sunplus Technology was founded May 1993 Obtained approval from the SIPA to move into Hsinchu Science Park October 1993 Moved into Hsinchu Science Park September 1994 Company started in-house wafer circuit probe testing December 1995 Groundbreaking for the construction of Sunplus’ office building, located in 19, Innovation First Road, Hsinchu Science Park April 1996 Evaluated as “The most productive IC design company” by Hsinchu SIPA January 1997 Grand opening of Sunplus’ office building September 1997 Sunplus Technology was IPO on the Over-The-Counter stock market January 2000 Sunplus was listed on the main board of the Taiwan Stock Exchange (TSE) Jun 2000 Received certificate of ISO 9001 Quality Assessment by RWTUV September 2000 Reorganized into three new business unit, Consumer center, Multimedia center, and production center; and the BOD appointed Mr. Yarn-Chen Chen as the president December 2000 Received the “Distinguished Achieved Award” from Hsinchu SIPA March 2001 Launched Global Depositary Receipts on the London Stock Exchange December 2001 Completed the Grandtech merger and announced the company’s reorganization January 2002 Established a subsidiary in Shanghai, China to provide better service to customers in Mainland. February 2002 Implemented ERP system successfully to enhance company‘s operating efficiency and competence Jun 2002 Purchased a new office building (B-building) at Science Park July 2002 Sponsored the new Innovation Park and Parking Lot at Science Park, Hsinchu February 2003 Licensed 32-bit core IP from MIPS Technology for next-generation consumer electronic products April 2003 Completed acquisition of Oak Optical Storage Business and spin-off a new venture, Sunext May 2003 Technology to focus on next generation Blue Ray ODD controller Licensed MPEG-4 video compression technology from DivX Networks to create DivX certified IC solution for consumer electronic products Jun 2003 Announced reorganization by altering the Product Business Unit Systems to Functional Business Unit Systems August 2003 Established a new milestone for monthly sales over NT$1 billion December 2003 Won “Innovation Product Award 2003” and “R&D Performance Award 2003” from Hsinchu SIPA March 2004 Established a new subsidiary, Generalplus Technology to focus on consumer IC design September 2004 Received certificate of ISO 14000 Quality Assessment December 2004 MFP SoC with 4800dpi image quality won “Innovation Product Award 2004” from Hsinchu SIPA December 2004 Won “R&D Performance Award 2004” from Hsinchu SIPA Jun 2005 Announced the first 32-bit processor core S+core® with Sunplus-owned instruction set Jun 2005 architecture Launched USB2.0-to-Serial ATA bridge solution August 2005 Applied MPEG-4 image controlling technology to the first IP cam with resolution up to 1M pixel in the worldwide August 2005 Completed the merger with the 3G team of information & communication research lab ITRI and started the development of 3G cellular communication ICs September 2005 Established a new milestone of monthly sales up to NT$1.899 billion as record high October 2005 Mass-produced the PHS mobile baseband processor November 2005 Announced the worldwide first DVD ICs certificated by DivX Ultra December 2005 Announced reorganization by altering the Functional Business Unit System to Product Business Unit System and the resolved to spin off the LCD IC business. Mr. Chou-Chye Huang was appointed to CEO of Sunplus 4 March 2006 Completed the spin-off of the LCD IC business into Orise Technology Co., Ltd. December 2006 Completed the spin-off of Controller & Peripheral Business Unit into Sunplus Innovation Technology Inc. December 2006 Completed the spin-off of the Personal Entertainment Business Unit and Advanced Business Unit into Sunplus mMobile Inc. December 2006 Established a new record high with 2006 profit after tax, NT$2.97 billion February 2007 Licensed digital TV SoC IP to Silicon Image, Inc. with US$40 million for license fee. March 2007 Completed the return of capital with outstanding shares afterward 512,953,665 shares April 2007 The spin-off LCD driver IC design company Orise Technology was IPO April 2007 Sunplus mMobile spun-off Sunplus mMedia Inc. December 2007 Highly integrated SoC SPG290 with interactive game and education function won the “Innovation Product Award 2007” from Hsinchu SIPA December 2007 Received certificate of IECQ 080000 for hazardous substance process management. December 2007 Established a new subsidiary, Sunplus Prof-tek Technology, in Shenzhen January 2008 Established a new subsidiary, Sunmedia Technology, in Chengdu March 2008 Sunext licensed optical storage technology to Broadcom Corporation with license income up March 2008 to US$38 million Launched first DTMB demodulator for China digital broadcasting TV system among Taiwanese IC design companies April 2008 Established new subsidiary Sunplus APP Technology in Beijing, to follow up Sunplus University March 2009 Program in China Joint-promoted with DTS next generation DVD SoC delivering the ultimate audio entertainment experience. October 2009 Spun off Sunplus mMedia’s product lines: PC-Cam to Sunplus Innovation Technology Inc.; PMP/MP3/DPF to Generalplus Technology Inc.; DSC to new start-up December 2009 Started up iCatch Technology Inc. to take over the DSC business from Sunplus mMedia Inc. August 2010 Celebrated Sunplus’ 20th Anniversary and Kept Going for “Technology for Easy Living” May 2011 Announced reorganization by altering the IC design Unit and System design Unit to “DVD Product Center”, “STB Product Center”, “TV Product Center” and “IP Product Center”. Appointed Dr. Archie Yeh as President of Home Entertainment Business Unit November 2011 The subsidiary, Generalplus Technology Co., Ltd., focused on consumer IC design listing on Taiwan Stock Exchange under the code “4952” May 2012 Updated the company vision from “Technology for Easy Living” to “Customers Win we win” June 2012 Elected the 9th Board of Directors and Supervisors in AGM2012, the BOD re-elected December 2012 Unanimously Mr. Chou-Chye Huang as Chairman Joint-invest Sunplus Core Technology (renamed: S2-tek Inc.) for TV IC design January 2013 Reorganization to “DVD Product Center”, “STB Product Center” and “IP Product Center”. November 2013 “DVD Product Center” renamed to “Automotive Product Center”. January 2014 Established new subsidiary Beijing Sunplus-Ehue Tech Co., Ltd. October 2014 Sunplus mMedia spun-off Jumplux for USB Multi-Screen Display SoC and IP Design December 2014 The consolidated net sales reached NT$8.71 billion January 2015 Orise Technology merged with Focal Tech January 2015 Disposed STB product Center February 2015 Reorganization due to disposal of STB center, Chariman & CEO Mr. Chou-Chye Huang is acting June 2015 December 2016 June 2017 March 2018 August 2018 February 2019 as President of HE BU Elected the 10th Board of Directors and Supervisors in AGM2015, the BOD re-elected Unanimously Mr. Chou-Chye Huang as Chairman Completed TSMC 28nm HPC + IP development and verification The first release of the Corporate Social Responsibility Report (CSR Report) actively implements corporate social responsibility to meet the international trends of balanced environmental, social and corporate governance development, contribute to economic development, and improve employees, their families, and the local community as a whole. Social quality of life Home Entertainment BU has set up a "Smart Computing Project" Update Slogan to "Make difference". Simple and powerful, easy to understand, the larger version of Make declares that you want to "do something" and create valuable differentiation Passed ISO45001 and TOHSMS environmental safety and health management system certification 5 III. Corporate Governance 3.1 Organization 3.1.1 Organization Chart 6 3.1.2 Major Corporate Functions Department Job Description March 31st, 2020 Chairman Office CEO Office Internal Auditor Home Entertainment Business Unit Engaging the strategic alliances (1) (2) Planning and executing investment plans (3) Arranging Board of Directors Meetings (4) Executing internal auditing plan as routine Executing and managing the strategic alliances The planning, promotion and implementation of the Company's integrity management Establishing company’s operational strategies, and goals (1) (2) Auditing and improving the operating performances (3) Communicating with investors, public and media (4) (5) Managing strategic investments (1) (2) Auditing subsidiaries regularly (3) Auditing special cases (4) Re-certification auditing of self-examination (5) Establishing the internal control system (1) Developing world-class audio and video solutions (2) Managing sales channels and distributors and providing customer services (3) Marketing and expanding business worldwide (4) Conducting production, material control, International trading affairs (5) Developing and handling quality assurance system (6) Planning new products and engaging cutting-edge technologies (7) Maintaining testing software and facility (1) Total Management, Plant Management, Procurement, Occupational safety, Environmental Protection and Administrative Services Administration Unit Finance & Accounting Division Legal & IP Department Establishing corporate information service to upgrade the productivity (2) Managing human resources and personnel (3) (4) Automating of business process to be more competitive (5) Consulting for management to making business decisions (1) Managing finance & accounting affairs (2) Arranging annual shareholders’ meeting (1) Coordinating the legal and IP affairs (2) Controlling the project procedures and design documents (3) Conserving company confidential documents (4) Purchasing, maintaining librarianship (5) Conducting contracts & IP management 7 3.2 Directors, and Management 3.2.1 Directors& Supervisors Title Name Date Elected Initial Date Elected Term of Office Chairman & CEO Chou-Chye Huang 2018.06.11 1990.07.09 3 years Share holding When Elected Amount 92,737,817 15.67 % Current Shareholding Amount 92,737,817 15.67 % Spouse & Minor Shareholding Amount 1,370,993 Educational Background % 0.23 M.S., Electrical Engineering, Director Wen-Shiung Jan 2018.06.11 2009.04.30 3 years 0 0.00 0 0.00 0 0.00 MBA, International Business, National Taiwan University, Taiwan National Tsing Hua University, Taiwan Director Global View Co., Ltd., 2018.06.11 1990.07.09 3 years 10,038,049 1.70 10,038,049 1.70 0 0.00 - 2018.06.11 1990.07.09 3 years 0 0.00 0 0.00 Director Director Wen-Ren Su (Global View Co., Ltd., Representative of Legal Entity) Wei-Min Lin Independent Director Che-Ho Wei 2018.06.11 2009.04.30 3 years 2018.06.11 2009.04.30 3 years 0 0 0.00 0.00 0 0 0.00 0.00 0 0.00 B.S., Accounting, Chinese Culture University 0 0 0.00 M.S., Accountancy, Jinan University, China 0.00 Ph.D., Electronic Engineering, University of Washington, Seattle, USA April 14th, 2020/Unit: shares Positions Currently held in Other Companies (Note 2) Note 1 Supervisor: Mildex Optical Inc., Hi-Yes Group., E-Pin Optical Inc. Director: Ability Enterprise, Panjit, GenkiTek, OPALS Independent Director: Ko Ja (Cayman), Biostar Chairman: iCatch Chairman: ECSC Inc. Chairman: RADIANT INNOVATION INC. Chairman: British Cayman Islands GLOBAL VIEW CO.,LTD Director: NVTEK Director & President: Global View, Director: Beijing Global View, Independent Director: Well Shin Technology Co., Ltd. Supervisor: NVTEK CPA Auditor of Wei-Min Lin Accounting Firm Independent Director: Fu-Shin holding Cayman Independent Director & Compensation Committee: Genesis Photonics Inc., Director: Unizyx Holding Corporation, Arcadyan Technology, MXIC Chairman : NIIEPA NCTU, Department of Electronic Engineering, Adjunct Professor Independent Director Tse-Jen Huang 2018.06.11 2015.06.12 3 years 0 0.00 0 0.00 0 0.00 EMBA, National Taiwan CPA and Head of Shengxin CO., CPAs Independent Director Yao-Ching Hsu 2018.06.11 2015.06.12 3 years 0 0.00 0 0.00 University of Science and Independent Director & Compensation Committee: GenMont, Technology Sunfon 0 0.00 M.S., Laws, Cornell University, USA Charged lawyer of Yuan Qing Patent and Trademark Office Supervisor: Xiyinlina Prevention Foundation Note1: Chairman: Generalplus, Russell Holdings Co., Ltd.,Venturplus Group Inc., Venturplus Mauritius Inc., Venturplus Cayman Inc., Shanghai Sunplus, Sunplus Technology (HK), Sunplus Venture Capital, Lin Shih Investment, Weiying Investment, Sunplus Management Consulting, Generalplus International (SAMOA)Inc., Sunplus Innovation Technology, Sunplus mMobile, Generalplus (MAURITIUS) Inc., Generalplus (Shenzhen), , Sunplus Prof-tek, Sunmedia, Sunplus APP, Ytrip Technology , Magic Sky Limited, , Award Glory Ltd., Sunny Fancy Ltd., Giant Rock Inc., Giant Kingdom Ltd., Zhu Ming Teaching Foundation, Zhu Ming Academic Foundation, Jumplux, Chongqing Shuangxin Technology, NVTEK, GlintMed. Chairman & President: Sunext, Sunplus mMedia, Beijing Sunplus-Ehue Tech Co., Ltd. President: Worldplus Holdings L.L.C Director: Pan Wen Yuan Foundation, Sinocon Industrial standards Foundation, SIPP Technology, Inc., iCatch, Global View Co., Ltd., Zhu Ming Foundation. Note 2: The chairman of the company and the general manager or equivalent (the top manager) are the same person, are relatives of each other, such as spouse or one parent, should explain the reasons, rationality, necessity and corresponding measures (such as increasing the number of independent directors and should (More than half of the directors have not served as employees or managers, etc.): The chairman of the company also serves as the chief executive officer. To improve business efficiency and decision-making execution, the company has the following specific measures. 1. Of the seven members of the board of directors, except for the chairman, the remaining six directors are not part-time employees or managers. 2. Independent directors can fully discuss and make recommendations for the board of directors in each functional committee to implement corporate governance. 8 3.2.2 Directors and Supervisors' Qualifications and Independence Analysis April 14th, 2020 Numbers of other public companies concurrently serving as an independent director Criteria Name (Note 1) With over 5 years of working experience and one of the following professional requirements Independent Status (Note 2) With an experience in commerce, law, finance, accounting or other specialties necessary to the Company’s business An instructor of higher position in a department of commerce, law, finance, accounting, or other departments related to the Company’s business in a public or private college or university A judge, public prosecutor, attorney, certified public accountant, or other professional or technical specialist who has passed a national examination and been awarded a certificate in a profession necessary for the Company’s business 1 2 3 4 5 6 7 8 9 10 11 12 0                       Chou-Chye Huang Wen-Shiung Jan Wen-Ren Su (Global View Co., Ltd., Representative of Legal Entity) Wei-Min Lin Che-Ho Wei Tse-Jen Huang Yao-Ching Hsu Note 1: The amount of columns depends on the actual circumstance. Note 2: “” indicates the directors and supervisors meeting any of the following criteria during the term of office and two years before                                                                   2 1 1 0 2 1 being elected. (1) Not an employee of the company or its affiliates. (2) Not a director or supervisor of the company or its affiliates. (However, if the independent directors established by the company and its parent company, subsidiary company or subsidiary of the same parent company in accordance with this law or local national laws and regulations are concurrently held by each other, it is not limited.) (3) Not the shareholder (with its relatives or under others’ names) who holds more than 1% shareholding of the total issued shares or ranked as the Top 10 shareholders. (4) Not a manager listed in (1) or a spouse, relative within the second parent, or direct blood relative within the third parent, etc. (5) Directors who do not directly hold more than 5% of the total issued shares of the company, the top five shareholders, or a legal person shareholder who appoints a representative as a company director or supervisor according to Article 27, paragraph 1 or 2, of the company law, Supervisor or Employee (However, if the independent directors established by the company and its parent company, subsidiary company or subsidiary of the same parent company in accordance with this law or local national laws and regulations are concurrently held by each other, it is not limited to this). (6) More than half of the shares that are not on the board of directors of the company or have voting rights are the directors, supervisors or employees of other companies controlled by the same person (but if it is a company or its parent company, subsidiary or a child of the same parent company) (The independent directors established by the company in accordance with 9 this law or local national laws shall not be limited to this). (7) Directors (directors), supervisors (supervisors) or employees (but in the case of the company and its parent company) of other companies or organizations that are not the same person or spouse with the company ’s chairman, general manager or equivalent. Independent directors set up by a subsidiary company or a subsidiary of the same parent company in accordance with this law or local national laws shall not be limited to this). (8) Directors (directors), supervisors (supervisors), managers or shareholders holding more than 5% of shares in specific companies or institutions that do not have financial or business dealings with the company (but specific companies or institutions that hold issued shares in the company) If the total number is more than 20% but not more than 50%, and the independent directors established by the company and its parent company, subsidiary company or subsidiary of the same parent company in accordance with this law or local national laws and regulations are concurrently held by each other, it is not limited to this). (9) Professionals, sole proprietorships, partnerships, companies or institutions that do not provide audits for companies or related companies or have business, legal, financial, accounting and other related services whose cumulative amount of remuneration in recent two years has not exceeded NT $ 500,000 Business owners, partners, directors (directors), supervisors (supervisors), managers and their spouses. However, members of the Remuneration and Compensation Committee, Public Takeover Review Committee, or M & A Special Committee that perform their duties in accordance with the relevant laws and regulations of the Securities Exchange Act or the Corporate M & A Act are not limited. (10) There is no kinship relationship with other directors within the scope of spouse or second parent. (11) There is no one of the circumstances in Article 30 of the Company Law. (12) There is no Article 27 of the Company Law which stipulates that the government, legal person or its representative shall be elected. 10 3.2.3 Major Shareholders of Sunplus’ Shareholders as Legal Entities a) Global View’s Top 10 Shareholders Shareholder Sunplus Technology HSBC as trustee for Bank of Singapore Jhih-Yuan Chou Kai Tian Investment Co., Ltd Citi bank as trustee for First Securities (HK) China Trust Commercial Bank is entrusted to keep the investment account of Baofu Investment Consultant (Hong Kong) Co., Ltd. - Customer Account Meng-Huei Lin Shuhui Chen Yunlong Huang Yi Jiang Nan Co., Ltd. b) Remark if the above Major Shareholders as Legal Entities: Shareholder HSBC as trustee for Bank of Singapore Kai Tian Investment Co., Ltd Citi bank as trustee for First Securities (HK) China Trust Commercial Bank is entrusted to keep the investment account of Baofu Investment Consultant (Hong Kong) Co., Ltd. - Customer Account Yi Jiang Nan Co., Ltd. Major Shareholders Not Applicable Bing Huang Shi Yi Ye Wu Not Applicable Not Applicable Jiaxi Huang Jiaqi Huang April 14th, 2020 Holding 13.06% 9.20% 5.61% 5.07% 3.31% 2.58% 2.47% 2.47% 2.09% 2.04% Holding - 50% 50% - - 27% 26% 11 3.2.4 Management Team Title Country of Citizenship Name Gender Effective Date Current Shareholding Spouse’s & Minor’s Shareholding Use the Name of Others to Hold Shares Amount % Amount % Amount % Educational Background Positions Currently held in Other Companies (Note 5) Chairman & CEO Vice President Assistant VP Assistant VP Assistant VP Republic of China Republic of China Republic of China Republic of China Republic of China Chou-Chye Huang Wayne Shen Alex Chang Jason Lin Michael Su male male male male male 1990.07.09 92,737,817 15.67 1,370,993 0.23 0 2005.12.01 969,558 0.16 0 0.00 0 0.00 M.S., Electrical Engineering, National Tsing Hua University, Taiwan 0.00 EMBA, Technology Management, Note:1 Note:2 National Chiao-Tung University, Taiwan 2013.07.01 0 0.00 0 0.00 0 0.00 Master, Industrial Engineering, Note:3 National Chiao-Tung University, Taiwan 2013.11.01 146,111 0.02 8,637 0.00 0 0.00 Master, Industrial Engineering, Note:4 2018.03.15 0 0.00 0 National Chiao-Tung University, Taiwan 0.00 Master of Electrical Engineering, University of Southern California, USA - April 12th, 2019/Unit: shares With Spouse or Two Parents Relationship Manager Remarks Note:6 Job Title Name Relationship - - - - - - - - - - - - Shu-Chen Cheng Republic of China Director of Finance & Accounting Division Note 1 Chairman: Generalplus, Russell Holdings Co., Ltd.,Venturplus Group Inc., Venturplus Mauritius Inc., Venturplus Cayman Inc., Shanghai Sunplus, Sunplus Technology (HK), Sunplus Venture Capital, Lin Shih Investment, Weiying Investment, Sunplus Management Consulting, Generalplus International (SAMOA)Inc., Sunplus Innovation Technology, Sunplus mMobile, Generalplus (MAURITIUS) Inc., Generalplus (Shenzhen), , Sunplus Prof-tek, Sunmedia, Sunplus APP, Ytrip Technology , Magic Sky Limited, , Award Glory Ltd., Sunny Fancy Ltd., Giant Rock Inc., Giant Kingdom Ltd., Zhu Ming Teaching Foundation, Zhu Ming Academic Foundation, Jumplux, Chongqing Shuangxin Technology, GenkiTek, GlintMed Innovation. 0.00 Bachelor, Accounting, Tunghai University, Taiwan 2013.03.01 Note:5 0.00 0 36,067 female 0.01 0 - - - Chairman & President: Sunext, Sunplus mMedia, Beijing Sunplus-Ehue Tech Co., Ltd. Director: Pan Wen Yuan Foundation, Sinocon Industrial standards Foundation, SIPP Technology, Inc., iCatch, Global View Co., Ltd., Zhu Ming Foundation. President: Worldplus Holdings L.L.C Note 2 Director: Sunplus mMobile, Sunplus Innovation Technology, Beijing Sunplus-Ehue Tech Co., Ltd., Sunplus mMedia, Supervisor: Jumplux, Sunext. Note 3 AVP: iCatch, Sunext, Jumplux, , Shanghai Sunplus, Chongqing Shuangxin Technology. Director: Rudong Core Electronic Technology. Note 4 Director: Advanced Vehicle Systems Co., Ltd. AutoSys Co., Ltd. Note 5 Manager: Sunext, Jumplux. Supervisor: Rudong Core Electronic Technology. Director: GenkiTek. Note 6 When the general manager or equivalent (the top manager) and the chairman are the same person, are relatives such as spouse or one parent, they should disclose the reasons, rationality, necessity and corresponding measures (such as increasing the number of independent directors More than half of the directors have not served as employees or managers, etc.) related information: The chairman of the company also serves as the chief executive officer. To improve operational efficiency and decision-making execution, the company currently has the following specific measures: 1. Among the seven members of the board of directors, except for the chairman, the remaining six directors are not part-time employees or managers. 2. Independent directors can fully discuss and make recommendations for the board of directors in each functional committee to implement corporate governance. 12 3.2.5 Remuneration to Directors, Presidents, and Vice Presidents a) Remuneration to Directors Title Name (Note 1) Remuneration to Directors Remuneration to Directors who hold a Concurrent Post in the Company Salary (A) (Note 2) Pension (B) Bonus from Profit Distribution (C) (Note 3) Allowance (D) (Note 4) (A)+(B)+(C)+ (D) %of Net Income (Note 10) Salary, Bonus, etc. (E) (Note 5) Pension (F) Employee Bonus from Profit Distribution (G) (Note 6) (A)+(B)+(C)+( D) +(E)+(F)+(G) % of Net Income (Note 10) S u n p l u s S u n p l u s C o n s o l i d a t e d S u b s i d i a r i e s ( N o t e 7 ) S u n p l u s C o n s o l i d a t e d S u b s i d i a r i e s ( N o t e 7 ) C o n s o l i d a t e d S u b s i d i a r i e s ( N o t e 7 ) S u n p l u s C o n s o l i d a t e d S u b s i d i a r i e s ( N o t e 7 ) Sun plu s Cons olidat ed Subsi diarie s (Note 7) Sunplus Consolid Sunplus ated Subsidia ries (Note 7) Sunplus Consolida ted Subsidiari es (Note 7) Consolidated Subsidiaries (Note 7) S u n p l u s S u b s i d i a r i e s C o n s o l i d a t e d Cash Bonus Stock Bonus Cash Bonus Stock Bonus Receive remuneratio n from non-subsidia ry reinvestment business or parent company (Note 11) Units: NT$, shares Chairman Director Director Chou-Chye Huang Wen-Shiung Jan Global View Wen-Ren Su Representative of Legal Entity Wei-Min Lin Che-Ho Wei Tse-Jen Huang Yao-Ching Hsu - - - - 868,000 924,000 5.67 6.04 5,625,126 5,625,126 91,848 91,848 - - - - 43.01 43.38 4,242,507 Director Independent Director Independent Director Independent Director 1. Please state the policy, system, standards and structure of independent directors' remuneration payment, and describe the relevance to the amount of remuneration according to the responsibilities, risks, time invested, etc. According to one of Article 18 of the company's articles of association, "when the directors of the company perform the duties of the company, the company may pay remuneration regardless of the company's business profits and losses. The remuneration is authorized by the board of directors to negotiate with the industry's usual level. Remuneration is distributed in accordance with the provisions of Article 29 of this Constitution. " To measure the company's current operating scale and to consider the company's current operating conditions, the company's policies and regulations for the payment of independent directors' remuneration have a positive relationship with operating performance and future risks assumed. The payment of the sole director's remuneration shall be reported to the board of directors for resolution after the approval of the remuneration committee. 2. In addition to the disclosures in the above table, the directors of the company in the most recent year have received remuneration for providing services to all companies in the financial report (such as serving as consultants for non-employees): none. 1,314,000 1,314,000 8.58 8.58 8.58 8.58 - - - - - - - - - Remuneration to Directors Under NT$1,000,000 NT$1,000,000~NT$2,000,000 (Not included) NT$2,000,000~NT$3,500,000 (Not included) NT$3,500,000~NT$5,000,000 (Not included) NT$5,000,000~NT$10,000,000 (Not included) NT$10,000,000~NT$15,000,000 (Not included) NT$15,000,000~NT$30,000,000 (Not included) NT$30,000,000~NT$50,000,000 (Not included) NT$50,000,000~NT$100,000,000 (Not included) More than 100,000,000 Total Remuneration Class Names of Directors The total amount of the first four remuneration (A)+(B)+(C)+(D) Sunplus (Note 8) Chou-Chye Huang, Wen-Shiung Jan, Global View, Wen-Ren Su, Wei-Min Lin, Che-Ho Wei, Tse-Jen Huang, Yao-Ching Hsu Consolidated Subsidiaries (Note 9) H Chou-Chye Huang, Wen-Shiung Jan, Global View, Wen-Ren Su, Wei-Min Lin, Che-Ho Wei, Tse-Jen Huang, Yao-Ching Hsu The total amount of the first seven remuneration (A)+(B)+(C)+(D)+(E)+(F)+(G) Sunplus (Note 8) Wen-Shiung Jan, Global View, Wen-Ren Su, Wei-Min Lin, Che-Ho Wei, Tse-Jen Huang, Yao-Ching Hsu All companies in the financial report (I) (Note 9) Global View, Wei-Min Lin, Che-Ho Wei, Tse-Jen Huang, Yao-Ching Hsu Chou-Chye Huang Wen-Ren Su Wen-Shiung Jan Chou-Chye Huang 8 8 8 8 Note 1: The names of directors should be listed separately (legal shareholders should separately list the names and representatives of legal shareholders), and the general directors and independent directors should be listed separately, and the amount of each payment should be disclosed in a summary manner. If the director also serves as the general manager or deputy general manager, this table and the following table (3-1), or the following tables (3-2-1) and (3-2-2). Note 2: It indicates the remuneration to directors (including salary, allowance, pension, bonus, rewards, and etc.) in the most recent fiscal year. Note 3: It indicates the remuneration to directors from profit distribution in the most recent fiscal year according to the proposal submitted by BOD to shareholders’ meeting for approval. 13 Note 4: It indicates the expenses generated from directors’ business (including transportation fees, social activity fees, allowances, dormitories, company cars, and etc.) in the most recent fiscal year. If the Company provides a house, car/other transportation, or other allowances to directors, the relevant payments, calculated at actual cost or fair value, shall be disclosed. The remuneration paid to the company drivers shall be disclosed but not included in the remuneration to directors. Note 5: It indicates the salaries, allowances, pensions, severance pay, bonuses, rewards, transportation fees, social activity fees, dormitories, cars, and etc., to directors who hold concurrently posts in the Company (including presidents, vice presidents, managers, or other employees). If the Company provides a house, car/other transportation, or other allowances to directors, the relevant payments, calculated at actual cost or fair value, shall be disclosed. The remuneration paid to the company drivers shall be disclosed but not included in the remuneration to directors. And the salary fee recognized by IFRS 2 "Share Fundamental Contribution", including obtaining employee stock vouchers, restrictions on employee rights of new shares and participation in cash replenishment of shares and so on, should also be included in the remuneration. The company's Chairman Huang and the chief executive officer are equipped with official car, and are provided with drivers to pay the relevant remuneration of NT$462,000. Note 6: It indicates the employee bonuses (including cash and stock) paid to directors who hold concurrently posts in the Company (including presidents, vice presidents, managers, or other employees). The amount of employee bonus according to the proposal of profit distribution submitted by BOD to shareholders’ meeting for approval in the most recent fiscal year shall be disclosed. If there is no such proposal yet, the stock bonus may be calculated according to the stock bonus last year. Note 7: The total amount remuneration paid to the Company’s directors by all the companies in the consolidated financial statements (including Sunplus) shall be disclosed. Note 8: It indicates the numbers of directors classified by the amount of their remuneration paid by Sunplus. The amount of remuneration paid to juridical-person shareholders shall be distributed equally to each representative, and then they shall also be classified according to the amount. If the Company is willing to disclose the names of directors in each classification, the title of column shall be changed to “Names of Directors”. Note 9: It indicates the numbers of directors classified by the amount of their remuneration paid by all the companies in the consolidated financial statements (including Sunplus). If the Company is willing to disclose the names of directors in each classification, the title of column shall be changed to “Names of Directors”. Note 10: Net profit after tax refers to net profit after tax in the most recent individual or individual financial report. Note 11: a. This column should clearly list the amount of remuneration received by the company's directors from reinvested businesses other than subsidiaries or the parent company (if not, please fill in "none"). b. If the directors of the company receive remuneration from a subsidiary's reinvestment business or parent company, the remuneration received by the company's directors from a subsidiary's reinvestment business or parent company shall be included in column I of the remuneration scale and The field name is changed to "Parent company and all reinvestment businesses". c. Remuneration refers to the remuneration, remuneration (including remuneration of employees, directors and supervisors) and business execution fees received by the directors of the company as directors, supervisors or managers of non-subsidiary investment companies or parent companies. ※The remuneration disclosed here shall not be applied for taxation purpose because those are calculated on a different basis. b) Remuneration to Management Team Title Name (Note 1) Salary (A) (Note 2) Pension (B) Reward, Allowance, etc. (C) (Note 3) Sunplus Consolidated Subsidiaries (Note 5) Sunplus Consolidated Subsidiaries (Note 5) Sunplus Consolidated Subsidiaries (Note 5) Bonus from Profit Distribution (D) (Note 4) Sunplus Consolidated Subsidiaries (Note 5) Cash Bonus Stock Bonus Cash Bonus Stock Bonus (A)+(B)+(C) +(D) % on Net Income (Note 8) Sunplus Consolidated Subsidiaries (Note 5) Unit: NT$, shares Receive remuneration from non-subsidiary reinvestment business or parent company (Note 9) CEO VP * Regardless of title, where the job is equivalent to the general manager, deputy general manager (such as: president, chief executive, director ... etc.), should be exposed. Chou-Chye Huang Wayne Shen 8,030,554 8,030,554 1,488,772 1,488,772 268,608 268,608 0 0 0 0 63.93 63.93 25,000 Remuneration to Management Sunplus (Note 6) All companies in the financial report (E) (Note 7) Names of Presidents and Vice Presidents Under NT$1,000,000 NT$1,000,000~NT$2,000,000 NT$2,000,000~NT$3,500,000 NT$3,500,000~NT$5,000,000 NT$5,000,000~NT$10,000,000 NT$10,000,000~NT$15,000,000 NT$15,000,000~NT$30,000,000 NT$30,000,000~NT$50,000,000 NT$50,000,000~NT$100,000,000 More than NT$100,000,000 Total Note 1: Names of presidents and vice presidents shall be disclosed separately, and the remuneration shall be disclosed in total amount. If the director concurrently serves as the general manager or deputy general manager, this table and the above table (1-1), or (1-2-1) and (1-2-2). Note 2: It indicates the remuneration to presidents and vice presidents, including salary, allowance, pension, and severance pay) in the most recent fiscal year. Note 3: It indicates the bonuses, rewards, transportation fees, social activity fees, dormitories, cars, and etc., to presidents and vice presidents. If the Company provides a house, car/other transportation, or other allowances to presidents and vice presidents, the relevant payments, calculated at actual cost or fair value, shall be disclosed. The remuneration paid to the company drivers shall be disclosed but not included in the remuneration to directors. And the salary fee recognized by IFRS 2 "Share Fundamental Contribution", including obtaining employee stock vouchers, restrictions on employee rights of new shares and participation in cash replenishment of shares and so on, should also be included in the remuneration. Wayne Shen Chou-Chye Huang Wayne Shen Chou-Chye Huang 2 2 Note 4: It is to fill in the amount of employee compensation (including stocks and cash) approved by the board of directors for the distribution of the general manager and deputy general manager in the most recent year. And should also fill in table 1-3. Note 5: The total amount remuneration paid to the Company’s presidents and vice presidents by all the companies in the consolidated financial statements (including Sunplus) shall be disclosed. Note 6: It indicates the numbers of presidents and vice presidents classified by the amount of their remuneration paid by Sunplus. If the Company is willing to disclose the names of presidents and vice presidents in each classification, the title of column shall be changed to “Names of Presidents and Vice Presidents”. Note 7: It indicates the numbers of presidents and vice presidents classified by the amount of their remuneration paid by all the companies in the consolidated financial statements (including Sunplus). If the Company is willing to disclose the names of presidents and vice presidents in each classification, 14 the title of column shall be changed to “Names of Presidents and Vice Presidents”. Note 8: Net profit after tax refers to net profit after tax in the most recent individual or individual financial report. Note 9: a. This column should clearly list the amount of remuneration received by the general manager and deputy general manager of the company from the investment company outside the subsidiary or the parent company (if not, please fill in "none"). b. If the general manager and deputy general manager of the company receive relevant remuneration from a subsidiary's out-of-investment business or parent company, the remuneration received by the general manager and deputy general manager of the company's out-of-subsidiary investment business or parent company shall be incorporated into Remuneration level from column E of the table and change the name of the column to "Parent company and all reinvested businesses". c. Remuneration refers to the remuneration, remuneration (including employees, directors and supervisors) and business execution received by the general manager and deputy general manager of the company as directors, supervisors or managers of non-subsidiary companies or parent companies Fees and related remuneration. ※The remuneration disclosed here shall not be applied for taxation purpose because those are calculated on a different basis. 15 c) Employee Bonus Granted to Management Team April 14th, 2020 Title Name Shares Bonus Cash Bonus Sum up % on Net Income Chairman & CEO Chou-Chye Huang Wayne Shen Jason Lin Alex Chang Michael Su Shu-Chen Cheng Vice President Assistant VP Assistant VP Assistant VP Director of Finance & Accounting Division - - - - 3.2.6 Analysis for remuneration paid by all the companies in the consolidated financial statements (including Sunplus) to directors, presidents and vice presidents as % net income in the most recent two years. Also, the relevant policy, standards and procedures, and the relation between remuneration and performance shall be stated. 1. Analysis for remuneration paid as % net income Remuneration Director Supervisor Management 2017 2018 Amount % of Net income(Loss) Amount % of Net income (Loss) 12,296,000 218.93% 12,235,000 79.92% 2. The remuneration is fair compared to peers and the compensations are based on the operation performance of company and individuals. 16 3.3 Corporate Governance Implementation 3.3.1 BOD Meeting Status 8 meetings were held in 2019 (8 meetings by 11th BOD) (A), and the attendance of directors is as follow: Title Name (Note 1) Attendance in Person (B) By Proxy Attendance Rate B/A (%) (Note 2) Remarks Chairman Director Director Chou-Chye Huang Wen-Shiung Jan Representative of Legal Entity , Global View Wen-Ren Su Wei-Min Lin 8 6 8 0 2 0 100 75 100 7 1 8 Che-Ho Wei Tse-Jen Huang Director Independent Director Independent Director Independent Director Other information required to be disclosed: 1.The operation of the board if one of the following circumstances, should specify the date of the board, period, the contents of the motion, the opinions of all independent directors and the handling of opinions of independent directors: (1)matters listed in Article 14-3 of the Securities Exchange Act Yao-Ching Hsu 87.5 100 100 100 0 8 0 0 8 Board of Directors The contents of the motion and follow-up Article 14-3 of the Securities Exchange Act Independence or objection The Sixth Board of Directors of the Eleventh Session 108.01.22 The Seventh Session of the Eleventh Board of Directors 108.03.20 1. The company's "Disposal Procedures for Obtaining or Disposing of Assets" revision discussion. Opinion of independent directors：None. v None The Company's handling of the opinions of independent directors：None. Resolution results: After the chairman asked all the attendees to pass the case without objection. 1. The company's "Endorsement Guarantee Operation Procedure" revision discussion. 2. The company's "Disbursement of Funds and Others' Operation Methods" revised discussion proposal. Opinion of independent directors：None. v Note The Company's handling of the opinions of independent directors：None. Resolution results: After the chairman asked all the attendees to pass the case without objection. 1. The discussion of directors' remuneration distribution in 2018. Opinion of independent directors：None. None v The Tenth Board of Directors of the Eleventh Session 108.08.13 The Company's handling of the opinions of independent directors：None. Resolution results: (1) On the instruction of the chairman, Wei Zhe and the independent director shall act as the acting chairman. In addition to avoiding the general directors who did not participate in the discussion and voting according to law, the acting chairman shall consult all the independent directors present and pass the proposal on the remuneration of the general director without objection. 17 (2) In addition to evading independent directors who did not participate in the discussion and voting according to law, the chairman consulted all the general directors present, and passed the proposal of the independent directors without objection. 1. The discussion on the revision of the company's management measures. Opinion of independent directors：None. v None The Company's handling of the opinions of independent directors：None. Resolution results: After the chairman asked all the attendees to pass the case without objection. 1. 2020 accountant appointment and independence assessment discussion. Opinion of independent directors：None. v None The Company's handling of the opinions of independent directors：None. Resolution results: After the chairman asked all the attendees to pass the case without objection. The eleventh board of directors of the eleventh session 108.11.13 The 13th Board of Directors of the 11th Session 108.12.25 (2) Except for the foregoing, other board of directors who oppose or retain opinions and have a record or written statement by an independent director: None. 2. The implementation of the directors ’avoidance of the proposal of interest shall state the name of the director, the content of the proposal, the reason for the avoidance of interests and the situation of participation in voting— A. On August 13, 2008, the board of directors discussed the "Discussion on the Distribution of Directors' Remuneration in 2007": 1. On the instruction of the chairman, Wei Zhe and the independent director shall act as the acting chairman. In addition to avoiding the general directors who did not participate in the discussion and voting according to law, the acting chairman consulted all the independent directors present and passed the proposal of the general director's remuneration without objection. 2. In addition to evading independent directors who did not participate in the discussion and voting according to law, the general directors who were consulted by the chairman in consultation with all the directors passed the proposal without objection on the remuneration of independent directors. 3. The listed OTC company should disclose information such as the evaluation cycle and period, evaluation scope, method, and evaluation content of the board ’s self (or peer) evaluation— The company has passed the resolution of the board of directors on March 30, 109 to formulate the "board performance evaluation method", the relevant content of the method is as follows: Evaluation cycle During evaluation Assessmen t scope The board of directors of the company shall perform the internal board performance evaluation in accordance with the evaluation procedures and evaluation indicators of these measures every year. Completed before the end of the first quarter of the following year. Performance evaluation of the overall board of directors, individual board members and functional committees. Evaluation method Including internal self-evaluation of the board of directors, self-evaluation of board members, peer evaluation, appointment of external professional institutions, experts or other appropriate methods for performance 18 Evaluation content The company should consider the company's situation and needs to determine the measurement items for board performance evaluation, and should include at least the following five aspects: 1. The level of participation in the company's operations. Second, improve the quality of board decision-making. 3. The composition and structure of the board of directors. 4. Selection and continuous training of directors. 5. Internal control. Directors (self or peers) performance evaluation measures should include at least the following six aspects: 1. Master the company's goals and tasks. 2. Cognition of directors' responsibilities. evaluation. 3. The level of participation in the company's operations. 4. Internal relationship management and communication. 5. Professional and continuous education of directors. 6. Internal control. The measurement items of the performance evaluation of the functional committee should include at least the following five aspects: 1. The level of participation in the company's operations. 2. Cognition of functional committee responsibilities. 3. Improve the quality of functional committee decision-making. 4. Composition of functional committees and selection of members. 5. Internal control. The indicators for the performance evaluation of the board of directors and functional committees should be based on the company's operations and needs to determine the content that is suitable for the company's performance evaluation, and the remuneration committee should periodically review and make recommendations. The scoring standard is revised and adjusted according to the company's needs, and it can also be scored according to the weighting method of each measurement. 4. The objectives of strengthening the functions of the board of directors in the current year and the most recent year (for example, the establishment of an audit committee, the enhancement of information transparency, etc.) and the assessment of implementation status The company has set up functional committees such as auditing and remuneration to review relevant proposals in accordance with its powers and submit them to the board of directors for resolution to improve its supervisory functions and strengthen management functions. Board members continue to participate in refresher courses related to corporate governance topics, enrich new knowledge and enhance communication to continuously enhance board functions. Note 1: The name of a legal entity shareholder and its representative shall be disclosed. Note 2: (a) If a director or supervisor being relieved of office before year end, it shall be notified as a remark. The actual rate of attendance shall be calculated according to the meetings held when he/she is at the post. (b) If there is a re-election before year-end, the new directors and supervisors along with the original ones shall be disclosed, and the date of directors and supervisors being elected shall be stated. The actual rate of attendance shall be calculated according to the meetings held when they are at posts. 3.3.2 Audit Committee The second session of the Audit Committee met for 8 times in 2019 (A), Independent directors are present as follows: Title Name Independent director Independent director Independent director Che-Ho Wei Tse-Jen Huang Yao-Ching Hsu Attendance in Person (B) By Proxy Attendance Rate B/A (%) (Note) Remarks 8 8 8 19 0 0 0 100.00 100.00 100.00 Other information required to be disclosed: 1.The operation of the Audit Committee is one of the following circumstances, should specify the date of the board, period, the contents of the motion, the results of the resolutions of the Audit Committee and the handling of the opinions of the Audit Committee. (1) The matters listed in Article 14.5 of the Securities Exchange Act. (2) Except for the foregoing, other unapproved by the Audit Committee, and more than two-thirds of all directors agreed to the matter. The Audit Committee The contents of the motion and follow-up The matters listed in Article 14.5 of the Securities Exchange Act unapproved by the Audit Committee, and more than two-thirds of all directors agreed to the matter The 5th Audit Committee of the 2nd Session 108.01.22 1. The Company's "Procedure for Obtaining or Disposing of Assets" revision discussion. v None Audit committee resolution results: All members of the Audit Committee agreed to adopt. The Company's handling of the opinions of the Audit Committee： All attendees agree to pass. 1. 2018 the report on the results of the internal control self-assessment report and the statement of the internal control system. None v The 6th Audit Committee of the 2nd Session 108.03.20 2. Discussion on the revision of the company's "Endorsement Guarantee Procedure" 3. The Company's "Discussion on the Operation of Fund Loan and Others" Discussion. 4. Report on the status of budget implementation in the fourth quarter of 2018 and discussion of the 2018 financial statements. 5. The discussion of consolidated financial statements in 2018. v v V v None None None None Audit committee resolution results: All members of the Audit Committee agreed to adopt. The Company's handling of the opinions of the Audit Committee： All attendees agree to pass. 1. Discussion on the revision of the company's management measures. v None Audit committee resolution results: All members of the Audit Committee agreed to adopt. The Company's handling of the opinions of the Audit Committee： All attendees agree to pass. 1. 2020 Accountant Appointment and Independence Assessment Discussion. v None Audit committee resolution results: All members of the Audit Committee agreed to adopt. The Company's handling of the opinions of the Audit Committee： 20 The 10th Audit Committee of the Second Session 108.11.12 The Second Session of the Twelfth Audit Committee 108.12.25 All attendees agree to pass. 2. If there is any avoidance of motions in conflict of interest by Independent Director, the Independent Directors’ names, contents of motions, causes for avoidance and voting should be specified: None. 3. The communication between the independent director and the internal audit manager and the accountant (should include the company's financial, business conditions to communicate matters, methods and results): (1) The accountants of the Company made an assessment of the year 2019 on March 20, 2019, May 13, 2019, August 13, 2019, and November 12, 2019. Fourth quarter and the first to third quarters of 2019, the results of the combined financial report review or review will be communicated. (2) The internal audit supervisors of the Company regularly report with the independent directors on the implementation of the internal audit plan and the implementation of the tracking report, for the implementation of the audit business and the results are fully communicated. (3) The independent directors of the Company may at any time require the visa accountants to examine the financial statements (including the consolidated financial statements) and other relevant laws and regulations, report and communicate to independent directors. Note: *If an independent director resigns before the end of the year, the resignation date should be indicated in the remarks column. The actual attendance rate (%) is calculated based on the number of audit committee meetings and the actual number of attendances during his tenure. * Before the end of the year, if an independent director is reelected, the new and old independent directors should be filled in, and the remarks column indicates that the independent director is old, new or re-elected and the date of re-election. The actual attendance rate (%) is calculated based on the number of audit committee meetings during his tenure and his actual number of attendance. 21 3.3.3 Corporate Governance Implementation as Required by Taiwan Financial Supervisory Commission Item 1. Formulation of its own corporate governance principles 2. Shareholding Structure and Shareholders’ Rights 1) The way handling shareholders’ suggestions or disputes Y V V N Summary Implementation Status (Note 1) Sunplus and its subsidiaries Generalplus for the establishment of a good corporate governance system, participate in the "Code of Practice for Corporate Governance of Listed OTC", the Company's Code of Corporate Governance Practices, and has been disclosed at the Public Information Observatory and the company's website. The rest of the subsidiaries has not formulated the related principles, however all of our rules and procedures are based on laws and regulations stipulated by authorities in charge. Difference to “Corporate Governance Best Practice Principles for TWSE/GTSM Listed Companies” No major Difference (1) Sunplus and its subsidiaries Generalplus, Sunext and Sunplus Innovation Commission by the stock agency on behalf of the relevant business, and according to the law to establish a complete spokesman system. The Company and Generalplus and set up Investor Relations Responsible Personnel responsible for handling shareholder recommendations and disputes related matters. Unlisted Subsidiaries are responsible for handling shareholders' opinions, doubts and disputes. No major Difference 2) The Company’s possession of major shareholders list V (2) The Company and its subsidiaries Generalplus, and Sunplus Innovation through the shares of the agency, master and understand the structure No major Difference and the list of ultimate owners of these major shareholders of major shareholders, and regularly declare the directors and managers of equity changes, to master the ultimate controlling shareholder of the major shareholders and major shareholders. Other subsidiaries shares regularly view the register of members at the end of each month, to master the ultimate controlling shareholder of the major shareholders and major shareholders. 3) Risk management mechanism and fire wall between V (3) The Company and Sunplus Innovation have a " Relational transaction processing", Generalplus has a "Group Business and Related No major Difference the Company and its affiliates 4) Disclosure agreement to prohibit that those insiders V may not take advantage of undisclosed information of which they have learned to engage in insider trading. 3. Composition and Responsibilities of the BOD 1) Board diversity policy V 2) Other Functional Committees than Audit committee and Compensation Committee 3) Whether the company has formulated the board performance evaluation method and its evaluation method, and conducts performance evaluation annually and regularly, and reports the results of the performance evaluation to the board of directors, and applies it to individual directors ’salary and nomination renewal. 4) Regular evaluation of external auditors’ independency V Transactions", the remaining subsidiaries also have various management methods, for the relationship between the business transactions are clearly defined, to achieve risk control and firewall mechanisms. (4) The Company and its subsidiaries, Generalplus have formulated the "Internal Significant Information Disclosure and Prevention of Insider Trading Management Procedures" and "Integrity Management Procedures and Behavior Guide”, and told the company insiders to strictly follow, it is forbidden for insiders to use the unlisted information on the market to buy and sell securities. Other subsidiaries advertise relevant laws and regulations to insiders from time to time. No major Difference (1) A. Article 20 of the Company's Code of Practice on Corporate Governance (the ability of the board of directors as a whole) has clearly defined the composition of the board of directors. In addition to being a director of a company manager, it is not appropriate to exceed one-third of the board of directors. Operational, operational and development needs to develop an appropriate diversification approach. The nomination and selection of the board of directors of the Company follows the requirements of the Articles of Association and adopts the nomination system for candidates. In addition to assessing the eligibility of each candidate's academic experience, it also complies with the "Director's Election Method" and the "Code of Corporate Governance" to ensure the directors. Diversity and independence of members. V V No major Difference No major Difference No major Difference No major Difference B. The current board of directors of the company has seven seats: (1) General directors: He holds a master's degree from the Institute of Electrical Engineering of Tsinghua University, a master's degree from the Institute of International Enterprise Management of the Taiwan University, a bachelor's degree in accounting from the Cultural University, and a Ph.D. in economics and taxation from Jinan University. (2) Independent directors: composed of members such as Dr. Motor of the University of Washington in Seattle, EMBA of the Institute of Finance and Finance of the Taiwan University of Science and Technology, and Master of Laws of Cornell University. (3) Those who are longer than leaders, operational judgment, management, crisis management, and have industrial knowledge and international market views include Huang Zhoujie, Zhan Wenxiong, and Shu Weiren; those who served as the chairman of the National Science Council are Wei Zhehe; those who are longer than financial accounting tax have Huang Zeren And Lin Weimin; who is longer than legal affairs, Xu Zhaoqing. C. The company has 14% of employees with employee status and 43% of independent directors. An independent director has a term of office of more than nine years, and the other two independent directors are appointed for a term of three to five years. One director is over 70 years old, one is 60 to 69 years old, and five are under 60 years old. The directors of each subsidiary also have different expertise in various fields, and indeed implement the policy of diversity of board members. (2) Sunplus and Genealplus have set up audit committee and compensation committee. The company shall set up other functional committee if needed anytime. (3) In the first quarter of 2009, the Company has passed the resolution of the Board of Directors and the Board of Directors to approve the “Board Performance Evaluation Method”. Subsidiaries have not yet formulated a board performance evaluation method, but they do not regularly review the functions of the board. In the future, they will assess the feasibility of setting a board performance evaluation method based on the legal environment, company operating conditions and management needs. (4) The company’s accounting department conducts self-assessment of the independence of visa accountants once a year, and the assessed visa accountants meet the company’s independence assessment standards (Note 2), and passed the resolution of the Audit Committee and the 22 4. Whether the listed OTC company is equipped with qualified and appropriate number of corporate governance personnel, and designated corporate governance directors, responsible for corporate governance related matters (including but not limited to providing directors and supervisors with the necessary information to perform business, assisting directors and supervisors to comply with laws and (According to the law, handle matters related to the meetings of the board of directors and shareholders 'meetings, produce the minutes of the board of directors and shareholders' meetings, etc.)? 5. Communication channel with Stakeholders (Including but not limited to shareholders, employees, customers and suppliers) 6. Engaging professional shareholder services agent to handle shareholders meeting matters 7. Information Disclosure 1) Establishment of corporate website to disclose information regarding the Company’s financials, business, and corporate governance status 2) Other information disclosure channels (ex. English website, appointing responsible people to handle information collection and disclosure, appointing spokesman, webcasting investors conference) 3) Whether the company announces and declares the annual financial report within two months after the end of the fiscal year, and announces and declares the first, second, and third quarter financial reports and the monthly operating situation within the prescribed period. V V V V V Board of Directors on December 25, 2019. Each subsidiary will assess the independence of the visa accountant at the end of the year, and the appointment of the accountant in the resolution of the board of directors. The company's business execution focus in 2019: (1) To consolidate the agenda of the meeting for the board of directors and the committee, specify the convening matters, and send the convening notice to the directors or members seven days before the meeting, and provide sufficient meeting materials so that the participants can truly understand the relevant information of the proposal; When directors or committee members or the legal persons of their representatives are interested, they should also be reminded that their interests should be avoided. (2) Responsible for issuing major messages or announcements of important resolutions after the day of the board meeting and the shareholders' meeting to ensure the legality and correctness of the disclosed information, so as to protect the investor's transaction information parity (3) Change registration of various operations of the company. (4) Evaluate and purchase the "Director and Manager Liability Insurance" of the appropriate insurance amount and complete the insurance coverage, and report the underwriting content to the board of directors. (5) Irregularly provide relevant training information for directors, reminding them to complete the relevant hours of training and completing the relevant declarations in accordance with the "Key Points for the Implementation of Director and Supervisor Training for Listed OTC Companies". (6) Irregularly provide members of the board of directors with information on new ordinances or amendments related to directors' execution of businesses, corporate governance or business operations. (7) Review the compliance status of corporate governance evaluation indicators item by item each year, and propose improvement plans and corresponding measures for the unscored indicators. (8) According to the needs of directors, provide company business or financial and other operational information to maintain smooth communication and communication between directors and business executives. Sunplus and its subsidiaries maintain good relations with stakeholders including banks, suppliers, and other relevant parties. Sunplus, with a principle of honesty, provides sufficient information about the Company’s operations and defends the Company’s lawful rights and interests. The interests of the company's stakeholders are concerned about issues and communication methods (Note 3) The Company and Lingtong Technology have set up stakeholder areas on the company's website. The remaining subsidiaries also provide detailed contact information on the company's website. Interested parties can contact the phone, letter, fax and email at any time if necessary. Sunplus, Generalplus, Sunplus Innovation Technology : China Trust Commercial Bank Corporate Trust Operation and service Department Sunext: SinoPac Securities Corporate Trust Operation and service Department (1) Sunplus and Genealplus have established bilingual corporate website, managed by relevant departments to disclose Company’s financials, No major Difference No major Difference No major Difference business, and corporate governance status. Sunplus Innovation also have established bilingual corporate website to disclose the business and product information. No major Difference (2) Sunplus and its subsidiaries have established English website. Sunplus, Generalplus, and Sunplus Innovation Technology have assigned spokesperson, acting spokesperson and designated specialists to disclose and collect the company’s information. Other subsidiaries are responsible for the collection and disclosure of company information, there is currently no speaker yet. No major Difference V (3) Although the company and its subsidiaries did not announce and declare the annual financial report within two months after the end of the fiscal year, they still announced and declared the annual financial report and the first, second, and third quarter financial reports and the monthly operating situation before the deadline specified by the decree. 8. Other important information to facilitate better V (1) Employee rights: Sunplus and its subsidiaries have made and followed the internal management procedures regarding employee rights under the No major Difference understanding of the Company’s corporate governance (such as human rights, employee rights, employee wellness, community participation, social contribution, community service, investor relations, supplier relations, shareholders’ rights, customer relations, the implementation of risk management policies and risk evaluation measures, the implementation of consumers/customers protection policies, and purchasing insurance for directors and supervisors. ): regulations of the Labor Standards Act and Gender Equality in Employment Act. (2) Employee wellness: Sunplus and its subsidiaries have made and followed the internal management procedures regarding employee wellness. (3) Investor relations: Sunplus and its subsidiaries have set a investor relations professionals to communicate with investors and disclose the operations and financials. (4) Supplier relations: Sunplus and its subsidiaries have good relationship with suppliers and manage the supply chains efficiently. (5) Stakeholders: Sunplus and its subsidiaries respect all stakeholders and have established the channels to communicate with stakeholders. (6) Directors and supervisors' training: The company and its subsidiaries encourage directors and supervisors to participate in continuing education courses. The company announces the status of directors' training at the public information observatory. (7) Implementation of risk management policies and risk evaluation measures: Internal rules and procedures are based on laws and regulations stipulated by authorities in charge (8) Customer: Sunplus and its subsidiaries provide best service to Customers based on internal rules and procedures (9) Sunplus and Generalplus have taken liability insurance for directors and supervisors with respect to liabilities resulting from exercising their duties in Sunplus and subsidiaries. 23 9. Please review the results of the corporate governance evaluation issued by the Corporate Governance Center of the Taiwan Stock Exchange Co., Ltd. in recent years, and to give priority to matters and measures that have not yet been improved: The improvement of 2019 years is as follows: (1) The company has disclosed in the annual report the handling of the implementation of the integrity management policy for the year. (2) The independent directors of the company have completed the training in accordance with the hours specified in the "Implementation Points for Directors and Supervisors of Listed OTC Companies. (3) The company has disclosed on the company's website and annual report the protection measures for employees' personal safety and working environment and their implementation. The other part has not been improved, and will be actively studied for improvement. Note 1: Whether or not "yes" or "no" is checked, it should be stated in the summary description field. 24 Note 2: The evaluation criteria for the independence of the Company's accountants are as follows: Sunplus Technology Accountant Independence Assessment Criteria Evaluation items Evaluation result Whether it is independent 1. Whether the accountant has a direct or significant indirect financial interest relationship with the Company 2. Whether the accountant has a financing or guaranteeing action with the Company or the directors of the Company 3. Whether the accountant has a close business relationship or potential employment relationship with the Company 4. Whether the accountants and their members of the audit team are currently directors or managers in the current or the last two years or have a significant impact on the audit work 5. Whether the accountant has provided non-audit services to the Company that may directly affect the audit 6. Whether the accountant has any stock or other securities issued by the No No No No No No Company 7. Whether the accountant has a conflict with the defendant of the Company or No on behalf of the Company in coordination with other third parties 8. Whether the accountant has a kinship with the directors, managers or No persons who have a significant impact on the audit Yes Yes Yes Yes Yes Yes Yes Yes Note 3: The company's stakeholders pay attention to issues and communication methods: Stakeholder Concerns Communication route Communication frequen Related records Staff client Agent Salary, benefits, education, occupational health and safety Customer appeal Staff communication meeting High-level supervisor mailbox Employee welfare committee Labor Retirement Reserves Supervision Committee Once per season Internal promotion: E-mail, posters, electronic bulletin board Employee performance interview Customer complaints Once every six months Irregular Irregular 2 times a year Customer complaint case Irregular Customer satisfaction customer satisfaction survey 2 times a year Meeting record E-mail announcement Meeting record E-mail, posters, announcements Performance and Future Development Analysis Notes / Quality Assurance / Customer Appeal System Notes/Quality Insurance/Customer Satisfaction Survey System Foreign document control Product quality and hazardous substance requirements Bad quarters inventory mail Bad quarters inventory Green product requirements GPM system Outsourcing factory Supplier management approach Supplier management approach supplier Government agencies Instrument calibration Compliance Green environmental compliance Technology Exchange Outsourcing factory audit: For the new outsourcing factory, it will join the company before joining Outsourcing factory assessment: for the quality / environmental assessment of existing outsourcing plants Annual calibration plan Document round trip Official website announcement Meeting, E-mail 1 time a year Monthly schedule Irregular Irregular Irregular Irregular Notes / Quality Assurance / Customer Appeal System Quarterly Report deadlines, new product releases, new specification requirements When company's supply chain the new outsourcing factory joins the GPM system Notes / Quality Assurance / Audit Management System Notes / Quality Assurance / Audit Management System Notes / Quality Assurance Department / Instrument Calibration Management System Official document Website download E-mail, poster 25 3.3.4 Disclosure of Operations of the Company’s Compensation Committee: 1. Qualifications and Independence Analysis With over 5 years of working experience and one of the following professional requirements Independent Status (Note 2) Status(Not e 1) Name An instructor of higher position in a department of commerce, law, finance, accounting, or other departments related to the Company’s business in a public or private college or university A judge, public prosecutor, attorney, certified public accountant, or other professional or technical specialist who has passed a national examination and been awarded a certificate in a profession necessary for the Company’s business With an experience in commerce, law, finance, accounting or other specialties necessary to the Company’s business 1 2 3 4 5 6 7 8 9 10 Numbers of other public companies concurrently serving on compensation committee Remark Che-Ho Wei  Independent Director Independent Director Tse-Jen Huang Yao-Ching Hsu Independent Director Note 1: The Status is identified by director, independent director and other. Note 2: “” indicates the directors and supervisors meeting any of the following criteria during the term of office and two years before being elected.                                    1 2 0 (1) Not an employee of the company or its affiliates. (2) Directors and supervisors of non-company or related companies (but if the company and its parent company, subsidiary or subsidiary of the same parent company are independent directors established by this law or local state laws and regulations, they are not limited to this). (3) Not the shareholder (with its relatives or under others’ names) who holds more than 1% shareholding of the total issued shares or ranked as the Top 10 shareholders. (4) Not a manager listed in (1) or a spouse, relative within the second parent, or direct blood relative within the third parent, etc. (5) Directors, supervisors or directors of corporate shareholders who do not directly hold more than 5% of the company's total issued shares, hold the top five shares, or appoint representatives to act as company directors or supervisors in accordance with Article 27, paragraph 1 or 2, of the Company Law Employee (but if the independent directors established by the company and its parent company, subsidiary company or subsidiary of the same parent company in accordance with this law or local national laws and regulations are concurrently held by each other, it is not limited to this). (6) More than half of the shares that are not on the board of directors of the company or have voting rights are the directors, supervisors or employees of other companies controlled by the same person (but if it is the company or its parent company, subsidiary or subsidiary of the same parent company according to this (The independent directors established by the law or local national laws and regulations are mutually concurrent, not limited to this). (7) Directors (directors), supervisors (supervisors) or employees of other companies or institutions that are not the same person or spouse with the company's chairman, general manager or equivalent, but if the company and its parent company, subsidiary Or independent directors set up by subsidiaries of the same parent company in accordance with this law or local national laws shall not be limited to this). (8) Directors (directors), supervisors (supervisors), managers or shareholders holding more than 5% of a particular company or institution that does not have financial or business dealings with the company The above does not exceed 50%, and the independent directors established by the company and its parent company, subsidiary company or subsidiary of the same parent company in accordance with this law or local national laws and regulations concurrently serve each other. (9) Professionals, sole proprietorships, partnerships, companies or institutions that do not provide audits for companies or related companies or business, legal, financial, accounting and other related services that do not exceed NT $ 500,000 in cumulative compensation in the past two years Business owners, partners, directors (directors), supervisors (supervisors), managers and their spouses. However, members of the Salary and Compensation Committee, Public Acquisition Review Committee, or M & A Special Committee that perform their duties in accordance with the relevant laws and regulations of the Securities Exchange Act or the Corporate M & A Act are not limited to this. (10) There is not one of the circumstances in Article 30 of the Company Law. 2. Operation 1. BOD appointed three independent director to be members of compensation committee. 2. The term of office is 3 years from June 11th 2018. The fourth salary remuneration committee of the 2019th meeting meets four times(A), membership qualifications and attendance are as follows: Title Name Convener Member Member Other information required to be disclosed: Che-Ho Wei i Tse-Jen Huang Yao-Ching Hsu Attendance in Person(B) 4 4 4 By Proxy 0 0 0 Attendance Rate(B/A) (%) (Note) 100 100 100 Remarks 1. The BOD has adopted the proposal by compensation committee without dissent 2. The participated members have approved the resolutions by compensation committee. without dissent Note 3: (a) If the member being relieved of office before year end, it shall be notified as a remark. The actual rate of attendance shall be calculated according to the meetings held when he/she is at the post. (b) If there is a re-appointment before year-end, the new member along with the original ones shall be disclosed, and the date of member being appointed shall be stated. The actual rate of attendance shall be calculated according to the meetings held when he/she is at the post. 26 3.3.5 Social Responsibilities Implementation Status (such as environment protection, community participation, contribution to community, social service, charity, consumer rights, human rights and other social responsibilities): Item 1. Does the company conduct risk assessments on environmental, social and corporate governance issues related to the company's operations and formulate relevant risk management policies or strategies based on the principle of materiality? (Note 3). 2. Does the company set up a full-time (part-time) unit that promotes corporate social responsibility, and the board of directors authorizes the senior management to handle it, and reports the handling situation to the board of directors. 3. Environmental issues (1) Whether the company establishes an appropriate environmental management system according to its industrial characteristics. (2) Whether the company is committed to improving the utilization efficiency of various resources and using recycled materials with low impact on environmental load. (3) Whether the company assesses the potential risks and opportunities of climate change to the company now and in the future, and adopts measures to deal with climate-related issues. (4) Does the company count greenhouse gas emissions, water consumption and total weight of waste in the past two years, and formulate policies for energy conservation and carbon reduction, greenhouse gas reduction, water and other waste management. 4. Social issues (1) Has the company formulated relevant management policies and procedures in accordance with relevant regulations and international human rights conventions? (2) Whether the company has formulated and implemented reasonable employee welfare measures (including salary, vacation and other benefits), and appropriately reflected the operating performance or results in employee compensation. Y V V V V V N Implementation Status (Note 1) Summary (Note 2) Deviations from “Corporate Social Responsibility Best Practice Principles for TWSE/GTSM Listed Companies” and reasons The company and its subsidiaries conduct risk assessments on environmental, social and corporate governance issues related to operations through the operation of various management systems. The latest risk assessment date of the company was June 28, 2019. No major Difference In order to improve the management of corporate social responsibility, the company sets up a part-time unit that promotes corporate social responsibility. It is responsible for the proposal and implementation of corporate social responsibility policies, systems, or related management policies and specific promotion plans, and regularly reports to the board of directors. The last time the company reported to the board of directors was on December 25, 2019. Although each subsidiary has not set up a full-time (part-time) unit to promote social responsibility, it has spared no effort in environmental protection and related social responsibility activities. (1) The company and its subsidiaries attach great importance to environmental management. At present, the company has passed ISO14001, ISO45001 and TOSHMS environmental protection and occupational safety and health management system certification, and the system operation is performed by the chief auditor of each management system at a standard that is superior to the management system. management. The company and Generalplus Technology have set up occupational safety and health special units and management personnel in accordance with the provisions of the Occupational Safety and Health Law to implement statutory occupational safety and health management. (2) The company and its subsidiaries have announced paperless operations and the use of power-saving lamps and water-saving appliances, and at the same time implementing the policy of turning off lights and saving water. And through the optimization of factory facilities operating system and actively promote various waste reduction activities, increase the operational efficiency of the factory affairs system and reduce the impact on the environment; the company and its subsidiaries comply with relevant environmental protection laws, actively respond to resource recovery and classification, and promote Use various recycled materials and packaging materials for reuse to reduce the impact on the environment. No major Difference No major Difference No major Difference (3) The IC design industry is located in the upstream of the semiconductor industry. The company and its subsidiaries have no No major Difference relevant manufacturing procedures. If the substantial risks caused by climate change should be caused only by the increase in electricity and water demand for air conditioning and office lighting Increased costs, but through the optimization of factory facilities and operating systems to reduce energy consumption and environmental impact; the company and its subsidiaries continue to promote semiconductor high-end process technology and practice Moore's Law in order to save chip The consumption of energy, in turn, drives the use of electrical energy in downstream consumer electronics terminal products. In product design, provide more energy-saving solutions to increase product adoption. (4) According to the ISO14064 standard, the company uses the 100th year of the Republic of China as the base year for inventory, and conducts self-inspection of greenhouse gas emissions every year. The environmental safety and health management policies formulated by the company include the contents of "controlling risks, preventing disasters" and "energy saving, waste reduction and sustainable environment". No major Difference (1) The company and its subsidiaries abide by labor-related laws and regulations and formulate relevant work rules to protect employees ’rights and provide information for employees to understand their rights and interests. No major Difference (2) The company's compensation and benefits are positioned to be better than the market average, to provide competitive salary and compensation to attract talents, and to encourage existing employees and stabilize excellent talents. The company and its subsidiaries provide a leave-giving system that is superior to the law, such as special days off the law, 10 days of paid sick leave per year, and 19 national holidays and anniversaries. In accordance with the "Organization Guidelines for Employee Welfare Committees" promulgated by the Labor Commission, the Company invites various departments to appoint members to form Employee Welfare Committees to coordinate the company's welfare committee funds and promote various welfare measures. The provision ratio has always been 0.15% of revenue (the highest statutory ratio), so that the Fu Committee can plan more diverse and interesting welfare projects. The overall rewards paid by the company and its subsidiaries each year will be determined based on the company's overall operating goals, annual profitability, and employee performance and investment levels. Before July of each year, the company 27 No major Difference (3) Whether the company provides a safe and healthy working environment for employees, and regularly implement safety and health education for employees. (4) Whether the company has established an effective career development training program for employees. (5) Whether the company complies with relevant regulations and international standards on customer health and safety, customer privacy, marketing and labeling of products and services, and formulates relevant consumer protection policies and appeal procedures. (6) Whether the company has formulated supplier management policies, requiring suppliers to follow relevant regulations on environmental protection, occupational safety and health or labor human rights, and their implementation. 5. Does the company make reference to internationally-used report preparation standards or guidelines to prepare corporate social responsibility reports and other reports that disclose the company's non-financial information? Whether the pre-report report obtained the confidence or assurance opinion of the third-party verification unit. V V V V V will measure the overall salary level of the same industry in the market and the employees' personal performance, future development and other relevant principles, and appropriately adjust the salary for colleagues. Annual employee compensation must be approved by the board of directors and reported at the shareholders ’meeting, and disclosed in the company ’s annual report. (3) The company and its subsidiaries provide facilities and environments that are superior to occupational safety and health laws and regulations. Set up special organizations and personnel in accordance with the law, implement environmental safety and health management related matters, and pass ISO14001, ISO45001 and TOSHMS environmental and occupational safety and health management systems. The workplace is automatically inspected regularly to ensure the safety of employees, the environment and equipment. And provide regular health checks that are better than the legal requirements. Provide a good environment for employee career development, provide a variety of education and training programs. (4) The human resources department of the company and its subsidiaries has a complete training plan for the development of colleagues ’careers, so as to ensure that colleagues can perform their duties in existing positions and learn the necessary skills for promotion. (5) The marketing and labeling of products and services by the company and its subsidiaries follow the local regulations and international standards of the company's customers and suppliers. (6) The company and its subsidiaries have long been aware of the environmental and social responsibility of the supply chain, and the requirements for suppliers are not limited to performance and quality. Colleagues in relevant departments regularly audit and liaise with suppliers to ensure that suppliers' environmental protection, occupational safety and health or labor human rights and other issues comply with relevant standards and maintain their due standards. If the supplier does not meet the regulations, it needs to improve and meet the standard within the specified time. If it cannot be improved, it will find other suppliers who can meet the expectations of the ethical and environmental standards of the company and its subsidiaries. The company compiles and publishes the "Corporate Social Responsibility Report" in accordance with the Global Reporting Initiative 2017 new version of the GRI Standards (GRI Sustainability Reporting Standards, GRI Standards) to disclose to stakeholders the operating performance outside of finance, including corporate governance, green processes With environmentally friendly management measures, employee occupational safety software and hardware equipment updates, employee education and training, welfare policies and social welfare implementation results, it demonstrates the corporate vision and mission of sustainable operation. The publication media is the official website and the Taiwan Stock Exchange Open Information Observatory, where both shareholders and stakeholders can conveniently and quickly obtain transparent non-financial performance information. The previous report has not obtained the confidence or assurance opinions of the third-party verification unit. Although each subsidiary has not prepared a corporate social responsibility report, it has spared no effort in environmental protection and related social responsibility activities in the company's senior management policies. No major Difference No major Difference No major Difference No major Difference No major Difference 6. If the company has its own corporate social responsibility code based on the "Code of Practice for Corporate Social Responsibility of Listed Companies", please state the difference between its operation and the established code: The company has formulated the "Corporate Social Responsibility Code", which has internal regulations governing related issues such as sustainable management, environmental protection, employee rights, social welfare and related information disclosure. Each subsidiary has not clearly formulated a corporate social responsibility policy, but related issues such as sustainable management, environmental protection, employee rights, social welfare, and related information disclosure are all regulated by internal systems. In order to fulfill corporate social responsibilities, the company and its subsidiaries will make occasional contributions to environmental protection, social contribution, social services, social welfare, consumer rights, human rights, safety and health and other social responsibility activities. 9. Other important information to facilitate better understanding of the Company’s corporate social responsibility practices (1) Sunplus and the subsidiaries for the professional IC design company, IC research and development and design based, department of non-polluting industries, there is no environmental pollution situation. (2) Sunplus and its subsidiaries are actively involved in relevant activities related to social welfare from time to time. (3) Based on the concept of professional services, the Company and its subsidiaries have formulated the relevant guidelines for the implementation of the relevant customers, in order to seek the fastest solution to customer questions. (4) Sunplus and its subsidiaries are responsible for the management of the Company's employees in accordance with the Labor Standards Act, and by hand to deal with the work of employees, to protect its basic rights and interests. (5) The company and its subsidiaries refer to occupational safety and health related laws and regulations to handle safety and health work to ensure workers' health and safety. (6) The company implements workplace and worker health and safety care through ISO45001 international occupational safety and health management system and TOSHMS Taiwan occupational safety and health management system. Note 1: If the operation is checked "Yes", please explain the important policies, strategies, measures and implementations adopted; if the operation is checked "No", please explain the reasons and explain the plan for the future adoption of relevant policies, strategies and measures painting. Note 2: The company has prepared corporate social responsibility report, the abstract statement can be used to indicate the way in which the corporate social responsibility report is reviewed and the index page is replaced. Note 3: The principle of materiality refers to those who have a significant influence on the company's investors and other stakeholders in relation to environmental, social and corporate governance issues. 3.3.6 Implementation of Ethical Corporate Management Sunplus discloses financial reports according to the regulations of the government. In order to enhance transparency and protect shareholders’ rights and interests, Sunplus announces financial results and business information on TSE and Sunplus’ websites regularly. 28 The situation and reasons for the implementation of integrity management and the difference with the listed company's code of integrity management Item Y N Summary Implementation Status (Note 1) 1. Promulgation ethical corporate management principles 1) Has the company formulated the integrity management policy approved by the board of directors, and stated in the regulations and external documents the policies and practices of integrity management, and the board and senior management's commitment to actively implement the management policy. V 2) Whether the company has established an assessment mechanism for the V risk of dishonesty, regularly analyzes and evaluates business activities with a high risk of dishonesty in the business scope, and formulates a plan to prevent dishonesty, and at least covers the "good faith management of listed companies "Code" Article 7, Paragraph 2, Prevention Measures. 3) Does the company clearly specify the operating procedures, behavior V guidelines, disciplinary punishment and grievance system in the plan to prevent dishonesty, and implement it, and regularly review and revise the pre-disclosure plan. 2. Implement integrity management (1) Whether the company evaluates the integrity records of the counterparties, and specifies the terms of integrity behavior in the contract signed with the counterparties. (2) Does the company set up a special unit under the board of directors to promote corporate integrity management, and regularly (at least once a year) report to the board of directors on its integrity management policies and plans to prevent dishonest behaviors and supervision and implementation. (3) Does the company formulate a policy to prevent conflicts of interest, provide appropriate reporting channels, and implement them. (4) Whether the company has established an effective accounting system and internal control system for the implementation of integrity management, and the internal audit unit formulates the relevant audit plan based on the assessment results of the risk of dishonesty, and checks the compliance with the plan to prevent dishonesty, Or entrust an accountant to perform the audit. (5) Does the company regularly organize internal and external education and training on integrity management. V V V V V Deviations from “Ethical Corporate Management Best Practice Principles for TWSE/GTSM-Listed Companies” and reasons No major Difference No major Difference No major Difference (1) The Company and Generalplus Technology have established the "Integrity Management Operation Procedures and Behavior Guidelines" approved by the Board of Directors as a policy and practice for expressing integrity management, and the commitment of the Board and management to actively implement the operation policies. The company and Lingtong Technology will also publicly disclose the "Integrity Management Operation Procedures and Behavior Guide" and its related specifications at public information observatories and the company's website. The remaining subsidiaries uphold the business philosophy of "integrity", "creative", "quality", and "service", formulate various management systems and methods within the company, and implement and review them from time to time. (2) The company and Generalplus Technology have set up "integrity business operation procedures and behavior guidelines", which clearly prohibits the provision or acceptance of improper benefits. The company also has a "whistleblowing system", and Generalplus's official website has an online "whistleblowing system" to encourage the reporting of any illegal or violations of the Code of Ethical Conduct or Code of Integrity. In addition, the company still requires colleagues with highly sensitive job management, production centers, business and information units to sign a "corruption commitment"; when signing an annual dealer contract with customers, they also sign a "declaration of integrity behavior"; According to the annual transaction amount, the relevant suppliers shall sign the "Certificate of Integrity". The rest of the subsidiaries have specified the reporting and punishment system for employees ’integrity behaviors in the“ Work Rules ”, and through the effective implementation of internal control system to reduce the risk of dishonesty behaviors and take preventive effect. (3) The company and Generalplus Technology have respectively set up a "whistleblowing system", "employee ethical code of conduct", "director and manager's code of ethical behavior", "handling methods for reporting illegal and unethical or dishonest conduct" and "Integrity Management Operation Procedures and Conduct Guidelines", clearly stipulate the relevant operation procedures and behavior guidelines for preventing dishonest behaviors. For colleagues to inquire at any time, we will also provide relevant promotion for new employees through education courses. For any suspected violations of business ethics and confirmed cases, the violators will be subject to severe disciplinary measures including termination of employment or business relationships, and appropriate legal action will be taken in due course. Subsidiary's "Work Rules" set out to prohibit dishonesty, punishment and appeal system for violations of regulations. (1) The "Integrity Operation Procedures and Behavior Guide" of the company and Generalplus Technology clearly states that No major Difference No major Difference when signing a contract, it should fully understand the other party's integrity management status and incorporate the company's integrity management policy into the contract terms. In addition, when the company signed an annual distributor contract with customers since 2006, it also signed a "Certificate of Integrity"; the relevant suppliers, who defined the annual transaction amount, also signed a "Certificate of Integrity". The remaining subsidiaries carefully evaluate the legality of the counterparties through customer credit evaluation and supplier management operations to avoid dishonest business activities. (2) To improve the management of integrity management, the company and Generalplus Technology have appointed the chairman's office as the special unit for promoting enterprise integrity management, responsible for formulating and promoting integrity management policies and prevention plans. The dedicated unit regularly reports to the board of directors on the implementation status in December. The last time the company reported to the board of directors was on December 25, 2008. The remaining subsidiaries actively promote the corporate integrity management concept from top to bottom. In the future, they will set up promotion units according to the actual situation of the company and report to the board of directors regularly. In 2008, the company's integrity management policies and plans to prevent dishonesty and supervision and implementation: 1. Promote integrity policy The company has set up an honesty policy advocacy zone to promote honesty management policies to employees and implement core values and business philosophy based on honesty. Newcomer training promotes the company ’s integrity policy and conducts tests to ensure that the newcomer understands the company ’s integrity policy. A total of 32 people visited in 2008, about 14 hours and 40 minutes. 2. The contract stipulates the integrity management clause When the company signed a distributor agreement in 2008 with its customers, it signed a "Certificate of Integrity" together with its suppliers. According to the definition of annual transaction amount, the relevant suppliers also signed a "Certificate of Integrity". 3. Sign a declaration of integrity 29 The company requires colleagues in the management, production center, business and information units with high sensitivity in their duties to sign the "Corruption Commitment Letter". A total of 11 copies were signed in 2019. 4. Establish a convenient reporting channel The company has a "whistleblowing system" that clearly defines the reporting procedures and confidentiality mechanism, and encourages internal and external personnel to report any illegal or violation of the Code of Ethical Conduct or Code of Integrity Management. " As of the end of 2008, no letter of report was received. (3) The communication channel between the employees of the company and its subsidiaries and the management level is unblocked, and if any problems are found, they can be reported to the management level. In addition, the departments responsible for the integrity of business-related matters are responsible for handling related matters in accordance with their duties and laws to prevent conflicts of interest and provide appropriate statements about pipeline operations. No major Difference (4) The company, Generalplus Technology and Sunplus Innovation Technology have established an effective accounting system No major Difference and internal control system for the implementation of integrity management. Internal auditors regularly check the implementation of the internal control system and implement the self-inspection system to ensure The effectiveness of the internal control system shall serve as the basis for issuing the internal control system statement and shall be reported to the board of directors for approval. The parent company has prepared and implemented an annual audit plan for its subsidiaries based on risk analysis. The company and Generalplus Technology have set up "integrity management operation procedures and behavior guidelines". The built-in integrity management is in the corporate culture and is advertised at various meetings from time to time. In the internal announcement, it also promotes the integrity management operation procedures and behavior guidelines to the company's employees, and implements the company's core values and management philosophy based on integrity. In 2008, the company proclaimed the company's integrity policy to new employees and conducted tests. The remaining subsidiaries implement opportunity education in their daily business, and will organize education and training in the future according to the company's practical situation. (5) The company and Generalplus Technology have set up "integrity management operation procedures and behavior guidelines". The built-in integrity management is in the corporate culture and is advertised at various meetings from time to time. In the internal announcement, it also promotes the integrity management operation procedures and behavior guidelines to the company's employees, and implements the company's core values and management philosophy based on integrity. In 2008, the company proclaimed the company's integrity policy to new employees and conducted tests. The remaining subsidiaries implement opportunity education in their daily business, and will organize education and training in the future according to the company's practical situation. No major Difference V V V V (1) The company has a "whistleblowing system", Generalplus Technology has "handling methods for reporting cases of illegal and unethical or dishonesty", and the remaining subsidiaries have "employee complaint methods". The company and its subsidiaries Appropriate persons in charge will be assigned to deal with them, as a convenient reporting channel for employees to report. No major Difference (2) The company and its subsidiaries all have relevant methods for reporting and appealing, which specify the procedures for No major Difference reporting, the follow-up measures to be taken after the investigation is completed, and the relevant confidentiality principles. (3) The procedures for the protection of whistleblowers are clearly stipulated in the relevant reporting and appeal measures of the No major Difference company and its subsidiaries. The company and Generalplus Technology have placed relevant regulations on integrity management on the company's internal website for colleagues to inquire at any time. The company's external websites and public information observatories place annual reports and corporate social responsibility reports, which also fully disclose relevant policy requirements and information on honest operation. No major Difference 3. Operation of the company's whistleblowing system (1) Whether the company has set a specific reporting and reward system, and established a convenient reporting channel, and assigned appropriate personnel for the acceptance of the reported object. (2)Has the company established the standard operating procedures for the investigation of the complaint, follow-up measures to be taken after the investigation is completed, and the relevant confidentiality mechanism? (3) Whether whistleblowers from improper disposal due to the whistleblowing. the company has taken measures to protect the 4. Strengthen information disclosure (1) Whether the company disclosed the content of its integrity management code and promoted its effectiveness on its website and public information observatory. 5. If the company has its own code of integrity management in accordance with the "Code of Integrity Management of Listed OTC Companies", please state the difference between its operation and the code: The company and its subsidiaries and various manufacturers and organizations cooperate in accordance with the principle of integrity management. 6. Other important information that helps to understand the company's integrity management and operation situation: (such as the company reviewing and revising its integrity management code and other situations) The company and its subsidiaries take honesty as the foundation, and strive for the integrity of all employees and are responsible to investors, customers and the society. The company has a mailbox for complaints and reports. If employees find any violation of the principle of good faith or harm to the reputation of the company, they can complain or report through the Internet. In addition, the company and its subsidiaries and the relevant manufacturers and partners are mostly long-term cooperation, and clearly set a contract, set up relevant full-time personnel to participate, and maintain a long-term stable cooperative relationship. Note 1: Whether the operation is checked "Yes" or "No", it should be stated in the summary description field. 3.3.7 Formulate Corporate Governance Rules and Regulations: (If the company has established corporate governance rules and related regulations, it should disclose its search methods) The Company has a Code of Corporate Governance Practices, to protect the interests of shareholders, strengthen the functions of the board of directors, respect for the interests of stakeholders, to enhance the transparency of information, etc. are relevant norms, also for the Taiwan Stock Exchange Co., Ltd. for corporate governance review one by one to review the actual implementation of the assessment indicators, hoping to help companies gradually build a good corporate governance system, to enhance the effectiveness of corporate governance. The Company's corporate governance operation, please refer to this Annual Report, Corporate Governance Report III, Corporate Governance Operations (pages 21-51), for the Code of Corporate Governance Practices, please 30 contact our website. 3.3.8 Other Matters Needed to Improve the Company’s Implementation of Corporate Governance: None 31 3.3.9 Internal Control System Execution Status and Information a) Statement of Internal Control System Sunplus Technology Co., Ltd. Statement of Internal Control System Date: March 30th, 2020 Based on the findings of a self-assessment, Sunplus states the following with regard to our internal control system during January 1st – December 31st, 2019: Sunplus is fully aware that establishing, operating, and maintaining an internal control system are the responsibility of Board of Directors and management team. Sunplus has established such a system aimed at providing reasonable assurance regarding achievement of objectives in the following categories: (a) effectiveness and efficiency of operations (including profitability, performance, and protection of assets), (b) reliability of financial reporting, and (c) compliance with applicable laws and regulations. An internal control system has inherent limitations. No matter how perfectly designed, an effective internal control system can only reasonable assurance of accomplishment for the three objectives mentioned above. Moreover, the effectiveness of an internal control system may be subject to changes of environment and circumstances. Nevertheless, Sunplus’ internal control system contains self-monitoring mechanisms, and Sunplus takes corrective actions whenever a deficiency is identified. Sunplus evaluates the design and operating effectiveness of our internal control system based on “Regulations Governing the Establishment of Internal Control Systems by Public Companies” (herein below, the “Regulations”). The criteria adopted by the Regulations identify five components of internal control based on the process of management control: (a) control environment, (b) risk assessment, (c) control activities, (d) information and communication, and (e) monitoring. Each component further contains several items. Please refer to the Regulations for details. Sunplus has evaluated the design and operating effectiveness of our internal control system according to the aforesaid criteria. Based on the findings of the evaluation mentioned in the preceding paragraph, Sunplus believe that, during the year 2019, our internal control system (including the supervision and management of subsidiaries), as well as our internal control to monitor the achievement of our objectives concerning operational effectiveness and efficiency, reliability of financial reporting, and compliance with applicable laws and regulations, were effective in design and operation, and reasonably assured the achievement of the above-stated objectives. This statement is an integral part of Sunplus’ annual report for the year 2019 and prospectus, and would be made public. Any falsehood, concealment, or other illegality in the content made public will entail legal liability under Article 20, 32, 171, and 174 of the “Securities and Exchange Law”. This statement has been passed by the Board of Directors Meeting held on March 30th, 2020, with all six attending directors expressing dissenting opinions, and the remainder all affirming the content of this statement. Sunplus Technology Co., Ltd. Chou-Chye Huang Chairman& CEO 32 3.3.10 The Company’s Internal Control System Audit Report by External Auditors: Not applicable 3.3.11 Regulatory Authorities’ Legal Penalties to the Company, and the Company’s Resulting Punishment on Its Employees: None 3.3.12 Major Resolutions by the Shareholders’ Meetings and the Board of Directors Meetings 2019 The implementation of the resolution of the shareholders' meeting Date 2019.06.10 Decision Maker Shareholders’ Meeting Resolution matters and implementation 1. To recognize the Company's 2018 annual business report and financial statements. Implementation of the situation: The relevant bibliography has been filed with the competent authority for filing and announcement in accordance with the relevant laws and regulations. 2. To recognize the Company's 2018 earnings distribution case. Implementation of the situation: No dividends allotted this year. 3. Through capital accumulation and cash. Implementation of the situation: Proposed on July 21, 2019 for distributing base date, August 09, 2019 is the date of payment (Distributary capital reserve of $.36 per share). 4. Approved the revision of the company's "procurement procedures for acquiring or disposing of assets". Implementation: Effective after the resolution of the shareholders' meeting. 5. Approved the revision of the company's "Endorsement Guarantee Procedure". Implementation: Effective after the resolution of the shareholders' meeting. 6. Approved the revision of the company's "Measures for Fund Loan and Others' Operation". Implementation: Effective after the resolution of the shareholders' meeting. 7. Approved the case of lifting the restriction on competition of directors of the company. Implementation: Effective after the resolution of the shareholders' meeting. 2019 and as of the date of publication of the annual report of the board of directors important matters Date Decision Maker Case Result 2019.05.13 Board Meeting 1. Discussion on the consolidated financial statements for the first quarter of 2019. 2019.08.13 Board Meeting 1. Discussion of the consolidated financial statements in the second quarter of 2019. 2. Discussion on the distribution of directors' remuneration in 2018. After the chairman's consultation, all the attending directors passed the case without objection. After the chairman consulted all the directors present without objection, they passed the case. 1. On the instruction of the chairman, Wei Zhe and the independent director shall act as the acting chairman. In addition to avoiding the general directors who did not participate in the discussion and voting according to law, the acting chairman consulted all the independent directors present and passed the proposal of the general director's compensation without objection. 2. In addition to evading independent directors who did not participate in the discussion and voting according to 33 2019.11.13 Board Meeting 1. Discussion of the consolidated financial statements for the third quarter of 2019. 2020.02.19 Board Meeting 1. The discussion on lifting the restriction on competition of managers of the company. 2. The 2009 general shareholders meeting and the acceptance of the shareholders' proposal discussion. 2020.03.30 Board Meeting 1. The company's 2008 employee compensation and director compensation distribution discussion. 2. Discussion of the consolidated financial statements for 2008. 3. Discussion of the 2008 business report. 4. The discussion of the 2008 loss allocation. 5. Handle the discussion of the capital reserve allocation cash. 6. Discussion on lifting the restriction on the competition of directors of the company. 7. Discussion on the revision of the 2009 regular meeting of shareholders. 2020.04.22 Board Meeting 1. Discussion on the adjustment of employees 'compensation and directors' compensation distribution in 2019. 2. Discussion on the revision of the 2009 regular meeting of shareholders. law, the general directors who were consulted by the chairman in consultation with all the directors passed the proposal without objection on the remuneration of independent directors. After the chairman consulted all the attending directors without objection, they passed the case. After the chairman consulted all the attending directors without objection, they passed the case. In this case, the employee compensation and director compensation are determined by the total compensation, but not the individual compensation, so there is no need to avoid interest. The case was approved by the chairman after consulting all the directors present without objection. After the chairman asked all the attendees to pass the case without objection. In this case, the employee compensation and director compensation are determined by the total compensation, but not the individual compensation, so there is no need to avoid interest. The case was approved by the chairman after consulting all the directors present without objection. After the chairman consulted all the attending directors without objection, they passed the case. 3.3.13 The most recent year and as of the date of report publication the directors have different opinions and record or written statements by the board of directors through important resolutions, its main content: None 34 3.3.14 The most recent year and as of the date of report publication, the person related with financial report that resignation of summary of the situation. None 3.4 Audit Fees Audit Firm Name of Auditor Duration of auditing Remarks Deloitte & Touche Zheng-Zhi Lin Yu-Feng Huang 2019.01.01~2019.12.31 Amount 1. Under NT$2,000,000 2. NT$2,000 ,000~ NT$4,000,000 3. NT$4,000,000 ~ NT$6,000,000 4. NT$6,000,000 ~ NT$8,000,000 5. NT$8,000,000 ~ NT$10,000,000 6. Over NT$10,000,000 Item Audit fee Non-audit fee Total    3.4.1 Payment of visa accountants, visa accountants and their relationship between the firm's non-audit fees accounted for the proportion of the audit fee of more than one-fourth per cent, should disclose the amount of audit and non-audit fees and non-audit services: Not applicable. 3.4.2 Replacement of accounting firms and replacement of annual audit fees paid to replace the previous year's audit fee reductions, should disclose the reduction, proportion and reason of the audit public expense: Not applicable. 3.4.3 The audit fee is reduced by more than 15% over the previous year, should reduce the amount of audit fees, the proportion and reason: Not applicable. 3.5 Replacement of Auditors 3.5.1 About the former accountant Change date Approved by the board of directors on December 25, 2019 Replace reason and Deloitte & Touche internal business transfer, since the from 2020 Zheng-Zhi explanation Lin and Yu-Feng Huang accountants replaced Zheng-Zhi Lin and Mei-Zhen Cai accountants The description was litigant terminated or not accepted situation by the appointor or Proactively terminate the accountant appointment Accountant Appointed person Not applicable No longer accept (continue) appointment 35 Opinions and Reasons for Examining Check Reports Other than Unqualified Opinions within the Latest Two Years The 2019 and 2018 annual review reports of the central bank issued reservations. The relevant information of the investee companies whose main series was included in the financial statements and equity methods of the some non-substantial subsidiaries in the consolidated financial statements were based on the financial reports unaudited by the accountants during the same period. Recognize and expose. Accounting principles or practices Financial report disclosure Yes Check the scope or steps Is there any disagreement with the issuer Others Other disclosures (The first to fourth heads of Article 10, paragraphs 6 to 7 should be disclosed) No  Instructions No 36 3.5.2 About Succession Accountant Office name Deloitte & Touche Accountant's name Zheng-Zhi Lin、Mei-Zhen Cai Date of appointment Approved by the board of directors on December 25, 2019 Pre-appointment accounting for specific transactions Treatment methods or accounting No principles and Financial report may issue opinions Consultation and results Successor Accountant to Former Accountant No Written opinions on different opinions 3.5.3 Reply from former accountants to the first and second items of Article 10, paragraph 5 of this standard: None. 3.6 Chairman, Presidents, and Managers in Charge of Finance and Accounting Who Held a Position in Sunplus’ Independent Audit Firm or Its Affiliates during the Recent Year: Not applicable. 37 3.7 Net Change in Shareholding and Net Changes in Shares Pledged by Directors, Management, and Shareholders with 10% Shareholding or More 3.7.1 Net Change in Shareholding and Net Changes in Shares Pledged by Directors, Management, and Shareholders with 10% Shareholding or More 2019 Ended of April 14th, 2020 Unit: Shares Title Name Shareholding Increased (decreased) Shares Pledged (Released) Chou-Chye Huang Chairman& CEO Global View Co., Ltd. Director Wen-Shiung Jan Director Wei-Min Lin Director Independent Director Che-Ho Wei Independent Director Tse-Jen Huang Independent Director Yao-Ching Hsu VP Director of Finance & Accounting Division AVP AVP AVP Alex Chang Jason Lin Michael Su Wayne Shen Shu-Chen Cheng 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Shareholding Increased (decreased) 0 0 0 0 0 0 0 0 0 0 0 0 Shares Pledged (Released) 0 0 0 0 0 0 0 0 0 0 0 0 3.7.2 Stock Trade Name (Note 1) - Transfer Reason - Transaction Date - Name of Counter Party - Nature of Relationship - Amount of Shares - Transaction Price - Ended of April 14th, 2020 Percentage of Shares Pledge - Transaction Price - 3.7.3 Shares Pledge with Related Parties Name (Note 1) - Reason of Pledge (Note 2) - Date of Change - Name of Counter Party - Nature of Relationship Amount of Shares - - Percentage of Shareholding - Note 1: Including Directors, mangers and shareholders holding more than 10% Note 2: Reasons for shares pledged or released 38 3.8 Top 10 Shareholders & Related Parties Current Shareholding Shareholding under Spouse & Minor Amount of Shares Holding % Amount of Shares Holding % Shareholding under Others’ Name Amount of Shares Holding % Relationship with related-parties Name Relationship 92,737,817 15.67% 1,370,993 0.23% 13,045,795 2.20% 2,006,943 0.34% - - - - Global View - Corporate Director - 11,466,000 1.94% 10,038,049 1.70% - - - Chou-Chye Huang - Corporate Director of Global View Co., Ltd. 0 8,333,160 0.00% 1.41% 0 771,433 0.00% 0.13% 7,732,825 1.31% - - 7,000,000 1.18% 1,647,542 0.28% 6,244,752 1.05% - - - - - - - - - - - - 5,292,000 0.89% - - - - - - - - - - 5,086,153 0.86% - - - - - - - - - - - - Name Chou-Chye Huang De-Zhong Liu Citi (Taiwan) Commercial Bank is entrusted with the custody of the investment account of the Norwegian Central Bank Global View Co., Ltd. Zhi-yuan Zhou (Representative of Legal Entity) Chih-Hao Gong Polunin Emerging Markets Small Cap Fund, LLC Wen-Qin Lee Chase Managed Advanced Starlight Advanced General International Stock Index The American branch of JPMorgan Chase Bank Taipei is entrusted with the custody of Vanguard's emerging market stock index fund investment account Citigroup (Taiwan) Commercial Bank is entrusted with the DFA Investment Diversified Group's Emerging Markets Core Portfolio Investment Account 39 3.9 Long-term Investment Ownership Long-term Investments (Note) December 31st, 2018/Unit: thousand shares, % Sunplus Investment Shareholding of Director, Supervisor, Management or Subsidiary Synthetic Shareholding Amount of Shares Holding % Amount of Shares Holding% Amount of Shares Holding % 34 61 14 3,979 31,450 37,324 14,892 Generalplus Technology Sunplus Innovation Technology iCatch Technology Inc. Sunplus mMedia Inc. Jumplux Technology Global View Co., Ltd. EVERGREEN STEEL CORP. Broadcom Inc. Note: Except companies listed above, all other long-term investments are held by the parent company. 20,735 22,441 13,200 8,229 5,326 2,559 10,100 8 10 42 - 29 90 55 13 173 1500 1000 - - 8 - - - - 52,216 35,429 26,061 25,000 23,300 8,402 2500 - 48 69 37 100 97 13 - - 40 IV. Capital & Shares 4.1 Capitalization Month/Year Price (NT$) Authorized capital Shares (thousand shares) Amount (NT$K) Issued capital Shares (thousand shares) Amount (NT$K) Funding (NT$K) 08/1990 10 2,300 23,000 620 6,200 Cash 08/1990 10 2,300 23,000 1,150 03/1992 10 2,300 23,000 2,300 Offering 6,200 11,500 Cash Offering 5,300 23,000 Cash Offering 11,500 April 14th, 2020 Remark Funding Except Cash None Not IPO yet Note None Not IPO yet None Not IPO yet 12/1993 10 6,000 60,000 6,000 60,000 Cash None Not IPO yet Offering 20,900 Capitalization of Profits 16,100 09/1994 10 19,800 198,000 19,800 198,000 Cash None Not IPO yet 06/1995 10 39,600 396,000 39,600 Offering 60,000 Capitalization of Profits 78,000 396,000 Capitalization of Profits 198,000 None 06/28/1995 SFC No. 37335 06/1996 10 64,360 643,600 64,360 643,600 Capitalization None of Profits 247,600 06/1997 10 105,500 1,055,000 105,500 1,055,000 Capitalization None of Profits 411,400 06/1998 10 184,000 1,840,000 184,000 1,840,000 Capitalization None of Profits 785,000 06/1999 10 269,120 2,691,200 269,120 2,691,200 Capitalization None of Profits 851,200 06/2000 10 600,000 6,000,000 370,000 3,700,000 Capitalization None of Profits 1,008,800 09/2000 10 600,000 6,000,000 390,000 3,900,000 Cash None 06/2001 10 700,000 7,000,000 Offering for GDR 200,000 534,000 5,340,000 Capitalization of Profits 1,440,000 06/26/1996 SFC No. 40155 06/10/1997 SFC No.46641 06/08/1998 SFC No.49408 06/23/1999 SFC No.57760 06/03/2000 SFC No.48003 09/18/2000 SFC No 72620 None 06/27/2001 SFC No 140791 12/2001 10 700,000 7,000,000 544,742 5,447,424 Merger from None Grandtech 10,742 12/12/2001 SFC No 173137 06/2002 10 1,000,000 10,000,000 694,950 6,949,500 Capitalization None 05/30/2002 SFC 41 of Profits 957,334 And Capital Surplus 544,742 07/2003 10 1,000,000 10,000,000 777,504 7,775,040 Capitalization None of Profits 130,590 And Capital Surplus 694,950 06/2004 10 1,000,000 10,000,000 875,254 8,752,544 Capitalization None of Profits 355,500 And Capital Surplus 622,004 07/2005 10 1,050,000 10,500,000 945,570 9,455,700 Capitalization None of Profits 487,576 And Capital Surplus 175,051 Employee Stock Option 40,529 11/2005 10 1,050,000 10,500,000 948,147 9,481,472 Employee None Stock Option 25,772 03/2006 10 1,050,000 10,500,000 948,730 9,487,297 Employee None Stock Option 5,825 06/2006 10 1,050,000 10,500,000 949,784 9,497,844 Employee None Stock Option 10,547 06/2006 10 1,200,000 12,000,000 1,021,358 10,213,578 Capitalization None of Profits 508,844 And Capital Surplus 189,230 Employee Stock Option 17,660 11/2006 10 1,200,000 12,000,000 1,022,777 10,227,773 Employee None 01/2007 10 1,200,000 12,000,000 Stock Option 14,195 512,212 5,122,119 Capital Reduction 5,114,358 Employee Stock Option 8,703 No.129546 05/22/2003 SFC No.0920122560 06/15/2004 SFC No.0930126644 07/11/2005 FSC No. 0940127940 TSE No.09400288741 TSE No.09400340711 TSE No.09500052761 TSE No.09500116511 FSC No.0950126238 TSE No.0950030505 None FSC No.0950159014 03/2007 10 1,200,000 12,000,000 512,954 5,129,537 Employee None Stock Option 7,418 09/2007 10 1,200,000 12,000,000 554,240 5,542,399 Capitalization None of Profits 288,622 And Capital 42 TSE No.0960005441 FSC No.0960038299 Surplus 102,415 Employee Stock Option 21,825 11/2007 10 1,200,000 12,000,000 556,051 5,560,514 Employee None Stock Option 18,115 03/2008 10 1,200,000 12,000,000 556,750 5,567,504 Employee None Stock Option 6,990 05/2008 10 1,200,000 12,000,000 556,893 5,568,931 Employee None Stock Option 1,427 09/2008 10 1,200,000 12,000,000 598,203 5,982,028 Capitalization None of Profits 301,637 And Capital Surplus 111,092 Employee Stock Option 368 02/2009 10 1,200,000 12,000,000 596,910 5,969,099 Treasury None 03/2014 10 1,200,000 12,000,000 591,995 5,919,949 Stock write-off 12,929 Treasury Stock write-off 4,915 TSE No.0960037136 TSE No.09700075761 TSE No.09700142371 FSC No.0970036239 TSE No.0980003591 None TSE No.10300058351 Issued Shares Authorized Capital Treasury Stock Shares Un-issued Shares April 14th, 2020/Unit: shares Total Remark 591,994,919 0 608,005,081 1,200,000,000 Type Common Share 43 SHELF REGISTRATION Shares Expected to Issue Total Shares N/A N/A Type N/A Amount Amount Price N/A N/A Issued Shares Objective and Expected Benefit of Issued Shares Expected time of Un-issued Shares Remark N/A N/A N/A 4.1.1 Composition of Shareholders Shareholder Amount Governmen t Financial Institutions Others Juridical Person Foreign Institutions and natural Person Domestic Retail investors April 14th, 2020/Unit: share Treasury Stock Total 3 263 0 0 0.0% 69,174 67,048 24,041,542 71,776,505 496,109,824 83.81% 0.01% Persons Shares Shareholding Note: The first-listed companies and cabinet companies should disclose their shareholdings in land-based capital; land-based capital refers to the people, legal persons, organizations, and other organizations in mainland China as stipulated in Article 3 of the People's Republic of China to Taiwan Investment Permit Measures, or its investment in a third region. 69,574 0 0 591,994,919 100.00% 12.12% 4.06% 0.0% 134 4.1.2 Distribution Profile of Shareholder Ownership – Common Share April 14th, 2020/Par value per share: NT$10 Shareholding Ownership Number of Shareholders (persons) Shares Owned (shares) Holding (%) 1~999 1,000~5,000 5,001~10,000 10,001~15,000 15,001~20,000 20,001~30,000 30,001~40,000 40,001~50,000 50,001~100,000 100,001~200,000 200,001~400,000 400,001~600,000 600,001~800,000 800,001~1,000,000 Over 1,000,001 Total 33,668 23,984 5,823 1,693 1,343 1,083 501 394 590 287 111 30 17 13 37 69,574 2,377,045 55,520,345 47,205,974 21,434,491 25,248,348 28,153,634 18,269,353 18,463,084 42,545,354 40,358,979 31,545,791 14,885,266 12,097,453 12,069,096 221,820,706 591,994,919 0.40% 9.38% 7.97% 3.62% 4.26% 4.76% 3.09% 3.12% 7.19% 6.82% 5.33% 2.51% 2.04% 2.04% 37.47% 100.00% 4.1.3 Distribution Profile of Shareholder Ownership – Preferred Shares Not Applicable 44 4.1.4 Major Shareholders Shareholding Name Chou-Chye Huang De-Zhong Liu Norges Bank Global View Co., Ltd. Chih-Hao Gong Polunin Emerging Markets Small Cap Fund, LLC Wen-qin Li Chase Managed Advanced Starlight Advanced General International Stock Index The American branch of JPMorgan Chase Bank Taipei is entrusted with the custody of Vanguard's emerging market stock index fund investment account Citibank (Taiwan) Commercial Bank is entrusted with the custody of the DFA Investment Diversity Group's emerging market core portfolio investment account Shares Owned Holding % April 14th, 2020 92,737,817 13,045,795 11,466,000 10,038,049 8,333,160 7,732,825 7,000,000 6,244,752 5,292,000 15.67% 2.20% 1.94% 1.70% 1.41% 1.31% 1.18% 1.05% 0.89% 5,086,153 0.86% 4.1.5 Net Worth, Earnings, Dividends, and Market Price per Share Year 2018 2019 Item Market Price Net Worth Highest Lowest Average Before Distribution After Distribution Weighted Average Shares Earnings Per Share Dividends Per Share Return on Investment EPS (Note 2) Before Adjustment After Adjustment From Profits From Surplus Cash Dividends Stock Dividends Accumulated Undistributed Dividends Price/Earnings Ratio (Note 3) Price/Dividend Ratio (Note 4) Cash Dividends Yield Rate (Note 5) 19.00 9.66 14.24 14.30 13.94 588,434,923 0.01 0.01 0.36(Note6) - - - 1,424.00 39.56 0.03 14.85 10.85 12.97 13.82 (Note1) 588,434,923 0.03 (Note1) (Note1) (Note1) (Note1) (Note1) 432.33 (Note1) (Note1) Ended of March 31st, 2020 13.90 7.42 11.20 13.52 (Note1) 588,434,923 (0.21) - - - - - (Note7) - - Note 1: Pending shareholders’ approval Note 2: Retroactively adjusted for stock dividends and stock remuneration to employees Note 3: Price/Earnings ratio=average market price/earnings per share Note 4: Price/dividends ratio=Average market price/cash dividends per share Note 5: Cash dividends yield rate=cash dividend per share/average market price per share Note 6: Capital reserve cash is NT$ 0.36 per share, and the surplus is calculated as surplus NT$ 0 per share, totaling NT$ 0.36 in cash per share 4.1.6 Dividend Policy a) Dividend policy in the “Article of Incorporation” Our dividend policy is made according to regulations set forth in the “Company Act” and the “Article of Incorporation”. The dividends can be in the form of cash or stock, which depends on the status of company’s capital, financial structure, operational needs, retained earnings and industrial environment. The dividend policy for this year will follow the aforementioned rules and maintain the policy of cash dividend with stock dividend, while cash part shall not be less than 10% of the total dividend. b) Stock dividends for 2019 The company's 2019 loss appropriation plan was approved by the board of directors on March 30, 2020. There is no dividend to be distributed in the 2019 resolution. (Not yet approved by the shareholders' meeting). c) The proposed capital reserve of the shareholders' meeting is cashed out 45 The Company's capital reserve for the year 2019 was cashed out, was approved by the board of directors on March 30, 2020 (not yet passed by the shareholders' meeting), it is proposed to allocate more than NT$177,598,476 of the capital reserve of the excess amount of the issued amount of the issued shares to the shareholders, shareholding of the cash register on the basis of the capital reserve, NT$0.3 in cash per share. d) Expected Variation: None 4.1.7 Impact to Profits and EPS Resulting from Dividend Distribution Due to no official financial guidance there is no related information to disclose. 4.1.8 Profits Distributed as Employee Rewards and Directors and Supervisors’ Compensation a) Regulations Concerning Rewards to Employees, Directors, and Supervisors in the “Article of Incorporation” If the Company has a profit for the year, should be raised not less than one percent for the staff and not more than one percent. Five for the directors reward. But the company still has accumulated losses (including the adjustment of undistributed surplus amount), should be kept in advance to make up the amount. The former employee is remunerated by stock or cash, which shall be made to include the employees of the subsidiary who meet the conditions set by the Board. The remuneration of the former directors is only in cash. The first two items should be resolved by the board of directors, and report to the shareholders' meeting. When allocating the net profits of each fiscal year, the Company should pay the taxes and make up the losses in previous years; and then shall set aside 10% of the rest after paying tax and making up loss as a legal capital reserve until the accumulated legal capital reserve has equaled the total capital of the Company; In accordance with the law or the competent authorities, to allocate or rotate the special surplus reserve, the surplus, together with the previous accumulated unallocated surplus, is the shareholder's dividend, the board of directors is proposing to assign a motion, to be circulated after the resolution of the shareholders' meeting. But the ratio of the distributions offered by the surplus and the cash dividends of the shareholders, depending on the actual profit and the state of the funds, adjusted by the shareholders' meeting. The above cash dividend shall not be less than 10% of the total dividend of the shareholders to be distributed, but the cash dividend per share is lower than NT$0.5 will not be issued. In the event that the previous year's accrued or current year occurred but the annual after-tax surplus was not included in the shareholders', accrual of the same amount of surplus reserve due from the previous year's accumulated unallocated surplus, and deducted before being allocated for distribution. b) No information such as employee compensation and directors' compensation for 2019 was allotted this year c) Bonus to Employees, Directors, and Supervisors for last fiscal year Approval by shareholders’ meeting on June 10th, 2019, the company decided to distribute the profits of 2018 Cash rewards to Employee NT$79,590 Cash bonus to Directors NT$119,384 The above distributions are not different from those of the Board of Directors of the Company dated 14 March 2018. 4.1.9 Buyback of Common Shares None 4.2 Issuance of Corporate Bonds None 4.3 Preferred Shares None 46 4.4 Issuance of GDR Item Issuing Date Issuance & Listing Total Amount Offering Price per Unit Issued Units Underlying Securities Common Shares Represented Rights and Obligations of GDR holders Trustee Depositary Bank Custodian Bank GDRs Outstanding Issuing Date March 16, 2001 March 31st, 2020 March 16, 2001 London Stock Exchange Listed US$191,400,000 US$9.57 14,737,222.5 Offering 20,000,000 new shares of common stock of par value NT$10 29,474,455 Common Shares Same as common share holders N/A The Bank of New York Mega International Commercial Bank 176,225 units All fees and expenses related to issuance of GDRs were borne to the selling shareholders and Sunplus, while the maintenance expenses such as annual listing fees, information disclosure fees and other expenses were borne by Sunplus Apportionment of the expenses for the issuance and maintenance Terms and Conditions in the Deposit Agreement and Custody Agreement - Closing price per GDRs 2019 January 1 to March 31, 2020 Highest Lowest Average Highest Lowest Average US$0.95 US$0.71 US$0.84 US$0.91 US$0.49 US$0.76 4.5 Employee Stock Options Plan 4.5.1 Issuance of Employee Stock Options and Its Impact to Shareholders Equity 4.5.2 Stock Option to Management Team and Top 10 Individual 4.6 Restricted Employees Stock Not applicable 4.7 Mergers and Acquisitions Not Applicable V. Financial Plan & Implementation Not Applicable 47 VI. Business Highlight 6.1 Business Activities 6.1.1 Business Scope a) Major Business CC01080 Manufacturing of electronic component I501010 Product Designing F401010 International Trading I301010 Software Design Services I301020 Data Processing Services R&D, Manufacturing, Testing, Selling of (1) ICs (2) modules (3) Application software (4) IPs (5) Trading and Agency Business of ICs 4 Product Segments and Sales Amount Product Categories Amount Percentage % 2019 Unit: NT$K, % IC income Other Total 5,110,744 401,586 5,512,330 92.71 7.29 100.00 6.1.2 Plan to develop new products (services) Company Plans to develop new products (1) Car entertainment system chip (2) Vehicle smart cockpit system chip (3) Vehicle navigation and driving assistance system flat (4) Medium and high-order Soundbar system Sunplus Technology chip Generalplus Technology (5) High-speed interface IP (6) High - performance data converter (7) Analog IP (8) Industrial control system chip based on sunplus Plus1 architecture (1) A new generation of speech synthesis control chip (a) High sound quality and high volume PWM driver (b) OTP / Flash memory, can quickly update the code (2) Digital audio and voice recognition control IC: (a) High-resolution Sigma-Delta ADC recording device (b) High sound quality Class-D broadcast drive device (c) Flash memory, can quickly update the code (3) LCD control IC: (a) Low-power platform capable of single battery operation (b) OTP memory, can quickly update the code (4) Multimedia application control IC: (a) High-performance Cortex-A series 32-bit platform (b) More display technologies and interfaces 48 (CVBS, HDMI, MIPI) (c) Advanced image processing (ISP, GPU, H.264, computer vision and AI deep learning) (d) DDR2/DDR3 DRAM interface (5) Microcontroller: (a) Cortex-M0 motor drive control IC (b) Highly integrated wireless charging IC (c) High-sensitivity touch IC (6) Other ICs: (a) Various peripheral chips supporting the main control IC (b) More complete power control IC (c) Higher quality audio amplifier IC (1) Very low power USB image processing IC (2) USB3.0 4K image processing IC (3) Image processing IC with intelligent image detection function (1) Front loading regulation Automotive USB TYPEC PD3.0 Charger IC. (2) MCU chip and subsystem based on RISC-V instruction set (3) Endpoint deep learning software and hardware accelerator and its AIOT application chip Sunplus Innovation Technology Jumplux Technology 6.1.3 Industry Overview a) Industry Status and Exhibition 2019 global IC design industry share to the highest in the United States, Taiwan second, China has grown fast and has risen to third place. According to the Institute of Industry Intelligence Research (MIC) estimates, Taiwan IC design industry in 2019 outstanding performance, 2020 will originally maintain growth momentum, and because of the strong demand for high-end process, Taiwan wafer foundry output will grow. And driven by high-end packaging needs, Taiwan IC packaging and testing industry to restore growth momentum. In the IC design industry, ITRI IEK industry analyst Zhehao Fan pointed out, at present, the international semiconductor manufacturers emphasize life applications and user experience, technology layout direction will also be its own advantages of technology as the core, locking the wisdom of computing, wisdom, sensory transmission and other things required for the development of the three major technical direction, build a more open industrial ecology, more interoperable platform. b) Supply Chain In the product development flow, Sunplus focuses on IC design, system design, wafer testing and sales services but out-sources most of the manufacturing including mask making, wafer fabrication, wafer sawing, packaging and final testing. The infrastructure of semiconductor industry in Taiwan is very efficient; we have foundries like TSMC, UMC, etc., and backend assembly and testing houses such ASE, SPIL and KYEC. Since those factories are located in Hsinchu Science Park or nearby, the “Cluster” effect could enable high production efficiency. c) Market Trend and Competition Company Main Product Sunplus IC products are used in automotive infotainment systems, advanced driver assistance systems (ADAS), home audio Soundbar and DVD players, and authorized high-speed interface IP, high-performance data converter IP and analog IP 49 Product development trends and competitive situation In recent years, Lingyang has focused on the development of automotive chip products and system platforms, and has successively launched advanced driver assistance system (ADAS) chip platform products, as well as automotive information entertainment systems (IVI). In the IVI product line, Sunplus continues to develop a single chip that supports the interconnection functions of mobile phones such as Apple CarPlay and Google Android Auto. It is currently the industry's most optimized system cost solution. The follow-up strategy is to increase the computing power of the chip and invest in a higher-order process to build AI functions into the system to enhance its competitive advantage. In the home audio-visual entertainment segment, the SoundBar product line continues to be developed based on the DVD player technology and customer base. The 3D surround sound field (such as Dolby Atmos, DTS: X and other technologies) has been generally accepted by consumers. Lingyang has a deep cooperation foundation with Dolby and DTS, and has successively launched products that support 3D sound field. The development strategy is to optimize the system Introducing a more integrated SoC, it is expected to reduce the price of terminal products and expand the penetration rate of 3D sound field products. Lingyang also provides high-speed interfaces, data converters and analog IP licenses. In addition, Lingyang also launched the Plus1 architecture. The C + P architecture developed by it solves the problem that the advanced process of the semiconductor industry cannot match the market volume. The C + P architecture is a Computing Unit plus a Peripheral Unit. The process and the computing power can keep up with the trend of the times, and the peripheral units of the Peripheral Unit use mature processes to achieve reasonable development costs. Based on this architecture, the industrial Linux SoC development platform SP7021 has been launched on the market. A. Educational learning platform The highly integrated ARM9 SoC up to 513MHz, in addition to full HD 1080P full HD H.264 image compression and decompression, also has the flexibility of CPU and DSP (Digital Signal Processor) powerful computing capabilities. Provide a competitive hardware platform, provide customers with complete solutions in the development tools and libraries to quickly and effectively serve customers. B. Smart interactive toy market In the field of interactive toys, injecting AI technology concepts into the toy market is expected to lead the market trend and create new and different interactive toys. The model of product innovation is divided into technology-driven market and market feedback to drive the company's technological innovation. C. Wireless charging market In the product development, 15W products are Generalplus A. Educational learning platform B. Smart interactive toy market C. Wireless charging market D. Driving recorder market 50 launched, which can be applied to mobile phones, mobile power supplies, charging back clips and other various devices suitable for wireless charging. It also successfully introduced into the automotive pre-installation market and mass production. D. Driving recorder market Will continue to develop on the development of multi-channel cameras and intelligent driving assistance systems, with a view to diversifying product applications. The main supplier of optical mouse image sensors is mainly the original phase technology. The company launched a highly integrated single-chip wired optical gaming mouse to provide customers with total solutions. The products built by our company in external Webcam and NB have obtained the quality recognition of major international manufacturers including Logitech HP DELL Lenovo Acer and other brands, and become their long-term cooperative supplier. Front-loading regulation product line: With the continuous shipment of front-loading customers, we continue to work on the peripheral chips of the relevant front-loading regulation.The current main competitors are Microchip, ST, Ti, NXP. Storage product line: Cooperate with strategic customers to develop UFS-related high-speed storage ICs, and make product differentiation with main rivals Huirong and Qunlian. Endpoint deep learning software and hardware accelerators and their AIOT application chips: In the market where AIOT has erupted, we are actively developing customized and diversified neural network acceleration ICs with high computing power and low power consumption. Sunplus Innovation Technology Micro-control product line, used in computer and home appliances such as keyboard, mouse, and remote control; Image product line, used in external network camera, NB laptop built-in network camera Jumplux Technology Front loading regulations USB MediaHub IC Front loading regulations USB TYPEC PD3.0 Charger IC UFS high-speed storage bridge IC MCU chip and subsystem based on RISC-V instruction set Endpoint deep learning software and hardware accelerator and its AIOT application chip 6.1.4 Technology and Development a) R&D expenditure Year 2019 Ended March 31st, 2020 Unit: NT$K, % 1,481,269 27% 363,100 35% Item Expense Percentage to Revenue b) R&D Accomplishment Company Sunplus Accomplishment (1) H.264 decoder (2) MPEG2/4 decoder (3) Servo Control (4) HDMI DVD (5) JPEG decoder (6) Video encoder (7) CarPlay / Android Autod single chip and system Applications (1) High-end car infotainment system chip (2) Smart cockpit platform products for high-end vehicles (5) Medium and high-end Soundbar system chip 51 platform (8) ADAS system platform (9) 3D surround sound field DSP and system platform (10) Plus1 architecture Generalplus (1) Development and completion of GPC74B full series of voice / music synthesis controller chips (2) Development of Cortex-M0 voice recording platform with 81MHz operating frequency (3) Develop a new generation of 32-bit SoC high-end handheld open application platform (4) Development of 32-bit Cortex-M0 sine wave drive control IC GPM32F0118B (5) GPMQ series product development (1) Mouse, keyboard, smart remote control (2) Low power consumption and high integration NB Camera control IC (3) Machine vision intelligent image (4) ISP technology-TNR HDR WDR Sunplus Innovation Technology Jumplux (1) USB Display IC (2) Automotive Mediahub IC (3) USB3.1 to UFS2.1 Bridge IC 52 (6) High-speed interface IP (7) High-performance data converter IP (8) Analog IP (9) Industrial standard Linux open platform SoC (1) Integrate CPU, OTP, RAM, I / O, timer and high resolution digital audio amplifier drive circuit. (2) In addition to integrating high-resolution Sigma-Delta ADC recording devices and integrating high-quality performance Class-D broadcasting devices. (3) Built-in image processing unit, computer vision processing unit, voice processing unit, cooperate with self-developed deep learning and audio and video processing algorithms, develop various types of ELA education and learning, STEAM scientific toys, driving recorder, sports camera, aerial camera application. (4) Integrate Flash ROM, RAM, DMA, Programmable PWM, 1Msps 12-bit ADC and high-speed OPA to provide peripheral circuits and efficient DC brushless motor solutions. (5) Newly developed 15W IC solution, integrated high and low voltage components and passed WPC EPP certification. (1) Very low power USB image processing IC (2) USB3.0 4K image processing IC (3) Image processing IC with intelligent image detection function (4) Gaming mouse control IC (1) USB TYPEC PD3.0 Charger IC (2) MCU chip and subsystem based on RISC-V instruction set (3) Endpoint deep learning software and hardware 6.1.5 Business Plan accelerator and its AIOT application chip Short-term business plan: In terms of automotive chip products and system platforms, Sunplus Technology has successfully developed CarPlay / Android Auto (DA, Display Audio) audio and video systems for vehicles and successfully introduced to Japan, South Korea and China before and after installation customers. At present, the terminal product sales area is mainly Japan , North America, South America, Southeast Asia, etc. In the past year, the total sales volume of the global auto market has declined, and automakers and first-tier suppliers have sought to increase the demand for DA products, so these products have shown better cost performance. Following this trend, Lingyang will invest more business resources to expand the pre-installation channels, especially in the Chinese market. In terms of household Soundbar and audio products, we continue to work closely with major audio and audio codec manufacturers to integrate advanced audio processing technology on Sunplus ’system platform and promote it to international brand customers, which have been imported into Japan, South Korea and North America Mass production of international brand customers, follow-up will continue to improve the product line, complement low-end and middle-high-end product blocks, to provide customers with a more comprehensive product portfolio. Generalplus focuses on consumer electronics chips, product lines include voice, multimedia, and microcontroller chips, and product development ranks the market leader. The main applications include multimedia interactive toys, educational learning, voice and LCD control, MP3, consumer digital camcorders and MCU and other related applications. In the consumer product line, it is expected to maintain stable growth and profitability. In the multimedia product line, focusing on intelligent interactive robots, wearable devices, IoT start-up products, driving recorders, aerial recorders, sports DVs, etc., is expected to continue to grow in product development and market expansion. In the MCU product line, more emphasis will be placed on the planning and development of new product lines and the establishment of new customers, investing more resources and accelerating the expansion of product lines. Sunplus Innovation Technology focuses on the development of computer peripheral application chips. Products include PC man-machine interface device chips, network camera chips, optical sensors, remote control ICs, etc. The sales in 2019 will mainly come from PC-related camera control chip solutions, consumer image processing solutions, computer mouse controller chips and remote control chips. Continue to deepen the image processing technology, and at the same time invest in the field of machine vision, add more value to the image product program, and can continue to grow steadily in the future. Jumplux Technology focuses on the development of peripheral chips and high-speed storage chips for front-loading. Currently, the top ten customers account for approximately 100% of the total revenue. The customer structure is sound and the risk is low. The main sales areas are Taiwan, Hong Kong and the mainland. At present, Tier1 customers' pre-loaded products are introduced into mass production, and they are still mainly based on Sino-foreign joint venture brands in North America and Europe on the mainland. Starting in 2020, the domestic domestic brand car manufacturers will also be introduced into mass production. In addition, in 2019, the USB Media Hub SPD10X series will also be redesigned to meet the needs of Tier1 customers ’various brand models. Several related ICs currently designed have also been tested and related certifications on the client side. It is expected that 2020 will bring new Camp sports. 53 Long-term development: Sunplus Technology includes all of the Group's consolidated entities, will continue to deepen its core competitiveness in all areas, strive to expand the market to increase market share, develop high value-added products to improve gross margin, observe the boom and market trends, adjust and optimize the product line Reinvestment to improve the performance of industry and industry investment, at the same time, it actively invests in the development of advanced technologies and products, expands the scale of operations, enriches the operating team and enhances the company’s visibility and image, in the hope of creating more profit for all shareholders. 6.2 Market Status 6.2.1 Market Analysis a) Market Analysis by Region Area Amount (NT$K) Percentage (%) 2019 Unit: NT$K, % Asia Taiwan Others Total b) Market Share 3,499,818 1,956,236 56,276 5,512,330 63.49 35.49 1.02 100.00 The Industrial Economics and Trends Research Center (IEK) of the Industrial Technology Research Institute calculates the output value of Taiwan ’s IC industry in 2019 to be 266.6 billion yuan, a 1.7% increase from 2018. Among them, the output value of the IC design industry was 692.8 billion yuan, an increase of 8.0% from 2018; the IC manufacturing industry was 1.47 trillion yuan, a decline of 0.9% from 2018. Among them, the wafer foundry was 1.131 trillion yuan, a growth from 2018 2.1%, memory and other manufacturing was 159.6 billion yuan, a 20.4% decline from 2018; IC packaging industry was 346.3 billion yuan, a 0.5% increase from 2018; IC testing industry was 154.4 billion yuan, a 4.0% increase from 2018. The company's 2019 consolidated revenue is NT $ 5.51 billion, with a market share of approximately 0.8%. c) Demand and Growth The MIC pointed out that demand for special application chips (ASICs) is expected to increase in 2020, and Taiwan ’s IC design related companies are expected to benefit. Senior industry analyst Ye Zhenxiu pointed out that the demand for ASIC chips has always existed, but the rising demand has been observed since 2019. In the past, mainstream demand focused on 3C, but with the development of the Internet of Things, it has driven product categories toward diversified development, including AI Development has also opened up the market demand for customized chips in the cloud and terminals. Under this wave of demand, Taiwanese manufacturers are expected to benefit simultaneously. In addition to existing IC design service providers, traditional IC design manufacturers can also use the accumulated bottom layer in the past. IP is the basis for developing ASIC services, with advanced process development experience to provide services. Ye Zhenxiu, senior industry analyst at MIC, said that Taiwan ’s IC design service revenue has maintained a growth rate of approximately 10% year-on-year. From this, it can be seen that demand is still growing steadily. Although ASIC accounts for a small proportion of the overall, customized services The high gross profit also attracts many traditional IC design companies to invest in it. Taking the dynamics of Taiwanese manufacturers as an example, in the past, IC design service providers such as Creative and Chihara provided ASIC design services. Now MediaTek and Lingyang have also established ASIC departments to develop their own IP and high-end process chip development through long-term accumulation Ability to assist customers to develop unique application chips and further expand applications to markets other than 3C. In the process part, the package integrates chips of different processes such as sensors, memory, and processing cores through the type of SiP module to improve chip computing efficiency and bring chip diversity. In view of this, Lingyang has invested a relatively large amount of resources in the IC development of the Smart Computing Project (Plus1) in the past few years, which can be applied to AI. As customers gradually understand acceptance and 54 market demand increases, sales will have the opportunity to grow year by year. Company Product Demands With advanced ADAS related systems gradually listed in the legislation implementation regulations of various countries, first-line depots have also introduced ADAS applications, the market adjustment agency estimates that ADAS' compound annual growth rate can reach 35%, and Barclays expects ADAS penetration rate will exceed 25% by 2021, future related applications will become more popular, Strategy Analytics predicts ADAS output will exceed 26 billion U.S. dollars by 2026. Electronic education toys have been more than ten years of history, because of its excellent interaction and sound and light effects, can help children to learn from the shape, name, number to text and so on, through fun games and interactive processes, due to the prevalence of smart phones and tablet PCs, for school age children and adolescents, in the electronic trend, manufacturers have also begun to launch such as Tablet PC learning platform, children in the subtle, but also because the learning effect is better than traditional books development of fast learning, so the market continues to grow rapidly. The field of smart interactive toys is the company's key development direction and is the IC design company with the highest market share. In addition, in high-end products, 16 / 32-bit SoC control chips are also used in countless products every year, such as karaoke, electronic pianos, children's cameras, TV interactive entertainment platforms and wearable devices. In addition, intelligent photorealistic pets and robots are currently the hottest topics. Under the trend of aging, more products have been designed to be used by older ethnic groups. At present, the top five mobile phone brands (Apple, Samsung, Huawei, Xiaomi, Oppo) officially Sunplus Car infotainment &ADAS Generalplus Education and learning toys Intelligent interactive toys Wireless charging 55 support wireless charging, showing that the market is constantly following this trend. The most representative is Apple's Bluetooth wireless headset AirPods charging box also launched wireless charging Version, allowing this application to quickly spread to a variety of products, and even in the newly launched AirPods Pro, the original wireless charging was changed from optional to standard equipment. The volume will continue to increase. The global overall driving recorder market has a growth rate of about 15%. The latest electronic rearview mirror and voice control are popular products this year. In 2019, Lingtong still steadily occupies China's overall domestic and foreign sales in the driving recorder market. 4 ~ More than 50% of the market share. In addition, the market share of children's cameras is estimated to exceed 60%. The market for PC-based cameras and mouse keyboards is flat. The demand for cameras has great potential opportunities in smart home appliances and new retail. The company has invested in research and development of high-end imaging products to create new products and applications suitable for machine vision. In addition, it also actively increases non-PC related product lines such as high-speed wireless cameras and car cameras, etc. The automobile is hailed as the fourth C after the 3C market in the electronics industry. Especially with the joint investment of the automobile and electronics industries, the market has begun to accelerate development, and the industry, government, and academia are also optimistic about its future potential. According to the international management consulting company Bain & Company ’s report pointed out that the ADAS ecological supply chain includes inter-vendor technology, software, hardware and services. The output value in 2025 is $ 26 billion. In addition to the MediaHub that has been Driving recorder market Sunplus Innovation Mouse keyboard controller PC / NB cam Jumplux Front-loading peripheral market AIOT market 56 shipped, the current scene is also actively invested Development with related peripheral chips, such as the USB charging chip of the front loading machine, and the class AB amplifier chip of the front loading car audio. d) Advantages and disadvantages of competitive advantages and development prospects (1) Competition Analysis (a) Accumulation and impartation of the experience of the R&D team The company since its inception in 1990 that is positioned as IC design company, management team has established a complete product development, technology management, marketing and other systems, and passed on to the backward employees, so that technology without fault, customers less complain, the staff personal growth achievements. In addition, Sunplus and actively establish a patent layout, so that the core IP research and development can create more value. (b) Focus on high-level consumer IC market, enlarge the distance from competitors Since the IC market is extremely competitive and stagnation is an ever-present trap, we keep on bringing in a large number of R&D resources to develop new high-level consumer products and widening the distance between us and other competitors. Meanwhile, Sunplus’ numerous product lines give us a tremendous advantage over our competitors. We are the kind of customer that prized by most wafer foundries because our wafer demand does not fluctuate when a few products are eliminated. Due to our steady stream orders to our wafer suppliers, we enjoy more consistent wafer supply during peak seasons over our competitors. This also allows us to keep our wafer costs at a competitive rate. (c) Strategic cooperation with upper stream and down- stream factories In recent years, Sunplus has increased cooperation between our upper stream and down-stream factories. We believe that this new strategic and more dynamic cooperation relationship will bring positive contributions to our production and marketing in the long term. (d) Maintain long-term and stable cooperative relationship with customers Consumer electronic products rely on IC to raise their added-on value; consequently the manufacturers and brand-names choose their IC suppliers with extreme caution by evaluating their product specification, features, delivery term, yield rate, and sales service. IC design houses have to work in coordination with customers to build up long-term relationship and facilitate the cooperation. Sunplus is always devoted itself to cutting-edge technology development and have accumulated IC design expertise. We also adopted distributors as expanding sales channels to reach more customers with strongly support and best service. Till today, we have sustained a strong relationship with a lot of end-product manufacturers worldwide. (2) Advantages (a) Sunplus offers high value-added products to enable customer to win the market. (b) The growing demand for SoC complicates IC product development and raises the entry barrier, which benefits IC design companies with rich resources like Sunplus. (c) Sunplus has strong IC design capability to meet customers’ requirements for time to market and costs reduction. (d) Sunplus has built up long-term relationship with wafer foundries due to our steady demand for wafers, and therefore we can get stable supply and lower prices from wafer foundries. (e) Sunplus have developed a strong technology and customer base on car entertainment IC that makes Sunplus easier to get into automotive ADAS applications (3) Disadvantages (a) The competitors are mainly international and big IC design companies. (b) Revenue and growth are slowing down due to poor PC demands. 57 (c) SoC design and integration of features and functions, which developing products costs are a lot more than before, has become the trend of IC design. (d) Consumer application demands link to world economics. (e) There is high entry-barrier to get into automotive market. (4) Business Strategy (a) Developing new and high value-added products. (b) Process migration to make per wafer productivity higher and drive cost down. (c) Expanding strategic partnership with clients to create win-win situation. (d) Collaboration with partners to broaden IP licensing sources. 58 6.2.2 Product Applications and Development Flow a) IC Development Flow Product Spec. Product Spec. Product Spec. Product Spec. Mask Making Mask Making Packaging Packaging IC Design IC Design IC Design IC Design & Layout & Layout & Layout & Layout System Design System Design & Coding & Coding System Design System Design & Coding & Coding Wafer Foundry Wafer Foundry Final Testing Final Testing Tape Out Tape Out Tape Out Tape Out Wafer Wafer Wafer Wafer C.P. Testing C.P. Testing C.P. Testing C.P. Testing After Sales After Sales After Sales After Sales Service Service Service Service In the product development flow, Sunplus focuses on IC design, system design, wafer testing and sales services but out-sources most aspects of the manufacturing including mask making, wafer fabrication, wafer sawing, packaging, and final testing. 6.2.3 Major Suppliers The major materials are wafers, at present the main suppliers for domestic and foreign wafer foundry manufacturers, whose wafer supplements are sufficient and stable. Main raw material name Major suppliers Supply status Quality and supply stability, long-term cooperation, the supply situation is good. Wafer A, B, C 59 6.2.4 Major Customers and Suppliers in the Recent Two Years a) Major Customers 2018 2019 End of March, 31, 2020 Unit: NT$K Customer Sales Amount % of Total Sales Relation with Sunplus Customer Sales Amount % of Total Sales Relation with Sunplus Customer Sales Amount % of Total Sales Relation with Sunplus A B C Others Net sales 763,906 652,318 622,701 4,038,808 6,077,733 12.57 10.73 10.25 66.45 100.00 No No No A B D Others Net sales 844,237 651,715 468,794 3,547,584 5,512,330 15.32 11.82 8.50 64.36 100.00 No No No A B E Others Net sales 128,071 117,605 104,217 692,563 1,042,456 12.29 11.28 10.00 66.43 100.00 No No No b) Major Supplier 2018 2019 End of March, 31, 2020 Supplier Purchasing Value % of Total Purchasing Relation with Sunplus Supplier Purchasing Value % of Total Purchasing Relation with Sunplus Supplier Purchasing Value % of Total Purchasing A B C Others Net purchase 953,504 233,065 192,493 1,075,991 2,455,053 38.84 9.49 7.84 43.83 100.00 No No No A C B Others Net purchase 762,121 188,444 145,227 818,577 1,914,369 39.81 9.84 7.59 42.76 100.00 No No No A C B Others Net purchase 244,451 30,987 25,614 215,534 516,586 47.32 6.00 4.96 41.72 100.00 Unit: NT$K Relation with Sunplus No No No 60 6.2.5 Production Year Capacity Product Multimedia ICs IC income Total Note: Sunplus out-sourced production to wafer foundries, so there is no capacity limitation. 643,298 17 643,315 - - - 2018 Output Value Capacity 3,670,886 23,111 3,693,997 Unit: thousand pcs, NT$K 2019 Output 547,812 17 547,829 - - - Value 3,041,599 22,248 3,063,847 6.2.6 Sales Product IC income Other ICs Total Year 2018 Unit: thousand pcs, NT$K 2019 Local Export Local Export Quantity Sales Quantity Sales Quantity Sales Quantity Sales 189,206 - 189,206 1,894,980 13,490 1,908,470 386,708 52 386,760 3,768,079 401,184 4,169,263 189,589 - 189,589 1,940,267 15,969 1,956,236 363,463 - 363,463 3,170,477 385,617 3,556,094 6.3 Personnel Structure Workforce Structure by Job Function Year R&D Production Administration Total Average Age Average Years Served Workforce Structure by Education Degree Ph.D. Master Bachelor Other Higher Education High School Total 2018 757 72 333 1,162 32.7 5.14 1% 38% 50% 7% 4% 100% 61 2019 710 72 284 1,066 36.9 6.88 1% 40% 49% 6% 4% 100% End of March 31, 2020 704 71 276 1,051 37.8 7.95 1% 40% 49% 6% 4% 100% 6.4 Environmental Protection & Expenditures 6.4.1 Environmental Protection The company is a high-tech integrated circuit professional IC design firms, in the Hsinchu Science and Technology Industrial Park in the semiconductor research and development, all products commissioned at home and abroad well-known integrated circuit manufacturers manufacturing wafer, relevant aspects of the environmental pollution regulations and the losses caused by non-violation of environmental regulations. The vast majority of the company's office operations, no facilities and equipment to produce harmful pollution sources, no expenditure on environmental protection operations. On the product, the foundry, package, and test foundry with the best combination of quality, cost, and production efficiency are entrusted to reduce the consumption of defective products and effectively reduce environmental expenditure directly and indirectly. If defective products are produced, they are currently qualified manufacturers. Unpaid cleaning, no clean-up costs. Sunplus does not violate any EPA regulation regarding pollutants and environmental protection. To adhere to the conception of Earth Vision, Sunplus has established the environment protection system for fulfilling policies, social responsibilities and obligations, and been ISO-14001 certified. To reduce the environmental impact of E-Waste, Sunplus supplies customers with hazardous substances free (HSF) and satisfying products, and has been IECQ QC080000 certified. In order to reduce the impact of the greenhouse effect on the climate, Sunplus Technology conducts independent investigation of greenhouse gas emissions in accordance with the ISO14064 standard and 100 years as the base year of inspections in the Republic of China, and exposes it in the Corporate Social Responsibility Report (CSR Report), according to the results of the self-examination, the annual greenhouse gas emissions in the past three years (2017-2019) were 4284.82, 4585.41, and 4471.34 (tons of CO2 equivalent), of these, those that belonged to [Scope 1] and those directly emitting emissions (such as official vehicle fuel consumption and generator oil) accounted for only about 0.001% (2019 category 1 was 2.89 tons of CO2 equivalent). Yu Jun is an Scope II, and the indirect emission of energy such as purchased electricity. Sunplus is an IC design industry. More than 99.9% of greenhouse gas emissions are indirect emissions. The emission sources mainly come from the water and electricity required by air-conditioning and office lighting. They have passed the plant monitoring system, making air-conditioning equipment more efficient. , At the same time, to promote energy-saving concepts and actions to colleagues, with a goal of reducing the amount by more than 2% annually, reducing unnecessary waste, and the comparison has reached the standard in the past two years. (Greenhouse gas emissions reduced by 2.49%). In addition, it also actively strengthens employees’ awareness of environmental protection, promotes waste reduction, recycling, energy conservation and water saving, and saves energy resource consumption in order to reduce the impact on the environment. 6.4.2 Working Environment As the leading company in IC design, it is the company's primary responsibility to care for and care for the company's workers. We provide facilities and environments that are better than the Occupational Safety and Health Act, and set up dedicated organizations and personnel to implement environmental safety and health management related matters. The employees' workplaces are automatically checked regularly, and the labor operating environment is monitored every six months (April and October each year) to ensure the safety of employees, the environment, and equipment. In order to protect the physical and mental health of every colleague, the company conducts annual health checks for general employees and senior executives that are better than the legal requirements to ensure that each employee can master their own health status. There is also a medical room, and there are professional doctors resident every two months, providing staff health consultation services, and even scheduling health promotion activities from time to time. More importantly, we provide good breastfeeding rooms for women in the workplace, equipped with refrigerators and electric milk collection equipment, and passed the Hsinchu County Workplace Friendly Breastfeeding Room Certification in 2015, so that every mother in need Can work at ease. In addition, since April 2018, the company has promoted the establishment of occupational safety and health management systems. It has also obtained ISO45001: 2018 Occupational Health and Safety Management Systems (Occupational Health and Safety Management Systems) and CNS15506: 2011 (TOSHMS, Taiwan) in 2019. Occupational Safety and Health Management System) Taiwan Occupational Safety and Health Management System, two certifications of occupational safety and health management system; in response to the revision of TOSHMS to CNS45001, the new version has been applied for conversion on December 26, 2019 and has been verified. Management system International standard code and version Valid from Valid until Environmental Management System Occupational safety and health management system ISO14001:2015 2017/02/10 2020/02/09 ISO45001:2018 TOSHMS (CNS15506:2011)註 TOSHMS (CNS45001:2018) 2019/02/25 2022/02/24 2019/03/12 2021/03/11 2020/02/07 2022/02/24 Note: Sunplus Technology's TOSHMS (CNS15506:2011) certification has been applied for a new version of the verification on December 26, 2019, and the standard code is CNS45001:2018. 6.5 Employees 6.5.1 Employee Welfare We strive to provide a clean and supportive environment for our employees. We established an Employee Welfare Committee to operate welfare activities including emergency aid, educational grants, book purchase subsidies, social club activities and overseas trips. We also comply with the Labor Standards Law to conduct labor insurance and retirement system programs, and participation with the National Health Insurance plan according to the National Health Insurance Act. Moreover, we also handle group insurance and insurance for employees’ family to ensure security for our employees. 6.5.2 Pension Plan Sunplus has a pension plan for all regular employees, which provides benefits according to the Labor Standard Law. The Company makes monthly contributions, equal to 2% of salaries, to the pension fund, which is administered by a pension fund monitoring committee. The contributions are deposited in the committee’s name in the Central Trust of China. Since July 1, 2005, employees who choose Labor Pension Act Implementation Rules of the Labor Pension, the Company makes monthly contributions, equal to 6% of salaries to the personal pension fund of Bureau of Labor Insurance. 6.5.3 Other Affairs Sunplus have smooth commutation channels with employees. Employees could address their opinions to management team directly. All operations are based on the Labor Standard Law. Sunplus’ labor relations are outstanding. We are proud to say that there has not been a single loss resulting from a labor dispute since the establishment of the company. 6.5.4 Training The Company provides various kinds of external professional training courses & internal training regarding management, professional skills, general skills, special skills, and self-development. 6.5.5 Loss from Controversy between Labor and Management None 6.6 Important Contracts Contract Lease of Land Lease of office Counter Party Hsinchu Science Park Administration Hsinchu Science Park Administration Term Content Restriction 1995/8/01-2034/12/31 Lease of Land Self-use 2019/01/01~2023.12.31 Lease of office - Licensing ARM Limited 2007.12.27 ~ ARM7 TDMI-Score Licensing ARM Limited 2010.06.01 ~ CORETEX-A8 Score Licensing ARM Limited 2008.03.09 ~ ARM926EJ-Score Licensing ARM Limited 2016.03.09~ ARM CORTEX –M0 Only license Generalplus Only license Generalplus Only license Generalplus Only license Generalplus VII. Financial Statements 7.1 Condensed Financial Statement and Auditors’ Opinions by adopting IFRSs 7.1.1 Condensed Balance Sheet by adopting IFRSs-Consolidated Year Recent 5 Years (Note 1) Item Current Assets Fixed Assets Intangible Assets Other Assets Total Assets Current Liabilities Non-Current Liabilities Total Liabilities Equity Attributed to Shareholder of Before Distribution After Distribution Before Distribution After Distribution 2015 2016 2017 2018 2019 8,705,229 3,563,095 193,481 3,137,202 15,599,007 2,740,858 3,267,733 1,632,909 4,373,767 4,900,642 8,792,142 2,265,910 191,024 3,379,946 14,629,022 3,045,403 3,134,084 895,442 3,940,845 4,029,526 8,561,910 2,164,154 196,131 2,557,784 13,479,979 2,190,116 2,517,667 646,578 2,836,694 3,164,245 6,638,302 2,052,359 178,521 3,057,802 11,926,984 1,684,729 1,684,729 374,649 2,059,378 2,059,378 5,940,147 1,968,803 176,233 3,404,584 11,489,767 1,342,416 (Note 2) 574,660 1,917,076 (Note 2) Unit: NT$K End of March 31, 2020 (Note 3) 5,660,889 1,981,737 165,533 3,330,087 11,138,246 1,140,035 (Note 2) 573,249 1,713,284 (Note 2) the parent 9,530,012 9,024,254 8,966,236 8,465,942 8,178,533 8,002,761 Before Distribution After Distribution Capital Stock Capital Surplus Retain Earnings Unrealized Gain (Loss) on Financial Merchandise Cumulative translation adjustments Unrealized Net Loss on the Costs of Pensions Total Equity Before Distribution After Distribution 5,919,949 897,317 2,444,655 1,917,780 5,919,949 911,110 2,012,196 1,923,515 5,919,949 835,241 2,336,709 2,009,158 5,919,949 801,398 2,250,839 2,250,839 5,919,949 594,432 1,988,579 (Note 2) 5,919,949 599,862 1,863,942 (Note 2) 331,492 (63,401) 244,400 (63,401) (62,262) (63,401) (442,843) (63,401) (261,026) (63,401) (317,591) (63,401) 1,695,228 11,225,240 10,698,365 1,663,923 10,688,177 10,599,496 1,677,049 10,643,285 10,315,734 1,401,664 9,867,606 9,867,606 1,394,158 9,572,691 (Note 2) 1,422,201 9,424,962 (Note 2) Note 1: Figures are audited by adopting IFRSs Note 2: The 2019 loss appropriation plan is yet to be approved by the shareholders' meeting Note 3: Figures are reviewed by CPA adopting IFRSs 7.1.2 Balance Sheet by adopting IFRSs- Standalone Year Recent 5 Years (Note 1) Unit: NT$K Before Distribution After Distribution Item Current Assets Fixed Assets Intangible Assets Other Assets Total Assets Current Liabilities Non-Current Liabilities Total Liabilities Equity Attributed to Shareholder of the parent Capital Stock Capital Surplus Retain Before Distribution After Distribution Before Distribution 2015 2016 2017 2018 2019 3,273,115 744,937 67,742 7,279,247 11,365,041 836,984 1,363,859 998,045 1,835,029 2,361,904 3,267,397 722,145 68,497 6,465,991 10,524,030 898,923 987,604 600,853 1,499,776 1,588,457 2,942,735 682,943 62,141 6,055,212 9,743,031 604,818 932,369 171,977 776,795 1,104,346 1,909,420 687,187 86,495 6,268,285 8,951,387 413,663 413,663 71,782 485,445 485,445 1,292,316 688,706 86,258 6,663,491 8,730,771 312,929 （Note 2） 239,309 552,238 （Note 2） 5,919,949 897,317 2,444,655 5,919,949 911,110 2,012,196 5,919,949 835,241 2,336,709 5,919,949 801,398 2,250,839 5,919,949 594,432 1,988,579 After Distribution Earnings Unrealized Gain (Loss) on Financial Merchandise Cumulative translation adjustments Unrealized Net Loss on the Costs of Pensions Total Equity Before Distribution After Distribution 1,917,780 331,492 (63,401) - 1,923,515 244,400 (63,401) - 2,009,158 (62,262) 2,250,839 (442,843) （Note 2） (261,026) (63,401) - (63,401) - (63,401) - 9,530,012 9,003,137 9,024,254 8,935,573 8,966,236 8,638,685 8,465,942 8,465,942 8,178,533 （Note 2） * If the company has prepared individual financial reports, it should prepare a separate condensed balance sheet and consolidated profit and loss statement for the individual in the last five years. * If the financial information using IFRS is less than 5 years, the following table (2) Financial information using my country’s financial accounting standards should be prepared separately. Note 1: Figures are audited by adopting IFRSs Note 2: The 2019 loss appropriation plan is yet to be approved by the shareholders' meeting. 7.1.3 Condensed Income Statement adopting IFRSs -Consolidated Year Recent 5 Years (Note 1) Item Net Sales Gross Profit (Loss) Income from Operation (Loss) Non-operating Income (Expense) Income (Loss)Before Tax Income (Loss) From Operations of Continued Segments (Loss) Income (Loss) From Operations of Discontinued Segments Consolidated Net Income (Loss) Other comprehensive income (Loss) for the period, net of income tax Total Comprehensive Income (Loss) for the Period Net Profit (Loss) Attributable to: Owner of the Company 2015 2016 2017 2018 2019 8,465,833 3,522,625 566,540 371,467 938,007 7,556,045 3,202,488 236,391 129,776 366,167 6,820,237 2,736,766 47,185 587,470 634,655 6,077,733 2,429,384 (89,790) 293,780 203,990 5,512,330 2,374,575 131,741 112,479 244,220 856,125 272,506 551,228 142,323 174,752 (105,754) (27,845) 828,280 - 272,506 - 551,228 - 142,323 - 174,752 - (105,754) 18,282 (113,556) (320,167) (131,361) (102,073) (59,405) 846,562 158,950 231,061 10,962 72,679 (165,159) 589,348 120,187 421,458 5,616 15,309 (124,637) Unit: NT$K End of March 31, 2020 (Note 2) 1,042,456 488,522 (48,166) (43,633) (91,799) 238,932 152,319 Net Profit (Loss) Attributable to: Non-controlling interests Total Comprehensive Income (Loss) Attributable to: Owner of the Company Total Comprehensive Income (Loss) Attributable to: Non-controlling interests Earnings per share (Loss) Note 1: Figures are audited for the past-5 years by CPA adopting IFRSs Note 2: Figures are audited by adopting IFRSs. 237,359 1.00 132,373 0.20 609,203 26,577 129,770 136,707 159,443 18,883 109,174 (120,733) (77,049) (181,202) 121,887 0.72 131,695 0.01 149,728 0.03 16,043 (0.21) 7.1.4 Condensed Income Statement adopting IFRSs -Standalone Year Recent 5 Years (Note 1) Unit: NT$K Item Net Sales Gross Profit(Loss) Income from Operation(Loss) Non-operating Income (Expense) Income (Loss)Before Tax Income(Loss) From Operations of Continued Segments(Loss) Income(Loss) From Operations of Discontinued Segments Net Income (Loss) Other comprehensive income (Loss) for the period, net of income tax Total Comprehensive Income(Loss) for the Period Net Profit(Loss) Attributable to: 2015 2016 2017 2018 2019 2,671,392 1,011,207 167,996 453,504 621,500 617,193 (27,845) 589,348 19,855 1,904,224 767,713 (79,166) 200,242 121,076 120,187 1,365,802 473,255 (273,494) 694,952 421,458 421,458 1,238,780 429,308 (239,614) 247,374 7,760 5,616 1,235,269 499,903 (269,444) 289,540 20,096 15,309 - - - - 120,187 (93,610) 421,458 (312,284) 5,616 (126,349) 15,309 (92,358) 609,203 26,577 109,174 (120,733) (77,049) 589,348 120,187 421,458 5,616 15,309 - - - 26,577 609,203 Owner of the Company Net Profit (Loss)Attributable to: Non-controlling interests Total Comprehensive Income (Loss)Attributable to: Owner of the Company Total Comprehensive Income (Loss)Attributable to: Non-controlling interests Earnings per share (Loss) * If the company has prepared individual financial reports, it should prepare a separate condensed balance sheet and consolidated profit and loss statement for the individual in the last five years. * If the financial information using IFRS is less than 5 years, the following table (2) financial information using my country’s financial accounting standards should be prepared separately. Note 1: Figures are audited for the past-5 years by CPA adopting IFRSs (120,733) 109,174 0.72 0.01 0.20 1.00 - - - - - (77,049) - - 0.03 7.1.5 Auditors’ Opinions Year 2015 2016 2017 2018 2019 CPA Audit Opinion Tung-Hui Yeh, Shu-Jay Huang Zheng-Zhi Lin, Shu-Jay Huang Zheng-Zhi Lin, Shu-Jay Huang Zheng-Zhi Lin, Yu-Feng Huang Zheng-Zhi Lin, Yu-Feng Huang An unqualified opinion An unqualified opinion An unqualified opinion An unqualified opinion An unqualified opinion 7.2 Financial Analysis for recent 5 years 7.2.1 Financial Analysis (consolidated by IFRSs) Unit: NT$K Year Recent 5 years (Note 1) Analysis Item Capital Structure Liquidity Operating Performance Profitability Debts ratio (%) Long-term fund to Property, plant and equipment (%) Current ratio (%) Quick ratio (%) Times interest earned (times) Average collection turnover (times) Average collection days Inventory turnover (times) Payment turnover (times) Average inventory turnover days Fixed assets turnover (times) Property, plant and equipment turnover (times) Return on total assets (%) Return on stockholders’ equity (%) 2015 2016 2017 2018 2019 28.03 26.93 21.04 17.26 16.68 350.30 495.04 503.31 480.79 486.21 475.59 390.93 288.70 317.60 257.15 319.47 251.00 2,518.77 1,020.20 2,519.94 5.29 69 4.18 6.23 87 2.59 0.50 2.02 2.48 5.49 66 4.37 5.60 83 3.07 0.48 4.07 5.16 5.13 71 3.84 7.09 95 2.40 0.56 5.65 7.47 394.02 326.66 956.27 5.64 65 3.99 6.03 91 2.88 0.47 1.27 1.38 496.55 442.49 368.28 394.03 1,082.81 Note 6 5.26 69 2.63 5.98 138 2.11 0.36 (0.90) (1.11) 6.17 59 3.97 7.49 92 2.74 0.47 1.66 1.79 End of March 31, 2020 (Note 2) 15.38 4.12 6.19 3.44 10.72 15.37 (1.55) Leverage Cash Flow 9.78 1.00 36.73 46.54 3.64 5.55 1.07 3.60 0.20 40.69 54.36 4.08 11.54 1.20 2.34 0.01 16.85 56.71 Note 4 Note 5 Note 5 8.08 0.72 14.37 77.50 Note 4 49.66 2.25 Profit before tax to paid-in capital (%) (Note 8) Profit after tax to net sales (%) Earnings per share (NT$) Cash flow ratio (%) Cash flow adequacy ratio (%) (Note3) Cash flow reinvestment ratio (%) Operating leverage Financial leverage Variation Analysis 2019 vs. 2018 1. The reduction in interest protection multiples is mainly due to the decrease in net profit before interest expenses for the current year. 2. The decrease in return on assets and return on equity was mainly due to the decrease in net profit after tax after the disposal of investment benefits decreased during the year. 3. The decrease in the net profit ratio and the ratio of net profit before tax to paid-in capital is mainly due to the decrease in the disposition of investment benefits during the year. 4. The decrease in basic earnings per share is mainly due to the decrease in net profit after tax for the year. 5. The decrease in the cash flow allowance ratio is mainly due to the decrease in net cash inflow from operating activities in the last five years. Note 1: Figures have been audited by adopting IFRSs. Note 2: Figures 1Q’20ave been audited by adopting IFRSs. Note 3: Cash flow adequacy ratio of 2015~2016 is calculated based on the data by Taiwan GAAP. Note 4: Figures not listed due to cash flow from operating less than cash dividends. (10.14) (0.21) Note 7 65.91 Note 7 Note 5 Note 5 3.17 0.03 48.54 81.59 2.44 15.98 1.23 Note 5: Figures not listed due to operating loss. Note 6: The profit and loss before income tax and interest expenses are pure losses, so they are not shown. Note 7: Operating activities are net cash outflows, so they are not shown. Note 8: for those stock without par value or par value not equal to NT$10, the ratio of Operating income to paid-in capital (%) is calculated by ratio to attributable to Owner of the Company. 7.2.2 Financial Analysis (Standalone) by IFRSs Unit: NT$K Recent 5 years (Note 1) Year Analysis Item Capital Structure Liquidity Operating Performance Debts ratio (%) Long-term fund to Property, plant and equipment (%) Current ratio (%) Quick ratio (%) Times interest earned (times) Average collection turnover (times) Average collection days Inventory turnover (times) Payment turnover (times) 2015 2016 2017 2018 2019 16.14 1,400.06 14.25 1,322.92 7.97 1,327.52 5.42 1,231.97 6.32 1,187.52 391.06 334.88 2,662.46 4.00 91 2.86 7.26 363.47 319.86 687.97 4.26 86 3.23 8.57 486.54 426.00 5,155.27 4.95 74 3.34 6.33 461.58 393.47 259.53 6.65 55 3.03 6.61 412.97 315.12 396.35 7.88 46 2.77 8.61 Average inventory turnover days Fixed assets turnover (times) Property, plant and equipment turnover (times) Return on total assets (%) Return on stockholders’ equity (%) Profit before tax to paid-in capital (%) (Note 4) Profit after tax to net sales (%) Earnings per share (NT$) Cash flow ratio (%) (Note2) Cash flow adequacy ratio (%) Cash flow reinvestment ratio (%) Operating leverage Financial leverage 128 3.51 0.23 5.39 6.25 10.02 22.06 1.00 70.01 97.84 2.10 5.42 1.17 113 2.59 0.17 1.25 1.29 2.04 6.31 0.20 86.72 84.41 2.49 Note 3 Note 3 109 1.94 0.13 4.22 4.68 7.11 30.85 0.72 51.41 137.53 0.15 Note 3 Note 3 120 1.80 0.13 0.10 0.06 0.13 0.45 0.01 54.00 92.68 Note 5 Note 3 Note 3 132 1.79 0.13 0.23 0.18 0.33 1.23 0.03 36.66 88.14 Note 5 Note 3 Note 3 Profitability Cash Flow Leverage Variation Analysis 2017 vs. 2016 1. The increase in interest protection multiples was mainly due to the increase in net profit before tax this year. 2. The increase in the payables turnover rate was mainly due to the decrease in accounts payable during the year. 3. The increase in return on assets and return on equity was mainly attributable to the increase in the profit and loss after taxation of subsidiaries, related companies and joint ventures that adopted the equity method during the year. 4. The increase in net profit before tax to paid-in capital ratio, net profit ratio and earnings per share was mainly due to the increase in the profit and loss after taxation of the subsidiaries, affiliates and joint ventures that adopted the equity method in this year. 5. The decrease in cash flow ratio is mainly due to the decrease in net cash inflow from operating activities. * If the company has prepared individual financial reports, it should separately prepare an analysis of the company's individual financial ratios. * If the financial information adopting IFRS is less than 5 years, the following table (2) financial information adopting my country’s financial accounting standards should be prepared separately. 1. Capital Structure Analysis (1) Debts ratio (2) Long term fund to Property, plant and equipment 2. Liquidity Analysis (1) Current Ratio (2) Quick Ratio (3) Times Interest Earned 3. Operating Performance Analysis = Total Liabilities/Total Assets = (Total Equity + Non-Current Liabilities)/ Property, plant and equipment = Current Assets/Current Liabilities = (Current Assets – Inventories – Prepaid Expenses)/Current Liabilities = Earnings before Interest and Taxes/Interest Expenses (1) Average Collection Turnover (2) Average Collection Days (3) Average Inventory Turnover (4) Average Payment Turnover (5) Average Inventory Turnover Days (6) Property, plant and equipment Turnover = Net Sales/Average Trade Receivables = 365/Receivables Turnover Rate = Cost of Sales/Average Inventory = Cost of Sales/Average Trade Payables = 365/Average Inventory Turnover = Net Sales/ Average Property, plant and equipment (7) Total Assets Turnover = Net Sales/Average Total Assets 4. Profitability Analysis (1) Return on Total Assets (2) Return Ratio on Stockholders’ Equity (3) Profit after Tax to Net Sales (4) Earnings Per Shares 5. Cash Flow (1) Cash Flow Rate (2) Cash Flow Adequacy Ratio (3) Cash flow reinvestment ratio = {Net Income + Interest Expense × (1 – Effective tax rate)}/Average Total Assets = Net Income/Average Total Equity = Net Income/Net Sales = (Net Profit Attributable to Owner of the Company – Preferred Stock Dividend)/ Weighted Average Number of Shares Outstanding = Net Cash Provided by Operating Activities/Current Liabilities = Five-Year Cash from Sum of Operations /(Five-Year Capital Expenditure + Inventory Increase + Cash Dividend) = (Net Cash Provided by Operating Activities – Cash Dividend)/( Property, plant and equipment + Long-term Investment + Other Non-current Assets + Working Capital) (Note3) 6. Leverage (1) Operating Leverage (2) Financial Leverage = (Net Sales – Operating Expenses & Cost)/Operating Income (Note4) = Operating Income/(Operating Income – Interest Expenses) Note 1: Figures have been audited by adopting IFRSs. Note 2: The calculation of the cash flow tonnage ratio from 2015 to 2016 is calculated using the previous year's ROC information. Note 3: Net operating loss, it is not listed Note 4: for those stock without par value or par value not equal to NT$10, the ratio of Operating income to paid-in capital (%) is calculated by ratio to attributable to Owner of the Company Note 5: The net cash flow from operating activities is less than the number of cash dividends issued, so it is not listed. 7.3 Audit Committee’s Report Sunplus Technology Co., Ltd. Audit Committee’s Report Sunplus’ Board has submitted the 2019 business report, financial statements and loss appropriation proposals, etc. The Deloitte & Touche CPA firm has audited the financial statements, and issued an audit report. The Audit Committee has reviewed the 2017 business report, financial statements and loss appropriation proposals, and verified that they comply with the Company Law and relevant regulations. According to Article14-4of Securities Exchange Law and Article 219 of the Company Law, I hereby submit this report. To Sunplus 2020 Annual General Shareholders’ Meeting Sunplus Technology Co., Ltd. Audit Committee Convener, Che-Ho Wei March 30th, 2020 7.4 Consolidated Financial Statements and Auditors' Audit Report Sunplus Technology Company Limited and Subsidiaries Consolidated Financial Statements for the Years Ended December 31, 2019 and 2018 and Independent Auditors’ Report DECLARATION OF CONSOLIDATION OF FINANCIAL STATEMENTS OF AFFILIATES The companies required to be included in the consolidated financial statements of affiliates in accordance with the “Criteria Governing Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises” for the year ended December 31, 2019 are all the same as the companies required to be included in the consolidated financial statements of parent and subsidiary companies as provided in International Financial Reporting Standard No. 10 “Consolidated Financial Statements”. Relevant information that should be disclosed in the consolidated financial statements of affiliates has all been disclosed in the consolidated financial statements of parent and subsidiary companies. Hence, we do not prepare a separate set of consolidated financial statements of affiliates. Very truly yours, Sunplus Technology Company Limited By CHOU-CHYE HUANG Chairman March 30, 2020 INDEPENDENT AUDITORS’ REPORT The Board of Directors and Shareholders Sunplus Technology Company Limited Opinion We have audited the accompanying consolidated financial statements of Sunplus Technology Company Limited and its subsidiaries (collectively referred to as the “Group”) as of December 31, 2019 and 2018, and the consolidated statements of comprehensive income, changes in equity and cash flows for the years then ended, and the notes to the consolidated financial statements, including a summary of significant accounting policies (collectively referred to as the “consolidated financial statements”). In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as of December 31, 2019 and 2018, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), IFRIC Interpretations (IFRIC), and SIC Interpretations (SIC) endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China. Basis for Opinion We conducted our audits in accordance with the Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants and auditing standards generally accepted in the Republic of China. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with The Norm of Professional Ethics for Certified Public Accountant of the Republic of China, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements for the year ended December 31, 2019. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Validity of Specific Customer's Revenue Integrated circuit chip sales accounted for 93% of the Group’s total revenue. Operating income declined in 2019, but sales to some customers increased significantly. Therefore, we deem revenue recognition as a key audit matter. For detailed explanation of revenue, refer to Notes 4 and 23 to the accompanying consolidated financial statements. 1. We understood the related internal control and operating procedures in the sales transaction cycle, and we evaluated and confirmed the operating effectiveness of the internal control and operating procedures. 2. We selected samples from the sales details, and we examined customers’ original orders, sales electronic orders, delivery orders, logistics receipt documents or export declaration, and sales invoices for any abnormal situations and confirmed the validity of the revenue. Other Matter We have also audited the parent company only financial statements of Sunplus Technology Company Limited as of and for the years ended December 31, 2019 and 2018 on which we have issued an unmodified opinion. Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), IFRIC Interpretations (IFRIC), and SIC Interpretations (SIC) endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so. Those charged with governance, including the audit committee, are responsible for overseeing the Group’s financial reporting process. Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the auditing standards generally accepted in the Republic of China will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements. As part of an audit in accordance with the auditing standards generally accepted in the Republic of China, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: 1. Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. 2. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. 3. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. 4. Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Group to cease to continue as a going concern. 5. Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation. 6. Obtain sufficient and appropriate audit evidence regarding the financial information of entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision, and performance of the group audit. We remain solely responsible for our audit opinion. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements for the year ended December 31, 2019 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 Cheng-Chih Lin and Yu-Feng Huang. Deloitte & Touche Taipei, Taiwan Republic of China March 30, 2020 Notice to Readers The accompanying consolidated financial statements are intended only to present the consolidated financial position, financial performance and cash flows in accordance with accounting principles and practices generally accepted in the Republic of China and not those of any other jurisdictions. The standards, procedures and practices to audit such consolidated financial statements are those generally applied in the Republic of China. For the convenience of readers, the independent auditors’ report and the accompanying consolidated financial statements have been translated into English from the original Chinese version prepared and used in the Republic of China. If there is any conflict between the English version and the original Chinese version or any difference in the interpretation of the two versions, the Chinese-language independent auditors’ report and consolidated financial statements shall prevail. SUNPLUS TECHNOLOGY COMPANY LIMITED AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2019 AND 2018 (In Thousands of New Taiwan Dollars) ASSETS CURRENT ASSETS Cash and cash equivalents (Notes 4 and 6) Financial assets at fair value through profit or loss - current (Notes 4 and 7) Notes and accounts receivable, net (Notes 4, 5, 9, 23 and 33) Other receivables (Notes 4 and 33) Inventories (Notes 4 and 10) Other financial assets - current (Notes 17 and 34) Other current assets (Note 17) Total current assets NON-CURRENT ASSETS Financial assets at fair value through profit or loss - non-current (Notes 4 and 7) Financial assets at fair value through other comprehensive income - non-current (Notes 4 and 8) Investments accounted for using the equity method (Notes 4 and 12) Property, plant and equipment (Notes 4, 5 and 13) Right-of-use assets (Notes 3, 4, 5 and 14) Investment properties (Notes 4 and 15) Intangible assets (Notes 4, 5 and 16) Deferred tax assets (Notes 4 and 25) Net defined benefit assets - non-current (Notes 4 and 21) Other financial assets - non-current (Notes 17 and 34) Other non-current assets (Notes 17 and 33) Total non-current assets TOTAL LIABILITIES AND EQUITY CURRENT LIABILITIES Short-term borrowings (Notes 18 and 34) Contract liabilities - current (Note 23) Accounts payable (Note 19) Current tax liabilities (Notes 4 and 25) Lease liabilities - current (Notes 3, 4, 5 and 14) Deferred revenue - current (Notes 4, 20 and 27) Current portion of long-term bank borrowings (Notes 18 and 34) Other current liabilities (Note 20) Total current liabilities NON-CURRENT LIABILITIES Lease liabilities - non-current (Notes 3, 4, 5 and 14) Deferred revenue - non-current (Notes 4, 20 and 27) Net defined benefit liabilities - non-current (Notes 4 and 21) Guarantee deposits (Note 33) Other liabilities (Note 20) Total non-current liabilities Total liabilities EQUITY ATTRIBUTABLE TO OWNERS OF THE COMPANY (Notes 4, 22 and 30) Share capital Ordinary shares Capital surplus Retained earnings Legal reserve Special reserve (Deficits not yet compensated) unappropriated earnings Total retained earnings Other equity Treasury shares 2019 2018 Amount % Amount % $ $ 3,020,628 1,090,679 832,633 28,159 759,211 119,920 88,917 26 10 7 - 7 1 1 3,235,721 1,313,747 954,030 70,960 818,948 153,575 91,321 27 11 8 1 7 1 1 5,940,147 52 6,638,302 56 1,027,445 189,387 695,028 1,968,803 241,914 1,066,797 176,233 28,754 1,163 140,049 14,047 9 2 6 17 2 9 2 - - 1 - 737,867 246,208 729,219 2,052,359 - 1,039,314 178,521 30,254 - 127,215 147,725 6 2 6 17 - 9 2 - - 1 1 5,549,620 48 5,288,682 44 $ 11,489,767 100 $ 11,926,984 100 $ 323,626 24,912 352,155 52,169 11,885 1,568 - 576,101 $ 3 - 3 1 - - - 5 311,215 7,511 484,810 56,972 - 1,629 250,046 572,546 3 - 4 - - - 2 5 1,342,416 12 1,684,729 14 230,251 58,015 64,258 213,579 8,557 574,660 2 - 1 2 - 5 - 61,894 79,313 230,177 3,265 374,649 - - 1 2 - 3 1,917,076 17 2,059,378 17 5,919,949 594,432 52 5 5,919,949 801,398 50 7 17 2 (2) 17 1,942,388 308,452 (262,261) 1,988,579 (261,026) (63,401) (2) (1) 1,941,826 67,279 241,734 2,250,839 (442,843) (63,401) 16 1 2 19 (4) (1) Total equity attributable to owners of the Company 8,178,533 71 8,465,942 71 NON-CONTROLLING INTERESTS (Notes 4, 11, 22 and 30) 1,394,158 12 1,401,664 12 Total equity TOTAL 9,572,691 83 9,867,606 83 $ 11,489,767 100 $ 11,926,984 100 The accompanying notes are an integral part of the consolidated financial statements. SUNPLUS TECHNOLOGY COMPANY LIMITED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018 (In Thousands of New Taiwan Dollars, Except Earnings Per Share) 2019 2018 Amount % Amount % NET OPERATING REVENUE (Notes 4, 23, and 33) $ 5,512,330 100 $ 6,077,733 100 OPERATING COSTS (Notes 10 and 24) 3,137,755 57 3,648,349 60 GROSS PROFIT 2,374,575 43 2,429,384 40 OPERATING EXPENSES (Notes 24 and 33) Selling and marketing expenses General and administrative expenses Research and development expenses Expected credit gain (Note 9) 263,373 498,466 1,481,269 (73) 5 9 27 - 286,562 532,943 1,699,345 - 5 9 28 - Total operating expenses 2,243,035 41 2,518,850 42 OTHER OPERATING INCOME AND EXPENSES PROFIT (LOSS) FROM OPERATIONS 201 131,741 - 2 NON-OPERATING INCOME AND EXPENSES (Notes 4, 14, 24, 27 and 33) Other income Other gains and losses Finance costs Share of loss of associates Total non-operating income and expenses PROFIT BEFORE INCOME TAX INCOME TAX EXPENSE (Notes 4 and 25) NET PROFIT FOR THE YEAR OTHER COMPREHENSIVE INCOME (LOSS) Items that will not be reclassified subsequently to profit or loss (Notes 4 and 22): Remeasurement of defined benefit plans Unrealized gain (loss) on investments in equity instruments at fair value through other comprehensive income 156,116 1,127 (24,849) (19,915) 112,479 244,220 69,468 174,752 4,864 (21,444) 3 - (1) - 2 4 1 3 - - (324) (89,790) 116,463 246,002 (23,823) (44,862) 293,780 203,990 61,667 142,323 - (2) 2 4 - (1) 5 3 1 2 1,845 - (103,685) (2) (Continued) SUNPLUS TECHNOLOGY COMPANY LIMITED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018 (In Thousands of New Taiwan Dollars, Except Earnings Per Share) 2019 2018 Amount % Amount % Share of the other comprehensive income (loss) of associates accounted for using the equity method Items that may be reclassified subsequently to profit or loss (Notes 4 and 22): Exchange differences on translating the financial statements of foreign operations Share of other comprehensive loss of associates accounted for using the equity method 3,789 - (8,556) (84,888) (2) (18,061) (4,394) - (2,904) - - - Other comprehensive loss for the year, net of income tax (102,073) (2) (131,361) (2) TOTAL COMPREHENSIVE INCOME FOR THE YEAR $ 72,679 1 $ 10,962 NET PROFIT ATTRIBUTABLE TO: Owners of the Company Non-controlling interests TOTAL COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO: Owners of the Company Non-controlling interests EARNINGS PER SHARE (Note 26) Basic Diluted $ 15,309 159,443 $ - 3 5,616 136,707 $ 174,752 3 $ 142,323 $ (77,049) 149,728 (2) $ 3 (120,733) 131,695 $ 72,679 1 $ 10,962 $ $ 0.03 0.03 $ $ 0.01 0.01 - - 2 2 (2) 2 - The accompanying notes are an integral part of the consolidated financial statements. (Concluded) SUNPLUS TECHNOLOGY COMPANY LIMITED AND SUBSIDIARIES STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018 (In Thousands of New Taiwan Dollars) Share Capital Issued and Outstanding Share Equity Attributable to Owners of the Company Other Equity Unrealized Gain Exchange (Loss) on Retained Earnings Differences on Financial Assets Unappropriated Translating the at Fair Value Earnings Financial Through Other (Deficits not yet Statements of Comprehensive Non-controlling BALANCE AT JANUARY 1, 2018 591,995 $ 5,919,949 $ 835,241 $ 1,900,505 $ 22,995 $ 707,497 $ (122,100 ) $ (230,011 ) $ (63,401 ) $ 8,970,675 $ 1,678,527 $ 10,649,202 (Thousands) Amount Capital Surplus Legal Reserve Special Reserve Compensated) Foreign Operations Income Treasury Shares Total Interests Total Equity Appropriation of 2017 earnings Legal reserve Special reserve Cash dividends to shareholders Changes in capital surplus from investments in associates accounted for using the equity method Issuance of share dividends from capital surplus Difference between share price and carrying amount from disposal of subsidiaries Changes of equity of subsidiaries 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 Adjustment of capital surplus for the Company Cash dividends received by subsidiaries Disposals of investments in equity instruments designated as at fair value through other comprehensive income Decrease in non-controlling interests - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 50,782 (86,846 ) (271 ) - - - - 2,492 - - 41,321 - - - - - - - - - - - - - 44,284 - - - - - - - - - - - (41,321 ) (44,284 ) (327,551 ) - - - (22,606 ) 5,616 1,453 7,069 - (37,070 ) - - - - - - - - - - - - - - - - - (16,775 ) (111,027 ) (16,775 ) (111,027 ) - - - - 37,070 - - - - - - - - - - - - - - - - (327,551 ) 50,782 (86,846 ) (271 ) (22,606 ) - - - - - - - - - (327,551 ) 50,782 (86,846 ) (271 ) (22,606 ) 5,616 136,707 142,323 (126,349 ) (5,012 ) (131,361 ) (120,733 ) 131,695 10,962 2,492 - - - - 2,492 - (408,558 ) (408,558 ) BALANCE AT DECEMBER 31, 2018 591,995 5,919,949 801,398 1,941,826 67,279 241,734 (138,875 ) (303,968 ) (63,401 ) 8,465,942 1,401,664 9,867,606 Appropriation of 2018 earnings Legal reserve Special reserve Cash dividends to sharesholders Changes in capital surplus from investments in associates accounted for using the equity method Issuance of share dividends from capital surplus - - - - - - - - - - - - - 4,709 (213,118 ) 562 - - - - - 241,173 (562 ) (241,173 ) - - - - - - - - - - - - - - - - - - - - - - - - 4,709 (213,118 ) - - - - - - - - 4,709 (213,118 ) Difference between share price and carrying amount from disposal of subsidiaries Changes of equity of subsidiaries Net profit for the year ended December 31, 2019 Other comprehensive income (loss) for the year ended December 31, 2019, net of income tax Total comprehensive income (loss) for the year ended December 31, 2019 Adjustment of capital surplus for the Company Cash dividends received by subsidiaries Decrease in non-controlling interests Disposals of investments in equity instruments designated as at fair value through other comprehensive income - - - - - - - - - - - - - - - - 162 - - - - 1,281 - - - - - - - - - - - - - - - - - - - (3,394 ) 15,309 - - - - - - 5,339 (79,905 ) (17,792 ) 20,648 (79,905 ) (17,792 ) - - (279,514 ) - - - - - 279,514 - - - - - - - - 162 (3,394 ) - - 162 (3,394 ) 15,309 159,443 174,752 (92,358 ) (9,715 ) (102,073 ) (77,049 ) 149,728 72,679 1,281 - 1,281 - - (157,234 ) (157,234 ) - - BALANCE AT DECEMBER 31, 2019 591,995 $ 5,919,949 $ 594,432 $ 1,942,388 $ 308,452 $ (262,261 ) $ (218,780 ) $ (42,246 ) $ (63,401 ) $ 8,178,533 $ 1,394,158 $ 9,572,691 The accompanying notes are an integral part of the consolidated financial statements. SUNPLUS TECHNOLOGY COMPANY LIMITED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018 (In Thousands of New Taiwan Dollars) CASH FLOWS FROM OPERATING ACTIVITIES Income before income tax Adjustments for: Depreciation expenses Amortization expenses Expected credit loss reversed on trade receivables Net gain on fair value change of financial assets designated as of fair value through profit or loss Finance costs Interest income Dividend income Compensation costs of employee share options Share of profits of associates (Gain) loss on disposal of property, plant and equipment Gain on disposal of intangible assets (Gain) loss on disposal of subsidiaries Gain on disposal of investments Net loss on foreign currency exchange Gain on lease modification Amortization of prepaid lease payments Changes in operating assets and liabilities: Decrease in trade receivables Decrease in other receivables Decrease (increase) in inventories Increase in other current assets Increase in net defined benefits assets - non-current Decrease in trade payables Increase in contract liabilities Decrease in deferred revenue Increase (decrease) in other current liabilities Decrease in defined benefits liabilities - non-current Cash generated from operations Interest received Dividends received Interest paid Income tax paid 2019 2018 $ 244,220 $ 203,990 282,554 77,812 (73) (17,879) 24,849 (24,578) (28,815) - 19,915 (161) (39) 43 - 8,984 (1) - 114,248 41,197 59,737 (132) (1,163) (130,606) 17,401 (1,629) 4,465 (10,191) 680,158 26,584 45,274 (27,923) (72,440) 275,786 82,237 - (67,736) 23,823 (22,896) (26,982) 37 44,862 324 - (170,897) (11,724) 34,248 - 2,810 114,488 11,333 (17,157) (6,368) - (89,495) 27,331 (3,659) (153,224) (4,309) 246,822 21,707 101,047 (20,370) (65,287) Net cash generated from operating activities 651,653 283,919 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of financial assets at FVTOCI Purchase of financial assets at FVTPL Proceeds from the sale of financial assets at FVTPL Proceeds from the sale of financial assets at FVTOCI Acquisition of associates Net cash outflow on acquisition of subsidiaries (Note 28) Proceeds from disposal of subsidiaries Payments for property, plant and equipment Proceeds of the disposal of property, plant and equipment Increase in refundable deposits - (1,588,698) 1,572,327 25,990 - (48,215) (744) (138,970) 4,239 (459) (105,213) (1,764,316) 2,060,690 4,930 (110,368) - (159,571) (173,729) 568 (2,039) (Continued) SUNPLUS TECHNOLOGY COMPANY LIMITED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018 (In Thousands of New Taiwan Dollars) Decrease in refundable deposits Payments for intangible assets Proceeds of disposal of intangible assets Payments for investment properties Decrease in investment properties Decrease on other financial assets - non-current Decrease in other assets - non-current 2019 2018 1,871 (78,623) 484 (1,488) - 10,909 - 62 (84,655) - (3,891) 10,016 10,635 3,570 Net cash (used in) generated from investing activities (241,377) (313,311) CASH FLOWS FROM FINANCING ACTIVITIES Repayments of short-term borrowings Repayments of long-term borrowings Proceeds of guarantee deposits received Refunds of guarantee deposits received Repayment of principal portion of lease liabilities Increase in other liabilities Cash dividends paid Dividends paid to non-controlling interests Decrease in non-controlling interests 15,000 (248,544) 22,168 (33,729) (11,303) 4,758 (211,837) (157,520) (2,184) (132,566) (179,088) 47,914 (18,331) - - (411,905) (169,798) (31,266) Net cash used in financing activities (623,191) (895,040) EFFECTS OF EXCHANGE RATE CHANGES ON THE BALANCE OF CASH HELD IN FOREIGN CURRENCIES (2,178) 3,876 NET DECREASE IN CASH AND CASH EQUIVALENTS (215,093) (920,556) CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR 3,235,721 4,156,277 CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR $ 3,020,628 $ 3,235,721 The accompanying notes are an integral part of the consolidated financial statements. (Concluded) SUNPLUS TECHNOLOGY COMPANY LIMITED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise) 1. GENERAL INFORMATION Sunplus Technology Company Limited (“Sunplus” or the “Company”) was established in August 1990. It researches, develops, designs, tests and sells high quality, high value-added consumer integrated circuits (ICs). Its products are based on core technologies in such areas as multimedia audio/video, single-chip microcontrollers and digital signal processors. These technologies are used to develop hundreds of products including various ICs: liquid crystal display, microcontroller, multimedia, voice/music, and application-specific. Sunplus’ shares have been listed on the Taiwan Stock Exchange since January 2000. Some of its shares have been issued in the form of global depositary receipts (GDRs), which have been listed on the London Stock Exchange since March 2001 (refer to Note 22). Following is a diagram of the relationship and ownership percentages between Sunplus and its subsidiaries (collectively, the “Group”) as of December 31, 2019: Sunplus Technology Award Sunplus Sunplus HK Ventureplus Sunplus Lin Shih Sunplus Jumplux 92.55% Sunext Sunplus 100% 100% Sunny Ventureplus Sunplus Worldplus Giant Giant Ventureplus Generalplus Generalplus Lingyao Technology Co., Ltd. (Shenzhen) Ytrip Sunplus App Sunplus Sunplus Sunplus SunMedia Generalplus Generalplus 1culture Shuangxin Jsilicon The consolidated financial statements are presented in the Company’s functional currency, the New Taiwan dollar.  2. APPROVAL OF FINANCIAL STATEMENTS The consolidated financial statements were approved by the Company’s board of directors and authorized for issue on March 30, 2020. 3. APPLICATION OF NEW, AMENDED AND REVISED STANDARDS AND INTERPRETATIONS a. Initial application of the amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), Interpretations of IFRS (IFRIC), and Interpretations of IAS (SIC) endorsed and issued into effect by the Financial Supervisory Commission (FSC) Except for the following, 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 did not have any material impact on the Company’s accounting policies: 1) IFRS 16 “Leases” IFRS 16 provides a comprehensive model for the identification of lease arrangements and their treatment in the financial statements of both lessee and lessor. It supersedes IAS 17 “Leases”, IFRIC 4 “Determining whether an Arrangement contains a Lease”, and a number of related interpretations. Refer to Note 4 for information relating to the relevant accounting policies. Definition of a lease The Group elects to apply the guidance of IFRS 16 in determining whether contracts are, or contain, a lease only to contracts entered into (or changed) on or after January 1, 2019. Contracts identified as containing a lease under IAS 17 and IFRIC 4 are not reassessed and are accounted for in accordance with the transitional provisions under IFRS 16. The Group as lessee The Group recognizes right-of-use assets or investment properties if the right-of-use assets meet the definition of investment properties, and lease liabilities for all leases on the consolidated balance sheets except for those whose payments under low-value asset and short-term leases are recognized as expenses on a straight-line basis. On the consolidated statements of comprehensive income, the Group presents the depreciation expense charged on right-of-use assets separately from the interest expense accrued on lease liabilities; interest is computed using the effective interest method. On the consolidated statements of cash flows, cash payments for the principal portion of lease liabilities are classified within financing activities; cash payments for the interest portion are classified within operating activities. Prior to the application of IFRS 16, payments under operating lease contracts were recognized as expenses on a straight-line basis. Cash flows for operating leases were classified within operating activities on the consolidated statements of cash flows. Lease liabilities were recognized on January 1, 2019 for leases previously classified as operating leases under IAS 17. Lease liabilities were 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. The Group applies IAS 36 to all right-of-use assets. The lessee’s weighted average incremental borrowing rate applied to lease liabilities recognized on January 1, 2019 is 1.58%-2.39%. The difference between the (i) lease liabilities recognized and (ii) operating lease commitments disclosed under IAS 17 on December 31, 2018 is explained as follows: The future minimum lease payments of non-cancellable operating lease commitments on December 31, 2018 Less: Recognition exemption for short-term leases and leases of low-value assets Undiscounted amounts on January 1, 2019 $ 99,174 - $ 99,174 Discounted amounts using the incremental borrowing rate on January 1, 2019 Add: Adjustments as a result of a different treatment of extension and termination options $ 88,507 161,220 Lease liabilities recognized on January 1, 2019 $ 249,727 The Group as lessor The Group does not make any adjustments for leases in which it is a lessor, and it accounts for those leases with the application of IFRS 16 starting from January 1, 2019. The impact on assets, liabilities and equity as of January 1, 2019 from the initial application of IFRS 16 is set out as follows: As Originally Stated on January 1, 2019 Adjustments Arising from Initial Application Restated on January 1, 2019 Prepayments for leases - current Prepayments for leases - non-current Right-of-use assets Investment properties $ $ 2,756 102,175 - 1,039,314 $ (2,756) (102,175) 251,956 102,702 - - 251,956 1,142,016 Total effect on assets $ 1,144,245 $ 249,727 $ 1,393,972 Lease liabilities - current Lease liabilities - non-current Total effect on liabilities $ $ - - - $ 10,907 238,820 $ 10,907 238,820 $ 249,727 $ 249,727 2) IFRIC 23 “Uncertainty over Income Tax Treatments” IFRIC 23 clarifies that when there is uncertainty over income tax treatments, the Company should assume that the taxation authority will have full knowledge of all related information when making related examinations. If the Company concludes that it is probable that the taxation authority will accept an uncertain tax treatment, the Company should determine the taxable profit, tax bases, unused tax losses, unused tax credits or tax rates consistently with the tax treatments used or planned to be used in its income tax filings. If it is not probable that the taxation authority will accept an uncertain tax treatment, the Company should make estimates using either the most likely amount or the expected value of the tax treatment, depending on which method the entity expects to better predict the resolution of the uncertainty. The Company has to reassess its judgments and estimates if facts and circumstances change. 3) Amendments to IAS 28 “Long-term Interests in Associates and Joint Ventures” The amendments clarified that IFRS 9 “Financial Instruments” shall be applied to account for other financial instruments in an associate or joint venture to which the equity method is not applied. These included long-term interests that, in substance, form part of the Group’s net investment in an associate or joint venture. 4) Amendments to IAS 19 “Plan Amendment, Curtailment or Settlement” The amendments stipulate that, if a plan amendment, curtailment or settlement occurs, the current service cost and the net interest for the remainder of the annual reporting period are determined using the actuarial assumptions used for the remeasurement of the net defined benefit liabilities (assets). In addition, the amendments clarify the effect of a plan amendment, curtailment or settlement on the requirements regarding the asset ceiling. The Group applied the above amendments prospectively. b. The IFRSs endorsed by the Financial Supervisory Commission (FSC) for application starting from 2020 New IFRSs Effective Date Announced by IASB Amendments to IFRS 3 “Definition of a Business” Amendments to IFRS 9, IAS 39 and IFRS 7 “Interest Rate Benchmark January 1, 2020 (Note 1) January 1, 2020 (Note 2) Reform” Amendments to IAS 1 and IAS 8 “Definition of Material” January 1, 2020 (Note 3) Note 1: The Group shall apply these amendments to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after January 1, 2020 and to asset acquisitions that occur on or after the beginning of that period. Note 2: The Group shall apply these amendments retrospectively for annual reporting periods beginning on or after January 1, 2020. Note 3: The Group shall apply these amendments prospectively for annual reporting periods beginning on or after January 1, 2020. As of the date the consolidated financial statements were authorized for issue, the Group is continuously assessing the possible impact that the application of other standards and interpretations will have on the Group’s financial position and financial performance and will disclose the relevant impact when the assessment is completed. c. New IFRSs in issue but not yet endorsed and issued into effect by the FSC New IFRSs Effective Date Announced by IASB (Note 1) Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets between To be determined by IASB an Investor and its Associate or Joint Venture” IFRS 17 “Insurance Contracts” January 1, 2021 Amendments to IAS 1 “Classification of Liabilities as Current or Non-current” January 1, 2022 Note 1: Unless stated otherwise, the above New IFRSs are effective for annual reporting periods beginning on or after their respective effective dates. 1) Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets between an Investor and its Associate or Joint Venture” The amendments stipulate that, when the Group sells or contributes assets that constitute a business (as defined in IFRS 3) to an associate or joint venture, the gain or loss resulting from the transaction is recognized in full. Also, when the Group loses control of a subsidiary that contains a business but retains significant influence or joint control, the gain or loss resulting from the transaction is recognized in full. Conversely, when the Group sells or contributes assets that do not constitute a business to an associate or joint venture, the gain or loss resulting from the transaction is recognized only to the extent of the Group’s interest as an unrelated investor in the associate or joint venture, i.e., the Group’s share of the gain or loss is eliminated. Also, when the Group loses control of a subsidiary that does not contain a business but retains significant influence or joint control over an associate or a joint venture, the gain or loss resulting from the transaction is recognized only to the extent of the Group’s interest as an unrelated investor in the associate or joint venture, i.e., the Group’s share of the gain or loss is eliminated. 2) Amendments to IAS 1 “Classification of Liabilities as Current or Non-current” The amendments clarify that for a liability to be classified as non-current, the Group shall assess whether it has the right at the end of the reporting period to defer settlement of the liability for at least twelve months after the reporting period. If such rights are in existence at the end of the reporting period, the liability is classified as non-current regardless of whether the Group will exercise that right. The amendments also clarify that, if the right to defer settlement is subject to compliance with specified conditions, the Group must comply with those conditions at the end of the reporting period even if the lender does not test compliance until a later date. The amendments stipulate that, for the purpose of liability classification, the aforementioned settlement refers to a transfer of cash, other economic resources or the Group’s own equity instruments to the counterparty that results in the extinguishment of the liability. However, if the terms of a liability that could, at the option of the counterparty, result in its settlement by a transfer of the Group’s own equity instruments, and if such option is recognized separately as equity in accordance with IAS 32: Financial Instruments: Presentation, the aforementioned terms would not affect the classification of the liability. Except for the above impact, as of the date the consolidated financial statements were authorized for issue, the Group is continuously assessing the possible impact that the application of other standards and interpretations will have on the Group’s financial position and financial performance and will disclose the relevant impact when the assessment is completed. 4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES a. Statement of Compliance The consolidated 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. b. Basis of preparation The consolidated financial statements have been prepared on the historical cost basis except for financial instruments that are measured at fair values, and net defined benefit liabilities which are measured at the present value of the defined benefit obligation less the fair value of plan assets. The fair value measurements are grouped into Levels 1 to 3 based on the degree to which the fair value measurement inputs are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows: 1) Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities; 2) Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices); and 3) Level 3 inputs are unobservable inputs for the asset or liability. c. Classification of current and non-current assets and liabilities Current assets include: 1) Assets held primarily for the purpose of trading; 2) Assets expected to be realized within 12 months after the reporting period; and 3) Cash and cash equivalents unless the asset is restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period. Current liabilities include: 1) Liabilities held primarily for the purpose of trading; 2) Liabilities due to be settled within 12 months after the reporting period, and 3) Liabilities for which the Group does not have an unconditional right to defer settlement for at least 12 months after the reporting period. Assets and liabilities that are not classified as current are classified as non-current. d. Basis of consolidation The consolidated financial statements incorporate the financial statements of the Company and the entities controlled by the Company (i.e., its subsidiaries). Income and expenses of subsidiaries acquired or disposed of during the period are included in the consolidated statement of profit or loss and other comprehensive income from the effective date of acquisition up to the effective date of disposal, as appropriate. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by the Company. All intra-group transactions, balances, income and expenses are eliminated in full upon consolidation. Total comprehensive income of subsidiaries is attributed to the owners of the Company and to the no controlling interests even if this results in the no controlling interests having a deficit balance. Changes in the Group’s ownership interests in subsidiaries that do not result in the Group losing control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the Group’s interests and the no controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the no controlling interests are adjusted and the fair value of the consideration paid or received is recognized directly in equity and attributed to the owners of the Company. When the Group loses control of a subsidiary, a gain or loss is recognized in profit or loss and is calculated as the difference between (i) the aggregate of the fair value of the consideration received and any investment retained in the former subsidiary at its fair value at the date when control is lost and (ii) the assets (including any goodwill) and liabilities and any no controlling interests of the former subsidiary at their carrying amounts at the date when control is lost. The Group accounts for all amounts recognized in other comprehensive income in relation to that subsidiary on the same basis as would be required if the Group had directly disposed of the related assets or liabilities. The fair value of investment retained in subsidiaries at the date when control is lost is regarded as the fair value on the initial recognition of the investment in an associate. See Note 11 and Tables 6 and 7 for detailed information on subsidiaries (including percentages of ownership and main businesses). e. Foreign currencies In preparing the financial statements of each individual entity, transactions in currencies other than the entity’s functional currency (i.e., foreign currencies) are recognized at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Exchange differences on monetary items arising from settlement or translation are recognized in profit or loss 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 nonmonetary items are included in profit or loss for the period except for exchange differences arising from the retranslation of nonmonetary 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. For the purposes of presenting consolidated financial statements, the assets and liabilities of the Group’s foreign operations (including of the subsidiaries, associates, joint ventures or branches operations in other countries or currencies used different with the Company) are translated into New Taiwan dollars using exchange rates prevailing at the end of each reporting period. Income and expense items are translated at the average exchange rates for the period. Exchange differences arising are recognized in other comprehensive income (attributed to the owners of the Company and no controlling interests as appropriate). On the disposal of a foreign operation (i.e., a disposal of the Group’s entire interest in a foreign operation, or a disposal involving loss of control over a subsidiary that includes a foreign operation, a disposal involving loss of joint control over a jointly controlled entity that includes a foreign operation, or a disposal involving loss of significant influence over an associate that includes a foreign operation), all of the exchange differences accumulated in equity in respect of that operation attributable to the owners of the Group are reclassified to profit or loss. f. Inventories Inventories consist of raw materials, supplies, finished goods and work in progress and are stated at the lower of cost or net realizable value. Inventory write-downs are made by item, except where it may be appropriate to group similar or related items. The net realizable value is the estimated selling price of inventories less all estimated costs of completion and costs necessary to make the sale. The inventories of Sunplus Technology Company Limited, Generalplus Technology Inc., Sunplus Innovation Technology Inc., Sunplus mMobile Inc., iCatch Technology Inc., Sunplus mMedia Inc., Jumplux Technology and Sunext Technology Co., Ltd. are generally recorded at standard cost. On the balance sheet date, the cost is adjusted to approximate weighted-average cost method. Other subsidiaries’ inventories are recorded at the weighted-average cost. g. Investments in associates An associate is an entity over which the Group has significant influence and that is not a subsidiary. The Group uses the equity method to account for its investments in associates. Under the equity method, investments in an associate is initially recognized at cost and adjusted thereafter to recognize the Group’s share of the profit or loss and other comprehensive income of the associate. The Group also recognizes the changes in the Group’s share of the equity of associates. Any excess of the cost of acquisition over the Group’s share of the net fair value of the identifiable assets and liabilities of an associate at the date of acquisition is recognized as goodwill, which is included within the carrying amount of the investment and is not amortized. Any excess of the Group’s share of the net fair value of the identifiable assets and liabilities over the cost of acquisition, after reassessment, is recognized immediately in profit or loss. When the Company subscribes for additional new shares of an associate at a percentage different from its existing ownership percentage, the resulting carrying amount of the investment differs from the amount of the Group’s proportionate interest in the associate. The Group records such a difference as an adjustment to investments with the corresponding amount charged or credited to capital surplus - changes in capital surplus from investments in associates and joint ventures accounted for using the equity method. If the Group’s ownership interest is reduced due to its additional subscription of the new shares of the associate, the proportionate amount of the gains or losses previously recognized in other comprehensive income in relation to that associate is reclassified to profit or loss on the same basis as would be required had the investee 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 using the equity method is insufficient, the shortage is debited to retained earnings. When the Group’s share of losses of an associate equals or exceeds its interest in that associate (which includes any carrying amount of the investment accounted for using the equity method and long-term interests that, in substance, form part of the Group’s net investment in the associate), the Group discontinues recognizing its share of further loss, if any. Additional losses and liabilities are recognized only to the extent that the Group has incurred legal obligations, or constructive obligations, or made payments on behalf of that associate. The entire carrying amount of an investment (including goodwill) is tested for impairment as a single asset by comparing its recoverable amount with its carrying amount. Any impairment loss recognized is not allocated to any asset, including goodwill, that forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognized to the extent that the recoverable amount of the investment subsequently increases. The Group discontinues the use of the equity method from the date on which its investment ceases to be an associate. Any retained investment is measured at fair value at that date, and the fair value is regarded as the investment’s fair value on initial recognition as a financial asset. The difference between the previous carrying amount of the associate 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 Group accounts for all amounts previously recognized in other comprehensive income in relation to that associate on the same basis as would be required had that associate directly disposed of the related assets or liabilities. When the Group transacts with its associate, profits and losses resulting from the transactions with the associate are recognized in the Group’s consolidated financial statements only to the extent of interests in the associate that are not related to the Group. h. Property, plant and equipment Property, plant and equipment are stated at cost, less 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. On derecognition of an item of property, plant and equipment, the difference between the sales proceeds and the carrying amount of the asset is recognized in profit or loss. i. Investment properties Investment properties are properties held to earn rentals or for capital appreciation. (It includes right-of-use assets that meet the definition of investment properties in 2019) Investment properties are initially measured at cost, including transaction costs. Subsequent to initial recognition, investment properties are measured at cost less accumulated depreciation and accumulated impairment loss. Depreciation is recognized using the straight-line method. On derecognition of an investment property, the difference between the net disposal proceeds and the carrying amount of the asset is included in profit or loss. j. Goodwill Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition of the business less accumulated impairment loss. For the purposes of impairment testing, goodwill is allocated to each of the Group’s cash-generating units (or groups of cash-generating units) that is expected to benefit from the synergies of the combination. A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is an indication that the unit may be impaired, by comparing its carrying amount, including the attributable goodwill, with its recoverable amount. However, if the goodwill allocated to a cash-generating unit was acquired in a business combination during the current annual period, that unit shall be tested for impairment before the end of the current annual period. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated at first to reduce the carrying amount of any goodwill allocated to the unit, and then to the other assets of the unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss is recognized directly in profit or loss. The impairment loss recognized for goodwill is not reversible in subsequent periods. k. Intangible assets 1) Intangible assets acquired separately Intangible assets with finite useful lives that are acquired separately are initially measured at cost and subsequently measured at cost less accumulated amortization and accumulated impairment loss. Amortization is recognized on a straight-line basis. The estimated useful life, residual value, and amortization method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis. The residual value of an intangible asset with a finite useful life shall be assumed to be zero unless the Group expects to dispose of the intangible asset before the end of its economic life. Intangible assets with indefinite useful lives that are acquired separately are measured at cost less accumulated impairment loss. 2) Derecognition of intangible assets On derecognition of an intangible asset, the difference between the net disposal proceeds and the carrying amount of the asset is recognized in profit or loss. l. Impairment of tangible and intangible assets other than goodwill At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible assets, excluding goodwill, to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. When it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Corporate assets are allocated to the individual cash-generating units on a reasonable and consistent basis of allocation. Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired. The recoverable amount is the higher of fair value less costs to sell and value in use. If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the asset or cash-generating unit is reduced to its recoverable amount, with the resulting impairment loss recognized in profit or loss. When an impairment loss is subsequently reversed, the carrying amount of the asset or cash-generating unit is increased to the revised estimate of its recoverable amount, but only to the extent of the carrying amount that would have been determined had no impairment loss been recognized for the asset or cash-generating unit in prior years. A reversal of an impairment loss is recognized in profit or loss. m. Financial instruments Financial assets and financial liabilities are recognized when a group entity becomes a party to the contractual provisions of the instruments. Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at FVTPL) 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 FVTPL are recognized immediately in profit or loss. 1) Financial assets All regular way purchases or sales of financial assets are recognized and derecognized on a trade date basis. a) Measurement category Financial assets are classified into the following categories: Financial assets at FVTPL, financial assets at amortized cost and investments in equity instruments at FVTOCI. i. Financial assets at FVTPL A financial asset is classified as at FVTPL when such a financial asset is mandatorily classified or it is designated as at FVTPL. Financial assets mandatorily classified as at FVTPL include investments in equity instruments which are not designated as at FVTOCI and debt instruments that do not meet the amortized cost criteria or the FVTOCI criteria. Financial assets at FVTPL are subsequently measured at fair value, and any dividends or interest earned on such financial assets are recognized in other income; any remeasurement gains or losses on such financial assets are recognized in other gains or losses. Fair value is determined in the manner described in Note 32: Financial Instruments. ii. Financial assets at amortized cost Financial assets that meet the following conditions are subsequently measured at amortized cost: i) The financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows; and ii) The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Subsequent to initial recognition, financial assets at amortized cost, including cash and cash equivalents, other financial assets, notes and accounts receivable, other receivables and refundable deposits, are measured at amortized cost, which equals the gross carrying amount determined using the effective interest method less any impairment loss. Exchange differences are recognized in profit or loss. Interest income is calculated by applying the effective interest rate to the gross carrying amount of a financial asset, except for: i) Purchased or originated credit-impaired financial assets, for which interest income is calculated by applying the credit-adjusted effective interest rate to the amortized cost of such financial assets; and ii) Financial assets that have subsequently become credit impaired, for which interest income is calculated by applying the effective interest rate to the amortized cost of such financial assets. Cash equivalents include time deposits, which are highly liquid, readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. These cash equivalents are held for the purpose of meeting short-term cash commitments. iii. Investments in equity instruments at FVTOCI On initial recognition, the Group may make an irrevocable election to designate investments in equity instruments as at FVTOCI. Designation 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 are recognized in profit or loss when the Group’s right to receive the dividends is established, unless the dividends clearly represent a recovery of part of the cost of the investment. b) Impairment of financial assets The Group recognizes a loss allowance for expected credit losses on financial assets at amortized cost (including trade receivables). The Group always recognizes lifetime expected credit losses (ECLs) for trade receivables. For all other financial instruments, the Group recognizes lifetime ECLs when there has been a significant increase in credit risk since initial recognition. If, on the other hand, the credit risk on a financial instrument has not increased significantly since initial recognition, the Group measures the loss allowance for that financial instrument at an amount equal to 12-month ECLs. Expected credit losses reflect the weighted average of credit losses with the respective risks of a default occurring as the weights. Lifetime ECLs represent the expected credit losses that will result from all possible default events over the expected life of a financial instrument. In contrast, 12-month ECLs represent the portion of lifetime ECLs that is expected to result from default events on a financial instrument that are possible within 12 months after the reporting date. The impairment loss of all financial assets is recognized in profit or loss by a reduction in their carrying amounts through a loss allowance account. c) Derecognition of financial assets The Group derecognizes a financial asset only when the contractual rights to the cash flows from the asset expire or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party. On derecognition of a financial asset at amortized cost in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable is recognized in profit or loss. 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. 2) Financial liabilities a) Subsequent measurement All financial liabilities are measured at amortized cost using the effective interest method. b) Derecognition of financial liabilities The difference between the carrying amount of a financial liability derecognized and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognized in profit or loss. n. Provisions For the best estimate of provisions, the discounted cash flows need to consider the risk and uncertainties of obligations. Provisions are measured by the discounted value of the estimated cash flows for the liquidation of the obligation. o. Revenue recognition The Group identifies a contract with a customer, allocates the transaction price to the performance obligations, and recognizes revenue when performance obligations are satisfied. Unearned receipts for merchandise sales would be recognized as contract liabilities before the Group fulfills its performance obligations. Revenue from the sale of goods Revenue from the sale of goods comes from the sale of ICs. Sales of ICs are recognized as revenue when the goods are shipped because it is the time when the customer has full discretion over the manner of distribution and the price to sell the goods, has the primary responsibility for sales to future customers, and bears the risks of obsolescence. Trade receivables are recognized concurrently. The Group does not recognize revenue on materials delivered to subcontractors because this delivery does not involve a transfer of control. Other Other mainly comes from software development. p. Lease 2019 At the inception of a contract, the Group assesses whether the contract is, or contains, a lease. 1) The Group as lessor Leases are classified as finance leases whenever the terms of a lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. When the Group subleases a right-of-use asset, the sublease is classified by reference to the right-of-use asset arising from the head lease, not with reference to the underlying asset. However, if the head lease is a short-term lease that the Group, as a lessee, has accounted for applying recognition exemption, the sublease is classified as an operating lease. Lease payments less any lease incentives payable from operating leases are recognized as income on a straight-line basis over the terms of the relevant leases. Initial direct costs incurred in obtaining operating leases are added to the carrying amounts of the underlying assets and recognized as expenses on a straight-line basis over the lease terms. 2) The Group as lessee The Group recognizes right-of-use assets and lease liabilities for all leases at the commencement date of a lease, except for short-term leases and low-value asset leases accounted for applying a recognition exemption where lease payments are recognized as expenses on a straight-line basis over the lease terms. Right-of-use assets are initially measured at cost, which comprises the initial measurement of lease liabilities adjusted for lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs needed to restore the underlying assets, and less any lease incentives received. Right-of-use assets are subsequently measured at cost less accumulated depreciation and impairment losses and adjusted for any remeasurement of the lease liabilities. Right-of-use assets are presented on a separate line in the consolidated balance sheets, except for those that meet the definition of investment properties. With respect to the recognition and measurement of right-of-use assets that meet the definition of investment properties, refer to Note 4(9) for the accounting policies for investment properties. Right-of-use assets are depreciated using the straight-line method from the commencement dates to the earlier of the end of the useful lives of the right-of-use assets or the end of the lease terms. Lease liabilities are initially measured at the present value of the lease payments, which comprise fixed payments and variable lease payments which depend on an index or a rate. The lease payments are discounted using the interest rate implicit in a lease, if that rate can be readily determined. If that rate cannot be readily determined, the Group uses the lessee’s incremental borrowing rate. Subsequently, lease liabilities are measured at amortized cost using the effective interest method, with interest expense recognized over the lease terms. When there is a change in a lease term or a change in future lease payments resulting from a change in an index or a rate used to determine those payments, the Group remeasures the lease liabilities with a corresponding adjustment to the right-of-use-assets. However, if the carrying amount of the right-of-use assets is reduced to zero, any remaining amount of the remeasurement is recognized in profit or loss. Lease liabilities are presented on a separate line in the consolidated balance sheets. 2018 Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. 1) The Group as lessor Rental income from operating leases is recognized on a straight-line basis over the term of the relevant lease. 2) The Group as lessee Contingent rents arising under operating leases are recognized as an expense in the year in which they are incurred. q. Government grants Government grants are not recognized until there is reasonable assurance that the Group will comply with the conditions attached to the grants and that the grants will be received. Government grants are recognized in profit or loss on a systematic basis over the periods in which the Group recognizes as expenses the related costs for which the grants are intended to compensate. Specifically, government grants whose primary condition is that the Group should purchase, construct or otherwise acquire non-current assets are recognized as a deduction from the carrying amount of the relevant asset and recognized in profit or loss over the useful lives of the related assets. Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Group with no future related costs are recognized in profit or loss in the period in which they become receivable. r. Employee benefits 1) Short-term employee benefits Liabilities recognized in respect of short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in exchange for the related services. 2) Retirement benefits Payments to defined contribution retirement benefit plans are recognized as expenses 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 and past service cost) and net interest on the net defined benefit liabilities (assets) are recognized as employee benefits expense in the period in which they occur, and the return on plan assets (excluding interest), is recognized in other comprehensive income in the period in which it occurs. Remeasurement recognized in other comprehensive income is reflected immediately in retained earnings and will not be reclassified to profit or loss. Net defined benefit liabilities (assets) represent the actual deficit (surplus) in the Group’s defined benefit plans. Any surplus resulting from this calculation is limited to the present value of any refunds from the plans or reductions in future contributions to the plans. s. 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 determined at the grant date of the employee share options is expensed on a straight-line basis over the vesting period, based on the Group's estimate of employee share options that will eventually vest, with a corresponding increase in capital surplus - employee share options. The fair value determined at the grant date of the employee share options is recognized as an expense in full at the grant date when the share options granted vest immediately. When restricted shares for employees are issued, other equity - unearned employee benefits is recognized on the grant date, with a corresponding increase in capital surplus - restricted shares for employees. If restricted shares for employees are granted for consideration and should be returned, they are recognized as payables. Dividends paid to employees on restricted shares that do not need to be returned if employees resign in the vesting period are recognized as expenses when the dividends are declared with a corresponding adjustment in capital surplus - restricted shares for employees. At the end of each reporting period, The Group revises its estimate of the number of employee share 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 - employee share options. t. Taxation Income tax expense represents the sum of the tax currently payable and deferred tax. 1) Current tax According to the Income Tax Law, an additional tax of inappropriate earnings is provided for as income tax in the year the shareholders approve to retain the earnings. Adjustments of prior years’ tax liabilities are added to or deducted from the current year’s tax provision. 2) Deferred tax Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences and unused loss carryforwards to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized. Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognized to the extent that it is probable that there will be sufficient taxable profits against which to utilize the benefits of the temporary differences and they are expected to reverse in the foreseeable future. The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. A previously unrecognized deferred tax asset is also reviewed at the end of each reporting period and recognized to the to the extent that it has become probable that future taxable profit will allow 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 period in which the liabilities are settled or the assets are realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which The Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. 3) Current and deferred tax for the period 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 UNCERTAINTY In the application of the Group’s accounting policies, management is required to make judgments, estimations, and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised if the revisions affect only that period or in the period of the revisions and future periods if the revisions affect both current and future periods. Critical Accounting Judgements a. Lease terms - 2019 In determining a lease term, the Group considers all facts and circumstances that create an economic incentive to exercise or not to exercise an option, including any expected changes in facts and circumstances from the commencement date until the exercise date of the option. Main factors considered include contractual terms and conditions for the optional periods, significant leasehold improvements undertaken over the contract term, the importance of the underlying asset to the lessee’s operations, etc. The lease term is reassessed if a significant change in circumstances that are within control of the Group occur. Key Sources of Estimation Uncertainty a. Estimated impairment of financial assets The provision for impairment of trade receivables, investments in debt instruments, and financial guarantee contracts is based on assumptions about risk of default and expected loss rates. The Group uses judgment in making these assumptions and in selecting the inputs to the impairment calculation, based on the Group’s historical experience, existing market conditions as well as forward looking estimates as of the end of each reporting period. Where the actual future cash inflows are less than expected, a material impairment loss may arise. b. Estimated impairment of tangible assets and intangible assets (excluding goodwill) The Group relies on subjective judgments and depends on industry usage patterns and related characteristics to determine cash flows, asset useful lives, and future revenues and expenses. Any change in the operating environment and corporate strategy may cause significant impairment loss. c. Lessees’ incremental borrowing rates- 2019 In determining a lessee’s incremental borrowing rate used in discounting lease payments, a risk-free rate for the same currency and relevant duration is selected as a reference rate, and the lessee’s credit spread adjustments and lease specific adjustments are also taken into account. 6. CASH AND CASH EQUIVALENTS Cash on hand Checking accounts and demand deposits Cash equivalent Time deposits in banks Repurchase agreements collateralized by bonds December 31 2019 2018 $ 6,065 769,510 $ 7,521 1,338,553 2,245,053 - 1,881,214 8,433 $ 3,020,628 $ 3,235,721 The market rate intervals of cash in bank and bank overdrafts at the end of the reporting period were as follows: Bank balance Repurchase agreement collateralized by bonds December 31 2019 2018 0.01%-2.25% - 0.01%-1.55% 1.00% 7. FINANCIAL ASSETS AND LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS Financial assets at FVTPL - current Financial assets classified as at FVTPL Non-derivative financial assets - Mutual funds - Unlisted securities in the ROC - Listed securities in the ROC Financial assets held for trading Non-derivative financial assets December 31 2019 2018 $ 987,692 45,904 41,960 $ 1,280,668 4,361 - - Securities listed in the ROC and other countries - CB 15,123 28,718 $ 1,090,679 $ 1,313,747 Financial liabilities at FVTPL – non-current Financial assets classified as at FVTPL Non-derivative financial assets - Securities unlisted in the ROC - Private funds - Mutual funds - Securities listed in the ROC and other countries $ $ 658,431 260,140 75,119 33,755 462,387 160,226 75,432 39,822 $ 1,027,445 $ 737,867 8. FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME Non-current Domestic and foreign investments Unlisted shares and emerging market shares Listed shares and emerging market shares Private funds December 31 2019 2018 $ 98,915 90,472 - $ 127,991 78,246 39,971 $ 189,387 $ 246,208  9. NOTES AND ACCOUNTS RECEIVABLE, NET Notes receivable Notes receivable - operating $ 300 $ 16 December 31 2019 2018 Trade receivables At amortized cost Gross carrying amount Less: Allowance for impairment loss Trade receivable 832,662 (329) 832,333 954,518 (504) 954,014 $ 832,633 $ 954,030 The average credit period on sales of goods was 30 to 60 days without interest. The Group's exposure to credit risk and external credit ratings are continuously monitored. In order to minimize credit risk, the management of the Group has delegated a team responsible for determining credit limits, credit approvals and other monitoring procedures to ensure that follow-up action is taken to recover overdue debts. In addition, the Group reviews the recoverable amount of each individual trade debt at the end of the reporting period to ensure that adequate allowance is made for possible irrecoverable amounts. In this regard, the management believes the Group’s credit risk was significantly reduced. The Group measures the loss allowance for trade receivables at an amount equal to lifetime ECLs. The expected credit losses on trade receivables are estimated using a provision matrix by reference to the past default experience of the debtor and an analysis of the debtor’s current financial position, adjusted for general economic conditions of the industry in which the debtors operate and an assessment of both the current as well as the forecasted direction of economic conditions at the reporting date. As the Group’s historical credit loss experience does not show significantly different loss patterns for different customer segments, the provision for loss allowance based on past due status is not further distinguished according to the Group’s different customer base. The Group writes off a trade receivable when there is information indicating that the debtor is in severe financial difficulty and there is no realistic prospect of recovery. Where recoveries are made, these are recognized in profit or loss. The Group’s current credit risk grading framework is shown in the following table: December 31, 2019 Not Overdue Overdue 1- 60 days Overdue 61-90 days Overdue 91-120 days Overdue 121 days or More Total Gross carrying amount Expected credit losses $ 832,233 - $ $ 90 - $ - - $ - - 339 (329 ) $ 832,662 (329 ) Amortized cost at December 31, 2019 $ 832,233 $ 90 $ - $ - $ 10 $ 832,333 December 31, 2018 Not Overdue Overdue 1- 60 days Overdue 61-90 days Overdue 91-120 days Overdue 121 days or More Total Gross carrying amount Expected credit losses $ 953,258 - $ $ 691 - $ - - $ - - 569 (504 ) $ 954,518 (504 ) Amortized cost at December 31, 2018 $ 953,258 $ 691 $ - $ - $ 65 $ 954,014 The movements of the loss allowance of trade receivables were as follows: Balance at January 1 Less: Amounts written off (Note) Less: Net remeasurement of loss allowance Exchange differences Balance at December 31 December 31 2019 2018 $ 504 (76) (73) (26) $ 107,744 (107,257) - 17 $ 329 $ 504 Note: The accounts receivable from one customer that were overdue for 2 years and determined to be uncollectible and the accounts receivable from another customer that was declared bankrupt by court ruling were both written off. The written-off receivables and allowance were both $107,257. 10. INVENTORIES Finished goods Work in progress Raw materials December 31 2019 2018 $ $ 307,179 281,042 170,990 321,099 290,973 206,876 $ 759,211 $ 818,948 The costs of inventories recognized as cost of goods sold for the years ended December 31, 2019 and 2018 were $3,050,138 thousand and $3,563,885 thousand, respectively. The costs of inventories recognized as costs of goods sold for the years ended December 31, 2019 and 2018 were as follows: Inventory write - downs Income from scrap sales Years Ended December 31 2018 2019 $ (16,192) 103 $ (35,411) 361 $ (16,089) $ (35,050) 11. SUBSIDIARIES a. The subsidiaries included in the consolidated financial statements The information of the subsidiaries at the end of reporting period was as follows: Name of Investor Name of Investee Main Businesses and Products 2019 2018 Note Percentage of Ownership December 31 Sunplus Sunplus Management Consulting Management Ventureplus Group Inc. Investment (“Ventureplus Group”) Sunplus Technology (H.K.) International trade Sunplus Venture Investment Lin Shih Investment (“Lin Shih”) Investment Sunplus mMobile Inc. Design of ICs Sunext Technology Co., Ltd. Design of ICs (“Sunext”) Sunplus Innovation Technology Design of ICs Generalplus Technology Inc. Design of ICs (“Generalplus”) Wei-Young Investment Inc. Investment Russell Holdings Limited Investment Magic Sky Limited Investment Sunplus mMedia Inc. Design of ICs Award Glory Investment Jumplux Technology Design of ICs Ventureplus Group Ventureplus Mauritius Ventureplus Mauritius Ventureplus Cayman Investment Investment Ventureplus Cayman Ytrip Technology Web research and development 100.00 100.00 100.00 100.00 100.00 100.00 92.55 61.13 34.30 100.00 100.00 100.00 89.76 100.00 55.00 100.00 100.00 38.47 100.00 100.00 100.00 100.00 100.00 100.00 91.40 61.13 34.30 100.00 100.00 100.00 89.76 100.00 55.00 100.00 100.00 - - - - - - - - Sunplus and its subsidiaries owned 47.99% of the equity in Generalplus Technology, Inc. and the Group had controlling interest over Generalplus Technology, Inc.; the investee is included in the consolidated financial statements - - - - - - - - 38.47 Sunplus and its subsidiaries owned 90.71% of the equity in Ytrip. Sunplus App Technology Manufacturing and sale of 53.85 93.33 computer software; system integration services and information management and education. Sunplus Prof-tek Technology Development of computer 100.00 100.00 (Shenzhen) software, system integration services, building rental services and property management Sunplus Technology (Shanghai) Development of computer 100.00 100.00 software, system integration services and building rental services SunMedia Technology Development of computer 100.00 100.00 software, system integration services and building rental services Sunplus Technology (Beijing) Development of computer 100.00 100.00 software, system integration services and building rental services - - - - - Sunplus Technology (Shanghai) Ytrip Technology Web research and development 44.08 44.08 Sunplus and its subsidiaries owned Jsilicon Technology Software Development and IC 100.00 Shuangxin Technology Software Development and IC 55.00 Design Design Sunplus Prof-tek (Shenzhen) Shuangxin Technology Software Development and IC 45.00 Design - - - 90.71% of the equity in Ytrip. Registration of establishment completed on February 26, 2019. - Sunplus and its subsidiaries owned 100% of the equity in Chongqing Shuangxin Co., Ltd. Ytrip Technology Cculture Communication Development and sale Sunplus Venture Jumplux Technology Design of ICs 100.00 42.08 100.00 - 42.08 Sunplus and its subsidiaries owned Han Young Technology Design of ICs Sunext Technology Co., Ltd. Design of ICs - - 97.08% of the equity in Jumplux Technology. 70.00 The liquidation of Han Young Technology was completed on November 15, 2019, refer to Note 29. - Due to organizational reorganization, it transferred its equity to Sunplus on 2018 and 2019. Sunplus mMedia Design of ICs 7.64 7.64 Sunplus and its subsidiaries owned Sunplus Innovation Design of ICs 5.64 5.64 Sunplus and its subsidiaries owned 100% of the equity in Sunplus mMedia. 100% of the equity in Sunplus Innovation Lin Shih Generalplus Technology Inc. Design of ICs 13.69 13.69 Sunplus and its subsidiaries had 47.99% stake in Generalplus Technology, Inc. and the Group had controlling interest over Generalplus Technology, Inc.; the investee is included in the consolidated financial statements (Continued) Percentage of Ownership December 31 Name of Investor Name of Investee Main Businesses and Products 2019 2018 Note Lin Shih Sunplus mMedia Design of ICs 2.60 2.60 Sunplus and its subsidiaries owned Sunplus Innovation Design of ICs 2.09 2.09 Sunplus and its subsidiaries owned 68.86% of the equity in Sunplus Innovation. 100% of the equity in Sunplus mMedia. Generalplus Generalplus Samoa Generalplus Samoa Generalplus Mauritius Investment Investment Generalplus Mauritius Generalplus Shenzhen IC product development, after sales service and market research Award Glory Sunny Fancy Generalplus HK Marketing Sunny Fancy Giant Kingdom Giant Rock Investment Investment Investment WORLDPLUS HOLDINGS Investment L.L.C. (Worldplus) 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 - - - - - - - - Giant Kingdom Ytrip Technology Web research and development 8.16 8.16 Sunplus's subsidiaries owned 90.71% Giank Rock Sunplus App Technology Manufacturing and sale of 42.31 - Sunplus and its subsidiaries owned of the equity in Ytrip. computer software; system integration services and information management and education 96.16% of the equity in Sunplus App. Worldplus Lingyao Technology Software development and rental 100.00 - Obtained control on September 2, sales 2019, so it was included in the consolidated financial statements. (Concluded) The financial statements as of and for the years ended December 31, 2019 of the above subsidiaries except Sunplus Management Consulting and Generalplus HK, were audited by the auditors. The management of the Company believes that the financial statements of Sunplus Management Consulting and Generalplus HK will not be subject to major adjustments if it were audited. b. Subsidiary excluded from the consolidated financial statements Company name Generalplus Technology Inc. Sunplus Innovation Technology The Voting Ratio of Non-controlling Equity December 31 2019 2018 52.01% 31.14% 52.01% 31.14% Refer to attachment 6 for registered countries and company information: Company Name Profits Attributed to Non-controlling Interests Years Ended December 31 2019 2018 Non-controlling Interests December 31 2019 2018 Generalplus Technology Inc. Sunplus Innovation Technology iCatch Technology $ $ 116,295 42,244 - 147,898 18,906 (20,889) $ 1,075,166 308,951 - $ 1,109,947 283,063 - The summarized financial information below represents amounts before intragroup eliminations. Current assets Non-current assets Current liabilities Non-current liabilities Equity Equity attributable to: Owners of the Company Non-controlling interests Operating revenue Net income Other comprehensive income December 31 2019 2018 $ 3,190,003 790,554 792,198 214,644 $ 3,201,689 760,401 828,965 175,669 $ 2,973,715 $ 2,957,456 $ 1,589,598 1,384,117 $ 1,564,446 1,393,010 $ 2,973,715 $ 2,957,456 For the Years Ended December 31 2019 2018 $ 3,606,544 $ 4,223,670 $ 359,235 (19,486) $ 306,710 (10,077) Total other comprehensive income $ 339,749 $ 296,633 Equity attributable to: Owners of the Company Non-controlling interests Total other comprehensive attributable to: Owners of the Company Non-controlling interests $ 200,697 158,538 $ 160,795 145,915 $ 359,235 $ 306,710 $ 191,123 148,626 $ 156,526 140,107 $ 339,749 $ 296,633 Cash flows Cash flows from operating activities Cash flows from (used in) investing activities Cash flows used in financing activities Effect of exchange rate changes on the balance of cash held in foreign $ currencies Net cash outflow $ 512,043 57,697 (304,255) 414,702 (146,496) (296,520) 1,452 (1,649) $ 266,937 $ (29,963) Dividend paid to non-controlling interests $ (157,520) $ (169,798) 12. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD Investments in associates a. Investments in associates Listed companies iCatch Technology Global View Co., Ltd. Autsys Co., Ltd. December 31 2019 2018 $ 695,028 $ 729,219 December 31 2019 2018 $ 320,180 297,640 77,208 $ 350,859 307,106 71,254 $ 695,028 $ 729,219 As the end of the reporting period, the proportion of ownership and voting rights in associates held by the Group were as follows: Name of Associate iCatch Technology Global View Co., Ltd. Autsys Co., Ltd. December 31 2019 2018 36% 13% 16% 36% 13% 19% Refer to Table 6 following these Notes to Consolidated Financial Statements for information on the associates’ business types, main operating locations and registered countries, and Table 7 following these Notes for the information on investments in mainland China. The fair values of publicly traded investments accounted for using the equity method were based on the closing prices of those investments at the balance sheet date, as follows: Name of Associate Global View, Co., Ltd. December 31 2019 2018 $ 239,889 $ 248,530 Investments in the above jointly controlled entities are accounted for using the equity method. The summarized financial information of the Group’s associates is set out below: Total assets Total liabilities December 31 2019 2018 $ 2,438,751 313,348 $ $ 2,569,477 369,039 $ Revenue Profit for the period Comprehensive income Group’s share of profits of associates Years Ended December 31 2018 2019 $ 1,088,383 (5,711) $ (14,131) $ (19,915) $ $ 1,005,661 (45,428) $ (103,126) $ (44,862) $ The investments accounted for by the equity method and the share of profit or loss and other comprehensive income of those investments for the year ended December 31, 2019 and 2018 was based on the associates’ financial statements audited by the auditors for the same years. 13. PROPERTY, PLANT AND EQUIPMENT a. Assets used by the Group - 2019 Prepayments for Equipment and Auxiliary Machinery and Testing Transportation Furniture and Leasehold Other Construction Buildings Equipment Equipment Equipment Equipment Fixtures Improvements Equipment in Progress Total Cost Balance at January 1, 2019 $ 2,383,245 $ 193,874 $ 13,729 $ 616,529 $ 5,904 $ 266,331 $ 2,782 $ 23,959 $ 2,940 $ 3,509,393 Additions Disposals Reclassified to investment property Consolidated changes Effect of exchange rate - - - - 442 5,446 102,304 773 17,700 457 (5,408 ) (6,486 ) (198,512 ) (1,076 ) (40,489 ) (1,716 ) 234 (39 ) 9,900 137,256 - (253,726 ) - - - - - - - - 10,493 2,501 - - - (10,720 ) (227 ) 205 17,088 19,794 changes (44,726 ) (1,618 ) (2,261 ) (2,904 ) 272 (6,517 ) (43 ) (512 ) (6 ) (58,315 ) Balance at December 31, 2019 $ 2,338,519 $ 187,290 $ 10,428 $ 517,417 $ 5,873 $ 250,019 $ 1,480 $ 23,847 $ 19,202 $ 3,354,075 Accumulated depreciation Balance at January 1, 2019 $ 507,818 $ 126,857 $ 12,759 $ 540,595 $ 3,633 $ 231,996 $ 2,331 $ 19,447 $ - $ 1,445,436 Depreciation expense 53,530 19,626 2,322 95,336 1,145 16,945 5,288 Disposals Consolidated changes Effect of exchange rate - - (5,408 ) (6,375 ) (195,243 ) (1,052 ) (39,515 ) (1,716 ) - - - - 2,273 - 601 (39 ) 85 - - - 194,793 (249,648 ) 2,358 changes (6,105 ) 2,147 (1,477 ) (3,534 ) 292 (5,975 ) (4,664 ) 151 - (19,165 ) Balance at December 31, 2019 $ 555,243 $ 143,222 $ 7,229 $ 437,154 $ 4,018 $ 205,424 $ 1,239 $ 20,245 $ - $ 1,373,774 Accumulated impairment Balance at December 31, 2019 $ - $ - $ - $ 11,498 $ - $ - $ - $ - $ - $ 11,498 Carrying amounts at December, 2019 $ 1,783,276 $ 44,068 $ 3,199 $ 68,765 $ 1,855 $ 44,595 $ 241 $ 3,602 $ 19,202 $ 1,968,803 b. 2018 Auxiliary Machinery Testing Transportation Furniture and Leasehold Other Construction Payable for Buildings Equipment and Equipment Equipment Fixtures Improvements Equipment in Progress purchases of Total Cost Balance at January 1, 2018 Additions Disposals Reclassified to investment property Consolidated changes Effect of exchange rate changes Balance at December 31, 2018 Accumulated depreciation Balance at January 1, 2018 Depreciation expense Disposals Reclassified to investment property Consolidated charges Effect of exchange rate changes Balance at December 31, 2018 Equipment Equipment $ 2,407,349 - - $ 184,489 882 (9,476 ) $ 15,131 1,576 (1,836 ) $ 566,450 133,708 (5,908 ) $ 7,846 - (1,790 ) $ 257,883 19,426 (6,625 ) $ - - 23,676 - - - - (77,014 ) - - 45 (1,224 ) 26,352 125 - (23,676 ) (516 ) $ $ 21,772 253 (1,237 ) - - (24,104 ) (5,697 ) (1,142 ) (707 ) (152 ) (3,174 ) 497 3,171 - 45 - (45 ) - - $ - 2,940 - $ 3,487,272 158,955 (26,872 ) - - - - (78,754 ) (31,308 ) $ 2,383,245 $ 193,874 $ 13,729 $ 616,529 $ 5,904 $ 266,331 $ 2,782 $ 23,959 $ - $ 2,940 $ 3,509,293 $ 456,802 53,993 - $ 109,497 21,608 (9,476 ) $ 13,500 3,612 (1,115 ) $ 478,413 101,194 (6,389 ) $ $ 3,556 1,348 (22 ) $ 226,324 15,746 (7,741 ) $ $ 4,695 5,272 - 18,833 773 (1,237 ) - - 2,762 - - - - (34,174 ) - - - (2,762 ) (505 ) (473 ) - - (2,977 ) 2,466 (3,238 ) 1,551 (1,249 ) (1,828 ) (4,401 ) 1,078 $ - - - - - - - - - - - - $ 1,311,620 203,546 (25,980 ) - (35,152 ) (8,598 ) $ 507,818 $ 126,857 $ 12,759 $ 540,595 $ 3,633 $ 231,996 $ 2,331 $ 19,447 $ - $ - $ 1,445,436 (Continued) Machinery Payable for Auxiliary and Testing Transportation Furniture and Leasehold Other Construction purchases of Buildings Equipment Equipment Equipment Equipment Fixtures Improvements Equipment in Progress Equipment Total Accumulated impairment Balance at December 31, 2018 $ - $ - $ - $ 11,498 $ - $ - $ - $ - $ - $ - $ 11,498 Balance at December 31, 2017 and January 1, 2018 Carrying amounts at December, 2018 $ 1,950,547 $ 74,992 $ 1,631 $ 76,539 $ 4,290 $ 31,559 $ 21,657 $ 2,939 $ $ 1,875,427 $ 67,017 $ 970 $ 64,436 $ 2,271 $ 34,335 $ 451 $ 4,512 $ - - $ $ - $ 2,164,154 2,940 $ 2,052,359 (Concluded) The above items of property, plant and equipment are depreciated on a straight-line basis over the following estimated useful lives as follows: Buildings Auxiliary equipment Machinery and equipment Testing equipment Transportation equipment Furniture and fixtures Leasehold improvements Other equipment 10-56 years 3-11 years 3-10 years 1-5 years 4-10 years 1-6 years 5 years 3-10 years Refer to Note 34 for the carrying amounts of property, plant and equipment that had been pledged by the Group to secure borrowings. 14. LEASE ARRANGEMENTS a. Right-of-use assets - 2019 Carrying amounts Land Buildings Transportation equipment Additions to right-of-use assets Depreciation charge for right-of-use assets Land Buildings Transportation equipment December 31, 2019 $ 215,922 25,098 894 $ 241,914 2019 $ $ 3,989 6,859 6,454 361 $ 13,674 Income from the subleasing of right-of-use assets (presented in other income) $ (1,093) The other part of right-of-use assets-land in China is subleased by operating leases, and the relevant right-of-use assets are classified as investment properties. Please refer to Note 15. b. Lease liabilities - 2019 Carrying amounts Current Non-current Range of discount rate for lease liabilities was as follows: Land Buildings Transportation equipment c. Material lease-in activities and terms December 31, 2019 $ 11,885 $ 230,251 December 31, 2019 2.39% 1.575%-4.75% 1.575% The Group leases land and buildings for the use of plants, offices and dormitory, also leases transportation equipment for the use of business travel with lease terms of 2 to 50 years. Lease terms of land in the ROC is 20 years, the lease contract for land located in the ROC specifies that lease payments will be adjusted on the basis of changes in announced land value prices. Lease terms of land in China is 45-50 years. The Group does not have bargain purchase options to acquire the leasehold land, buildings and transportation equipment at the end of the lease terms. d. Subleases Sublease of right-of-use assets - 2019 The Group subleases its right-of-use assets for buildings under operating leases with lease terms for 2 years The maturity analysis of lease payments receivable under operating subleases was as follows: Year 1 e. Other lease information 2019 Expenses relating to short-term leases Expenses relating to low-value asset leases Total cash outflow for leases December 31, 2019 $ 1,153 2019 $ $ $ 11,343 2,282 30,995 The Group leases parking spaces and other leases which qualify as short-term leases. The Group has elected to apply the recognition exemption and thus, did not recognize right-of-use assets and lease liabilities for these leases. 2018 The future minimum lease payments of non-cancellable operating lease commitments are as follows: Not later than 1 year Later than 1 year and not later than 5 years Later than 5 years 15. INVESTMENT PROPERTIES Cost December 31, 2018 $ 16,561 46,037 36,576 $ 99,174 Completed Investment Properties Right-of-use Assets Total Balance at January 1, 2019 Adjustments on initial application of IFRS 16 Balance at January 1, 2019 as restated Additions Effect of acquisition of subsidiary Effect of exchange rate differences $ $ 1,400,135 - 1,400,135 1,488 52,074 (52,690) - 102,702 102,702 - - (3,835) $ 1,400,135 102,702 1,502,837 1,488 52,074 (56,525) Balance at December 31, 2019 $ 1,401,007 $ 98,867 $ 1,499,874 Accumulated depreciation Balance at January 1, 2019 Depreciation expense Effect of acquisition of subsidiary Effect of exchange rate differences $ (360,821) $ (71, 513) (14,691) 16,424 $ - (2,574) - 98 (360,821) (74,087) (14,691) 16,522 Balance at December 31, 2019 $ (430,601) $ (2,476) $ (433,077) Balance at December 31, 2019, net $ 970,406 $ 96,391 $ 1,066,797 Cost Balance at January 1, 2018 Additions Disposals Effect of exchange rate differences $ $ 1,435,061 3,891 (10,016) (28,801) - - - $ 1,435,061 3,891 (10,016) (28,801) Balance at December 31, 2018 $ 1,400,135 $ - $ 1,400,135 (Continued) Completed Investment Properties Right-of-use Assets Total Accumulated depreciation Balance at January 1, 2018 Depreciation expense Effect of exchange rate differences $ (296,010) $ (72,240) 7,429 Balance at December 31, 2018 $ (360,821) $ Balance at December 31, 2018 $ 1,039,314 $ - - - - - $ (296,010) (72,240) 7,429 $ (360,821) $ 1,039,314 (Concluded) The right-of-use assets in the investment properties are the use right of land signed by the Group and is subleased under operating lease. The lease terms of the investment properties are from 1 to 15 years, with extension option according to the original contract when exercising the renewal right. The lessee does not have the right of first refusal at the end of the lease period. The maturity analysis of lease payments receivable under operating leases of investment properties as of December 31, 2019 was as follows: Year 1 Year 2 Year 3 December 31, 2019 $ 142,060 61,643 22,066 $ 225,769 The above items of investment properties are depreciated on a straight-line basis over their estimated useful lives as follows: Completed investment properties Right-of-use assets 5-26 years 35-39 years The future minimum lease payments of non-cancellable operating lease commitments as of December 31, 2018 are as follows: Not later than 1 year Later than 1 year and not later than 5 years Later than 5 years December 31, 2018 $ 226,650 568,499 581,826 $ 1,376,975 The newly added investment properties of Lingyao Technology Co., Ltd. in Shenzhen, China were due to the merger of enterprises. The fair value of the investment properties is appraised by an independent valuation agency of non-related parties. Innolux Technology Co., Ltd. conducted a valuation by using income approach on September 2, 2019, and the important unobservable inputs used included discounted values. The fair value of the valuation is as follows: Fair value December 31, 2019 $ 37,900 The fair value of the investment properties of SunMedia Technology had been determined on the basis of valuations carried out on December 31, 2018 and 2017 by Sichuan Zongli Real Estate Land Assets Evaluation Co., Ltd. The evaluation adopted the income approach, and the important unobservable input values used included the discounted value. The evaluated fair value is as follows: December 31 2019 2018 Fair value $ 1,182,963 $ 1,267,909 The fair value of the investment properties of Sunplus Technology (Shanghai) Co., Ltd. had been determined on the basis of valuations carried out at the reporting dates by Suzhou Feng-Zheng valuation firm. The evaluation adopted the income approach, and the important unobservable input values used included the discounted value. The evaluated fair value is as follows: Fair value $ 2,295,816 $ 2,471,410 December 31 2019 2018 16. INTANGIBLE ASSETS Cost Year Ended December 31, 2019 Technology License Fees Software Patents Goodwill Total Balance at January 1 Additions Decrease Reclassified Effect of exchange rate differences $ 778,507 55,525 (23,509) (350) (924) $ 298,609 20,069 (6,026) - (52) $ 114,504 - - - (10) $ 30,596 - - - - $ 1,222,216 75,594 (29,535) (350) (986) Balance at December 31 $ 809,249 $ 312,600 $ 114,494 $ 30,596 $ 1,266,939 Accumulated amortization Balance at January 1 Amortization expense Decrease Reclassified Effect of exchange rate differences $ 556,915 51,139 (23,509) (175) (512) $ 270,852 25,302 (5,581) - (1,020) $ $ 83,215 1,371 - - 4 - - - - - $ 910,982 77,812 (29,090) (175) (1,536) Balance at December 31 $ 583,858 $ 289,553 $ 84,582 $ - $ 957,993 (Continued) Year Ended December 31, 2019 Technology License Fees Software Patents Goodwill Total $ 111,136 $ - $ 21,577 $ - $ 132,713 $ 114,255 $ 23,047 $ 8,335 $ 30,596 $ 176,233 (Concluded) Year Ended December 31, 2018 Technology License Fees Software Patents Goodwill Total Accumulated deficit Balance at January 1 and December 31 Carrying amounts at December 31, 2018 Cost Balance at January 1 Additions Decrease Effect of exchange rate differences Consolidated changes $ 762,432 66,784 (20,568) (500) (29,641) $ 310,734 24,736 (22,271) (3,439) (11,151) $ 114,510 - - (6) - $ 30,596 - - - - $ 1,218,272 91,520 (42,839) (3,945) (40,792) Balance at December 31 $ 778,507 $ 298,609 $ 114,504 $ 30,596 $ 1,222,216 Accumulated amortization Balance at January 1 Amortization expense Decrease Effect of exchange rate differences Consolidated changes $ 528,672 54,526 (20,568) (181) (5,534) $ 275,297 26,340 (22,271) (375) (8,139) $ $ 81,846 1,371 - (2) - - - - - - $ 885,815 82,237 (42,839) (558) (13,673) Balance at December 31 $ 556,915 $ 270,852 $ 83,215 $ - $ 910,982 Accumulated deficit Balance at January 1 Consolidated changes $ 114,749 (3,613) $ $ - - 21,577 - $ - - $ 136,326 (3,613) Balance at December 31 $ 111,136 $ - $ 21,577 $ - $ 132,713 Carrying amounts at December 31, 2018 $ 110,456 $ 27,757 $ 9,712 $ 30,596 $ 178,521 Other intangible assets are amortized on a straight-line basis over their estimated useful lives as follows: Technology license fees Software Patents 1-10 years 1-10 years 8-18 years An analysis of depreciation by function” Operating costs Selling and marketing expenses General and administrative expenses Research and development expenses 17. OTHER ASSETS Current Other financial assets Pledged time deposits (a) Other assets Prepayments for EDA tools Finance lease payables (c) Others Non-current Other financial assets Pledged time deposits (a) Time deposits (b) Other assets Refundable deposits Finance lease payables (c) Prepaid long-term investment Others For the Year Ended December 31 2019 2018 $ - 106 5,894 71,812 $ 228 110 6,743 75,156 $ 77,812 $ 82,237 December 31 2019 2018 $ 119,920 $ 153,575 $ 16,787 - 72,130 $ 17,194 2,756 71,371 $ 88,917 $ 91,321 $ 10,899 129,150 $ 10,943 116,272 $ 140,049 $ 127,215 $ 6,247 - - 7,800 $ 7,749 102,175 30,001 7,800 $ 14,047 $ 147,725 a. Refer to Note 34 for information on pledged time deposits. b. Generalplus Shenzhen invested RMB30,000 thousand and RMB26,0000 thousand in long-term certificates of deposit with the bank in December 31, 2019 and December 31, 2018 (for durations of three years). The interest rates for such certificates of deposit are at fixed rates. c. The amounts of the Group’s finance lease payables for right of use assets - Land in China as of December 31, 2018 was $104,931 thousand, respectively. 18. LOANS Short-term borrowings Secured borrowings Bank loans Unsecured borrowings Bank loans December 31 2019 2018 $ 120,130 $ 122,769 203,496 188,446 $ 323,626 $ 311,215 The weighted average effective interest rates for bank loans from January 1, 2019 to December 31, 2019 and from January 1, 2018 to December 31, 2018 were 1.745%-3.000% and 2.500%-3.594% per annum, respectively. Long-term borrowings The borrowings of the Group were as follows: Maturity Date Significant Covenant 2019 2018 December 31 Floating rate borrowings Unsecured bank borrowings 2019.10.14 Originally repaid in July 2016, extended to October 2019. The loan was settled in advance on September 10, 2019. Unsecured bank borrowings 2019.11.10 Repayable semiannually from November 2016, Unsecured bank borrowings 2019.2.14 Repayable quarterly from February 2014, the the loan was repaid on maturity loan was repaid on maturity Less: Current portion Long-term borrowings $ $ - - - - - - $ 135,046 100,000 15,000 250,046 250,046 $ - The effective borrowing rates as of December 31, 2018 were 1.545%-3.959%. According to the loan contract, the consolidated financial statements of the company for 107 are limited by current ratio, debt ratio, interest guarantee multiple. However, the Company’s inability to meet the ratio requirements would not be deemed as a violation of the contracts. As of 2018, the Company was in compliance with these financial ratio requirements. 19. TRADE PAYABLES Accounts payable Payable - operating December 31 2019 2018 $ 352,155 $ 484,810 The average credit period on purchases of certain goods was 30-60 days. The Group has financial risk management policies in place to ensure that all payables are paid within the pre-agreed credit terms. 20. OTHER LIABILITIES Current Other payables Salaries or bonuses Payable for royalties Compensation due to directors Commissions payable Labor/health insurance Refund liabilities Payables for labor Payables for purchases of equipment Receipt in advance Others Deferred revenue Deferred revenue December 31 2019 2018 $ 299,871 46,676 46,467 31,540 26,629 21,971 6,105 5,552 3,028 88,262 $ 299,445 42,261 59,190 39,772 29,424 14,796 6,403 8,088 3,767 69,400 $ 576,101 $ 572,546 Arising from government grants (Note 27) $ 1,568 $ 1,629 Non-current Other payable Long-term payables Payables for purchases of equipment Decommissioning liabilities $ 4,470 3,198 889 $ - 2,376 889 $ 8,557 $ 3,265 Deferred revenue Arising from government grants (Note 27) $ 58,015 $ 61,894 21. RETIREMENT BENEFIT PLANS a. Defined contribution plans Sunplus, Generalplus, Sunext, Sunplus Innovation, Sunplus mMedia and Jumplux Technology of the Group adopted a pension plan under the Labor Pension Act (LPA), which is a state-managed defined contribution plan. Under the LPA, the Group makes monthly contributions to employees’ individual pension accounts at 6% of monthly salaries and wages. b. Defined benefit plans Before the promulgation of the LPA, Sunplus, Generalplus, Sunext, Sunplus Innovation and Jumplux Technology of the Group had a defined benefit pension plan under the Labor Standards Law. Under this plan, employees should receive either a series of pension payments with a defined annuity or a lump sum that is payable immediately on retirement and is equivalent to 2 base units for each of the first 15 years of service and 1 base unit for each year of service thereafter. The total retirement benefit is subject to a maximum of 45 units. The pension benefits are calculated on the basis of the length of service and average monthly salaries of the six month before retirement. In addition, the Group makes monthly contributions, equal to 2% of salaries, to a pension fund, which is administered by a fund monitoring committee. Pension contributions are deposited in the Bank of Taiwan in the committee’s name and are managed by the Bureau of Labor Funds, Ministry of Labor (the “Bureau”); the company has no right to influence the investment policy and strategy. According to the letter of Zhuhuanzi No. 1090003642 issued by the Hsinchu Science Park Administration of the Ministry of Science and Technology, the Company ceased its retirement fund contribution temporarily from January 1, 2020 to December 31, 2020. The actuarial valuations of plan assets and the present value of the defined benefit obligation were carried out by qualifying actuaries. The principal assumptions used for the purposes of the actuarial valuations were as follows: December 31 2019 2018 Present value of funded defined benefit obligation Fair value of plan assets $ 267,360 (204,475) $ 268,025 (188,770) Net liabilities arising from defined benefit obligation $ 62,885 $ 79,255 Movements in net defined benefit liabilities were as follows: Present Value of Funded Defined Benefit Obligation Fair Value of Plan Assets Net Defined Benefit Liabilities (Assets) $ 290,833 $ 191,869 $ 98,964 Balance at January 1, 2018 Service cost Current service cost Net interest expense (income) Recognized gain and loss Remeasurement Return on plan assets Actuarial (gain) loss-experience adjustment Actuarial (gain) loss-changes in demographic assumptions Actuarial loss-changes in financial assumptions Recognized in other comprehensive income Contributions from the employer Consolidated changes Liabilities extinguished on settlement 789 3,587 4,376 - (4,068) (53) 5,222 1,101 - (24,373) (3,912) - 2,513 2,513 4,596 - - - 4,596 5,932 (8,609) (7,531) 789 1,074 1,863 (4,596) (4,068) (53) 5,222 (3,495) (5,932) (15,764) 3,619 Balance at December 31, 2018 $ 268,025 $ 188,770 $ 79,255 (Continued)  Present Value of Funded Defined Benefit Obligation Fair Value of Plan Assets Net Defined Benefit Liabilities (Assets) $ 268,025 $ 188,770 $ 79,255 Balance at January 1, 2019 Service cost Current service cost Net interest expense (income) Recognized gain and loss Remeasurement Return on plan assets Actuarial (gain) loss-experience adjustment Actuarial (gain) loss-changes in demographic assumptions Actuarial loss-changes in financial assumptions Recognized in other comprehensive income Contributions from the employer Benefit paid 805 3,051 3,856 - (2,387) 47 3,602 1,262 - (5,783) - 2,212 2,212 6,223 - - - 6,223 13,053 (5,783) 805 839 1,644 (6,223) (2,387) 47 3,602 (4,961) (13,053) - Balance at December 31, 2019 $ 267,360 $ 204,475 $ 62,885 (Concluded) An analysis by function of the amounts recognized in profit or loss in respect of the benefit plans is as follows: Operating costs Selling and marketing expenses General and administrative expenses Research and development expenses For the Year Ended December 31 2019 2018 $ 155 176 431 936 $ 215 234 453 904 Net liability arising from defined benefit obligation $ 1,698 $ 1,806 Through the defined benefit plans under the Labor Standards Law, the Group is exposed to the following risks: 1) Investment risk: The plan assets are invested in domestic and foreign equity and debt securities, bank deposits, etc. The investment is conducted at the discretion of the Bureau or under the mandated management. However, in accordance with relevant regulations, the return generated by plan assets should not be below the interest rate for a 2-year time deposit with local banks. 2) Interest risk: A decrease in the government bond interest rate will increase the present value of the defined benefit obligation; however, this will be partially offset by an increase in the return on the plan’s debt investments. 3) Salary risk: The present value of the defined benefit obligation is calculated by reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the present value of the defined benefit obligation. The actuarial valuations of the present value of the defined benefit obligation were carried out by qualified actuaries. The significant assumptions used for the purposes of the actuarial valuations were as follows: Discount rate(s) Expected rate(s) of salary increase Resignation rate December 31 2019 2018 0.80%-1.00% 4.00%-5.00% 0%-28% 1.10%-1.20% 4.00%-5.00% 0%-28% If possible reasonable change in each of the significant actuarial assumptions will occur and all other assumptions will remain constant, the present value of the defined benefit obligation would increase (decrease) as follows: Discount rate(s) 0.25% increase 0.25% decrease Expected rate(s) of salary increase 1% increase 1% decrease December 31, 2019 December 31, 2018 $ $ $ $ (7,703) 8,014 32,682 (28,567) $ $ $ $ (8,405) 8,761 35,932 (31,147) The sensitivity analysis presented above may not be representative of the actual change in the present value of the defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated. Expected contributions to the plan for the next year $ 4,024 $ 9,106 Average duration of the defined benefit obligation 13-16 years 14-17 years December 31 2019 2018 22. EQUITY a. Share capital 1) Ordinary shares: December 31 2019 2018 Number of shares authorized (in thousands) Shares authorized Number of shares issued and fully paid (in thousands) Shares issued 1,200,000 $ 12,000,000 591,995 5,919,949 $ 1,200,000 $ 12,000,000 591,995 5,919,949 $ Fully paid ordinary shares, which have a par value of $10, carry one vote per share and carry a right to dividends. Of the Group’s authorized shares, 80,000 thousand shares had been reserved for the issuance of convertible bonds and employee share options. 2) Global depositary receipts In March 2001, Sunplus issued 20,000 thousand units of global depositary receipts (GDRs), representing 40,000 thousand ordinary shares that consisted of newly issued and originally outstanding shares. The GDRs are listed on the London Stock Exchange (code: SUPD) with an issuance price of US$9.57 per unit. As of December 31, 2019, the outstanding 175 thousand units of GDRs represented 350 thousand ordinary shares. b. Capital surplus December 31 2019 2018 May be used to offset a deficit, distributed as cash dividends, or transferred to share capital (a) Arising from the issuance of ordinary shares Arising from the acquisition of a subsidiary The difference between consideration received or paid and the carrying amount of the subsidiaries’ net assets during actual disposal or acquisition $ 196,095 157,423 $ 409,213 157,423 140,184 140,022 May be used to offset a deficit only From treasury share transactions Changes in net equity of associates or joint ventures accounted for using the equity method 45,239 55,491 43,958 50,782 $ 594,432 $ 801,398 a) When the Company has no deficit, such capital surplus may be distributed as cash dividends, or may be transferred to share capital once a year and within a certain percentage of the Company’s capital surplus. c. Retained earnings and dividend policy Under the dividend policy as set forth in the amended Articles, Sunplus shall appropriate from annual net income less any accumulated deficit: (a) 10% as legal reserve; and (b) special reserve equivalent to the debit balance of any accounts shown in the shareholders’ equity section of the balance sheet, other than deficit. Under the approved shareholders’ resolution, the current year’s net income less all the foregoing appropriations and distributions, plus the prior years’ unappropriated earnings may be distributed as additional dividends. Sunplus’ policy is that cash dividends should be at least 10% of total dividends distributed. However, cash dividends will not be distributed if these dividends are less than NT$0.5 per share. Under the regulations promulgated, a special reserve equivalent to the debit balance of any account shown in the shareholders’ equity section of the balance sheet (for example, unrealized loss on financial assets and cumulative translation adjustments) should be allocated from unappropriated retained earnings. For the policies on distribution of employees’ compensation and remuneration to directors before and after amendment, refer to Note 24-g. Appropriation of earnings to legal reserve shall be made until the legal reserve equals the Company’s paid-in capital. Legal reserve may be used to offset deficit. If the Company has no deficit and the legal reserve has exceeded 25% of the Company’s paid-in capital, the excess may be transferred to capital or distributed in cash. The Company appropriates or reverses a special reserve in accordance with Rule No. 1010012865 and Rule No. 1010047490 issued by the FSC and the directive entitled “Questions and Answers on Special Reserves Appropriated Following the Adoption of IFRSs”. Distributions can be made out of any subsequent reversal of the debit to other equity items. The appropriations from the 2019 and 2018 earnings were approved at the shareholders’ meetings in June 10, 2019 and on June 11, 2018, respectively. The appropriations, including dividends, were as follows: Legal reserve Special reserve Cash dividend Cash dividend per share (NT$) Appropriation of Earnings For Year 2018 For Year 2017 562 $ $ 241,173 - $ - $ 41,321 $ $ 44,284 $ 327,551 0.5533 $ The Company’s shareholders also proposed in the shareholders’ meeting on June 10, 2019 and June 11, 2018 to issue cash dividends from capital surplus of $213,118 and $86,846 thousand, respectively. The appropriation of earnings for 2019 is subject to resolution in the shareholders’ meeting to be held on June 12, 2020. d. Special reserve Beginning at January 1 Appropriations to the special reserve Balance at December 31 e. Other equity items 1) Foreign currency translation reserve: Balance at January 1 Exchange differences on translating foreign operations Share of exchange differences of associates accounted for using equity method Balance at December 31 For the Year Ended December 31 2019 2018 $ 62,279 241,173 $ 22,995 44,284 $ 308,452 $ 67,279 For the Year Ended December 31 2019 2018 $ (138,875) (75,511) $ (122,100) (13,871) (4,394) (2,904) $ (218,780) $ (138,875) 2) Unrealized gain (loss) from investments in equity instruments measured at fair value through other comprehensive income: Balance at January 1 Current Unrealized gain (loss) Cumulative unrealized gain (loss) of equity instruments transferred to retained earnings due to disposal Share of unrealized gain (loss) on associates accounted for using the equity method Balance at December 31 f. Non-controlling interests For the Year Ended December 31 2019 2018 $ (303,968) $ (230,011) (20,881) (104,028) 279,514 3,089 37,070 (6,999) $ (42,246) $ (303,968) Balance at January 1 Attributable to no controlling interests: Share of profit for the year Exchange difference on translation foreign operations Unrealized gain (loss) on financial assets at FVTOCI Actuarial gains on defined benefit plans Distribution of dividends by subsidiaries Non-controlling interests related to outstanding vested share options held by the employees of subsidiaries Disposal of subsidiaries (Note 29) Others For the Year Ended December 31 2019 2018 $ 1,401,664 $ 1,677,049 159,443 (9,377) (563) 225 (157,520) - - 286 136,707 (4,190) 343 (1,165) (169,798) 37 (229,844) (8,953) Balance at December 31 $ 1,394,158 $ 1,401,664 g. Treasury shares Purpose of Buyback Number of shares as of January 1, 2018 Decrease Number of shares as December 31, 2018 Number of shares as of January 1, 2019 Decrease Number of shares as December 31, 2019 Shares Transferred to Employees (In Thousands of Shares) Shares Held by Its Subsidiaries (In Thousands of Shares) Total (In Thousands of Shares) - - - - - - 3,560 - 3,560 3,560 - 3,560 3,560 - 3,560 3,560 - 3,560 The Group’s shares held by its subsidiaries at the end of the reporting periods were as follows: Name of Subsidiary December 31, 2019 Shares Transferred to Employees (in Thousands of Shares) Shares Held by Its Subsidiaries (in Thousands of Shares) Total (in Thousands of Shares) Lin Shin Investment Co., Ltd 3,560 $ 63,401 $ 48,238 December 31, 2018 Lin Shin Investment Co., Ltd 3,560 $ 63,401 $ 40,050 Under the Securities and Exchange Act, Sunplus should neither pledge treasury shares nor exercise shareholders’ rights on these shares, such as rights to dividends and to vote. 23. REVENUE Revenue from contracts with customers Rental income from property Other a. Contract information Revenue from the sale of goods For the Year Ended December 31 2019 2018 $ 5,110,744 265,330 136,256 $ 5,663,059 199,184 215,490 $ 5,512,330 $ 6,077,733 IC products are sold to agents and customers. The Company determines the sales price of products based on orders. It takes into consideration the past purchases of agents and customers in order to estimate the most likely discount amount and return rate. Based on the determination of revenue, the Company recognizes the amount and the liabilities for refunds (accounted for as other current liabilities). Other Other mainly come from software development. b. Contract balances December 31, 2019 December 31, 2018 January 1, 2018 Trade receivables (Note 9) $ 832,633 $ 954,030 $ 1,197,626 Contract liabilities - current $ 24,912 $ 7,511 $ - The changes in the balance of contract liabilities primarily result from the timing difference between the Company’s performance and the respective customer’s payment. c. Disaggregation of revenue For the Year Ended December 31, 2018 Primary geographical markets Asia Taiwan Others Timing of revenue recognition Satisfied at a point in time Satisfied over time 24. NET PROFIT Net profit included the following items: a. Other income Interest income Dividend income Subsidy income Others b. Other gains and losses Reportable Segments Direct Sales 2018 2018 $ 3,499,818 1,956,236 59,276 $ 4,065,798 1,909,863 102,072 $ 5,512,330 $ 6,077,733 $ 5,236,136 276,194 $ 5,860,179 217,554 $ 5,512,330 $ 6,077,733 For the Year Ended December 31 2019 2018 $ 24,578 28,815 19,294 83,429 $ 22,896 26,982 1,661 64,924 $ 156,116 $ 116,463 For the Year Ended December 31 2019 2018 Net gain (loss) on financial assets and liabilities Net gain (loss) on financial assets designated as at FVTPL (Note 7) $ Net foreign exchange loss Gain on disposal of subsidiary/associates Others 17,879 (27,640) (43) 10,931 $ 67,736 (15,895) 182,621 11,540 $ 1,127 $ 246,002 c. Finance costs Interest on bank loans Interest on lease liabilities Other finance costs d. Depreciation and amortization An analysis of depreciation by function Operating costs Operating expenses An analysis of amortization by function Operating costs Operating expenses e. Operating expenses directly related to investment properties For the Year Ended December 31 2019 2018 $ 15,721 5,674 3,454 $ 21,239 - 2,584 $ 24,849 $ 23,823 For the Year Ended December 31 2019 2018 $ 81,393 201,161 $ 79,758 196,028 $ 282,554 $ 275,786 $ - 77,812 $ 228 82,009 $ 77,812 $ 82,237 For the Year Ended December 31 2019 2018 Direct operating expenses from investment property that generated rental income $ 77,547 $ 76,191 f. Employee benefit expense Short-term benefits Post-employment benefits Defined contribution plans Defined benefit plans (Note 21) Other employee benefits Share-based payments Equity-settled Other employee benefits For the Year Ended December 31 2019 2018 $ 1,494,942 $ 1,716,303 45,278 1,698 46,976 - 28,171 56,066 1,806 57,872 37 28,418 Total employee benefit expense $ 1,570,089 $ 1,802,630 An analysis of employee benefit expense by function Operating costs Operating expenses g. Employees’ compensation and remuneration of directors $ 97,707 1,472,382 $ 136,269 1,666,361 $ 1,570,089 $ 1,802,630 The Company resolved amendments to its Articles of Incorporation to distribute employees’ compensation and remuneration directors at rates of no less than 1% and no higher than 1.5%, respectively, of net profit before income tax, employees’ compensation, and remuneration of directors. The employees’ compensation and remuneration of directors for the years ended December 31, 2019 and 2018, which have been approved by the Company’s board of directors on March 30, 2020 and March 20, 2018, respectively, were as follows: Accrual rate Employees’ compensation Remuneration of directors Amount For the Year Ended December 31 2019 1.00% 1.50% 2018 1.00% 1.50% For the Year Ended December 31 2019 2018 Cash Shares Cash Shares Employees’ compensation Remuneration of directors $ $ 206 309 $ - - $ 80 119 - - If there is a change in the proposed amounts after the annual consolidated financial statements are authorized for issue, the differences are recorded as a change in accounting estimate. There was no difference between the actual amounts of employees’ compensation and remuneration of directors paid and the amounts recognized in the consolidated financial statements for the years ended December 31, 2019 and 2018. Information on the employees’ compensation and remuneration of directors resolved by the Company’s board of directors in 2020 and 2019 is available at the Market Observation Post System website of the Taiwan Stock Exchange. h. Gain or loss on exchange rate changes Exchange rate gains Exchange rate losses For the Year Ended December 31 2019 2018 $ 87,093 (114,733) $ 140,569 (156,464) $ (27,640) $ (15,895) 25. INCOME TAXES a. Income tax recognized in profit or loss The major components of tax expense were as follows: Current tax In respect of the current year Adjustments for prior periods Consolidated changes Deferred tax In respect of the current year For the Year Ended December 31 2019 2018 $ 90,323 (22,355) - 67,968 $ 86,720 (24,496) (1,518) 60,706 1,500 961 Income tax expense recognized in profit or loss $ 69,468 $ 61,667 A reconciliation of accounting profit and current income tax expenses is as follows: Profit before tax Income tax expense at the 17% statutory rate Different statutory rate in other jurisdictions Tax effect of adjusting items: Nondeductible expenses in determining taxable income Temporary differences Unrecognized temporary differences Current investment credit Effects of consolidated income tax filing Current income tax expense Deferred income tax expense Temporary differences Unrecognized loss carryforwards Adjustments for prior years’ tax Foreign income tax expense Consolidated changes Years Ended December 31 2018 2019 $ 244,220 $ 203,990 $ 48,844 2,344 $ 40,798 1,710 3,163 (11,475) (419) (6,650) (42) 35,765 1,500 49,771 (22,355) 4,787 - (11,962) (22,380) (885) - (47) 7,234 961 77,806 (24,496) 1,680 (1,518) Income tax expense recognized in profit or loss $ 69,468 $ 61,667 The Income Tax Act in the ROC was amended in 2018, and the corporate income tax rate was adjusted from 17% to 20%. In addition, the rate of the corporate surtax applicable to the 2018 unappropriated earnings was reduced from 10% to 5%. In July 2019, the President of the ROC announced the amendments to the Statute for Industrial Innovation, which stipulate that the amounts of unappropriated earnings in 2018 and thereafter that are reinvested in the construction or purchase of certain assets or technologies are allowed as deduction when computing the income tax on unappropriated earnings. b. Current tax assets and liabilities Current tax assets Tax refund receivable (classified as other receivable) Prepaid income tax (classified as other current assets) $ 516 24 $ 871 - December 31 2019 2018 Current tax liabilities Income tax payable c. Deferred tax assets and liabilities $ 540 $ 871 $ 52,169 $ 56,972 The Group offset certain deferred tax assets and deferred tax liabilities that met the offset criteria. The movements of deferred tax assets and deferred tax liabilities were as follows: For the year ended December 31, 2019 Deferred Tax Assets Opening Balance Recognized in Profit or Loss Closing Balance Temporary differences Unrealized loss on inventories Fixed assets Unrealized sales Exchange (gains) losses Other For the year ended December 31, 2018 $ 12,102 4,063 675 (1,003) 14,417 $ 18 884 208 777 (3,387) $ 12,120 4,947 883 (226) 11,030 $ 30,254 $ (1,500) $ 28,754 Deferred Tax Assets Opening Balance Recognized in Profit or Loss Closing Balance Temporary differences Unrealized loss on inventories Fixed assets Unrealized sales Exchange (gains) losses Other $ 19,913 864 658 (924) 10,704 $ (7,811) 3,199 17 (79) 3,713 $ 12,102 4,063 675 (1,003) 14,417 $ 31,215 $ (961) $ 30,254 d. Deductible temporary differences, unused loss carryforwards and unused investment credits for which no deferred tax assets have been recognized in the consolidated balance sheets Loss Carryforwards Expiry in 2019 Expiry in 2020 Expiry in 2021 Expiry in 2022 Expiry in 2023 Expiry in 2024 Expiry in 2025 Expiry in 2026 Expiry in 2027 Expiry in 2028 Expiry in 2029 December 31 2019 2018 $ $ - 251,700 535,328 536,364 1,467,084 65,199 49,489 55,551 88,194 130,320 75,674 257,108 251,700 551,637 536,364 1,467,084 65,199 49,489 55,551 88,194 130,320 - $ 3,254,903 $ 3,452,646 Deductible temporary differences $ 113,956 $ 177,411 e. Unused loss carryforwards and tax-exemptions Loss carryforwards as of December 31, 2019 pertaining to Sunplus: Unused Amount $ 211,457 322,509 394,894 1,144,831 24,228 19,642 $ 2,117,561 Loss carryforwards as of December 31, 2019 pertaining to Sunplus Venture: Unused Amount $ 17,891 4,863 92,197 $ 114,951 Loss carryforwards as of December 31, 2019 pertaining to Lin Shin: Unused Amount $ 39,908 Loss carryforwards as of December 31, 2019 pertaining to Sunext: Unused Amount Expiry Year 2020 2021 2022 2023 2027 2029 Expiry Year 2020 2022 2023 Expiry Year 2023 Expiry Year  $ 103,779 100,760 159,490 31,147 975 $ 396,151 2021 2022 2023 2024 2025 Loss carryforwards as of December 31, 2019 pertaining to Sunplus mMedia: Unused Amount Expiry Year $ 22,352 109,040 35,847 30,658 29,360 27,164 11,155 9,369 57,427 25,066 $ 357,438 Loss carryforwards as of December 31, 2019 pertaining to Jumplux: Unused Amount $ 4,692 21,350 44,396 54,597 72,893 30,966 $ 228,894 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 Expiry Year 2024 2025 2026 2027 2028 2029 The income from the following projects is exempt from income tax for five years. The related tax-exemption periods are as follows: Project Tax Exemption Period Sunplus Fourteenth expansion Fifteenth expansion January 1, 2015 to December 31, 2019 January 1, 2015 to December 31, 2019 f. Income tax assessments The income tax returns of Sunplus, Sunplus mMobile, Generalplus, Sunplus Innovation, Sunext, Sunplus mMedia, Sunplus management Consulting, Wei-Yough, Lin Shih, Sunplus Venture and Jumplus through 2017 had been assessed by the tax authorities. 26. EARNINGS PER SHARE Basic gain per share Diluted earnings per share Unit: NT$ Per Share For the Year Ended December 31 2019 2018 $ $ 0.03 0.03 $ $ 0.01 0.01 The earnings and weighted average number of ordinary shares outstanding in the computation of earnings per share were as follows: Net profit for the year Profit for the year attributable to owners of the Company Effect of potentially dilutive ordinary shares Bonuses for employees Years Ended December 31 2018 2019 $ 15,309 $ 5,616 - - Earnings used in the computation of diluted EPS from continuing operations $ 15,309 $ 5,616 The weighted average number of ordinary shares outstanding (in thousand shares) is as follows: For the Year Ended December 31 2019 2018 Weighted average number of ordinary shares used in the computation of basic earnings per shares Effect of dilutive potential ordinary shares: Bonuses issued to employees 588,435 588,435 16 60 Weighted average number of ordinary shares used in the computation of diluted earnings per share 588,451 588,495 If the Company offered to settle bonus or remuneration to employees in cash or shares. If the Company decides to use shares in settling the entire amount of the bonus or remuneration the resulting potential shares will be included in the weighted average number of shares outstanding to be used in computation of diluted earnings per share, if the effect is dilutive. This dilutive effect of the potential shares will be included in the computation of diluted earnings per share until the number of shares to be distributed to employees is determined in the following year. 27. GOVERNMENT GRANTS In August 2013, Sun Media Technology Co., Ltd. received a government grant amounting to RMB16,390 thousand ($79,213 thousand) for the purchase of land on which to build a plant. The amount was recognized as deferred revenue and subsequently transferred to profit or loss over the useful life of the related asset. The total revenue recognized as profit for the years ended December 31, 2019 and 2018 was $1,629 and $1,661 thousand, respectively. 28. CONSOLIDATION OF SUBSIDIARR a. Subsidiaries acquired Subsidiary Principal Activity Date of Acquisition Proportion of Voting Equity Interests Acquired (%) Consideration Transferred Worldplus and its subsidiaries Investment, development of computer software, system integration services and building rental b. Consideration transferred September 2, 2019 100 $ 112,669 Cash c. Assets acquired and liabilities assumed at the date of acquisition Current assets Cash and cash equivalents Trade and other receivables Non-current assets Property, plant and equipment Construction in progress Investment properties Current liabilities Trade and other payables Long-term payables Worldplus and Its Subsidiaries $ 112,669 Worldplus and Its Subsidiaries $ 64,454 428 377 17,088 37,383 (2,303) (4,758) $ 112,669 d. Net cash outflow on the acquisition of subsidiaries Consideration paid in cash Less: Cash and cash equivalent balances acquired e. Impact of acquisitions on the results of the Group Worldplus and Its Subsidiaries $ 112,669 (64,454) $ 48,215 The results of Worldplus and its subsidiary since the acquisition date included in the consolidated statements of comprehensive income were as follows: Net revenue Net profit Worldplus and Its Subsidiaries $ $ 2,053 (2,582) If the merger of Worldplus and its subsidiaries occurred on January 1, 2019, the Japanese company’s proposed operating income and proposed operating net loss were $5,516,431 and $728,250, respectively, from January 1 to December 31, 2019. It is reflected that the actual revenue and operating results of the Company should not be used as a predictor of future operating results. The original accounting treatment of Worldplus and its subsidiaries is only tentative on the balance sheet date. For the purpose of taxation, the tax base of Worldplus and its subsidiaries’ assets is subject to re-determination based on the market value of such assets and the taxable value of the company’s management. In determining the pro-forma revenue and profit of the Group had Worldplus and its subsidiaries been acquired at the beginning of the financial year, the management considered the following: 1) The fair values of property, plant and equipment, rather than their carrying amounts recognized in the respective pre-acquisition financial statements at the initial accounting for the business combination, were used as a basis for the depreciation of property, plant and equipment. 29. DISPOSAL OF SUBSIDIARIES 2019 The Group completed the liquidation on its subsidiary, Han Young Technology Co., Ltd. on November 15, 2019. a. Analysis of assets amd liabilities from liquidation Current assets Cash and cash equivalents Other receivables Non-current assets Property, plant and equipment Refundable deposits Current liabilities Others Net assets disposed of b. Loss on liquidation of subsidiaries Collection price of investments accounted Net assets disposed of Non-controlling interests Loss on disposal c. Net cash inflow on liquidation of subsidiaries Consideration received in cash and cash equivalents Less: Cash and cash equivalent balances disposed of 2018 Hanyang Technology Co., Ltd. $ 2,481 7 29 55 (29) $ (2,543) Hanyang Technology Co., Ltd. $ 1,737 (2,543) 763 $ 43 Hanyang Technology Co., Ltd. $ 1,737 (2,481) $ (744) In March 2018, the Company did not participate in the capital increase in cash of Sunplus Technology Xiamen Xm-plus in accordance with the shareholding ratio, resulting in the company’s shareholding ratio decreasing from 100% to 45%, and the number of directors was less than half the usual number, hence the control of Sunplus Technology Xiamen Xm-plus was lost. In addition, iCatch Technology has independently operated its financial activities on July 31, 2018, so the Company assessed it has lost control. a. Analysis of assets and liabilities on the date control was lost Current assets Cash and cash equivalents Accounts receivables Inventories Other receivables Other current assets Non-current assets Property, plant and equipment Intangible assets Refundable deposits Deferred income tax - non-current Current liabilities Trade payables Accrued expenses Other current liabilities Accrued pension liabilities Deposits received Contract liabilities Net liabilities disposed of b. Gain on disposal of subsidiaries Collection price of investments accounted for using the equity method Disposed of net liabilities (assets) Reclassification of net assets and related hedging instruments to accumulated exchange differences on profit (loss) due to loss of control of subsidiaries Non-controlling interests Sunplus Technology Xiamen Xm-plus iCatch Technology $ 187 - 971 63 1,009 595 77 - - (170) - (20,710) - - - $ 159,384 130,898 205,200 5,686 94,941 43,007 25,427 1,674 1,518 (148,922) (28,812) (606) (15,533) (33,053) (19,637) $ (17,978) $ 421,172 Sunplus Technology Xiamen Xm-plus iCatch Technology $ 9,294 17,978 $ 335,164 (421,172) (211) - - 229,844 Gain on disposals $ 27,061 $ 143,836 30. EQUITY TRANSACTIONS WITH NON-CONTROLLING INTERESTS Sunplus purchased Jumplux Technology's issuance of ordinary shares for cash on July, 2018, resulting in an increase in the overall shareholding ratio from 95.00% to 97.08%. Sunplus Shanghai Company purchased Yrip Technology’s issuance of ordinary shares for cash on August, 2018, resulting in an increase in the overall shareholding ratio from 83.40% to 90.71%. Lingyang Company repurchased its equity from the external shareholders of Sunext Company from October to December, 2018, resulting in an increase in the overall shareholding ratio from 74.15% to 91.40%. From January to March, April and September, 2019, Sunplus purchased the equity from the external shareholders of Sunext Technology Co., Ltd. increasing its controlling interest from 91.40% to 91.47%, 91.47% to 91.53% and 91.53% to 92.55%, respectively. In February, May and December, 2019, Giant Rock subscribed for the capital increase in cash of Sunplus App Technology, increasing its controlling interest from 93.33% to 95.00%, 95.00% to 95.65% and 95.65% to 96.16%. The above transactions were accounted for as equity transactions since the Group did not cease to have control over these subsidiaries. 2019 Cash consideration paid The proportionate share of the carrying amount of the net assets of the subsidiary transferred to non-controlling interests Sunext Technology Co., Ltd. Sunplus App Technology $ (2,184) $ - 2,346 (3,394) Differences recognized from equity transactions $ 162 $ (3,394) Line items adjusted for equity transactions Unappropriated earnings Capital surplus - difference between consideration received or paid and the carrying amount of the subsidiaries’ net assets during actual disposal or acquisition Retained earnings 2018 Cash consideration paid The proportionate share of the carrying amount of the net assets of the subsidiary transferred to non-controlling interests Reattribution of other equity to (from) non-controlling interests Exchange differences on translating the financial statements of foreign operations Sunext Technology Co., Ltd. Sunplus App Technology Total $ - $ (3,394) $ (3,394) 162 - 162 $ 162 $ (3,394) $ (3,232) Jumplux Technology Ytrip Technology Co., Ltd. Sunext Technology Co., Ltd. $ - $ - $ (31,571) (3,667) (18,747) 31,300 - 212 - Differences recognized from equity transactions $ (3,667) $ (18,535) $ (271) Jumplux Technology Ytrip Technology Co., Ltd. Sunext Technology Co., Ltd. Total Line items adjusted for equity transactions Capital surplus - changes in percentage of ownership interests in subsidiaries $ (3,667) $ (18,535) $ - $ (22,202) Capital surplus - difference between consideration received or paid and the carrying amount of the subsidiaries’ net assets during actual - - (271) (271) disposal or acquisition 31. CAPITAL MANAGEMENT $ (3,667) $ (18,535) $ (271) $ (22,473) The Group manages its capital to ensure that entities in the Group will be able to continue as going concerns while maximizing the return to stakeholders through the optimization of the debt and equity balance. The capital structure of the Group consists of net debt (borrowings offset by cash and cash equivalents) and equity of the Group (comprising issued capital, reserves, retained earnings and other equity) attributable to owners of the Group. The Group is not subject to any externally imposed capital requirements. 32. FINANCIAL INSTRUMENTS a. Fair value of financial instruments that are not measured at fair value The management of the Company considers that the fair values of financial assets and financial liabilities that are not measured at fair value approximate their fair values. b. Fair value of financial instruments that are measured at fair value on recurring basis. 1) Fair value hierarchy December 31, 2019 Financial assets at FVTPL Mutual funds Listed shares and emerging market shares in the ROC and other countries Level 1 Level 2 Level 3 Total $ 1,062,811 $ - $ - $ 1,062,811 75,715 - - 75,715 (Continued) Level 1 Level 2 Level 3 Total Unlisted shares and emerging market shares in the ROC and other countries $ 7,864 $ - $ 696,471 $ 74,335 Securities listed in the ROC and other countries - CB Private funds 15,123 - - - - 260,140 15,123 260,140 $ 1,161,513 $ - $ 956,611 $ 2,118,124 Financial assets at FVTOCI Listed shares and emerging market shares in the ROC $ 90,472 $ - $ - $ 90,472 Unlisted shares and emerging market shares in the ROC and other countries December 31, 2018 Financial assets at FVTPL Mutual funds Listed shares and emerging market shares in the ROC and other countries Unlisted shares and emerging market shares in the ROC and other countries Securities listed in the ROC - CB Private funds Financial assets at FVTOCI Listed shares and emerging 18,680 - 80,235 98,915 $ 109,152 $ - $ 80,235 $ 189,387 (Concluded) Level 1 Level 2 Level 3 Total $ 1,356,100 $ - $ - $ 1,356,100 44,183 - 28,718 - - - - - - 44,183 462,387 462,387 - 160,226 28,718 160,226 $ 1,429,001 $ - $ 622,613 $ 2,051,614 market shares in the ROC $ 78,246 $ - $ - $ 78,246 Unlisted shares and emerging market shares in the ROC and other countries Private funds 17,320 - - - 110,671 39,971 127,991 39,971 $ 95,566 $ - $ 150,642 $ 246,208 There were no transfers between Levels 1 and 2 in the current and prior periods. 2) Reconciliation of Level 3 fair value measurements of financial instruments For the Year Ended December 31, 2019  Financial Assets Balance at January 1, 2019 Recognized in profit or loss Recognized in other comprehensive income Purchases Disposals and proceeds from return of capital of investments Reclassified Effect of exchange rate changes Financial Assets at FVTPL Financial Assets at FVTOCI $ 662,584 (25,062) - 328,054 $ 110,671 - (35,402) - (5,963) - (3,002) (24,604) 30,001 (431) Total $ 773,255 (25,062) (35,402) 328,054 (30,567) 30,001 (3,433) Balance at December 31, 2019 $ 956,611 $ 80,235 $ 1,036,846 For the Year Ended December 31, 2018 Financial Assets Financial Assets at FVTPL Financial Assets at FVTOCI Balance at January 1, 2018 Recognized in profit or loss Recognized in other comprehensive income Purchases Disposals Transfers out of Level 3 Effect of exchange rate changes $ 442,888 16,345 - 315,443 (111,996) - (96) $ 171,568 - (78,319) 35,894 (4,930) (13,593) 51 Total $ 614,456 16,345 (78,319) 351,337 (116,926) (13,593) (45) Balance at December 31, 2018 $ 622,584 $ 110,671 $ 773,255 3) Valuation techniques and inputs applied for Level 3 fair value measurement a) The fair values of unlisted shares and emerging market shares were determined using the market approach. The significant unobservable inputs used are listed in the table below. An increase in the price-to-book ratio or price-sales ratio or a decrease in the discount for lack of marketability used in isolation would result in increases in fair value. Price-to-book ratio Price-to-sales ratio Discount for lack of marketability December 31 2019 2018 1.85-4.42 2.27-6.37 10%-20% 0.66-4.16 0.69-7.52 10%-30% b) The fair values of unlisted shares and emerging market shares were determined using the asset-based approach. The Group assesses that the amount of its net assets attributable to its investment approaches the fair value of the equity investment. The Group assesses the total value of the individual assets and liabilities covered by the target to reflect the overall value of the business. c) The fair values of unlisted shares and emerging market shares were determined using the income approach. In this approach, the discounted cash flow method was used to capture the present value of the expected future economic benefits to be derived from the ownership of these investees. The significant unobservable inputs used are listed in the table below. An increase in long-term revenue growth rates or a decrease in the weighted average cost of capital (WACC) or discount for lack of marketability used in isolation would result in increases in fair value. c. Categories of financial instruments Financial assets Fair value through profit or loss (FVTPL) Financial assets at amortized cost (i) Financial assets at fair value through other comprehensive income Equity instruments Financial liabilities December 31 2019 2018 $ 2,118,124 4,147,636 $ 2,051,614 4,549,250 189,387 246,208 Measured at amortized cost (ii) 889,360 1,276,248 i) The balances included loans and receivables measured at amortized cost, which comprise cash and cash equivalents, note and trade receivables, other financial assets and refundable deposit. ii) The balances included financial liabilities measured at amortized cost, which comprised short-term and long-term loans, note and trade payables, long-term liabilities -current portion and guarantee deposits. d. Financial risk management objectives and policies The Group's major financial instruments included equity and debt investments, convertible notes, trade receivable, trade payables, bonds payable and borrowings. The Group's corporate treasury function provides services to the business, coordinates access to domestic and international financial markets, monitors and manages the financial risks relating to the operations of the Group through internal risk reports which analyze exposures by degree and magnitude of risks. These risks include market risk (including currency risk, interest rate risk and other price risk), credit risk and liquidity risk. The Corporate Treasury function reported quarterly to the Group's risk management committee. 1) Market risk The Group's activities exposed it primarily to the financial risks of changes in foreign currency exchange rates (see (a) below) and interest rates (see (b) below). The Group entered into a variety of derivative financial instruments to manage its exposure to foreign currency risk and interest rate risk, including: a) Foreign currency risk A part of the Group’s cash flows is in foreign currency, and the use by management of derivative financial instruments is for hedging adverse changes in exchange rates, not for profit. For exchange risk management, each foreign-currency item of net assets and liabilities is reviewed regularly. In addition, before obtaining foreign loans, the Group considers the cost of the hedging instrument and the hedging period. The carrying amounts of the Group's foreign currency-denominated monetary assets and monetary liabilities (including those eliminated on consolidation) at the end of the reporting period were refer to Note 35. Sensitivity analysis The Group was mainly exposed to the USD and RMB. The following table details the Company sensitivity to a US$1.00 and RMB1.00 increase and decrease in the New Taiwan dollar (the functional currency) against the relevant foreign currencies. The sensitivity analysis considers the currencies of USD and RMB in circulation, and adjusts the end-of-term conversion to exchange rate change of $1.00. The sensitivity analysis covers cash and cash equivalents, notes and accounts receivable, other receivables, other financial assets, long-term and short-term loans, accounts payable, other accounts payable and deposit margins. A negative number below indicates a decrease in post-tax profit associated with the New Taiwan dollar strengthening $1.00 against USD and RMB. For a $1.00 weakening of the New Taiwan dollar against the relevant currency, there would be an equal and opposite impact on post-tax profit, and the balances below would be positive. Profit or loss $ (18,017) $ (9,525) USD Impact Years Ended December 31 2018 2019 Profit or loss b) Interest rate risk RMB Impact Years Ended December 31 2018 2019 $ 244 $ (107) The Group was exposed to interest rate risk because entities in the Group borrowed funds at both fixed and floating interest rates. The risk is managed by the Group by maintaining an appropriate mix of fixed and floating rate borrowings, and using interest rate swap contracts and forward interest rate contracts. Hedging activities are evaluated regularly to align with interest rate views and defined risk appetite, ensuring the most cost-effective hedging strategies are applied. The carrying amounts of the Group’s financial assets and financial liabilities with exposure to interest rates at the end of the reporting period were as follows: Fair value interest rate risk Financial assets Financial liabilities Cash flow interest rate risk Financial assets Financial liabilities Sensitivity analysis December 31 2019 2018 $ 2,505,022 565,762 $ 2,025,410 311,215 769,506 - 1,367,150 250,046 The sensitivity analyses below were determined based on the Group’s exposure to interest rates for both derivatives and non-derivative instruments at the end of the reporting period. For floating rate liabilities, the analysis was prepared assuming the amount of the liability outstanding at the end of the reporting period was outstanding for the whole year. Basis points of 0.125% increase or decrease was used when reporting interest rate risk internally to key management personnel and represents management's assessment of the reasonably possible change in interest rates. Had interest rates increased/decreased by 0.125% and all other variables held constant, the Group’s post-tax profit for the years ended December 31, 2019 and 2018 would increase/decrease by $962 thousand and $1,396 thousand, respectively. c) Other price risk The Group was exposed to equity price risk through its investments in listed equity securities. Equity investments are held for strategic rather than trading purposes. The Group does not actively trade these investments. The sensitivity analyses below were determined based on the exposure to equity price risks at the end of the reporting period. Had the prices of financial assets at FVTPL been 1% higher/lower, post-tax profit for the year ended December 31, 2019 and 2018 would have increased/decreased by $21,181 and $20,516 thousand, respectively. Had the prices of financial assets at FVTOCI been 1% higher/lower, post-tax profit for the year ended December 31, 2019 and 2018 would have increased/decreased by $1,894 and $2,462 thousand, respectively. 2) Credit risk Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in financial loss to the Group. As at the end of the reporting period, the Group’s maximum exposure to credit risk which will cause a financial loss to the Group due to failure to discharge an obligation by the counterparties and financial guarantees provided by the Group is arising from the carrying amount of the respective recognized financial assets as stated in the balance sheets. In order to minimize credit risk, the management of the Group has delegated a team responsible for determination of credit limits, credit approvals and other monitoring procedures to ensure that follow-up action is taken to recover overdue debts. In addition, the Group reviews the recoverable amount of each individual trade debt at the end of the reporting period to ensure that adequate impairment losses are made for irrecoverable amounts. In this regard, the directors of the Group consider that the Group’s credit risk was significantly reduced. The credit risk on liquid funds and derivatives was limited because the counterparties are banks with high credit ratings assigned by international credit-rating agencies. Trade receivables consisted of a large number of customers, spread across diverse industries and geographical areas. Ongoing credit evaluation is performed on the financial condition of trade receivables and, where appropriate, credit guarantee insurance cover is purchased. The Group’s concentration of credit risk of 75% and 59% in total trade receivables as of December 31, 2019 and 2018, respectively, was related to the five largest customers within the property construction business segment. 3) Liquidity risk The Group manages liquidity risk by monitoring and maintaining a level of cash and cash equivalents deemed adequate to finance the Group’s operations and mitigate the effects of fluctuations in cash flows. In addition, management monitors the utilization of bank borrowings and ensures compliance with loan covenants. The Group relies on bank borrowings as a significant source of liquidity. As of December 31, 2019 and 2018, the Group had available unutilized overdraft and financing facilities refer to the following instruction. a) Liquidity and interest risk rate tables The following table details the Group's remaining contractual maturity for its non-derivative financial liabilities with agreed repayment periods. The tables had been drawn up based on the undiscounted cash flows of financial liabilities from the earliest date on which the Group can be required to pay. The tables included both interest and principal cash flows. December 31, 2019 Nonderivative financial liabilities On Demand or Less than 1 Month 1-3 Months More than 3 Months to 1 Year Over 1 Year to 5 Years 5+ Years Non-interest bearing Lease liabilities Fixed interest rate liabilities $ 271,434 $ 172,191 $ - $ - $ 1,414 179,756 3,109 23,984 13,074 120,130 58,541 4,922 - 266,450 142,928 $ 452,604 $ 199,284 $ 133,204 $ 63,463 $ 409,378 Additional information about the maturity analysis for lease liabilities: Less than 1 Year 1-5 Years 5-10 Years 10-15 Years 15-20 Years 20+ Years Lease liabilities $ 17,597 $ 60,032 $ 49,046 $ 49,046 $ 43,896 $ 122,971 December 31, 2018 Nonderivative financial liabilities On Demand or Less than 1 Month 1-3 Months More than 3 Months to 1 Year Over 1 Year to 5 Years 5+ Years Non-interest bearing Lease liabilities Fixed interest rate liabilities $ 274,169 $ 105 117,896 85,001 $ 561,988 $ 15,000 - 235,046 193,361 38,504 $ - 7,685 63,523 - 152,292 $ 392,170 $ 100,001 $ 990,395 $ 46,189 $ 215,815 b) Financing facilities Unsecured bank overdraft facility, review annually and payable on demand Amount used Amount unused December 31 2019 2018 $ 323,416 4,515,381 $ 561,504 4,479,716 $ 4,838,797 $ 5,041,220 33. TRANSACTIONS WITH RELATED PARTIES Balances and transactions between the Company and its subsidiaries had been eliminated on consolidation and are not disclosed in this note. Details of transactions between the Group and other related parties are disclosed below. a. Name and relationship of related parties Name Relationship with the Group Global View Co., Ltd. Beijing Golden Global View Co., Ltd. iCatch Technology, Inc. AutoSys Co., Ltd. Associate Associate (Note 1) Associate (Note 2) Associate (Note 3) Note 1： It is an associate of the Company; subsidiary of Global View Co., Ltd. Note 2： On July 31, 2018, the Company assessed that it had lost control of iCatch Technology, Inc.; therefore, it is classified as an associate. Note 3： It is an associate of the company; subsidiary of AutoSys Co., Ltd. b. Sales of goods Line Items Related Party Categories 2019 2018 For the Year Ended December 31 Sales Associates $ 54,712 $ 51,833 Sales price to related parties is based on cost and market price. The sales terms to related parties were similar to those with external customers. c. Receivables from related parties (excluding loans to related parties) Account Item Related Party December 31 2019 2018 Trade receivables Associates $ 11,645 $ 17,941 Other trade receivable Associates $ 280 $ 1,358 There were no guarantees on outstanding receivables from related parties. For the years ended December 31, 2019 and 2018, no impairment loss was recognized for trade receivables from related parties. d. Other transactions with related parties December 31 Account Item Related Parties Types 2019 2018 Refundable deposits Associates Deposits received Associates Operating expenses Associates $ $ $ - - $ $ 871 393 139 $ 4,539 Non-operating income and Associates $ 10,228 $ 9,009 expenses Administrative support services price between the Company and the related parties were negotiated and were thus not comparable with those in the market. The pricing and the payment terms of the lease contract between the Company and the related parties were similar to those with external customers. e. Compensation of key management personnel Short-term employee benefits Post-employment benefits For the Years Ended December 31 2019 2018 $ 50,100 1,297 $ 61,183 1,562 $ 51,397 $ 62,745 The remuneration of directors and other key management personnel was determined by the Compensation Committee in accordance with individual performance and market trends. 34. PLEDGED OR MORTGAGED ASSETS The following assets of the Company have been pledged or mortgaged as guarantees for endorsement, loan, purchase quota, leased land and customs clearance: Buildings, net Pledged time deposits (classified as other financial assets, including current and non-current) December 31 2019 2018 $ 595,735 $ 615,136 130,819 164,518 $ 726,554 $ 779,654 35. EXCHANGE RATE OF FINANCIAL ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES The Group’s group entities’ significant financial assets and liabilities denominated in foreign currencies aggregated by the foreign currencies other than functional currencies and the related exchange rates between foreign currencies and respective functional currencies were as follows: December 31, 2019 Financial assets Monetary items USD CNY JPY HKD GBP EUR Nonmonetary items USD CHF Financial liabilities Monetary items USD CNY JPY December 31, 2018 Financial assets Monetary items USD CNY JPY HKD GBP EUR Nonmonetary items USD CHF Financial liabilities Monetary items USD CNY Foreign Currencies (In Thousands) Exchange Rate Carrying Amount $ 44,893 1,399 391 173 3 1 28 734 26,876 1,643 241 29.980 4.305 0.276 3.849 39.360 33.590 30.620 30.925 $ 1,345,892 6,023 108 666 118 34 848 22,705 29.980 4.305 0.276 805,742 7,073 67 Foreign Currencies (In Thousands) Exchange Rate Carrying Amount $ 42,724 2,388 352 152 3 1 28 786 30.715 4.472 0.278 3.921 38.880 35.200 30.715 31.190 $ 1,312,268 10,679 98 596 117 35 848 24,513 33,199 2,281 30.715 4.472 1,019,707 10,201 The foreign currency exchange loss and gain (realized and unrealized) were amounted to $27,640 thousand and $15,895 thousand for the ended December 31, 2019 and 2018, respectively. Due to the diversity of the functional currencies of the Group, it is unable to disclose foreign currency with significant influence. 36. ADDITIONAL DISCLOSURES a. Following are the additional disclosures required for the Group and its investees by the Securities and Futures Bureau: 1) Financings provided: Table 1 (attached) 2) Endorsement/guarantee provided: Table 2 (attached) 3) Marketable securities held: Table 3 (attached) 4) Marketable securities acquired and disposed of at costs or prices of at least NT$300 million or 20% of the paid-in capital: Tables4 (attached) 5) Acquisition of individual real estate at costs of at least NT$300 million or 20% of the paid-in capital: No. 6) Disposal of individual real estate at prices of at least NT$300 million or 20% of the paid-in capital: No. 7) Total purchases from or sales to related parties amounting to at least NT$100 million or 20% of the paid-in capital: No. 8) Receivables from related parties amounting to at least NT$100 million or 20% of the paid-in capital: No. 9) Trading in derivative instruments: No. 10) Intercompany relationships and significant intercompany transactions: Table 5 (attached) 11) Information on investee: Table 6 (attached) b. Information on investments in mainland China 1) Information on any investee company in mainland China, showing the name, principal business activities, paid-in capital, method of investment, inward and outward remittance of funds, ownership percentage, net income of investees, investment income or loss, carrying amount of the investment at the end of the period, repatriations of investment income, and limit on the amount of investment in the mainland China area. (Table 7) 2) Any of the following significant transactions with investee companies in mainland China, either directly or indirectly through a third party, and their prices, payment terms, and unrealized gains or losses: (Table 8) a) The amount and percentage of purchases and the balance and percentage of the related payables at the end of the period. b) The amount and percentage of sales and the balance and percentage of the related receivables at the end of the period. c) The amount of property transactions and the amount of the resultant gains or losses. d) The balance of negotiable instrument endorsements or guarantees or pledges of collateral at the end of the period and the purposes. e) The highest balance, the end of period balance, the interest rate range, and total current period interest with respect to financing of funds. f) Other transactions that have a material effect on the profit or loss for the period or on the financial position, such as the rendering or receiving of services. Except for Table 1 to Table 8, there’s no further information about other significant transactions. 37. SEGMENT INFORMATION Information reported to the chief operating decision maker for the purpose of resource allocation and assessment of segment performance focuses on types of goods provided. Since all products have similar economic characteristics and product selling is centralized, the Group reports information as referring to one segment. Thus, the information of the operating segment is the same as that presented in the accompanying financial statements. That is, the revenue by sub segment and operating results for the years ended December 31, 2019 and 2018 are shown in the accompanying consolidated income statements, and the assets by segment as of December 31, 2019 and 2018 are shown in the accompanying consolidated balance sheets. a. Segment revenues and results The following was an analysis of the Group’s operating revenue and results by reportable segment. IC design Income from lease of property, plant, and equipment Other income Segment Revenue For the Year Ended December 31 2019 2018 $ 5,111,744 265,330 136,256 $ 5,663,059 199,184 215,490 $ 5,512,330 $ 6,077,733 b. Geographical information The Group operates in two principal geographical areas - the Asia and Taiwan. The Group’s revenue from external customers by location of operations and information about its non-current assets by location of assets is detailed below. Revenue from External Customers For the Year Ended December 31 Non-current Assets For the Year Ended December 31 2019 2018 2019 2018 Asia Taiwan Others $ 3,499,818 1,956,236 $ 4,067,191 1,908,470 $ 2,159,216 1,294,531 $ 2,192,346 1,077,848 56,276 102,072 - - $ 5,512,330 $ 6,077,733 $ 3,453,747 $ 3,270,194 Non-current assets exclude non-current assets held for sale, financial instruments, deferred tax assets, post-employment benefits assets, and assets result from insurance contracts. c. Information about major customers Single customers contributing 10% or more to the Group’s revenue were as follows: Customer A Customer B Customer C For the Year Ended December 31 2019 2018 $ $ 844,237 651,715 Note 763,906 652,318 622,701 Note: The amount of revenue does not reach 10% of the company’s net revenue. SUNPLUS TECHNOLOGY COMPANY LIMITED AND SUBSIDIARIES FINANCINGS PROVIDED FOR THE YEAR ENDED DECEMBER 31, 2019 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise) No. Lender Borrower Financial Statement Account Related Party Highest Balance for the Period Ending Balance Actual Borrowing Amount Interest Rate Nature of Financing Business Transaction Amounts Reasons for Short-term Financing Allowance for Bad Debt Collateral Item Value Financing Limit for Each Borrower Aggregate Financing Limit 2 Sunplus Technology (Shanghai) Sun Media Technology Co., Ltd. 2 Sunplus Technology (Shanghai) Co., Ltd. Co., Ltd. Sunplus APP Technology 3 Russell Holdings Ltd. Sun Media Technology Co., Ltd. 4 Sunplus Venture Capital Co., Sun Media Technology Ltd. 5 Sunplus Prof-tek Technology (Shenzhen) Co., Ltd. Sunplus APP Technology 5 Lin Shih Investment Co., Ltd. Sun Media Technology Co., Ltd. Receivables from related parties Receivables from related parties Receivables from related parties Receivables from related parties Receivables from related parties Receivables from related parties Yes $ 91,300 $ - $ - 1.8% Note 1 $ Yes Yes Yes Yes Yes 25,108 12,522 12,522 1.8% Note 1 335,477 261,077 261,077 2.05% Note 1 293,926 232,426 232,426 2.05% Note 1 41,086 39,354 39,354 1.8% Note 1 135,170 121,645 121,164 2.05% Note 1 - - - - - - Note 2 $ - Note 3 Note 4 Note 5 Note 6 Note 7 12,522 - - 39,354 - - - - - - - $ - $ - - - - - $ 256,983 (Note 8 ) 21,415 (Note 9 ) 455,427 (Note 10 ) 419,740 (Note 11 ) 37,851 (Note 12 ) 317,228 (Note 13 ) 256,983 (Note 8 ) 42,830 (Note 9 ) 455,427 (Note 10 ) 419,740 (Note 11 ) 75.703 (Note 12 ) 317,228 (Note 13 ) TABLE 1 Note 1: Short-term financing. Note 2: Sunplus Technology (Shanghai) Co., Ltd. provided funds for the operating needs of Sun Media Technology Co., Ltd. Note 3: Sunplus Technology (Shanghai) Co., Ltd. provided funds for the operating needs of Sunplus APP Technology. Note 4: Russell Holdings Ltd. provided funds for the operating needs of Sun Media Technology Co., Ltd. Note 5: Sunplus Venture Capital provided funds for the operating needs of Sun Media Technology Co., Ltd. Note 6: Sunplus Prof-tek Technology (Shenzhen) provided funds for the operating needs of Sunplus APP Technology. Note 7: Lin Shih Investment Co., Ltd. Provided funds for the operating needs of Sun Media Technology Co., Ltd. Note 8: The foreign company has voting shares that are directly and indirectly wholly owned by the Company’s parent company. The total amount of all guarantees issued and the individual amount of each guarantee should not exceed 60% of Sunplus Technology (Shanghai) Co., Ltd.’s net equity as of its latest financial statements; in addition, each guarantee period should not exceed two years. Note 9: The aggregate amount of all guarantees issued should not exceed 10% of the net equity of Sunplus Technology (Shanghai) Co., Ltd. (“Sunplus Shanghai”), and the individual amount of each guarantee should not exceed 5% of Sunplus Shanghai’s net equity, with net equity based on its latest financial statements. Note 10: The foreign company has voting shares that are directly and indirectly wholly owned by the Company’s parent company. The total amount of all guarantees issued and the individual amount of each guarantee should not exceed 80% of Russell Holdings Ltd.’s net equity as of its latest financial statements; in addition, each guarantee period should not exceed two years. Note 11: The total amount of all guarantees issued and the individual amount of each guarantee should not exceed 40% of Sunplus Venture Capital Co., Ltd.’s net equity as of its latest financial statements. Note 12: The total amount of all guarantees issued and the individual amount of each guarantee should not exceed 10% of the net equity of Sunplus Prof-tek Technology (Shenzhen); and the individual amount of each guarantee should not exceed 5% of Sunplus Shanghai’s net equity. Note 13: The total amount of all guarantees issued and the individual amount of each guarantee should not exceed 40% of Lin Shih Investment Co., Ltd.’s net equity as of its latest financial statements. SUNPLUS TECHNOLOGY COMPANY LIMITED AND SUBSIDIARIES ENDORSEMENTS/GUARANTEES PROVIDED FOR THE YEAR ENDED DECEMBER 31, 2019 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise) Endorsee/Guarantee No. Endorser/ Guarantor Name Nature of Relationship Limits on Endorsement/ Guarantee Given on Behalf of Each Party Maximum Balance for the Period Ending Balance Actual Borrowing Amount Value of Collateral (Property, Plant, or Equipment) TABLE 2 Percentage of Accumulated Amount of Collateral to Net Equity as of the Latest Financial Statements Maximum Collateral/Guara ntee Amounts Allowable Provided by the Company Guarantee Provided by the Subsidiary Guarantee Provided to a Subsidiary Located in Mainland China 0 (Note 1) Sunplus Technology Company Limited (“Sunplus”) Sun Media Technology Co., Ltd. 3 (Note 4) Sunext Technology Co., Ltd. 2 (Note 3) 1 (Note 2) Russell Holdings Ltd. Sun Media Technology Co., Ltd. 3 (Note 4) $ 817,853 (Note 5) 817,853 (Note 5) 341,570 (Note 7) $ 428,573 $ 169,365 $ 107,625 $ 10,000 - - - - 2.07 - 279,585 122,860 122,860 122,860 21.58 $ 1,635,707 (Note 6) 1,635,707 (Note 6) 341,570 (Note 7) Yes Yes No No No No Yes No Yes Note 1: Issuer. Note 2: Investee. Note 3: The endorser directly holds more than 50% of the ordinary shares of the endorsee. Note 4: Sunplus and its subsidiaries jointly hold more than 50% of the ordinary shares of the endorsee. Note 5: For each transaction entity, the guarantee amount should not exceed 10% of the endorsement/guarantee provider’s net equity based on the provider’s latest financial statements. Note 6: The guarantee amount should not exceed 20% of the endorsement/guarantee provider’s net equity based on the provider’s latest financial statements. Note 7: Russell Holdings Ltd. and the endorsement guaranty object are the parent company which holds 100% voting rights directly or indirectly. For each transaction entity, the guarantee amount should not exceed 60% of the endorsement/guarantee provider’s net equity, i.e., Russell Holdings Ltd. provider’s latest financial statements. TABLE 3 SUNPLUS TECHNOLOGY COMPANY LIMITED AND SUBSIDIARIES MARKETABLE SECURITIES HELD FOR THE YEAR ENDED DECEMBER 31, 2019 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise, U.S. Dollars and Renminbi in Thousands) Holding Company Name Type and Name of Marketable Security Relationship with the Holding Company Financial Statement Account Shares or Units (In Thousands) Carrying Amount Percentage of Ownership (%) Market Value or Net Asset Value Note December 31, 2019 Sunplus Technology Company Limited Nomura Taiwan Money Market Fund (the “Company”) Mega RMB Money Market Fund FSITC RMB Money Market Fund TWD FSITC US Top 100 bond fund A Taishin 1699 Money Market Fund Mega Diamond Money Market Fund UPAMC James Bond Money Market Fund Yuanta USD Money Market Fund USD PineBridge Muliti - Income Fund Prudential Financial RMB Money Market Fund TWD Yuanta RMB Money Market TWD Harvest Series 1 Fund Yuanta Emerging Indonesia and India 4 years Bond Fund Broadcom Inc. Triknight Capital Corporation EVERGREEN STEEL Co., Ltd. Network Capital Global - - - - - - - - - - - - - - - - - Financial assets at fair value through 616 $ 10,096 profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - non-current Financial assets at fair value through profit or loss - non-current Financial assets at fair value through profit or loss - non-current 466 5,387 2,000 2,216 13,197 1,851 239 95 5,810 1,702 2 1,500 - 24,146 52,658 20,100 30,100 166,162 31,058 75,886 30,516 57,349 17,918 59,960 15,159 815 Financial assets at fair value through 29,625 285,289 profit or loss - non-current Financial assets at fair value through profit or loss - non-current Financial assets at fair value through other comprehensive income - non-current 1,500 380 52,500 2,586 - - - - - - - - - - - - - - 5 - 7 $ 10,096 Note 3 24,146 Note 3 52,658 Note 3 20,100 Note 3 30,100 Note 3 166,162 Note 3 31,058 Note 3 75,886 Note 3 30,516 Note 3 57,349 Note 3 17,918 Note 3 59,960 Note 3 15,159 Note 3 815 Note 2 285,289 Note 1 52,500 Note 1 2,586 Note 1 (Continued) Holding Company Name Type and Name of Marketable Security Relationship with the Holding Company Financial Statement Account Shares or Units (In Thousands) Carrying Amount Percentage of Ownership (%) Market Value or Net Asset Value Note December 31, 2019 Lin Shih Investment Co., Ltd. UPI Semiconductor Corp. A-Spine Asia Co., Ltd. Taiwan Mask Corp. Enterex International Limited - CB Kee Song Bio - Technology Holdings Limited Everlight Electronics Co., Ltd. - CB Genius Vision Digital Co., Ltd. Ortery Technologies, Inc. Chain Sea Information Integration Co., Ltd. AIII Co., Ltd. GEMFOR Leading Financial Solution Provider fund Sanjet Technology Corporation Minton Optic Industry Co., Ltd. Lead Sun Corporation Ability Enterprise Co., Ltd. - - - - - - - - - - - - - - - Sunplus Technology Co., Ltd. Parent company Russell Holdings Limited Synerchip Inc. Prine Rich International Co., Ltd. OZ Optics Limited Innobrige International Inc. - - - - Financial assets at fair value through 300 $ 18,420 profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - non-current Financial assets at fair value through profit or loss – non-current Financial assets at fair value through profit or loss - non-current Financial assets at fair value through profit or loss – non-current Financial assets at fair value through profit or loss - non-current Financial assets at fair value through profit or loss - non-current Financial assets at fair value through profit or loss - non-current Financial assets at fair value through profit or loss - non-current Financial assets at fair value through other comprehensive income - non-current Financial assets at fair value through other comprehensive income - non-current Financial assets at fair value through other comprehensive income - non-current Financial assets at fair value through profit or loss - non-current Financial assets at fair value through profit or loss - non-current Financial assets at fair value through profit or loss - non-current 220 101 30 50 80 300 103 43 26 13 8 4,272 - 5,434 3,560 33 6,452 1,000 4,000 19,620 3,479 2,700 4,423 8,000 - - 474 431 216 - - 27,934 90,472 48,238 4,600 - - - - - - - - - 4 1 - - - - 7 12 2 1 - 12 8 15 $ 18,420 Note 1 19,620 Note 1 3,479 Note 2 2,700 Note 2 4,423 Note 2 8,000 Note 2 - Note 1 - Note 1 474 Note 1 431 Note 1 216 Note 1 - Note 1 - Note 1 27,934 Note 1 90,472 Note 2 48,238 Note 2 4,600 Note 1 - Note 1 - Note 1 - Note 1 (Continued) Holding Company Name Type and Name of Marketable Security Relationship with the Holding Company Financial Statement Account Shares or Units (In Thousands) Carrying Amount Percentage of Ownership (%) Market Value or Net Asset Value Note December 31, 2019 Russell Holdings Limited Ether Precision Inc. Asia Tech Taiwan Venture, L.P. Asia B2B on Line Inc. AMED Ventures I, L.P. Intudo Ventures II, L.P. GeneOne Diagnostics Corporation Sunplus Venture Capital Co., Ltd. Taiwan Mask Corp. Charles Schwab - Money Fund Cyberon Corporation Grand Fortune Venture Capital Co., Ltd. Ortery Technologies, Inc. Funyou Venture Capital Limited Partnersh Book4u Company Limited Sanjet Technology Corp. Simple Act Inc. Minton Optic Industry Co., Ltd. Raynergy Tek Inc. Genius Vision Digital CDIB Capital Growth Partners L.P. VenGlobal International Fund TIEF Fund LP San Neng Group Holding Co., Ltd. - - - - - - - - - - - - - - - - - - - - - - Financial assets at fair value through profit or loss - non-current Financial assets at fair value through profit or loss - non-current Financial assets at fair value through profit or loss - non-current Financial assets at fair value through profit or loss - non-current Financial assets at fair value through profit or loss - non-current Financial assets at fair value through other comprehensive income - non-current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - non-current Financial assets at fair value through profit or loss - non-current Financial assets at fair value through profit or loss - non-current Financial assets at fair value through profit or loss - non-current Financial assets at fair value through profit or loss - non-current Financial assets at fair value through profit or loss - non-current Financial assets at fair value through profit or loss - non-current Financial assets at fair value through profit or loss - non-current Financial assets at fair value through profit or loss - non-current Financial assets at fair value through profit or loss - non-current Financial assets at fair value through profit or loss - non-current Financial assets at fair value through profit or loss - non-current Financial assets at fair value through profit or loss - non-current Financial assets at fair value through profit or loss - non-current 1,250 $ - 1,000 - - 1,710 108 - 786 5,000 68 - 9 49 1,900 5,000 4,500 375 - 1 - 900 - - - 5,563 24,411 20,386 3,721 2,032 27,530 54,950 - 19,877 - - - - 81,630 - 54,379 - 40,721 32,940 1 5 3 3 6 13 - - 8 7 1 10 - - 10 8 16 5 2 - 7 1 $ - Note 1 - Note 1 - Note 1 5,563 Note 1 24,411 Note 1 20,386 Note 1 3,721 Note 2 2,032 Note 2 27,530 Note 1 54,950 Note 1 - Note 1 19,877 Note 1 - Note 1 - Note 1 - Note 1 - Note 1 81,630 Note 1 - Note 1 54,379 Note 1 - Note 1 40,721 Note 1 32,940 Note 2 (Continued) Holding Company Name Type and Name of Marketable Security Relationship with the Holding Company Financial Statement Account Shares or Units (In Thousands) Carrying Amount Percentage of Ownership (%) Market Value or Net Asset Value Note December 31, 2019 Sunplus Venture Capital Co., Ltd. Huijia Health Life Technology Intudo Ventures I, L.P. eWave System, Inc. Feature Integration Technology Inc. Qun-Kin Venture Capital Protect Life International Biomedical Inc. Wei-Young Investment Inc. Shiny Brands Group Co., Ltd. Cheng Mei Materials Technology Corporation Chipbond Technology Corporation Sunplus Technology (Shanghai) Co., Ltd. GF Every Day The Red Haired Type Money Market Fund B GF Live Treasury Currency B Chongqing CYIT Communication Technology Co., Ltd. Ready Sun Investment Group Fund Xiamen Xm-plus Technology Ltd. Generalplus Technology Inc. Franklin Templeton SinoAm Money Market Sunplus Innovation Technology Inc. Mega Diamond Money Market Fund Fund Yuanta Wan Tai Money Market Fund Fuh Hwa You Li Money Market Fund Yuanta De-Li Money Market Fund Taishin 1699 Money Market Fund Advanced Silicon SA - - - - - - - - - - - - - - - - - - - Financial assets at fair value through profit or loss - non-current Financial assets at fair value through profit or loss - non-current Financial assets at fair value through profit or loss - non-current Financial assets at fair value through other comprehensive income - non-current Financial assets at fair value through other comprehensive income - non-current Financial assets at fair value through other comprehensive income - non-current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - non-current Financial assets at fair value through profit or loss - non-current Financial assets at fair value through profit or loss - non-current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through other comprehensive income - non-current 1,000 $ 30,000 - 1,833 1,247 3,000 1,364 105 2,000 300 13,100 13,550 - - - 7,869 810 3,963 2,235 4,333 2,212 1,000 45,630 - 18,680 24,000 5,110 7,864 14,600 20,160 56,579 58,493 - 41,625 11,520 81,669 10,199 60,241 30,226 70,939 30,042 22,705 6 8 22 4 6 4 - - - - - 3 16 3 - - - - - - $ 30,000 Note 1 45,630 Note 1 - Note 1 18,680 Note 2 24,000 Note 1 5,110 Note 1 7,864 Note 2 14,600 Note 2 20,160 Note 2 56,579 Note 3 58,493 Note 3 - Note 1 41,625 Note 1 11,520 Note 1 81,669 Note 3 10,199 Note 3 60,241 Note 3 30,226 Note 3 70,939 Note 3 30,042 Note 3 10 22,705 Note 1 (Continued) Holding Company Name Type and Name of Marketable Security Relationship with the Holding Company Financial Statement Account Shares or Units (In Thousands) Carrying Amount Percentage of Ownership (%) Market Value or Net Asset Value Note December 31, 2019 Sunplus Innovation Technology Inc. Advanced NuMicro System, Inc. Point Grab Ltd. Magic Sky Limited GTA Co., Ltd. - CB Giant Rock Inc. Xiamen Xm-plus Technology Ltd. Sunext Technology Co., Ltd. Yunata Taiwan Dividend + ETF Feeder Fund Yunata Taiwan Top 50 ETF Feeder Fund EVERGREEN STEEL Co.,Ltd. Jsilicon Technology Co., Ltd. GF Live Treasure Currency B Note 1: The market value was based on the carrying amount as of December 31, 2019. Note 2: The market value was based on the closing price as of December 31, 2019. - - - - - - Financial assets at fair value through other comprehensive income - non-current Financial assets at fair value through other comprehensive income - non-current Financial assets at fair value through profit or loss - non-current Financial assets at fair value through profit or loss - non-current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current 2,000 $ 182 - - 2,843 467 1,000 7,888 848 - 32,079 46,813 31,609 5,715 35,000 33,959 8 1 - 15 - - - - $ 848 Note 1 - Note 1 32,079 Note 1 46,813 Note 1 31,609 Note 3 5,715 Note 3 35,000 Note 1 33,959 Note 3 Note 3: The market value was based on the net asset value of the fund as of December 31, 2019. (Concluded) SUNPLUS TECHNOLOGY COMPANY LIMITED AND SUBSIDIARIES MARKETABLE SECURITIES ACQUIRED OR DISPOSED OF AT COSTS OR PRICES OF AT LEAST NT$300 MILLION OR 20% OF THE PAID-IN CAPITAL FOR THE YEAR ENDED DECEMBER 31, 2019 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise) Company Name Type and Name of Marketable Securities Financial Statement Account Counterparty Relationship Number of Shares Amount Number of Shares Amount Number of Shares Amount Carrying Amount Gain (Loss) on Disposal Beginning Balance Acquisition(Note 1) Disposal(Note 1) Ending Balance(Note 3) Shares Amount Generalplus Technology Inc. Franklin Templeton SinoAm Money Market Fund Financial assets at fair - - 5,721 $ 59,048 29,017 $ 300,000 26,869 $ 278,000 $ 277,539 $ 461 7,869 $ 81,669 value through profit or loss - current Note 1: The cumulative purchase and sale amount shall be calculated separately at the market price to determine whether it has reached NT$300 million or 20% of the paid-up capital. Note 2: The paid-in capital refers to the paid-in capital of the parent company. Note 3: The amount on the end of the period is the amount of unrealized profit or loss. TABLE 4 TABLE 5 SUNPLUS TECHNOLOGY COMPANY LIMITED AND SUBSIDIARIES INTERCOMPANY RELATIONSHIPS AND SIGNIFICANT INTERCOMPANY TRANSACTIONS FOR THE YEAR ENDED DECEMBER 31, 2019 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise) Company Name Counterparty Sunplus Technology Co., Ltd. (the “Company”) Generalplus Technology Inc. Sunext Technology Co., Ltd. Sunplus Innovation Technology Inc. Sunplus mMedia Inc. Jumplux Technology Co., Ltd. Sunplus Innovation Technology Inc. Sun Media Technology Co., Ltd. Generalplus Technology Inc. Sunplus Prof-tek (Shenzhen) Co., Ltd. Sunplus Innovation Technology Inc. Generalplus Technology (Hong Kong) Inc. Generalplus Technology (Shenzhen) Inc. Sunplus Technology (Shanghai) Co., Ltd. SunMedia Technology Co., Ltd. Sunplus App Technology Sunplus Technology (Beijing) Jumplux Technology Co., Ltd. Flow of Transaction (Note 5) Financial Statement Account Item Amount Terms Percentage of Consolidated Total Gross Sales or Total Assets Intercompany Transactions 1 1 1 1 1 2 2 2 2 2 2 2 2 2 Sales Non-operating income and gains Notes and trade receivables Sales Non-operating income and gains Notes and trade receivables Other receivables Sales Non-operating income and gains Notes and trade receivables Other receivables Non-operating income and gains Sales Non-operating income and gains Notes and trade receivables Other receivables Accrued expenses Marketing expenses Accrued expenses Marketing expenses Sales Marketing expenses Accrued expenses Sales Research and development expenses Notes and trade receivables Accrued expenses Accrued expenses Interest income Research and development expenses Interest income Research and development expenses Sales Notes and trade receivables $ 2,562 Note 1 145 Note 2 407 Note 1 196 Note 1 4,361 Notes 2 5 Note 1 295 Note 3 424 Note 1 3,805 Note 2 74 Note 1 337 Note 3 3,956 Notes 2 and 4 4,508 Note 1 14,291 Notes 2 and 4 111 Note 1 1,091 Note 3 1,114 Note 3 3,151 Note 2 5,503 Note 3 23,208 Note 1 513 Note 1 11,081 Note 1 2,048 Note 3 13,422 Note 2 84,656 Note 2 1,752 Note 3 28,838 Note 3 710 Note 3 1,441 Note 1 5,358 Note 1 251 Note 2 150 Note 2 969 Note 1 427 Note 1 0.05% - - - 0.08% - - 0.01% 0.07% - - 0.07% 0.08% 0.26% - 0.01% 0.01% 0.06% 0.05% 0.42% 0.01% 0.20% 0.02% 0.24% 1.54% 0.02% 0.25% 0.01% 0.03% 0.10% - - 0.02% - (Continued) Company Name Counterparty Flow of Transaction (Note 5) Financial Statement Account Item Amount Terms Percentage of Consolidated Total Gross Sales or Total Assets Intercompany Transactions Jumplux Technology Co., Ltd. Sunplus Technology (Beijing) Jsilicon Technology Lin Shih Investment Co., Ltd. Sun Media Technology Co., Ltd. Sunplus Venture Co., Ltd. Sun Media Technology Co., Ltd. Russell Holdings Ltd. Sun Media Technology Co., Ltd. Sunplus Technology (Beijing) Sun Media Technology Co., Ltd. Sunplus Technology (Beijing) Sunplus Prof-tek (Shenzhen) Co., Ltd. Sunplus Technology (Beijing) Sunplus App Technology Jsilicon Technology Sunplus App Technology Sunplus Technology (Beijing) Shuangxin Technology Note 1: The transactions were based on normal commercial prices and terms. 2 2 2 2 2 2 2 2 2 2 2 Research and development expenses Sales Notes and trade receivables Interest income Other receivables Interest income Other receivables Other receivables Interest income Management expenses Sales Management expenses Sales Interest income Sales Notes and trade receivables Sales Notes and trade receivables Research and development expenses $ 2,867 Note 2 8,987 Note 1 5,645 Note 1 992 Note 2 117,008 Note 3 5,309 Note 2 228,029 Note 3 255,277 Note 3 5,412 Note 2 38 Note 2 585 Note 1 38 Note 2 585 Note 1 553 Note 2 2,057 Note 1 45 Note 1 3,663 Note 1 1,421 Note 1 10 Note 2 0.05% 0.16% 0.05% 0.02% 1.02% 0.10% 1.98% 2.22% 0.10% - 0.01% - 0.01% 0.01% 0.04% - 0.07% 0.01% - Note 2: The prices were based on negotiations, and the payment period and related terms were not comparable to market terms. Note 3: The transaction payment terms were at normal commercial terms. Note 4: Lease transaction terms were based on negotiations and, thus, were not comparable to market terms. The transactions between the Company and the counterparty were at normal terms. Note 5: The directional flow of the transactions are indicated by the following numerals: 1 - From parent company to subsidiary. 2 - Between subsidiaries. (Concluded) SUNPLUS TECHNOLOGY COMPANY LIMITED AND SUBSIDIARIES NAMES, LOCATIONS, AND RELATED INFORMATION OF INVESTEES ON WHICH THE COMPANY EXERCISES SIGNIFICANT INFLUENCES DECEMBER 31, 2019 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise) Investor Investee Location Main Businesses and Products Sunplus Technology Company Limited Ventureplus Group Inc. Award Glory Ltd. Belize Belize Investment Investment GLOBAL VIEW CO., LTD. Hsinchu, Taiwan Consumer electronics, components and rental Investment Amount Balance as of December 31, 2019 December 31, 2019 December 31, 2018 Shares (Thousands) Percentage of Ownership (%) Carrying Amount Net Income (Loss) of the Investee Investment Gain (Loss) Note 2,399,817 $ ( US$ 74,605 RMB 37,900 ) 226,834 ( US$ 5,642 RMB 13,400 ) 315,658 2,399,817 $ ( US$ 74,605 RMB 37,900 ) 61,219 2,042 ) ( US$ - - 100 $ 1,373,861 $ 21,479 $ 21,479 Subsidiary 100 160,186 8,497 8,497 Subsidiary 315,658 8,229 13 297,640 85,934 11,165 Investee TABLE 6 Lin Shih Investment Co., Ltd. Generalplus Technology Inc. Sunplus Venture Capital Co., Ltd. Sunplus Innovation Technology Inc. Russell Holdings Limited iCatch Technology, Inc. Sunext Technology Co., Ltd. Sunplus mMedia Inc. Sunplus Management Consulting Inc. Sunplus Technology (H.K.) Co., Ltd. Hsinchu, Taiwan Hsinchu, Taiwan Hsinchu, Taiwan Hsinchu, Taiwan Cayman Islands, British West Indies Hsinchu, Taiwan Hsinchu, Taiwan Hsinchu, Taiwan Hsinchu, Taiwan Kowloon Bay, Hong Kong Magic Sky Limited Samoa Sunplus mMobile Inc. Wei-Young Investment Inc. Jumplux Technology Co., Ltd. Generalplus Technology Inc. Sunplus Innovation Technology Inc. iCatch Technology, Inc. Sunplus mMedia Inc. Jumplux Technology Co., Ltd. Sunplus Innovation Technology Inc. iCatch Technology, Inc. Sunplus mMedia Inc. Han Young Technology Co., Ltd. Hsinchu, Taiwan Hsinchu, Taiwan Hsinchu, Taiwan Hsinchu, Taiwan Hsinchu, Taiwan Hsinchu, Taiwan Hsinchu, Taiwan Hsinchu, Taiwan Hsinchu, Taiwan Hsinchu, Taiwan Hsinchu, Taiwan Taipei, Taiwan of buildings Investment Design of ICs Investment Design of ICs Investment Design of ICs Design of ICs Design of ICs Management International trade Investment Design of ICs Investment Design of ICs Design of ICs Design of ICs Design of ICs Design of ICs Design of ICs Design of ICs Design of ICs Design of ICs Design of ICs Lin Shih Investment Co., Ltd. Sunplus Venture Capital Co., Ltd. Russell Holdings Limited Autosys Co., Ltd. Cayman Islands, British west Indies Investment Ventureplus Group Inc. Ventureplus Mauritius Inc. Mauritius Investment ( US$ ( US$ 699,988 281,001 999,982 414,663 739,307 24,660 ) 207,345 983,237 407,565 5,000 42,628 11,075 ) 304,597 10,160 ) 2,596,792 70,157 132,000 699,988 281,001 999,982 414,663 721,319 24,060 ) 207,345 981,053 407,565 5,000 42,628 11,075 ) 302,049 10,075 ) 2,596,792 70,157 132,000 ( HK$ ( HK$ ( US$ ( US$ 86,256 15,701 9,645 19,408 86,256 15,701 9,645 19,408 101,000 101,000 57,388 33,439 44,878 - 57,388 33,439 44,878 4,200 74,950 2,500 ) ( US$ 74,950 2,500 ) ( US$ 2,399,817 ( US$ 74,605 RMB 37,900 ) 2,399,817 ( US$ 74,605 RMB 37,900 ) 70,000 37,324 100,000 31,450 24,660 20,735 58,778 22,441 500 11,075 100 34 100 61 100 29 93 90 100 100 744,832 681,743 1,049,350 573,897 569,284 263,237 194,234 23,627 3,768 35 43,053 223,584 43,973 135,651 5,887 (79,931 ) 19,076 (25,068 ) (142 ) (3 ) 41,771 Subsidiary 76,690 Subsidiary 43,973 Subsidiary 82,919 Subsidiary 5,887 Subsidiary (27,997 ) Investee 17,497 Subsidiary (22,501 ) Subsidiary (142 ) Subsidiary (3 ) Subsidiary - 100 32,282 (53,190 ) (53,190 ) Subsidiary 16,240 5,400 13,200 14,892 1,075 965 650 10,100 2,904 3,332 1,909 - - - 100 100 55 14 2 1 3 42 6 5 8 - 16 29,576 49,602 2,785 273,385 17,399 12,784 5,348 2,130 53,990 44,159 457 - (209 ) (5,239 ) (26,527 ) 223,584 135,651 (79,931 ) (25,068 ) (26,527 ) 135,651 (79,931 ) (25,068 ) - (209 ) Subsidiary (5,239 ) Subsidiary (14,590 ) Subsidiary 30,599 Subsidiary 2,834 Subsidiary (1,094 ) Investee (652 ) Investee (11,163 ) Subsidiary 7,655 Subsidiary (3,779 ) Subsidiary (1,914 ) Subsidiary - Subsidiary (Note 2) 77,208 (1,845 ) (1,793 ) Investee 100 1,373,859 21,496 21,496 Subsidiary Ventureplus Mauritius Inc. Ventureplus Cayman Inc. Cayman Islands, British West Indies Investment Generalplus Technology Inc. Generalplus International (Samoa) Inc. Samoa Investment Generalplus International (Samoa) Inc. Generalplus (Mauritius) Inc. Mauritius Investment 2,399,817 ( US$ 74,605 RMB 37,900 ) 2,399,817 ( US$ 74,605 RMB 37,900 ) 572,318 19,090 ) ( US$ 572,318 19,090 ) ( US$ 572,318 19,090 ) ( US$ 572,318 19,090 ) ( US$ - 100 1,373,837 21,497 21,497 Subsidiary 19,090 100 475,396 13,484 13,484 Subsidiary 19,090 100 475,394 13,484 13,484 Subsidiary (Continued) Investor Investee Location Main Businesses and Products Investment Amount Balance as of December 31, 2019 December 31, 2019 December 31, 2018 Shares (Thousands) Percentage of Ownership (%) Carrying Amount Net Income (Loss) of the Investee Investment Gain (Loss) Note Generalplus (Mauritius) Inc. Generalplus Technology (Hong Kong) Inc. Hong Kong Sales Award Glory Ltd. Sunny Fancy Ltd. Seychelles Investment $ (US$ 11,692 390 ) $ (US$ 11,692 390 ) 226,834 (US$ 5,642 RMB 13,400 ) 61,212 2,042 ) (US$ Sunny Fancy Ltd. Giant Kingdom Ltd. Giant Rock Inc. Seychelles Anguilla Investment Investment WORLDPLUS HOLDINGS L.L.C. America Investment Note 1: The initial exchange rate was based on the exchange rate as of December 31, 2018. Note 2: Han Young Technology Co., Ltd. was liquidated in November 2019. (US$ 23,145 772 ) 95,762 (US$ 1,270 RMB 13,400 ) 107,928 3,600 ) (US$ (US$ (US$ 23,145 772 ) 38,075 1,270 ) - - - - - - 100 $ 4,691 $ (456 ) $ (456 ) Subsidiary 100 160,186 8,497 8,497 Subsidiary 100 100 100 558 (240 ) (240 ) Subsidiary 50,758 11,319 11,319 Subsidiary 108,870 (2,138 ) (2,582 ) Subsidiary (Concluded) TABLE 7 SUNPLUS TECHNOLOGY COMPANY LIMITED AND SUBSIDIARIES INFORMATION ON INVESTMENTS IN MAINLAND CHINA FOR THE YEAR ENDED DECEMBER 31, 2019 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise) Investee Company Name Main Businesses and Products Total Amount of Paid-in Capital Investment Type Sunplus Technology Development of computer software, system (Shanghai) Co., Ltd. Sunplus Prof-tek (Shenzhen) integration services and building rental services Development of computer software, system Co., Ltd. integration services, building rental services and property management $ (US$ (US$ 515,656 17,200) 966,855 32,250) Sun Media Technology Co., Development of computer software, system Ltd. Sunplus App Technology Co., Ltd. integration services and building rental services Manufacturing and sale of computer software, system integration services and information management and education (US$ (RMB Ytrip Technology Co., Ltd. Computer system integration services, supply of general advertising and other information services (RMB Sunplus Technology (Beijing) Development of computer software, system integration services and building rental services (RMB 1culture Communication Co., System development Ltd. JSilicon Technology Co., Ltd. Development of computer software, system (Ru Domg) integration services Lingyao Technology Co., Ltd. (Shenzhen) Shuangxin Technology Co., Development of computer software, system integration services and building rental Development of computer software, system Ltd. (Chongqing) integration services (RMB (RMB (RMB (RMB 599,600 20,000) 111,930 26,000) 263,681 61,250) 116,235 27,000) 13,991 3,250) 43,050 10,000) 81,963 19,039) 8,610 2,000) Note 1 Note 1 Note 1 Note 1 Note 1 Note 1 Note 3 Note 4 Note 6 Note 5 Accumulated Outflow of Investment from Taiwan as of January 1, 2019 $ (US$ (US$ 529,297 17,655) 966,855 32,250) (US$ (US$ RMB (US$ (RMB 599,600 20,000) 60,618 586 10,000) 135,240 4,511) 116,235 27,000) - - - - Investment Flows Outflow Inflow $ - $ - - (RMB 47,355 11,000) - - - - (US$ 107,928 3,600) - Accumulated Outflow of Investment from Taiwan as of December 31, 2019 $ (US$ (US$ 529,297 17,655) 966,855 32,250) 599,600 20,000) 107,973 586 21,000) 135,240 4,511) 116,235 27,000) (US$ (US$ RMB (US$ (RMB - 107,928 3,600) - (US$ - - - - - - - - - - % Ownership of Direct or Indirect Investment Net Income (Loss) of the investee Investment Loss Carrying Amount as of December 31, 2019 Accumulated Inward Remittance of Earnings as of December 31, 2019 100 $ 13,082 $ 13,082 $ 428,305 $ 100 (29,577) (29,577) 757,026 100 96 91 100 100 100 100 100 31,538 31,538 131,080 (10,628) (10,290) 4,071 (2,566) (2,327) 1,861 3,096 3,096 49,237 (29) (29) 65 (15,033) (15,033) 28,209 (2,138) (2,582) 108,870 (10,973) (10,973) 75,218 - - - - - - - - - - Accumulated Investment in Mainland China as of December 31, 2019 Investment Amounts Authorized by Investment Commission, MOEA Limit on Investment 2,597,759 $ ( US$ 79,872 and 49,900 ) RMB 2,623,398 $ ( US$ 78,602 and RMB 62,000 ) $ 4,907,120 Sunplus Venture Capital Co., Ltd. Accumulated Investment in Mainland China as of December 31, 2019 (Note 7) Investment Amounts Authorized by Investment Commission, MOEA Limit on Investment $ ( US$ 37,775 1,260 ) $ ( US$ 37,775 1,260 ) $ 629,610 (Continued) Generalplus Technology Inc. (Nature of Relationship: 1) Investee Company Name Main Businesses and Products Total Amount of Paid-in Capital Investment Type (e.g., Direct or Indirect) Accumulated Outflow of Investment from Taiwan as of January 1, 2019 Investment Flows Outflow Inflow Accumulated Outflow of Investment from Taiwan as of December 31, 2019 % Ownership of Direct or Indirect Investment Net Loss of the investee Investment Loss (Note 2) Carrying Amount as of December 31, 2019 Accumulated Inward Remittance of Earnings as of December 31, 2019 Generalplus Shenzhen IC product development, after sales service and market research $ (US$ 560,626 18,700) Note 1 $ (US$ 560,626 18,700) $ - $ - $ (US$ 560,626 18,700) 100% $ 13,940 $ 13,940 $ 471,173 $ - Accumulated Investment in Mainland China as of December 31, 2019 Investment Amount Authorized by Investment Commission, MOEA $ ( US$ 560,626 18,700 ) $ ( US$ 560,626 18,700 ) Limit on Investment $ 1,210,358 Note 1: Indirect investment in a company located in mainland China through investment in a company located in a third country. Note 2: Based on the investee’s reviewed financial statements for the same period. Note 3: Ytrip Technology Co., Ltd. indirectly invested in a company located in mainland China. Note 4: Sunplus Technology (Shanghai) Co., Ltd.’s indirect investment in a company located in mainland China. Note 5: Sunplus Technology (Shanghai) Co., Ltd. and Sunplus Prof-tek (Shenzhen) Co., Ltd.’s indirect investments in a company located in mainland China. Note 6: It is a company located in mainland China that acquired the investment of the third regional investment company on September 2, 2019. Note 7: The Ministry of Economic Affairs approved an investment in the shares of San Neng Group Holding Co., Ltd., which is accounted for under the financial assets at fair value through profit or loss- non-current. Note 8: The original foreign currency was derived from the exchange rate on December 31, 2019. (Concluded) SUNPLUS TECHNOLOGY COMPANY LIMITED AND SUBSIDIARIES SIGNIFICANT TRANSACTIONS WITH INVESTEE COMPANIES IN MAINLAND CHINA, EITHER DIRECTLY OR INDIRECTLY THROUGH A THIRD PARTY, AND THEIR PRICES, PAYMENT TERMS, AND UNREALIZED GAINS OR LOSSES FOR THE YEAR ENDED DECEMBER 31, 2019 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise) Investee Company Transaction Type Research and Development Expense Amount % Price Transaction Details Payment Term Comparison with Market Transactions Other Payable To Related Parties Ending Balance % Unrealized (Gain) Loss Generalplus Technology (Shenzhen) Development and $ 84,656 18.06 Based on contract Based on contract Not comparable with market $ 28,838 93.05 $ - Corp. processing services Sales 13,422 0.51 Based on contract Based on contract Not comparable with market 1,752 100 490 transactions transactions Note NA NA TABLE 8 7.5 The Company's individual financial report for the past year has been audited by the accountant Sunplus Technology Company Limited Financial Statements for the Years Ended December 31, 2019 and 2018 and Independent Auditors’ Report INDEPENDENT AUDITORS’ REPORT The Board of Directors and Shareholders Sunplus Technology Company Limited Opinion We have audited the accompanying financial statements of Sunplus Technology Company Limited (the “Company”), which comprise the balance sheets as of December 31, 2019 and 2018, and the statements of comprehensive income, statements of changes in equity and statements of cash flows for the years then ended, and the notes to the financial statements, including a summary of significant accounting policies (collectively referred to as the “financial statements”). In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and its financial performance and its cash flows for the years then ended in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers. Basis for Opinion We conducted our audits in accordance with the Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants and auditing standards generally accepted in the Republic of China. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the 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 financial statements for the year ended December 31, 2019. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Validity of Specific Customer’s Revenue Integrated circuit chip sales accounted for 93% of the Company’s total revenue. Operating income declined in 2019, but sales to some customers increased significantly. Therefore, we deem revenue recognition as a key audit matter. For detailed explanation of revenue, refer to Notes 4 and 21 to the accompanying consolidated financial statements. 1. We understood the related internal control and operating procedures in the sales transaction cycle, and we evaluated and confirmed the operating effectiveness of the internal control and operating procedures. 2. We selected samples from the sales details, and we examined customers’ original orders, sales electronic orders, delivery orders, logistics receipt documents or export declaration, and sales invoices for any abnormal situations and confirmed the validity of the revenue. Responsibilities of Management and Those Charged with Governance for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the 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 the audit committee, are responsible for overseeing the Company’s financial reporting process. Auditors’ Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the 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 financial statements. As part of an audit in accordance with the auditing standards generally accepted in the Republic of China, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: 1. Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. 2. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. 3. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. 4. Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the 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 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. 5. Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. 6. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the 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 financial statements for the year ended December 31, 2019 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 Cheng-Chih Lin and Yu-Feng Huang. Deloitte & Touche Taipei, Taiwan Republic of China March 30, 2020 Notice to Readers The accompanying financial statements are intended only to present the 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 financial statements are those generally applied in the Republic of China. For the convenience of readers, the independent 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. 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 the financial statements shall prevail. SUNPLUS TECHNOLOGY COMPANY LIMITED BALANCE SHEETS DECEMBER 31, 2019 AND 2018 (In Thousands of New Taiwan Dollars, Except Par Value) ASSETS CURRENT ASSETS Cash and cash equivalents (Notes 4 and 6) Financial assets at fair value through profit or loss - current (Notes 4 and 7) Accounts receivable, net (Notes 4, 5, 9, 21 and 29) Other receivables (Notes 4, 23 and 29) Inventories (Notes 4 and 10) Other current assets (Note 15) Total current assets NON-CURRENT ASSETS Financial assets at fair value through profit or loss - non-current (Notes 4 and 7) Financial assets at fair value through other comprehensive income - non-current (Notes 4 and 8) Investments accounted for using the equity method (Notes 4, 11 and 29) Property, plant and equipment (Notes 4, 5, 12 and 30) Right-of-use assets (Notes 3, 4, 5 and 13) Intangible assets (Notes 4, 5 and 14) Deferred tax assets (Notes 4 and 23) Net defined benefit assets - non-current (Notes 4 and 19) Other financial assets (Notes 15 and 30) Other non-current assets (Note 15) Total non-current assets TOTAL LIABILITIES AND EQUITY CURRENT LIABILITIES Short-term bank borrowings (Note 16) Contract liabilities - current (Note 21) Account payable (Note 17) Lease liabilities - current (Notes 3, 4, 5 and 13) Current portion of long-term bank borrowings (Notes 16 and 30) Other current liabilities (Note 18) Total current liabilities NON-CURRENT LIABILITIES Lease liabilities - non-current (Notes 3, 4, 5 and 13) Net defined benefit liabilities (Notes 4 and 19) Guarantee deposits Other non-current liabilities (Note 18) Total non-current liabilities Total liabilities EQUITY ATTRIBUTABLE TO OWNERS OF THE COMPANY Share capital (Notes 4 and 20) Ordinary shares Capital surplus Retained earnings Legal reserve Special reserve (Deficits not yet compensated) Unappropriated earnings Total retained earnings Other equity Treasury shares Total equity TOTAL The accompanying notes are an integral part of the financial statements. 2019 2018 Amount % Amount % $ 321,084 515,989 141,845 7,209 273,764 32,425 $ 4 6 2 - 3 - 780,555 661,494 171,387 14,226 256,907 24,851 9 7 2 - 3 - 1,292,316 15 1,909,420 21 413,723 2,586 6,049,939 688,706 179,559 86,258 2,485 1,163 6,100 7,936 5 - 69 8 2 1 - - - - 266,154 4,337 5,981,209 687,187 - 86,495 2,485 - 6,100 8,000 3 - 67 8 - 1 - - - - 7,438,455 85 7,041,967 79 $ 8,730,771 100 $ 8,951,387 100 $ 53,964 3,373 62,566 4,007 - 189,019 312,929 177,424 - 58,687 3,198 239,309 552,238 $ - - 1 - - 2 3 2 - 1 - 3 6 - 2,547 108,075 - 115,000 188,041 413,663 - 5,275 64,131 2,376 71,782 485,445 - - 1 - 1 2 4 - - 1 - 1 5 5,919,949 594,432 68 7 5,919,949 801,398 66 9 22 4 (3) 23 1,942,388 308,452 (262,261) 1,988,579 (261,026) (63,401) (3) (1) 1,941,826 67,279 241,734 2,250,839 (442,843) (63,401) 21 1 3 25 (5) - 8,178,533 94 8,465,942 95 $ 8,730,771 100 $ 8,951,387 100 SUNPLUS TECHNOLOGY COMPANY LIMITED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018 (In Thousands of New Taiwan Dollars, Except Earnings Per Share) 2019 2018 Amount % Amount % NET OPERATING REVENUE (Notes 4, 21 and 29) $ 1,235,269 100 $ 1,238,780 100 OPERATING COSTS (Notes 10 and 22) 735,366 60 809,472 66 GROSS PROFIT 499,903 40 429,308 34 OPERATING EXPENSES (Notes 22 and 29) Selling and marketing expenses General and administrative expenses Research and development expenses 46,290 179,275 543,782 4 14 44 31,670 176,445 460,807 3 14 37 Total operating expenses 769,347 62 668,922 54 LOSS FROM OPERATIONS (269,444) (22) (239,614) (20) NON-OPERATING INCOME AND EXPENSES (Notes 4, 11, 22, 25 and 29) Other income Other gains and losses Finance costs Share of profit of associates and joint ventures 61,933 48,381 (6,781) 186,007 5 4 - 15 52,856 152,227 (4,864) 47,155 4 12 - 4 Total non-operating income and expenses 289,540 24 247,374 20 PROFIT BEFORE INCOME TAX INCOME TAX EXPENSE (Notes 4 and 23) NET PROFIT FOR THE YEAR OTHER COMPREHENSIVE INCOME (LOSS) Items that will not be reclassified subsequently to profit or loss (Notes 4 and 19): Remeasurement of defined benefit plans Unrealized losses on investments in equity instruments at fair value through other comprehensive income Share of other comprehensive loss of subsidiaries and 20,096 4,787 15,309 4,309 (1,203) 2 1 1 - - associates accounted for using equity method (15,559) (1) 7,760 2,144 5,616 - - - 3,443 (94,350) - (8) (18,667) (1) (Continued) SUNPLUS TECHNOLOGY COMPANY LIMITED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018 (In Thousands of New Taiwan Dollars, Except Earnings Per Share) 2019 2018 Amount % Amount % Items that may be reclassified subsequently to profit or loss (Notes 4 and 20): Exchange differences on translating the financial statements of foreign operations Share of other comprehensive loss of subsidiaries and (13,842) (1) 19,736 associates accounted for using equity method (66,063) (5) (36,511) 2 (3) Other comprehensive loss for the year, net of income tax (92,358) (7) (126,349) (10) TOTAL COMPREHENSIVE INCOME FOR THE YEAR $ (77,049) (6) $ (120,733) (10) EARNINGS PER SHARE (Note 24) Basic Diluted $ $ 0.03 0.03 $ $ 0.01 0.01 The accompanying notes are an integral part of the financial statements. (Concluded) SUNPLUS TECHNOLOGY COMPANY LIMITED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018 (In Thousands of New Taiwan Dollars) Share Capital Issued and Outstanding Share Retained Earnings Exchange Other Equity Unappropriated Differences on Unrealized Losses Earnings Translating the Financial from Investments (Deficits not yet Statements of in Equity Instruments (Thousands) Amount Capital Surplus Legal Reserve Special Reserve Compensated) Foreign Operations Measured at FVTOCI Treasury Shares Total Equity BALANCE AT JANUARY 1, 2018 591,995 $ 5,919,949 $ 835,241 $ 1,900,505 $ 22,995 $ 707,497 $ (122,100 ) $ (230,011 ) $ (63,401 ) $ 8,970,675 Appropriation of the 2017 earnings Legal reserve Special reserve Cash dividends to shareholders Changes in capital surplus from investments in associates and joint ventures accounted for using the equity method Issuance of share dividends from capital surplus Difference between share price and carrying amount from disposal of subsidiaries Changes of equity of subsidiaries 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 Adjustments to capital surplus due to the distribution of cash dividends to subsidiaries Disposals of investments in equity instruments designated as at fair value through other comprehensive income - - - - - - - - - - - - - - - - - - - - - - - - - - - 50,782 (86,846 ) (271 ) - - - - 2,492 - 41,321 - - - - - - - - - - - - 44,284 - - - - - - - - - - (41,321 ) (44,284 ) (327,551 ) - - - (22,606 ) 5,616 1,453 7,069 - (37,070 ) - - - - - - - - - - - - - - - - (16,775 ) (111,027 ) (16,775 ) (111,027 ) - - - 37,070 - - - - - - - - - - - - - - (327,551 ) 50,782 (86,846 ) (271 ) (22,606 ) 5,616 (126,349 ) (120,733 ) 2,492 - BALANCE AT DECEMBER 31, 2018 591,995 5,919,949 801,398 1,941,826 67,279 241,734 (138,875 ) (303,968 ) (63,401 ) 8,465,942 Appropriation of the 2018 earnings Legal reserve Special reserve Cash dividends to shareholders Changes in capital surplus from investments in associates and joint ventures accounted for using the equity method Issuance of share dividends from capital surplus Difference between share price and carrying amount from disposal of subsidiaries Changes of equity of subsidiaries Net profit for the year ended December 31, 2019 - - - - - - - - - - - - - - - - - - - 4,709 (213,118 ) 162 - - 562 - - - - - - - - 241,173 (562 ) (241,173 ) - - - - - - - - - - (3,394 ) 15,309 - - - - - - - - - - - - - - - - - - - - - - - - - - - 4,709 (213,118 ) 162 (3,394 ) 15,309 Other comprehensive income (loss) for the year ended December 31, 2019, net of income tax Total comprehensive income (loss) for the year ended December 31, 2019 Adjustments to capital surplus due to the distribution of cash dividends to subsidiaries Disposals of investments in equity instruments designated as at fair value through other comprehensive income - - - - - - - - - - 1,281 - - - - - - - - - 5,339 20,648 - (279,514 ) (79,905 ) (17,792 ) (79,905 ) (17,792 ) - - - 279,514 - - - - (92,358 ) (77,049 ) 1,281 - BALANCE AT DECEMBER 31, 2019 591,995 $ 5,919,949 $ 594,432 $ 1,942,388 $ 308,452 $ (262,261 ) $ (218,780 ) $ (42,246 ) $ (63,401 ) $ 8,178,533 The accompanying notes are an integral part of the financial statements. SUNPLUS TECHNOLOGY COMPANY LIMITED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018 (In Thousands of New Taiwan Dollars) CASH FLOWS FROM OPERATING ACTIVITIES Income before income tax Adjustments for: Depreciation expenses Amortization expenses Net gain on the fair value change of financial assets at fair value through profit or loss Financial costs Interest income Dividend income Share of profit of subsidiaries, associates and joint ventures Gain on disposal of subsidiaries Realized gain on the transactions with subsidiaries Net loss on foreign currency exchange Changes in operating assets and liabilities: Decrease in other receivables Decrease in trade receivables Decrease (increase) in inventories Decrease (increase) in other current assets Increase in net defined benefit assets - non-current Increase (decrease) in contract liabilities decrease in trade payables Increase (decrease) in other current liabilities Decrease in defined benefit liabilities Cash used in operations Interest received Dividends received Interest paid Income tax paid 2019 2018 $ 20,096 $ 7,760 86,185 42,652 (17,428) 6,781 (2,490) (3,702) (186,007) - (131) 1,062 6,870 27,310 (16,857) (7,347) (1,163) 826 (44,951) 6,979 (966) (82,281) 2,633 206,037 (6,862) (4,787) 45,232 42,802 13,218 4,864 (3,467) (7,986) (47,155) (119,154) (2,287) 203 22,170 29,387 20,001 4,883 - (996) (28,717) (34,475) (2,146) (55,863) 3,980 281,986 (5,018) (1,680) Net cash generated from operating activities 114,740 223,405 CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from financial assets at FVTOCI Purchase of financial assets at FVTPL Proceeds from the sale of financial assets at FVTPL Purchase of investments accounted for using the equity method Payments for property, plant and equipment Payments for intangible assets Decrease in other assets - non-current Decrease in refundable deposits 548 (293,720) 309,084 (177,633) (83,624) (45,662) - 64 - (454,704) 313,976 (346,554) (41,358) (65,360) 59,520 - Net cash used in investing activities (290,943) (534,480) CASH FLOWS FROM FINANCING ACTIVITIES (Continued) SUNPLUS TECHNOLOGY COMPANY LIMITED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018 (In Thousands of New Taiwan Dollars) Proceeds from short-term borrowings Repayments of short-term borrowings Repayments of long-term borrowings Proceeds from guarantee deposits received Refunds of guarantee deposits received Repayment of the principal portion of lease liabilities Dividends paid to owners of the Company 2019 2018 54,658 - (115,000) 1,406 (5,483) (3,913) (213,118) - (59,520) (160,000) 1,860 (752) - (414,397) Net cash used in financing activities (281,450) (632,809) EFFECTS OF EXCHANGE RATE CHANGES ON THE BALANCE OF CASH HELD IN FOREIGN CURRENCIES (1,818) 1,870 NET DECREASE IN CASH AND CASH EQUIVALENTS (459,471) (942,014) CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR 780,555 1,722,569 CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR $ 321,084 $ 780,555 The accompanying notes are an integral part of the financial statements. (Concluded) SUNPLUS TECHNOLOGY COMPANY LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise) 1. GENERAL INFORMATION Sunplus Technology Company Limited (“Sunplus” or the “Company”) was established in August 1990. It researches, develops, designs, tests and sells high quality, high value-added consumer integrated circuits (ICs). Its products are based on core technologies in such areas as multimedia audio/video, single-chip microcontrollers and digital signal processors. These technologies are used to develop hundreds of products including various ICs: liquid crystal display, microcontroller, multimedia, voice/music, and application-specific devices. Sunplus’ shares have been listed on the Taiwan Stock Exchange since January 2000. Some of its shares have been issued in the form of global depositary receipts (GDRs), which have been listed on the London Stock Exchange since March 2001 (refer to Note 20). The parent financial statements are presented in the Company’s functional currency, the New Taiwan dollar. 2. APPROVAL OF FINANCIAL STATEMENTS The parent company only financial statements were approved by the board of directors and authorized for issue on March 30, 2020. 3. APPLICATION OF NEW, AMENDED AND REVISED STANDARDS AND INTERPRETATIONS a. Initial application of the amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), Interpretations of IFRS (IFRIC), and Interpretations of IAS (SIC) endorsed and issued into effect by the Financial Supervisory Commission (FSC) Except for the following, 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 did not have any material impact on the Company’s accounting policies: 1) IFRS 16 “Leases” IFRS 16 provides a comprehensive model for the identification of lease arrangements and their treatment in the financial statements of both lessee and lessor. It supersedes IAS 17 “Leases”, IFRIC 4 “Determining whether an Arrangement contains a Lease”, and a number of related interpretations. Refer to Note 4 for information relating to the relevant accounting policies. Definition of a lease The Company elects to apply the guidance of IFRS 16 in determining whether contracts are, or contain, a lease only to contracts entered into (or changed) on or after January 1, 2019. Contracts identified as containing a lease under IAS 17 and IFRIC 4 are not reassessed and are accounted for in accordance with the transitional provisions under IFRS 16. The Company as lessee The Company recognizes right-of-use assets or investment properties if the right-of-use assets meet the definition of investment properties, and lease liabilities for all leases on the consolidated balance sheets except for those whose payments under low-value asset and short-term leases are recognized as expenses on a straight-line basis. On the statements of comprehensive income, the Company presents the depreciation expense charged on right-of-use assets separately from the interest expense accrued on lease liabilities; interest is computed using the effective interest method. On the consolidated statements of cash flows, cash payments for the principal portion of lease liabilities are classified within financing activities; cash payments for the interest portion are classified within operating activities. Prior to the application of IFRS 16, payments under operating lease contracts, were recognized as expenses on a straight-line basis. Cash flows for operating leases were classified within operating activities on the statements of cash flows. Lease liabilities were recognized on January 1, 2019 for leases previously classified as operating leases under IAS 17. Lease liabilities were 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. The Company applies IAS 36 to all right-of-use assets. The lessee’s weighted average incremental borrowing rate applied to lease liabilities recognized on January 1, 2019 is 2.39%. The difference between the (i) lease liabilities recognized and (ii) operating lease commitments disclosed under IAS 17 on December 31, 2018 is explained as follows: The future minimum lease payments of non-cancellable operating lease commitments on December 31, 2018 Less: Recognition exemption for short-term leases and leases of low-value assets Undiscounted amounts on January 1, 2019 $ 65,973 - $ 65,973 Discounted amounts using the incremental borrowing rate on January 1, 2019 Add: Adjustments as a result of a different treatment of extension and termination options $ 56,503 128,841 Lease liabilities recognized on January 1, 2019 $ 185,344 The Company as lessor The Company does not make any adjustments for leases in which it is a lessor, and it accounts for those leases with the application of IFRS 16 starting from January 1, 2019. The impact on assets, liabilities and equity as of January 1, 2019 from the initial application of IFRS 16 is set out as follows: Right-of-use assets Total effect on assets Lease liabilities - current Lease liabilities - non-current Total effect on liabilities As Originally Stated on January 1, 2019 Adjustments Arising from Initial Application Restated on January 1, 2019 $ $ $ $ - - - - - $ 185,344 $ 185,344 $ 185,344 $ 185,344 $ 3,913 181,431 $ 3,913 181,431 $ 185,344 $ 185,344 2) IFRIC 23 “Uncertainty over Income Tax Treatments” IFRIC 23 clarifies that when there is uncertainty over income tax treatments, the Company should assume that the taxation authority will have full knowledge of all related information when making related examinations. If the Company concludes that it is probable that the taxation authority will accept an uncertain tax treatment, the Company should determine the taxable profit, tax bases, unused tax losses, unused tax credits or tax rates consistently with the tax treatments used or planned to be used in its income tax filings. If it is not probable that the taxation authority will accept an uncertain tax treatment, the Company should make estimates using either the most likely amount or the expected value of the tax treatment, depending on which method the entity expects to better predict the resolution of the uncertainty. The Company has to reassess its judgments and estimates if facts and circumstances change. 3) Amendments to IAS 28 “Long-term Interests in Associates and Joint Ventures” The amendments clarified that IFRS 9 “Financial Instruments” shall be applied to account for other financial instruments in an associate or joint venture to which the equity method is not applied. These included long-term interests that, in substance, form part of the Company’s net investment in an associate or joint venture. 4) Amendments to IAS 19 “Plan Amendment, Curtailment or Settlement” The amendments stipulate that, if a plan amendment, curtailment or settlement occurs, the current service cost and the net interest for the remainder of the annual reporting period are determined using the actuarial assumptions used for the remeasurement of the net defined benefit liabilities (assets). In addition, the amendments clarify the effect of a plan amendment, curtailment or settlement on the requirements regarding the asset ceiling. The Company applied the above amendments prospectively. b. The IFRSs endorsed by the FSC for application starting from 2020 New IFRSs Effective Date Announced by IASB Amendments to IFRS 3 “Definition of a Business” Amendments to IFRS 9, IAS 39 and IFRS 7 “Interest Rate Benchmark January 1, 2020 (Note 1) January 1, 2020 (Note 2) Reform” Amendments to IAS 1 and IAS 8 “Definition of Material” January 1, 2020 (Note 3) Note 1: 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 2: The Company shall apply these amendments retrospectively for annual reporting periods beginning on or after January 1, 2020. 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 consolidated 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 and will disclose the relevant impact when the assessment is completed. c. New IFRSs in issue but not yet endorsed and issued into effect by the FSC New IFRSs Effective Date Announced by IASB (Note 1) Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets between To be determined by IASB an Investor and its Associate or Joint Venture” IFRS 17 “Insurance Contracts” January 1, 2021 Amendments to IAS 1 “Classification of Liabilities as Current or Non-current” January 1, 2022 Note 1: Unless stated otherwise, the above New IFRSs are effective for annual reporting periods beginning on or after their respective effective dates. 1) Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets between an Investor and its Associate or Joint Venture” The amendments stipulate that, when the Company sells or contributes assets that constitute a business (as defined in IFRS 3) to an associate or joint venture, the gain or loss resulting from the transaction is recognized in full. Also, when the Company loses control of a subsidiary that contains a business but retains significant influence or joint control, the gain or loss resulting from the transaction is recognized in full. Conversely, when the Company sells or contributes assets that do not constitute a business to an associate or joint venture, the gain or loss resulting from the transaction is recognized only to the extent of the Company’s interest as an unrelated investor in the associate or joint venture, i.e., the Company’s share of the gain or loss is eliminated. Also, when the Company loses control of a subsidiary that does not contain a business but retains significant influence or joint control over an associate or a joint venture, the gain or loss resulting from the transaction is recognized only to the extent of the Company’s interest as an unrelated investor in the associate or joint venture, i.e., the Company’s share of the gain or loss is eliminated. 2) Amendments to IAS 1 “Classification of Liabilities as Current or Non-current” The amendments clarify that for a liability to be classified as non-current, the Company shall assess whether it has the right at the end of the reporting period to defer settlement of the liability for at least twelve months after the reporting period. If such rights are in existence at the end of the reporting period, the liability is classified as non-current regardless of whether the Company will exercise that right. The amendments also clarify that, if the right to defer settlement is subject to compliance with specified conditions, the Company must comply with those conditions at the end of the reporting period even if the lender does not test compliance until a later date. The amendments stipulate that, for the purpose of liability classification, the aforementioned settlement refers to a transfer of cash, other economic resources or the Company’s own equity instruments to the counterparty that results in the extinguishment of the liability. However, if the terms of a liability that could, at the option of the counterparty, result in its settlement by a transfer of the Company’s own equity instruments, and if such option is recognized separately as equity in accordance with IAS 32: Financial Instruments: Presentation, the aforementioned terms would not affect the classification of the liability. Except for the above impact, as of the date the consolidated 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 and will disclose the relevant impact when the assessment is completed. 4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES a. Statement of Compliance The parent company only financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers. b. Basis for Preparation The Company financial statements have been prepared on the historical cost basis except for financial instruments that are measured at fair values, and net defined benefit liabilities which are measured at the present value of the defined benefit obligation less the fair value of plan assets. The fair value measurements are grouped into Levels 1 to 3 based on the degree to which the fair value measurement inputs are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows: 1) Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities; 2) Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices); and 3) Level 3 inputs are unobservable inputs for the asset or liability. When preparing these parent company only financial statements, the Company used the equity method to account for its investments in subsidiaries, associates and joint ventures. In order for the amounts of the net profit for the year, other comprehensive income for the year and total equity in the parent company only financial statements to be the same with the amounts attributable to the owners of the Company in its financial statements, adjustments arising from the differences in accounting treatments between the parent company only basis and the basis were made to investments accounted for using the equity method, the share of profit or loss of subsidiaries, associates and joint ventures, the share of other comprehensive income of subsidiaries, associates and joint ventures and the related equity items, as appropriate, in these parent company only financial statements. c. Classification of current and non-current assets and liabilities Current assets include: 1) Assets held primarily for the purpose of trading; 2) Assets expected to be realized within twelve months after the reporting period; and 3) Cash and cash equivalents unless the asset is restricted from being exchanged or used to settle a Current liabilities include: 1) Liabilities held primarily for the purpose of trading; 2) 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 3) Liabilities for which the Company does not have an unconditional right to defer settlement for at least twelve months after the reporting period. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification. Assets and liabilities that are not classified as current are classified as non-current. d. Foreign currencies In preparing the financial statements of the Company, transactions in currencies other than the Company’s functional currency (i.e., foreign currencies) are recognized at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Exchange differences on monetary items arising from settlement or translation are recognized in profit or loss in the period. Nonmonetary 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 nonmonetary items are included in profit or loss for the period except for exchange differences arising from the retranslation of nonmonetary 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. Nonmonetary items that are measured at historical cost in a foreign currency are not retranslated. For the purposes of presenting parent company only financial statements, the assets and liabilities of the Company’s foreign operations (including of the subsidiaries, associates, joint ventures or branches operations in other countries or currencies used different with the Company) are translated into New Taiwan dollars using exchange rates prevailing at the end of each reporting period. Income and expense items are translated at the average exchange rates for the period. Exchange differences arising are recognized in other comprehensive income. e. Inventories 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 weighted-average cost on the balance sheet date. f. Investments accounted for using the equity method The Company uses the equity method to account for investments in subsidiaries, associates and joint ventures. 1) Investment 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. The acquisition cost in excess of the acquisition-date fair value of the identifiable net assets acquired is recognized as goodwill. Goodwill is not amortized. The acquisition-date fair value of the net identifiable assets acquired in excess of the acquisition cost is recognized immediately in profit or loss. When testing for impairment, the cash-generating unit is determined based on the financial statements as a whole by comparing its recoverable amount with its carrying amount. If the recoverable amount of the asset subsequently increases, the reversal of the impairment loss is recognized as a gain, but the increased carrying amount of an asset after a reversal of an impairment loss shall not exceed the carrying amount that would have been determined (net of amortization or depreciation) had no impairment loss been recognized on the asset in prior years. An impairment loss recognized for goodwill shall not be reversed in a subsequent period. When the Company ceases to have control over a subsidiary, any retained investment is measured at fair value at that date and the difference between the previous carrying amount of the subsidiary attributable to the retained interest and its fair value is included in the determination of the gain or loss. Furthermore, 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. Profits and losses from downstream transactions with a subsidiary are eliminated in full. Profits and losses from upstream with subsidiary and side stream transactions between subsidiaries are recognized in the Company’s financial statements only to the extent of interests in the subsidiary that are not related to the Company. 2) Investments 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 joint venture. The results and assets and liabilities of associates are incorporated in these parent company only financial statements using the equity method of accounting. Under the equity method, an investment in an associate is initially recognized at cost and adjusted thereafter to recognize the Company’s share of the profit or loss and other comprehensive income of the associate. The Company also recognizes the changes in the Company’s share of equity of associates. When the Company subscribes for additional new shares of the 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 adjustment 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 previously 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 interest 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 and jointly controlled entity. Any excess of the cost of acquisition over the Company’s share of the net fair value of the identifiable assets and liabilities of an associate recognized at the date of acquisition is recognized as goodwill, which is included within the carrying amount of the investment and is not amortized. Any excess of the Company’s share of the net fair value of the identifiable assets and liabilities over the cost of acquisition, after reassessment, is recognized immediately in profit or loss. 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 forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognized to the extent that the recoverable amount of the investment subsequently increases. The Company discontinues the use of the equity method from the date on which it ceases to have significant influence. Any retained investment is measured 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. When the Company transacts with its associate (profits and losses resulting from the transactions with the associate are recognized in the Company’s parent company only financial statements only to the extent of interests in the associate and the jointly controlled entity that are not related to the Company. g. Property, plant and equipment Property, plant and equipment are stated at cost, less subsequent accumulated depreciation and subsequent 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. h. Intangible assets 1) Intangible assets acquired separately Intangible assets with finite useful lives that are acquired separately are initially measured at cost and subsequently measured at cost less accumulated amortization and accumulated impairment loss. Amortization is recognized on a straight-line basis. The estimated useful life, residual value, and amortization method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis. The residual value of an intangible asset with a finite useful life shall be assumed to be zero unless the Company expects to dispose of the intangible asset before the end of its economic life. Intangible assets with indefinite useful lives that are acquired separately are measured at cost less accumulated impairment loss. 2) Derecognition of intangible assets On derecognition of an intangible asset, the difference between the net disposal proceeds and the carrying amount of the asset is recognized in profit or loss. i. 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, excluding goodwill, to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. When it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs. Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually. 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. When an impairment loss is subsequently reversed, the carrying amount of the asset or cash-generating unit is increased to the revised estimate of its recoverable amount, but only to the extent of the carrying amount that would have been determined had no impairment loss been recognized for the asset or cash-generating unit in prior years. A reversal of an impairment loss is recognized in profit or loss. j. Financial instruments Financial assets and financial liabilities are recognized when the Company becomes a party to the contractual provisions of the instruments. Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognized immediately in profit or loss. 1) Financial assets All regular way purchases or sales of financial assets are recognized and derecognized on a 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. i. Financial assets at FVTPL A financial asset is classified as at FVTPL when such a financial asset is mandatorily classified or it is designated as at FVTPL. Financial assets mandatorily classified as at FVTPL include investments in equity instruments which are not designated as at FVTOCI and debt instruments that do not meet the amortized cost criteria or the FVTOCI criteria. Financial assets 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 incorporates any dividends or interest earned on the financial assets. Fair value is determined in the manner described in Note 28. ii. Financial assets at amortized cost Financial assets that meet the following conditions are subsequently measured at amortized cost: i) The financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows; and ii) The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Subsequent to initial recognition, financial assets at amortized cost, including cash and cash equivalents, other financial assets, notes and accounts receivable and other receivables, are measured at amortized cost, which equals the gross carrying amount determined using the effective interest method less any impairment loss. Exchange differences are recognized in profit or loss. Interest income is calculated by applying the effective interest rate to the gross carrying amount of a financial asset, except for: i) Purchased or originated credit impaired financial assets, for which interest income is calculated by applying the credit-adjusted effective interest rate to the amortized cost of such financial assets; and ii) Financial assets that are not credit impaired on purchase or origination but have subsequently become credit impaired, for which interest income is calculated by applying the effective interest rate to the amortized cost of such financial assets in subsequent reporting periods. Cash equivalents include time deposits, which are highly liquid, readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. These cash equivalents are held for the purpose of meeting short-term cash commitments. iii. Investments in equity instruments at FVTOCI On initial recognition, the 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 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. b) Impairment of financial assets The Company recognizes a loss allowance for expected credit losses on financial assets at amortized cost (including trade receivables). The Company always recognizes lifetime expected credit losses (ECLs) for trade receivables. For all other financial instruments, the Company recognizes lifetime ECLs when there has been a significant increase in credit risk since initial recognition. If, on the other hand, the credit risk on a financial instrument has not increased significantly since initial recognition, the Company measures the loss allowance for that financial instrument at an amount equal to 12-month ECLs. Expected credit losses reflect the weighted average of credit losses with the respective risks of a default occurring as the weights. Lifetime ECLs represent the expected credit losses that will result from all possible default events over the expected life of a financial instrument. In contrast, 12-month ECLs represent the portion of lifetime ECLs that is expected to result from default events on a financial instrument that are possible within 12 months after the reporting date. The Company recognizes an impairment gain or loss in profit or loss for all financial instruments with a corresponding adjustment to their carrying amount through a loss allowance account. c) Derecognition 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. 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 consideration 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. 2) Financial liabilities a) Subsequent measurement All the financial liabilities are measured at amortized cost using the effective interest method: b) Derecognition 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. k. Revenue recognition The Company identifies a contract with a customer, allocates the transaction price to the performance obligations, and recognizes revenue when performance obligations are satisfied. Unearned receipts for merchandise sales would be recognized as contract liabilities before the company fulfills its performance obligations. Revenue from the sale of goods Revenue from the sale of goods comes from the sale of ICs. Sales of ICs are recognized as revenue when the goods are shipped because it is the time when the customer has full discretion over the manner of distribution and the price to sell the goods, has the primary responsibility for sales to future customers, and bears the risks of obsolescence. Trade receivables are recognized concurrently. The Company does not recognize revenue on materials delivered to subcontractors because this delivery does not involve a transfer of control. Other Other mainly comes from software development and royalties. l. Leases 2019 At the inception of a contract, the Company assesses whether the contract is, or contains, a lease. 1) The Company as lessor Leases are classified as finance leases whenever the terms of a lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. When the Company subleases a right-of-use asset, the sublease is classified by reference to the right-of-use asset arising from the head lease, not with reference to the underlying asset. However, if the head lease is a short-term lease that the Company, as a lessee, has accounted for applying recognition exemption, the sublease is classified as an operating lease. Lease payments less any lease incentives payable from operating leases are recognized as income on a straight-line basis over the terms of the relevant leases. Initial direct costs incurred in obtaining operating leases are added to the carrying amounts of the underlying assets and recognized as expenses on a straight-line basis over the lease terms. 2) The Company as lessee The Company recognizes right-of-use assets and lease liabilities for all leases at the commencement date of a lease, except for short-term leases and low-value asset leases accounted for applying a recognition exemption where lease payments are recognized as expenses on a straight-line basis over the lease terms. Right-of-use assets are initially measured at cost, which comprises the initial measurement of lease liabilities. Right-of-use assets are subsequently measured at cost less accumulated depreciation and impairment losses and adjusted for any remeasurement of the lease liabilities. Right-of-use assets are presented on a separate line in the balance sheets. Right-of-use assets are depreciated using the straight-line method from the commencement dates to the earlier of the end of the useful lives of the right-of-use assets or the end of the lease terms. Lease liabilities are initially measured at the present value of the lease payments, which comprise fixed payments and variable lease payments which depend on an index or a rate. The lease payments are discounted using the interest rate implicit in a lease, if that rate can be readily determined. If that rate cannot be readily determined, the Company uses the lessee’s incremental borrowing rate. Subsequently, lease liabilities are measured at amortized cost using the effective interest method, with interest expense recognized over the lease terms. When there is a change in a lease term or a change in future lease payments resulting from a change in an index or a rate used to determine those payments, the Company remeasures the lease liabilities with a corresponding adjustment to the right-of-use-assets. However, if the carrying amount of the right-of-use assets is reduced to zero, any remaining amount of the remeasurement is recognized in profit or loss. Lease liabilities are presented on a separate line in the balance sheets. 2018 Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. 1) The Company as lessor Rental income from operating leases is recognized on a straight-line basis over the term of the relevant lease. 2) The Company as lessee Contingent rents arising under operating leases are recognized as an expense in the year in which they are incurred. m. Employee benefits 1) Short-term employee benefits Liabilities recognized in respect of short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in exchange for the related services. 2) Retirement benefits Payments to defined contribution retirement benefit plans are recognized as expenses 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 and past service cost) and net interest on the net defined benefit liabilities (assets) are recognized as employee benefits expense in the period in which they occur, or when the plan amendment or curtailment occurs. Remeasurement, comprising actuarial gains and losses, and the return on plan assets (excluding interest), is recognized in other comprehensive income in the period in which it occurs. Remeasurement recognized in other comprehensive income is reflected immediately in retained earnings and will not be reclassified to profit or loss. Net defined benefit liabilities (assets) represent the actual deficit (surplus) in the Company’s defined benefit plans. Any surplus resulting from this calculation is limited to the present value of any refunds from the plans or reductions in future contributions to the plans. n. Taxation Income tax expense represents the sum of the tax currently payable and deferred tax. 1) Current tax According to the Income Tax Law, an additional tax of inappropriate earnings is provided for as income tax in the year the shareholders approve to retain the earnings. Adjustments of prior years’ tax liabilities are added to or deducted from the current year’s tax provision. 2) Deferred tax Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences and unused loss carryforwards to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized. Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries and associates, except where the Company is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognized to the extent that it is probable that there will be sufficient taxable profits against which to utilize the benefits of the temporary differences and they are expected to reverse in the foreseeable future. The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. A previously unrecognized deferred tax asset is also reviewed at the end of each reporting period and recognized to the to the extent that it has become probable that future taxable profit will allow 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 period in which the liabilities are settled or the assets are realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which The Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. 3) Current and deferred tax for the period 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 UNCERTAINTY In application of the Company’s accounting policies, management is required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods. Critical Accounting Judgements a. Lease terms - 2019 In determining a lease term, the Company considers all facts and circumstances that create an economic incentive to exercise or not to exercise an option, including any expected changes in facts and circumstances from the commencement date until the exercise date of the option. Main factors considered include contractual terms and conditions for the optional periods, significant leasehold improvements undertaken over the contract term, the importance of the underlying asset to the lessee’s operations, etc. The lease term is reassessed if a significant change in circumstances that are within control of the Company occur. Key Sources of Estimation Uncertainty a. Estimated impairment of financial assets The provision for impairment of trade receivables is based on assumptions about the risk of default and expected loss rates. The Company uses judgment in making these assumptions and in selecting the inputs to the impairment calculation, based on the Company’s past history, existing market conditions as well as forward-looking estimates as at the end of each reporting period. Where the actual future cash inflows are less than expected, a material impairment loss may arise. b. Estimated impairment of tangible assets and intangible assets (excluding goodwill) The Company relies on subjective judgments and depends on industry usage patterns and related characteristics to determine cash flows, asset useful lives, and future revenues and expenses. Any change in the operating environment and corporate strategy may cause significant impairment loss. c. Lessees’ incremental borrowing rates - 2019 In determining a lessee’s incremental borrowing rate used in discounting lease payments, a risk-free rate for the same currency and relevant duration is selected as a reference rate, and the lessee’s credit spread adjustments and lease specific adjustments are also taken into account.  6. CASH AND CASH EQUIVALENTS Cash on hand Checking accounts and demand deposits Cash equivalents Time deposits December 31 2019 2018 $ 447 271,637 $ 424 522,131 49,000 258,000 $ 321,084 $ 780,555 The market rate intervals of cash in bank and bank overdrafts at the end of the reporting period were as follows: December 31 2019 2018 Bank balance 0.01%-1.70% 0.01%-0.65% 7. FINANCIAL ASSETS AND LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS Financial assets at FVTPL - current Financial assets classified as at FVTPL Non-derivative financial assets - Mutual funds Financial liabilities at FVTPL - non-current Financial assets classified as at FVTPL Non-derivative financial assets - Securities unlisted in the ROC - Mutual funds - Securities listed in other countries December 31 2019 2018 $ 515,989 $ 661,494 $ 337,789 75,119 815 $ 190,050 75,432 672 $ 413,723 $ 266,154 8. FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME - 2018 Non-current Domestic and foreign investments - Unlisted shares and emerging market shares December 31 2019 2018 $ 2,586 $ 4,337  9. ACCOUNTS RECEIVABLE, NET Trade receivables At amortized cost Gross carrying amount Trade receivables December 31 2019 2018 $ 141,845 $ 171,387 The average credit period on sales of goods was 30 to 60 days without interest. The Company's exposure to credit risk and external credit ratings are continuously monitored. In order to minimize credit risk, the management of the Company has delegated a team responsible for determining credit limits, credit approvals and other monitoring procedures to ensure that follow-up action is taken to recover overdue debts. In addition, the Company reviews the recoverable amount of each individual trade debt at the end of the reporting period to ensure that adequate allowance is made for possible irrecoverable amounts. In this regard, the management believes the 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 receivables. The expected credit losses on trade receivables are estimated using a provision matrix by reference to past default experience of the debtor and an analysis of the debtor’s current financial position, the forecast direction of economic conditions at the reporting date. As the Company’s historical credit loss experience does not show significantly different loss patterns for different customer segments, the provision for loss allowance based on past due status is not further distinguished according to the Company’s different customer base. The Company writes off a trade receivable when there is information indicating that the debtor is in severe financial difficulty and there is no realistic prospect of recovery. Where recoveries are made, these are recognized in profit or loss. The Company’s current credit risk grading framework is shown in the following table: December 31, 2019 Not Overdue Overdue 1- 60 days Overdue 61-90 days Overdue 91-120 days Overdue 121 days or More Total Gross carrying amount at September 30, 2019 Expected credit losses $ 141,845 - $ $ - - $ - - $ - - - - $ 141,845 - Amortized cost at September 30, 2019 $ 141,845 $ - $ - $ - $ - $ 141,845 December 31, 2018 Not Overdue Overdue 1- 60 days Overdue 61-90 days Overdue 91-120 days Overdue 121 days or More Total Gross carrying amount Expected credit losses $ 171,387 - $ $ - - $ - - $ - - - - $ 171,387 - Amortized cost at December 31, 2018 $ 171,387 $ - $ - $ - $ - $ 171,387 The movements of the loss allowance of trade receivables were as follows: Balance at January 1 Less: Amounts written off (Note) Balance at December 31 December 31 2019 2018 $ $ - - - $ 107,257 (107,257) $ - Note: The trade receivable from one customer that were overdue for 2 years and determined to be uncollectible and the accounts receivable from another customer that was declared bankrupt by court ruling were both written off. The written-off receivables and allowance were both $107,257. 10. INVENTORIES Finished goods Work in progress Raw materials December 31 2019 2018 $ 126,606 125,054 22,104 $ 98,872 129,316 28,719 $ 273,764 $ 256,907 The costs of inventories recognized as cost of goods sold for the years ended December 31, 2019 and 2018 were $735,366 thousand and $809,472 thousand, respectively. The costs of inventories recognized as costs of goods sold for the years ended December 31, 2019 and 2018 were as follows: Inventory write-downs (reversed) Income from scrap sales Years Ended December 31 2018 2019 $ 3,047 103 $ (17,880) 87 $ 3,150 $ (17,793) The reversals of previous write-downs for the year ended December 31, 2019 resulted from reduced inventories. 11. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD Investments in subsidiaries Investments in associates December 31 2019 2018 $ 5,489,062 560,877 $ 5,384,684 596,525 $ 6,049,939 $ 5,981,209 a. Investments in subsidiaries Listed companies Generalplus Technology Corp. Non-listed Company Ventureplus Group Inc. Sunplus Venture Capital Co., Ltd. Lin Shih Investment Co., Ltd. Russell Holdings Limited Sunplus Innovation Technology Sunext Technology Co., Ltd. Award Glory Ltd. Wei-Young Investment Inc. Magic Sky Limited Sunplus mMobile Inc. Sunplus mMedia Inc. Sunplus Management Consulting Jumplux Technology Co., Ltd. Sunplus Technology (H.K.) December 31 2019 2018 $ 681,743 $ 704,549 1,373,861 1,049,350 744,832 569,284 573,897 194,234 160,186 49,602 32,282 29,576 23,627 3,768 2,785 35 1,354,351 1,028,567 750,558 579,038 523,083 174,391 33,116 56,947 82,747 29,785 46,128 3,910 17,475 39 $ 5,489,062 $ 5,384,684 Except for Sunplus Management Consulting, investments were accounted for using the equity method and the share of profit or loss and other comprehensive income of those investments were calculated based on financial statements which have been audited. Management believes there is no material impact on the equity method of accounting or the calculation of the share of profit or loss and other comprehensive income from the financial statements of Sunplus Management Consulting which have not been audited. Refer to Note 32 for the detail list of investments in subsidiaries. The percentage subsidiaries’ ownerships and voting right held by the Company: Listed companies Generalplus Technology Corp. Non-listed Company Ventureplus Group Inc. Sunplus Venture Capital Co., Ltd. Lin Shih Investment Co., Ltd. Russell Holdings Limited Sunplus Innovation Technology Sunext Technology Co., Ltd. Award Glory Ltd. Wei-Young Investment Inc. Magic Sky Limited Sunplus mMobile Inc. Sunplus mMedia Inc. Sunplus Management Consulting Jumplux Technology Sunplus Technology (H.K.) b. Investments in associates December 31 2019 2018 34% 100% 100% 100% 100% 61% 93% 100% 100% 100% 100% 90% 100% 55% 100% 34% 100% 100% 100% 100% 61% 91% 100% 100% 100% 100% 90% 100% 55% 100% Associates Global View Co., Ltd. iCatch Technology Inc. Name of Associate Global View Co., Ltd. iCatch Technology Inc. December 31 2019 2018 $ 297,640 263,237 $ 307,106 289,419 $ 560,877 $ 596,525 Proportion of Ownership and Voting Rights December 31 2019 13% 29% 2018 13% 30% Refer to Table 5 and Table 6 “Information on Investees” “Information on Investments in Mainland China” for the nature of activities, principal places of business and countries of incorporation of the associates. iCatch Technology Inc. has independently operated its financial activities since July 31, 2018 due to operational needs; thus, the Company assessed that the control of iCatch Technology Inc. was lost. On July 31, 2018 the equity investment was remeasured at fair value, and a disposal gain of $119,154 thousand was recognized. The fair values of publicly traded investments accounted for using the equity method, which were based on the closing prices of those investments at the balance sheet date, are summarized as follows: Global View Co., Ltd. $ 239,889 $ 248,530 All the associates are accounted for using the equity method. The summarized financial information of the Company’s associates is set out below: December 31 2019 2018 Total assets Total liabilities December 31 2019 2018 $ 2,150,913 307,922 $ $ 2,346,302 365,599 $ Years Ended December 31 2018 2019 Revenue Loss for the period Comprehensive income Share of profits of associates accounted for using the equity method $ 1,088,352 (8,509) $ (6,310) $ (16,832) $ $ 1,005,661 (35,177) $ (95,076) $ (18,098) $ The amounts of share of profits of associates are based on the associates’ financial statements audited by the auditors. 12. PROPERTY, PLANT AND EQUIPMENT a. Assets used by the Company - 2019 Machinery Prepayments for Equipment and Auxiliary and Testing Furniture and Construction Buildings Equipment Equipment Equipment Fixtures in Process Total Cost Balance at beginning of year $ 969,205 $ 32,191 $ 1,770 $ 198,906 $ 35,002 $ 2,940 $ 1,240,014 Additions Disposals Reclassified - - - 290 (5,408 ) - 3,500 (626 ) - 59,453 (162,640 ) 113 10,154 (18,766 ) 10,380 8,749 - (10,720 ) 82,146 (187,440 ) (227 ) Balance at end of year $ 969,205 $ 27,073 $ 4,644 $ 95,832 $ 36,770 $ 969 $ 1,134,493 Accumulated depreciation and impairment Balance at beginning of year $ 342,662 $ 19,654 $ 1,085 $ 169,575 $ 19,851 $ Depreciation expense Disposals 19,721 - 3,277 (5,408 ) 1,008 (626 ) 47,796 8,598 (162,640 ) (18,766 ) Balance at end of year $ 362,383 $ 17,523 $ 1,467 $ 54,731 $ 9,683 $ - - - - $ 552,827 80,400 (187,440 ) $ 445,787 Net, end of year $ 606,822 $ 9,550 $ 3,177 $ 41,101 $ 27,087 $ 969 $ 688,706 b. 2018 Cost Machinery Prepayments for Equipment and Auxiliary and Testing Furniture and Construction Buildings Equipment Equipment Equipment Fixtures in Process Total Balance at beginning of year $ 969,205 $ 41,392 $ 2,225 $ 164,145 $ 28,080 $ - $ 1,205,047 Additions Disposals - - 275 (9,476 ) - (455 ) 36,552 (1,791 ) 9,709 (2,787 ) 2,940 - 49,476 (14,509 ) Balance at end of year $ 969,205 $ 32,191 $ 1,770 $ 198,906 $ 35,002 $ 2,940 $ 1,240,014 Accumulated depreciation and impairment Balance at beginning of year $ 322,941 $ 25,176 $ 1,003 $ 156,667 $ 16,317 $ Depreciation expense Disposals 19,721 - 3,954 (9,476 ) 537 (455 ) 14,699 (1,791 ) 6,321 (2,787 ) Balance at end of year $ 342,662 $ 19,654 $ 1,085 $ 169,575 $ 19,851 $ - - - - $ 522,104 45,232 (14,509 ) $ 552,827 Net, end of year $ 626,543 $ 12,537 $ 685 $ 29,331 $ 15,151 $ 2,940 $ 687,187 The above items of property, plant and equipment are depreciated on a straight-line basis over the following estimated useful lives as follows: Buildings Auxiliary equipment Machinery and equipment 35-56 years 4-11 years 4 years Testing equipment Furniture and fixtures 1-5 years 4-5 years Refer to Note 30 for the carrying amounts of property, plant and equipment that had been pledged by the Company to secure borrowings. 13. LEASE ARRANGEMENTS a. Right-of-use assets - 2019 Carrying amounts Land Depreciation charge for right-of-use assets Land b. Lease liabilities - 2019 Carrying amounts Current Non-current Range of discount rate for lease liabilities was as follows: Land c. Material lease-in activities and terms December 31, 2019 $ 179,559 $ 5,785 December 31, 2019 $ 4,007 $ 177,424 December 31, 2019 2.39% The Company leases land and buildings for the use of plants and offices with lease terms of 20 years, and the lease contract for land located in the ROC specifies that lease payments will be adjusted on the basis of changes in the announced land value prices. The Company does not have bargain purchase options to acquire the leasehold land and buildings at the end of the lease terms. d. Other lease information 2019 Expenses relating to short-term leases Expenses relating to low-value asset leases Total cash outflow for leases 2019 $ $ $ 1,265 448 10,080 The Company leases certain transportation equipment and other leases which qualify as short-term leases. The Company has elected to apply the recognition exemption and, thus, did not recognize right-of-use assets and lease liabilities for these leases. 2018 The future minimum lease payments of non-cancellable operating lease commitments are as follows: Not later than 1 year Later than 1 year and not later than 5 years Later than 5 years December 31, 2018 $ 8,318 21,079 36,576 $ 65,973 14. INTANGIBLE ASSETS Cost Balance at January 1 Additions Disposals Reclassified Year Ended December 31, 2019 Technology License Fees Software Patents Total $ $ 314,894 41,125 (23,509) (350) $ 11,120 1,465 (4,379) - 97,099 - - - $ 423,113 42,590 (27,888) (350) Balance at December 31 $ 332,160 $ 8,206 $ 97,099 $ 437,465 Accumulated amortization Balance at January 1 Amortization expense Disposals Reclassified $ $ 122,383 38,721 (23,509) (175) $ 6,000 3,931 (4,379) - 75,522 - - - $ 203,905 42,652 (27,888) (175) Balance at December 31 $ 137,420 $ 5,552 $ 75,522 $ 218,494 Accumulated deficit Balance at December 31 $ 111,136 $ - $ 21,577 $ 132,713 Carrying amounts at December 31, 2019 $ 83,604 $ 2,654 $ - $ 86,258 Year Ended December 31, 2018 Technology License Fees Software Patents Total Cost Balance at January 1 Additions Disposals $ $ 271,582 63,880 (20,568) $ 16,382 3,276 (8,538) 97,099 - - $ 385,063 67,156 (29,106) Balance at December 31 $ 314,894 $ 11,120 $ 97,099 $ 423,113 Accumulated amortization Balance at January 1 Amortization expense Disposals $ $ 104,915 38,036 (20,568) $ 9,772 4,766 (8,538) 75,522 - - $ 190,209 42,802 (29,106) Balance at December 31 $ 122,383 $ 6,000 $ 75,522 $ 203,905 Accumulated deficit Balance at January 1 and December 31 Carrying amounts at December 31, $ 111,136 $ - $ 21,577 $ 132,713 2018 $ 81,375 $ 5,120 $ - $ 86,495 Other intangible assets are amortized on a straight-line basis over their estimated useful lives as follows: Technology license fees Software Patents An analysis of the amortization by function: Operating costs Selling and marketing expenses General and administrative expenses Research and development expenses 1-10 years 1-5 years 18 years December 31 2019 2018 $ - - 3,430 39,222 $ 191 3 3,933 38,675 $ 42,652 $ 42,802 15. OTHER ASSETS Current Other assets Prepayments for EDA tools Prepaid technical licensing fee Prepaid royalty Others Non-current Other financial assets Pledged time deposits (a) Other assets Refundable deposits Others a. Refer to Note 30 for information on pledged time deposits. 16. LOANS a. Short-term borrowings Unsecured borrowings Bank loans December 31 2019 2018 $ 15,570 9,103 4,691 3,061 $ 16,019 - 5,170 3,662 $ 32,425 $ 24,851 $ 6,100 $ 6,100 $ 136 7,800 $ 200 7,800 $ 7,936 $ 8,000 December 31 2019 2018 $ 53,964 $ - The weighted average effective interest rate on the bank loans as of December 31, 2019 were 2.402%-2.537%. b. Long-term borrowings The borrowings of the Company were as follows: Loans on credit Less: Current portion Long-term borrowings - non-current December 31 2019 2018 $ $ - - - $ 115,000 115,000 $ - The effective rate borrowings as of December 31 2018 were 1.545%-1.600%. According to the loan contract, the financial statements of the company for 107 years are limited by current ratio, debt ratio and interest guarantee multiple. However, the Company’s inability to meet the ratio requirements would not be deemed as a violation of the contracts. As of 2018, the Company was in compliance with these financial ratio requirements. 17. ACCOUNTS AND NOTES PAYABLE Accounts payable Payable - operating December 31 2019 2018 $ 62,566 $ 108,075 The average credit period on purchases of certain goods was 30-60 days. The Company has financial risk management policies in place to ensure that all payables are paid within the pre-agreed credit terms. 18. OTHER LIABILITIES Current Other liabilities Salaries or bonuses Payable for royalties Refund liabilities (Note 21) Labor/health insurance Payable on machinery and equipment Compensation due to directors Others Non-current December 31 2019 2018 $ 96,390 36,862 8,806 7,897 5,470 515 33,079 $ 102,634 19,459 9,014 7,491 7,770 199 41,474 $ 189,019 $ 188,041 Payable on machinery and equipment $ 3,198 $ 2,376 19. RETIREMENT BENEFIT PLANS Defined contribution plans The Company adopted a pension plan under the Labor Pension Act (LPA), which is a state-managed defined contribution plan. Under the LPA, the Company makes monthly contributions to employees’ individual pension accounts at 6% of monthly salaries and wages. Defined benefit plans Before the promulgation of the LPA, Sunplus, Generalplus, Sunext, Sunplus Innovation, Jumplux Technology, Sunplus mMedia and iCatch of the Company had a defined benefit pension plan under the Labor Standards Law. Under this plan, employees should receive either a series of pension payments with a defined annuity or a lump sum that is payable immediately on retirement and is equivalent to 2 base units for each of the first 15 years of service and 1 base unit for each year of service thereafter. The total retirement benefit is subject to a maximum of 45 units. The pension benefits are calculated on the basis of the length of service and average monthly salaries of the six month before retirement. In addition, the Company makes monthly contributions, equal to 2% of salaries, to a pension fund, which is administered by a fund monitoring committee. Pension contributions are deposited in the Bank of Taiwan in the committee’s name and are managed by the Bureau of Labor Funds, Ministry of Labor (the “Bureau”); the Company has no right to influence the investment policy and strategy. According to the letter of Zhuhuanzi No. 1090003642 issued by the Hsinchu Science Park Administration of the Ministry of Science and Technology, the Company ceased its retirement fund contribution temporarily from January 1, 2020 to December 31, 2020. The amounts included in the balance sheets in respect of the Company’s defined benefit plans were as follows: December 31 2019 2018 Present value of funded defined benefit obligation Fair value of plan assets $ 173,083 (174,246) $ 169,342 (164,067) Net defined benefit (assets) liabilities $ (1,163) $ 5,275 Movements in net defined benefit liabilities (assets) were as follows: Balance at January 1, 2018 Service cost Current service cost Interest expense Recognized in profit or loss Remeasurement Return on plan assets Actuarial (gain) loss-changes in financial assumptions Adjustment on actuarial (gain) loss-experience adjustment Recognized in other comprehensive income Contributions from employer Present Value of Funded Defined Benefit Obligation Fair Value of Plan Assets Net Liabilities (Assets) Arising from Defined Benefit Obligation $ 165,832 $ 154,968 $ 10,864 587 2,322 2,909 - 5,484 (4,883) 601 - - 2,190 2,190 4,044 - - 4,044 2,865 587 132 719 (4,044) 5,484 (4,883) (3,443) (2,865) Balance at December 31, 2018 $ 169,342 $ 164,067 $ 5,275 (Continued) Balance at January 1, 2019 Service cost Current service cost Interest expense Recognized in profit or loss Remeasurement Return on plan assets Actuarial (gain) loss-changes in financial assumptions Adjustment on actuarial (gain) loss-experience adjustment Recognized in other comprehensive income Contributions from employer Present Value of Funded Defined Benefit Obligation Fair Value of Plan Assets Net Liabilities (Assets) Arising from Defined Benefit Obligation $ 169,342 $ 164,067 $ 5,275 605 1,947 2,552 - 3,042 (1,853) 1,189 - - 1,903 1,903 5,498 - - 5,498 2,778 605 44 649 (5,498) 3,042 (1,853) (4,309) (2,778) Balance at December 31, 2019 $ 173,083 $ 174,246 $ (1,163) (Concluded) An analysis by function of the amounts recognized in profit or loss in respect of the benefit plans is as follows: Operating costs Selling and marketing expenses General and administrative expenses Research and development expenses For the Year Ended December 31 2019 2018 $ 105 6 215 323 $ 153 6 232 328 $ 649 $ 719 Through the defined benefit plans under the Labor Standards Law, the Company is exposed to the following risks: a. Investment risk: The plan assets are invested in domestic and foreign equity and debt securities, bank deposits, etc. The investment is conducted at the discretion of the Bureau or under the mandated management. However, in accordance with relevant regulations, the return generated by plan assets should not be below the interest rate for a 2-year time deposit with local banks. 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 plan’s debt investments. 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 significant assumptions used for the purposes of the actuarial valuations were as follows: Discount rate(s) Expected rate(s) of salary increase Resignation rate December 31 2019 2018 1.00% 4.00% 0%-28% 1.15% 4.00% 0%-28% If possible reasonable change in each of the significant actuarial assumptions will occur and all other assumptions will remain constant, the present value of the defined benefit obligation would increase (decrease) as follows: Discount rate(s) 0.25% increase 0.25% decrease Expected rate(s) of salary increase 1% increase 1% decrease December 31 2019 2018 $ $ (5,029) 5,237 $ 21,475 $ (18,693) $ $ (5,484) 5,726 $ 23,638 $ (20,348) The sensitivity analysis presented above may not be representative of the actual change in the present value of the defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated. The expected contributions to the plan for the next year $ 2,778 $ 2,866 The average duration of the defined benefit obligation 14 years 15 years December 31 2019 2018 20. EQUITY a. Share capital 1) Ordinary shares: December 31 2019 2018 Numbers of shares authorized (in thousands) Shares authorized 1,200,000 $ 12,000,000 1,200,000 $ 12,000,000 Number of shares issued and fully paid (in thousands) Shares issued 591,995 5,919,949 $ 591,995 5,919,949 $ Fully paid ordinary shares, which have a par value of $10.00, carry one vote per share and a right to dividends. Of the Company’s authorized shares, 80,000 thousand shares had been reserved for the issuance of convertible bonds and employee share options. 2) Global depositary receipts In March 2001, Sunplus issued 20,000 thousand units of global depositary receipts (GDRs), representing 40,000 thousand ordinary shares that consisted of newly issued and originally outstanding shares. The GDRs are listed on the London Stock Exchange (code: SUPD) with an issuance price of US$9.57 per unit. As of December 31, 2019, the outstanding 175 thousand units of GDRs represented 350 thousand ordinary shares. b. Capital surplus A reconciliation of the carrying amount at the beginning and at the end of 2019 and 2018 for each component of capital surplus was as follows: December 31 2019 2018 May be used to offset a deficit, distributed as cash dividends, or transferred to share capital (1) From the issuance of ordinary shares From the acquisition of a subsidiary The difference between consideration received or paid and the carrying amount of the subsidiaries’ net assets during actual disposal or acquisition $ 196,095 157,423 $ 409,213 157,423 140,184 140,022 May be used to offset a deficit only From treasury share transactions Changes in net equity of associates or joint ventures accounted for using the equity method 45,239 55,491 43,958 50,782 $ 594,432 $ 801,398 1) Such capital surplus may be used to offset a deficit; in addition, when the Company has no deficit, such capital surplus may be distributed as cash dividends or transferred to share capital (limited to a certain percentage of the Company’s capital surplus and once a year). c. Retained earnings and dividend policy Under the dividend policy as set forth in the amended Articles, Sunplus shall appropriate from the annual net income less any accumulated deficit: (a) 10% as legal reserve; and (b) special reserve equivalent to the debit balance of any accounts shown in the shareholders’ equity section of the balance sheet, other than deficit. Under the approved shareholders’ resolution, the current year’s net income less all the foregoing appropriations and distributions, plus the prior years’ unappropriated earnings may be distributed as additional dividends. Sunplus’ policy is that cash dividends should be at least 10% of total dividends distributed. However, cash dividends will not be distributed if these dividends are less than NT$0.5 per share. Under the regulations promulgated, a special reserve equivalent to the debit balance of any account shown in the shareholders’ equity section of the balance sheet (for example, unrealized loss on financial assets and cumulative translation adjustments) should be allocated from unappropriated retained earnings. For the policies on the distribution of employees’ compensation and remuneration to directors and supervisors before and after amendment, refer to Note 22-f. Appropriation of earnings to the legal reserve shall be made until the legal reserve equals the Company’s paid-in capital. The legal reserve may be used to offset deficit. If the Company has no deficit and the legal reserve has exceeded 25% of the Company’s paid-in capital, the excess may be transferred to capital or distributed in cash. The Company appropriates or reverses a special reserve in accordance with Rule No. 1010012865 and Rule No. 1010047490 issued by the FSC and the directive entitled “Questions and Answers on Special Reserves Appropriated Following the Adoption of IFRSs”. Distributions can be made out of any subsequent reversal of the debit to other equity items. The appropriations from the 2018 and 2017 earnings were approved at the shareholders’ meetings in June 10, 2019 and on June 11, 2018, respectively. The appropriations, including dividends, were as follows: Legal reserve Special reserve Cash dividend Dividends per share (NT$) Appropriation of Earnings For Year 2018 For Year 2017 $ 562 $ 241,173 - $ - $ 41,321 $ 44,284 $ $ 327,551 0.5533 $ The Company’s shareholders also proposed in the shareholders’ meeting on June 10, 2019 and June 11, 2018 to issue cash dividends from capital surplus of $213,118 thousand and $86,846 thousand, respectively. The appropriation of earnings for 2019 are subject to resolution in the shareholders’ meeting to be held on June 12, 2020. d. Special reserve Beginning at January 1 Appropriations to the special reserve Balance at December 31 e. Other equity items For the Year Ended December 31 2019 2018 $ 67,279 241,173 $ 22,995 44,284 $ 308,452 $ 67,279 1) Exchange differences or translating the financial statements of foreign operations Balance at January 1 Exchange differences on translating the financial statements of foreign operations Share of exchange differences of associates accounted for using the equity method Balance at December 31 Years Ended December 31 2018 2019 $ (138,875) $ (122,100) (13,842) 19,736 (66,063) (36,511) $ (218,780) $ (138,875) 2) Unrealized gain (loss) from investments in equity instruments measured at fair value through other comprehensive income: Balance at January 1 Current Unrealized gain (loss) Cumulative unrealized gain (loss) of equity instruments transferred to retained earnings due to disposal Share of unrealized gain (loss) on associates accounted for using the equity method Balance at December 31 For the Year Ended December 31 2019 2018 $ (303,968) $ (230,011) (1,203) (94,350) 279,514 37,070 (16,589) (16,677) $ (42,246) $ (303,968) f. Non-controlling interests Purpose of Buyback Number of shares as of January 1, 2018 Decrease Number of shares as December 31, 2018 Number of shares as of January 1, 2019 Decrease Number of shares as December 31, 2019 Shares Transferred to Employees (in Thousands of Shares) Shares Held by Its Subsidiaries (in Thousands of Shares) Total (in Thousands of Shares) - - - - - - 3,560 - 3,560 3,560 - 3,560 3,560 - 3,560 3,560 - 3,560 The Company’s shares held by its subsidiaries at the end of the reporting periods were as follows: Number of Shares Held (In Thousand) Carrying Amount Market Price December 31, 2019 Lin Shin Investment Co., Ltd 3,560 $ 63,401 $ 48,238 December 31, 2018 Lin Shin Investment Co., Ltd 3,560 $ 63,401 $ 40,050 Under the Securities and Exchange Act, Sunplus shall neither pledge treasury shares nor exercise shareholders’ rights on these shares, such as rights to dividends and to vote. 21. REVENUE Revenue from the sale of goods Other a. Contract information Revenue from the sale of goods Years Ended December 31 2018 2019 $ 1,143,333 91,936 $ 1,114,399 124,381 $ 1,235,269 $ 1,238,780 IC products are sold to agents and customers. The Company determines the sales price of products based on orders. It takes into consideration the past purchases of agents and customers in order to estimate the most likely discount amount and return rate. Based on the determination of revenue, the Company recognizes the amount and the liabilities for refunds (accounted for as other current liabilities). Other Other mainly comes from software development and royalties. b. Contract balances December 31, 2019 December 31, 2018 January 1, 2018 Trade receivables (Note 9) $ 141,845 $ 171,387 $ 200,733 Contract liabilities - current $ 3,373 $ 2,547 $ - The changes in the balance of contract liabilities primarily result from the timing difference between the Company’s performance and the respective customer’s payment c. Disaggregation of revenue Primary geographical markets Asia Taiwan Others Timing of revenue recognition Satisfied at a point in time Satisfied over time 22. NET PROFIT Net profit included the following items: Reportable Segments Direct Sales 2019 2018 $ $ 984,862 208,641 41,766 962,788 225,802 50,190 $ 1,235,269 $ 1,238,780 $ 1,224,955 10,314 $ 1,216,620 22,160 $ 1,235,269 $ 1,238,780 a. Other income Rent income Dividend income Interest income Others b. Other gains and losses Service income of management support Net loss on financial assets and liabilities Net loss on financial assets designated as at FVTPL (Note 7) Net foreign exchange gain (loss) Gain on disposal of subsidiaries c. Finance costs Interest on lease liabilites Interest on bank loans Other financial costs d. Depreciation and amortization An analysis of depreciation by function Operating costs Operating expenses An analysis of amortization by function Operating costs Operating expenses e. Employee benefit expense Years Ended December 31 2018 2019 $ 29,932 3,702 2,490 25,809 $ 29,740 7,986 3,467 11,663 $ 61,933 $ 52,856 Years Ended December 31 2018 2019 $ 34,023 $ 44,542 17,428 (3,070) - (13,218) 1,749 119,154 $ 48,381 $ 152,227 Years Ended December 31 2018 2019 $ 4,405 1,132 1,244 $ - 3,887 977 $ 6,781 $ 4,864 Years Ended December 31 2018 2019 $ 3,789 82,396 $ 4,044 41,188 $ 86,185 $ 45,232 $ - 42,652 $ 191 42,611 $ 42,652 $ 42,802 Years Ended December 31 2018 2019 Short-term benefits $ 448,979 $ 422,759 Post-employment benefits Defined contribution plans Defined benefit plans (Note 19) Other employee benefits 19,742 649 20,391 10,874 18,402 719 19,121 10,314 Total employee benefit expense $ 480,154 $ 452,194 An analysis of employee benefit expense by function Operating costs Operating expenses $ 40,642 439,512 $ 61,245 390,949 $ 480,154 $ 452,194 f. Employees’ compensation and remuneration of directors The Company accrued employees’ compensation and remuneration of directors and supervisors at rates of no less than 1% and no higher than 1.5%, respectively, of net profit before income tax, employees’ compensation, and remuneration of directors. The employees’ compensation and remuneration of directors for the years ended December 31, 2019 and 2018, which have been approved by the Company’s board of directors on March 30, 2020 and March 20, 2019, respectively, were as follows: Accrual rate Employees’ compensation Remuneration of directors Amount For the Year Ended December 31 2019 1.0% 1.5% 2018 1.0% 1.5% For the Year Ended December 31 2019 2018 Cash Shares Cash Shares Employees’ compensation Remuneration of directors $ $ 206 309 $ - - $ 80 119 - - If there is a change in the proposed amounts after the annual financial statements are authorized for issue, the differences are recorded as a change in the accounting estimate. There is no difference between the actual amounts of employees’ compensation and remuneration of directors paid and the amounts recognized in the financial statements for the years ended December 31, 2018 and 2017. Information on the employees’ compensation and remuneration of directors resolved by the Company’s board of directors in 2020 and 2019 is available at the Market Observation Post System website of the Taiwan Stock Exchange. g. Gain or loss on exchange rate changes Exchange rate gains Exchange rate losses Years Ended December 31 2018 2019 $ 22,155 (25,225) $ 21,272 (19,523) 23. INCOME TAXES a. Income tax recognized in profit or loss The major components of tax expense were as follows: Current tax In respect of the current year Adjustments for prior periods Deferred tax In respect of the current year Changes in tax rates $ (3,070) $ 1,749 Years Ended December 31 2018 2019 $ 4,787 - $ 1,680 464 - - (373) 373 Income tax expense recognized in profit or loss $ 4,787 $ 2,144 A reconciliation of accounting profit and current income tax expenses is as follows: Profit before tax Income tax expense calculated at the statutory rate Tax effect of adjusting items: Nondeductible expenses Temporary differences Tax-exempt income Current income tax expense Unrecognized investment credit Foreign income tax expense Adjustments for prior years’ tax Years Ended December 31 2018 2019 $ 20,096 $ 4,019 $ $ 7,760 1,552 (37,633) (8,659) (42) (42,315) 42,315 4,787 - (31,528) (21,414) (47) (51,437) 51,437 1,680 464 Income tax expense recognized in profit or loss $ 4,787 $ 2,144 The Income Tax Act in the ROC was amended in 2018, and the corporate income tax rate was adjusted from 17% to 20%. In addition, the rate of the corporate surtax applicable to the 2018 unappropriated earnings was reduced from 10% to 5%. In July 2019, the President of the ROC announced the amendments to the Statute for Industrial Innovation, which stipulate that the amounts of unappropriated earnings in 2018 and thereafter that are reinvested in the construction or purchase of certain assets or technologies are allowed as deduction when computing the income tax on unappropriated earnings. b. Current tax assets and liabilities Current tax assets Tax refund receivable (classified as other receivables) December 31 2019 2018 $ 486 $ 508 c. Deferred tax assets and liabilities The movements of deferred tax assets and deferred tax liabilities were as follows: For the year ended December 31, 2019 Deferred Tax Assets Opening Balance Recognized in Profit or Loss Closing Balance Temporary differences Depreciation expense Exchange (gains) losses Others For the year ended December 31, 2018 $ 763 (297) 2,019 $ 3,029 195 (3,224) $ 3,792 (102) (1,205) $ 2,485 $ - $ 2,485 Deferred Tax Assets Opening Balance Recognized in Profit or Loss Closing Balance Temporary differences Depreciation expense Exchange (gains) losses Others $ 791 (468) 2,162 $ (28) 171 (143) $ 763 (297) 2,019 $ 2,485 $ - $ 2,485 d. Deductible temporary differences, unused loss carryforwards and unused investment credits for which no deferred tax assets have been recognized in the parent company only balance sheets Loss carryforwards Expiry in 2019 Expiry in 2020 Expiry in 2021 Expiry in 2022 Expiry in 2023 Expiry in 2027 Expiry in 2029 December 31 2019 2018 $ - 211,457 322,509 394,894 1,144,831 24,228 19,642 $ 190,618 211,457 322,509 394,894 1,144,831 24,228 - $ 2,117,561 $ 2,288,537 Deductible temporary differences $ 69,427 $ 124,021 e. Unused loss carryforwards and tax exemptions Loss carryforwards as of December 31, 2019: Unused Amount $ 211,457 322,509 394,894 1,144,831 24,228 19,642 $ 2,117,561 Expiry Year 2020 2021 2022 2023 2027 2029 The income from the following projects is exempt from income tax for five years. The related tax-exemption periods are as follows: Project Tax Exemption Period Sunplus Fourteenth expansion Fifteenth expansion f. Income tax assessments January 1, 2015 to December 31, 2019 January 1, 2015 to December 31, 2019 The income tax returns of the Company before 2017 had been assessed by the tax authorities. 24. EARNINGS PER SHARE Basic gain per share Diluted earnings per share Unit: NT$ Per Share Years Ended December 31 2018 2019 $ $ 0.03 0.03 $ $ 0.01 0.01 The earnings and weighted average number of ordinary shares outstanding in the computation of earnings per share were as follows: Net profit for the year Profit for the year attributable to owners of the Company Effect of potentially dilutive ordinary shares Bonuses for employees Years Ended December 31 2018 2019 $ 15,309 $ 5,616 - - Earnings used in the computation of diluted EPS from continuing operations $ 15,309 $ 5,616 Weighted average number of ordinary shares outstanding (in thousand shares): Weighted average number of ordinary shares used in the computation of basic earnings per shares Effect of dilutive potential ordinary shares: Employee bonuses Years Ended December 31 2018 2019 $ 588,435 $ 588,435 16 60 Weighted average number of ordinary shares used in the computation of diluted earnings per share $ 588,451 $ 588,495 The Company can settle bonus or remuneration to employees in cash or shares. If the Company decides to use shares in settling the entire amount of the bonus or remuneration the resulting potential shares will be included in the weighted average number of shares outstanding to be used in computation of diluted earnings per share, if the effect is dilutive. This dilutive effect of the potential shares will be included in the computation of diluted earnings per share until the number of shares to be distributed to employees is determined in the following year. 25. DISPOSAL OF SUBSIDIARIES iCatch Technology Inc. has independently operated its financial activities since July 31, 2018 due to operational needs; thus, the Company assessed that the control of iCatch Technology Inc. was lost. For details about the partial disposal of iCatch Technology Inc., refer to Note 29 to the Company’s consolidated financial statements for the year ended December 31, 2018. 26. EQUITY TRANSACTIONS WITH NON-CONTROLLING INTEREST For details about the partial disposal of Sunext Technology Co., Ltd. and Jumplux Technology, refer to Note 30 to the Company’s consolidated financial statements for the year ended December 31, 2018. 27. CAPITAL MANAGEMENT The Company manages its capital to ensure that entities in the Company will be able to continue as going concerns while maximizing the return to stakeholders through the optimization of the debt and equity balance. The capital structure of the Company consists of [net debt (borrowings offset by cash and cash equivalents) and equity of the Company (comprising issued capital, reserves, retained earnings and other equity) attributable to owners of the Company. The Company is not subject to any externally imposed capital requirements. 28. FINANCIAL INSTRUMENTS The management of the Company considers that the fair values of financial assets and financial liabilities that are not measured at fair value approximate their fair values. a. Fair value of financial instruments that are not measured at fair value The management of the Company considers that the fair values of financial assets and financial liabilities that are not measured at fair value approximate their fair values. b. Fair value of financial instruments that are measured at fair value on a recurring basis 1) Fair value hierarchy December 31, 2019 Financial assets at FVTPL Mutual funds Unlisted shares - ROC Listed shares in other countries Financial assets at FVTOCI Unlisted shares - ROC December 31, 2018 Financial assets at FVTPL Mutual funds Unlisted shares - ROC Listed shares in other countries Financial assets at FVTOCI Unlisted shares in ROC and Level 1 Level 2 Level 3 Total $ 591,108 - $ 815 - - - $ - 337,789 $ 591,108 337,789 - 815 $ 591,923 $ - $ 337,789 $ 929,712 $ - $ - $ 2,586 $ 2,586 Level 1 Level 2 Level 3 Total $ 736,926 - $ 672 - - - $ - 190,050 $ 736,926 190,050 - 672 $ 737,598 $ - $ 190,050 $ 927,648 other countries $ - $ - $ 4,337 $ 4,337 There were no transfers between Levels 1 and 2 in the current and prior periods. 2) Reconciliation of Level 3 fair value measurements of financial instruments For the year ended December 31, 2019 Financial Assets Financial Assets at FVTPL Financial Assets at FVTOCI Balance at January 1, 2018 Recognized in profit or loss Recognized in other comprehensive income Purchases Disposals and proceeds from return of capital of investments $ 190,050 8,989 - 142,500 (3,750) $ 4,337 - (1,203) - (548) Total $ 194,387 8,989 (1,203) 142,500 (4,298) Balance at December 31, 2018 $ 337,789 $ 2,586 $ 340,375 For the year ended December 31, 2018 Financial Assets Financial Assets at FVTPL Financial Assets at FVTOCI Balance at January 1, 2018 Recognized in profit or loss Recognized in other comprehensive income Purchases Disposal $ 111,851 (26,801) - 201,000 (96,000) $ 98,687 - (94,350) - - Total $ 210,538 (26,801) (94,350) 201,000 (96,000) Balance at December 31, 2018 $ 190,050 $ 4,337 $ 194,387 c. Categories of financial instruments Financial assets Financial assets at FVTPL Financial assets at amortized cost (i) Financial assets at fair value through other comprehensive income Equity instruments Financial liabilities December 31 2019 2018 $ 929,712 476,374 $ 927,648 927,468 2,586 4,337 Measured at amortized cost (ii) 175,217 287,206 i) The balances include loans and receivables measured at amortized cost, which comprise cash and cash equivalents, accounts receivable, refundable deposits, trade and other receivables and other financial assets. Those reclassified to held-for-sale disposal groups are also included. ii) The balances include available-for-sale financial assets carried at cost. d. Financial risk management objectives and policies The Company’s major financial instruments included equity and debt investments, trade receivable, trade payables, bonds payable, borrowings and convertible notes. The Company’s corporate treasury function provides services to the business, coordinates access to domestic and international financial markets, monitors and manages the financial risks relating to the operations of the Company through internal risk reports which analyze exposures by degree and magnitude of risks. These risks include market risk (including currency risk, interest rate risk and other price risk), credit risk and liquidity risk. The Corporate Treasury function reported quarterly to the Company's risk management committee. 1) Market risk The Company's activities exposed it primarily to the financial risks of changes in foreign currency exchange rates (see (a) below) and interest rates (see (b) below). The Company entered into a variety of derivative financial instruments to manage its exposure to foreign currency risk and interest rate risk, including: a) Foreign currency risk A part of the Company’s cash flows is in foreign currency, and the use by management of derivative financial instruments is for hedging adverse changes in exchange rates, not for profit. For exchange risk management, each foreign-currency item of net assets and liabilities is reviewed regularly. In addition, before obtaining foreign loans, the Company considers the cost of the hedging instrument and the hedging period. The carrying amounts of the Company’s foreign currency-denominated monetary assets and monetary liabilities at the end of the reporting period, please refers to Note 31. Sensitivity analysis The Company was mainly exposed to the USD and RMB. The following table details the Company sensitivity to a US$1.00 and RMB1.00 increase and decrease in the New Taiwan dollar (the functional currency) against the relevant foreign currencies. The sensitivity analysis considers the currencies of USD and RMB in circulation, and adjusts the end-of-term conversion to exchange rate change of $1.00. The sensitivity analysis covers cash and cash equivalents, notes and accounts receivable, other receivables, other financial assets, long-term and short-term loans, accounts payable, other accounts payable and deposit margins. A negative number below indicates a decrease in post-tax profit associated with the New Taiwan dollar strengthening $1.00 against USD and RMB. For a $1.00 weakening of the New Taiwan dollar against the relevant currency, there would be an equal and opposite impact on post-tax profit, and the balances below would be positive. Profit or loss $ (1,783) $ (3,163) USD Impact Years Ended December 31 2018 2019 Profit or loss b) Interest rate risk RMB Impact Years Ended December 31 2018 2019 $ (11) $ (1,007) The Company was exposed to interest rate risk because entities in the Company borrowed funds at both fixed and floating interest rates. The risk is managed by the Company by maintaining an appropriate mix of fixed and floating rate borrowings, and using interest rate swap contracts and forward interest rate contracts. Hedging activities are evaluated regularly to align with interest rate views and defined risk appetite, ensuring the most cost-effective hedging strategies are applied. The carrying amounts of the Company’s financial assets and financial liabilities with exposure to interest rates at the end of the reporting period were as follows. Fair value interest rate risk Financial assets Financial liabilities Cash flow interest rate risk Financial assets Financial liabilities Sensitivity analysis December 31 2019 2018 $ $ 55,100 235,395 271,637 - 264,100 - 521,977 115,000 The sensitivity analyses below were determined based on the Company’s exposure to interest rates for both derivatives and non-derivative instruments at the end of the reporting period. For floating rate liabilities, the analysis was prepared assuming the amount of the liability outstanding at the end of the reporting period was outstanding for the whole year. Basis points of 0.125% increase or decrease was used when reporting interest rate risk internally to key management personnel and represents management's assessment of the reasonably possible change in interest rates. Had interest rates increased/decreased by 0.125% and all other variables held constant, the Company’s post-tax profit for the years ended December 31, 2019 and 2018 would decrease/increase by $340 thousand and $509 thousand, respectively. c) Other price risk The Company was exposed to equity price risk through its investments in listed equity securities. Equity investments are held for strategic rather than trading purposes. The Company does not actively trade these investments. The sensitivity analyses below were determined based on the exposure to equity price risks at the end of the reporting period. Had the prices of financial assets at FVTPL been 1% higher/lower, post-tax profit for the year ended December 31, 2019 and 2018 would have increased/decreased by $9,297 and $9,276 thousand, respectively. Had the prices of financial assets at FVTOCI been 1% higher/lower, post-tax profit for the year ended December 31, 2019 and 2018 would have increased/decreased by $26 and $43 thousand, respectively. 2) 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 and financial guarantees provided by the Company is arising from the carrying amount of the respective recognized financial assets as stated in the balance sheets. In order to minimize credit risk, the management of the Company has delegated a team responsible for determination of credit limits, credit approvals and other monitoring procedures to ensure that follow-up action is taken to recover overdue debts. In addition, the Company reviews the recoverable amount of each individual trade debt at the end of the reporting period to ensure that adequate impairment losses are made for irrecoverable amounts. In this regard, the directors of the Company consider that the Company’s credit risk was significantly reduced. The credit risk on liquid funds and derivatives was limited because the counterparties are banks with high credit ratings assigned by international credit-rating agencies. Trade receivables consisted of a large number of customers, spread across diverse industries and geographical areas. Ongoing credit evaluation is performed on the financial condition of trade receivables and, where appropriate, credit guarantee insurance cover is purchased. The Company’s concentration of credit risk of 92% and 91% in total trade receivables as of December 31, 2019 and 2018, respectively, was related to the five largest customers within the property construction business segment. 3) Liquidity risk The Company manages liquidity risk by monitoring and maintaining a level of cash and cash equivalents deemed adequate to finance the Company’s operations and mitigate the effects of fluctuations in cash flows. In addition, management monitors the utilization of bank borrowings and ensures compliance with loan covenants. The Company relies on bank borrowings as a significant source of liquidity. As of December 31, 2019 and 2018, the Company had available unutilized overdraft and financing facilities refer to the following instruction. a) Liquidity and interest rate risk tables The following table details the Company’s remaining contractual maturity for its non-derivative financial liabilities with agreed repayment periods. The tables had been drawn up based on the undiscounted cash flows of financial liabilities from the earliest date on which the Company can be required to pay. The tables included both interest and principal cash flows. December 31, 2019 Non-derivative financial liabilities On Demand or Less than 1 Month 1-3 Months More than 3 Months to 1 Year Over 1 Year to 5 Years 5+ Years Non-interest bearing Lease liabilities Fixed interest rate liabilities $ 47,708 693 30,004 $ 46,288 1,386 23,984 $ $ - 6,239 - - 33,271 2,401 - $ 223,324 56,286 $ 78,405 $ 71,658 $ 6,239 $ 35,672 $ 279,610 Additional information about the maturity analysis for lease liabilities: Less than 1 Year 1-5 Years 5-10 Years 10-15 Years 15-20 Years 20+ Years Lease liabilities $ 8,318 $ 33,271 $ 41,589 $ 41,589 $ 36,439 $ 103,707 December 31, 2018 Non-derivative financial liabilities Non-interest bearing Variable interest rate liabilities On Demand or Less than 1 Month 1-3 Months More than 3 Months to 1 Year Over 1 Year to 5 Years 5+ Years $ 109,063 $ 38,642 $ - $ - $ - Fixed interest rate liabilities 105 - 15,000 - 100,000 - - 2,633 - 61,427 $ 109,168 $ 53,642 $ 100,000 $ 2,633 $ 61,427 b) Financing facilities Unsecured bank overdraft facility, reviewed annually and payable on demand: Amount used Amount unused December 31 2019 2018 $ 53,964 2,545,436 $ 115,000 3,121,450 $ 2,599,400 $ 3,236,450 29. TRANSACTIONS WITH RELATED PARTIES a. Name and relationship of related parties Related Party Name Related Party Category Xiamen Xm-plus Technology Ltd. AutoSys Co., Ltd. Jumplux Technology Co., Ltd. Generalplus Technology Inc. Sunext Technology Co., Ltd. Sunplus Innovation Technology Inc. Sunplus mMedia Inc. Sunplus Venture Capital Co., Ltd. Lin Shih Investment Co., Ltd. Wei-Young Investment Inc. Russell Holdings Limited Associate (Note 1) Associate (Note 2) Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Note 1: The board of directors of Xiamen Xm-plus Technology Ltd. was re-elected on December 19, 2018. The company judged that it had lost significant influence on Xiamen Xm-plus Technology Ltd. Note 2: It is an associate of the company; subsidiary of AutoSys Co., Ltd. b. Sales of goods Account Items Related Parties Types 2019 2018 For the Year Ended December 31 Sales of goods Subsidiaries Associates $ 7,690 10,065 $ 19,460 28,058 $ 17,755 $ 47,518 Sales price to related parties is based on cost and market price. The sales terms to related parties were similar to those with external customers. c. Receivables from related parties (excluding loans to related parties) Account Item Related Party 2019 2018 December 31 Trade receivables Other receivable Subsidiaries Associates Subsidiaries Associates $ $ $ 597 1,258 1,855 1,723 280 $ $ $ 2,047 2,400 4,447 5,339 1,358 $ 2,003 $ 6,697 There were no guarantees on outstanding receivables from related parties. For the years ended December 31, 2019 and 2018, no impairment loss was recognized for trade receivables from related parties. d. Other transactions with related parties Account Item Related Parties Types 2019 2018 For the Year Ended December 31 Operating expenses Subsidiaries $ 161 $ - Non-operating income and expenses Subsidiaries Associates $ 26,558 10,228 $ 44,508 8,072 $ 36,786 $ 52,580 Administrative support services price and support services price between the Company and the related parties were negotiated and were thus not comparable with those in the market. The pricing and the payment terms of the lease contract between the Company and the related parties were similar to those with external customers. e. Acquisitions of investments accounted for using the equity method For the year ended December 31, 2019 Related Party Category/Name Line Item Number of Shares Underlying Assets Purchase Price Subsidiary Investments accounted for using the equity method - Sunext Technology Co., $ - Ltd. For the year ended December 31, 2018 Related Party Category/Name Line Item Number of Shares Underlying Assets Purchase Price Subsidiary Subsidiary Investments accounted for using the equity method Investments accounted for using the equity method 3,200 Jumplux $ 32,000 Technology Co., Ltd. 8,251 Sunext Technology 24,752 Co., Ltd. The Company acquired shares of Sunext Technology Co., Ltd. from Sunplus Venture Capital Co., Ltd., in June, 2019. The Company acquired shares of Jumplux Technology Co., Ltd. from Sunplus mMedia Inc. in August 2018 and acquired Sunext Technology Co., Ltd. from Sunplus Venture Capital Co., Ltd., Lin Shih Investment Co., Ltd., Wei-Young Investment Inc. and Russell Holdings Limited from October to December 2018. f. Compensation of key management personnel Short-term employee benefits Post-employment benefits For the Year Ended December 31 2019 2018 $ 11,721 269 $ 18,100 269 $ 11,990 $ 18,369 Compensation of directors and other key management personnel was decided by the Compensation Committee in accordance with individual performance and market trends. 30. PLEDGED OR MORTGAGED ASSETS The following assets were mortgaged or pledged as collateral for bank borrowings and leased land: Buildings, net Pledged time deposits (classified to other financial assets, including current $ 595,735 $ 615,136 and non-current) 6,100 6,100 $ 601,835 $ 621,236 December 31 2019 2018 31. EXCHANGE RATE OF FINANCIAL ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES The following information is summarized and expressed in foreign currencies other than the functional currency. The disclosed exchange rate refers to the rate at which such foreign currencies are converted into the functional currency. The significant financial assets and liabilities denominated in foreign currencies are as follows: December 31, 2019 Financial assets Monetary items USD JPY CNY HKD GBP Nonmonetary items subsidiaries accounted for using equity method USD HKD Foreign Currencies (In Thousands) Exchange Rate Carrying Amount $ 7,103 208 117 15 3 20,066 9 29.980 0.276 4.305 3.849 39.360 29.980 3.849 $ 212,948 57 504 58 118 601,579 35 (Continued) Financial liabilities Monetary items USD CNY December 31, 2018 Financial assets Monetary items USD JPY CNY HKD GBP Nonmonetary items subsidiaries accounted for using equity method USD HKD Financial liabilities Monetary items USD CNY Foreign Currencies (In Thousands) Exchange Rate Carrying Amount $ 5,320 106 29.980 4.305 $ 159,494 456 (Concluded) Foreign Currencies (In Thousands) Exchange Rate Carrying Amount $ 7,594 279 1,012 34 3 21,546 10 30.715 0.278 4.472 3.921 38.880 30.715 3.921 $ 233,250 78 4,526 133 117 661,785 39 4,431 5 30.715 4.472 136,098 22 The significant unrealized foreign exchange gains (losses) were as follows: Foreign Currencies Exchange Rate Net Foreign Exchange (Loss) Gain Exchange Rate Net Foreign Exchange (Loss) Gain 2019 2018 USD CNY 29.980 (USD:NTD) 4.305 (CNY:NTD) $ (537) 25 30.715 (USD:NTD) 4.472 (CNY:NTD) $ (1,234) (32) $ (512) $ (1,266) 32. ADDITIONAL DISCLOSURES a. Following are the additional disclosures required for the Company and its investees by the Securities and Futures Bureau: 1) Financings provided: Table 1 (attached) 2) Endorsement/guarantee provided: Table 2 (attached) 3) Marketable securities held: Table 3 (attached) 4) Marketable securities acquired and disposed of at costs or prices of at least $100 million or 20% of the paid-in capital: Table 4 (attached) 5) Information on investee: Table 5 (attached) b. Information on investments in mainland China 1) Information on any investee company in mainland China, showing the name, principal business activities, paid-in capital, method of investment, inward and outward remittance of funds, ownership percentage, net income of investees, investment income or loss, carrying amount of the investment at the end of the period, repatriations of investment income, and limit on the amount of investment in the mainland China area. (Table 6) Except for Table 1 to Table 6, there’s no further information about other significant transactions. SUNPLUS TECHNOLOGY COMPANY LIMITED FINANCINGS PROVIDED FOR THE YEAR ENDED DECEMBER 31, 2019 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise) No. Lender Borrower Financial Statement Account Related Party Highest Balance for the Period Ending Balance Actual Borrowing Amount Interest Rate Nature of Financing Business Transaction Amounts Reasons for Short-term Financing Allowance for Bad Debt Collateral Item Value Financing Limit for Each Borrower Aggregate Financing Limit 2 Sunplus Technology (Shanghai) Sun Media Technology Co., Ltd. 2 Sunplus Technology (Shanghai) Co., Ltd. Co., Ltd. Sunplus APP Technology 3 Russell Holdings Ltd. Sun Media Technology Co., Ltd. 4 Sunplus Venture Capital Co., Sun Media Technology Ltd. 5 Sunplus Prof-tek Technology (Shenzhen) Co., Ltd. Sunplus APP Technology 5 Lin Shih Investment Co., Ltd. Sun Media Technology Co., Ltd. Receivables from related parties Receivables from related parties Receivables from related parties Receivables from related parties Receivables from related parties Receivables from related parties Yes $ 91,300 $ - $ - 1.8% Note 1 $ Yes Yes Yes Yes Yes 25,108 12,522 12,522 1.8% Note 1 335,477 261,077 261,077 2.05% Note 1 293,926 232,426 232,426 2.05% Note 1 41,086 39,354 39,354 1.8% Note 1 135,170 121,645 121,164 2.05% Note 1 - - - - - - Note 2 $ - Note 3 Note 4 Note 5 Note 6 Note 7 12,522 - - 39,354 - - - - - - - $ - $ - - - - - $ 256,983 (Note 8 ) 21,415 (Note 9 ) 455,427 (Note 10 ) 419,740 (Note 11 ) 37,851 (Note 12 ) 317,228 (Note 13 ) 256,983 (Note 8 ) 42,830 (Note 9 ) 455,427 (Note 10 ) 419,740 (Note 11 ) 75.703 (Note 12 ) 317,228 (Note 13 ) TABLE 1 Note 1: Short-term financing. Note 2: Sunplus Technology (Shanghai) Co., Ltd. provided funds for the operating needs of Sun Media Technology Co., Ltd. Note 3: Sunplus Technology (Shanghai) Co., Ltd. provided funds for the operating needs of Sunplus APP Technology. Note 4: Russell Holdings Ltd. provided funds for the operating needs of Sun Media Technology Co., Ltd. Note 5: Sunplus Venture Capital provided funds for the operating needs of Sun Media Technology Co., Ltd. Note 6: Sunplus Prof-tek Technology (Shenzhen) provided funds for the operating needs of Sunplus APP Technology. Note 7: Lin Shih Investment Co., Ltd. Provided funds for the operating needs of Sun Media Technology Co., Ltd. Note 8: The foreign company has voting shares that are directly and indirectly wholly owned by the Company’s parent company. The total amount of all guarantees issued and the individual amount of each guarantee should not exceed 60% of Sunplus Technology (Shanghai) Co., Ltd.’s net equity as of its latest financial statements; in addition, each guarantee period should not exceed two years. Note 9: The aggregate amount of all guarantees issued should not exceed 10% of the net equity of Sunplus Technology (Shanghai) Co., Ltd. (“Sunplus Shanghai”), and the individual amount of each guarantee should not exceed 5% of Sunplus Shanghai’s net equity, with net equity based on its latest financial statements. Note 10: The foreign company has voting shares that are directly and indirectly wholly owned by the Company’s parent company. The total amount of all guarantees issued and the individual amount of each guarantee should not exceed 80% of Russell Holdings Ltd.’s net equity as of its latest financial statements; in addition, each guarantee period should not exceed two years. Note 11: The total amount of all guarantees issued and the individual amount of each guarantee should not exceed 40% of Sunplus Venture Capital Co., Ltd.’s net equity as of its latest financial statements. Note 12: The total amount of all guarantees issued and the individual amount of each guarantee should not exceed 10% of the net equity of Sunplus Prof-tek Technology (Shenzhen); and the individual amount of each guarantee should not exceed 5% of Sunplus Shanghai’s net equity. Note 13: The total amount of all guarantees issued and the individual amount of each guarantee should not exceed 40% of Lin Shih Investment Co., Ltd.’s net equity as of its latest financial statements. SUNPLUS TECHNOLOGY COMPANY LIMITED ENDORSEMENTS/GUARANTEES PROVIDED FOR THE YEAR ENDED DECEMBER 31, 2019 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise) Endorsee/Guarantee No. Endorser/ Guarantor Name Nature of Relationship Limits on Endorsement/ Guarantee Given on Behalf of Each Party Maximum Balance for the Period Ending Balance Actual Borrowing Amount Value of Collateral (Property, Plant, or Equipment) TABLE 2 Percentage of Accumulated Amount of Collateral to Net Equity as of the Latest Financial Statements Maximum Collateral/Guara ntee Amounts Allowable Provided by the Company Guarantee Provided by the Subsidiary Guarantee Provided to a Subsidiary Located in Mainland China 0 (Note 1) Sunplus Technology Company Limited (“Sunplus”) Sun Media Technology Co., Ltd. 3 (Note 4) Sunext Technology Co., Ltd. 2 (Note 3) 1 (Note 2) Russell Holdings Ltd. Sun Media Technology Co., Ltd. 3 (Note 4) $ 817,853 (Note 5) 817,853 (Note 5) 341,570 (Note 7) $ 428,573 $ 169,365 $ 107,625 $ 10,000 - - - - 2.07 - 279,585 122,860 122,860 122,860 21.58 $ 1,635,707 (Note 6) 1,635,707 (Note 6) 341,570 (Note 7) Yes Yes No No No No Yes No Yes Note 1: Issuer. Note 2: Investee. Note 3: The endorser directly holds more than 50% of the ordinary shares of the endorsee. Note 4: Sunplus and its subsidiaries jointly hold more than 50% of the ordinary shares of the endorsee. Note 5: For each transaction entity, the guarantee amount should not exceed 10% of the endorsement/guarantee provider’s net equity based on the provider’s latest financial statements. Note 6: The guarantee amount should not exceed 20% of the endorsement/guarantee provider’s net equity based on the provider’s latest financial statements. Note 7: Russell Holdings Ltd. and the endorsement guaranty object are the parent company which holds 100% voting rights directly or indirectly. For each transaction entity, the guarantee amount should not exceed 60% of the endorsement/guarantee provider’s net equity, i.e., Russell Holdings Ltd. provider’s latest financial statements. TABLE 3 SUNPLUS TECHNOLOGY COMPANY LIMITED MARKETABLE SECURITIES HELD FOR THE YEAR ENDED DECEMBER 31, 2019 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise) Holding Company Name Type and Name of Marketable Security Relationship with the Holding Company Financial Statement Account Shares or Units (In Thousands) Carrying Amount Percentage of Ownership (%) Market Value or Net Asset Value Note December 31, 2019 Sunplus Technology Company Limited Nomura Taiwan Money Market Fund (the “Company”) Mega RMB Money Market Fund FSITC RMB Money Market Fund TWD FSITC US Top 100 bond fund A Taishin 1699 Money Market Fund Mega Diamond Money Market Fund UPAMC James Bond Money Market Fund Yuanta USD Money Market Fund USD PineBridge Muliti - Income Fund Prudential Financial RMB Money Market Fund TWD Yuanta RMB Money Market TWD Harvest Series 1 Fund Yuanta Emerging Indonesia and India 4 years Bond Fund Broadcom Inc. Triknight Capital Corporation EVERGREEN STEEL Co., Ltd. Network Capital Global - - - - - - - - - - - - - - - - - Financial assets at fair value through 616 $ 10,096 profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - non-current Financial assets at fair value through profit or loss - non-current Financial assets at fair value through profit or loss - non-current 466 5,387 2,000 2,216 13,197 1,851 239 95 5,810 1,702 2 1,500 - 24,146 52,658 20,100 30,100 166,162 31,058 75,886 30,516 57,349 17,918 59,960 15,159 815 Financial assets at fair value through 29,625 285,289 profit or loss - non-current Financial assets at fair value through profit or loss - non-current Financial assets at fair value through other comprehensive income - non-current 1,500 380 52,500 2,586 - - - - - - - - - - - - - - 5 - 7 $ 10,096 Note 3 24,146 Note 3 52,658 Note 3 20,100 Note 3 30,100 Note 3 166,162 Note 3 31,058 Note 3 75,886 Note 3 30,516 Note 3 57,349 Note 3 17,918 Note 3 59,960 Note 3 15,159 Note 3 815 Note 2 285,289 Note 1 52,500 Note 1 2,586 Note 1 (Continued) Holding Company Name Type and Name of Marketable Security Relationship with the Holding Company Financial Statement Account Shares or Units (In Thousands) Carrying Amount Percentage of Ownership (%) Market Value or Net Asset Value Note December 31, 2019 Lin Shih Investment Co., Ltd. UPI Semiconductor Corp. A-Spine Asia Co., Ltd. Taiwan Mask Corp. Enterex International Limited - CB Kee Song Bio - Technology Holdings Limited Everlight Electronics Co., Ltd. - CB Genius Vision Digital Co., Ltd. Ortery Technologies, Inc. Chain Sea Information Integration Co., Ltd. AIII Co., Ltd. GEMFOR Leading Financial Solution Provider fund Sanjet Technology Corporation Minton Optic Industry Co., Ltd. Lead Sun Corporation Ability Enterprise Co., Ltd. - - - - - - - - - - - - - - - Sunplus Technology Co., Ltd. Parent company Russell Holdings Limited Synerchip Inc. Prine Rich International Co., Ltd. OZ Optics Limited Innobrige International Inc. - - - - Financial assets at fair value through 300 $ 18,420 profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - non-current Financial assets at fair value through profit or loss – non-current Financial assets at fair value through profit or loss - non-current Financial assets at fair value through profit or loss – non-current Financial assets at fair value through profit or loss - non-current Financial assets at fair value through profit or loss - non-current Financial assets at fair value through profit or loss - non-current Financial assets at fair value through profit or loss - non-current Financial assets at fair value through other comprehensive income - non-current Financial assets at fair value through other comprehensive income - non-current Financial assets at fair value through other comprehensive income - non-current Financial assets at fair value through profit or loss - non-current Financial assets at fair value through profit or loss - non-current Financial assets at fair value through profit or loss - non-current 220 101 30 50 80 300 103 43 26 13 8 4,272 - 5,434 3,560 33 6,452 1,000 4,000 19,620 3,479 2,700 4,423 8,000 - - 474 431 216 - - 27,934 90,472 48,238 4,600 - - - - - - - - - 4 1 - - - - 7 12 2 1 - 12 8 15 $ 18,420 Note 1 19,620 Note 1 3,479 Note 2 2,700 Note 2 4,423 Note 2 8,000 Note 2 - Note 1 - Note 1 474 Note 1 431 Note 1 216 Note 1 - Note 1 - Note 1 27,934 Note 1 90,472 Note 2 48,238 Note 2 4,600 Note 1 - Note 1 - Note 1 - Note 1 (Continued) Holding Company Name Type and Name of Marketable Security Relationship with the Holding Company Financial Statement Account Shares or Units (In Thousands) Carrying Amount Percentage of Ownership (%) Market Value or Net Asset Value Note December 31, 2019 Russell Holdings Limited Ether Precision Inc. Asia Tech Taiwan Venture, L.P. Asia B2B on Line Inc. AMED Ventures I, L.P. Intudo Ventures II, L.P. GeneOne Diagnostics Corporation Sunplus Venture Capital Co., Ltd. Taiwan Mask Corp. Charles Schwab - Money Fund Cyberon Corporation Grand Fortune Venture Capital Co., Ltd. Ortery Technologies, Inc. Funyou Venture Capital Limited Partnersh Book4u Company Limited Sanjet Technology Corp. Simple Act Inc. Minton Optic Industry Co., Ltd. Raynergy Tek Inc. Genius Vision Digital CDIB Capital Growth Partners L.P. VenGlobal International Fund TIEF Fund LP San Neng Group Holding Co., Ltd. - - - - - - - - - - - - - - - - - - - - - - Financial assets at fair value through profit or loss - non-current Financial assets at fair value through profit or loss - non-current Financial assets at fair value through profit or loss - non-current Financial assets at fair value through profit or loss - non-current Financial assets at fair value through profit or loss - non-current Financial assets at fair value through other comprehensive income - non-current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - non-current Financial assets at fair value through profit or loss - non-current Financial assets at fair value through profit or loss - non-current Financial assets at fair value through profit or loss - non-current Financial assets at fair value through profit or loss - non-current Financial assets at fair value through profit or loss - non-current Financial assets at fair value through profit or loss - non-current Financial assets at fair value through profit or loss - non-current Financial assets at fair value through profit or loss - non-current Financial assets at fair value through profit or loss - non-current Financial assets at fair value through profit or loss - non-current Financial assets at fair value through profit or loss - non-current Financial assets at fair value through profit or loss - non-current Financial assets at fair value through profit or loss - non-current 1,250 $ - 1,000 - - 1,710 108 - 786 5,000 68 - 9 49 1,900 5,000 4,500 375 - 1 - 900 - - - 5,563 24,411 20,386 3,721 2,032 27,530 54,950 - 19,877 - - - - 81,630 - 54,379 - 40,721 32,940 1 5 3 3 6 13 - - 8 7 1 10 - - 10 8 16 5 2 - 7 1 $ - Note 1 - Note 1 - Note 1 5,563 Note 1 24,411 Note 1 20,386 Note 1 3,721 Note 2 2,032 Note 2 27,530 Note 1 54,950 Note 1 - Note 1 19,877 Note 1 - Note 1 - Note 1 - Note 1 - Note 1 81,630 Note 1 - Note 1 54,379 Note 1 - Note 1 40,721 Note 1 32,940 Note 2 (Continued) Holding Company Name Type and Name of Marketable Security Relationship with the Holding Company Financial Statement Account Shares or Units (In Thousands) Carrying Amount Percentage of Ownership (%) Market Value or Net Asset Value Note December 31, 2019 Sunplus Venture Capital Co., Ltd. Huijia Health Life Technology Intudo Ventures I, L.P. eWave System, Inc. Feature Integration Technology Inc. Qun-Kin Venture Capital Protect Life International Biomedical Inc. Wei-Young Investment Inc. Shiny Brands Group Co., Ltd. Cheng Mei Materials Technology Corporation Chipbond Technology Corporation Sunplus Technology (Shanghai) Co., Ltd. GF Every Day The Red Haired Type Money Market Fund B GF Live Treasury Currency B Chongqing CYIT Communication Technology Co., Ltd. Ready Sun Investment Group Fund Xiamen Xm-plus Technology Ltd. Generalplus Technology Inc. Franklin Templeton SinoAm Money Market Sunplus Innovation Technology Inc. Mega Diamond Money Market Fund Fund Yuanta Wan Tai Money Market Fund Fuh Hwa You Li Money Market Fund Yuanta De-Li Money Market Fund Taishin 1699 Money Market Fund Advanced Silicon SA - - - - - - - - - - - - - - - - - - - Financial assets at fair value through profit or loss - non-current Financial assets at fair value through profit or loss - non-current Financial assets at fair value through profit or loss - non-current Financial assets at fair value through other comprehensive income - non-current Financial assets at fair value through other comprehensive income - non-current Financial assets at fair value through other comprehensive income - non-current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - non-current Financial assets at fair value through profit or loss - non-current Financial assets at fair value through profit or loss - non-current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through other comprehensive income - non-current 1,000 $ 30,000 - 1,833 1,247 3,000 1,364 105 2,000 300 13,100 13,550 - - - 7,869 810 3,963 2,235 4,333 2,212 1,000 45,630 - 18,680 24,000 5,110 7,864 14,600 20,160 56,579 58,493 - 41,625 11,520 81,669 10,199 60,241 30,226 70,939 30,042 22,705 6 8 22 4 6 4 - - - - - 3 16 3 - - - - - - $ 30,000 Note 1 45,630 Note 1 - Note 1 18,680 Note 2 24,000 Note 1 5,110 Note 1 7,864 Note 2 14,600 Note 2 20,160 Note 2 56,579 Note 3 58,493 Note 3 - Note 1 41,625 Note 1 11,520 Note 1 81,669 Note 3 10,199 Note 3 60,241 Note 3 30,226 Note 3 70,939 Note 3 30,042 Note 3 10 22,705 Note 1 (Continued) Holding Company Name Type and Name of Marketable Security Relationship with the Holding Company Financial Statement Account Shares or Units (In Thousands) Carrying Amount Percentage of Ownership (%) Market Value or Net Asset Value Note December 31, 2019 Sunplus Innovation Technology Inc. Advanced NuMicro System, Inc. Point Grab Ltd. Magic Sky Limited GTA Co., Ltd. - CB Giant Rock Inc. Xiamen Xm-plus Technology Ltd. Sunext Technology Co., Ltd. Yunata Taiwan Dividend + ETF Feeder Fund Yunata Taiwan Top 50 ETF Feeder Fund EVERGREEN STEEL Co.,Ltd. Jsilicon Technology Co., Ltd. GF Live Treasure Currency B Note 1: The market value was based on the carrying amount as of December 31, 2019. Note 2: The market value was based on the closing price as of December 31, 2019. - - - - - - Financial assets at fair value through other comprehensive income - non-current Financial assets at fair value through other comprehensive income - non-current Financial assets at fair value through profit or loss - non-current Financial assets at fair value through profit or loss - non-current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current 2,000 $ 182 - - 2,843 467 1,000 7,888 848 - 32,079 46,813 31,609 5,715 35,000 33,959 8 1 - 15 - - - - $ 848 Note 1 - Note 1 32,079 Note 1 46,813 Note 1 31,609 Note 3 5,715 Note 3 35,000 Note 1 33,959 Note 3 Note 3: The market value was based on the net asset value of the fund as of December 31, 2019. (Concluded) SUNPLUS TECHNOLOGY COMPANY LIMITED MARKETABLE SECURITIES ACQUIRED OR DISPOSED OF AT COSTS OR PRICES OF AT LEAST NT$300 MILLION OR 20% OF THE PAID-IN CAPITAL FOR THE YEAR ENDED DECEMBER 31, 2019 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise) Company Name Type and Name of Marketable Securities Financial Statement Account Counterparty Relationship Number of Shares Amount Number of Shares Amount Number of Shares Amount Carrying Amount Gain (Loss) on Disposal Beginning Balance Acquisition(Note 1) Disposal(Note 1) Ending Balance(Note 3) Shares Amount Generalplus Technology Inc. Franklin Templeton SinoAm Money Market Fund Financial assets at fair - - 5,721 $ 59,048 29,017 $ 300,000 26,869 $ 278,000 $ 277,539 $ 461 7,869 $ 81,669 value through profit or loss - current Note 1: The cumulative purchase and sale amount shall be calculated separately at the market price to determine whether it has reached NT$300 million or 20% of the paid-up capital. Note 2: The paid-in capital refers to the paid-in capital of the parent company. Note 3: The amount on the end of the period is the amount of unrealized profit or loss. TABLE 4 SUNPLUS TECHNOLOGY COMPANY LIMITED NAMES, LOCATIONS, AND RELATED INFORMATION OF INVESTEES ON WHICH THE COMPANY EXERCISES SIGNIFICANT INFLUENCES DECEMBER 31, 2019 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise) Investor Investee Location Main Businesses and Products Sunplus Technology Company Limited Ventureplus Group Inc. Award Glory Ltd. Belize Belize Investment Investment GLOBAL VIEW CO., LTD. Hsinchu, Taiwan Consumer electronics, components and rental Investment Amount Balance as of December 31, 2019 December 31, 2019 December 31, 2018 Shares (Thousands) Percentage of Ownership (%) Carrying Amount Net Income (Loss) of the Investee Investment Gain (Loss) Note 2,399,817 $ ( US$ 74,605 RMB 37,900 ) 226,834 5,642 ( US$ RMB 13,400 ) 315,658 2,399,817 $ ( US$ 74,605 RMB 37,900 ) 61,219 2,042 ) ( US$ - - 100 $ 1,373,861 $ 21,479 $ 21,479 Subsidiary 100 160,186 8,497 8,497 Subsidiary 315,658 8,229 13 297,640 85,934 11,165 Investee TABLE 5 Lin Shih Investment Co., Ltd. Generalplus Technology Inc. Sunplus Venture Capital Co., Ltd. Sunplus Innovation Technology Inc. Russell Holdings Limited iCatch Technology, Inc. Sunext Technology Co., Ltd. Sunplus mMedia Inc. Sunplus Management Consulting Inc. Sunplus Technology (H.K.) Co., Ltd. Hsinchu, Taiwan Hsinchu, Taiwan Hsinchu, Taiwan Hsinchu, Taiwan Cayman Islands, British West Indies Hsinchu, Taiwan Hsinchu, Taiwan Hsinchu, Taiwan Hsinchu, Taiwan Kowloon Bay, Hong Kong Magic Sky Limited Samoa Sunplus mMobile Inc. Wei-Young Investment Inc. Jumplux Technology Co., Ltd. Generalplus Technology Inc. Sunplus Innovation Technology Inc. iCatch Technology, Inc. Sunplus mMedia Inc. Jumplux Technology Co., Ltd. Sunplus Innovation Technology Inc. iCatch Technology, Inc. Sunplus mMedia Inc. Han Young Technology Co., Ltd. Hsinchu, Taiwan Hsinchu, Taiwan Hsinchu, Taiwan Hsinchu, Taiwan Hsinchu, Taiwan Hsinchu, Taiwan Hsinchu, Taiwan Hsinchu, Taiwan Hsinchu, Taiwan Hsinchu, Taiwan Hsinchu, Taiwan Taipei, Taiwan of buildings Investment Design of ICs Investment Design of ICs Investment Design of ICs Design of ICs Design of ICs Management International trade Investment Design of ICs Investment Design of ICs Design of ICs Design of ICs Design of ICs Design of ICs Design of ICs Design of ICs Design of ICs Design of ICs Design of ICs Lin Shih Investment Co., Ltd. Sunplus Venture Capital Co., Ltd. Russell Holdings Limited Autosys Co., Ltd. Cayman Islands, British west Indies Investment Ventureplus Group Inc. Ventureplus Mauritius Inc. Mauritius Investment ( US$ ( US$ 699,988 281,001 999,982 414,663 739,307 24,660 ) 207,345 983,237 407,565 5,000 42,628 11,075 ) 304,597 10,160 ) 2,596,792 70,157 132,000 699,988 281,001 999,982 414,663 721,319 24,060 ) 207,345 981,053 407,565 5,000 42,628 11,075 ) 302,049 10,075 ) 2,596,792 70,157 132,000 ( HK$ ( HK$ ( US$ ( US$ 86,256 15,701 9,645 19,408 86,256 15,701 9,645 19,408 101,000 101,000 57,388 33,439 44,878 - 57,388 33,439 44,878 4,200 74,950 2,500 ) ( US$ 74,950 2,500 ) ( US$ 2,399,817 ( US$ 74,605 RMB 37,900 ) 2,399,817 ( US$ 74,605 RMB 37,900 ) 70,000 37,324 100,000 31,450 24,660 20,735 58,778 22,441 500 11,075 100 34 100 61 100 29 93 90 100 100 744,832 681,743 1,049,350 573,897 569,284 263,237 194,234 23,627 3,768 35 43,053 223,584 43,973 135,651 5,887 (79,931 ) 19,076 (25,068 ) (142 ) (3 ) 41,771 Subsidiary 76,690 Subsidiary 43,973 Subsidiary 82,919 Subsidiary 5,887 Subsidiary (27,997 ) Investee 17,497 Subsidiary (22,501 ) Subsidiary (142 ) Subsidiary (3 ) Subsidiary - 100 32,282 (53,190 ) (53,190 ) Subsidiary 16,240 5,400 13,200 14,892 1,075 965 650 10,100 2,904 3,332 1,909 - - - 100 100 55 14 2 1 3 42 6 5 8 - 16 29,576 49,602 2,785 273,385 17,399 12,784 5,348 2,130 53,990 44,159 457 - (209 ) (5,239 ) (26,527 ) 223,584 135,651 (79,931 ) (25,068 ) (26,527 ) 135,651 (79,931 ) (25,068 ) - (209 ) Subsidiary (5,239 ) Subsidiary (14,590 ) Subsidiary 30,599 Subsidiary 2,834 Subsidiary (1,094 ) Investee (652 ) Investee (11,163 ) Subsidiary 7,655 Subsidiary (3,779 ) Subsidiary (1,914 ) Subsidiary - Subsidiary (Note 2) 77,208 (1,845 ) (1,793 ) Investee 100 1,373,859 21,496 21,496 Subsidiary Ventureplus Mauritius Inc. Ventureplus Cayman Inc. Cayman Islands, British West Indies Investment Generalplus Technology Inc. Generalplus International (Samoa) Inc. Samoa Investment Generalplus International (Samoa) Inc. Generalplus (Mauritius) Inc. Mauritius Investment 2,399,817 74,605 ( US$ RMB 37,900 ) 2,399,817 74,605 ( US$ RMB 37,900 ) 572,318 19,090 ) ( US$ 572,318 19,090 ) ( US$ 572,318 19,090 ) ( US$ 572,318 19,090 ) ( US$ - 100 1,373,837 21,497 21,497 Subsidiary 19,090 100 475,396 13,484 13,484 Subsidiary 19,090 100 475,394 13,484 13,484 Subsidiary (Continued) Investor Investee Location Main Businesses and Products Investment Amount Balance as of December 31, 2019 December 31, 2019 December 31, 2018 Shares (Thousands) Percentage of Ownership (%) Carrying Amount Net Income (Loss) of the Investee Investment Gain (Loss) Note Generalplus (Mauritius) Inc. Generalplus Technology (Hong Kong) Inc. Hong Kong Sales Award Glory Ltd. Sunny Fancy Ltd. Seychelles Investment $ (US$ 11,692 390 ) $ (US$ 11,692 390 ) 226,834 (US$ 5,642 RMB 13,400 ) 61,212 2,042 ) (US$ Sunny Fancy Ltd. Giant Kingdom Ltd. Giant Rock Inc. Seychelles Anguilla Investment Investment WORLDPLUS HOLDINGS L.L.C. America Investment Note 1: The initial exchange rate was based on the exchange rate as of December 31, 2018. Note 2: Han Young Technology Co., Ltd. was liquidated in November 2019. (US$ 23,145 772 ) 95,762 (US$ 1,270 RMB 13,400 ) 107,928 3,600 ) (US$ (US$ (US$ 23,145 772 ) 38,075 1,270 ) - - - - - - 100 $ 4,691 $ (456 ) $ (456 ) Subsidiary 100 160,186 8,497 8,497 Subsidiary 100 100 100 558 (240 ) (240 ) Subsidiary 50,758 11,319 11,319 Subsidiary 108,870 (2,138 ) (2,582 ) Subsidiary (Concluded) TABLE 6 SUNPLUS TECHNOLOGY COMPANY LIMITED INFORMATION ON INVESTMENTS IN MAINLAND CHINA FOR THE YEAR ENDED DECEMBER 31, 2019 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise) Investee Company Name Main Businesses and Products Total Amount of Paid-in Capital Investment Type Sunplus Technology Development of computer software, system (Shanghai) Co., Ltd. Sunplus Prof-tek (Shenzhen) integration services and building rental services Development of computer software, system Co., Ltd. integration services, building rental services and property management $ (US$ (US$ 515,656 17,200) 966,855 32,250) Sun Media Technology Co., Development of computer software, system Ltd. Sunplus App Technology Co., Ltd. integration services and building rental services Manufacturing and sale of computer software, system integration services and information management and education (US$ (RMB Ytrip Technology Co., Ltd. Computer system integration services, supply of general advertising and other information services (RMB Sunplus Technology (Beijing) Development of computer software, system integration services and building rental services (RMB 1culture Communication Co., System development Ltd. JSilicon Technology Co., Ltd. Development of computer software, system (Ru Domg) integration services Lingyao Technology Co., Ltd. (Shenzhen) Shuangxin Technology Co., Development of computer software, system integration services and building rental Development of computer software, system Ltd. (Chongqing) integration services (RMB (RMB (RMB (RMB 599,600 20,000) 111,930 26,000) 263,681 61,250) 116,235 27,000) 13,991 3,250) 43,050 10,000) 81,963 19,039) 8,610 2,000) Note 1 Note 1 Note 1 Note 1 Note 1 Note 1 Note 3 Note 4 Note 6 Note 5 Accumulated Outflow of Investment from Taiwan as of January 1, 2019 $ (US$ (US$ 529,297 17,655) 966,855 32,250) (US$ (US$ RMB (US$ (RMB 599,600 20,000) 60,618 586 10,000) 135,240 4,511) 116,235 27,000) - - - - Investment Flows Outflow Inflow $ - $ - - (RMB 47,355 11,000) - - - - (US$ 107,928 3,600) - Accumulated Outflow of Investment from Taiwan as of December 31, 2019 $ (US$ (US$ 529,297 17,655) 966,855 32,250) 599,600 20,000) 107,973 586 21,000) 135,240 4,511) 116,235 27,000) (US$ (US$ RMB (US$ (RMB - 107,928 3,600) - (US$ - - - - - - - - - - % Ownership of Direct or Indirect Investment Net Income (Loss) of the investee Investment Loss Carrying Amount as of December 31, 2019 Accumulated Inward Remittance of Earnings as of December 31, 2019 100 $ 13,082 $ 13,082 $ 428,305 $ 100 (29,577) (29,577) 757,026 100 96 91 100 100 100 100 100 31,538 31,538 131,080 (10,628) (10,290) 4,071 (2,566) (2,327) 1,861 3,096 3,096 49,237 (29) (29) 65 (15,033) (15,033) 28,209 (2,138) (2,582) 108,870 (10,973) (10,973) 75,218 - - - - - - - - - - Accumulated Investment in Mainland China as of December 31, 2019 Investment Amounts Authorized by Investment Commission, MOEA Limit on Investment 2,597,759 $ ( US$ 79,872 and 49,900 ) RMB $ 2,623,398 ( US$ 78,602 and RMB 62,000 ) $ 4,907,120 Sunplus Venture Capital Co., Ltd. Accumulated Investment in Mainland China as of December 31, 2019 (Note 7) Investment Amounts Authorized by Investment Commission, MOEA Limit on Investment $ ( US$ 37,775 1,260 ) $ ( US$ 37,775 1,260 ) $ 629,610 (Continued) Generalplus Technology Inc. (Nature of Relationship: 1) Investee Company Name Main Businesses and Products Total Amount of Paid-in Capital Investment Type (e.g., Direct or Indirect) Accumulated Outflow of Investment from Taiwan as of January 1, 2019 Investment Flows Outflow Inflow Accumulated Outflow of Investment from Taiwan as of December 31, 2019 % Ownership of Direct or Indirect Investment Net Loss of the investee Investment Loss (Note 2) Carrying Amount as of December 31, 2019 Accumulated Inward Remittance of Earnings as of December 31, 2019 Generalplus Shenzhen IC product development, after sales service and market research $ (US$ 560,626 18,700) Note 1 $ (US$ 560,626 18,700) $ - $ - $ (US$ 560,626 18,700) 100% $ 13,940 $ 13,940 $ 471,173 $ - Accumulated Investment in Mainland China as of December 31, 2019 Investment Amount Authorized by Investment Commission, MOEA $ ( US$ 560,626 18,700 ) $ ( US$ 560,626 18,700 ) Limit on Investment $ 1,210,358 Note 1: Indirect investment in a company located in mainland China through investment in a company located in a third country. Note 2: Based on the investee’s reviewed financial statements for the same period. Note 3: Ytrip Technology Co., Ltd. indirectly invested in a company located in mainland China. Note 4: Sunplus Technology (Shanghai) Co., Ltd.’s indirect investment in a company located in mainland China. Note 5: Sunplus Technology (Shanghai) Co., Ltd. and Sunplus Prof-tek (Shenzhen) Co., Ltd.’s indirect investments in a company located in mainland China. Note 6: It is a company located in mainland China that acquired the investment of the third regional investment company on September 2, 2019. Note 7: The Ministry of Economic Affairs approved an investment in the shares of San Neng Group Holding Co., Ltd., which is accounted for under the financial assets at fair value through profit or loss- non-current. Note 8: The original foreign currency was derived from the exchange rate on December 31, 2019. (Concluded) 7.6 Financial Difficulties Impact to the Company or subsidiaries if any turnover problems: None 156 VIII. Financial Analysis 8.1 Financial Status 8.1.1 Financial Analysis Comparison 2018 vs. 2019 Unit: NT$K Variation YoY % Year 2018 2019 6,638,302 2,052,359 178,521 3,057,802 11,926,984 1,684,729 374,649 2,059,378 5,940,147 1,968,803 176,233 3,404,584 11,489,767 1,342,416 574,660 1,917,076 Increase (Decrease) (698,155) (83,556) (2,288) 346,782 (437,217) (342,313) 200,011 (142,302) Item Current Assets Property, Plant & Equipment Intangible Assets Other Assets Total Assets Current Liabilities Non-Current Liabilities Total Liabilities Equity Attributed to Shareholder of the parent Capital Stock Capital Surplus Retained Earnings Equity : Others Treasury Stock Minor interest Total Shareholder’s Equities Remark: 1. The decrease in current liabilities is mainly due to the decrease in long-term loans due within one year. 2. The increase in non-current liabilities was mainly due to the increase in lease liabilities recognized by IFRS16. 3. The decrease in capital reserves is mainly due to the distribution of dividends from capital reserves. 4. The increase in other equity is mainly due to the disposal of unrealized loss of financial commodities of equity instruments measured at fair value through other comprehensive profit and loss. 5,919,949 801,398 2,250,839 (442,843) (63,401) 1,401,664 9,867,606 5,919,949 594,432 1,988,579 (261,026) (63,401) 1,394,158 9,572,691 - (206,966) (262,260) 181,817 - (7,506) (294,915) 8,465,942 8,178,533 (287,409) (11) (4) (1) 11 (4) (20) 53 (7) (3) - (26) (12) (41) - (1) (3) 157 8.2 Operational Results 8.2.1 Operation Results Comparison 2018 vs. 2019 Unit: NT$K Variation Year 2018 2019 (62) 40,230 YoY % 174,752 112,479 244,220 293,780 203,990 142,323 (181,301) (9) (2) (247) 5,512,330 2,374,575 131,741 6,077,733 2,429,384 (89,790) Increase (decrease) (565,403) (54,809) 221,531 Item Net Sales Gross Profit Income (Loss) From Operating Non-Operating Income (Expense) Income (Loss) Before Tax Income (Loss) From Operations of Continued Segments Net Revenue (Loss) for the period Other Comprehensive Income (Loss) for the period Total Comprehensive Profit (Loss) for the period Remarks: 1. The increase in operating net profit was mainly due to the decrease in operating expenses for the current year. 2. The decrease in non-operating income and expenses was mainly due to the decrease in the interests of the handling company in this year. 3. The increase in profit and loss before tax and net profit after tax for the current period was mainly due to the increase in operating profit for the year. 4. The increase in other comprehensive profits and losses for the current period was mainly due to the decrease in unrealized losses of financial assets measured at fair value through other comprehensive gains and losses during the year. 5. The increase in total profit and loss for the current period is mainly due to the increase in net profit for the year. (102,073) (131,361) 142,323 174,752 32,429 29,288 61,717 32,429 72,679 10,962 (22) 563 20 23 23 158 8.3 Cash Flow 8.3.1 Cash Flow Analysis a) Cash Flow Analysis 2018 vs. 2019 Year 2018 2019 YoY % Item Cash flow ratio Cash flow adequacy ratio Cash flow reinvestment ratio 1. The increase in cash flow ratio is mainly due to the increase in net cash flow from operating activities. 2. The increase in the allowable cash flow ratio is mainly due to the increase in net cash flow from operating a ctivities in the past five years. 3. The increase in cash reinvestment ratio is mainly due to the increase in net cash flow from operating activitie s. Note 1: The net cash flow of operating activities is less than the cash dividend payment. It is not listed. 16.85 56.71 Note 1 48.54 81.59 2.44 188 44 - b) Cash Flow Forecast Cash Balance, beginning of the year (1) Net Cash Flow from Operating Activities (2) Estimated net cash inflow (outflow) from investment and financing activities throughout the year (3) Net Cash Balance (1)+(2)+(3) Unit: NT$K Remedial Measure if cash not enough Investment plan Financial leverage plan $3,020,628 544,355 (485,933) 3,079,050 - - 1. Analysis of Cash Flow: (1) From Operating: Cash flow in for predicting making profits in 2020. (2) From Investing: Cash flow in for purchasing properties, IPs and R&D tools. (3) From Financing: Cash flow in for expected to repay bank loans and distribute dividends, etc. 2. Remedies and Liquidity Analysis of Inadequate Cash: None. 8.4 Major Capital Expenditure 8.4.1 Major Capital Expenditure and Sources: None. 8.4.2 Benefits from the Capital Expenditure: None. 8.5 Long-Term Investment Not applicable 8.6 Risk Management 8.6.1 The Impact of Inflation, Foreign Exchange and Interest Rate Fluctuation and Measures to Cope With 1. Interest Rate: The Company will get more interest expenses when the interest rate rises. The finance division will collect information and evaluate the variation for hedge. Vice versa, the low interest rate will impact interest income. The company will put more cash on highly- returned short-term investment. 2. Exchange Rate: The selling products are quoted in US dollars. Most of the costs are quoted in US dollars but still some in NT dollars. So the New Taiwan Dollars appreciation will impact the company sales and gross margin. Our major foreign-currency assets are account receivable and time deposits. The company already utilizes mainly forward currency and option contracts to hedge its foreign exchange exposure, so the impact from floating exchange rate will be minimized. Inflation: The material costs vary timely. The higher manufacture cost and selling pricing which would impact the consumers’ budget for the high-end consumer electronic products. But Sunplus is working hard to develop new products for add-on value and cost-down, and expand the market shares in the emerging markets to relief the slow-down from developed countries. 3. 8.6.2 Internal Policies and Procedure Exist with Respect to High Risk/High Leveraged 159 Investment, Lending/Endorsements and Guarantees for Other Parties, Financial Derivatives Transaction 1. There is no high risk/high leveraged investment. 2. The company has made and followed “Sub-procedure of Extension of Monetary Loans to Others”, The loans are made with risk evaluation which follows the procedures. After the loan is granted, the Company follows and traces financial status, business and credit status of the borrower and guarantor frequently, and asks equal collaterals or takes proper actions to secure. 3. The company has made and followed “Procedure of Endorsement and Guarantees”, and the Endorsement and Guarantees will only be made under well evaluation before granted. 4. The company has made and followed “Procedure of Engaging in Derivatives Trading “. The financial transactions of a derivatives nature that Sunplus enters into are strictly for hedging purposes and not for any trading or speculative purposes and under well evaluation. 8.6.3 R&D Plan and Execution Sunplus Group will keep investing in research and development, therefore, the consolidated R&D costs will account for 25% ~ 35% of consolidated revenues. Company Sunplus Technology Generalplus Technology Sunplus Innovation Technology Jumplux Technology New Products (1) Automotive entertainment system chip (2) Smart Cockpit System Chip for Vehicle (3) Vehicle navigation and driving assistance system platform (4) Medium and high-end Soundbar system chip (5) High-speed interface IP (6) High-performance data converter IP (7) Analog IP (8) Industrial control system chip based on Sunplus Plus1 architecture (1) A new generation of speech synthesis control chip (a) High sound quality and high volume PWM driver (b) OTP /Flash memory, can quickly update the code (2) Digital audio and voice recognition control IC: (a) High-resolution Sigma-Delta ADC recording device (b) High sound quality Class-D broadcast drive device (c) Flash memory, can quickly update the code (3) LCD control IC: (a) Low-power platform capable of single battery operation (b) OTP memory, can quickly update the code (4) Multimedia application control IC: (a) High-performance Cortex-A series 32-bit platform (b) More display technologies and interfaces (CVBS, HDMI, MIPI) (c) Advanced image processing (ISP, GPU, H.264, computer vision and AI deep learning) (d) DDR2/DDR3 DRAM interface (5) Microcontroller: (a) Cortex-M0 motor drive control IC (b) Highly integrated wireless charging IC (c) High-sensitivity touch IC (6) Other ICs: (a) Various peripheral chips supporting the main control IC (b) More complete power control IC (c) Higher quality audio amplifier IC (1) Very low power USB image processing IC (2) USB3.0 4K image processing IC (3) Image processing IC with intelligent image detection function (1) Front loading regulation Automotive USB TYPEC PD3.0 Charger IC. (2) MCU chip and subsystem based on RISC-V instruction set (3) Endpoint deep learning software and hardware accelerator and its AIOT application chip 160 8.6.4 Political and Regulatory Environment: We will keep watch for any further updates and take actions to reduce the impacts on the company. 8.6.5 Advanced Technology The wafer process technology is moving to smaller geometry. The migrated process technology could keep the chip production cost down but R&D cost up. The company tries to develop higher add-on value and mainstream multimedia products, which mainstream means to produce in huge volume and to share the research and development cost. 8.6.6 Corporate Identify and Image Change The company takes corporate image seriously. Being people-oriented and having integrity are our top priorities when running our business. We disclose our operation and financial statements to public periodically and transparently in order to save the rights of our shareholders. 8.6.7 Mergers & Acquisitions None 8.6.8 Expansion of Facilities None 8.6.9 Suppliers & Customers The Company separately purchases raw materials from several different suppliers, encapsulation and testing of the foundry is also adopted scattered strategy, to ensure that the output is no problem. The Company's largest sales customers in 2018 and 2019 accounted for 13% and 15% of the total net revenue for the year, no sales focus on the risk of a single customer. 8.6.10 Major Shareholding Change None 8.6.11 Ownership Change None 8.6.12 Litigation Proceedings None 8.6.13 Other Risks None 8.7 Other Remarks None 161 IX. SPECIAL NOTES 9.1 Affiliates 9.1.1 Affiliated Chart Sunpl us Technology Company 0.03% 0.70% 6.98% 6.05% 13.69% 3.95% 2.09% 1.75% 100% 100% 100% 100% 100% 100% 61.15% 61.13% 34.30% 37.64% 100% 100% 100% Award Glary Sunp lus Management Consulting Ventureplus Sunplus HK Sunplus Venture Lin Shih Sunplus mMobile Sunext Sunplus Innovation Generalplus iCatch Wei Young Russell Magic Sky 100% Sunny Fancy 100% Ventureplus Mauritius 100% 100% 100 % Giant Kingdom Giant Rock Ventureplus Cayman 70 % Han Yuang 14.6% 68.8% 100% 93.33% 100% 100% 100% Ytrip Technology Co. Ltd. Sunplus Technology ( Beijing) Sunplus App Technology Co. , Ltd. Sunplus Prof- tek ( Shenzhen) Sunplus Shanghai SunMedia Technology 100 % 1 culture Co mmunication Co,.Ltd 100% Xiamen Xm- plus 5.29% 9.55% 3.25% Sunplus mMedia 72.14% 22.86% Jumplex Technology - 0.10% 5.64% 100% Generalplus Samoa 100% Generalplus Mauritius 100% 100% Generalplus Shenzhen Generalplus HK 162 9.1.2 Affiliated Companies December 31, 2019 Unit: NT$K, unless other specified Company Date of Incorporation Place of Registration August 31, 1993 Kowloon, HK Sunplus Technology (HK) Co., Ltd. Lin Shih Investment Co., Ltd. Russell Holdings Ltd. Sunplus Venture Capital Co., Ltd. November 20, July 2, 1998 March 11, 1998 Cayman Hsinchu, Taiwan Hsinchu, Taiwan Belize 1999 July 27, 2001 August 2, 2001 Mauritius September 14, 2001 December 7, 2001 Cayman Shanghai, China Ventureplus Group Inc. Ventureplus Mauritius Inc. Ventureplus Cayman Inc. Shanghai Sunplus Technology Co., Ltd. Sunplus Prof-tek Technology (Shenzhen) Co., Ltd. Paid-in Capital Business Activities HK$11,075,000 (Note) International Trading 700,000 Investment US$24,660,000 (Note) Investment Investment 1,000,000 2,526,650 2,526,656 2,526,661 Investment Investment Investment US$17,200,000 (Note) Software development, customer technical services and rental business October 22, 2007 Shenzhen, China US$32,250,000 (Note) Software development, customer technical services and rental business Sunmedia Technology Co., Ltd. January 8, 2008 Chengdu, China US$20,000,000 (Note) IC Sales and Sunplus App Technology Co., Ltd. October 6, 2008 Beijing, China RMB26,000,000 (Note) After Service, Software and System Design IC Sales and After Service, Software and System Design Ytrip Technology Co., Ltd. 1culture Communication Co., Ltd. Beijing Sunplus-Ehue Tech Co., Ltd. February 2011 February 2013 December11, 2013 18, Chengdu, China RMB61,250,000(Note) System and Web 18, Chengdu, China RMB3,250,000(Note) Web Service Service Beijing RMB27,000,000(Note) Software Magic Sky Limited Sunext Technology Co., Ltd. Sunplus Management Consulting Inc. WeiYing Investment Co., Ltd. Generalplus Technology Inc. Generalplus International (Samoa) Inc. Generalplus (Mauritius) Inc. Generalplus Technology (Shenzhen) Inc. Samoa September 22, 2010 March 13, 2003 Hsinchu, Taiwan October 2, 2003 Hsinchu, Taiwan Hsinchu, Taiwan February 13, 2004 March 30, 2004 Hsinchu, Taiwan November 12, 2004 November 25, 2004 March 24, 2005 Shenzhen, China Mauritius Samoa 163 development, customer technical services and rental business Investment IC Design Consulting Investment US$10,160,000 635,091 5,000 54,000 1,088,158 IC Design US$19,090,000 (Note) Investment US$19,090,000 (Note) Investment US$18,700,000 (Note) Sales Service March 21, 2007 Hong Kong US$390,000 (Note) Sales Service Generalplus Technology (HK) Inc. Sunplus mMobile Inc. Sunplus Innovation Technology Inc. Sunplus mMedia Inc. Jumplux Technology Inc, Award Glory Ltd. Sunny Fancy Ltd. Giant Kingdom Ltd. Giant Rock Inc. Hsinchu, Taiwan December 20, 2006 December 14, 2006 April 18, 2007 Hsinchu, Taiwan October 27,2014 Hsinchu, Taiwan Hsinchu, Taiwan January 04, 2016 Belize October 29, 2014 Mahe , Republic of Seychelles January 21, 2016 Mahé, Seychelles July 3, 2014 Rudong Jiexin Electronic Technology Co., Ltd. February 06, 2019 The Mason Complex, Suites 19 & 20, The Valley, Anguilla. Rudong County, Nantong City, China 162,400 514,501 250,000 240,000 IC Design IC Design IC Design Design & Trading 235,105 Investment 235,105 Investment 25,157 Investment 97,279 Investment RMB10,000,000(Note) Software development and integrated circuit design July 26, 2019 Chongqing, China RMB20,000,000(Note) Software development and integrated circuit design September 7, 1999 3500 South Dupont Highway,Dover,Delaware 19901,U.S.A. US$3,600,000(Note) Investment Business January 18, 2000 Shenzhen, China RMB19,039,000(Note) Software development, rental business and property management Chongqing Shuangxin Technology Co., Ltd. Worldplus Holdings L.L.C. Lingyao Technology (Shenzhen) Co., Ltd. Note: End of 2019, exchange rate as ref.: HK$1=NT$3.849 US$1=NT$29.98 RMB$1=NT$4.305 164 9.1.3 Business Scope of Affiliated Companies Company Business Activities Business Relationship Sunplus Technology (HK) Co., Ltd. Lin Shih Investment Co., Ltd. Russell Holdings Ltd. Sunplus Venture Capital Co., Ltd. Ventureplus Group Inc. Ventureplus Mauritius Inc. Ventureplus Cayman Inc. Shanghai Sunplus Technology Co., Ltd. Sunplus Prof-tek Technology (Shenzhen) Co., Ltd. Sunmedia Technology Co., Ltd. Sunplus App Technology Co., Ltd. Ytrip Technology Co., Ltd. 1culture Communication Co., Ltd. Beijing Sunplus-Ehue Tech Co., Ltd. Magic Sky Limited Sunext Technology Co., Ltd. Sunplus Management Consulting Inc. WeiYing Investment Co., Ltd. Generalplus Technology Inc. Generalplus International (Samoa) Inc. Generalplus (Mauritius) Inc. Generalplus Technology (Shenzhen) Inc. Generalplus Technology (HK) Inc. Sunplus mMobile Inc. Sunplus mMobile SAS Sunplus Innovation Technology Inc. Sunplus mMedia Inc. Jumplux Technology Inc. Award Glory Ltd. Sunny Fancy Ltd. Giant Kingdom Ltd. Giant Rock Inc. Rudong Jiexin Electronic Technology Co., Ltd. Chongqing Shuangxin Technology Co., Ltd. Worldplus Holdings L.L.C. Lingyao Technology (Shenzhen) Co., Ltd. N/A N/A N/A N/A N/A N/A N/A Trading Investment Investment Investment Investment Investment Investment Manufacture and Sales Service China branch China branch Manufacture, Sales Service and property management. Manufacture and Sales Service China branch Sales and IT Education Service China branch China branch System and Web Service Web Service N/A Manufacture and Sales Service China branch Investment IC Design Management Consulting Investment IC Design Investment Investment Sales Service Sales Service IC Design IC Design IC Design IC Design Software design7 trading Investment Investment Investment Investment Software development and integrated circuit design Software development and integrated circuit design Investment Business Software development, rental business and property management N/A Subsidiary N/A N/A Subsidiary N/A N/A N/A N/A Subsidiary N/A Subsidiary Subsidiary Grandson- Subsidiary N/A N/A N/A N/A China branch N/A China branch China branch 9.1.4 Directors, Supervisors, and Presidents of Affiliated Companies Company Title Name Sunplus Technology (HK) Co., Ltd. Lin Shih Investment Co., Ltd. Chairman Director Sunplus Technology Chou-Chye Huang (repr.) Ming-Cheng Hsieh Sunplus Technology Chairman & President Chou-Chye Huang (repr.) 165 December 31, 2019 Shareholding Amount (shares) *HK$11,075,000 - - 70,000,000 - - - - Ratio (%) 100% - - 100% - - - - Russell Holdings Ltd. Sunplus Venture Capital Co., Ltd. Director Sunplus Technology Chou-Chye Huang (repr.) Sunplus Technology Chairman & President Chou-Chye Huang (repr.) Ventureplus Group Inc. Sunplus Technology Ventureplus Mauritius Inc. Ventureplus Cayman Inc. Shanghai Sunplus Technology Co., Ltd. Director Director Director Chou-Chye Huang (repr.) Ventureplus Group Chou-Chye Huang (repr.) Ventureplus Mauritius Chou-Chye Huang (repr.) Ventureplus Cayman Chairman Director &President Chou-Chye Huang (repr.) Zai-De Wang Sunplus Prof-tek Technology (Shenzhen) Co., Ltd. Sunmedia Technology Co., Ltd. Sunplus App Technology Co., Ltd. Director Supervisor Chairman President Supervisor Chairman President Supervisor Chairman Supervisor Director Director Tang-Yi Huang Shu-Lan Wang Ventureplus Cayman Chou-Chye Huang (repr.) Tang-Yi Huang Shu-Lan Wang Ventureplus Cayman Chou-Chye Huang (repr.) Cheng-Cai Chang Shu-Lan Wang Ventureplus Cayman Chou-Chye Huang (repr.) Yu-Lun Liu Shu-Lan Wang Ya-Fei Luo Ytrip Technology Co., Ltd. Ventureplus Cayman Chairman Director & President Cheng-Cai Chang Director Yu-Lun Liu Chou-Chye Huang (repr.) 1culture Communication Co., Ltd. Supervisor Shu-Lan Wang Ytrip Technology Co., Ltd. E-Director& President Chen-Tsai Chang Supervisor Shao-Ling Chan 166 100% - 100% - - - - 100% - 100% - 100% - 100% *US$24,060,000 - 100,000,000 - - - - RMB37,900,000 & US74,605,000 (Note1) RMB37,900,000 & US74,605,000 (Note1) RMB37,900,000 & US74,605,000 (Note1) US$17,655,000 (Note1) - - - - *US$32,250,000 - 100% - *US$20,000,000 100% RMB10,000,000 & USD586,000 (Note1) - - - RMB438,000 USD3,750,000 (Note1) - - - - *RMB$3,250,000 - - 93.33% - 1.68% 38.47% - 17.5 - 100% - *RMB$27,000,000 100% US$10,160,000 100% 58,778,442 - - - - - - 100% - - - - - - - 100% 500,000 - - - - - - - - 100% 5,400,000 - - - - - - - - 37,324,304 34.30% - - 0.46% 500,000 1.16% 1,266,752 - - - - - - - - - - 100% *US$19,090,000 - - 100% *US$19,090,000 - - (Continued) Beijing Sunplus-Ehue Tech Co., Ltd. Magic Sky Limited Sunext Technology Co., Ltd. Chairman Director Director Supervisor Director Chairman Director Ventureplus Cayman Inc. Chou-Chye Huang (repr.) Wayne Shen Shu-Lan Wang Yin-Chi Chu Sunplus Technology Chou-Chye Huang (repr.) Sunplus Technology Chou-Chye Huang (repr.) Shu-Lan Wang Director Mei-Juan Chen Supervisor Wayne Shen Sunplus Management Consulting Inc. Chairman Sunplus Technology Chou-Chye Huang (repr.) WeiYing Investment Co., Ltd. Chairman Sunplus Technology Chou-Chye Huang (repr.) Generalplus Technology Inc. Chairman Vice Chairman Sunplus Technology Chou-Chye Huang (repr.) Shi-Rong Wang (Repr.) Hou-Shien Chu Shi-Hao Liu Director Director Independent Director Chia-Ming Chai Independent Director Nai-Shin Lai Independent Director Jing-Min Chen Generalplus Technology Chou-Chye Huang (repr.) Generalplus International (Samoa) Chou-Chye Huang (repr.) Generalplus International (Samoa) Inc. Generalplus (Mauritius) Inc. Chairman Chairman 167 Company Title Name Lingjia Technology (Shenzhen) Inc. Chairman Director and General Manager Director Generalplus Technology (HK) Inc. Sunplus mMobile Inc. Director Chairman Generalplus International (Mauritius) Chou-Chye Huang (repr.) Zhi-yi Yang Jian-yi Liu Generalplus (Mauritius) Inc. Yi-Xing Jia (repr.) Sunplus Technology Chou-Chye Huang (repr.) Sunplus Innovation Technology Inc. Sunplus mMedia Inc. Jumplux Technology Award Glory Ltd. Chairman Director Director Director & President Director Supervisor Supervisor Sunplus Technology Chou-Chye Huang (repr.) Shu-Lan Wang (repr.) Wayne Shen (repr.) Chih-Hao Kung Lin-Shih Investment Chi-Ying Chiu Wen-Chin Li Sunplus Technology Chairman& President Chou-Chye Huang (repr.) Director Director Supervisor Wayne Shen (repr.) Shu-Lan Wang (repr.) Lin-Shih Investment Sunplus mMedia Chou-Chye Huang (repr.) Shu-Lan Wang Mei-Juan Chen Sunplus Venture Capital Sunplus Technology Chou-Chye Huang (repr.) Chairman Director Director Supervisor Chairman Sunny Fancy Ltd. Chairman Award Glory Ltd. Chou-Chye Huang (repr.) Giant Kingdom Ltd. Chairman Giant Rock Inc.. Chairman Sunny Fancy Ltd. Chou-Chye Huang (repr.) Sunny Fancy Ltd. Chou-Chye Huang (repr.) Rudong Jiexin Electronic Technology Co., Ltd. Chairman and General Manager Director Director Supervisor Shanghai Sunplus Technology Co., Ltd. Zai-De Wang He-xing Yang Yang Zhang 168 Shareholding Amount (shares) *US$18,700,000 Ratio (%) 100% - *US$390,000 - 100% - 16,240,000 - - - 100% - - 31,449,751 61.13% - - - - - - 4.81% 2,476,473 2.09% 1,074,664 1.03% 527,880 - - 22,440,723 89.76% - - - - - - 2.60% 650,185 55.00% 13,200,000 10,100,000 US$5,642,000 RMB13,400,000 (Note1) - US$5,642,000 RMB13,400,000 (Note1) - US$772,000 (Note1) - US$1,270,000 RMB13,400,000 (Note1) - RM10,000,000 (Note1) 42.08% 100% (Note1) - 100% (Note1) - 100% (Note1) - 100% (Note1) 100% (Note1) Shu-zhen Zheng Chongqing Shuangxin Technology Co., Ltd. Chairman Chairman and General Manager Director Supervisor Shanghai Sunplus Technology Co., Ltd. Chou-Chye Huang (repr.) Cheng-cai Zhang Tang-yi Huang Shu-lan Wang RM11,000,000 (Note1) 55% (Note1) Worldplus Holdings L.L.C. Chairman Sunny Fancy Ltd. Lingyao Technology (Shenzhen) Co., Ltd. Chairman General manager Chou-Chye Huang (repr.) Worldplus Holdings L.L.C. Cheng-cai Zhang Tang-yi Huang US$3,600,000 (Note1) 100% (Note1) RM19,039,000 (Note1) 100% *Note: the invested companies are listed the capital paid-in amount of investment 169 9.1.5 Common Shareholders of Sunplus and Its Subsidiaries or Its Affiliates with Actual of Deemed Control Not Applicable 9.1.6 Operation Highlights of Sunplus Affiliates December 31st, 2019 Unit: NT$K, except EPS (NT$) Company Capital Assets Liabilities Net Worth Net Sales Operation Income Sunplus Technology (HK) Co., Ltd. Lin Shih Investment Co., Ltd. Russell Holdings Ltd. 42,628 700,000 739,307 35 793,825 569,284 0 35 755 793,070 569,284 0 0 47,621 1,793 (3) 46,805 (1,665) Net Income (After Tax) (3) 43,053 5,887 EPS (After Tax) N/A 0.62 N/A Sunplus Venture Capital Co., Ltd. Ventureplus Group Inc. Ventureplus Mauritius Inc. Ventureplus Cayman Inc. Shanghai Sunplus Technology Co., Ltd. Sunplus Prof-tek Technology (Shenzhen) Co., Ltd. Sunmedia Technology Co., Ltd. Sunplus App Technology Co., Ltd. Ytrip Technology Co., Ltd. 1culture Communication Co., Ltd. Beijing Sunplus-Ehue Tech Co., Ltd. Magic Sky Limited Sunext Technology Co., Ltd. Sunplus Management Consulting Inc. WeiYing Investment Co., Ltd. Generalplus Technology Inc. Generalplus International (Samoa) Inc. Generalplus (Mauritius) Inc. Generalplus Technology (Shenzhen) Inc. Generalplus Technology (HK) Inc. Sunplus mMobile Inc. Sunplus Innovation Technology Inc. Sunplus mMedia Inc. Jumplux Technology Inc. Award Glory Ltd. Sunny Fancy Ltd. Giant Kingdom Ltd. Giant Rock Inc. Rudong Jiexin Electronic Technology Co., Ltd. Chongqing Shuangxin Technology Co., Ltd. 1,049,35 0 295 1,373,86 1 0 1,373,85 1,000,000 2,526,650 2,526,656 2,526,661 1,049,64 5 1,373,86 1 1,373,85 9 1,373,83 7 0 9 21,497 21,497 21,496 1,373,83 7 0 21,890 21,602 21,497 53,108 43,421 43,973 0.44 21,496 21,479 21,479 515,656 476,637 48,332 428,305 159,408 53,856 13,082 966,855 599,600 111,930 263,681 13,991 776,037 979,962 8,579 4,066 65 19,011 848,882 4,345 76 0 757,026 131,080 4,234 3,990 65 150,675 279,443 16,304 2,586 0 (7,009) 64,475 (39,645) (2,544) (121) (29,577) 31,538 10,628 (2,566) (63) 116,235 54,806 32,282 304,597 635,091 212,646 3,768 49,622 5,000 54,000 5,569 0 49,237 32,282 2,779 209,867 3,768 49,602 0 20 1,088,158 572,318 572,318 2,727,76 2 475,396 475,394 710,499 0 0 2,017,26 3 475,396 475,394 18,225 0 39,236 0 0 2,610,09 9 13,484 13,484 (2,816) (53,193) 16,224 (161) (5,258) 3,096 (53,190) 19,076 (142) (5,239) 218,875 13,484 13,484 223,584 13,484 13,484 560,626 11,692 162,400 487,507 6,166 29,686 16,334 1,475 110 471,173 4,691 29,576 122,634 11,056 0 4,801 (494) (209) 13,940 (456) (209) 1,267,62 514,501 250,000 240,000 211,767 211,767 23,145 80,694 217 23,870 5 311,173 956,452 972,123 0 61,787 8,497 8,497 0 11,371 6,152 5,063 0 160,186 0 160,186 0 558 50,758 0 6,369 28,933 160,186 160,186 558 50,758 155,851 (25,085) (26,632) 8,497 8,497 (240) 11,371 135,651 (25,068) (26,527) 8,497 8,497 (240) 11,319 43,050 35,505 7,296 28,209 0 (15,931) (15,033) 86,100 82,660 7,442 75,218 0 (11,057) (10,973) 170 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 0.30 (0.28) (0.97) 2.05 N/A N/A N/A N/A (0.01) 2.64 (1.00) (1.11) N/A N/A N/A N/A N/A N/A Worldplus Holdings L.L.C. Lingyao Technology (Shenzhen) Co., Ltd. 107,928 108,870 0 108,870 0 (2,582) (2,582) N/A N/A 81,963 64,800 7,109 57,691 2,053 (2,572) (2,138) Note: The financial information of the above business relationship is prepared using the International Financial Reporting Standards. 171 9.1.7 Consolidated Financial Statement of Sunplus Affiliates Relationship Statement of Consolidated Financial Statements The Company's 2019(as of January 1, 2019 to December 31, 2019) shall be included in the preparation of the Company's consolidated financial report in accordance with the Guidelines for the preparation of the consolidated financial report and relational report on the relationship between the business combination business report. In accordance with the International Financial Reporting Standards No. 10 should be included in the preparation of parent company consolidated financial report of the company are the same, and the relationship between the consolidated financial statements should be disclosed in the relevant information in the parent company's consolidated financial statements have been exposed, there is no further preparation of the relationship between the consolidated financial report. Company Name: Sunplus Technology Co., Ltd Person in charge: Chou-Chye Huang March 30, 2020 331 9.2 Private Placement Securities Not Applicable 9.3 Status of Sunplus Common Shares/GDRs Acquired, Disposed of, or Held by Subsidiaries Company Capital Source of Fund % Owned by Sunplus Transaction Date Amount of Acquisition Amount of Disposal Investment Income Unit: NT$K, shares Balance (by the Date of this Report Printed) Balance of Pledged Shares Balance of Guarantee Provided by Sunplus Balance of Financing Provided by Sunplus Lin Shih Investment Co., Ltd. $700,000 Self-owned reserves 100% 2001.12.25 2002.07.02 2003.07.13 2004.08.23 2005.08.23 2006.08.05 2007.03.26 2007.09.05 3,870,196 shares & $95,605 967,549 shares Capital increase from profits and capital surplus 483,774 shares Capital increase from profits and capital surplus 532,151 shares Capital increase from profits and capital surplus 290,614 shares Capital increase from profits and capital surplus 306,132 shares Capital increase from profits and capital surplus -3,220,429 shares decreased for capital reduction & 32,204 160,538 shares 331 - - - - - - None None None None None None - - - None None None - - - None None None - - - 2,503,705 shares Pledged None None - - - 500,741 shares Pledged None None - - - - - - None None None 380,000 shares None None Capital increase from profits and capital surplus 169,471 shares Capital increase from profits and capital surplus 2008.09.08 Pledged - - - 3,384,446 shares Solution None None By the date of this report printed - - - 3,559,996 shares $63,401 None None None 332 9.4 Special Notes None 9.5 Any Events Impact to Shareholders’ Equity and Share Price None 333 Sunplus Technology Co., Ltd. Person in charge: Chou-Chye Huang Published on May 15, 2020 334 

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