25.

EQUITY

Share capital

Ordinary shares

	December 31
	2017		2018

Numbers of shares authorized (in thousands)		10,000,000		5,000,000

Numbers of shares reserved (in thousands)
Employee share options		800,000		400,000

Number of shares issued and fully paid (in thousands)		8,738,079		4,321,714

	December 31
	2017		2018
	NT$		NT$		US$ (Note 4)

Share capital authorized	$	100,000,000	$	50,000,000	$	1,633,453

Share capital reserved
Employee share options	$	8,000,000	$	4,000,000	$	130,676

Share capital issued and fully paid	$	87,380,787	$	43,217,144	$	1,411,864

As disclosed in Note 1, the Company acquired 100% shareholdings of ASE through share exchange at an exchange ratio of 1 ordinary share of ASE for 0.5 ordinary share of the Company. The holders of issued ordinary shares with par value NT$10 per share are entitled the right to vote and receive dividends, except the shares held by the Group’s subsidiaries which are not entitled the right to vote. Before the share exchange, 500,000 thousand ordinary shares included in ASE’s authorized shares as of December 31, 2017 were not yet required to complete the share registration process.

In December 2016, ASE’s board of directors approved the issuance of 300,000 thousand ordinary shares for cash capital increase at NT$34.3 per share. ASE has completed the registration formalities for the cash capital increase.

As disclosed in Note 22, there were 424,258 thousand ordinary shares issued under the conversion of Bonds in 2017. The record dates of 101,164 thousand and 323,094 thousand ordinary shares were July 13, 2017 and October 13, 2017, respectively. ASE has completed the registration formalities.

American Depositary Receipts

ASE issued ADSs and each ADS represents 5 ordinary shares of ASE. On April 30, 2018, ASE’s ADSs were fully exchanged to the Company’s ADSs and each of the Company’s ADS represents 2 ordinary shares of the Company. As of December 31, 2017 and 2018, 115,261 thousand and 140,042 thousand ADSs were outstanding and represented approximately 576,305 thousand ordinary shares of ASE and 280,085 thousand ordinary shares of the Company, respectively.

Capital surplus

	December 31
	2017		2018
	NT$		NT$		US$ (Note 4)

May be used to offset a deficit, distributed as cash dividends, or transferred to share capital (1)

Issuance of ordinary shares	$	21,553,853	$	12,906,401	$	421,640
Merger by share exchange		-		117,693,658		3,844,942
Conversion of bonds payable		1,930,066		-		-
Difference between consideration and the carrying amount of the subsidiaries’ net assets during actual disposal or acquisition		7,176,958		6,034,102		197,128
		30,660,877		136,634,161		4,463,710

	December 31
	2017		2018
	NT$		NT$		US$ (Note 4)

May be used to offset a deficit only

Changes in percentage of ownership interest in subsidiaries (2)	$	6,084,895	$	3,727,336	$	121,768
Treasury share transactions		1,151,345		182,354		5,957
Exercised employee share options		1,089,178		1,366,480		44,642
Expired share options (Notes 22 and 29)		223,454		645,978		21,103
Share of changes in capital surplus of associates		83,733		87,136		2,847
Dividends that the claim period has elapsed and unclaimed by shareholders		-		872		29
		8,632,605		6,010,156		196,346

May not be used for any purpose

Employee share options		960,888		583,542		19,064
Equity component of convertible bonds		214,022		-		-
Others (3)		155,936		48,805		1,594
		1,330,846		632,347		20,658

	$	40,624,328	$	143,276,664	$	4,680,714

Such capital surplus may be used to offset a deficit; in addition, when the Company has no deficit, such capital surplus may be distributed as cash dividends or transferred to share capital (limited to a certain percentage of the Company’s capital surplus and once a year).

Such capital surplus arises from the effect of changes in ownership interest in a subsidiary resulted from equity transactions other than actual disposal or acquisition, or from changes in capital surplus of subsidiaries accounted for using the equity method.

Such capital surplus represents the excess of the carrying amount of related accounts over the par value due to employee share options exercised and the Company has not completed registration formalities.

As disclosed in Note 1, share exchange between the Company and ASE was deemed as an organization restructure under common control and the Company recorded the same amounts of equity which were related to ASE’s assets and liabilities (the “continued equity”) and then recognized capital surplus arising from merger by share exchange in the amount of the excess of ASE’s total equity over the Company’s share capital and the continued equity.

In addition, the Company’s special shareholders’ meeting held in June 2018 resolved to distribute cash in NT$10,795,980 thousand (US$352,695 thousand) from capital surplus arising from issuance of ordinary shares.

Retained earnings and dividend policy

The Articles of Incorporation of the Company (the “Articles”) provides that annual net income shall be distributed in the following order:

Replenishment of deficits;

10.0% as legal reserve;

Special reserve appropriated or reversed in accordance with laws or regulations set forth by the authorities concerned;

Addition or deduction of realized gains or losses on equity instruments at fair value through other comprehensive income.

The Articles also provides the policy of the employees’ compensation and remuneration of directors, refer to employees’ compensation and the remuneration of directors in Note 26(g).

The Company is currently in the mature growth stage. To meet the capital needs for business development now and in the future and satisfy the shareholders’ demand for cash inflows, the Company shall use residual dividend policy to distribute dividends, of which the cash dividend is not lower than 30% of the total dividend distribution, with the remainder to be distributed in shares. A distribution plan is also to be made by the board of directors and passed for resolution in the shareholders’ meeting.

Appropriation of earnings to legal reserve shall be made until the legal reserve equals the Company’s share capital. Legal reserve may be used to offset deficits. If the Company has no deficit and the legal reserve has exceeded 25% of the Company’s share capital, the excess may be transferred to capital or distributed in cash.

Items referred to under Rule No. 1010012865 and Rule No. 1010047490 issued by the FSC and in the directive titled “Questions and Answers for Special Reserves Appropriated Following Adoption of IFRSs” should be appropriated to or reversed from a special reserve by the Company.

Others equity items

Exchange differences on translating foreign operations

	For the Year Ended December 31
	2016			2017			2018
	NT$			NT$			NT$			US$ (Note 4)

Balance at January 1	$	4,492,671		$	(1,643,623	)	$	(6,733,659	)	$	(219,982	)
Exchange differences on translating foreign operations		(5,843,856	)		(4,952,815	)		426,186			13,923
Share from associates and joint venture accounted for using the equity method		(292,438	)		(137,221	)		136,608			4,463
Disposal of associates and joint venture accounted for using the equity method		-			-			282,291			9,222

Balance at December 31	$	(1,643,623	)	$	(6,733,659	)	$	(5,888,574	)	$	(192,374	)

Unrealized gain (loss) on available-for-sale financial assets

	For the Year Ended December 31, 2016			For the Year Ended December 31, 2017
	NT$			NT$

Balance at January 1	$	588,119		$	(197,314	)
Unrealized gain (loss) arising on revaluation of available-for-sale financial assets		(257,240	)		169,585
Cumulative loss reclassified to profit or loss on impairment of available-for-sale financial assets		-			50,206
Cumulative loss (gain) reclassified to profit or loss on disposal of available-for-sale financial assets		7,512			(1,517	)
Share from associates and joint venture accounted for using the equity method		(535,705	)		401,610

Balance at December 31	$	(197,314	)	$	422,570

Unrealized gain (loss) on financial assets at FVTOCI

	For the Year Ended December 31, 2018
	NT$			US$ (Note 4)

Balance at January 1 per IAS 39	$	422,570		$	13,805
Adjustment on initial application of IFRS 9 (Note 3)		(287,053	)		(9,377	)
Balance at January 1 per IFRS 9		135,517			4,428
Unrealized gain (loss) recognized during the year
Debt instruments		(63,076	)		(2,061	)
Equity instruments		(398,513	)		(13,019	)
Share from associates and joint venture accounted for using the equity method		(555,271	)		(18,140	)
Realized loss (gain) recognized during the year
Disposal of equity instruments and transferred cumulative gain to retained earnings		(1,518	)		(50	)
Disposal of associates and joint venture accounted for using the equity method		(133,364	)		(4,357	)
Share from associates and joint venture accounted for using the equity method		1,118			36

Balance at December 31	$	(1,015,107	)	$	(33,163	)

Treasury shares (in thousand shares)

	Balance at						Balance at
	January 1		Addition		Decrease		December 31

2016

Shares held by subsidiaries		145,883		-		-		145,883
Shares reserved for bonds conversion		120,000		-		-		120,000

		265,883		-		-		265,883

	Balance at							Balance at
	January 1		Addition		Decrease			December 31

2017

Shares held by subsidiaries		145,883		-		-			145,883
Shares reserved for bonds conversion		120,000		-		-			120,000

		265,883		-		-			265,883

2018

Shares held by subsidiaries		145,883		-		(72,942	)		72,941
Shares reserved for bonds conversion		120,000		-		(120,000	)		-
Shares repurchased from dissenting shareholders in accordance with Business Mergers And Acquisitions Act		-		1,852		(1,852	)		-

		265,883		1,852		(194,794	)		72,941

The Company’s shares held by its subsidiaries at each balance sheet date were as follows:

	Shares Held By Subsidiaries		Carrying Amount		Carrying Amount		Fair Value		Fair Value
	(in thousand shares)		NT$		US$ (Note 4)		NT$		US$ (Note 4)

December 31, 2017

ASE Test		88,200	$	1,380,721			$	3,364,848
J&R Holding		46,704		381,709				1,781,749
ASE Test, Inc.		10,979		196,677				418,840

		145,883	$	1,959,107			$	5,565,437

December 31, 2018

ASE Test		44,100	$	1,380,721	$	45,107	$	2,571,044	$	83,994
J&R Holding		23,352		381,709		12,470		1,361,415		44,476
ASE Test, Inc.		5,489		196,677		6,425		320,031		10,455

		72,941	$	1,959,107	$	64,002	$	4,252,490	$	138,925

Fair values of the Company’s shares held by subsidiaries are based on the closing price from an available published price quotation, which is a Level 1 input in terms of IFRS 13, at the balance sheet dates.

In March 2018, ASE’s board of directors approved, in accordance with Business Mergers and Acquisitions Act, to repurchase ASE’s 1,852 thousand ordinary shares at $38.5 per share held by the shareholders dissenting on the share exchange transaction which has been approved by both of ASE and SPIL’s special shareholders’ meetings on February 12, 2018. In addition, ASE’s board of directors approved a capital reduction in April 2018 to cancel ASE’s 121,852 thousand treasury shares and the record date was April 9, 2018. ASE has completed the registration formalities before April 30, 2018.

ASE issued ordinary shares in connection with its merger with its subsidiaries. The shares held by its subsidiaries were reclassified to treasury shares on the proportion owned by ASE. As disclosed in Note 1, ASE’s ordinary shares held by subsidiaries were exchanged to the Company’s ordinary shares on April 30, 2018 in accordance with the joint share exchange agreement.

The subsidiaries holding the aforementioned treasury shares retain shareholders’ rights except the rights to participate in any capital increase by cash and voting.

Non-controlling interests

	For the Year Ended December 31
	2016			2017			2018
	NT$			NT$			NT$			US$ (Note 4)

Balance at January 1	$	11,492,545		$	12,000,551		$	13,190,129		$	430,909
Adjustment on initial application of IFRS 15 (Note 3)		-			-			5,183			169
Balance at January 1 per IFRS 15		11,492,545			12,000,551			13,195,312			431,078
Share of profit for the year		1,253,438			1,677,941			1,204,217			39,341
Other comprehensive income (loss)
Exchange difference on translating foreign operations		(601,787	)		(334,920	)		(198,365	)		(6,480	)
Unrealized gain on available-for-sale financial assets		1,129			5,763			-			-
Unrealized loss on equity instruments at FVTOCI		-			-			(23,928	)		(782	)
Remeasurement on defined benefit plans		8,846			(13,724	)		(30,079	)		(983	)
Non-controlling interests arising from acquisition of subsidiaries (Note 30)		-			-			3,582,866			117,049
Acquisition of non-controlling interests in subsidiaries		42,857			-			(2,492,915	)		(81,441	)
Partial disposal of subsidiaries (Note 32)		26,436			(3,055	)		1,693,064			55,311
Subsidiaries’ buy back of their own outstanding ordinary shares (Note 32)		(912,886	)		-			(801,884	)		(26,197	)

	For the Year Ended December 31
	2016			2017			2018
	NT$			NT$			NT$			US$ (Note 4)

Non-controlling interest relating to outstanding vested employee share options granted by subsidiaries	$	927,823		$	263,213		$	1,936,643		$	63,268
Non-controlling interest relating to outstanding expired employee share options granted by subsidiaries		-			(159,200	)		-			-
Cash dividends to non-controlling interests		(237,850	)		(246,440	)		(424,815	)		(13,878	)

Balance at December 31	$	12,000,551		$	13,190,129		$	17,639,487		$	576,265