tripod technology corporation · 2 tripod technology corporation 2020 annual shareholders'...

TRIPOD TECHNOLOGY

CORPORATION

2020 Annual Shareholders' Meeting Meeting Handbook

Date: June 17, 2020 Venue: No. 261, Nan Fung Road, Pingzhen District, Taoyuan City Meeting Room of the Industrial Park Management Center, Pingzhen District

Stock code: 3044

Table of Contents Chapter 1 Meeting Procedure ..............................................................................................................1 Chapter 2 Meeting Agenda ..................................................................................................................2 Chapter 3 Report Items

I. 2019 Business Report .................................................................................................3 II. Audit Committee's Review Report on the 2019 Financial Statements .......................3 III. External Endorsement/Guarantee and Loan of Funds .................................................3 IV. The 2019 Employee Remuneration and Remuneration to Directors Report ..............3 V. Amendments to Rules and Procedures for Board of Directors Meetings ..................3

Chapter 4 Ratification Items I. 2019 Financial Statements ..........................................................................................4 II. Proposal for distribution of 2019 earnings ..................................................................4

Chapter 5 Extempore Motions ............................................................................................................4 Chapter 6 Attachments

I. 2019 Business Report ..................................................................................................5 II. 2019 Independent Auditors’ Report and Consolidated and Individual Financial

Statements .................................................................................................................10 III. Audit Report by Audit Committee ............................................................................32 IV. Rules and Procedures for Board of Directors' Meetings ...........................................33 V. Earnings Distribution Proposal .................................................................................37

Chapter 7 Appendices I. Articles of Association ..............................................................................................38 II. The Rules and Procedure for Shareholders' Meetings...............................................43 III. Information on Employee Remuneration and Remuneration to Directors ...............45 IV. The Impact of Stock dividend Issuance on Business Performance, EPS, and

Shareholder Rate of Return .......................................................................................45 V. Current Shareholding of Individual and All Directors and Supervisors

Registered on Shareholders' Meeting Agenda Handbooks .......................................46

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TRIPOD TECHNOLOGY CORPORATION Procedure for the 2020 Annual Meeting of Shareholders

I. Announcement of Meeting

II. Chairman's Address

III. Report Items

IV. Ratification Items

V. Extempore Motions

VI. Adjournment

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TRIPOD TECHNOLOGY CORPORATION 2020 Annual Shareholders' Meeting Agenda

I. Announcement of Meeting (Attendance in Shares)

II. Chairman's Address

III. Report Items:

1. 2019 Business Report

2. Audit Committee's Review Report on the 2019 Financial Statements

3. External Endorsement/Guarantee and Loan of Funds

4. The 2019 Employee Remuneration and Remuneration to Directors Report

5. Amendments to Rules and Procedures for Board of Directors Meetings

IV. Ratification Items

1. 2019 Financial Statements

2. Proposal for distribution of 2019 earnings

V. Extempore Motions

VI. Adjournment

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Report Items I. 2019 Business Report

Please refer to Attachment 1 (page 5-9) for details. II. Audit Committee's Review Report on the 2019 Financial Statements

1. The Company's financial statements for 2019 were audited by Mr. Chen, Chung-Chen, and Ms. Chen, Chao-Mei, of Deloitte & Touche. The final reports, including Financial Statements, Business Reports and proposal for allocation of earnings, have been reviewed by the Audit Committee and hereby submitted the Review Report.

2. Please refer to Attachment 2 (page 10-31) for the Independent Audits’ Report. 3. Please refer to Attachment 3 (page 32) for the Audit Committee's Review Report.

III. Report of the Company's External Endorsements/Guarantees Provided

and Financing Provided 1. Endorsements/Guarantees Provided Items:

(Units: In thousands of NT$)

Endorser/ Guarantor

Endorsee/Guarantee Outstanding Endorsement/

Guarantee at the End of 2019

Ratio of Accumulated Endorsement/Guarantee to Net

Equity in the Financial Statements of the Period Name Relationship

Tripod (Wuxi) Electronic Co., Ltd.

Tripod (Wuxi) Electronic Co., Ltd. Self (Note 1) -

Tripod (Hubei) Electronic Co., Ltd.

Tripod (Hubei) Electronic Co., Ltd. Self (Note 2) -

Note 1: The amounts that Tripod (Wuxi) Electronic Co., Ltd. guaranteed to itself for tariffs is RMB$25,000 thousand. Note 2: The amounts that Tripod (Hubei) Electronic Co., Ltd. guaranteed to itself for tariffs is RMB$28,000 thousand.

2. Financing Provided Items: Uni t : thousand NT$

Lender Borrower Balance of Financing Provided at the End

of 2019 (Note)

Reasons of Short-term Financing

Relationship with the Borrower

J&J Holding Co., Ltd.

Tripod Overseas Co., Ltd. 479,980

The need for financing

operating capital

Subsidiary 100% share held by J & J Holding Co., Ltd, subsidiary of the Company

Tripod Overseas Co., Ltd.

Trison Technology (HK) Limited -


operating capital Subsidiary 100% share held by the Company


Tripod (Wuxi) Electronic Co., Ltd. 119,920


operating capital

Subsidiary 100% share held by Tripod International Holding Pte. Ltd, subsidiary of the Company


Tripod (Hubei) Electronic Co., Ltd. 4,952,696


operating capital

Subsidiary 100% share held by Tripod Worldwide Holding Pte. Ltd, subsidiary of the Company

Tripod (Wuxi) Electronic Co.,

Ltd. Tripod (Hubei)

Electronic Co., Ltd. 645,690 The need for

financing operating capital

Subsidiary 100% share held by Tripod Worldwide Holding Pte. Ltd, subsidiary of the Company

Note: The highest balance for the period and ending balance represented above are listed in New Taiwan dollars. The highest balance denominated in foreign currencies is translated using the highest prevailing exchange rate; and the ending balance is translated into NTD using the exchange rate as of December 31, 2019: USD/NTD=29.98 and RMB/NTD=4.3046.

IV. 2019 Employees’ Compensation and Remuneration of Directors Report In accordance with the Company’s Articles of Incorporation No.32, the Company allocated $42,000,000 remuneration of directors and $711,921,502 employees’ compensation. The aforementioned amount was approved by the Company’s board of directors on March 25, 2020, and should all be distributed in cash.

V. Amendments to Rules and Procedures for Board of Directors Meetings 1. In line with the establishment of the Audit Committee, the Company's “Rules and

Procedures for Board of Directors Meetings” are amended. 2. Please refer to Attachment 4 (page 33-36).

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Ratification Items Proposal 1 Proposed by the Board Proposal: To accept 2019 Financial Statements Explanation:

I. The Company's 2019 Individual Financial Statements and the Consolidated Financial Statements have been approved by the Board of Directors and audited by Mr. Chen, Chung-Chen CPA and Ms. Chen, Chao-Mei, CPA from Deloitte & Touche.

II. The above financial statements and business reports have been reviewed by the Audit Committee.

III. The above statements refer to Attachment 1(page 5-9) and Attachment 2(page 10-31). IV. Please proceed to be hereby ratified.

Resolution:

Proposal 2 Proposed by the Board Proposal: To approve the proposal for distribution of 2019 earnings Explanation:

I. The Company distribution of 2019 earnings was already resolved in the Board of Directors meeting convened on May 7, 2020.

II. The profit to be distributed among shareholders shall be NT$3,810,642,760 in cash dividends (NT$7.25per share). The distribution of cash dividends shall be based on share ratio and rounded down to the nearest dollar, and the sum of the fractional balance is recognized as the Company's other income. For the proposal of distribution of earnings for 2019, Please refer to Attachment 5(page 37).

III. After this resolution has been approved by the Shareholder's Meeting, the Board of Directors proposed to authorize the Chairman to stipulate the ex-dividend date, issuance date and other related matters, which shall be announced according to the law.

Resolution:

Extempore Motions Adjournment

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TRIPOD TECHNOLOGY CORPORATION

Business Report (I) 2019 Business Report

1. Results of the implementation of the business plan

Item (NT$ thousand) 2019 2018 Variation rate

Consolidated operating revenue

54,450,944 52,105,683 4.50%

Consolidated operating profit

11,265,984 9,764,495 15.38%

Consolidated net profit before tax

7,798,291 6,525,273 19.51%

Consolidated net profit 6,037,320 4,938,525 22.25%

2. Budget implementation The Company’s main product is printed circuit boards (PCB), with the main production locations being the Taoyuan Pingjhen plant, Jiangsu Wuxi plant, and Hubei Xiantao plant. The estimated sales volume in 2019 was 102,000 thousand sq. ft.. The 2019 actual consolidated sales volume was 92,774 thousand sq. ft.

3. Consolidated financial income and expenditure and profitability analysis Analysis Item 2019 2018

Financial Structure

Debt-asset Ratio (%) 52.30 54.65 The ratio of long-term capital to real estate plant and equipment （%） 220.30 197.56

Debt-paying ability

Current ratio (%) 151.88 140.99

Quick ratio (%) 129.30 116.81

Interest coverage ratio 32.04 20.66

Profitability

Return on assets (%) 8.71 7.34

Shareholders' return on equity (%) 18.13 15.64

Income before tax to paid-up capital ratio (%) 148.36 124.14

Net profit margin (%) 11.08 9.47

Earnings per share (NT$) - tracking 11.49 9.40

4. Research and development status Looking forward to the industrial development in 2020, TrendForce proposes 10 major technology trends: In Artificial Intelligence (AI): (1). 5G, AI, and automotive applications contribute to growth in the semiconductor

industry in contrast to the trend, e.g., IC design companies strengthen capabilities in chip customization and the development of ASICs; compound semiconductor

materials feature high-voltage resistance, high-frequency switching and low resistance, which are suitable for power discretes, RF switch ICs, and other products that are gaining traction in supply chains for 5G technologies and electric vehicles. In addition, smaller process pitch and higher computing power of chips have resulted in steady shift to SiP in the development of advanced IC packaging technologies.

(2). DRAM will gradually raise the market penetration of high-density modules and advance to EUV and DDR5/LPDDR5; NAND Flash stacking will surpass 100

Attachment 1

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layers in response to the growing demand stemming from the continuing progress in the fields of 5G, AI, and edge computing.

(3). The range of 5G commercialized solutions will expand and the focus in the development of network architecture will be on Standalone (SA) 5G technologies. Hence, more 5G devices and wireless base stations will arrive in the market in the near future.

(4). The penetration rate of 5G is expected to rise substantially owing to smartphone makers becoming more proactive in developing 5G-enabled models. The Chinese government also continues to aggressively push for the commercialization of the 5G network and related services. The devices under Chinese brands are likely to account for over 50% of the total 5G smartphone production in 2020. On the other hand, purchases of 5G smartphones by consumers will still hinge on a few fundamental factors, such as the progress made in the deployment of the 5G infrastructure, the data plans offered by telecom companies, and the pricing of the devices themselves.

(5). High transmission efficiency of 5G and its low- latency characteristics will boost the demand for high refresh rate panels; in addition, simultaneous entry of Mini LED backlight and OLED offer more technical choices for iPad tablets and high-end gaming products.

(6). The display industry is in an oversupply position and the cost of Micro LED is still high in the short term. As Micro LED with mass transfer technology can be combined with different display backplanes to produce transparent, projected, curved, flexible and other display effects, in the future, there will be opportunities to create a new blue ocean market in the oversupplied display industry.

(7). The advantages of Time of Flight (ToF) in mobile 3D sensing include a lower technological barrier for development and a larger number of solution suppliers. This, in turn, is expected to step up the adoption of sensing modules in smartphones.

(8). Sensing capabilities and algorithms are key to add value to IoT. The huge volumes of data produced by various connected devices, coupled with the integration of AI and edge computing in end-devices, will generate new opportunities for hardware and software upgrades in IoT market.

(9). Self-driving technology will soon become reality in terminal applications. There will be three main fields of interests, namely, commercial vehicles, specific driving routes and region-specific applications. Most manufacturers aim to develop autonomous vehicles which meet SAE Level 4.

(10). Once standardized end-products fade away, solar modules will do well. High value-realization in power generation will be given priority in end-products.

In industry development, the following trends will be seen in PCB development: (1). In smart mobile devices, the focus of design will be on lightness, thinness and

small size, as also in balancing the circuit grade with material grade. Any-layer HDI design will be fully optimized in alignment, flatness of the board and co-planarity of pad. In 5G, the demand will be even more for materials with characteristics, such as Low Dk, Low Df, and Low CTE.

(2). In high-density multi-layer boards, such as high-end SERVER, SWITCH, STORAGE, and BACKPANEL, the requirement for board thickness and alignment is more stringent with increase in number of layers. This, combined with the consideration of SI (Signal integrity), will pose major challenges in the selection of board material, back drilling, the ability to form circuits under thick copper, and reliability requirements.

(3). High-frequency antennas and high-frequency, high-speed transmission lines have been designed to raise the requirements for PCB SI (Signal integrity) and RF

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(Radio frequency). This includes the selection of Dk, Df, PIM of materials, antenna pattern, the capability to form a signal path, control of characteristic impedance, signal loss and S-Parameter.

(4). Micro, multi-functional, and high-density integration are development trends in electronic products. Therefore, the requirements of PCB will inevitably be high-density, high integration, encapsulation, miniaturization, and multi-layered. HDI boards, Flexible boards, Rigid-flex boards, Semi-flex boards, Cavity boards, IC packaging boards (BGA, CSP) will dominate the PCB development trend.

(5). 5G products and new energy electric vehicles have increased the demand for heat dissipation and carrying capacity of high current. For the development of derived thick copper, heat dissipation materials and related heat- dissipation technologies, heat dissipation capacity and PI (Power Integrity) are major considerations with the need for higher product functions and operating performance increasing.

(6). The capability of 5G antennae, base station, car radar, and various kinds of sensing products to control materials and antenna patterns will be a challenge and key to winning or losing. After all, even the slightest difference can lead to a huge loss.

(7). 5G products will increase the need for embedded technology development. In response to change in trends, the Company will fully commit to the development of A. product research & development; B. production yield enhancement and stability; C. new production technology and the introduction of equipment material evaluation; and D. industry-academia collaboration.

(II) Summary of Business Plan for the Current Year

1. Operating policies (1). The Company is also currently facing the epidemic problem plaguing the world,

the economic situation is complex and deteriorating, and no one understands the shape the industrial market will take in the future. Although emerging application products will continue to be introduced, the supply chain for it has to recover. There is thus a need to assess the development of industrial economic scenario cautiously, and control the development of new products and risks of fluctuations in raw material prices and monitor exchange rates.

(2). We will focus on PCB manufacturing and continue to diversify the application development of end products, judiciously diversify production capacity, assist customers in minimizing risk and enhance differentiation in core competency for long-term association with customers.

(3). We will continue to expand our market of product and production and improve technical capabilities, and collaborate with customers to expand the application of raw materials and products for value differentiation with competitors in the industry.

(4). We will continue to strengthen recruitment and educational training programs, attract talent and improve professional organization as well as management capabilities, and effectively manage the turnover rate of direct personnel to improve manufacturing yield and strengthen production efficiency as well as product quality and reliability.

(5). In the face of rising labor costs and labor shortage, we will optimize equipment and human resources in various plants by using resource optimization models. The Company will also gradually increase production capacity in response to market demand and increase production efficiency by adding automated equipment.

(6). We will make efforts to retain employees for stable operations, attract engineering and technical talent, and continue the development of technologies in niche product market and next-generation product market.

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(7). In view of persisting trade tensions and policy uncertainties in the international arena, as well as the impact of the global epidemic, we will carefully assess operating risks and operation bases.

2. Sales forecast and references thereof The Company’s main products are printed circuit boards (PCB). Based on the production capacity of current plants, the estimated sales volume this year was 102,000 thousand square feet.

3. The Company’s key production and sales policies (1). The industry’s end-consumption demand and product applications change rapidly.

To reduce customer and product interdependent risks, we will continue to maintain product diversification and prudently plan out production capacity expansion. Through increasing the utilization rate of the Company’s overall equipment capacity, we will be able to achieve the most efficient long-term stable business model.

(2). In response to the diversification of the customer’s product lines, we shall effectively apply information system management, set strict production disciplines, and have immediate control of the production schedule and reductions in inventory due to changes in the customer’s delivery period to pursue maximum production and sales benefit.

(3). We will continue to improve production capabilities and yield, strive for leading advantages in production capacity and cost and strengthen production flexibility to maintain accurate delivery.

(4). We will gather and analyze information on potential market growth and types of manufacturing processes for future product technologies to provide supporting information for continuous investment in new production capacity and equipment.

(5). We will enhance production capabilities of each plant to maximize the scale of production in order to face competitors using single product economies of scale and providing more flexible delivery.

(6). We will utilize the advantage of self-constructed production capacity to achieve economies of scale. A large number of factories located nearby will share a variety of resources and improve production capacity utilization to respond to the extreme changes in single-industry booms.

(7). The growing trend in semi-end product demand has ebbed. To maintain turnover and profitability, we will raise existing customer sales revenue to a reasonable level, and continue developing customers for new product application.

(8). We will respond carefully to the impact of the epidemic, immediately control the production capacity of each plant, and effectively carry out production and sales scheduling.

(III) Future development strategies 1. We will focus on environmental protection, occupational safety and health management,

corporate social responsibility, and corporate governance. We take a proactive approach to reducing environmental pollution, product hazards, as well as energy consumption problems to become a green enterprise for sustainable development.

2. Due to fluctuations in raw material prices as well as exchange rates, tightened environmental protection regulations, increased labor costs, shortage of manpower,and rapidly rising competitors, production capacity continues to expand, increasing threats to the overall PCB operations. Faced with unstable economic conditions, the operating strategy actively and effectively implements the plans of earning more and spending less.

3. Market scale is still huge. Hence, industry market share can be increased through the expansion of production capacity via competitiveness management and the steady

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expansion in sales revenue. However, careful evaluation and execution of capital expenditure plans should be applied.

4. We will continue to implement operational strategies formulated by the management of the Company, committed to developing win-win solutions for:

• Customers and the Company • Employees and the Company • Suppliers and the Company • Shareholders and the Company • The society and corporate responsibility

(IV) Impact from the external competition, the laws and regulations, and the overall business environment: 1. External Competitive Environment:

There are a large number of competitors within this industry. Under the pressure, the bargaining power of the Company is relatively weak. The effective disbursement of customers and the management of production and inventory costs are critical elements for profits under the pressure of the reduction of price and order visibility. Affected by uncertainties in the global economy, product demand poses unpredictable changes, and fluctuations in raw material prices make it difficult for manufacturers to control costs.

2. Regulatory Environment: Environmental protection laws, tax adjustment, and wage increase policies have been promoted. To comply with the increasingly stringent regulations, the Company not only actively reduces environmental pollution, comply with tax planning, and improve automated production capacity, but also devotes itself to solving the problems of resource consumption to reduce the industry’s operational pressure.

3. Macroeconomic conditions: IMF (Jan 2020) originally estimated that the overall global economic growth rate in 2020 was 3.3%. However, under the influence of the global epidemic and the uncertainty of the political and economic situation, the overall global economy has suffered a major shock, and the industry’s end consumer demand remains unknown. In view of that, we will carefully respond to changes in global manufacturing demands, so as to ensure possible development trends; also, in order to maintain the Company's

continued growth, we will continue to improve operational efficiency and flexibility to respond to rapidly changing economic conditions, and, through raising the share of niche products and high value-added emerging products, we expect to create new momentum for the Company’s relentless growth.

Chairman: Wang, Chiang-Chuang

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Key audit matters of the Group’s consolidated financial statements for the year ended December 31,

2019 are stated as follows:

Impairment Assessment of Property, Plant and Equipment

As of December 31, 2019, the carrying amount of property, plant and equipment of the Group was

$15,501,041 thousand, accounting for 22% of the Group’s total assets. According to IAS 36

“Impairment of Assets”, management is required to assess whether the recoverable amount of an

item of property, plant and equipment is below its carrying amount when the item of property, plant

and equipment shows signs of impairment.

As business operations of some companies in the Group face strong competition in their regions,

there is a risk that property, plant and equipment may be impaired. Management used the valuation

model to assess the recoverable amount of property, plant and equipment. When determining future

cash flows, management took into account the expected future sales growth rate and profit margin

based on the outlook of future operations and calculated the weighted average cost of capital as the

discount rate. Since the aforementioned assumptions involve subjective judgment from

management, there is a high degree of uncertainty in the estimation. Thus, the impairment

assessment of property, plant and equipment was identified as a key audit matter.

Refer to Notes 4, 5, and 12 to the consolidated financial statements for details on the accounting

policies, accounting estimates and uncertainty, and relevant disclosures of impairment assessment

of property, plant and equipment.

Our key audit procedures performed in respect of the impairment assessment of property, plant and

equipment were as follows:

1. We obtained the Group’s self-assessment of impairment of each cash-generating unit and

assessed that management included consideration of recent operating performance, historical

trends and industry overview in calculating the expected future sales growth rate and profit

rate as the basis for estimation of future cash flows.

2. We re-evaluated and verified that the recoverable amount which was calculated by

management based on the valuation model and the weighted average cost of capital used by

management, including assumptions about risk-free rate of interest, volatility and risk premium,

were consistent with the current situation and industry environment of the Group and also

performed re-execution and recalculation in our procedures.

Occurrence of Sales Revenue

For the year ended December 31, 2019, the consolidated operating revenue of the Group amounted

to $54,450,944 thousand, which accounted for an overall operating revenue growth rate of 4.5%.

Based on our assessment, there was a risk that the recognition of sales revenue from significant

amount of sales with customers whose individual revenue growth rates exceeded the Group’s

revenue growth rate and operating revenue with longer turnover days might not actually occur.

Thus, the occurrence of operating revenue from customers that met the abovementioned criteria

was identified as a key audit matter.

Refer to Notes 4 and 22 to the consolidated financial statements for details on accounting policies

and relevant disclosures of revenue recognition.

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Our key audit procedures performed in respect of the recognition of operating revenue were as

follows:

1. We understood the internal controls related to the aforementioned sales, assessed and tested

the operating effectiveness of the design and implementation of these controls.

2. We performed substantive analytical procedures testing of the aforementioned sales

transactions, and further examined the external documents and the recovery of receivables to

verify the occurrence of such transactions. We also verified that the settlement of trade

receivables was consistent with the trade terms of major customers.

3. We checked significant sales returns and allowances after the balance sheet date to confirm the

existence of revenue transactions.

Other Matter

We have also audited the parent company only financial statements of Tripod Technology

Corporation as of and for the years ended December 31, 2019 and 2018 on which we have issued

an unmodified opinion.

Responsibilities of Management and Those Charged with Governance for the Consolidated

Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial

statements in accordance with the Regulations Governing the Preparation of Financial Reports by

Securities Issuers and 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 audit committee, are responsible for overseeing the

Group’s financial reporting process.

Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial

statements as a whole are free from material misstatement, whether due to fraud or error, and to

issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of

assurance, but is not a guarantee that an audit conducted in accordance with the auditing standards

generally accepted in the Republic of China will always detect a material misstatement when it

exists. Misstatements can arise from fraud or error and are considered material if, individually or in

the aggregate, they could reasonably be expected to influence the economic decisions of users

taken on the basis of these consolidated financial statements.

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As part of an audit in accordance with the auditing standards generally accepted in the Republic of

China, we exercise professional judgment and maintain professional skepticism throughout the

audit. We also:

1. Identify and assess the risks of material misstatement of the consolidated financial statements,

whether due to fraud or error, design and perform audit procedures responsive to those risks,

and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.

The risk of not detecting a material misstatement resulting from fraud is higher than for one

resulting from error, as fraud may involve collusion, forgery, intentional omissions,

misrepresentations, or the override of internal control.

2. Obtain an understanding of internal control relevant to the audit in order to design audit

procedures that are appropriate in the circumstances, but not for the purpose of expressing an

opinion on the effectiveness of the Group’s internal control.

3. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting

estimates and related disclosures made by management.

4. Conclude on the appropriateness of management’s use of the going concern basis of

accounting and, based on the audit evidence obtained, whether a material uncertainty exists

related to events or conditions that may cast significant doubt on the Group’s ability to

continue as a going concern. If we conclude that a material uncertainty exists, we are required

to draw attention in our auditors’ report to the related disclosures in the consolidated financial

statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are

based on the audit evidence obtained up to the date of our auditors’ report. However, future

events or conditions may cause the Group to cease to continue as a going concern.

5. Evaluate the overall presentation, structure and content of the consolidated financial statements,

including the disclosures, and whether the consolidated financial statements represent the

underlying transactions and events in a manner that achieves fair presentation.

6. Obtain sufficient and appropriate audit evidence regarding the financial information of the

entities or business activities within the Group to express an opinion on the consolidated

financial statements. We are responsible for the direction, supervision, and performance of the

group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned

scope and timing of the audit and significant audit findings, including any significant deficiencies

in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with

relevant ethical requirements regarding independence, and to communicate with them all

relationships and other matters that may reasonably be thought to bear on our independence, and

where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters

that were of most significance in the audit of the consolidated financial statements for the year

ended December 31, 2019 and are therefore the key audit matters. We describe these matters in our

auditors’ report unless law or regulation precludes public disclosure about the matter or when, in

extremely rare circumstances, we determine that a matter should not be communicated in our report

because the adverse consequences of doing so would reasonably be expected to outweigh the

public interest benefits of such communication.

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TRIPOD TECHNOLOGY CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 2019 AND 2018

(In Thousands of New Taiwan Dollars)

2019 2018

ASSETS Amount % Amount %

CURRENT ASSETS

Cash and cash equivalents (Notes 4 and 6) $ 27,614,136 39 $ 27,150,561 38

Financial assets at fair value through profit or loss - current (Notes 4, 7 and 29) 100,383 - 28,068 -

Financial assets at amortized cost (Notes 4, 8 and 31) 7,000 - 7,000 -

Notes receivable (Notes 4 and 9) 312,424 - 330,750 -

Trade receivables (Notes 4 and 9) 16,352,110 23 14,974,957 21

Trade receivables from related parties (Notes 4 and 30) 88 - 31 -

Other receivables (Notes 4 and 9) 428,854 1 430,457 -

Inventories (Notes 4 and 10) 6,541,797 9 6,907,917 10

Prepayments (Note 15) 1,289,353 2 1,979,700 3

Other current assets 16,080 - 24,941 -

Total current assets 52,662,225 74 51,834,382 72

NON-CURRENT ASSETS

Property, plant and equipment (Notes 4, 5, 12 and 32) 15,501,041 22 16,414,443 23

Right-of-use assets (Notes 3, 4 and 13) 316,888 - - -

Other intangible assets (Notes 4 and 14) 52,996 - 43,441 -

Deferred tax assets (Notes 4 and 24) 2,569,190 3 2,283,150 3

Long-term prepayments for lease (Note 15) - - 296,755 1

Other non-current assets (Note 16) 502,692 1 648,334 1

Total non-current assets 18,942,807 26 19,686,123 28

TOTAL $ 71,605,032 100 $ 71,520,505 100

LIABILITIES AND EQUITY

CURRENT LIABILITIES

Short-term borrowings (Note 17) $ 14,410,764 20 $ 16,997,441 24

Financial liabilities at fair value through profit or loss - current (Notes 4, 7 and 29) 5,547 - 42,128 -

Contract liabilities - current (Note 22) 787,518 1 687,874 1

Trade payables 6,492,984 9 6,013,266 8

Other payables (Notes 18 and 27) 10,605,488 15 10,462,557 15

Current tax liabilities (Note 4) 1,087,356 1 1,422,847 2

Provisions - current (Notes 4 and 19) 526,600 1 523,680 1

Lease liabilities - current (Notes 3, 4 and 13) 12,361 - - -

Other current liabilities (Note 18) 743,299 1 613,904 1

Total current liabilities 34,671,917 48 36,763,697 52

NON-CURRENT LIABILITIES

Deferred tax liabilities (Notes 4 and 24) 2,634,839 4 2,202,439 3

Lease liabilities - non-current (Notes 3, 4 and 13) 18,685 - - -

Net defined benefit liabilities - non-current (Notes 4 and 20) 107,455 - 100,304 -

Guarantee deposits (Note 18) 23,318 - 25,419 -

Total non-current liabilities 2,784,297 4 2,328,162 3

Total liabilities 37,456,214 52 39,091,859 55

EQUITY ATTRIBUTABLE TO OWNERS OF THE COMPANY

Share capital (Note 21) 5,256,059 7 5,256,059 7

Capital surplus (Note 21) 333,778 1 333,778 -

Retained earnings (Note 21)

Legal reserve 5,112,088 7 4,618,248 7

Special reserve 2,190,702 3 1,703,150 2

Unappropriated earnings 24,651,354 35 22,701,647 32

Total retained earnings 31,954,144 45 29,023,045 41

Other equity (Note 21) (3,402,771) (5) (2,191,778) (3)

Total equity attributable to owners of the Company 34,141,210 48 32,421,104 45

NON-CONTROLLING INTERESTS 7,608 - 7,542 -

Total equity 34,148,818 48 32,428,646 45

TOTAL $ 71,605,032 100 $ 71,520,505 100

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

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

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

2019 2018

Amount % Amount %

OPERATING REVENUE (Notes 4, 22 and 30) $ 54,450,944 100 $ 52,105,683 100

OPERATING COSTS (Notes 10 and 23) 43,184,960 80 42,341,188 81

GROSS PROFIT 11,265,984 20 9,764,495 19

OPERATING EXPENSES (Notes 9 and 23)

Selling and marketing expenses 1,978,524 4 2,030,538 4

General and administrative expenses 2,218,436 4 2,115,316 4

Research and development expenses 205,446 - 183,004 -

Expected credit (gain) loss (9,603) - 13,752 -

Total operating expenses 4,392,803 8 4,342,610 8

OTHER OPERATING INCOME AND EXPENSES

(Notes 12 and 23) (102,597) - - -

PROFIT FROM OPERATIONS 6,770,584 12 5,421,885 11

NON-OPERATING INCOME AND EXPENSES

Other income (Notes 4 and 23) 827,893 1 957,901 2

Other gains and losses (Note 23) 450,978 1 477,298 1

Finance costs (Notes 4 and 23) (251,164) - (331,811) (1)

Total non-operating income and expenses 1,027,707 2 1,103,388 2

PROFIT BEFORE INCOME TAX FROM

CONTINUING OPERATIONS 7,798,291 14 6,525,273 13

INCOME TAX EXPENSE (Notes 4 and 24) (1,760,971) (3) (1,586,748) (3)

NET PROFIT FROM CONTINUING OPERATIONS 6,037,320 11 4,938,525 10

(Continued)

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME



2019 2018

Amount % Amount %

OTHER COMPREHENSIVE INCOME (LOSS)

Items that will not be reclassified subsequently to

profit or loss:

Remeasurement of defined benefit plans (Notes 4

and 20) $ (7,018) - $ 837 -

Unrealized gain (loss) on investments in equity

instruments at fair value through other

comprehensive income (Notes 4 and 21) 535 - (124,846) -

Income tax relating to items that will not be

reclassified subsequently to profit or loss

(Notes 4 and 24) 1,403 - 27,772 -

(5,080) - (96,237) -

Items that may be reclassified subsequently to profit

or loss:

Exchange differences on translating the financial

statements of foreign operations (Notes 4

and 21) (1,513,742) (3) (505,279) (1)

Income tax relating to items that may be


(Notes 4 and 24) 302,749 1 142,902 -

(1,210,993) (2) (362,377) (1)

Other comprehensive loss for the year, net of

income tax (1,216,073) (2) (458,614) (1)

TOTAL COMPREHENSIVE INCOME FOR THE

YEAR $ 4,821,247 9 $ 4,479,911 9

NET PROFIT ATTRIBUTABLE TO:

Owners of the Company $ 6,037,254 11 $ 4,938,398 9

Non-controlling interests 66 - 127 -

$ 6,037,320 11 $ 4,938,525 9

TOTAL COMPREHENSIVE INCOME

ATTRIBUTABLE TO:

Owners of the Company $ 4,821,181 9 $ 4,479,784 9

Non-controlling interests 66 - 127 -

$ 4,821,247 9 $ 4,479,911 9

EARNINGS PER SHARE (Note 25)

From continuing operations

Basic $11.49 $9.40

Diluted $11.34 $9.25

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

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CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY



Equity Attributable to Shareholders of the Parent

Others

Unrealized

Exchange Loss on

Differences on Financial Assets at

Translating the Fair Value

Retained Earnings Financial Through Other

Unappropriated Statements of Comprehensive Non-controlling

Share Capital Capital Surplus Legal Reserve Special Reserve Earnings Foreign Operations Income Total Interests Total Equity

BALANCE AT JANUARY 1, 2018 $ 5,256,059 $ 333,778 $ 4,181,680 $ 1,531,129 $ 21,128,618 $ (1,703,150) $ (27,363) $ 30,700,751 $ 7,415 $ 30,708,166

Appropriation of 2017 earnings (Note 21)

Legal reserve - - 436,568 - (436,568) - - - - -

Special reserve - - - 172,021 (172,021) - - - - -

Cash dividends - - - - (2,759,431) - - (2,759,431) - (2,759,431)

Net profit for the year ended December 31, 2018 - - - - 4,938,398 - - 4,938,398 127 4,938,525

Other comprehensive income (loss) for the year ended

December 31, 2018 (Note 21) - - - - 2,651 (362,377) (98,888) (458,614) - (458,614)

Total comprehensive income (loss) for the year ended

December 31, 2018 - - - - 4,941,049 (362,377) (98,888) 4,479,784 127 4,479,911

BALANCE AT DECEMBER 31, 2018 5,256,059 333,778 4,618,248 1,703,150 22,701,647 (2,065,527) (126,251) 32,421,104 7,542 32,428,646


Legal reserve - - 493,840 - (493,840) - - - - -

Special reserve - - - 488,628 (488,628) - - - - -

Cash dividends - - - - (3,101,075) - - (3,101,075) - (3,101,075)

Differences between equity purchase price and carrying amount

arising from actual acquisition or disposal of subsidiary

(Notes 21 and 26) - - - (1,076) 1,076 - - - - -

Disposals of investments in equity instruments at fair value

through other comprehensive income (Note 21) - - - - 535 - (535) - - -

Net profit for the year ended December 31, 2019 - - - - 6,037,254 - - 6,037,254 66 6,037,320

Other comprehensive income (loss) for the year ended

December 31, 2019 (Note 21) - - - - (5,615) (1,210,993) 535 (1,216,073) - (1,216,073)

Total comprehensive income (loss) for the year ended

December 31, 2019 - - - - 6,031,639 (1,210,993) 535 4,821,181 66 4,821,247

BALANCE AT DECEMBER 31, 2019 $ 5,256,059 $ 333,778 $ 5,112,088 $ 2,190,702 $ 24,651,354 $ (3,276,520) $ (126,251) $ 34,141,210 $ 7,608 $ 34,148,818

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

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CONSOLIDATED STATEMENTS OF CASH FLOWS



2019 2018

CASH FLOWS FROM OPERATING ACTIVITIES

Income before income tax $ 7,798,291 $ 6,525,273

Adjustments for:

Depreciation expenses 3,274,434 2,949,572

Amortization expenses 26,434 19,414

Amortization of prepayments for lease - 6,733

Expected credit loss (reversed) recognized on trade receivables (9,603) 13,752

Net gain on fair value changes of financial assets at fair value

through profit and loss (393,336) (281,863)

Finance costs 251,164 331,811

Interest income (434,409) (494,661)

Gain on disposal of subsidiary (253) -

Loss (gain) on disposals of property, plant and equipment 5,740 (5,222)

Impairment loss recognized on non-financial assets 102,597 516,757

Gain on reversal of non-financial assets (224,073) -

Net loss (gain) on foreign currency exchange 133,393 (266,792)

Changes in operating assets and liabilities:

Financial assets mandatorily classified at fair value through profit or

loss 658,043 736,416

Notes receivable 6,563 (96,941)

Trade receivables (1,829,315) (477,266)

Trade receivables from related parties (57) 1,981

Other receivables (12,735) 34,814

Inventories 368,131 (2,136,429)

Prepayments 646,133 (79,823)

Other current assets 1,976 (8,866)

Financial liabilities held for trading (365,601) (330,161)

Contract liabilities 129,358 31,528

Notes payable - (26)

Trade payables 715,489 162,549

Other payables 993,177 741,108

Provisions - current 16,776 68,619

Other current liabilities 115,855 42,221

Net defined benefit liabilities 133 68

Cash generated from operations 11,974,305 8,004,566

Interest received 434,702 477,120

Interest paid (268,263) (310,950)

Income tax paid (1,687,115) (525,532)

Net cash generated from operating activities 10,453,629 7,645,204

(Continued)

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CONSOLIDATED STATEMENTS OF CASH FLOWS



2019 2018

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of financial assets at fair value through other comprehensive

income $ (6,394) $ -

Proceeds from sale of financial assets at fair value through other

comprehensive income 6,929 -

Net cash inflow on disposal of subsidiary 193 -

Payments for property, plant and equipment (3,010,851) (5,246,165)

Proceeds from disposals of property, plant and equipment 3,426 185,773

Increase in refundable deposits - (6,840)

Decrease in refundable deposits 8,095 -

Payments for intangible assets (36,038) (35,862)

Increase in prepayments for other equipment (412,406) (362,661)

Increase in other prepayments - (18,012)

Net cash used in investing activities (3,447,046) (5,483,767)

CASH FLOWS FROM FINANCING ACTIVITIES

Repayments of short-term borrowings (2,397,233) (2,023,122)

Proceeds from guarantee deposits received 30,879 41,342

Repayment of the principal portion of lease liabilities (13,880) -

Distributed cash dividends (3,101,075) (2,759,431)

Net cash used in financing activities (5,481,309) (4,741,211)

EFFECTS OF EXCHANGE RATE CHANGES ON THE BALANCE

OF CASH HELD IN FOREIGN CURRENCIES (1,061,699) (22,908)

NET INCREASE (DECREASE) IN CASH AND CASH

EQUIVALENTS 463,575 (2,602,682)

CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE

YEAR 27,150,561 29,753,243

CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR $ 27,614,136 $ 27,150,561

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

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Key audit matters of the Company’s financial statements for the year ended December 31, 2019 are

stated as follows:

Impairment Assessment of Property, Plant and Equipment

As of December 31, 2019, the carrying amount of property, plant and equipment of the Company

was $1,098,801 thousand. According to IAS 36 “Impairment of Assets”, management is required to

assess whether the recoverable amount of an item of property, plant and equipment is below its

carrying amount when the item of property, plant and equipment shows signs of impairment.

As the Company faces strong competition in its region, there is a risk that property, plant and

equipment may be impaired. Management used the valuation model to assess the recoverable

amount of property, plant and equipment. When determining future cash flows, management took

into account the expected future sales growth rate and profit margin based on the outlook of future

operations and calculated the weighted average cost of capital as the discount rate. Since the

aforementioned assumptions involve subjective judgment from management, there is a high degree

of uncertainty in the estimation. Thus, the impairment assessment of property, plant and equipment

was identified as a key audit matter.

Refer to Notes 4, 5 and 12 to the financial statements for details on the accounting policies,

accounting estimates and uncertainty, and relevant disclosures of impairment assessment of

property, plant and equipment.

Our key audit procedures performed in respect of the impairment assessment of property, plant and

equipment were as follows:

1. We obtained the Company’s self-assessment of impairment of each cash-generating unit and

assessed that management included consideration of recent operating performance, historical

trends and industry overview in calculating the expected future sales growth rate and profit

rate as the basis for estimation of future cash flows.

2. We re-evaluated and verified that the recoverable amount which was calculated by

management based on the valuation model and the weighted average cost of capital used by

management, including assumptions about risk-free rate of interest, volatility and risk premium

were consistent with the current situation and industry environment of the Company and also

performed re-execution and recalculation in our procedures.

Occurrence of Sales Revenue

For the year ended December 31, 2019, the operating revenue of the Company amounted to

$4,561,479 thousand, and the Company’s overall operating revenue growth rate decreased by 7%

compared to the previous period. Based on our assessment, there was a risk that the recognition of

sales revenue from significant amount of sales with customers whose individual revenue growth

rates exceeded the Company’s revenue growth rate and operating revenue with longer turnover

days might not actually occur. Thus, the occurrence of operating revenue from customers that met

the abovementioned criteria was identified as a key audit matter.

Refer to Notes 4 and 21 to the financial statements for details on accounting policies and relevant

disclosures of revenue recognition.

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Our key audit procedures performed in respect of the recognition of operating revenue were as

follows:

1. We understood the internal controls related to the aforementioned sales, assessed and tested

the operating effectiveness of the design and implementation of these controls.

2. We performed substantive analytical procedures testing of the aforementioned sales

transactions, and further examined the external documents and the recovery of receivables to

verify the occurrence of such transactions. We also verified that the settlement of trade

receivables was consistent with the trade terms of major customers.

3. We checked significant sales returns and allowances after the balance sheet date to confirm the

existence of revenue transactions.

Responsibilities of Management and Those Charged with Governance for the Financial

Statements

Management is responsible for the preparation and fair presentation of the financial statements in

accordance with the Regulations Governing the Preparation of Financial Reports by Securities

Issuers, and for such internal control as management determines is necessary to enable the

preparation of financial statements that are free from material misstatement, whether due to fraud

or error.

In preparing the financial statements, management is responsible for assessing the Company’s

ability to continue as a going concern, disclosing, as applicable, matters related to going concern

and using the going concern basis of accounting unless management either intends to liquidate the

Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance, including the audit committee, are responsible for overseeing the

Company’s financial reporting process.

Auditors’ Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole

are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report

that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee

that an audit conducted in accordance with the auditing standards generally accepted in the

Republic of China will always detect a material misstatement when it exists. Misstatements can

arise from fraud or error and are considered material if, individually or in the aggregate, they could

reasonably be expected to influence the economic decisions of users taken on the basis of these

financial statements.

As part of an audit in accordance with the auditing standards generally accepted in the Republic of

China, we exercise professional judgment and maintain professional skepticism throughout the

audit. We also:

1. Identify and assess the risks of material misstatement of the financial statements, whether due

to fraud or error, design and perform audit procedures responsive to those risks, and obtain

audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of

not detecting a material misstatement resulting from fraud is higher than for one resulting from

error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the

override of internal control.

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2. Obtain an understanding of internal control relevant to the audit in order to design audit

procedures that are appropriate in the circumstances, but not for the purpose of expressing an

opinion on the effectiveness of the Company’s internal control.

3. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting

estimates and related disclosures made by management.

4. Conclude on the appropriateness of management’s use of the going concern basis of

accounting and, based on the audit evidence obtained, whether a material uncertainty exists

related to events or conditions that may cast significant doubt on the Company’s ability to

continue as a going concern. If we conclude that a material uncertainty exists, we are required

to draw attention in our auditors’ report to the related disclosures in the financial statements or,

if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the

audit evidence obtained up to the date of our auditors’ report. However, future events or

conditions may cause the Company to cease to continue as a going concern.

5. Evaluate the overall presentation, structure and content of the financial statements, including

the disclosures, and whether the financial statements represent the underlying transactions and

events in a manner that achieves fair presentation.

6. Obtain sufficient and appropriate audit evidence regarding the financial information of the

entities or business activities within the Company to express an opinion on the financial

statements. We are responsible for the direction, supervision, and performance of the audit. We

remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned

scope and timing of the audit and significant audit findings, including any significant deficiencies

in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with

relevant ethical requirements regarding independence, and to communicate with them all

relationships and other matters that may reasonably be thought to bear on our independence, and

where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters

that were of most significance in the audit of the financial statements for the year ended December

31, 2019 and are therefore the key audit matters. We describe these matters in our auditors’ report

unless law or regulation precludes public disclosure about the matter or when, in extremely rare

circumstances, we determine that a matter should not be communicated in our report because the

adverse consequences of doing so would reasonably be expected to outweigh the public interest

benefits of such communication.

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BALANCE SHEETS

DECEMBER 31, 2019 AND 2018


2019 2018

ASSETS Amount % Amount %

CURRENT ASSETS

Cash and cash equivalents (Notes 4 and 6) $ 104,846 - $ 234,159 1

Financial assets at amortized cost - current (Notes 4, 8 and 30) 7,000 - 7,000 -

Notes receivable (Notes 4 and 9) 717 - 896 -

Trade receivables (Notes 4 and 9) 774,819 1 674,636 1

Trade receivables from related parties (Notes 4 and 29) 1,301,867 3 949,572 2

Other receivables (Notes 4 and 9) 53,070 - 19,648 -

Other receivables from related parties (Notes 4 and 29) 4,050,866 8 2,979,619 6

Inventories (Notes 4 and 10) 283,959 1 276,308 1

Prepayments 53,698 - 45,735 -

Other current assets 8,811 - 20,881 -

Total current assets 6,639,653 13 5,208,454 11

NON-CURRENT ASSETS

Investments accounted for using the equity method (Notes 4, 11 and 29) 42,795,788 83 40,710,945 86

Property, plant and equipment (Notes 4, 5, 12, 29 and 31) 1,098,801 2 1,094,102 2

Right-of-use assets (Notes 3, 4 and 13) 26,596 - - -

Other intangible assets (Notes 4 and 14) 18,569 - 12,647 -

Deferred tax assets (Notes 4 and 23) 901,717 2 566,438 1

Other non-current assets (Note 15) 99,806 - 44,165 -

Total non-current assets 44,941,277 87 42,428,297 89

TOTAL $ 51,580,930 100 $ 47,636,751 100

LIABILITIES AND EQUITY

CURRENT LIABILITIES

Short-term borrowings (Note 16) $ 5,693,200 11 $ 5,538,218 12

Financial liabilities at fair value through profit or loss - current (Notes 4, 7 and 28) - - 141 -

Contract liabilities - current (Notes 3 and 21) 6,878 - 9,216 -

Trade payables 417,914 1 397,904 1

Trade payables to related parties (Note 29) 276,824 1 226,627 -

Other payables (Notes 17 and 26) 2,358,192 5 1,859,909 4

Other payables to related parties (Note 29) 5,411,373 10 4,006,356 8

Current tax liabilities (Note 4) 558,083 1 883,332 2

Provisions - current (Notes 4 and 18) 12,461 - 11,351 -

Lease liabilities - current (Notes 3, 4 and 13) 10,921 - - -

Other current liabilities (Note 17) 32,104 - 22,983 -

Total current liabilities 14,777,950 29 12,956,037 27

NON-CURRENT LIABILITIES

Deferred tax liabilities (Notes 4 and 23) 2,536,085 5 2,159,156 5

Lease liabilities - non-current (Notes 3, 4 and 13) 15,445 - - -

Net defined benefit liabilities - non-current (Notes 4 and 19) 107,455 - 100,304 -

Guarantee deposits (Note 17) 2,785 - 150 -

Total non-current liabilities 2,661,770 5 2,259,610 5

Total liabilities 17,439,720 34 15,215,647 32

EQUITY ATTRIBUTABLE TO OWNERS OF THE COMPANY

Share capital (Note 20) 5,256,059 10 5,256,059 11

Capital surplus (Note 20) 333,778 1 333,778 1

Retained earnings (Note 20)

Legal reserve 5,112,088 10 4,618,248 10

Special reserve 2,190,702 4 1,703,150 3

Unappropriated earnings 24,651,354 48 22,701,647 48

Total retained earnings 31,954,144 62 29,023,045 61

Other equity (Note 20) (3,402,771) (7) (2,191,778) (5)

Total equity 34,141,210 66 32,421,104 68

TOTAL $ 51,580,930 100 $ 47,636,751 100

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

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STATEMENTS OF COMPREHENSIVE INCOME



2019 2018

Amount % Amount %

OPERATING REVENUE (Notes 4, 21 and 29) $ 9,461,697 100 $ 9,098,357 100

OPERATING COSTS (Notes 10, 22 and 29) 4,534,201 48 4,855,451 54

GROSS PROFIT 4,927,496 52 4,242,906 46

UNREALIZED GAIN ON TRANSACTIONS WITH

SUBSIDIARIES, ASSOCIATES AND JOINT

VENTURES (Note 4) (375,704) (4) (210,875) (2)

REALIZED GAIN ON TRANSACTIONS WITH

SUBSIDIARIES, ASSOCIATES AND JOINT

VENTURES (Note 4) 210,875 2 82,899 1

REALIZED GROSS PROFIT 4,762,667 50 4,114,930 45

OPERATING EXPENSES (Notes 9, 22 and 29)

Selling and marketing expenses 230,287 3 214,806 2

General and administrative expenses 866,540 9 622,455 7

Research and development expenses 129,294 1 122,859 1

Expected credit (gain) loss (46) - 4,182 -

Total operating expenses 1,226,075 13 964,302 10

OTHER OPERATING INCOME AND EXPENSES

(Notes 12 and 22) (102,597) (1) - -

PROFIT FROM OPERATIONS 3,433,995 36 3,150,628 35

NON-OPERATING INCOME AND EXPENSES

Other income (Notes 4, 22 and 29) 54,454 1 194,665 2

Other gains and losses (Notes 4, 22 and 29) (2,785) - 12,461 -

Finance costs (Notes 4 and 22) (42,215) - (47,325) (1)

Share of profit of subsidiaries, associates and joint

ventures (Note 4) 3,740,683 39 2,715,168 30

Total non-operating income and expenses 3,750,137 40 2,874,969 31

PROFIT BEFORE INCOME TAX FROM

CONTINUING OPERATIONS 7,184,132 76 6,025,597 66

INCOME TAX EXPENSE (Notes 4 and 23) (1,146,878) (12) (1,087,199) (12)

NET PROFIT FROM CONTINUING OPERATIONS 6,037,254 64 4,938,398 54

(Continued)

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STATEMENTS OF COMPREHENSIVE INCOME



2019 2018

Amount % Amount %

OTHER COMPREHENSIVE INCOME (LOSS)

Items that will not be reclassified subsequently to

profit or loss:

Remeasurement of defined benefit plans (Notes 4

and 19) $ (7,018) - $ 837 -

Unrealized gain on investments in equity

instruments at fair value through other

comprehensive income (Notes 4 and 20) 535 - - -

Share of other comprehensive loss of subsidiaries,

associates and joint ventures accounted for

using the equity method (Notes 4 and 20) - - (124,846) (1)

Income tax relating to items that will not be


(Notes 4 and 23) 1,403 - 27,772 -

(5,080) - (96,237) (1)

Items that may be reclassified subsequently to profit

or loss:

Exchange differences on translating the financial

statements of foreign operations (Notes 4

and 20) (1,513,742) (16) (505,279) (6)

Income tax relating to items that may be


(Notes 4 and 23) 302,749 3 142,902 2

(1,210,993) (13) (362,377) (4)

Other comprehensive loss for the year, net of

income tax (1,216,073) (13) (458,614) (5)

TOTAL COMPREHENSIVE INCOME FOR THE

YEAR $ 4,821,181 51 $ 4,479,784 49

EARNINGS PER SHARE (Note 24)

From continuing operations

Basic $ 11.49 $ 9.40

Diluted $ 11.34 $ 9.25

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

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STATEMENTS OF CHANGES IN EQUITY



Others

Exchange

Differences on

Translating the

Financial

Unrealized Loss

on Financial

Assets at Fair

Value

Retained Earnings Statements of Through Other

Share Capital Capital Surplus Legal Reserve Special Reserve

Unappropriated

Earnings

Foreign

Operations

Comprehensive

Income Total Equity

BALANCE AT JANUARY 1, 2018 $ 5,256,059 $ 333,778 $ 4,181,680 $ 1,531,129 $ 21,128,618 $ (1,703,150) $ (27,363) $ 30,700,751


Legal reserve - - 436,568 - (436,568) - - -

Special reserve - - - 172,021 (172,021) - - -

Cash dividends - - - - (2,759,431) - - (2,759,431)

Net profit for the year ended December 31, 2018 - - - - 4,938,398 - - 4,938,398

Other comprehensive income (loss) for the year ended December 31, 2018 (Note 20) - - - - 2,651 (362,377) (98,888) (458,614)

Total comprehensive income (loss) for the year ended December 31, 2018 - - - - 4,941,049 (362,377) (98,888) 4,479,784

BALANCE AT DECEMBER 31, 2018 5,256,059 333,778 4,618,248 1,703,150 22,701,647 (2,065,527) (126,251) 32,421,104


Legal reserve - - 493,840 - (493,840) - - -

Special reserve - - - 488,628 (488,628) - - -

Cash dividends - - - - (3,101,075) - - (3,101,075)

Differences between equity purchase price and carrying amount arising from actual

acquisition or disposal of subsidiary (Notes 11 and 20) - - - (1,076) 1,076 - - -

Disposals of investments in equity instruments at fair value through other comprehensive

income (Note 20) - - - - 535 - (535) -

Net profit for the year ended December 31, 2019 - - - - 6,037,254 - - 6,037,254

Other comprehensive income (loss) for the year ended December 31, 2019 (Note 20) - - - - (5,615) (1,210,993) 535 (1,216,073)

Total comprehensive income (loss) for the year ended December 31, 2019 - - - - 6,031,639 (1,210,993) 535 4,821,181

BALANCE AT DECEMBER 31, 2019 $ 5,256,059 $ 333,778 $ 5,112,088 $ 2,190,702 $ 24,651,354 $ (3,276,520) $ (126,251) $ 34,141,210

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

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- 10 -


STATEMENTS OF CASH FLOWS



2019 2018

CASH FLOWS FROM OPERATING ACTIVITIES

Income before income tax $ 7,184,132 $ 6,025,597

Adjustments for:

Depreciation expenses 146,250 94,221

Amortization expenses 10,571 9,519

Expected credit loss (reversed) recognized on trade receivables (46) 4,182

Net gain on fair value changes of financial assets at fair value

through profit or loss (1,224) (2,354)

Finance costs 42,215 47,325

Interest income (1,629) (3,067)

Share of profit of subsidiaries, associates and joint ventures (3,740,683) (2,715,168)

Gain on disposals of property, plant and equipment (26) (3,639)

Gain on disposals of investment in equity method (253) -

Impairment loss recognized on non-financial assets 102,597 139,034

Gain on reversal of non-financial assets (20,233) -

Unrealized gain on sales with subsidiaries, associates and joint

ventures 375,704 210,875

Realized gain on sales with subsidiaries, associates and joint

ventures (210,875) (82,899)

Net loss on foreign currency exchange 9,087 239

Changes in operating assets and liabilities:

Financial assets mandatorily classified at fair value through profit or

loss 1,083 4,350

Notes receivable 179 2,366

Trade receivables (117,669) (270,728)

Trade receivables from related parties (356,828) 59,083

Other receivables (33,727) 12,742

Other receivables from related parties (1,125,648) 2,562,441

Inventories 12,582 (83,183)

Prepayments (7,963) 26,375

Other current assets 11,960 (12,881)

Financial liabilities held for trading - (2,800)

Contract liabilities (2,338) (3,001)

Trade payables 27,221 448

Trade payables to related parties 53,271 (141,856)

Other payables 510,036 285,952

Other payables to related parties 1,460,774 (2,100,708)

Provisions-current 1,110 3,234

Other current liabilities 7,343 (8,313)

Net defined benefit liabilities 133 68

Cash generated from operations 4,337,106 4,057,454

Interest received 1,921 2,877

Interest paid (45,979) (43,204)

Income tax paid (1,126,325) (212,207)

Net cash generated from operating activities 3,166,723 3,804,920

(Continued)

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- 11 -


STATEMENTS OF CASH FLOWS



2019 2018

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of financial assets at fair value through other comprehensive

income $ (6,394) $ -

Proceeds from sale of financial assets at fair value through other

comprehensive income 6,929 -

Acquisition of subsidiaries - (50,000)

Net cash inflow on disposal of subsidiary 2,522 -

Payments for property, plant and equipment (220,122) (409,979)

Proceeds from disposals of property, plant and equipment 524 12,017

Increase in refundable deposits (800) -

Payments for intangible assets (16,493) (876)

Decrease in other receivables from related parties 3,153 501

Increase in prepayments for other equipment (83,119) (44,254)

Net cash used in investing activities (313,800) (492,591)

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from short-term borrowings 154,757 -

Repayments of short-term borrowings - (629,457)

Proceeds from guarantee deposits received 4,772 1,000

Repayment of the principal portion of lease liabilities (12,439) -

Dividends paid (3,101,075) (2,759,431)

Acquisition of subsidiaries (25,000) -

Net cash used in financing activities (2,978,985) (3,387,888)

EFFECTS OF EXCHANGE RATE CHANGES ON THE BALANCE

OF CASH HELD IN FOREIGN CURRENCIES (3,251) 3,640

NET DECREASE IN CASH AND CASH EQUIVALENTS (129,313) (71,919)

CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE

YEAR 234,159 306,078

CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR $ 104,846 $ 234,159

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

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32

TRIPOD TECHNOLOGY CORPORATION Audit Committee’s Review Report

The Board of Directors has submitted the Company's 2019 Business

Report, Financial Statements (including consolidated financial

statements), and proposal for allocation of earnings. The CPA firm of

Deloitte & Touche was retained to Audit Tripod’s Financial Statements

and has issued an audit report relating to the above mentioned Financial

Statements. The Business Report, Financial Statements (including

consolidated financial statements), and earnings allocation proposal

have been reviewed by the Audit Committee and found in compliance

with requirements. According to relevant requirements of the Securities

and Exchange Act and the Company Law, we hereby submit this report.

To : 2020 Annual Shareholders' Meeting


Chairman of Audit Committee: Tai, Hsing-Cheng

May 7, 2020

Attachment 3

33


Rules and Procedures for Board of Directors Meetings Article 1: The Rules are hereby formulated pursuant to Article 26-3(8) of the Securities and Exchange Act

(hereinafter referred to as the "Act"). Article 2: The Company's major agenda of the Board meeting, operating procedures, particulars to be specified in the

minute book, public notice and items to be complied with, shall be handled in accordance with these Rules. Article 3: The Board of Directors shall meet at least once quarterly in principle. The reasons for calling a Board of

Directors' Meeting shall be notified to each director and supervisor (if there is any) at least 7 days in advance. In emergency circumstances, however, a meeting may be called on a shorter notice. The Board of Directors shall convene a meeting by giving a notice in writing, or by means of fax or email. All matters set out in Article 7(1) shall be specified in the notice of the reasons for calling a Board of Directors meeting; none of them may be raised by an extempore motion.

Article 4: The Board of Directors shall hold a meeting at a venue and a time suitable for the Board of Directors' Meeting.

Article 5: The Board of Directors shall be convened on a regular basis. The Board will designate a unit to handle the administrative matters relating to the Company's Board meetings. The meeting agenda and items shall be prepared in advance. The meeting notice shall be given to all directors as per the time limit specified in the preceding provision with sufficient meeting materials provided. If 2 or more directors find insufficient information regarding the Company's directors or supervisors as required by the preceding paragraph and if an independent director believes the agenda information is incomplete, the Board of Directors shall postpone the discussion of the matters. When the meeting is in progress, if more than one director find the meeting materials insufficient and agreed by more than one independent director, they shall propose for postponing the discussion of such matters to the Board.

Article 6: The agenda for the Board of Directors meetings shall include at least the following: I. Report Items:

(I) Minutes of the last meeting and the implementation status. (II) Major financial reports. (III) Internal audit reports and (IV) Other important reporting items.

II. Discussions: (I) Discussion items for the last meeting. (II) Items for discussion in the meeting.

III. Extempore Motions Article 7: The Company shall discuss the following matters:

I. Business plans of the Company. II. Annual and semi-annual financial reports. However, this provision doesn't apply to the semi-annual

financial reports, which need not be examined and certified by a certified public accountant in accordance with the provisions of laws and regulations;

III. Adoption or amendment of an internal control system in accordance with Article 14-1 of the Act, and evaluation of the effectiveness of the internal control system.

IV. Adoption or amendment of the Company's procedures for handling or amendment of assets, derivative product transactions, loaning of funds to other parties, or providing guarantees for other parties in accordance with Article 36-1 of the Act.

V. Offering, issuance, or private placement of equity-type securities. VI. Appointment and/or dismissal of financial, accounting or internal audit officers; and VII. A donation to a related party or a major donation to a non-related party. However, a public-interest

donation of disaster relief for a major natural disaster may be submitted to the following Board of Directors' Meeting for retroactive recognition.

VIII. Any matter that requires a resolution of a Shareholders’ Meeting or a Board of Directors' Meeting or any major matters as prescribed by the competent authority pursuant to Article 14-3 of the Act or the Articles of Association or other regulations.

The term "related party" in subparagraph 7 of the preceding paragraph means a related party as defined in the Regulations Governing the Preparation of Financial Reports by Securities Issuers. The term "substantial donation to a non-related party" means any donation or a series of donations within a one-year period to a single recipient that, on an individual basis or cumulatively, amount to NT$100 million or more, or reach 1% of the net operating revenue or 5% of the paid-in capital as stated in the audited financial reports for the

Attachment 4

34

most recent fiscal year. The term "within a one-year period" means the period between one year prior to the date of this Board meeting. Amount of the donations already approved by the Board should be excluded. If the foreign company shares have no par value or a par value other than NT$10, the amount of 5% of paid-in capital in the second paragraph shall be calculated as 2.5% of shareholders' equity. If the Company has independent directors, at least one of the independent directors shall attend the Board Meeting in person. For matters that shall be submitted to the Board of Directors for a resolution as specified in paragraph 1, all independent directors shall attend the meeting. If the independent director is unable to attend the meeting in person, he/she shall appoint other Independent Directors as his/her proxy to attend the meeting. If an independent director has an objection or reservation to the Board of Directors' Meeting, it shall be recorded in the minute book of the Board meeting; if an independent director is unable to attend a meeting to express his/her objection or reservation in person, he/she shall issue a written opinion in advance, and set out in the minutes of the Board of Directors' Meeting. Apart from matters referred to in Article 1 of the preceding paragraph, which are required to be submitted for discussion by the Board, when the Board delegates any exercise of its powers pursuant to laws or regulations of the Articles of Association, matters such as the level and substance of the delegation shall be concretely and specifically set out. The implementation shall also be reported to the Board.

Article 8: When a Board of Directors' Meeting is convened, a signature book shall be available to record the signatures of directors present for reference. A Director shall attend Board Meetings in person. If he or she is unable to attend the meeting in person, he or she may attend the meeting via videoconferencing or appoint another director to attend the meeting as his or her proxy in accordance with the Company’s Articles of Association. Attendance via video conference is deemed to be attendance in person. When a Director appoints another Director to attend a Board Meeting, he or she shall, each time, issue a written proxy. The proxy form shall state therein the scope of authority of such proxy with reference to the subject matters to be discussed as listed in the Board Meeting notice. A Director's proxy as described in the second paragraph may act as a proxy for only one Director.

Article 9: The Board of Directors is convened and chaired by the Chairman. However, the first Board of Directors' Meeting shall be convened by the Director who has the most votes on behalf of the Board of Shareholders, and the Chairman shall be the convener. If there are two or more conveners, the Chairman shall be elected from among themselves. Pursuant to Company Act, Article 203, Paragraph 4, or Article 203-1, Paragraph 3, the majority or more of the directors may convene a board meeting on their own, the directors shall agree among themselves as to who shall act as the chairman of the meeting. In the event that the Chairman of the Board is unable to exercise his or her duties during his or her absence or for cause, the Vice Chairman shall act as his or her proxy. In the absence of the Vice Chairman or if the Vice Chairman is unable to exercise his or her duties during his or her absence or for cause, the Chairman shall appoint a Managing Director to act as his or her proxy. If the Company has no Managing Directors, a Director shall be appointed as proxy. In the absence of such appointment, the proxy shall be elected from among the Managing Directors or Directors.

Article 10: The Company shall hold a Board of Directors' Meeting to notify the relevant departments or subsidiaries of the Company to be present depending on the proposal. If necessary, certified public accountants, lawyers or other professionals may be invited to attend the meeting as guests and to make explanatory statements. Provided, however, that they shall leave the meeting when discussion or voting takes place.

Article 11: If the majority of the Directors are not present at the schedule commencement time of the meeting, the Chairman of the meeting may announce the postponement of the meeting not more than twice. If a quorum has not been reached after the second postponement, the Chairman may convene a new meeting in accordance with the procedure under Paragraph 2, Article 3 of these Rules. For the purpose of the term "all Directors" as used in the preceding paragraph and in Article 17, Paragraph 2, Subparagraph 2, shall refer to the Directors actually in the office at the given time.

Article 12: The Board shall proceed with the procedures set out in the meeting notice. However, the change of the majority of Directors who have been agreed with the consent of a majority of the Directors present at a meeting may be changed. The Chairman shall not announce the adjournment of the meeting without the consent of the majority of the Directors present. During the Board meeting, if the number of Directors present at the meeting is not more than half of the Directors attending the meeting, the Chairman shall declare a suspension of the meeting in accordance with Paragraph 1 of the preceding article.

Article 13: The Chairman may declare an end to discussion of a proposal in the agenda if he deems the proposal in

35

discussion is ready for a vote and may then have the proposal voted on. When the Directors are deliberating a resolution to be adopted in a meeting of the Board, the resolution shall be deemed approved and voted on by the Board if all Directors present at the meeting consent to the passing of such resolution without raising any objection when the Chairman puts forward the relevant resolutions for approval. If, upon the Chairman proposing the relevant resolution for approval, a Director states his or her dissent, the resolution shall be voted on in the manner set out below. Formal votes may be cast in one of the following manners as determined by the Chairman, provided, however, that when a person present at the meeting voices his or her objection, the decision shall be made according to a majority vote. I. Vote by show of hands or a vote by voting machine; II. Roll-call vote; III. Vote by ballots; IV. Any other voting method as determined by the Company; V. When the Board votes for a proposal, the Chairman shall appoint counting personnel and all Directors

present shall act as monitoring personnel. All Directors present at the meeting mentioned in the preceding two paragraphs shall not be a Director who is not entitled to exercise voting rights pursuant to Paragraph 1, Article 15.

Article 14: Unless a higher approval threshold is required under the Securities and Exchange Act and the Company Act, a proposal to be resolved at the Company’s Board meeting shall be approved by consent of more than half of the Directors present at the meeting attended by a majority of all Directors. Results of the votes shall be announced on the spot and recorded. When there is an amendment or an alternative to a proposal, the Chairman shall present the amended or alternative proposal together with the original proposal and decide the order in which they will be put to a vote. If one of the proposals is passed, the other proposals shall be deemed rejected and no further voting shall be required. For resolutions of the Board of Directors, if the Company is required to comply with laws and regulations and the major messages stipulated by the competent authority, the Company shall transfer the contents to the Market Observation Post System (MOPS) within the prescribed time.

Article 15: If a Director is in any of the following circumstances related to matters to be discussed at the meeting, he/she shall not participate in the discussion and voting on the proposal and shall abstain himself or herself from discussion and voting on the proposal and cannot exercise the voting right for and on behalf of another Director. I. For any proposal in which a Director or the legal person he or she represents is an interested party and

when his/her interest is likely to compromise the interest of the Company, the Director shall explain the important aspects of his/her interest at the Board meeting.

II. The Directors shall abstain himself or herself. III. A resolution has been resolved by the Board of Directors. IV. Where the spouse, a blood relative within the second degree of kinship of a director, or any company

which has a controlling or subordinate relation with a director has interests in the matters under discussion in the meeting of the preceding paragraph, such director shall be deemed to have a personal interest in the matter.

When the matter is being discussed and resolved, all Directors present at the meeting shall still include Directors prohibited from exercising voting rights in the preceding paragraph.

Article 16: The resolutions of every Board Meeting shall be recorded in the minute book. The minute book shall accurately record the following items: I. The term, place and time of the meeting. II. Name of the Chairman. III. The attendance of the Directors, including the names and numbers of those who are present, on leave,

and absent. IV. The names and titles of the other attendants. V. The name of the recorder. VI. Report items: The name, title, and important opinions of the directors, experts and other personnel. VII. Discussion Items: The discussion items and the results of the proposal, the voting method and the

result of each proposed resolution; the summary of opinion by the Directors, experts, and other

personnel; the name of any Director that is an interested party as referred to in Paragraph 1 of the preceding Article, an explanation of the important aspects of the relationship of interest, the reasons why the Director was required or not required to enter recusal, and the status of their recusal; any

dissenting opinion or abstention with a written statement; any written statement provided by the

Independent Directors pursuant to Paragraph 2, Articles 7 of the Rules;

36

VIII. Extempore motion: the names of the persons proposing the extempore motion; the voting method and

the result of each proposed resolution; the summary of opinion by the Directors, experts, and other

personnel; the name of any Director that is an interested party as referred to in Paragraph 1 of the

preceding Article, an explanation of the important aspects of the relationship of interest, the reasons why the Director was required or not required to enter recusal, and the status of their recusal; any

dissenting opinion or abstention with a written statement; and IX. Other matters that shall be recorded. Any of matters in relation to a resolution passed at a meeting of the Board of Directors shall be stated in the minute book and within two days of the meeting be published on an information reporting website designated by the competent authority: The Board of Directors is a part of the minute book and shall be properly stored in the existence of the Company. The minute book shall be signed or stamped by the Chairman and the reporter. The meeting minutes shall be distributed to each Director within 20 days after the meeting and shall be included in the Company's important archive for permanent and proper preservation during the existence of the Company. The production and distribution of the minute book as described in Paragraph 1 may be effected by electronic means.

Article 17: The Company shall audio or video record the full process of the Board of Directors' meetings, and shall preserve in electronic for at least 5 years. If before the end of the preservation period referred to in the preceding paragraph any litigation arises in connection with a resolution of a Board of Directors' Meeting, the relevant audio or video recordings shall continue to be preserved until the litigation is concluded. If a Board of Directors' Meeting is held via video conference, the audio and video recordings of the video and audio meetings shall be properly preserved during the existence of the Company as part of the meeting record.

Article 18: The formulation and amendments to these Rules shall be approved by the Board of Directors and reported to the Shareholders' Meeting. These Rules shall go into effect from Jan. 1, 2007. The first amendment was made on Feb. 9, 2007. The second amendment was made on Feb 22, 2008. The third amendment was made on Feb 23, 2010. The fourth amendment was made on Oct 29, 2012. The fifth amendment was made on Dec. 20, 2017 The sixth amendment was made on Feb. 26, 2019

37

TRIPOD TECHNOLOGY CORPORATION Earning Distribution Proposal for 2019

Units: NT$ Item Amount

Unappropriated retained earnings at the beginning of the period 18,618,103,664 Less:_Remeasurement of defined benefit plans recognized in

retained earnings 5,614,375 Add:_Reversal of special reserve for the first-time adoption of

TIFRS 1,075,842 _Cumulative unrealized gain on investments in equity

instruments designated as at fair value through other comprehensive income was transferred directly to retained earnings due to disposal 534,607

Adjusted retained earnings 18,614,099,738 Profit after tax for the year 6,037,254,685 Less: _Appropriated as legal reserve for the year 603,725,469

_Appropriated as special reserve 1,212,069,578 Earnings in 2019 available for distribution by shareholders 22,835,559,376 Total shareholder distributable earnings 22,835,559,376 Distribution items:

Shareholders' cash dividends 3,810,642,760 Unappropriated retained earnings at the end of the period 19,024,916,616 Note: In line with the Income Tax Act, the Company will distribute earnings in 2019 on a

priority basis.

Chairman: Wang, Chiang-Chuang Manager: Wang, Chiang-Chuang Accounting Manager: Li, Cheng-I

Attachment 5

38


Articles of Association Chapter 1 General Provisions

Atrticle 1. The Company shall be incorporated as a company limited by shares, under the Company Act of the

Republic of China. The name of the Company shall be TRIPOD TECHNOLOGY CORPORATION. Atrticle 2. The scope of business of the Company shall be:

I. Design, manufacture, sale and lease of electronic computers, computer system equipment, peripheral equipment and terminal equipment.

II. Electronic cash register and its surrounding design, manufacture, sale and leasing. III. Design, manufacture and sale of computer system software and application software. IV. The design, manufacture, processing and sale of computer products, including sound card, image

card and transmission card. V. Design, manufacture, sales and leasing of electronic and computer components. VI. Design, manufacture, sale and import & export of computer automation equipment VII. Design, manufacture and sale of printed circuit boards, circuit templates and their combinations. VIII. Design, manufacture and sale of multiplex transmission equipment, data transmission equipment,

communication transmission equipment and network system. IX. Manufacturing, processing and sales of communication equipment including data machine, radio

data communicator and digital radio telephone. X. Design, manufacture and sales of monitor, fluorescent tube and LCD. XI. Design, manufacture and sales of electronic instruments & equipment and automation production

equipment. XII. Manufacturing, processing and trading of various electrical and mechanical hardware components. XIII. Agency services of price quotation, bidding and distribution for related products mentioned above

for domestic and foreign manufacturers (except futures). XIV. Import and export business of related products mentioned above, XV. Business not prohibited or restricted by law may be operated except for licensing business.

Article 2-1 The Company may act as a guarantor where necessary for the purpose of carrying out its business. Atrticle 3. As the Company is a shareholder of limited liability in other companies, the total amount of its

investments is not subject to the investment limitation specified in Article 13 of the Company Act. Atrticle 4. The Company shall have its registered head office in Taoyuan City and shall, where necessary and with a

resolution to do so by the Board of Directors, set up branch offices either within or outside the territory of the Republic of China.

Atrticle 5. Deleted.

Chapter 2 Shares

Atrticle 6. The total registered capital stock of the Company shall be NT$6 billion, divided into 600 million shares

with a par value of NT$10 per share. Any unissued shares shall be issued, where necessary, upon the approval of the Board. Of NT$6 billion of the above total capital stock of the Company, NT$2 million with a par value of NT$10, in a total of 20 million shares, shall be retained for the issuance of subscription right, special stocks with stock option or corporate bond with subscription right, which may be issued in installments from time to time upon the approval of the Board.

Atrticle 7. The share certificates of the Company shall be in registered form, and before they are issued, shall be signed by or affixed with the seals of no less than three Directors of the Company, and be certified pursuant to the law. For the shares to be issued to the public by the Company, the issuing company may be exempted from printing any share certificate for the shares issued.

Atrticle 8. The Company shall handle with stock affairs as per the Guidelines Governing Handling of Stock Affairs by Public Stock Companies.

Atrticle 9. Deleted Atrticle 10. Registration for transfer of shares shall be conducted within sixty days from the convening date of a

Appendix

39

regular shareholders' meeting and suspended for a period of the convening date of a regular shareholders meeting, thirty days before the convening date of a special shareholders meeting, or within five days before the date on which dividends, bonus, or other benefits are scheduled to be paid by the Company.


Chapter 3 Shareholders' Meetings

Atrticle 12. There are two types of shareholders' meetings: the general meetings and the temporary meetings. Regular

meetings shall be convened at least once a year by the Board of Directors according to the law within six months after close of each fiscal year, unless otherwise approved by the competent authority with good reasons. Temporary meetings shall be convened whenever necessary according to the laws and regulations.

Atrticle 13. For the general meeting, a meeting notice shall be given to each shareholder no later than thirty days prior to the scheduled meeting date; For special meetings, a meeting notice shall be given to each shareholder no later than 15 days prior to the scheduled meeting date, specifying the time and place of the meeting and the reason for convening the meeting.

Atrticle 14. Shareholders' Meeting is convened and presided over by Chairman. In case the Chairman is on leave of absence or cannot exercise his powers and authority, his proxy shall be subject to Article 208 of the Company Act. As for the meeting convened by any other person having the convening right, he/she shall act as the Chairman of that meeting provided, however, that if there are 2 or more persons having the convening right, the Chairman of the meeting shall be elected from among themselves.

Atrticle 15. A shareholder who is unable to attend a Shareholders’ Meeting may appoint a proxy to attend and vote on his behalf pursuant to a letter of proxy produced by the Company stating the ambit of the proxy’s authority and with the seal of the Company. The use of proxies for attendance by shareholders shall be subject to the Rules Governing the Use of Proxies for Attendance at Shareholder Meetings of Public Companies promulgated by the competent authority, in addition to Article 177 of the Company Act.

Atrticle 16. The shareholders of the Company shall have one voting right for each share, unless otherwise regulated under Article 179 of the Company Act.

Atrticle 17. Unless otherwise provided by the Company Act, all resolutions of a shareholders meeting of the Company shall be passed, at a meeting attended by shareholders holding at least half of the issued capital stock, by more than half of the shareholders attending the meeting. The voting power at a Shareholders' Meeting may be exercised by way of electronic means. Attendance via electronic means is deemed to be attendance in person. Related matters shall be handled subject to the relevant regulations.

Atrticle 18. Resolutions at a shareholders’ meeting shall be recorded in a meeting minute signed by or affixed with the personal seal of the Chairman. The minute book shall be distributed to all the shareholders of the Company within 20 days after the Shareholders’ Meeting. The minute book, the attendance list bearing the signatures of shareholders present at the meeting and the powers of attorney of the proxies shall be kept as per Article 183 of the Company Law. The public announcement of the minute book mentioned in the preceding paragraph shall suffice.

40

Chapter 4 Directors and Supervisors

Atrticle 19. There shall be 7 to 11 directors with a term of 3 years and shall be elected by the shareholders at the

Shareholders' Meeting and shall be eligible for re-election. Total shares held by all directors and supervisors shall be subject to related regulations of securities regulatory authority. In accordance with Article 14-2 and Article 183 of Securities and Exchange Act, the Company shall appoint independent directors numbering not less than 2 persons and not less than one-fifth of the number of directors The election of the independent directors shall be by the nomination system whereby the shareholders' meeting nominate and elect candidates from the candidates list as per Article 192-1 of the Company Act. The professional qualifications, restrictions on both shareholding and concurrent positions held determination of independence, method of nomination and other requirements with regard to the independent directors shall be set forth in accordance with the regulations of competent securities authority. Independent and non-independent directors shall be elected at the same time but on separate ballots.

Atrticle 20. Elections of Independent Directors at the Company shall be conducted in accordance with the candidate nomination system and procedures set out in Article 192-1 of the Company Act. The implementation shall be subject to the Company Act, Securities and Exchange Act and other related laws and regulations. Total registered stocks held by all directors shall be subject to the Rules and Review Procedures for Director and Supervisor Share Ownership Ratios at Public Companies promulgated by the Securities and Futures Commission, Ministry of Finance.

Atrticle 21. When the number of directors falls short by one third of the total number prescribed in the Company’s articles of association, the Company shall call a special shareholders meeting within 60 days from the date of occurrence to hold a by-election to fill the vacancies, so as to fulfill the unexposed term of office of the predecessor.

Atrticle 22. Expiry of the Director's term is less than re-election, may extend the duty to the re-election time. Atrticle 23. The Directors shall constitute the Board of Directors and shall elect one Chairman (and one Vice

Chairman, if necessary) of the Board from among themselves by a majority at a meeting attended by at least two-thirds of the Directors. The Chairman shall externally represent the Company.

Atrticle 24. The Company's operating policies and other important matters shall be adopted by the Board of Directors. The Company’s Board meetings shall be convened by the Chairman of the Board, who shall act as Chairperson of the meeting, provided, except for the first Board meeting of each term after an election of Directors as per Article 203 or the Company Act. A Board meeting may be convened on short notice in the event of emergency. The convening of the meetings mentioned in the preceding paragraph could give a notice to directors by fax or email.

Atrticle 25. Unless a higher approval threshold is required under the Company Act, a proposal to be resolved at the Company’s Board meeting shall be approved by consent of a majority of the Directors present at the meeting attended by a majority of all Directors. When a Director appoints another Director to attend a Board meeting due to his/her absence, he or she shall, each time, issue a written proxy. The proxy form shall state therein the scope of authority of such proxy with reference to the subject matters to be discussed as listed in the Board meeting notice. A Director's proxy as described herein may act as a proxy for only 1 other Director. If the Board of Directors meeting is convened by video conference, attendance via video conference is deemed to be attendance in person.

Atrticle 26. The minute book of the Board of Directors' Meeting shall be signed by the Chairperson of the meeting and a copy distributed to each shareholder within 15 days after the conclusion of the meeting. The minute book, the attendance list bearing the signatures of shareholders present at the meeting and the powers of attorney of the proxies shall be kept at the Company.

Atrticle 27. The Company shall set up the Auditing Committee as per Article 14-4 of the Securities and Exchanges Act. The Audit Committee shall be composed of the entire number of independent directors and is responsible for supervisors' duties as per the Company Act, Securities and Exchange Act and other related laws and regulations.

41

Chapter 5 Managers and employees

Atrticle 28. The Company may have one or more managerial personnel in accordance with the resolution of the Board

of Directors. Appointment, discharge and the remuneration of the managerial personnel shall be decided in accordance with Article 29 of the Company Act.

Atrticle 29. General Managers shall handle business matters of the Company as per the resolutions of the Board of Directors.


Chapter 6 Accounting

Atrticle 31. The fiscal year of the Company shall begin on January 1, and end on December 31, of each year. The

Board shall prepare the following reports after the end of each fiscal year, present the same first to the Supervisors for their inspection at least thirty days prior to the general meeting of the shareholders, and then to the shareholders at the general meeting of the shareholders for their ratifications: (I) Business report (II) Financial statements (III) Proposal for distribution of earnings to shareholders or recovery of prior year losses.

Atrticle 32. 6%-18% of profit of the current year distributable as employee bonus shall be distributed when the Company has profit. Employee bonus may be distributed in the form of shares or in cash. The distributed employees include qualified employees of subsidiaries of the Company. The bonus to directors shall not exceed 1% of profit of the current year distributable upon the adoption at the meeting of the Board of Directors. Proposals for the distribution of employee bonus and bonus to directors shall be submitted to the Shareholder’s Meeting. However, the Company’s accumulated losses shall have been covered before distributing employee bonus and bonus to directors by the aforementioned principles.

Article 32-1: Any profit made by the Company for each fiscal year shall, after deduction of tax, be applied firstly towards making up any losses incurred by the Company in the previous years, secondly retaining 10% of the balance thereof as legal capital reserve, then setting aside or release special capital reserve in accordance with regulations and adding previous unappropriated earnings for the Board of Directors to make surplus profit proposal for distribution for resolution by the Shareholders' Meeting to distribute dividend bonus to shareholders. The Company is in a growing stage in its life cycle. In considering the future operation expansion, capital demands and impact of tax on the Company and shareholders, the capital bonus policy of the Company is formulated based on the Company's capital demands estimated in planned capital budget plan. The appropriation of net income is drafted by the Board of Directors and implemented upon the adoption at the Shareholders' Meeting. The allocation of capital bonus shall be based on the allocated capital bonus offered in the current year and shall not less than 10% of cash bonus distributed.

Chapter 7 Supplementary Provisions:

Atrticle 33. The Company's organization and major regulations shall be formulated by the Board of Directors

separately. Atrticle 34. Any matter not provided for by this Articles of Association shall be subject to the Company Act and

related regulations. Atrticle 35. The Articles of Association were agreed to and signed on December 10, 1991.

The first amendment was made on August 6, 1992. The second amendment was made on July 15, 1993. The third amendment was made on September 29, 1995. The fourth amendment was made on December 12, 1995. The fifth amendment was made on February 5, 1996. The sixth amendment was made on October 30, 1996. The seventh amendment was made on July 19, 1997. The eight amendment was made on June 1, 1998. The ninth amendment was made on May 10, 2000. The tenth amendment was made on June 22, 2001.

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The eleventh amendment was made on June 21, 2002. The twelfth amendment was made on May 18, 2004. The thirteenth amendment was made on May 18, 2005. The fourteenth amendment was made on June 14, 2006. The fifthteenth amendment was made on June 13, 2007. The sixteenth amendment was made on June 13, 2008. The seventeenth amendment was made on June 16, 2009. The eighteenth amendment was made on June 22, 2010. The nineteenth amendment was made on June 17, 2011. The twentieth amendment was made on June 21, 2012. The twenty-first amendment was made on June 20, 2013. The twenty-second amendment was made on June 11, 2014. The twenty-third amendment was made on June 25, 2015. The twenty-fourth amendment was made on June 21, 2016. The twenty-fifth amendment was made on June 22, 2017. The twenty-sixth amendment was made on June 21, 2018.

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Rules and Procedures for Shareholders' Meeting I. The Shareholders' Meeting of the Company shall be proceeded in accordance with the rules set herein

II. Shareholders and their proxies shall attend Shareholders' Meetings based on attendance cards. The number of

shares in attendance shall be calculated according to the shares indicated by the submitted sign-in cards.

III. When the attending shareholders represent a majority (over 50%) of the total number of issued shares, the

Chairman may call the meeting to order. If the number of shares represented by the shareholders present at the

Meeting has not yet constituted the quorum at the time scheduled for the Meeting, the Chairman may postpone

the time for the Meeting, limited to 2 times (the first is 20 minutes and the second is 10 minutes). If after 2

postponements, the number of shares represented by the attending shareholders has constituted more than one-

third of all shares in issue present in person or by proxy and entitled to vote, a tentative resolution may be

passed if the number of shares represented by the attending shareholders has already constituted more than an

aggregate of one-half of all shares in issue in accordance with Article 175 of the Company Act. "

IV. If the Shareholders' Meeting is convened by the Board of Directors, its agenda shall be set by the Board of

Directors, and the Chairman of the Shareholders' Meeting shall be the Chairman of Board of Directors. Unless

otherwise approved in the general meeting, the general meeting shall proceed in accordance with the agenda.

The preceding paragraph applies to circumstances where the general meeting is convened by any person, other

than the Board of Directors, entitled to convene such general meeting.

V. However, in the event that the Chairman adjourns the Meeting in violation of these Rules and Procedures, the

shareholders may designate, by a majority (over 50%) of votes represented by shareholders attending the

Meeting, one person as Chairman to continue the Meeting. The shareholders cannot designate any other person

as Chairman and continue the Meeting in the same or other places after the Meeting is adjourned.

VI. Before speaking, an attending shareholder must specify on a speaker's slip his/her attendance card number and

account name. The order in which shareholders speak will be set by the Chairman.

A shareholder in attendance who has submitted a speaker's slip but does not actually speak shall be deemed to

have not spoken. When the content of the speech does not correspond to the subject given on the speaker's

slip, the spoken content shall prevail.

VII. When discussing a proposal, it should be discussed in the order of the scheduled agenda. In case the speech of

any shareholder violates the above provision or exceeds the scope of the discussion item, the Chairman may

stop the speech of such shareholder.

VIII. Shareholders shall not speak for more than 5 minutes at a time, but may extend the time by 3 minutes with the

permission of the Chairman. The Chairman may stop the speech if the time exceeds the limit. On the same

motion, each speaker may not speak more than twice.

IX. The Chairman may announce the end of discussion and submit an item for a vote if the Chairman deems that

the agenda item is ready for voting.

X. Except otherwise specified in relevant laws or in the Company Act, a resolution shall be adopted by a majority

(over 50%) of the votes represented by the shareholders present at the Meeting. A proposal being put to vote at

a Board meeting shall be deemed approved in the absence of objection voiced by the attending Directors upon

consultation by the Chairman and effective as if approved by a vote.

In case of objections, the Chairman shall record the method and the number or proportion of the votes in the

minute book.

When there is an amendment or an alternative to a proposal, the Chairman shall present the amended or

alternative proposal together with the original proposal and decide the order in which they will be put to a

vote. If any one of the motion has been adopted, the others shall be deemed vetoed and no further voting is

necessary.

XI. A shareholder may appoint a proxy to attend the Shareholders' Meeting due to his/her absence, he or she shall,

each time, issue a written proxy produced by the Company. The proxy shall state therein the scope of authority

of such proxy as per the Company Act and Rules Governing the Use of Proxies for Attendance at the

Shareholders' Meetings of Public Companies. Except in the case of a trust enterprise or securities proxy

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organization approved by the competent securities authority, the proxy voting rights of a person serving as a

proxy for two or more Members may not exceed 3% of total issued shares voting rights. If it does exceed 3%,

the excess portion shall not be counted. A Member may only appoint one proxy to represent him and vote on

his behalf. The power of attorney shall be delivered to the share office of the Company 5 days before the

Shareholders' Meeting. Where multiple power of attorney are received by the Company whichever received

first shall prevail. However, an explicit written statement revoking the previous power of attorney is not

subject to the limit. After the power of attorney of a proxy arrived at the Company, in case the shareholder

issuing the said proxy intends to attend the Shareholders' Meeting in person, a proxy rescission notice shall be

filed with the Company at least 1 day prior to the date of the shareholders' meeting as scheduled in the

Shareholders' Meeting notice so as to rescind the proxy at issue, otherwise, the voting power exercised by the

authorized proxy at the meeting shall prevail.

XII. If an emergency occurs in the course of a meeting which is enough to affect the safety of the participants in the

meeting, the Chairman shall announce the adjournment or suspension of the meeting, evacuate the participants,

and resume the meeting after the emergency is lifted.

XIII. Any matter not provided for by this Articles of Association shall be subject to the Company Act and related

regulations.

XIV. These Regulations thereof shall be effective upon approval of the Shareholders' Meeting. The same shall apply

to any amendments to these Regulations.

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Information on Employees’ Compensation and Remuneration of Directors I. The percentages or ranges of employees’ compensation and remuneration of directors

according to the Company's Articles of Incorporation. In accordance with the Company’s Articles of Incorporation regarding employees’ compensation and remuneration of directors, where the Company made a profit in a fiscal year, the Company shall accrue employees' compensation at rates of no less than 6% and no higher than 18% of net profit after income tax, which should be resolved by the board of directors to be distributed in the form of cash or shares, and includes certain qualified employees of subsidiaries. The Company shall accrue remuneration of directors at rates no higher than 1% of net profit after income tax. Employees' compensation and remuneration of directors should be reported in the shareholders' meeting. However, in the case of accumulated deficits, the Company shall first use the profit to offset deficits, before distributing the remaining profit as employees' compensation and remuneration of directors at the aforementioned rates.

II. The status of employees’ compensation and remuneration of directors approved by the Board of Directors.

Units: NT$ Allocation Items Allocation Amount

Approved by the Board of Directors (A)

Estimated Amount in year of recognition of expenses (B)

Difference (A-B)

Difference reasons and treatment

Employees’ compensation

711,921,502 711,921,502 0

None Remuneration of directors

42,000,000 42,000,000 0

The effect of Issuance of Bonus Shares on the Company's operating performance, earnings per share, and return on equity

Not applicable, since there were no stock dividend allocated in the year.

46


Status of Individual and all Directors' Shareholdings Recorded in the

Shareholders' Directory

I. According to the regulation, all directors of the Company shall hold not less than 16,819,388

shares, and as of the ex-dividend date, April 19, 2020, all directors held 26,260,976 shares.

II. As the Company has established the audit committee, the legal shareholding requirements for

supervisors do not apply.

III. Status of individual and all directors' shareholding: (the base date is the ex-dividend date: April

19, 2020)

Title Name Date of Appointment Tenure

Shares held at the time of election

Shares held on the ex-

dividend date

Chairman Wang, Chiang-Chuang June 21, 2018 3 Years 8,362,532 7,022,532

Vice Chairman Hu, Ching-Hsiu June 21, 2018 3 Years 7,023,713 6,325,713

Directors Hsu, Tsao-Kuei June 21, 2018 3 Years 8,982,056 8,982,056

Director Yun Jieh Investment Co., Ltd. Legal Representative:

Wang, Cheng-Ding June 21, 2018 3 Years 630,000 630,000

Director Winon Investment Limited Legal Representative:

Wu, Chew-Wun June 21, 2018 3 Years 630,000 630,000

Director

Ching Shan International Investment Co., Ltd. Legal Representative:

Tsai Mao Tang

June 21, 2018 3 Years 1,915,329 1,915,329

Director

Chuan-Sheng Investment Co., Ltd. Legal Representative:

Chang, Mei-Lan

June 21, 2018 3 Years 753,080 753,080

Independent Director

Wu, Hong-Cherng June 21, 2018 3 Years 0 0


Wu, Yeong-Cheng June 21, 2018 3 Years 0 0


Tai, Hsing-Cheng June 21, 2018 3 Years 2,266 2,266

Total Number of Directors 28,298,976 26,260,976

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