Victory New Materials Limited Company
and Subsidiaries

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

自勝合命計師事務所 11073 台北市信義區松仁路100號20樓

Deloitte & Touche 20F, Taipei Nan Shan Plaza No. 100, Songren Rd., Xinyi Dist., Taipei 11073, Taiwan

Tel:+886 (2) 2725-9988 Fax:+886 (2) 4051-6888 www.deloitte.com.tw

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Shareholders Victory New Materials Limited Company

Opinion

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

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as of December 31, 2018 and 2017, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), IFRIC Interpretations (IFRIC), and SIC Interpretations (SIC) endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China.

Basis for Opinion

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

Key Audit Matter

Key audit matter is the matter that, in our professional judgment, was of most significance in our audit of the consolidated financial statements for the year ended December 31, 2018. This matter was 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 this matter.

Cash and Cash Equivalents

Description of the key audit matter is as follows:

As of December 31, 2018, the Group's cash and cash equivalents, and time deposits with original maturities of more than three months (recognized as financial assets at amortized cost - current) amounted to NT\$4,731,498 thousand, which represented 70% of the Group's total assets and was significant. Refer to Notes 4, 6 and 7 to the accompanying consolidated financial statements for the related accounting policies and detailed disclosures.

There are inherent risks associated with cash and cash equivalents as well as time deposits with original maturities of more than three months. Therefore, cash and cash equivalents, and time deposits with original maturities of more than three months were identified as a key audit matter for the year of 2018.

Our main audit procedures performed in respect of the above key audit matter included obtaining a complete understanding of the controls over cash and cash equivalents, and time deposits with original maturities of more than three months and performing tests thereon. We also selected samples of bank receipts and withdrawals from the ledger to verify the legitimacy of bank receipts and examined the appropriateness of voucher's approval. In addition, we obtained details of the Group's bank deposits and verified their balances to the corresponding bank statements. We issued bank confirmations to all correspondent banks and verified the reconciliation of bank deposit balances with responses of bank confirmations. Besides that, we confirmed that the disclosures were properly made in the consolidated financial statements for any restricted bank deposits stated.

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 IFRS, IAS, IFRIC, and SIC endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

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

Those charged with governance, including the supervisors, are responsible for overseeing the Group's financial reporting process.

Auditors' Responsibilities for the Audit of the Consolidated Financial Statements

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

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

• 1. Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• 1. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group's internal control.
• 1. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
• 1. Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors' report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors' report. However, future events or conditions may cause the Group to cease to continue as a going concern.
• 1. Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
• 1. Obtain sufficient 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 a matter that was of most significance in the audit of the consolidated financial statements for the year ended December 31, 2018 and is therefore the key audit matter. We describe this matter 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 Ming-Hsing Cho and Ker-Chang Wu.

Deloitte & Touche Taipei, Taiwan Republic of China

March 22, 2019

Notice to Readers

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

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

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

	2018		2017
ASSETS	Amount	$\frac{9}{6}$	Amount	$\frac{0}{6}$
CURRENT ASSETS	\$3,221,091	48	\$3,056,733	44
Cash and cash equivalents (Note 6)	1,510,407	22		$\overline{\phantom{a}}$
Financial assets at amortized cost - current (Notes 7 and 8) Debt investments with no active market - current (Note 9)		ä,	1,533,557	22
	426,332	$\overline{7}$	1,110,925	16
Trade receivables (Notes 10 and 21) Other receivables (Note 10)	16,935	$\omega$	22,171	$\overline{a}$
Inventories (Note 11)	14,885		32,589	1
Prepayment for leases (Note 13)	13,258		8,626	ν
Prepayments (Note 16)	10,291		10,821	$\overline{a}$
Non-current assets held for sale (Note 21)	5,143	÷
Total current assets	5,218,342	77	5,775,422	83
NON-CURRENT ASSETS
Property, plant, and equipment (Note 14)	914,812	13	676,021	9
Deferred tax assets (Note 23)	2,506		47,166	$\blacksquare$ 1
Refundable deposits (Notes 15 and 16)	43,080	1 9	499,263	$7\phantom{.0}$
Long-term prepayments for leases (Note 15)	609,451
Total non-current assets	1,569,849	23	1,222,450	17
TOTAL	\$6,788,191	100	\$6,997,872	100
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Trade payables (Note 17)	S 97,330	2	200,456 s	3
Other payables (Note 18)	128,056	$\overline{2}$	148,750	$\overline{2}$
Current tax liabilities (Note 23)	7,642	$\overline{\phantom{a}}$	49,707	$\mathbf{I}$
Total current liabilities	233,028	4	398,913	6
NON-CURRENT LIABILITIES
Deferred tax liabilities (Note 23)	5,235		10,563
		$\overline{4}$	409,476	6
Total liabilities	238,263
EQUITY ATTRIBUTABLE TO OWNERS OF THE COMPANY
Share capital	1,390,208	21	1,263,825	18 36
Capital surplus	2,540,814	37 45	2,540,814 3,101,908	44
Retained earnings	3,072,309 (453, 403)	(7)	(318, 151)	(4)
Other equity
Total equity attributable to owners of the Company	6,549,928	$-96$	6,588,396	$-94$
Total equity	6,549,928	$-96$	6,588,396	94
TOTAL	\$6,788,191	100	\$ 6,997,872	100

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

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

	2018		2017
	Amount	$\frac{0}{0}$	Amount	$\frac{0}{0}$
OPERATING REVENUE (Note 21)	\$2,071,989	100	3,406,504 \$	100
OPERATING COSTS (Notes 11 and 22)	1,722,629	83	2,235,052	65
GROSS PROFIT	349,360	17	1,171,452	35
OPERATING EXPENSES (Notes 22 and 28) Selling and marketing expenses General and administration expenses Research and development expenses	23,309 54,533 144,360	1 3 $\overline{7}$	29,417 50,535 115,564	$\overline{c}$ $\overline{\mathbf{3}}$
Total operating expenses	222,202	$\perp$ 11	195,516	6
PROFIT FROM OPERATIONS	127,158	6	975,936	29
NON-OPERATING INCOME AND EXPENSES (Note 22)
Other income Other gains and losses	51,283 (5,633)	3	43,746 (17,909)	1
Total non-operating income and expenses	45,650	$\mathbf{3}$	25,837
PROFIT BEFORE INCOME TAX FROM CONTINUING OPERATIONS	172,808	9	1,001,773	30
INCOME TAX EXPENSE (Note 23)	38,109	$\overline{2}$	166,606	$\overline{\phantom{0}}$
NET PROFIT FOR THE YEAR	134,699	$\overline{7}$	835,167	25
OTHER COMPREHENSIVE LOSS Items that will not be reclassified subsequently to profit or loss: Exchange differences arising on translation to the
presentation currency	(135, 252)	(7)	(60, 517)	(2)
TOTAL COMPREHENSIVE INCOME (LOSS) FOR THE YEAR	\$ (553)		774,650	23
NET PROFIT ATTRIBUTABLE TO: Owners of the Company	134,699	6	835,167	25
TOTAL COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO: Owners of the Company	(553) S		774,650	(Continued)

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

	2018		2017
	Amount	$\frac{0}{0}$	Amount	$\frac{0}{0}$
EARNINGS PER SHARE (Note 24)
Basic	(197)

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

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

				Equity Attributable to Owners of the Company
				Retained Earnings (Note 20)		Other Equity Exchange Differences on Translating the Financial Statements of
	Share Capital (Note 20)	Capital Surplus (Note 20)	Legal Reserve	Special Reserve	Unappropriated Earnings	Foreign Operations	Total Equity
BALANCE, JANUARY 1, 2017	\$1,148,932	\$2.540.814	s 249.845	S	\$2,269,661	(257, 634) s	\$5,951,618
Appropriation of 2016 earnings Legal reserve Special reserve Cash dividends distributed by the	$\blacksquare$		88,209	257.634	(88.209) (257.634)
Company					(137.872)		(137.872)
Share dividends distributed by the Company	114,893				(114, 893)
	114,893		88,209	257,634	(598, 608)		(137.872)
Net profit for the year ended December 31, 2017	٠	×			835,167	۰	835.167
Other comprehensive loss for the year ended December 31, 2017, net of income tax						(60, 517)	(60, 517)
Total comprehensive income (loss) for the year ended December 31, 2017					835.167	(60, 517)	774,650
BALANCE, DECEMBER 31, 2017	1.263,825	2,540,814	338,054	257.634	2,506,220	(318, 151)	6.588.396
Appropriation of 2017 earnings Legal reserve Special reserve	٠	$\overline{\phantom{a}}$	83,517	60,517	(83.517) (60.517)		ä,
Cash dividends distributed by the Company	i.	٠	$\overline{\phantom{a}}$	٠	(37.915)		(37.915)
Share dividends distributed by the Company	126.383				(126, 383)
	126,383	٠	83,517	60.517	(308, 332)		(37, 915)
Net profit for the year ended December 31, 2018					134,699		134.699
Other comprehensive loss for the year ended December 31, 2018, net of income tax						(135.252)	(135, 252)
Total comprehensive income (loss) for the year ended December 31, 2018					134,699	(135, 252)	(553)
BALANCE, DECEMBER 31, 2018	\$1.390,208	\$2.540.814	\$421.571	318,151 S.	\$2,332,587	\$(453, 403)	\$6.549.928

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

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

	2018	2017
CASH FLOWS FROM OPERATING ACTIVITIES
Income before income tax	\$ 172,808	\$1,001,773
Adjustments for:
Depreciation expenses	23,332	23,518
Amortization expenses	9,987	5,793
Interest income	(51, 283)	(43, 746)
Loss on disposal of property, plant, and equipment		248
Loss on disposal of non-current assets held for sale	17,038	2,581
Changes in operating assets and liabilities
Trade receivables	674,987	(82,898)
Other receivables	7,113	(7, 121)
Inventories	17,376	(13, 598)
Prepayments	316	308,047
Trade payables	(100, 991)	(51, 925)
Other payables	(35, 115)	39,113
Cash generated from operations	735,568	1,181,785
Interest received	49,561	41,736
Income tax paid	(87, 739)	(152, 553)
Net cash generated from operating activities	697,390	1,070,968
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of financial assets at amortized cost	(2,901,824)
Proceeds from sale of financial assets at amortized cost	2,901,824
Purchase of debt investments with no active market		(2,863,277)
Proceeds from sale of debt investments with no active market		2,695,200
Proceeds from disposal of non-current assets held for sale		8,361
Payments for property, plant, and equipment	(288, 802)	(270, 215)
Increase in refundable deposits		(2, 135)
Decrease in refundable deposits		23
Increase in prepayments for lease	(136,030)	(172, 956)
Net cash used in investing activities	(424, 832)	(604, 999)
CASH FLOWS FROM FINANCING ACTIVITIES Dividends paid to owners of the Company	(35,987)	(130, 863)
EFFECTS OF EXCHANGE RATE CHANGES ON THE BALANCE OF CASH HELD IN FOREIGN CURRENCIES	(72, 213)	(22, 324)
NET INCREASE IN CASH AND CASH EQUIVALENTS	164,358	312,782
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR	3,056,733	2,743,951
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR	\$3,221,091	\$3,056,733

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

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

1. GENERAL INFORMATION

Victory New Materials Limited Company (the "Company") was incorporated in the British Cayman Islands in June 2012. The Company was established after an organizational restructuring for listing on the Taiwan Stock Exchange (TWSE).

The Company's shares have been listed on the TWSE since January 14, 2014.

The functional currency of the Company is the Renminbi ("RMB"). For greater comparability and consistency of financial reporting, the consolidated financial statements are presented in the New Taiwan dollar ("NTD") since the Company's shares are listed on the Taiwan Stock Exchange.

2. APPROVAL OF FINANCIAL STATEMENTS

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

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

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

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

1) IFRS 9 "Financial Instruments" and related amendments

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

Classification, measurement and impairment of financial assets

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

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

			Measurement Category		Carrying Amount
Financial Assets		IAS 39	IFRS 9		IAS 39	IFRS 9	Remark
Cash and cash equivalents		Loans and receivables	Amortized cost	s	3,056,733	3,056,733 s
Time deposits with original maturities of more than three months		Loans and receivables	Amortized cost		1,533,557	1,533,557	a)
Trade receivables and other receivables		Loans and receivables	Amortized cost		1,133,096	1,133,096	b)
Refundable deposits		Loans and receivables	Amortized cost		47,166	47,166
Financial Assets	IAS 39 Carrying Amount as of January 1, 2018	Reclassifications	Remeasurements	IFRS 9 Carrying Amount as of January 1, 2018	Retained Earnings Effect on January 1, 2018	Other Equity Effect on January 1, 2018	Remark
Amortized cost
Add: Reclassification from loans and receivables (IAS 39)		\$5,770,552	s	\$5.770.552	$\mathsf{s}$ ٠	s ×.
		\$5,770,552		\$5,770,552

• a) Debt investments previously classified as debt investments with no active market and measured at amortized cost under IAS 39 were classified as at amortized cost with an assessment of expected credit losses under IFRS 9, because on January 1, 2018, the contractual cash flows were solely payments of principal and interest on the principal outstanding and these investments were held within a business model whose objective is to collect contractual cash flows.
• b) Trade receivables and other receivables that were previously classified as loans and receivables under IAS 39 were classified as at amortized cost with an assessment of expected credit losses under IFRS 9.
• 2) IFRS 15 "Revenue from Contracts with Customers" and related amendments

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

In identifying performance obligations, IFRS 15 and the related amendments require that a good or service is distinct if it is capable of being distinct (for example, the Group regularly sells it separately) and the promise to transfer it is distinct within the context of the contract (i.e. the nature of the promise in the contract is to transfer each good or service individually rather than to transfer a combined output).

The first-time adoption of the abovementioned revised Regulations Governing the Preparation of Financial Reports by Securities Issuers and the IFRSs endorsed by the Financial Supervisory Commission would not have significant impact on the Group's assets, liabilities, equity, comprehensive income, and cash flows.

b. Amendments to the IFRSs endorsed by the FSC for application starting from 2019

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

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

• Note 2: The FSC permits the election for early adoption of the amendments starting from 2018.
• Note 3: The Group shall apply these amendments to plan amendments, curtailments or settlements occurring on or after January 1, 2019.
• IFRS 16 "Leases"

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

Definition of a lease

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

The Group as lessee

Upon initial application of IFRS 16, the Group will recognize right-of-use assets, or investment properties if the right-of-use assets meet the definition of investment properties, and lease liabilities for all leases on the consolidated balance sheets except for those whose payments under low-value asset and short-term leases will be recognized as expenses on a straight-line basis. On the consolidated statements of comprehensive income, the Group will present the depreciation expense charged on right-of-use assets separately from the interest expense accrued on lease liabilities: interest is computed using the effective interest method. On the consolidated statements of cash flows, cash payments for the principal portion of lease liabilities will be classified within financing activities; cash payments for the interest portion will be classified within operating activities. Currently, payments under operating lease contracts, including property interest qualified as investment properties, are recognized as expenses on a straight-line basis. Prepaid lease payments for land use rights of land located in China are recognized as prepayments for leases. Cash flows for operating leases are classified within operating activities on the consolidated statements of cash flows.

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

The Group expects to apply the following practical expedients:

The Group will apply a single discount rate to a portfolio of leases with reasonably similar $\ast$ characteristics to measure lease liabilities.

Anticipated impact on assets, liabilities and equity

	Carrying Amount as of December 31, 2018	Adjustments Arising from Initial Application	Adjusted Carrying Amount as of January 1, 2019
Prepayments for leases	\$ 13,258	(13,258) S	S
Prepayments	10,291	(6, 976)	3,315
Long-term prepayments for leases	609,451	(609, 451)
Right-of-use assets		716,887	716,887
	\$633,000	87,202	720,202
Lease liabilities - current Lease liabilities - non-current	$\boldsymbol{\mathsf{S}}$	20,771 S 66,431	20,771 66,431
		87,202	87,202

Except for the above impact, as of the date the consolidated financial statements were authorized for issue, the Group assessed that the application of other standards and interpretations would not have an impact on the Group's financial position and financial performance.

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 3 "Definition of a Business" Amendments to IFRS 10 and IAS 28 "Sale or Contribution of Assets between An Investor and Its Associate or Joint Venture"	January 1, 2020 (Note 2) To be determined by IASB
IFRS 17 "Insurance Contracts" Amendments to IAS 1 and IAS 8 "Definition of Material"	January 1, 2021 January 1, 2020 (Note 3)

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

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

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 the financial instruments which are measured at fair value.

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

• 1) Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities:
• 2) Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for an 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 an 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, even if an agreement to refinance, or to reschedule payments, on a long-term basis is completed after the reporting period and before the consolidated financial statements are authorized for issue; and
• 3) Liabilities for which the Group does not have an unconditional right to defer settlement for at least 12 months after the reporting period. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.

Assets and liabilities that are not classified as current are classified as 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 and up to the effective date of disposal, as appropriate.

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

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

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

Refer to Note 13, Tables 5 and 6 for the detailed information of subsidiaries (including the percentages of ownership and main businesses).

e. Foreign currencies

In preparing the financial statements of each individual group 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 in which they arise.

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

Non-monetary items that are measured at historical cost in a foreign currency are translated using the exchange rate at the date of the transaction.

For the purpose of presenting consolidated financial statements, the functional currencies of the Company and the group entities (including subsidiaries in other countries that use currencies which are different from the currency of the Company) are translated into the presentation currency, the NTD, as follows: Assets and liabilities are translated at the exchange rates prevailing at the end of the reporting period; and income and expense items are translated at the average exchange rates for the period. The resulting currency translation differences are recognized in other comprehensive income. The exchange differences accumulated in equity, which resulted from the translation of the assets and liabilities of the group entities into the presentation currency, are not subsequently reclassified to profit or loss.

f. Inventories

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

g. Property, plant, and equipment

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

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

Depreciation on property, plant, and equipment is recognized using the straight-line method. Each significant part is depreciated separately. The estimated useful lives, residual values and depreciation methods are reviewed at the end of each reporting period, with the effects of any changes in estimates 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.

h. Impairment of tangible assets

At the end of each reporting period, the Group reviews the carrying amounts of its tangible assets, 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 smallest group of cash-generating units on a reasonable and consistent basis of allocation.

The recoverable amount is the higher of fair value less costs to sell or 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 corresponding 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 on the asset or cash-generating unit in prior years. A reversal of an impairment loss is recognized in profit or loss.

i. Non-current assets held for sale

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

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

i. 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 issuance 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 categories

2018

Financial asset is classified as financial assets at amortized cost.

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, trade receivables at amortized cost, 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 such a financial asset, except for:

• i. Purchased or originated credit-impaired financial assets, for which interest income is calculated by applying the credit-adjusted effective interest rate to the amortized cost of such financial assets; and
• ii. Financial assets that 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 with original maturities within three months from the date of acquisition, which are highly liquid, readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. These cash equivalents are held for the purpose of meeting short-term cash commitments.

2017

Financial asset is classified as loans and receivables.

Loans and receivables

Loans and receivables (including trade receivables, cash and cash equivalents, debt investments with no active market) are measured using the effective interest method at amortized cost less any impairment, except for short-term receivables when the effect of discounting is immaterial.

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

b) Impairment of financial assets

2018

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

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

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

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

2017

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

Financial assets at amortized cost, such as trade receivables, are assessed for impairment on a collective basis even if they were assessed not to be impaired individually. Objective evidence of impairment for a portfolio of receivables could include the Group's past experience with collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period of 60 days, as well as observable changes in national or local economic conditions that correlate with defaults on receivables.

For a financial asset at amortized cost, the amount of the impairment loss recognized is the difference between such an asset's carrying amount and the present value of its estimated future cash flows, discounted at the financial asset's original effective interest rate.

For a financial asset at amortized cost, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment (at the date on which the impairment is reversed) does not exceed what the amortized cost would have been had the impairment not been recognized.

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

c) Derecognition of financial assets

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

Before 2018, on derecognition of a financial asset in its entirety, the difference between the asset's carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss which had been recognized in other comprehensive income is recognized in profit or loss. Starting from 2018, on derecognition of a financial asset at amortized cost in its entirety, the difference between the asset's carrying amount and the sum of the consideration received and receivable is recognized in profit or loss.

2) Equity instruments

Equity instruments issued by a group entity are recognized at the proceeds received, net of direct issue costs.

• 3) 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.

k. Revenue recognition

2018

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

For contracts where the period between the date on which the Group transfers a promised good or service to a customer and the date on which the customer pays for that good or service is one year or less, the Group does not adjust the promised amount of consideration for the effects of a significant financing component.

Revenue from the sale of goods comes from sale of various soles and related shoe materials. Sales is recognized as revenue when the goods are delivered to the customer's specific location and signed because it is the time when the customer has full discretion over the manner of distribution and price to sell the goods, has the primary responsibility for sales to future customers and bears the risks of obsolescence. Sales revenue and 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.

2017

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

1) Revenue from the sale of goods

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

• a) The Group has transferred to the buyer the significant risks and rewards of ownership of the goods;
• b) The Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;
• c) The amount of revenue can be measured reliably;
• d) It is probable that the economic benefits associated with the transaction will flow to the Group; and
• e) The costs incurred or to be incurred in respect of the transaction can be measured reliably.

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

2) Interest income

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

1. Leasing

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

The Group as lessee

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

• 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 service.

2) Retirement benefits

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

n. Taxation

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

1) Current tax

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

2) Deferred tax

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

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

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

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

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 tax and deferred taxes for the year

Current tax and deferred taxes 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 tax and deferred taxes 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.

6. CASH AND CASH EQUIVALENTS

	December 31
		2018		2017
Cash on hand	S	864	S	1,109
Checking accounts and demand deposits		215,043		499,224
Cash equivalent
Time deposits		3,005,184		2,556,400
		3,221,091		\$3,056,733

7. FINANCIAL ASSETS AT AMORTIZED COST - CURRENT - 2018

	December 31, 2018
Time deposits with original maturities of more than three months	\$1,510,407

The interest rates for time deposits with original maturities of more than three months were ranging from 1.95000% to 3.01188% as at the end of the reporting period. The time deposits were classified as debt investments with no active market under IAS 39. Refer to Note 3 and Note 9 for information relating to their reclassification and comparative information for 2017.

8. CREDIT RISK MANAGEMENT FOR INVESTMENTS IN DEBT INSTRUMENTS - 2018

Investments in debt instruments were classified as at amortized cost.

December 31, 2018

	At Amortized Cost
Gross carrying amount Less: Allowance for impairment loss	\$1,510,407
Amortized cost	\$1,510,407

The credit risk of financial instruments such as bank deposits is measured and monitored by the finance department. The Company selects the trading partners and the performance parties are banks with good credit ratings.

9. DEBT INVESTMENTS WITH NO ACTIVE MARKET - 2017

	December 31, 2017
Time deposits with original maturities of more than three months	\$1,533,557

As of December 31, 2017, the market interest rates of the time deposits with original maturities of more than three months were ranging from 1.95%-2.10%.

10. TRADE RECEIVABLES AND OTHER RECEIVABLES

	December 31
	2018	2017
Trade receivables
At amortized cost Gross carrying amount	426,332	1,110,925
Other receivables
Interest receivable Others	16,432 \$ 503	\$ 15,050 7,121
	16,935	22,171

In 2018

The average credit period for sales of goods was 90 to 120 days. 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 applies the simplified approach to providing for expected credit losses prescribed by IFRS 9, which permits the use of lifetime expected loss provision for all trade receivables. The expected credit losses on trade receivables are estimated using a provision matrix by reference to past default experience of the debtor and an analysis of the debtor's current financial position, adjusted for general economic conditions of the industry in which the debtors operate and an assessment of both the current as well as the forecast direction of economic conditions at the reporting date. As the Group's historical credit loss experience does not show significantly different loss patterns for different customer segments, the provision for loss allowance based on past due status is not further distinguished according to the Group's different customer base.

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

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

December 31, 2018

	Not Past Due	Less than 60 Days	Total
Expected credit loss rate	0%	0%
Gross carrying amount Loss allowance (Lifetime ECL)	426,332 S	S Ξ	426,332 S
Amortized cost	\$426,332		426,332

In 2017

The Group applied the same credit policy in 2018 and 2017. The Group considers any change in the credit quality of the trade receivables from the original credit date to the balance sheet date. The Group recognized an allowance for impairment loss based on the estimated irrecoverable amounts determined by reference to past default experience of the counterparties and an analysis of their current financial position.

For some trade receivables balances that were past due at the end of the reporting period, the Group did not recognize an allowance for impairment loss because there was no significant change in credit quality and the amounts were still considered recoverable. The Group did not hold any collateral or other credit enhancements for these balances.

The aging of receivables was as follows:

	December 31, 2017
Up to 60 days 61-90 days 91-120 days 121-180 days	\$ 672,608 334,555 - 103,713 49
	\$1,110,925

The above aging schedule was based on the number of past due days from the invoice date.

The aging of receivables that were past due but not impaired was as follows:

	December 31, 2017
Up to 60 days	49

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

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

	Individually Assessed for Impairment	Collectively Assessed for Impairment		Total
Balance at January 1, 2017	\$17,052	S	$\overline{\phantom{a}}$	\$17,052
Less: Amounts written off during the year as uncollectible	16,510			16,510
Foreign exchange translation gains and losses	(542)			(542)
Balance at December 31, 2017

11. INVENTORIES

	December 31
	2018	2017
Raw materials Work-in-process Finished goods	9,618 \$ 2,735 2,532	\$22,770 9,120 699
	14,885	32,589

The costs of inventories recognized as cost of goods sold for the years ended December 31, 2018 and 2017 were \$1,722,629 thousand and \$2,235,052 thousand, respectively.

12. NON-CURRENT ASSETS HELD FOR SALE

	Equipment
Carrying amount of non-current assets held for sale
Cost	34,859 S
Accumulated depreciation	(13,007)
Impairment losses	(17,038)
Effect of foreign currency exchange differences	329
Balance at December 31, 2018	5,143

The equipment disposal of subsidiary Jinjang Chengchang Shoes Industry Co., Ltd. was reclassified to non-current assets held for sale in the fourth quarter of 2018, and its net fair value was the recoverable amount. The recoverable amount was less than the book value, so the impairment losses were recognized in the amount of \$17,038 thousand.

13. SUBSIDIARIES

				Percentage of Ownership $($ %)
				December 31
Investor	Investee	Nature of Activities	2018	2017
Victory New Materials Limited Company	Super Light Shoe Soles Co., Ltd. (Super Light)	Holding company	100.00	100.00
	Century Victory New Materials Co., Ltd. (Century Victory)	Manufactures and sells various soles and related shoe materials	100.00	100.00
Super Light Co., Ltd.	Chengchang Shoes Industry Co., Ltd. (Hong Kong Chengchang)	Holding company	100.00	100.00
Hong Kong Chengchang Co., Ltd.	Jinjang Chengchang Shoes Industry Co., Ltd. (Jinjang Chengchang)	Manufactures and sells various soles and related shoe materials	100.00	100.00

14. PROPERTY, PLANT, AND EQUIPMENT

		Machinery and Equipment		Transportation Equipment		Office Equipment		Leasehold Improvement		Property under Construction		Total
Cost
Balance at January 1, 2017 Additions Disposals Effect of foreign currency	s	237,135 5,819 (784)	S	20,508 ÷	S	5,113 ă.	S	762 ÷ (741)	S	236,091 264,396	S	499,609 270,215 (1, 525)
exchange differences		(2, 557)		(231)		(58)		(21)		744		(2, 123)
Balance at December 31, 2017	S	239,613		20,277	S	5,055		÷	S	501,231		766,176
Accumulated depreciation
Balance at January 1, 2017 Disposals Depreciation expenses Effect of foreign currency	S	53,690 20.538 (536)	S	10,390 2,692 ÷	S	3,619 229 $\blacksquare$	S	701 59 (741)	S	$\ddot{}$	S	68,400 23,518 (1, 277)
exchange differences		(347)		(82)		(38)		(19)				(486)
Balance at December 31, 2017		73,345		13,000	S	3,810		$\overline{\phantom{a}}$				90,155
Carrying amounts at December 31, 2017		166,268		7,277	s	1,245		$\overline{\mathcal{Z}}$		501,231		676,021
Cost
Balance at January 1, 2018 Additions Disposals Reclassified as non-current	S	239,613 57,531	S	20,277	S	5,055	S		S	501,231 245,617 ٠	S	766,176 303,148
assets held for sale Effect of foreign currency		(34, 859)		ä,		÷						(34, 859)
exchange differences		(5,992)		(413)		(103)				(14, 951)		(21, 459)
Balance at December 31, 2018		256,293		19,864		4,952		÷	S	731,897		\$1,013,006
Accumulated depreciation
Balance at January 1, 2018 Disposals Depreciation expenses Reclassified as non-current	S	73,345 20,665	S	13,000 2,456 ×,	S	3,810 211 $\overline{a}$	S		\$		S	90.155 23,332 ×.
assets held for sale Effect of foreign currency		(13,007)		ä,		÷						(13,007)
exchange differences		(1, 892)		(312)		(82)						(2, 286)
Balance at December 31, 2018		79,111		15,144		3,939		$\overline{\phantom{a}}$				98,194
Carrying amounts at December 31, 2018	\$	177,182		4,720	S	1,013	\$		S	731,897	\$	914,812

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

Machinery and equipment	$5-10$ years
Transportation equipment	5-12 years
Office equipment	$3-10$ years
Leasehold improvement	3 years

The building of subsidiary Jinjiang Chengchang Co., Ltd. located in Qingyang Lianyu Industrial Zone, Jinijang City, Fujian Province, China was going to be reconstructed as a commercial office building. As of December 31, 2018, the total contract price of the signed project was RMB190,959 thousand. The amount that has been paid is RMB176,403 thousand.

15. PREPAYMENTS FOR LEASES

		December 31
	2018	2017
Current Non-current	13,258 609,451	8,626 \$ 499,263
	622,709	507,889

For the purpose of acquiring 29,452 square meters of land in Yaoqiong Village, Cizao Town, Jinjiang City by the subsidiary Century Victory Company, the subsidiary Jinjiang Chengchang Company paid pension security expenses on behalf of the subsidiary Century Victory Company which was affected by the compensation of land requisition amounted to RMB1,560 thousand in 2014 and paid the guarantee deposit to Jinijang City Municipal Land Resource Bureau for applying the land acquisition at RMB1,325 thousand in 2016. On January 15, 2016, the subsidiary Century Victory Company acquired the land by bidding procedure at RMB10,460 thousand. Since the land was owned by 18 individuals, including Tsung-Yi Chen, the subsidiary Jinjiang Chengchang Company paid reimbursements for transferring collective use rights to the subsidiary Century Victory Company on its behalf at RMB31,714 thousand on February 4, 2016. On September 25 and October 9, 2017, the subsidiary Century Victory Company signed the contract and related addendums with Jinjiang City Municipal Land Resource Bureau for assigning the right to use the state-owned construction land. The area of the land was adjusted to 22,363.1 square meters, and the transfer fee was adjusted to RMB7,942 thousand. After the subsidiary Century Victory Company paid the remaining balance of RMB6,617 thousand to Jinjiang City Municipal Land Resource Bureau in November 2017, the subsidiary Century Victory Company obtained the certificate of the right to use the land for 50 years on December 26, 2017.

For the purpose of acquiring 29,625 square meters of land in Xiaomei village, Neikeng town and Yaoqiong village, Cizao town in Jinjiang City, the subsidiary Jinjiang Chengchang Company paid the guarantee deposit to Jinjiang City Municipal Land Resource Bureau for applying the land acquisition at RMB1,441 thousand and pension security expenses to individuals who were affected by the land requisition at RMB1.441 thousand in 2015. On February 5, 2016, the subsidiary Jinjiang Chengchang Company acquired the land by bidding procedure at RMB10,400 thousand. Since the land was owned by 22 individuals, including Tsung-Yi Chen, the subsidiary Jinjiang Chengchang Company paid reimbursements for transferring collective use rights at RMB29,298 thousand on February 4, 2016. The subsidiary Jinjiang Chengchang Company signed the contract with Jinjiang City Municipal Land Resource Bureau for assigning the right to use the state-owned construction land on February 4, 2017. After paying the remaining balance of RMB7,518 thousand to Jinjiang City Municipal Land Resource Bureau in March 2017, the subsidiary Jinjiang Chengchang Company obtained the certificate of the right to use the land for 50 years on May 10, 2017.

Since the subsidiary Jinjiang Chengchang Company proposed to bid for 4,911 square meters of land on Oingyang Street, Lianyu Community, which was owned by Shu-Yuan Zhuang, the subsidiary Jinjiang Chengchang Company paid the reimbursement for transferring use rights at RMB23,574 thousand on January 20, 2017 (accounted in long-term prepayment) and paid the guarantee deposit for applying the land acquisition and pension security expenses to individual who was affected by the land requisition to Jinjiang Finance Bureau for a total of RMB213 thousand (accounted in refundable deposits). The subsidiary Jinjiang Chengchang Company acquired 2,235 square meters of land by bidding procedure on January 5, 2018, and signed the contract with Jinjiang City Municipal Land Resource Bureau for assigning the right to use the state-owned construction land and paid the remaining balance of RMB2,219 thousand on May 27, 2018. After that, the subsidiary Jinjiang Chengchang Company obtained the certificate of the right to use the land for 50 years on June 1, 2018. The subsidiary Jinjiang Chengchang Company acquired the remaining 2,499 square meters of land by bidding procedure on July 6, 2018, and signed the contract with Jinjiang City Municipal Land Resource Bureau for assigning the right to use the state-owned construction land and paid the remaining balance of RMB2,478 thousand on August 26, 2018. After that, the subsidiary Jinijang Chengchang Company obtained the certificate of the right to use the land for 50 years on September 1, 2018.

Since the subsidiary Jinjiang Chengchang Company proposed to bid for 4,444 square meters of land on Oingyang Street, Lianyu Community, which was owned by Shu-Fang Zhuang, the subsidiary Jinjiang Chengchang Company paid the reimbursement for transferring use rights at RMB21,331 thousand on January 18, 2018 (accounted in long-term prepayment) and paid the guarantee deposit for applying the land acquisition and pension security expenses to individual who was affected by the land requisition to Jinjiang Finance Bureau for a total of RMB373 thousand (accounted in refundable deposits). The subsidiary Jinjiang Chengchang Company acquired 3,543 square meters of land by bidding procedure on November 9, 2018. and signed the contract with Jinjiang City Municipal Land Resource Bureau for assigning the right to use the state-owned construction land and paid the remaining balance of RMB3,307 thousand on November 19, 2018. After that, the subsidiary Jinjiang Chengchang Company obtained the certificate of the right to use the land for 50 years on December 17, 2018.

16. OTHER ASSETS

	December 31
Current	2018	2017
Prepayments	\$10,291	\$10,821
Non-current
Refundable deposits	\$43,080	\$47,166

17. TRADE PAYABLES

	December 31
	2018	2017
Trade payables	97,330	200,456 S.

18. OTHER LIABILITIES

	December 31
		2018		2017
Other payables
Payables for dividends	\$	40,106	S	38,178
Payables for salaries or bonuses		32,609		36,704
Payables for purchases of equipment		14,069
Payables for insurance		13,757		14,008
Payables for business tax		1,744		26,081
Others		25,771		33,779
		\$128,056		148,750

19. RETIREMENT BENEFIT PLANS

The employees of the Group's subsidiary in China are members of a state-managed retirement benefit plan operated by the government of China. The subsidiary is required to contribute a specified percentage of payroll costs to the retirement benefit scheme to fund the benefits. The only obligation of the Group with respect to the retirement benefit plan is to make the specified contributions. The Company and certain subsidiaries have no employee retirement plan.

The Company recognized retirement expenses in the consolidated statements of comprehensive income for the years ended December 31, 2018 and 2017 of \$18,417 thousand and \$18,073 thousand, respectively.

20. EQUITY

a. Share capital

Ordinary shares

	December 31
	2018	2017
Number of shares authorized (in thousands)	200,000	200,000
Shares authorized	2,000,000	\$2,000,000
Number of shares issued and fully paid (in thousands)	139,021	126,383
Shares issued	1,390,208	1,263,825

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

The reconciliation of the outstanding shares of the Company is as follows:

	Number of Shares (In Thousands)	Amount	Additional Paid-In Capital
Balance at January 1, 2017 Share dividends	114,893 11,490	1,148,932 S 114,893	2,532,902 S
Balance at December 31, 2017	126,383	1,263,825	\$2,532,902
Balance at January 1, 2018 Share dividends	126,383 12,638	1,263,825 S 126,383	\$2,532,902
Balance at December 31, 2018	139,021	1,390,208	\$2,532,902

b. Capital surplus

	December 31
	2018	2017
May be used to offset a deficit, distributed as cash dividends, or transferred to share capital
Issuance of ordinary shares The difference between consolidation received or paid and the carrying amount of the subsidiaries' net assets during actual	2,532,902 S	\$2,532,902
disposal or acquisition	7,912	7,912
	2.540.814	2,540,814

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

In accordance with the policy on dividend distribution of the Company's Articles of Incorporation (the "Articles"). Unless otherwise provided in the Applicable Listing Rules, the Company made a profit in a fiscal year shall be allocated in the following order and proposed by the board of directors to the shareholders in the general meeting for approval:

• 1) To make provision for the applicable amount of income tax pursuant to applicable tax laws and regulations;
• 2) To set off cumulative losses of previous years (if any);
• 3) To set aside ten percent (10%) as legal reserve pursuant to the applicable listing rules unless the accumulated amount of such legal reserve equals to the total paid-in capital of the Company;
• 4) To set aside an amount as special reserve pursuant to the applicable listing rules and requirements of the Commission; and

5) With respect to the earnings available for distribution (i.e. the net profit after the deduction of the items (1) to (4) above plus any undistributed retained earnings), the board of directors may present a proposal to distribute earnings by way of dividends to the shareholders at the annual general meeting for approval pursuant to the applicable listing rules. Dividends may be distributed in the form of cash and/or shares; shares may be distributed in lieu of the cash amount of any dividend, and the amount of dividends shall be at least ten percent (10%) of the net profit after the deduction of the items (a) to (d) above. Cash dividends shall comprise a minimum of ten percent (10%) of the total dividends allocated to shareholders.

For the policies on the distribution of employees' compensation and remuneration of directors and supervisors after the amendment, refer to employees' compensation and remuneration of directors and supervisors in Note $22(e)$ .

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

The appropriations of earnings for 2017 and 2016 approved in the shareholders' meetings on June 12, 2018 and June 26, 2017, respectively, were as follows:

	Appropriation of Earnings				Dividends Per Share (NTS)
	For the Year Ended December 31				For the Year Ended December 31
	2017		2016		2017		2016
Legal reserve	83,517		88,209
Special reserve	60,517		257,634
Cash dividends	37,915		137,872		0.3		1.2
Share dividends	126,383		114,893		1.0		1.0

21. REVENUE

Trade receivables (Note 10)

	For the Year Ended December 31
	2018	2017
Revenue from contracts with customers Revenue from sale of goods	\$2,071,989	\$3,406,504
Contract balances		December 31
	2018	2017

426,332

£.

$$1,110,925$

b. Disaggregation of revenue

	December 31
	2018	2017
Primary geographical market
Mainland China	\$2,071,989	\$3,406,504
Major goods
Single color One injection with dual colors EVO plastic particles RB soles Others	$\mathbb{S}$ 1,233,056 487,975 339,203 11,755 \$2,071,989	\$ 1,820,909 951,581 627,263 282 6,469 \$3,406,504
Timing of revenue recognition
Satisfied at a point in time	2,071,989	3,406,504

22. NET PROFIT FROM CONTINUING OPERATIONS

a. Other income

	For the Year Ended December 31
	2018	2017
Interest income	\$51,283	\$43,746
b. Other gains and losses

	For the Year Ended December 31
	2018	2017
Impairment loss	\$(17,038)
Net foreign exchange gain (loss)	8,932	(19, 102)
Loss on disposal of non-current assets held for sale		(2, 581)
Loss on disposal of property, plant, and equipment		(248)
Others	2,473	4,022
	(5.633)	(17.909)

c. Depreciation and amortization

	For the Year Ended December 31
	2018	2017
Property, plant, and equipment Prepayments for leases	\$23,332 9,987	\$23,518 5,793
	\$33,319	\$29,311
An analysis of depreciation by function Operating costs Operating expenses	\$19,003 4,329	18,898 S. 4,620
	\$23,332	\$23,518
An analysis of amortization by function Operating expenses	9,987	5,793

d. Employee benefits expense

	For the Year Ended December 31
	2018	2017
Short-term employee benefits Post-employment benefits	290,209 S	298,903 S
Defined contribution plans	18,417	18,073
Other employee benefits	19,651	17,137
	\$ 328,277	\$334,113
An analysis of employee benefits expense by function
Operating costs	283,903 S	285,762 S
Operating expenses	44,374	48,351
	328,277	334,113

e. Employee's compensation and remuneration to directors and supervisors

The Company accrued employees' compensation and remuneration of directors and supervisors at the rates of no less than 3% and no higher than 1%, respectively, of net profit before income tax, employees' compensation, and remuneration of directors and supervisors. For the years ended December 31, 2018 and 2017, the Company did not estimate the bonus to employees and the remuneration to directors and supervisors.

If there is a change in the proposed amounts after the annual financial statements were 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 and supervisors paid and the amounts recognized in the consolidated financial statements for the years ended December 31, 2017 and 2016.

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

23. INCOME TAXES RELATING TO CONTINUING OPERATIONS

a. Income tax recognized in profit

The major components of tax expense were as follows:

	For the Year Ended December 31
	2018	2017
Current tax
In respect of the current period	45,879 S	158,729
Adjustments for of prior periods		(233)
	45,879	158,496
Deferred tax
In respect of the current period	(7,770)	8,110
Income tax expense recognized in profit	38,109	166,606

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

	For the Year Ended December 31
		2018		2017
Profit before tax		172,808		1,001,773
Income tax expense calculated at statutory rate Nondeductible expense calculated at the statutory rates Adjustments for prior year's tax	\$	28,636 9,473	S	156,469 10,370 (233)
Income tax expense recognized in profit		38,109		166,606

The applicable tax rate used by subsidiaries in China is 25%. In addition, Jinjiang Chengchang Company obtained the Hi-tech enterprise authenticated certification of the People's Republic of China in 2018 and 2017, so its applicable tax rate was reduced to 15%. Tax rates used by other group entities operating in other jurisdictions are based on the tax laws in those jurisdictions.

b. Current tax liabilities

	For the Year Ended December 31
	2018	2017
Current tax liabilities
Income tax payable	7,642	49,707

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, 2018

	Opening Balance	Recognized in Profit or Loss	Exchange Difference	Closing Balance
Deferred tax assets
Temporary differences Property, plant and equipment Deferred tax liabilities	$\mathbb{S}$	2,556	(50) S	2,506
Temporary differences Deferred disposal gains Unrealized foreign exchange	6,608 S	\$ (6,601)	\$ (7)	\$
gains	3,955	1,387	(107)	5,235
	\$10,563	\$ (5,214)	(114) S	5,235
	For the year ended December 31, 2017
	Opening Balance	Recognized in Profit or Loss	Exchange Difference	Closing Balance
Deferred tax assets
Temporary differences Non-current assets held for sale Property, plant and equipment	S 4,265 43 4,308 \$	(4,163) S (42) (4,205)	\$ (102) (1) (103)	$\mathbb{S}$
Deferred tax liabilities
Temporary differences Deferred disposal gains Unrealized foreign exchange gains	\$ 6,683	\$ 3,905	\$ (75) 50	6,608 \$ 3,955
	6,683	3,905	(25)	10,563

d. Income tax assessments

The income tax returns have been filed according to the terms of different national governments.

$\widetilde{\imath_2}$

24. EARNINGS PER SHARE

	For the Year Ended December 31
	2018	2017
Basic earnings per share	0.97	6.01

The weighted average number of shares outstanding used for the earnings per share computation was adjusted retroactively for the issuance of bonus shares on September 1, 2018. The basic and diluted earnings per share adjusted retrospectively for the year ended December 31, 2017 were as follows:

Unit: NTS Per Share

	Before Retrospective Adjustment	After Retrospective Adjustment
Basic earnings per share	6.61	6.01

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

Net Profit for the Period

	For the Year Ended December 31
	2018	2017
Earnings used in the computation of basic and diluted earnings per share	\$134,699	835,167
Ordinary Shares Outstanding
	For the Year Ended December 31
	2018	2017
Weighted average number of ordinary shares used in the
computation of basic earnings per share	139.02	139.02

25. OPERATING LEASE ARRANGEMENTS

The Group as Lessee

Operating leases relate to leases of plant with lease terms of three years. The Group does not have a bargain purchase option to acquire the leased plant at the expiration of the lease periods.

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

	December 31
	2018	2017
Not later than 1 year Later than 1 year and not later than 5 years	31,483 S 69,763	6,240 1,560
	101.246	7,800

26. CAPITAL MANAGEMENT

The Group manages its capital to ensure that entities in the Group will be able to continue as going concerns while maximizing the return to stakeholders through the optimization of the debt and equity balance. The Group's overall strategy remains unchanged in recent years.

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, and non-controlling interests).

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

Key management personnel of the Group review the capital structure on a quarterly basis. As part of this review, the key management personnel consider the cost of capital and the risks associated with each class of capital. Based on recommendations of the key management personnel, in order to balance the overall capital structure, the Group may adjust the amount of dividends paid to shareholders, the number of new shares issued or repurchased, and/or the amount of new debt issued or existing debt redeemed.

27. FINANCIAL INSTRUMENTS

a. Fair value of financial instruments not measured at fair value

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

b. Categories of financial instruments

	December 31
		2018		2017
Financial assets
Loans and receivables
Cash and cash equivalents	\$			\$ 3,056,733
Debt investments with no active market - current				1,533,557
Trade receivables				1,110,925
Other receivables				22,171
Refundable deposits				47,166
Financial assets at amortized cost
Cash and cash equivalents		3,221,091
Financial assets at amortized cost - current		1,510,407
Trade receivables		426,332
Other receivables		16,935
Refundable deposits		43,080
Financial liabilities
Financial liabilities at amortized cost
Trade payables		97,330		200,456
Other payables		128,056		148,750

c. Financial risk management objectives and policies

The Group's major financial instruments included cash, equity and debt investments, and borrowings. The Group's corporate treasury function provides services to the Group, coordinates access to domestic and international financial markets, and assesses the financial risks associated with the operations of the Group by actual demand and risk analysis. These risks include market risk (mainly interest rate risk), credit risk, and liquidity risk.

The Group did not enter into or trade financial instruments, including derivative financial instruments for speculative purposes.

The Corporate treasury function reports to the Group's risk management committee, and the internal auditors also review the implementation of the policies constantly.

1) Market risk

The Group's activities expose the Group primarily to the financial risk of changes in interest rates (see (a) below). The risk is managed by the Group by maintaining an appropriate mix of fixed and floating rate borrowings.

There had been no change in the Group's exposure to market risks or the manner in which these risks were measured and managed.

Interest rate risk

The Group was exposed to the fair value of interest rate risk and cash flow interest rate risk from short-term borrowings and long-term borrowings 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.

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:

	December 31
	2018	2017
Fair value interest rate risk
Financial assets	\$4,515,591	\$4,089,957
Financial liabilities
Cash flow interest rate risk
Financial assets	215,043	499,224
Financial liabilities

Sensitivity analysis

The sensitivity analyses below were determined based on the Group's exposure to interest rates for 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. The rate of a 1% increase or decrease was used when reporting interest rate risk internally to key management personnel and represents management's assessment of the reasonably possible change in interest rates.

If interest rates had been 1% higher/lower and all other variables were held constant, the Group's per-tax profit for the years ended December 31, 2018 and 2017 would have decreased/increased by \$2,150 thousand and \$4,992 thousand, respectively, which was mainly attributable to the Group's exposure to interest rates on its variable-rate financial assets.

2) Credit risk

Credit risk refers to the risk that a 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 of counterparties to discharge an obligation and financial guarantees provided by the Group could arise from:

• a) The carrying amount of the respective recognized financial assets as stated in the balance sheets; and
• b) The amount of contingent liabilities in relation to financial guarantee issued by the Group.

The Group adopted a policy of dealing only with creditworthy counterparties, which were mostly reputable department stores and shopping malls; the Group's exposure and the operating performance of its counterparties are continuously monitored. From historical experience, the Group considers that the possibility of facing a credit-related risk is low.

3) Liquidity risk

The Group manages liquidity risk by monitoring and maintaining a level of cash 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.

Ultimate responsibility for liquidity risk management rests with the board of directors, which has built an appropriate liquidity risk management framework for the Group's short, medium and long-term funding and liquidity management requirements.

The Group manages liquidity risk by maintaining adequate cash, reserves and using variety of equity and liability instruments, and continuously monitoring forecast and actual cash flows as well as matching the maturity profiles of financial assets and liabilities.

Liquidity and interest risk rate tables for non-derivative financial liabilities

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. Specifically, bank loans with a repayment on demand clause were included in the earliest time band regardless of the probability of the banks choosing to exercise their rights. The maturity dates for other non-derivative financial liabilities were based on the agreed repayment dates.

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

December 31, 2018

	On Demand or Less than
	1 Year	1 to 5 Years
Non-derivative financial liabilities
Non-interest bearing	\$225,386

December 31, 2017

	On Demand or Less than 1 Year	1 to 5 Years
Non-derivative financial liabilities
Non-interest bearing	349,206

28. TRANSACTIONS WITH RELATED PARTIES

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

Compensation of Key Management Personnel

	For the Year Ended December 31
	2018	2017
Short-term benefits	\$10,625	\$10,907

The remuneration of directors and key executives was determined by the remuneration committee based on the performance of individuals and market trends.

29. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED COMMITMENTS

Significant commitments and contingencies of the Group as of December 31, 2018 were as follows:

A contract for construction project signed but not yet paid by subsidiary Jinjiang Chengchang Co., Ltd. was RMB15,603 thousand.

Subsidiary Jinjiang Chengchang Company signed an agreement with Huagiao University in October 2016. Huaqiao University was commissioned to conduct researches and developments of plastic materials from October 16, 2016 to October 15, 2020. Jinjiang Chengchang Company should pay the joint research fee amounting to RMB3,000 thousand in total. According to the payment schedule, Jinjiang Chengchang Company should pay RMB500 thousand in the first year plus an annual increase rate of 10% from the second to the fifth year. In addition, Jinjiang Chengchang Company should provide funds for purchasing specific equipment and instruments in accordance with the contract. As of December 31, 2018, the accumulated joint research fee was RMB1,650 thousand.

Subsidiary Jinjiang Chengchang Company signed a contract with the scientific research team for developing new plastic foam materials. Jinjiang Chengchang Company agreed to pay regular professional service fees and the scientific research team should report situations and results of the research and development regularly. The professional service fee was RMB13,000 thousand and the related cost of research materials was RMB7,939 thousand, which were included in the research and development expenses.

30. SIGNIFICANT ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

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

December 31, 2018

	Foreign Currencies	Exchange Rate	Carrying Amount
Financial assets
Monetary items USD HKD	$\mathbb{S}$ 6,297 16	6.8632 (USD:RMB) 0.8768 (HKD:RMB)	\$193,277 64
Financial liabilities
Monetary items NTD	40,106	0.2236 (NTD:RMB)	40,106
December 31, 2017
	Foreign Currencies	Exchange Rate	Carrying Amount
Financial assets
Monetary items USD HKD	\$ 7,742 21	6.5342 (USD:RMB) 0.8340 (HKD:RMB)	\$230,943 79
Financial liabilities
Monetary items

The Group is mainly exposed to the USD and the NTD. The following information was aggregated by the functional currencies of the group entities, and the exchange rates between respective functional currencies and the presentation currency were disclosed. The significant realized and unrealized foreign exchange gains (losses) were as follows:

	For the Year Ended December 31, 2018		For the Year Ended December 31, 2017
		Net Foreign		Net Foreign
Foreign		Exchange Gains		Exchange Gains
Currencies	Exchange Rate	(Losses)	Exchange Rate	(Losses)
RMB	4.560 (RMB:NTD)	8,932	4.507 (RMB:NTD)	\$(19,102)

31. SEPARATELY DISCLOSED ITEMS

• a. Information about significant transactions and investees:
• 1) Financing provided to others. (Table 1)
• 2) Endorsements/guarantees provided. (None)
• 3) Marketable securities held (excluding investment in subsidiaries, associates and joint ventures). (None)
• 4) Marketable securities acquired and disposed of at costs or prices of at least NT\$300 million or 20% of the paid-in capital. (None)
• 5) Acquisitions of individual real estate at costs of at least NT \$300 million or 20% of the paid-in capital. (Table 2)
• 6) Disposals of individual real estate at prices of at least NT\$300 million or 20% of the paid-in capital. (None)
• 7) Total purchases from or sales to related parties amounting to at least NT\$100 million or 20% of the paid-in capital. (None)
• 8) Receivables from related parties amounting to at least NT\$100 million or 20% of the paid-in capital. (Table 3)
• 9) Trading in derivative instruments. (None)
• 10) Intercompany relationships and significant intercompany transactions. (Table 4)
• 11) Information on investees. (Table 5)
• 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)

• 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: (None)

  • 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.

32. SEGMENT INFORMATION

Jinjiang Chengchang Company and Century Victory Company are franchised investment holding business companies. The business activities of Jinjiang Chengchang Company and Century Victory Company include the research and development, manufacturing and trading of soles and shoe materials, which are the main source of profits for the Company. The measurement basis of departmental information provided to chief operating decision maker for review is the same as information reported in the financial statements. Therefore, the information of the operations department to be reported in the years of 2018 and 2017 can be referred to the consolidated financial statements for the years ended 2018 and 2017.

FINANCING PROVIDED TO OTHERS
FOR THE YEAR ENDED DECEMBER 31, 2018
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

	Note
	Aggregate Financing Limit (Note 2)		\$ 2,619.971		6.191.425		6.186,000
	Financing Limit for Each Borrower (Note 2)		654,993		6.191.425		6,186,000
Collateral	Value
	Item
	mpairment Loss Allowance for
	Reasons for Short-term Financing		Capital movement of operating need		Capital movement of operating need		Capital movement of operating need
	Business Transaction Amount
Interest Rate Financing (Note I) (Note I) Actual Borrowing Amount			134,160 1 30,000 thousand) (RMB		$[34,160]$ $(RMB 30,000)$ thousand)
							$[RMB \t 31.714]$ thousand)
			134,160 (RMB 30,000 thousand		134,160 thousand		357.760 thousand
	(Note 3)		(RMB 40,000 thousand) 178,880		(RMB 40,000 (RMB 30,000 thousand) 78,880		(RMB 80,000 (RMB 80,000 (housand) 357,760
	Party		Yes	Yes			Yes
Financial Statement Related Highest Balance Louing Balance Account Party for the Period Ending Balance	Account		related parties	Other receivables from	related parties		Other receivables from related parties
Hong Kong Cheng Chang Other receivables from Limited Company Borrower			Limited Company		Century Victory Limited Company
Lender			Victory New Materials Limited Company	Hong Kong Cheng Chang Jinjang Chengchang	Limited Company	Jinjang Chengchang	Limited Company
χó.			c

Note 1: Nature of financing was as follows:

a. Business relationship.
b. Necessity of short-term financing.

Note 2: Aggregate financing limits should not execut 40% of the Company's not in financing for cach counterparty should not exceed 40% of Shanghai Les Epphants Children Articless Co., Ltd.'s net worth as shown in the lates

Note 3: The highest balance for the period was calculated at the year-end exchange rate.

Note 4: Transactions between the Company and its subsidiaries were excluded from the consolidated financial statements.

l,

ACQUISITION OF INDIVIDUAL REAL ESTATE AT COSTS OF AT LEAST NTS300 MILLION OR 20% OF THE PAID-IN CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 2018
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

	Other Terms	Note 2
lo ssod.m.	cquisition	ommercial office building Build
	Pricing Reference	inquiry, parity and barging
	kmount
Information on Previous Title Transfer If Counterparty Is / Related Party
	Relationship
	Property Owner
Counterparty		Fujian Minnan Construction Engineering Co., Ltd.
	Payment Status
ransaction	Amount	482,641 Had paid $\begin{bmatrix} 482,641 \ \text{RMB105,52} \end{bmatrix}$ Co ne $(RMB 107,925$ thousand) $(Note 1)$
	Event Date	2016.03.11
	Property	Property under construction
	Buyer	injang Chengchang Limited Company

Note 1: The amount was calculated based on the exchange rate of RMB4.472 at the end of the reporting period.

Note 2: Jinjiang Chengclang Company and Fujian Minnan Construction Engineering Co., Ld. respectively signed the contracts of building no. 1 and building no. 2 (with a total contract price of RMB58,655 thousand) on March 11

RECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT\$100 MILLION OR 20% OF THE PAID-IN CAPITAL
DECEMBER 31, 2018
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

			Financial			Overdue	Amount
Company Name	Related Party	Relationship	Ending Balance Account and Statement	Turnover Rate	Amount	Actions Taken	Received in Subsequent Period	Allowance for Impairment Loss
The Company	Hong Kong Cheng Chang Limited Company Subsidiary		thousand) (RMB30,000 \$134,160
Hong Kong Cheng Chang Limited Company Jinjang Chengchang Limited Company		Subsidiary	$(RMB 30,000$ thousand) 134,160				$\begin{array}{c} \hline \end{array}$
Jinjang Chengchang Limited Company	Century Victory Limited Company	The same parent company	thousand) 141,825 (RMB31,714				$\pmb{\cdot}$

Note: Transactions between the Company and its subsidiaries were excluded from the consolidated financial statements.

TABLE 4

VICTORY NEW MATERIALS LIMITED COMPANY AND SUBSIDIARIES

INTERCOMPANY RELATIONSHIPS AND SIGNIFICANT TRANSACTIONS
FOR THE YEAR ENDED DECEMBER 31, 2018
(In Thousands of New Taiwan Dollars)

	Sales or Assets % to Total	2
	Payment Terms
Transaction Details	Amount	$$134,160$ (RMB 30,000 thousand)	$(RMB 30,000$ thousand) 134,160	thousand) 141,825 (RMB31,714
	Financial Statement Accounts	Other receivables	Other receivables	Other receivables
	Relationship (Note 1)	œ
	Counterparty	Hong Kong Cheng Chang Limited Company		Century Victory Limited Company
Investee Company		The Company	Hong Kong Cheng Chang Limited Company Jinjang Chengchang Limited Company	Jinjang Chengchang Limited Company
	Σó.		2	$\overline{ }$

Note 1: Nature of relationship is as follows:

• a. From the parent company to its subsidiary
  b. From a subsidiary to its parent company
• Note 2: Transactions between the Company and its subsidiaries were excluded from the consolidated financial statements.

. . .
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INFORMATION ON INVESTEES
FOR THE YEAR ENDED DECEMBER 31, 2018
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Investor Company	Investee Company	Location	Main Businesses and Products	Original Investment Amount (Note 1)			As of December 31, 2018		Net Income	Share of
				2018	December 31, December 31, 2017	Number of Sliares		Carrying Amount	(Loss) of the Investee	Profit (Loss)	Note
The Company	iuper Light Limited Company	Nevada, U.S.A.	nvestment	S 1,985,452 S 2,026,741 (RMB443,974 (	RMB443,974	100	100	$\begin{vmatrix} 5 & 6,191,425 \ 8 & 138,812 \end{vmatrix}$ \ 5		138,812
Super Light Limited Company	Hong Kong Cheng Chang Limited Company	Hong Kong	vestment	1,070,159 (RMB239,302 thousand) thousand)	thousand) (housand) 1,092,414 RMB239,302		$\frac{8}{100}$	6,191,425	138,812	138,812

Note 1: The amounts were calculated based on the exchange rates at the end of the reporting period.

Note 2: Net income of investees, investments accounted for using the equity method of investor company between the investor and investee company have been eliminated on consolidation.

Note 3: Refer to Table 6 for information relating to investees in mainland China.

INFORMATION ON INVESTMENTS IN MAINLAND CHINA
FOR THE YEAR ENDED DECEMBER 31, 2018
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

of Investment Income as of December 31, Repatriation 2018 December 31, Amount as of Carrying	Note	à,		ï 217,098
$\frac{2018}{(Note 2)}$ Net Income $[{\rm Ovnership\ of\ Inveetment}]$ $[{\rm Loss}]$ Investee Indirect (Note 2)		138,545 \$ 6,186,000		8,002
Investment		100 138,545		100 8,002
December 31,	2018	ï		í
		GA. ı		ĭ $\lambda$
	January 1, 2018
		S 532,966 Hong Kong Cheng	Chang Limited Company has $100\%$	Company has shareholding 245,720 Victory New S 8,000 Materials thousand) Limited
			[HKS 135,926] thousand)	USS 8,000
		Manufactures and sells	related shoe materials various soles and	related shoe materials various soles and
		Jinjang Chengchang	Limited Company	Century Victory Limited Manufactures and sells Company

nvestment Commission, MOEA nvestment Stipulated by	Not Applicable
nvestment Amount Authorized Upper Limit on the Amount of by Investment Commission, MOEA	Not Applicable
Remittance for Investment in Accumulated Outward Mainland China as of December 31, 2018	Not Applicable

Note 1: The amount was calculated based on exchange rates at the end of the reporting period.

Note 2: The amount is according to the financial statements which have been audited by the Company's auditors.

$\bar{\alpha}$

Note 3: Net income of investees, investments accounted for using the equity method of investor and net assets of investee between the investor company and investee company have been eliminated on consolidation.

$-49-$