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EMC Annual Report 2020

Sep 30, 2021

52046_rns_2021-09-30_f5c491f4-4ca5-4197-bc88-a5c6d7e7fbb4.pdf

Annual Report

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TWSE Stock Code ： 2383

Elite Material Co., Ltd.

2020

ANNUAL REPORT

Printed Date ： 5th May 2021

This annual report can also be viewed and downloaded at the following website:

http://mops.twse.com.tw

https://www.emctw.com

1. The Company Spokesperson:

Name : RandyYu
Job title : Vice President
Telephone : +886-3-483-7937
Email : [email protected]

Deputy Spokesperson:

Name : Vicky Chiang Job title : Deputy Manager, Finance Department Telephone : +886-3-483-7937 Email : [email protected]

2. Elite Material Co., Ltd.

Headquarters address : No. 18, Datong 1[st] Road, Guanyin District Taoyuan City 32849, Taiwan Telephone : +886-3-483-7937 Hsinchu Factory address : No. 14, Wenhua Road, Fenshan Village Huko Township, Hsinchu County 30352, Taiwan Telephone : +886-3-598-1688

3. Stock Transfer Processing Agent:

Name : Stock Transfer Agent Department Oriental Securities Co., Ltd. Address : 13F, No. 16, Xinzhan Rd., Banqiao Dist., New Taipei City, Taiwan Telephone : +886-2-7753-1699 Website : www.osc.com.tw

4. Independent Auditor:

Name of the accountants : Calvin C. Y. Chiang; Yi-Chun Chen Name of the firm : KPMG Address : 68F, No. 7, Xinyi Road, Section 5, Taipei City, Taiwan Telephone : +886-2-8101-6666 Website : www.kpmg.com.tw

5. Name of the Transaction Place of the Overseas Securities and the

Ways to Inquire the Information of the Overseas Securities:

Not Applicable

6. The Company Website : www.emctw.com

The English version is the translation of the Chinese version and if there is any discrepancy between this English translation

and the Chinese text of this document, the Chinese text shall prevail.

  • 1 -

Contents of the Annual Report

I. BUSINESS REPORT TO SHAREHOLDERS ..................................................... 4

II. COMPANY PROFILE

  1. Date of Incorporation ............................................................................................................... 7 2. Company History ..................................................................................................................... 7

III. CORPORATE GOVERNANCE REPORT

  1. Organization ............................................................................................................................ 11 2. Directors and the Management Team .................................................................................... 13 3. Corporate Governance ........................................................................................................... 27 4. Audit Fees .............................................................................................................................. 55 5. Information for Change of CPAs ........................................................................................... 55 6. The Company’s Chairman, President, and Managers Responsible for Finance or Accounting Who Have Held a Position in the CPA Office or Its Affiliates Within the Latest Year.............................................................................................................................. 55 7. Shareholding Transferred or Pledged by Directors, Management, and Major Shareholders Who Hold 10% of the Company Shares ................................................................................ 55 8. Top Ten Shareholders Being the Related Party as Defined in Statement of Financial Accounting Standards No. 6. ................................................................................................. 57 9. Shareholding Proportion of EMC to Investees ...................................................................... 57 IV. CAPITAL OVERVIEW

  2. Capital and Shares.................................................................................................................. 58 (1) Issued Shares ........................................................................................................................ 58 (2) Composition of Shareholders ................................................................................................... 58 (3) Distribution Profile of Share Ownership .................................................................................... 58 (4) Major Shareholders ............................................................................................................... 59 (5) Net Worth, Earnings, Dividends, and Market Price per Common Share ............................................ 59 (6) Dividend Policy and Its Execution Results ................................................................................. 60 (7) Effects on Business Performance and EPS Resulted from Stock Distribution Proposed by 2017 Annual General Shareholders Meeting ...................................................................................... 60 (8) Employees’ Compensation and Directors Remuneration ............................................................... 61 (9) Share Buyback by the Company ............................................................................................... 61 2. Corporate Bonds .................................................................................................................... 61 3. Preferred Shares ..................................................................................................................... 62 4. Issuance of Overseas Depository Receipts ............................................................................ 62 5. Employee Stock Options........................................................................................................ 62 6. Employee Restricted Stock Option and Share Issued for Merger or Acquisition .................. 62 7. Fund Utilization Plans and Status .......................................................................................... 62 V. OPERATIONAL HIGHLIGHTS 1. Business Activities ................................................................................................................. 63 (1) Business Scope ..................................................................................................................... 63

  3. 2 -

(2) Business Environment ............................................................................................................ 64 (3) Technology and R&D Overview .............................................................................................. 64 (4) Long-Term and Short-Term Business Plan ................................................................................. 65 2. Overview of the Market, Production and Sales Analysis ...................................................... 65 (1) Market Analysis .................................................................................................................... 65 (2) Applications and Production Process of Major Products................................................................ 67 (3) Sources of Major Raw Materials .............................................................................................. 67 (4) Major Suppliers or Customers Who Account for 10% of Purchases /or Revenues in Recent Two Years .................................................................................................................................. 67 (5) Volume and Value of the Production in Recent Two Years ............................................................. 68 (6) Sales Volume and Amount in Recent Two Years .......................................................................... 68 3. Information about Employees ................................................................................................ 69 4. Environmental Protection Measures and Expenses ............................................................... 69 5. Employee Welfare .................................................................................................................. 71 6. Important Contracts and Agreements..................................................................................... 72 VI. FINANCIAL INFORMATION 1. Five-Year Financial Summary ............................................................................................... 72 2. Financial Ratio Analysis for Recent Five Years..................................................................... 76 3. The Audit Committee’s Review Report ................................................................................. 79 4. Financial Reports (Stand-alone) ............................................................................................ 79 5. Financial Reports (Consolidated) .......................................................................................... 79 6. Impact of the Financial Distress Occurred to the Company and Affiliates in Recent Years until the Annual Report Being Published............................................................................... 79 VII.REVIEW AND ANALYSIS OF THE FINANCIAL CONDITION, PERFORMANCE AND RISK MANAGEMENT 1. Review and Analysis of Financial Conditions ....................................................................... 80 2. Review and Analysis of Financial Performance .................................................................... 81 3. Review and Analysis of Cash Flow ....................................................................................... 82 4. Major Capital Expenditures in Recent Years and Impacts on Financial and Operational Situations................................................................................................................................ 82 5. Investment Policies in Recent Years ...................................................................................... 82 6. Risks Management ................................................................................................................. 83 7. Others ..................................................................................................................................... 86 VIII. SPECIAL DISCLOUSE 1. Affiliated Companies ............................................................................................................. 87 2. Private Placement Securities in the Latest Year ..................................................................... 90 3. The Company’s Shares Held or Disposed by Subsidiaries in Recent Years until the Annual Report Being Published............................................................................................. 90 4. Other Supplementary Information ......................................................................................... 90 5. Pursuant to Article 36-3-2 of Security Exchange Act, Event Having Material Impact on the Shareholders’ Equity or Share Price in the Latest Year until the Annual Report Being Published ................................................................................................................................ 90

  • 3 -

I. BUSINESS REPORT TO SHAREHOLDERS

1. Year 2020 Business Results

  • i. Execution Results of Business Plan

  • a. Kunshan production site of Jiangsu Province, China: Monthly production capacity has achieved 1.35 million sheets.

  • b. Zhongshan production site of Guangdong Province, China: Monthly production capacity has achieved 950,000 sheets.

  • c. Guanyin/Hsinchu production site of Taiwan: Monthly production capacity has achieved 650,000 sheets.

  • d. Huangshi production site of Hubei Province, China: Monthly production capacity has achieved 600,000 sheets. (Expected capacity of 900,000 sheets in Q3 2022)

Unit: NT$ thousands

Items Year 2020 Year 2019 %
Revenue 27,200,786 24,865,522 9.39%
Gross profit 7,040,029 6,100,303 15.4%
Operating profit 4,683,451 4,079,550 14.8%
Income before tax 4,843,563 4,203,826 15.22%
Net income 3,694,270 3,245,301 13.83%

Note: Numbers are presented on consolidated basis. The net income of year 2020 includes the net income of NT$5,271 thousand belongs to the minority interests.

ii. Status of Budget Execution: Not applicable

iii. Summary of Cash Flow Statements

Summary of Cash Flow Statements
Unit: NT$thousands
Items Year 2020
Net cash provided by operating activities 3,517,212
Net cash used in investing activities 1,959,127
Net cash used in financing activities 2,113,193
Effects of changes in foreign exchange rate
on cash and cash equivalents (63,820)
Increase in cash in reporting period (618,928)

iv. Analysis of Profitability

Items Year 2020
Year 2019
Return on assets (%) 13.98
13.77
Return on equities (%) 24.39
25.50
Percentage of paid-in capital (%) Operating profit
140.68
127.60
Income before tax
145.49
131.49
Net margin (%) 13.58
13.05
Earningsper share(NT Dollar) 11.33
10.14

  • 4 -

  • v. Results of Research and Development:

New products successfully developed by the Company in 2020:

  1. New environmental-friendly laminates, consumed by 5G satellite communication

  2. New environmental-friendly laminates, consumed by 5G smartphone

  3. Outdoor antenna material consumed by 5G base station

  4. High-end substrate material consumed by packaging

  5. High frequency material consumed by mmWave

Embracing the upcoming 5G era, the optimal materials of 5G handheld devices/ base station/ server/ networking have been developed and enter mass production, with aggressive capacity expansions across the straits. In the future, EMC will continue to put resources in developing high speed, high frequency and high-end package materials, to fulfill the growing demand from its global clients.

II. Summary of Year 2021 Business Plan

  • i. Planning of Sales and Production

  • a. Continuously capacity expansion

  • b. Promote eco-friendly laminate materials

  • c. Balancing sales and production, flexible inventory adjustment and activate cash management

ii. Operating Strategy

  • a. To introduce environmental-friendly materials for 5G infrastructure, and introduce HDI fabricating process to produce PCBs used for high speed, high frequency 5G equipment, datacenter and networking infrastructures.

  • b. To develop laminates consumed by automotive vehicles.

  • c. To maintain lion’s share in high end HDI segment.

iii. Sales Volume Target

  • a. Expected sales volume target:

Copper clad laminates (CCLs): 43 million sheets/year Prepreg (PP): 900 thousand rolls/year Mass Lam (M/L): 1.9 million panels/year

III. Effects from changes in competitions, regulations, and business environment on the future development strategy of the company

  • i. Priorities of the Future Development Strategy of EMC:

  • a. To develop varieties of base materials in order to meet the rising demand from the proliferation of hyperscaler, AI, AIOT, cloud services and edge computing infrastructure, and for the rollout of 5G network.

  • b. To secure the leading position of EMC for materials consumed by HDI PCBs in the global market.

  • c. To expand overseas market and diversify operation risks.

  • 5 -

ii. To strengthen operating performance by precisely executing the internal control policy and the management decisions.

  • iii. Effects from Changes in Competitions, Regulations, and Business Environment:

Since the outbreak of Covid-19 starting January, 2020, the company and its sites have been following the quarantine protocols strictly to ensure the company’s normal operations.

From our observation, the industry has been facing two key trends, 1. As the global communication industry has been upgrading from 4G to 5G, the specification requirements of high-end laminates get higher, and companies with sufficient capacities and strong R&D capabilities will become bigger and bigger. 2. The demand for halogen-free materials keeps growing, on the back of strict environmental regulations. EMC continues to maintain its global leading position in eco-friendly laminates, equipped with long-lasting strength in HDI technology and environmental-friendly materials. After years of efforts, it has finally been recognized by the market and taken into a must-have consideration by the customers, enabling the company to have the competitive edge to succeed

We sincerely thank you for your continued trust, support, and commitment to EMC, and look forward to building a prosperous future together with our shareholders.

Chairman & President: Ding-Yu Dong

  • 6 -

II. COMPANY PROFILE

1. Date of Incorporation

Date of Incorporation: 24 March 1992

1.1. Company Tax ID Number : 86521351 Company Address : No. 18, Datong 1st Road, Guanyin Industrial Park, Guanyin District Taoyuan City 32849, Taiwan Company Telephone : +886-3-4837937 1.2. Factory Establishment Permission: Permission Number : 81 Jian-Yi-Tze No.083375, issued by Construction Tin, Provincial Government on 15 June 1992 Factory Address : No.18, Datong 1st Road, Guanyin Industrial Park, Guanyin District Taoyuan City 32849, Taiwan Factory Telephone : +886-3-4837937

2. Company History

1992 The first meeting of promoters convened and drew up the Articles of Incorporation. Meanwhile, resolution was formed that promoters shall make full payment for the numbers of shares respectively subscribed to by 25 February 1992.

The second meeting of promoters convened to elect Directors and Supervisors; thereafter, the first meeting of the first term Board of Directors called to elect Mr. Zhu, Ho-Zen as the Chairman.

1993 Extraordinary Shareholders’ Meeting was convened, and resolved to increase the capital of the Company by NT$22.5 million. The total paid-in capital rose to NT$430 million after the capital increase. Meanwhile, seven Directors and two Supervisors were elected in accordance with the Article 22 of the Article of Incorporation.

The Letter of Construction Tin, Taiwan Provincial Government (Letter No. 82 Jian-Yi-Tze 075808) issued the factory registration certificate to the Company, and the certificate number was 99-079038-00.

1995 For increasing business and creating more profits, the Extraordinary Shareholders’ Meeting resolved to raise capital of NT$210 million in order to expand factory space and purchase machinery and equipment. The total paid-in capital rose to NT$640 million after the capital increase.

The Company, receiving pre-listing counseling guidance, applied for OTC listing.

The Article of Incorporation was amended in the Annual General Shareholders’ Meeting, increasing the number of Supervisors from two to three. The third term of Directors were elected, and new Chairman was elected among Directors.

1996 The Company held the analyst meeting before initial public offering in the OTC market.

The common shares of the Company began to trade in the OTC market.

  • 7 -

The Board of Directors resolved to increase capacity on existing production site.

1997 The following resolutions were approved in the Extraordinary Shareholders’ Meeting in 1997:

  1. The Company shall issue 7 million new common shares, with a par value of NT$10 per share, at a premium price of NT$35 per share.

  2. The Company shall apply for listing in the Taiwan Stock Exchange in 1998; meanwhile, de-listed from the OTC market.

  3. The Company shall proceed investment business in domestic and overseas market in order to develop business opportunities and expand business scope.

  4. 1998 The Annual General Shareholders’ Meeting elected the fourth term Directors, and Mr. Zhu, Ho-Zen was again elected as the Chairman of the Board.

The common shares of the Company began to trade in the Taiwan Stock Exchange.

  • 2001 The fifth term Directors and Supervisors were elected by the Annual General Shareholders’ Meeting, and Mr. Zhu, Ho-Zen was again elected as the Chairman of the Board by the first meeting of the fifth term Board of Directors.

  • 2002 The Annual General Shareholders’ Meeting resolved to make up the total loss occurred in 2001 by using the legal reserve of NT$18,280,038.

  • 2003 The Annual General Shareholders’ Meeting resolved to make up the total loss occurred in 2002 by the legal reserve of NT$56,449,987 and the capital surplus of NT$61,010,761. Mr. Zhu, Ho-Zen retired from the position of the Chairman in the 18th meeting of the fifth term Board of Directors, and Directors subsequently elected Ms. Dong-Ho, Mei-Chin to substitute the Chairman position.

  • 2004 The sixth term Directors and Supervisors were elected by the Annual General Shareholders’ Meeting, and the first meeting of such Board of Directors elected Mr. Tsai, Fei Liang as the Chairman, and Mr. Dong, Ding Yu as the Vice Chairman.

  • 2005 Hsinchu Factory commenced commercial operation and the Company began to offer Mass Lamination services to printed-circuit board makers.

  • 2006 The sixth term 24th Board of Directors Meeting resolved to re-organize the holding structure. Grand Shanghai and EMC-HK, subsidiaries originally controlled by EMC-Holding, were re-organized as subsidiaries under the control of Grand Zhuhai. Meanwhile, Grand Zhongshan was created and also put under the control of Grand Zhuhai.

2007 The seventh term Directors and Supervisors were elected by the Annual General Shareholders’ Meeting. The first meeting of the seventh term Board of Directors elected Mr. Tsai, Fei Liang and Mr. Dong, Ding Yu as Chairman and Vice Chairman, respectively.

After the capitalization of retained earnings, combined with the conversion of convertible bonds into

  • 8 -

common shares, the number of outstanding shares of the Company increased by 27,499,796 shares. The total share capital of the Company arrived at NT$2,383,918,790.

2008 The Company bought back and canceled 2,318,000 shares. The share capital was reduced to
NT$2,369,331,320.

After the capitalization of retained earnings, combined with the conversion of convertible bonds into common shares, the number of outstanding shares of the Company increased by 21,470,823 shares. The total share capital of the Company arrived at NT$2,575,447,020.

2009 The Company bought back and canceled 2,888,000 shares. The share capital was reduced to
NT$2,546,567,020.

Retained earnings was capitalized. In combination with the exercise of employees’ option certificates and conversion of convertible bonds into common shares, the number of outstanding shares of the Company increased by 13,511,674 shares. The total share capital of the Company arrived at NT$2,681,683,760.

2010 The eighth term Directors and Supervisors were elected by the Annual General Shareholders’ Meeting.
The first meeting of the eighth Board of Directors elected Mr. Tsai, Fei Liang as the Chairman, and Mr.
Dong, Ding Yu as the Vice Chairman.
Retained earnings was capitalized. In combination with the exercise of employees’ option certificates
and conversion of convertible bonds into common shares, the number of outstanding shares of the
Company increased by 16,345,084 shares. The total share capital of the Company arrived at
NT$2,845,134,600.
2011 After capitalization of the retained earnings, combined with the exercise of employees’ option certificates
and conversion of convertible bonds into common shares, the number of outstanding shares of the
Company increased by 18,029,734 shares. The total share capital of the Company arrived at
NT$3,025,431,940.
2012 The Company bought back and canceled 3,000,000 shares. Meanwhile, the exercise of the employees’
option certificates and the conversion of convertible bonds into common shares increased the number of
outstanding shares by 6,849,265 shares. The total share capital of the Company reached
NT$3,063,924,590.
2013 The ninth term Directors and Supervisors were elected by the Annual General Shareholders’ Meeting.
The first meeting of the ninth Board of Directors elected Mr. Tsai, Fei Liang and Mr. Dong, Ding Yu as
Chairman and Vice Chairman, respectively.
The exercise of the employees’ option certificates, combined with the conversion of convertible bonds into
common shares increased the number of outstanding shares of the Company by 5,178,370 shares. The
total share capital of the Company reached NT$3,115,708,290.

2014 After the exercise of the employees’ option certificates and the conversion of convertible bonds into common shares, the number of outstanding shares of the Company increased by 2,030,311 shares. The total share capital of the Company reached NT$3,136,011,400.

  • 9 -
2015 After the exercise of the employees’ option certificates and the conversion of convertible bonds into
common shares, the number of outstanding shares of the Company increased by 3,722,000 shares. The
total share capital of the Company reached NT$3,173,231,400.
2016 The tenth term Directors were elected by the Annual General Shareholders’ Meeting. The first meeting
of the tenth Board of Directors elected Mr. Dong, Ding Yu as Chairman of the Company, and Mr. Tsai, Fei
Liang as Vice Chairman.
The exercise of employees’ option certificates increased the number of the outstanding shares of the
Company by 1,558,000 shares, and the total share capital of the Company arrived at NT$3,188,811,400.
2017 The exercise of employees’ option certificates increased the number of outstanding shares of the Company
by 7,713,180 shares, and the total share capital of the Company arrived at NT$3,196,524,580.
The Board of Directors resolved to establish a wholly-own subsidiary, Elite Material Electronic (Huangshi)
Limited.
2018 The green-field factory located at Huangshi City, Hubei Province of China broke the ground and began
construction.
2019 The Eleventh term Directors were elected by the Annual General Shareholders’ Meeting. The first meeting
of the eleventh Board of Directors elected Mr. Dong, Ding Yu as Chairman of the Company, and Mr. Tsai,
Fei Liang as Vice Chairman.
Mass production of Huangshi City, Hubei Province of China
CB transferred to common shares at NT$ 556060, paid in capital increased to 3,197,080,640
2020 Domestic 4th unsecure convertible bonds are fully converted, CB converted to common shares at NT$
132,102,350, paid in capital increased to 3,329,182,990
  • 10 -

III. CORPORATE GOVERNANCE

1. Organization

1.1. Organization Chart

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1.2. Affairs in charge for each Major Department

Chairman Office To plan and instruct the business operations; to undertake the review and examination of
legal affairs, contacts of the parent company, subsidiaries, and affiliated entities that the
Company has controlling interests in.
President Office 1) To develop the business strategy of the Company and to execute the business plan.
2) To prepare the annual business budget, targets, and strategic management plan.
3) To appoint the persons in charge of quality assurance, customer service, EHS
(Environmental protection, Health, Safety), and HSPM (Hazardous Substance Process
Management System).
4) To set up the target and make the policy of the product quality control, EHS, and HSF
(Hazardous Substance Free).
5) To build up the Company organization, and the systems for product quality control,
EHS, and HSPM, and to monitor the execution and management of such systems.
Financial&
Accounting
Division		 Assist the President and be in charge of the management of finance, accounting,
information system, and EHS system.
  • 11 -
Human Resources
Division		 Assist the President and be in charge of the management of human resources, information
system, and EHS system.
Each Business
Unit (Zhongshan,
Kunshan,
Guanyin, and
Huangshi)		 1) Be in charge of the sales of domestic and overseas markets, the management of
inventory, product engineering design, and customer service.
2) Be responsible for production, quality assurance, and equipment maintenance affairs.
Audit Office Assist the Board of Directors to perform internal control and examine the auditing,
accounting and internal control system and executions.
Procurement
Division		 1) Be in charge of the evaluation, counseling, and management of suppliers and
outsourcers, making sure of the product of the Company can meet the quality standards
of customers and requirements of HSF regulations.
2) Be in charge of procurement, import / export, and custom clearance.
Research &
Development
Division		 Be in charge of the research and development of new products, patent applications and
filings, and promotions of new products.
Marketing &
Promotion Office		 Be in charge of the market research of the Company’s products and formulation of the
marketing strategies.
Q&A Office Be in charge of the integration of quality system and establish database of related product
characters.
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2.2. Major shareholders of EMC’s Directors are institutional shareholders

30 March 2021

30 March 2021
Name of Institutional Shareholders Major Shareholders of the Institutional Shareholders
Yu Chang Investment Co., Ltd. Yu Sheng Investment Co., Ltd.

2.3. Major shareholders of the major shareholders who are juridical persons

30 March 2021

30 March 2021
Name of Juridical Persons Major Shareholders of the Juridical Persons
Yu Sheng Investment Ltd. British Virgin Island Daton West Limited
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----- Start of picture text -----

None
Remarks Note(1)
Relationship
None None None None None None None
30 March 2021 Name
Managers Who Are Spouses or Within Two Degrees of Kinship Title
None None None None None None
President, Elite Electronic Material (Kunshan) Co., Ltd.
Other Positions in EMC and Other Companies
Curriculum vitae Ph.D. in Engineering, Stanford University, USA Assistant Professor, San Jose State University, USA Bachelor in Chemistry, National Cheng-Kung University Production Director, Pou Li Der Inc. Ph.D. in Chemical Engineering, University of Southern California Senior Vice President, SOCLE Technology Corporation VP of AUO Optronics Corp./ President of AUO Business Group Master in Chemical Engineering, University of Nebraska, USA Master in Chemistry, University of LAMAR, USA Master in Power Mechanical Engineering, National Tsin Hua University MBA, National Taiwan University President, Simplo Technology Inc. Excecutive Assistant to CEO, Pegatron Corporation MBA, New York University, USA Senior Vice President, FIH Mobile Limited General manager, BLU of Coretronics corporation
of Spouse % 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Shareholding 29 0 0 0 0
& Minor Children Share 15,842 5,000
% 1.65 0.02 0.00 0.00 0.04 0.00 0.00
Shareholding 0 0 0
Share 5,265,766 51,222 175 147,774
Date Effective 27 Jun 2016 1 May 2007 9 Aug 2018 1 Jul 2006 1 Apr 2011 18 Jan 2019 14 Feb 2019
Sex Male Male Male Male Male Male Male
Name Ding-Yu Dong En-Xiang Guan Michael Sun Li-Gang Wang Yi-Ren Peng Jason Pan Randy Yu
Nationality ROC ROC ROC ROC ROC ROC ROC
Title President Senior Vice President Senior Vice President Vice President Vice President Vice President Vice President (Concurrently Director of Finance Department)
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----- Start of picture text -----

Unit: NT$ thousand
None
Company's Subsidiary
Compensation paid to President and Other Managers in This Table from an Invested Company other than the
B
2.81%
Ratio of Total Compensation (I+II+III+IV) to Net Income (%) A 2.58%
0
Stock
B
Cash 13,958
0
Stock
A
Distribution of Earnings (IV)
Employees' Compensation from
Cash 13,958
B
60,106
A
Allowances (III)
Compensation and 56,541
B
2,891
Pension (II) A
2,891
Severance Pay and
B
26,630
Salary (I)
A
21,965
Name Ding-Yu Dong En-Xiang Guan Michael Sun Li-Gang Wang Yi-Reng Peng Jason Pan Randy Yu Li-Ming Chou Michael Chuang Kenny Su Chang, Wen Xing
Title President Senior Vice President Senior Vice President Vice President Vice President Vice President Vice President Vice President Vice President Vice President Vice President (2020.7.1 retirement) Note:
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2.6.5. Compensation Paid to Managers

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Unit: NT$ thousands
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Unit: NT$ thousands
Title Name Compensation
(Stock)		 Compensation
(Cash)		 Total amount Ratio of Total
Amount to Net
Income (%)
President Ding-Yu Dong 0 13,958 13,958 0.38%
SeniorVice President En-Xiang Guang
SeniorVice President MichaelSun
Vice President Li-Gang Wang
Vice President Yi-Ren Peng
Vice President Jason Pan
Vice President(CFO) RandyYu
Vice President Li-Ming Chou
Vice President MichaelChuang
Vice President Kenny Su
Head of Corporate
Governance		 Li-Chio Chang
Director of Accounting
Department		 Sara Yen

Note: There are no shares being issued by the Company to pay for the Managers’ compensation.

2.6.6. The ratio of total remuneration paid by the Company and by all companies included in the consolidated financial statements for the two latest fiscal years to Directors, Presidents and Vice Presidents of the Company over net income:

The Ratio of Total Paid RemunerationOver Net Income(%) The Ratio of Total Paid RemunerationOver Net Income(%) The Ratio of Total Paid RemunerationOver Net Income(%) The Ratio of Total Paid RemunerationOver Net Income(%)
2019 2020
A B A B
Directors 1.19% 1.33% 1.22% 1.24%
Independent
Directors		 0.45% 0.45% 0.45% 0.45%
President &
Vice President		 2.19% 2.68% 2.58% 2.81%

Remuneration policies, standards and combinations, procedures for determining remuneration, and relevance to business performance and future risks:

  • 25 -

  • ⚫ According to Article 36-1 of the company's articles of association: If the company makes a profit in the year, 3% of the employee's compensation and no more than 1.2% of the director's compensation shall be provided. However, when the company still has accumulated losses, it should reserve the compensation amount in advance. When employees' compensation is distributed in stock or cash, the distribution target must include employees of subordinate companies that meet certain conditions, and the method shall be separately formulated by the board of directors.

  • ⚫ The remuneration of general directors and independent directors of the company, the remuneration committee reviews the degree of participation and contribution value of each director to the company's operations, and also makes recommendations to the board of directors for resolution after considering the company's operating performance and the normal payment situation in the industry.

  • ⚫ The company allocated 1% of directors' remuneration in the year of 2020 for the amount of NT$ 43,589 thousand and paid director's carriage fee (attendance fee) of NT$ 482 thousand.

  • ⚫ The salary and remuneration of the general manager and vice president of the company are reviewed by the salary and remuneration committee and approved according to the individual performance achievement rate and contribution.

  • ⚫ The company's remuneration policy considers the company's current year's operating results, financial situation and future capital utilization needs planning, and the assessment of future risks is also included in the scope of consideration to minimize the possibility of risk occurrence.

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3. Corporate Governance

3.1. Board of Directors

Total six meetings were convened by the Board of Directors in 2019. Attendance of each Director and Independent Director is as follows:

Title Name Name Name Attendance in
Person		 By
Proxy		 Attendance
Rate		 Remarks
Chairman Ding-Yu Dong 6 0 100%
Vice
Chairman		 Fei-Liang Tsai
Representative of Yu Chang
Investment Co.,Ltd.		 5 1 83%
Director Wen-Shiung Li
Representative of Yu Chang
Investment Co.,Ltd.		 6 0 100%
Director Mon-ChangHsieh 6 0 100%
Independent
Director		 Bing Sheng 6 0 100%
Independent
Director		 Rong-Dong Tsai 6 0 100%
Independent
Director		 Duen-Chian Cheng 6 0 100%
Other required disclosure:
(1) Should anycircumstance described in Article 14-3 of the Securities and Exchange Act		 The Opinions of
Independent
Directors and the
Company's
handling of the
Opinions of
Independent
Directors
No objection
Pass the case
Term Date Important Resolutions The Opinions of
Independent
Directors and the
Company's
handling of the
Opinions of
Independent
Directors
The 5th Board
Meeting of the
11th term		 20 Mar 2020 1.
Approved the proposal of management of information safety
code of Elite Material Co., Ltd.
2.
Approved the proposal of decreasing the amount of short-term
financial credit line of Elite Material Co., Ltd.
3.
Approved the proposal of lending to one another between
subsidiaries of the Company.
4.
Approved the Year 2019 Declaration of Internal Control
System.
5.
Approved lifting the ban on competition among the managers
of the Company.
6.
Approved set up a position of head of corporate governance of
the Company.
7.
Accepted the proposal submitted by the Remuneration
Committee about the Directors' remuneration and managers'		 No objection
Pass the case
  • 27 -
compensation of Year 2020.
8.
Approved the proposal of Year 2019 Directors' remuneration
and Employees' compensation.
9.
Approved the Year 2019 business report and financial
statements.
10. Approved the proposal of distribution of Year 2019 profits.
11. Approved the proposal of convening the Year 2020 annual
general shareholders' meeting.
The 6th Board
Meeting of the
11th term		 30 Apr 2020 1.
Approved the proposal of decreasing the amount of short-term
financial credit line of Elite Material Co., Ltd.
2.
Approved the proposal of lending to one another between
subsidiaries of the Company.
3.
Approved the re-assignment of subsidiary directors and
liftingof the manager's competitionprohibition case.		 No objection
Pass the case
The 7th Board
Meeting of the
11th term		 24
Jun 2020		 1.
Approved the re-appointment of subsidiary’s supervisor.
2.
Approved the proposal of capital expenditure.
3.
Approved of re-allocation of Kuanshan Ubi’s facility
4.
Approved the investment of offshore manufacturingsites.		 No objection
Pass the case
The 8th
Board Meeting
of the 11th term		 31
Jul 2020		 1.
Approved the 4th Domestic unsecured convertible bonds
transfer to common share’s date.
2.
Approved the proposal of decreasing the amount of short-term
financial credit line of Elite Material Co., Ltd.
3.
Approved the proposal of increasing the amount of mid –long
term financial credit line of Elite Material Co., Ltd.
4.
Approved the proposal of lending to one another between
subsidiaries of the Company.
5.
Approved the proposal of access method of board of directors’
performance and amend Board of Directors' code of conduct,
Code of Ethics, Audit Committee Organization. of the
Company.
6.
Approved the proposal of internal controls, internal audit
implementation rules implementation guidelines of the
Company.
7.
Approved theproposal of Taoyuan site’s capital expenditure.		 No objection
Pass the case
The 9th Board
Meeting of the
11th term		 30 Oct 2020 1.
Approved the 4th Domestic unsecured convertible bonds
transfer to common share’s date.
2. Approved the review of the CPA audit fee for Year 2020.
3. Approved the Year 2021 plan of auditing of Elite Material Co.,
Ltd.
4.
Approved the proposal of amending the Company's Corporate
Governance Practices, obtain or dispose of asset handling
procedures.
5.
Approved the proposal of surplus transfer to capital of the
company's subsidiary " (Kunshan) Co., Ltd."
6.
Approved the proposal of increasing capital expenditure of
OEM business unit.
7. Approved the capital expenditure budget of KY factory
8. Approved the proposal of increasing capital expenditure of
Huangshi site of Elite material. .		 No objection
Pass the case
The 10th Board
Meeting of the
11th term		 21 Dec 2020 1.
Approved the proposal of Year 2021 remuneration committee’s
business plans.
2.
Approved to amending “ the principle of corporate
governance”.
3.
Approved the proposal of investment disposal of Elite Material
(China subsidiaries)Co, Ltd.
4.
Approved year 2020 the conglomerate’s budget and capital
expenditure.		 No objection
Pass the case
  • 28 -

==> picture [478 x 431] intentionally omitted <==

----- Start of picture text -----

5. Approved the proposal of acquired 100% stake of EMD
Specialty Material, LLC.
6. Approved the proposal of increase the amount of endorsement
guarantee
(2) Should any circumstance described in Article 14-3 of the Securities and Exchange Act and any resolution on which an independent director
had a dissenting or qualified opinion occur in board meetings, the dates and sessions of the said board meetings, the contents of the said
resolutions, opinions of all independent directors, and measures the Company had in responding to such opinions shall be specified: None
(3) Should there be any director neither joining discussion nor exercising the voting rights in board meetings for the resolution which he/she
has personal interests, the name of such director, the contents of the said resolution, the reasons such director has personal interests, and the
voting results shall be specified: None
(4) The board of directors (peer) valuation cycles, periods, scopes, ways and content of board of directors:
Frequency Timeframe Scope Evaluation
once/year 1.1, 2020~12.31, 2020 Board of Directors Self-Assessment,
Context:
1. Evaluation of board of directors ： The Board's performance appraisal program and its contents include two main
orientations: compliance with relevant laws and regulations, participation in the company's operations, etc.
2. Performance appraisal of individual board members ：「 The board member's self-assessment questionnaire items and
content include nine main objectives: the company's tasks and objectives, the company's internal control and risk, the
operation of internal relations, external relations, the composition and ability of the board of directors, the culture of the
board of directors, the operation of the board of directors, the chairman/chairman of the meeting, etc., and the director's self-
assessment.
(5) Targets and measures of this and previous years established to improve the functionality of the Board of Directors and their execution
results (for instance, the establishment of the audit committee, the improvement of information disclosure, and so forth):
1. The company has set up the head of corporate governance on March 20, 2020, responsible for corporate governance related affairs and
handle the items required by board of directors.
2. On July 30, 200, the board of directors approved the proposal of evaluation method of board of directors’ and conducted self-
assessment in December, the result is on the range of high level, performance is good.
----- End of picture text -----

  • 29 -

3.2. Audit Committee

Total six meetings were convened by the Audit Committee in 2019. Attendance of each Independent Director is as follows:

as follows:
Title Name Attendance in Person By Proxy Attendance
Rate		 Remarks
Independent
Director		 Bing Sheng 6 0 100%
Independent
Director		 Duen-Chian Cheng 6 0 100%
Independent
Director		 Rong-Dong Tsai 6 0 100%
Other required disclosure:
(1) Should any circumstance described in Article 14-5 of the Securities and Exchange Act and any resolution
Term
Proposals
Resolutions
The 3th meeting of the 2nd term dated as
20 Mar 2020
1.
Approved the management of
information safety code of Elite
Material Co., Ltd.
2.
Approved decreasing the amount of
short-term financial credit line of
Elite Material Co., Ltd.
3.
Approved amending the “Accounting
System” of the Company.
4.
Approved the Year 2019 business
operation and financial reports.
5.
Approved the proposal of distribution
of Year 2019profits.
Resolved.
All members vote For both
proposals.
The 6th meeting of the 2nd term dated as
30 Apr 2020
1.
Approved the decreasing the amount
of short-term financial credit line of
Elite Material Co., Ltd.
2.
Approved the lending to one another
between subsidiaries of the
Company.
The 7th meeting of the 2nd term dated as
24 Jun 2020
1.
Approved the proposal of capital
expenditure.
2.
Approved of re-allocation of
Kuanshan Ubi’s facility
3.
Approved the investment of offshore
manufacturingsites.
The 8nd meeting of the 2nd term dated as
31 July 2019
1.
Approved the proposal of lending to
one another between subsidiaries of
the Company.
2.
Approved the proposal of internal
controls, internal audit
implementation rules implementation
guidelines of the Company.
3.
Approved theproposal of Taoyuan
  • 30 -
site’s capital expenditure.
4.
Approved the consolidated financial
statement of 1H2020..
1.
Approved the consolidated financial
statement of Q32020.
2.
Approved the review of the CPA
audit fee for Year 2020.
3.
Approved the amendment of asset
acquisition and disposal of the
The 9th meeting of the 2nd term dated as
30 Oct 2020
Company.
4.
Approved the capital expenditure
budget of KY factory
5.
Approved the capital expenditure
budget of OEM business unit.
6.
Approved the proposal of increasing
capital expenditure of Huangshi site
of Elite material. .
1.
Approved to amending
“ the .Amendment of the Company's
internal authorization provisions..
The 10th meeting of the 2nd term dated as
21 Dec 2020
2.
Approved the proposal of investment
disposal of Elite Material (China
subsidiaries)Co, Ltd.
3.
Approved the acquired 100% stake of
EMD Specialty Material, LLC.
4.
Approved the increase amount of
endorsementguarantee
(2) Should any circumstance described in Article 14-5 of the Securities and Exchange Act and any resolution on which the
Audit Committee had a dissenting or qualified opinion occur with the approval of two thirds or more of the entire
Board of Directors, the dates and sessions of the said board meetings, the contents of the said resolutions, opinions of
the Audit Committee, and measures the Company had in responding to such opinions shall be specified: None
(3) Should there be any independent director neither joining discussion nor exercising the voting rights in board meetings
for the resolution which he/she has personal interests, the name of such independent director, the contents of the said
resolution, the reasons such independent director has personal interests, and the voting results shall be specified: None
(4) Communications between Independent Directors and the chief internal auditor and CPAs of the Company (for instance,
the ways and topics that the aforesaid parties discuss on the financial and business situations of the Company, and the
conclusions of their discussions):
a. The Audit Committee comprises of all three Independent Directors of the Company.
b. Internal Audit Office shall submit reports, including the auditing plan and the execution of such plan, to the Audit
Committee for review and examination periodically. Should unusual matters, likely to cause material breach of
regulations or material damage to the Company, occur during the auditing process, the chief internal auditor shall
report to the Audit Committee immediately. The Audit Committee shall maintain thorough and sufficient
communications with the chief internal auditor.
c. The CPAs of the Company shall commute the quarterly reports of the auditing results in the quarterly Audit
Committee meetings. Should unusual matters occur, the CPA shall report to Audit Committee members
immediately. The Audit Committee shall maintain thorough and sufficient communications with the CPAs of the
Company.
  • 31 -

3.3. Corporate governance execution results and deviations from “Corporate Governance BestPractice Principles for TWSE/GTSM Listed Companies”

Item Implementation status Deviations from
“Corporate
Governance Best-
Practice Principles
for TWSE/GTSM
listed Companies”
and explanations
Yes No Summary
Has the Company formulated and
disclosed its own corporate
governance best practice principles
in accordance with “Corporate
Governance Best-Practice
Principles for TWSE/GTSM Listed
Companies”?		 V The Company has formulated “Corporate
Governance Principles” to promote the
protection of shareholders’ interests,
improvement of functions of Board of
Directors, and the transparency of the
Company’s information; meanwhile, to
encourage the declaration of rights of interested
parties. The said principle can be viewed and
downloaded from the Companywebsite.		 None
(2)Shareholding structure and
shareholders’ rights:
a. Has the Company established internal
operating procedures to handle
shareholder proposals, doubts,
disputes, and litigation related issues,
and practically implemented such
procedures?		 V The Company has designated Stock Transfer
Agent, and has appointed personnel to be in
charge of stock affairs and investor relations.
The said agent and personnel have handled
shareholder proposals, doubts, disputes, and
litigation related issues in compliance with
relevant laws and regulations and the
Company’s Articles of Incorporation.		 None
b. Has the Company kept a list of major
shareholders and a list of ultimate
owners of these major shareholders?		 V The Company, at all time, keeps updated
shareholding information of Directors,
Managers, and major shareholders with a
percentage holding of 10% and more, and the
ultimate owners of these major shareholders.
If change in ownership occurs, the Company
follows the relevant regulations to disclose
related information.		 None
c. Has the Company established and
operated a risk management
mechanism and “firewall” between
the Company and its affiliates?		 V To manage the potential risk and establish a
“firewall” between the Company and its
affiliates, the Company and its affiliates have
already established and implemented
“Procedures for Acquisition and Disposition of
Assets”,“Procedures for Lending of Capital to
Others”, and “Procedures for Endorsements and
Guarantees”.		 None
d. Has the Company established internal
rules to prohibit company insiders
from trading securities using
information not disclosed to the
market?		 V The Company has established the“Procedures
for Handling Material Inside Information” and
“Procedures for Preventing Insider Trading” to
prohibit company insiders from trading
securities using information not disclosed to the
market. The Company has performed internal
self-evaluation, and the Audit Office has audited
the implementation of the said procedures
periodically.		 None
(3)Composition and
Responsibilities of the Board
of Directors:
a. Have members of the Board of
Directors formulated diversepolicies		 V Article 16 of the Company's Code of Practice
on Corporate Governance provides that the
composition of its board of directors shall
consider diversity, and that, in addition to
serving as a director of the Company's
managers,it shall not exceed one third of the		 None
- 32 -
and implemented them accordingly? board seats and formulate appropriate
diversification guidelines for its own operation,
mode of operation and development needs,
which shall include, but are not limited to, the
following two criteria:
(1) Basic conditions and values: gender, age,
nationality and culture.
(2) Expertise and skills: professional
background (e.g. law, accounting, industry,
finance, marketing or technology),
professional skills and industry experience,
etc.
Board members should generally have the
knowledge, skills and literacy necessary to
perform their duties. In order to achieve the
ideal goal of corporate governance, the board of
directors as a whole should have the following
capabilities:
(1) Operational judgment.
(2) Accounting and financial analysis
capabilities.
(3) Management capacity.
(4) Crisis management capacity.
(5) Industry knowledge.
(6) International market view.
(7) Leadership.
(8) Decision-making ability.
2. Diversity implementation of board members:
Footnote(1)
b. In addition to establishing a
Remuneration Committee and an
Audit Committee, has the Company
voluntarily established other types of
functional committees?		 V In addition to Remuneration Committee and the
Audit Committee, The Company has not yet
established other functional committees.		 Ditto
c. Has the Company established a Board
performance assessment method, and
have performance evaluations been
conducted annually?		 V The Company has formulated the "Performance
Assessment Measures of the Board of
Directors" and, with the approval of the Board
of Directors on 31 July 2020, the following
aspects shall be decided by the Members of the
Board:
1. Compliance with relevant laws and
regulations (compliance with matters
discussed by the board of directors in
accordance with the law, whether the board
of directors meeting is convened at least once
a quarter, and comply the interests of
directors are avoided)
2. Level of operational involvement in the
company (monitoring and understanding of
the execution of the operating plan,
expression of financial statements, audit
reports and their tracking, assessment of the
independence of accountants, assessment of
risks existing or potential to monitor the
company,communication and interaction		 None
  • 33 -
with company management)
Conduct the annual board performance
evaluation by means of internal self-assessment.
The results of the year 2020 performance
appraisal of the Board of Directors of the
Company are in the mid-to-high level, and the
results of the evaluation were reported by the
Board of Directors on 21 December 2020, and
the above-mentioned evaluation results are also
used as a reference for the payment of
remuneration and the nomination of renewal.
d. Has the Company evaluated the
independence of CPAs on a regular
basis?		 V The Company’s Accounting Department
annually evaluates the independence and
qualifications of its CPAs. According to the
evaluation of Accounting Department, the
accountants, Mr. Calvin C. Y. Chiang and Ms.
Celia Chen of KPMG, both meet the
requirements of independence of the Company
(note 1). And KPMG has issued a letter of
declaration of independence (please refer to
section 3.4). The said evaluation report and
the letter of declaration have been submitted to
the Board for approval in the meeting of Board
of Directors convened on 31 July2018.		 None
(4)Has the Company designated a
full-time (or part-time) unit or
personnel to be in charge of
corporate governance affairs
(including, but not limited to,
providing Directors and
Supervisors with information
needed to conduct businesses,
handling matters about Board
of Directors meeting and
Shareholders’ Meeting in
compliance with laws,
handling company registration
and change in the company
registration, document meeting
minutes of Board of Director
meetings and Shareholders’
Meetings)?		 V The company passed a board of directors
resolution on March 20, 2020 to establish a
corporate governance director,the main
responsibilities are to handle matters related to
board of directors and shareholders ’meetings,
producing the minutes of the board of directors
and shareholders' meetings, assisting directors
to take office and continuing education, and
providing the information necessary for
directors to perform business Assist directors to
follow laws and regulations.
The key business operations in 2020 are as
follows:
Provide board meeting and audit committee
meetings with materials to each director.
Responsible for the announcement of major
information on major resolutions on the day
after the board of directors and shareholders'
meeting.
Handle matters related to the shareholders'
meeting according to law.
Handle the change registration of the company's
various operations
Evaluate the purchase of "Director and Key
Staff Insurance" of the appropriate amount of
insurance and complete the insurance coverage,
and report the underwriting content to the board
of directors.
Irregularly provide relevant training information
for directors, reminding them to complete the
relevant hours of training and completion of the
relevant reporting operations in accordance with
the "Key Points for the Implementation of the
Directors and Supervisors of Listed		 None
  • 34 -
Companies".
Training situation: Due to the completion of
2020 years, there are no training courses as of
the date ofpublication of the annual report
(5)Has the company established a
communication channel for
interested parties, a company
website dedicated to interested
parties, and appropriately
responded to the main social
responsibility issues which are
critical to the interested
parties?		 V The Company has established spokesperson and
deputy spokesperson to communicate with
investors and other interested parties such as
press and media. In addition, the Company
has designated full-time personnel to be in
charge of stock affairs and communication with
other interested parties. The contact
information of the responsible personnel can be
found in the Company’s website.		 None
(6)Has the company
commissioned a professional
stock service agent to handle
matters about shareholders’
meetings?		 V The Company has commissioned Oriental
Securities Co., Ltd. to assist and handle matters
about shareholders’ meetings.		 None
(7)Information disclosure
a. Has the Company set up a corporate
website to disclose information on
financial, business and its corporate
governance?		 V The Company has established a multi-language
website(www.emctw.com)to disclose
information on financial, business, and
corporate governance. Those information can
also be viewed on the Market Observatory Post
System (MOPS) operated by the Taiwan Stock
Exchange.		 None
b. Has the Company adopted other
information disclosure channels (i.e.
English website; designated
appropriate personnel to be in charge
of Company information collection
and disclosure, implemented the
spokesperson system, uploaded the
investor conference presentations on
the Company’s website, etc.)?		 V The Company has designated appropriate
persons to collect information for public
disclosure. Investor conference and analyst
meeting are held periodically. Those
information are disclosed on the Company
website or the MOPS system operated by the
Taiwan Stock Exchange. The Company also
has established a spokesperson system,
including spokesperson and deputy
spokesperson.		 None
c. Has the Company announce and file
annual report within 2 months after
the accounting calendar year ends,
and compliance with regulations that
announce and file for first quarter,
second quarter, third quarter and
monthlyrevenue in advanced ?		 V The Company has not announced or published
year 2018 result within 2 months after the
accounting calendar years end, however, the
company did announce and publish its first,
second, third quarter and monthly revenue in
advance.		 None
(8)Does the Company have other
critical information which can
help others to understand the
implementation of corporate
governance (including, but not
limited to, employee welfare,
staff care, investor relations,
vendor relations, interested
parties’ rights, training for
Director, risk management
policies and risk measurement
standard implementation
progress, customer policy
implementation progress, and
the Company’s purchase of
liability insurance for
Directors)?
a. Employee rights and interests, and V In compliance with laws and regulations, the
- 35 -
staff care Company has an employee welfare committee
that appropriates welfare funds and manages
various welfare activities for employees. The
Company also provide training courses to
cultivate employee talents and enhance safety
requirements of operations.
The Company complies with all pertinent labor
regulations and the International Bill of Human
Rights, and have established and adjusted
internal management systems accordingly. For
instance, we do not, and will not, recruit
children under the age of 15. We ensure that our
recruitment policy does not discriminate based
on gender, ethnicity, age, marital status, and/or
family conditions, and our practices ensure the
equality of salaries, recruitment conditions,
trainings, and career advancement
opportunities. The Company also ensures a
working environment that all employees are
protected from not being bullied, discriminated,
and harassed.
Employees are informed the contact details,
including email, phone number, and mail box,
of the Human Resources Department, which
handles employee grievances. Each case will
be handled bya dedicatedpersonnel.
b. Investor relations, vendors’ relations,
rights of interested parties		 V The Company has established a spokesperson
system, including spokesperson and deputy
spokesperson, to respond to requests and
opinions from the investing public and
interested parties. The Company also
designates a full-time IR personnel to serve the
needs of professional institutional investors.
Vendors’ relationship is well maintained by the
chief of theprocurement department.		 None
c. The purchase of liability insurance for
Directors		 V The Company has purchased liability insurance
for each Director, and reviewed the insurance
coverage program on annual basis.		 None
d. Risk management policies and risk
measurement standard
implementation progress		 V The Company has, in compliance with laws and
regulations, formulate internal procedures to
measure and manage risks. The procedures
include “Procedures for Prohibiting Insider
Trading” and “Procedures for Handling
Material Inside Information” to prevent inside
trading. The Audit Office implements the
auditing process on periodical basis, and each
unit is required to perform self-evaluation every
year.		 None
e. Customer policy implementation
progress		 V The Company has maintained a stable
relationship with customers in accordance with
the internal guidelines. To ensure the
Company will be able to meet the demand of
customers, the Company consistently obtain
better understanding of customers’ situations
and continuously improve the product quality.		 None
Should there are any material
information helps to understand the
operation of corporate
governance(including but not limited
to employee rights,investor		 V Please refer to Note 3. None
  • 36 -

relationship, supply-chain Risk

management etc.)

  • (9) According to the Corporate Governance Evaluation Results published by the Corporate Governance Center of Taiwan Stock Exchange in the latest year, please describe what sorts of improvements the Company has already made and what has the higher priority that the Company plans to implement or improve:

Based on the said evaluation results published in 2018, The Company plans to achieve the follows in 2018: 1) The improvement of information disclosure in the annual report; 2) the improvement of the Company’s website and the information disclosure on the Company’s website; 3) Cooperating with IR Platform operated with Taiwan Depository and Clearing Corporation (TDCC) to improve the ESG rating of the Company.

Footnote:1

Diversity of Board Members:

The current board of directors has seven seats: 4 directors, 3

independent directors, members with rich experience and expertise in finance, business, industrial technology and

management. The percentage of directors with employee status is 14%, 2 independent directors with a term of less than 3 years, 1 independent director with 4-6 years, 2 directors aged 70 years old and over, 3 directors between 60 and 69 years old and 2 directors under 60 years old. The directors are all male and ROC

nationality.

Title Name Diversity of core capabilities items Diversity of core capabilities items Diversity of core capabilities items
Operational
judgment.		 Management
capacity.		 Accounting
and
financial
analysis
capabilities.		 Industry
knowledge.		 International
market view.		 Decision-
making
ability.
Chairman Ding- Yu
Dong
Director Fei-Liang Tsai
Director Wen-Shiung
Lee
Director Mon-Chong
Hsieh
Independent
Director		 Bing Shen
Independent
Director		 Duen-Chian
Cheng
Independent
Director		 Rong-Dong
Tsai
  • 37 -

  1. Criteria to evaluate the independence of CPAs (The following criteria are formulated in accordance with the Article 47 of the Accountant Law and the requirement of “Integrity, Objectivity and Independence” stipulated in the Bulletin No. 10 of the Professional Ethics of CPAs of the Republic of China):

  2. a. The CPAs have voluntarily terminated their services and transferred to other qualified ones in compliance with relevant regulations in past seven years until the latest audit/review of financial statements.

  3. b. Not having a material financial interest in the audit client.

  4. c. Avoid having an inappropriate relationship with the audit client.

  5. d. The CPA firm shall ensure its employees follow the requirement of “Integrity, Objectivity, and Independence”.

  6. e. The CPA shall not audit and/or review the financial statements of an organization by which he or she has been employed and not separated with the organization for less than two years.

  7. f. The CPA shall not permit others to practice under his or her name.

  8. g. The CPA does not hold stakes in the Company or the affiliated entities of the Company.

  9. h. The CPA shall not borrow from or lend to the Company or the affiliated entities of the Company.

  10. i. The CPA shall not cooperate with the Company or the affiliated entities of the Company to invest in the same business or make profitsharing arrangement with the Company or the affiliated entities of the Company.

  11. j. The CPA shall not be concurrently employed by the Company or the affiliated entities of the Company to conduct routine business and receive a consistent salary.

  12. k. The CPA shall not be involved in the management decision making of the Company or the affiliated entities of the Company.

  13. l. The CPA shall not engage in the conduct that could jeopardize the independence.

  14. m. The CPA is not the spouse, a lineal consanguinity, a direct affinity, or a collateral consanguinity within two degree of kinship of the management team of the Company.

  15. n. The CPA shall not receive any commission related to the practice performed.

  16. o. Matters could compromise or jeopardize the independence of the CPA were not found until the date the annual report published.

  17. 38 -

3.4. The Declaration of Independence by KPMG

To: Elite Material Co., Ltd.

The Declaration of Independence by the Audit Engagement Team of KPMG

The Audit Engagement Team (hereinafter referred as “the Team”) of KPMG, engaged in reviewing and auditing the Year 2020 financial statements of Elite Material Co., Ltd. declares that the Team has complied with the Bulletin of Norm of Professional Ethics for Certified Public Accountant of the Republic of China No.10 (the “Bulletin”).

The considerations on independence matters and the safeguards to be applied of KPMG includes, but not limited to, policies and procedures that regulate the independence of members of the Team (financial interests, loans and guarantees, employment with an audit client, etc.), business relationships with an audit client, the job rotation of CPAs, and nonassurance services. The important policies and procedures are elaborated further as follows:

  1. Important regulations of independence:

  2. 1.1. KPMG, employees of KPMG, and other persons prescribed in the Bulletin (including employees of any affiliate and network firm) must always maintain independence with clients.

  3. 1.2. All members mentioned in the preceding paragraph are prohibited from engaging in, directly or indirectly, inside trading, misuse of inside information, and activities likely to cause misleading behavior in the security and capital markets. Meanwhile, KPMG will obtain the Declaration of Independence from each person mentioned hereinto.

  4. 1.3. Should the same accountant in charge, accountants, review accountants and accountants in charge of subsidiaries of an audit client have provided TWSE & OTC listed companies with audited engagement services for a period which has reached the limit of the Bulletin or laws, the positions of the aforesaid persons shall be rotated.

  5. 1.4. KPMG and the Team should identify and evaluate the materiality of the effect on independence, and adopt appropriate measure to eliminate the effect, or reduce the effect to an acceptable level. When necessary, the engagement with the audit client shall be terminated.

  6. The compliance and monitor of independence policy

  7. 2.1. KPMG monitors if each employee and relevant member has filed Declaration of Independence each year via a computerized system.

  8. 2.2. KPMG will periodically audit the compliance result of each employee and relevant member on a random basis. Also, personal investment will be reviewed via an electronic investment declaration system to examine if any person with a title higher than vice manager (inclusive) has filed the changes of the investment he/she holds.

  9. 2.3. KPMG will periodically monitor and audit the job rotation of accountants, including the period that the audited engagement service provided and the appropriateness of non-assurance services.

  10. 2.4. Should a violation of the independence policy occurs, those who involved (including partners) will be brought to the Committee of Risk and Independence, and proper punishment will be taken by The Committee according to the severity of the violation.

Accountant in charge: Yi-Chun Chen Accountant : Calvin Y.C. Chiang

  • 39 -

3.5. Training for Directors and Independent Directors

Title Name Study Date Sponsoring
Organization		 Name of the Course Study
Hours
Chairman Ding-Yu Dong 22 July 20 Taiwan
Academy of
Banking and
Finance		 Board of Directors Operational Practice and
Corporate Governance Workshop		 3
31 July20 Taiwan
Corporate
Governance
Association		 The trend of CSR and sustainablegovernance 3
7 Aug 20 Tax disputes over salaries received by
expatriate employees - from the perspective of
corporate andpersonal taxes		 3
18 Sep 20 Taiwan
Institute of
Directors		 2020 Annual Meeting of the Institute of
Directors: Looking for New Momentum for
Growth in a Strategic TurningYear		 3
24 Sep20 Association of
Corporate
Governance
professionals		 2020 Substantive Beneficiaries Legal Seminar 3
9 Dec 20 Taiwan
Academy of
Banking and
Finance		 Board Operating Practice and Corporate
Governance Workshop (No. 2)		 3
21 Dec 20 Taiwan
Corporate
Governance
Association		 Trends and challenges in information security
governance		 3
Director Fei-Liang Tsai 31 July 20 Taiwan
Corporate
Governance
Association		 The trend of CSR and sustainable governance 3
21 Dec 20 Taiwan
Corporate
Governance
Association		 Trends and challenges in information security
governance		 3
Director Mon-Chang Hsieh 10 Mar 20 Taiwan
Corporate
Governance
Association		 The company's transformation strategy 3
31 July 20 Taiwan
Corporate
Governance
Association		 The trend of CSR and sustainable governance 3
Director Wen-Shiung Li 31 July 20 Taiwan
Corporate
Governance
Association		 The trend of CSR and sustainable governance 3
21 Dec 20 Taiwan
Corporate
Governance
Association		 Trends and challenges in information security
governance		 3
Independent
Director		 Bing Sheng 22 July 20 Taiwan
Academy of
Banking and
Finance		 Board of Directors Operational Practice and
Corporate Governance Workshop		 3
31 July 20 Taiwan
Corporate
Governance
Association		 The trend of CSR and sustainable governance 3
21 Dec 20 Taiwan
Corporate		 Trends and challenges in information
security governance		 3
  • 40 -
Governance
Association
Independent
Director		 Duen-Chian
Cheng		 18 Jun 20 Taiwan
Corporate
Governance
Association		 The company's transformation strategy 3
31 July 20 The trend of CSR and sustainable governance 3
Independent
Director		 Rong-Dong Tsai 14 Feb 20 Taiwan
Corporate
Governance
Association		 Key technologies and market applications for
5G and IoT		 3
17 July 20 Taiwan
Insurance
Institute		 International anti-corruption and
whistleblower protection practices - from the
prevention of money laundering and the fight
against capital terrorism		 3
31 July 20 Taiwan
Corporate
Governance
Association		 The trend of CSR and sustainable governance 3
  • 41 -
3.6.1. Information of Remuneration Committee Members Meet one of the Following Professional Qualification Requirements, Together with at
Least Five-Year Work Experience
Conform to Independent (Note 2)
Number of Other		 Public
An Instructor or a Higher
A Judge, Public Prosecutor,		 Companies in
Position in a Department of
Attorney, Certified Public		 Role
(Note 1)
Remarks
4
5
6
7
10
Which the
Individual is
Concurrently
Serving as an
Independent
Director
Commerce, Law, Finance,
Accounting, or Other
Academic Department
Related to the Business
Needs of the Company in a
Public or Private Junior
Account, or Other
Professional or Technical
Specialist Who has Passed
National Examination and
been awarded a Certificate in
a Profession Necessary for
Have Work Experience in the
Areas of Commerce, Law,
Finance, or Accounting, or
Otherwise Necessary for the
Business of the Company
1
2
3
8
9		 College, College, or
the Business of the		 University
Company		 Independent
Director
Independent
Director
Independent
Director
Two
V
V
V
Two
V
V
V
V
V
V
V
V
V
Three
V
V
V
V
V
V
Shen, Bing
V
V
V
V
Cheng, Duen-Chian
V
V
V
V
V
V
V
V
V
V
V
Tsai, Rong Dong		 Note 1: Please indicate the role of each member as Director, Independent Director, or Others. Note 2: Please tick the corresponding boxes if members meet the follow ing qualifications during the tw o years prior to being elected or during the term of office. (1) Not an employee of the Company or any of its affiliates. (2) Not a Director or Supervisor of the Company or any of its affiliates. The same does not apply, how ever, in cases w here the person is an Independent Director of the Company, its parent company, or any subsidiary in w hich the Company holds, directly or indirectly, more than 50% of the voting shares. (3) Not a natural-person shareholder w ho holds shares, together w ith those held by the person’s spouse, minor children, or held by the person under others’ names, in an aggregate amount of 1% or more of the total number of outstanding shares of the Company or ranking in the top 10 in holdings. (4) Not a spouse, relative w ithin the second degree of kinship, or lineal relative w ithin the third degree of kinship, of any of the persons in the preceding three subparagraphs. (5) Not a director, supervisor, or employee of a corporate shareholder that directly holds 5% or more of the total number of outstanding shares of the Company or that holds shares ranking in the top five in holdings. (6) Not a director, supervisor, officer, or shareholder holding 5% or more of the share, of a specified company or institution that has a financial or business relationship w ith the Company. (7) Not a professional individual w ho, or an ow ner, partner, director, supervisor, or officer of a sole proprietorship, partnership, company, or institution that, provides commercial, legal, financial, accounting services or consultation to the Company or to any affiliate of the Company, or a spouse thereof. (8) Not been a person of any conditions defined in Article 30 of the Company Act. (9) Professionals, sole proprietorships, partnerships, business ow ners of companies or institutions that do not provide audits for companies or related enterprises or have obtained business-related services such as business, legal, financial, accounting and other related services w hose cumulative amount of remuneration in the past tw o years has not exceeded NT $ 500,000 Partners, directors (directors), supervisors (supervisors), managers and their spouses. How ever, members of the Salary and Compensation Committee, Public Acquisition Review Committee, or M & A Special Committee that perform their duties in accordance w ith the relevant law s and regulations of the Securities Exchange Act or the Corporate M & A Act are not limited to this. (10) Not of any items as defined in Article 30 of the Company Act. Note 3: Should the role of the member be Director, please indicate if the Article 6-5 of "Regulations Governing the Appointment and Exercise of Pow ers by the Remuneration Committee of a Company Whose Stock is Listed on the Stock Exchange or Traded over the Counter" is follow ed.
  • 42 -

3.6.2. Executive Status of Remuneration Committee

  • A. The number of committee members of the Company is three.

  • B. The tenure of current Remuneration Committee is from 10 June 2019 to 9 June 2022. The Remuneration Committee held two times in 2019, and the attendance status of members in most recent year is disclosed as follows:

Title Name Attendance in
Person		 By Proxy Attendance Rate Remarks
Independent
Director		 Rong-Dong Tsai 2 0 100%
Independent
Director		 Bing Shen 2 0 100%
Independent
Director		 Duen-Chian Cheng 2 0 100%
Other required disclosure:
(1) Should Board of Directors reject or amend the proposal of Remuneration Committee, the dates and sessions of
the said board meetings, the contents of the said resolutions, opinions of the Remuneration Committee, and
measures the Company had in responding to such opinions shall be specified (for instance, the Board of Directors
resolved a remuneration package that is better than the proposed remuneration by the Committee, the difference
and reasons shall be specified): None
(2) Should any resolution on which the member of Remuneration Committee have a dissenting or qualified opinion
occur and such opinion be recorded or be expressed by writing notice, the dates and sessions of the said
Remuneration Committee meetings, the contents of the said resolutions, opinions of the Remuneration
Committee members,and measures the Companyhad in respondingto such opinions shall be specified: None

C. Resolutions resolved by the Remuneration Committee in year 2019:

Proposals Resolutions Measures the Company had
The 6th meeting of
the 3rd term dated as
22 Mar 2019		 1. To approve the planned
remuneration of Directors and
compensation of employees
for year 2020.
2. To approve the distribution of
remuneration of Directors and
compensation of employees
for year 2019.
3. To approve the proposal of set
up head of corporate
governance.		 Resolved. All
members vote For all
proposals.		 The resolution was submitted
to the Board of Directors
Meeting and obtain approval
from the Board.
The 1st meeting of the
4th term dated as 30
Oct 2019		 1. Discussion of the Year 2019
working plan for the
remuneration committee.		 Resolved. All
members vote For the
proposal.		 The resolution was submitted
to the Board of Directors
Meeting and obtain approval
from the Board.

IV. Measures the Company takes to fulfill corporate social responsibilities and their execution results

  • 43 -
Item Implementation status Deviations from
“Corporate Social
Responsibility Best-
Practice Principles
for TWSE/GTSM
listed Companies”
and explanations
Yes No Summary
(1)Has the Company established a
CSR (Corporate Social
Responsibility) policy and assessed
the effectiveness of its
implementation?		 V The Company for environmental management,
with a dedicated unit, counseling relevant
departments in accordance with the relevant
provisions of the Environmental Protection Act,
to obtain the proper operation / operation license,
the introduction of ISO 14001 environmental
management system, OHSAS18001 occupational
safety and health management system, improve
the environmental and safety awareness of
relevant departments.
In order to implement the culture of industry and
security, the Company in 108 years to introduce a
new version of ISO 45001 occupational safety
and health management system, 109 September
to obtain a revised certification.
Compensation for the operating activities related
to the environment, employee safety, customers,
suppliers and other risks, can be mastered and
responded to in real time.
In recent years, due to the increasing reliance on
information technology for operational activities,
the Company has also strengthened its
governance of information security risks and
formulated relevant policies:
1.
In order to improve information security,
the Company has information security
management methods for employees to
carry out information security education
advocacy, compliance and case analysis.
2.
The Company attaches great importance to
information security and confidential
information protection, the establishment of
firewalls, security equipment, anti-virus
software and other security-related
protection measures. Avoid malicious
hackers, computer viruses, ransomware
mail and other external attacks, affecting
the company's operating system stable
operation.
The company's CSR implementation results and
details are disclosed in the company's annual
CSR report.		 None
(2)Has the Company established a
dedicated (or non-dedicated) unit to
promote CSR, which is authorized to
handle senior management level
affairs by the Board of Directors, and
sends feedback on its handling to the
Board?		 V The Company set up a Corporate Social
Responsibility Committee in 109 to formulate
and review corporate social responsibility
policies, systems and management policies. The
Chairman of the Board of Directors is the highest
level of the Committee and authorizes the Head
of Corporate Governance to promote and
implement corporate governance and corporate
social responsibility in accordance with the
relevant management practices and to submit it to
the Board of Directors.		 None
- 44 -
(3) Environmental Issues
A.
Has the Company established an
appropriate environmental
management system according to
its industrycharacteristics?		 V In compliance with the environmental protection
regulations, the Company has dedicated units
responsible for prevention of water and air
pollutions. The waste of the factories is
disposed properly by qualified organizations.		 None
B.
Is the Company committed to
enhancing the effectiveness of
utilizing various resources and
consuming recycled materials as
feedstock to minimize the adverse
impact on the environment?		 V Since establishment, the Company has committed
to promote sustainability management. The
Company has received qualifications of ISO
14001. The waste of the production process is
classified, and the materials can be recycled and
reused are properly stored and consumed again
internally. The remaining waste is properly
disposed by the organization qualified by the
Environmental Protection Administration,
Executive Yuan.		 None
C. Has the Company paid attention to
the impact from climate changes on
its business operations, carried out
assessments on greenhouse gases, and
set up corporate strategies to save
energy and to reduce the emission of
carbon and greenhouse gas?		 V The Company also organizes employee training
program to promote the environmental awareness
and the Company’s environmental policy.
For potential risks and opportunities for the
Company today and in the future, please refer to
the Company's Annual Corporate Social
ResponsibilityReport.		 None
D. Has the Company calculate the
greenhouse gas emission, water
consumption and total weight of
waste, and formulate energy policy of
energy saving/ carbon reduction,
reduction of greenhouse emission,
water and other waste management in
the past two years?		 V The company Taoyuan and Hsinchu facility are
gradually using natural gas to replace heavily oil,
significantly reduce the emission of CO2, and
follow the baseline of ISO 14064-1, set the
reduction target for each year.
The total greenhouse emission of 33,0001.1627
Tons, in 2018, the 2019 figure is as the following
Total greenhouse gas emissions (tons)
2019
41,609.232
2020
42,126.707
CO2 equivalent (tons)
Total waste (kg)
Category 1 emission equivalent
2019
14,897.129
2020
15,855.151
CO2 equivalent (tons)
Total waste (kg)
Category II emission equivalent
2019
26,712.103
2020
26,271.556
Total water consumption (tons)
2019
308,850
2020
288,648
Total waste (kg)
2019
2,461,565
2020
2,841,464
The company is pursuing energy saving to push
the reduction of carbon, thus, aggressively push
all sorts of energy saving plans.
The Company also organizes employee training
program topromote the environmental awareness		 None
  • 45 -
and the Company’s environmental policy. The
office temperature is set at 27 – 28 degree
Celsius, saving the energy consumed by air
conditioners. The lighting of office is using
LED light bulbs. Elevators and display panels
of bulletin boards, which are not relevant to
production process, are turned off after working
hours.
(4) Social Issues
A. Has the Company set up
management policies and procedures
according to related laws and regulations
as well as the International Bill of
Human Rights?		 V As a global corporate citizen, the Responsible
Business Alliance (RBA), social responsibility
standards (Social Accountability 8000, SA 8000)
and internationally recognized human rights
norms include the United Nations Universal
Declaration of Human Rights, the International
Labour Organization ( International Labour
Organization), United Nations Guiding Principles
on Business and Human Rights.
And in accordance with the above-mentioned
guidelines and local laws and regulations where
the operation is located, develop the basis of
labor standards and establish the Code of
Conduct for Labor and Ethical Management, the
Corporate Social and Environmental
Responsibility Policy Statement, and the
Corporate Social Responsibility Code of Practice
as guidelines for the practice of corporate social
responsibility. The use of child labour is
expressly prohibited, child labour under the legal
minimum age is ensured, the physical and mental
health and safety of underage employees are
ensured, and hazardous work is prohibited.
Companies also promote freedom of
employment, and all work is voluntary. Violations
of Taiwan's photovoltaic human rights policy,
such as non-slavery and human trafficking, will
occur in 2020.		 None
B. Has the Company established
employee grievance mechanisms and
channels, and handled these
grievances properly?		 V Employees are informed the contact details,
including email, phone number, and mail box, of
the Human Resources Department, which handles
employee grievances. Each case will be
handled bya dedicatedpersonnel.		 None
C.. Has the Company offered a safe and
healthy work environment and
routinely offered employees with
safety and health education training?		 V The Company adopts ESH (Environmental,
Safety, and Health) philosophy and management
system. Moreover, two systems,
OHSAS18001 and ISO14001, are implemented
in the working place. Sufficient initial training
is a must for new employees, and workers in the
working place are under stringent supervision to
ensure the safety.
To maintain the health of employees, the
Company routinely collaborates with hospitals to
provide health checkups for its employees.
Depending on the conditions of the working
place, special health checkups will also be
offered to certain workers.
The Company has formulated “Procedures for
Ensuring the Safety of Working Place and Health
of Employees” to prevent workplace hazards and
ensure the heath of each employees.		 None
D. Has the Company established
employee grievance mechanisms and
channels, and handled these
grievancesproperly?		 V Employees are informed the contact details,
including email, phone number, and mail box, of
the Human Resources Department, which handles
employeegrievances. Each case will be		 None
  • 46 -
handled bya dedicatedpersonnel.
E. Prior to conducting business with Prior to conducting business with suppliers, the
suppliers, has the Company evaluated Company will obtain “Supplier CSR
if such suppliers have had records
where they made an impact on the		 V Commitment Declaration”. The legality, code
of ethical management, and records of unethical		 None
environment and on society at large? behavior, if there is any, are used as a reference in
the supplier selectionprocess.
F. Do the Company's contracts with its Prior to signing contracts with suppliers, the
primary suppliers contain any Company will audit the records of suppliers with
immediate termination or cancellation their compliance with laws, regulations, and code
clauses when suppliers violate their of conducts in the relevant industries. With
corporate social responsibility respect to the construction contracts, the
policies, and pose a significant Company will make sure the turnkey provider
impact on the environment and V obey relevant laws, purchase insurance coverage None
society? for construction workers. Above all, bribery is
absolutely prohibited and that is written in
contracts with suppliers. The Company has
made every possible efforts to encourage
suppliers and vendors to undertake corporate
social responsibility.
(5) Has the company adopted In accordance with core options (Core) of the
international standard code or Sustainable Reporting Guidelines (GRI
guideline of financial statement to Standards) issued by the Global Sustainability
prepare CSR report to disclose Standards Council, the Company has
non-financial data? Whether fore-
mentioned report acquired third		 V commissioned the Taiwan branch of the British
Standards Institute (bsi) to verify the contents of		 None
part assertion or guarantee the report on the basis of the AA1000 AS (2008)
opinion? Type 1 Medium Assurance Level and the Core
GRI Standards Core Option (Core) to enhance
correctness and credibility.
(6) If the company has set up the principles based on "Corporate Social Responsibility Best-Practice Principles for
TWSE/GTSM Listed Companies", please illustrate the implementation progress and any difference:The
Company has formulated a Code of Practice on Corporate Social Responsibility, and there is no material difference between the
actual operatingconditions and the Code of Practice on Corporate Social Responsibilityof Listed Companies.

  • (7) Please state any other important information that would facilitate better understanding of the Company’s status in fulfilling corporate social responsibilities:

  • (a) Environmental protection, regulations, measures, and compliance

    • Meet international environmental standards such as RoHS and Reach, and the HSF (Hazardous Substance Free) requirements of customers and the Company.

    • Comply with relevant environmental laws and regulations, including, but not limited to, Waste Disposal Act, Water Pollution Control Measures and Test Reporting Management Regulations, and Air Pollution Control Act.

  • (b) Community welfare, social services, and social welfare: The Company contributes to society through participation in activities of environmental protection, art & culture, and education. The Company also routinely makes monetary donation to non-profit organization supporting the minority group.

  • (c) Rights and interests of consumers: Understanding customers’ demand and promptly respond to customers’ requests, in order to enhance the competitiveness of the Company.

  • (d) Human rights: The Company ensures that its recruitment and human resource policy do not discriminate based on gender, ethnicity, age, marital status, and/or family conditions, and our practices ensure the equality of salaries, recruitment conditions, trainings, and career advancement opportunities for each employee. All employees are protected from not being discriminated, harassed, and bullied.

  • (e) Safety and Health: The Company complies with laws and regulations to ensure the safety of labor in the work place and the health of each employee. The Company also adopts the EHS philosophy and management system.

V. Implementation of Code of Business Conduct

VI.

  • 47 -
Item ImplementationStatus Deviations from
“Ethical Corporate
Management Best-
Practice Principles
for TWSE/GTSM
listed Companies”
and explanations
Yes No Summary
(1) Establishment of Business
Conduct Policy and Plans
a. Does the Company demonstrate
business conduct policy and practice
in the corporate guidelines and
external documents? Have the Board
of Directors and management
committed to actively implement
such policy?		 V The Company has established “Code of Ethics”
& “Best Practice Principles of Ethical Corporate
Management”. All employees are required
and trained to comply with our “Code of
Ethics” & “Best Practice Principles of Ethical
Corporate Management” throughout daily
operations. In order to promote awareness, the
policies are available for access through
channels such as intranet, company website, and
various meetings, etc.
The purpose of the Principles said in the
preceding paragraph is to cultivate an enterprise
culture for the Company to ensure all
businesses conducted with sincerity and
integrity, preventing any misconduct while
conducting business.
The Company Directors, managers, employees,
and mandatories are prohibited from, directly or
indirectly, offering, promising to offer,
requesting, or receiving improper benefits of
any sort when conducting business with
counterparties. Obtaining or sustaining benefits
by conducting business without sincerity and
integrity, in any illegal way, or in breach of
fiduciary duty is also prohibited.		 None
b. Has the Company established and
implemented an unethical conduct
prevention plan, which stipulates
operational processes, provides
guidelines for conduct, discipline for
violations of rules, and an appeal
system in each case?		 V
c. Has the Company taken any
precautionary measures to prevent
corruption or high-risk illegal
business activities, based on
Paragraph 2 in Article 7 of the
“Ethical Corporate Management Best
Practice Principles for TWSE/GTSM-
Listed Companies”?		 V The internal control system and the internal
ratification system of the Company have
included measures to prevent conducting
business without sincerity and integrity, and that
shall also be able to prevent corruption or high-
risk illegal business activities.		 None
  • 48 -
Item ImplementationStatus Deviations from
“Ethical Corporate
Management Best-
Practice Principles
for TWSE/GTSM
listed Companies”
and explanations
Yes No Summary
(2) Implementation of the Code
of Business Conduct
a. Does the Company evaluate the
ethical conduct records of its
counterparties and specify “Ethical
clauses” in business contracts?		 V Prior to engaging in a commercial transaction,
the Company will take into consideration the
legitimacy and legality of the counterparty such
as agents, vendors, customers, and other
entities, and their misconduct record, if any.
The Company shall avoid engaging in business
with counterparty with any record of
misconducts. The Company will also make
sure the counterparty will not, directly or
indirectly, offer, promise to offer, request, or
accept any improper benefits, including, but not
limited to, bribery, kickbacks, commissions, and
grease payments.
When entering into material contracts with
counterparties, the Company will include
provisions in such contracts demanding the
compliance of ethical corporate management
policy.		 None
b. Has the Company established
dedicated units under the supervision
of the Board of Directors to promote
corporate ethical management and
which regularly report to the Board
on their implementation status?		 V The Human Resources Department of the
Company is dedicated to set up the Principles
said in this table, and to be in charge of the
amendments, explanations, enforcement, and
providing counseling services and other
relevant matters. The implement status will be
documented and submitted to the Board of
Directors.		 None
c. Does the Company promulgate
policies to prevent conflicts of
interests and offer appropriate
channels for reporting conflicts of
benefits?		 V The Company periodically organizes training
programs for Company Directors, managers,
and employees, so that the said Principles can
be fully understood.
For any violation of the Principles being found,
each member of the Company is urged to
proactively report to the Audit Committee, the
management, head of internal audit, Human
Resources Department, and other appropriate
authorized managers, and to provide
information, as comprehensive as possible, to
allow the Companyto take appropriate actions.		 None
d. Does the Company establish an
effective operation of the accounting
and internal control systems, and
periodically conduct internal audits
byinternal auditors,or audit byCPA?		 V The accounting system, the internal control
system of the Company, and their
implementation status are audited by the
internal Audit Office.		 None
e. Does the Company periodically
conduct internal and external training
on ethical management?		 V From time to time, the Company organizes
training programs, or via many sorts of
meetings,topromote compliance with ethical		 None
  • 49 -
and integrity standards.
The total hours of training courses, including
internally designed and externally offered,
reached 17,499 hours, and each employee on
the average attended relevant programs of 18.9
hours in year 2020. The aforesaid courses
include “Compliance with Ethical Business
Conduct Regulations”, “Corporate Social
Responsibility and Employees’ Code of
Conduct”, “Maternity Protection in Working
Place”, and “Hazard Communication
Education”.
(3) Establishment of Reporting
Channels for Violations of
the Code Of Business
Conduct
a. Has the Company established a
specific complaints and rewards
system through convenient channels
for lodging complaints? And does the
Company assign dedicated personnel
to attend to the matter?		 V For any violation of the Principles being found,
each member of the Company is urged to
proactively report to the Audit Committee, the
management, head of internal audit, Human
Resources Department, and other appropriate
authorized managers, and to provide
information, as comprehensive as possible, to
allow the Company to take appropriate actions.
The Company ensures that the whistle- blower’s
identity and the contents of the complaint are
kept confidential in order to protect the whistle-
blower from retaliation for having filed the
complaint. There are also measures are in
place to conduct independent investigation into
the alleged misconduct.		 None
b. Has the Company established
standard operating procedures for
investigating and handling complaints
in a confidential manner?		 V
c. Does the Company adopt measures to
protect whistle- blowers from
reprisals for having filed the
complaint report?		 V
(4) Improvements in
Information Disclosure
Does the Company disclose the
principle and the practice of business
conduct related information on the
corporate website and MOPS website
operated by the Taiwan Stock
Exchange?		 V The Company has set up the “Code of Business
Conduct” and “Ethical Corporate Management
Best-Practice Principles for EMC”, and both
Principles has been disclosed on the Company
website and the MOPS website operated by the
Taiwan Stock Exchange.		 None
(5) If the Company has established its own guidelines for the “Code of Business Conduct” according to Ethical
Corporate Management Best Practice Principles for TWSE/GTSM-Listed Companies, please state the
discrepancies (if any) between actual operation and policy:
There is no material discrepancies between actual operation and thepolicy.
(6) Other important information revealing the Company’s ethical operations:
For the review of the current policy and continual improvement at the ethical corporate management, the Company is paying close
attention to anyfurther development at the best-practiceprinciples for ethical corporate management.

(6) Other important information revealing the Company’s ethical operations:

For the review of the current policy and continual improvement at the ethical corporate management, the Company is paying close attention to any further development at the best-practice principles for ethical corporate management.

  • 50 -

VII. Methods for searching the rules and relevant regulations of corporate governance:

The rules and relevant regulations of Corporate Governance can be viewed and downloaded at the Company’s website: www.emctw.com, or the Market Operation Observe System (MOPS) by the Taiwan Stock Exchange: http://mops.twse.com.tw/

  • VIII. Other important information that would facilitate better understanding of the Company’s status in implementing corporate governance:

Please refer to page 28 to page 34 of the Annual Book.

IX. Internal Control System execution status

  • 3.11.1. Internal control report

Elite Material Co., Ltd.

The Declaration of Internal Control System

Date: 25 Feb 2021

Based on the self-examination results of the internal control system for the year of 2020, Elite Material Co., Ltd. (the Company) therefore declares the following:

  1. Board of Directors and the management of the Company understand that it is their responsibility to establish, implement, and maintain an internal control system, and such a system has been established. The purpose to establish the aforesaid system is to reasonably assure 1) the operating results and operating efficiencies (including profit, performance, and the safeguard of assets); 2) the reliability, instantaneity and transparency of the financial reports, and 3) the compliance of the relevant laws and regulations.

  2. An internal control system, regardless how perfectly the system is being designed, can have its defects. A system that can reasonably assure the achievements of the three purposes mentioned in the preceding paragraph is considered as effective and useful. In addition, changes in the business environment and situation may, as a result, hinder the effectiveness of an adequate system. However, the internal control system of the Company has included a self-examination mechanism; the Company will make immediate corrections considering the materiality when material errors are detected.

  3. The evaluation of effectiveness of the internal control system design and implementation is made in accordance with “Guidelines for the Establishment of Internal Control Systems by Public Companies” (the Guidelines). The Guidelines are made to exam the following five items during the internal control process: 1) Control Environment, 2) Risk Evaluation and Management, 3) Control Activities, 4) Information and Communication, and 5) Monitoring processes. Details of each area being examined can be found in the Guidelines.

  4. Based on the items mentioned in the preceding paragraph, the Company has evaluated the design of the internal control system and the effectiveness of the implementation of the aforesaid system.

  5. The Company management declares that the internal control system (including Subsidiary Governance) has effectively assured that the following objectives have been reasonably achieved during the assessment period: (1) The effectiveness and efficiency of business operations;

  6. (2) The reliability, timeliness, transparency, and regulatory compliance of the financial reports;

  7. (3) The compliance of the relevant laws/regulations.

  8. This Declaration is a significant content in the annual report and prospectus of the Company, and it is available to the general public. If it contains false information or conceals any material contents, the Company is in violation of Article 20, Article 32, Article 171 and Article 174 set forth in the ROC Securities and Exchange Act.

  9. 51 -

  10. The Board of Directors has approved the Declaration of Internal Control System in the board meeting held on 25 Feb 2021. All of seven Directors present consented to the Declaration, and no dissenting opinion was expressed.

==> picture [223 x 92] intentionally omitted <==

  • 3.11.2. The investigative report of Entrusting CPA to examine the internal control system: None

  • X. In recent years until the annual report being published, violation of internal control policies by employees: None

  • XI. In recent years until the annual report being published, major resolutions of shareholders’ meeting and board meetings:

3.13.1. Shareholders’ Meeting

Date Resolutions of Shareholders’ Meeting Executions
2020 Annual
General
Shareholders’
Meeting		 18 June
2020		 1. To accept the Year 2019 business report and
financial statements		 30 Sep 2020 was decided to be the
ex-dividend date, and the cash was
distributed on 30 Sep 2020. (Cash
dividend is NT$5.76191933 per
share)
2. To approve the proposal for distribution of 2019
profits
  • 52 -

3.13.2. Board Meetings

Term Date Important Resolutions
The 5th Board
Meeting of the
11th term		 20 Mar 2020 1.
Approved the proposal of management of information safety code of Elite
Material Co., Ltd.
2.
Approved the proposal of decreasing the amount of short-term financial
credit line of Elite Material Co., Ltd.
3.
Approved the proposal of lending to one another between subsidiaries of
the Company.
4.
Approved the Year 2019 Declaration of Internal Control System.
5.
Approved lifting the ban on competition among the managers of the
Company.
6.
Approved set up a position of head of corporate governance of the
Company.
7.
Accepted the proposal submitted by the Remuneration Committee about
the Directors' remuneration and managers' compensation of Year 2020.
8.
Approved the proposal of Year 2019 Directors' remuneration and
Employees' compensation.
9.
Approved the Year 2019 business report and financial statements.
10. Approved the proposal of distribution of Year 2019 profits.
11. Approved the proposal of convening the Year 2020 annual general
shareholders' meeting.
The 6th Board
Meeting of the
11th term		 30 Apr 2020 1.
Approved the proposal of decreasing the amount of short-term financial
credit line of Elite Material Co., Ltd.
2.
Approved the proposal of lending to one another between subsidiaries of
the Company.
3.
Approved the re-assignment of subsidiary directors and lifting of the
manager's competition prohibition case.
The 7th Board
Meeting of the
11th term		 24 Jun 2020 1.
Approved the re-appointment of subsidiary’s supervisor.
2.
Approved the proposal of capital expenditure.
3.
Approved of re-allocation of Kuanshan Ubi’s facility
4.
Approved the investment of offshore manufacturingsites.
The 8th
Board Meeting
of the 11th term		 31 Jul 2020 1.
Approved the 4th Domestic unsecured convertible bonds transfer to
common share’s date.
2.
Approved the proposal of decreasing the amount of short-term financial
credit line of Elite Material Co., Ltd.
3.
Approved the proposal of increasing the amount of mid –long term
financial credit line of Elite Material Co., Ltd.
4.
Approved the proposal of lending to one another between subsidiaries of
the Company.
5.
Approved the proposal of access method of board of directors’ performance
and amend Board of Directors' code of conduct, Code of Ethics, Audit
Committee Organization. of the Company.
6.
Approved the proposal of internal controls, internal audit implementation
rules implementation guidelines of the Company.
7.
Approved theproposal of Taoyuan site’s capital expenditure.
The 9th Board
Meeting of the
11th term		 30 Oct 2020 1.
Approved the 4th Domestic unsecured convertible bonds transfer to
common share’s date.
2.
Approved the review of the CPA audit fee for Year 2020.
3.
Approved the Year 2021 plan of auditing of Elite Material Co., Ltd.
4.
Approved the proposal of amending the Company's Corporate Governance
Practices, obtain or dispose of asset handling procedures.
5.
Approved the proposal of surplus transfer to capital of the company's
subsidiary " (Kunshan) Co., Ltd."
6.
Approved the proposal of increasing capital expenditure of OEM business
unit.
7.
Approved the capital expenditure budget of KY factory
  • 53 -
8.
Approved the proposal of increasing capital expenditure of Huangshi site
of Elite material. .
The 10th Board
Meeting of the
11th term		 21 Dec 2020 1.
Approved the proposal of Year 2021 remuneration committee’s business
plans.
2.
Approved to amending “ the principle of corporate governance”.
3.
Approved the proposal of investment disposal of Elite Material (China
subsidiaries)Co, Ltd.
4.
Approved year 2020 the conglomerate’s budget and capital
5.
expenditure.
6.
Approved the proposal of acquired 100% stake of EMD Specialty Material,
LLC.
The 11th Board
Meeting of the
11th term		 25 Feb 2021 1.
Approved the proposal of amending the Company's "Procedures for the
Operation of Funds loans and others" and the "Measures for the Election of
Directors".
2.
Approved the proposal of lending to one another between subsidiaries of
the Company.
3.
Approved the Year 2020 Declaration of Internal Control System.
4.
Approved the capital expenditure budget of KY factory
5.
Approved the proposal of internal controls, internal audit implementation
rules implementation guidelines of the Company.
6.
Accepted the proposal submitted by the Remuneration Committee about
the Directors' remuneration and managers' compensation of Year 2020.
7.
Approved employees’ compensation and Directors’ remuneration of year
2020
8.
Approved year 2020 business report and financial statements
9.
Approved proposal for distribution of 2020 profits
10. Approved the proposal of convening the Year 2020 annual general
shareholders' meeting.

  • XII. In recent years until the annual report being published, dissenting comments on major BOD resolutions from Directors and Independent Directors: None

  • XIII. In recent years until the annual report being published, resignation or dismissal of Chairman, President, Director of Accounting Department, Director of Financial Department, Chief Internal Auditing Officer, and Head of Research and Development Department: None

  • 54 -

4. Audit Fees

4.1. Information of Audit Fees

Unit: NT$ thousands

Unit: NT$ thousands
Accounting
Firm		 Name of CPA Audit
Fee		 Non-Audit Fee Audit Period
System
Design		 Registration Human
Resource		 Others
(Note)		 Total
KPMG Chen, Yi-Chun
Chiang, Calvin		 3,000 0 70 0 1,595 1,665 1 Jan 20 – 31 Dec 20

Note: Service fees for income tax counseling, audit fees of business tax report, and fees for English translation of financial reports.

Unit: NT$ Dollar

Item
Amount		 Item
Amount		 Audit Fee Non-audit Fee Total
1 Under 2,000,000 1,665,000 1,665,000
2 2,000,000 – 3,999,999 3,000,000 3,000,000
3 4,000,000 – 5,999,999
4 6,000,000 – 7,999,999
5 8,000,000 – 9,999,999
6 10,000,000 and over

  • 4.2. In the event that the CPA firm is changed and the audit fee paid in the year when the CPA firm is changed is less than that in the previous year: The company did not change its auditors in year 2020.

  • 4.3. In the event that the audit fee was reduced by 10% or more compared to that of the previous year: None

5. Information for change of CPA:

Not Applicable

6. The Company’s Chairman, President, Managers Responsible for Finance and Accounting who have held a position in the CPA Office or its affiliates within the latest year: None

7. Shareholding Transferred or Pledged by Directors, Management, and Major Shareholders Who Hold 10% or More of the Company Shares:

  • 55 -

7.1. Shareholding variation

Title Name 2020 2020 1Jan 2021 – 20 Apr 2021
Shares Increased
(Decreased)		 Pledged Shares
Increased
(Decreased)		 Shares Increased
(Decreased)		 Pledged Shares
Increased
(Decreased)
Chairman Ding-Yu Dong 0 0 0 0
Vice Chairman Yu Chang Investment
Co.,Ltd.		 0 0 0 0
Representative:
Fei-LiangTsai		 47,000 0 0 0
Director Yu Chang Investment
Co.,Ltd.		 0 0 0 0
Representative:
Wen-ShiungLi		 0 0 0 0
Director Mon Chang, Hsieh 0 0 0 0
Independent
Director		 Bing Shen 0 0 0 0
Independent
Director		 Duen-Chian Cheng 0 0 0 0
Independent
Director		 Rong-Dong Tsai 0 0 0 0
President Ding-Yu Dong 0 0 0 0
Senior Vice
President		 Li-Gang Wang 0 0 0 0
Senior Vice
President		 En-Xiang Guan 0 0 0 0
Senior Vice
President		 Michael Sun 0 0 0 0
Vice President Yi-Ren Peng 0 0 0 0
Vice President Jason Pan 0 0 0 0
Vice President Li-Ming Chou 0 0 0 0
Vice President Michael Chuang 0 0 0 0
Vice President Kenny Su 0 0 0 0
Vice President
(CFO)		 Randy Yu 0 0 0 0
Vice President Lisa Lee 0 0 0 0
Assistant Vice
President
(Goverrnor)		 Li-Choi Chang 0 0 0 0
Director of
Accounting
Department		 Sara Yen 0 0 0 0

7.2. Shareholding transferred:

Not applicable.

7.3. Shareholding pledged:

Not applicable.

  • 56 -

8. Top ten shareholders being the related party as defined in statement of financial accounting standards No. 6:

Name Current
Shareholding		 Current
Shareholding		 Spouse & Minor
Children’s
Shareholding		 Spouse & Minor
Children’s
Shareholding		 Shareholding in
Name of Others		 Shareholding in
Name of Others		 Name, relationship of top ten shareholders
are spouses of within 2 degrees of
consanguinityto each other		 Name, relationship of top ten shareholders
are spouses of within 2 degrees of
consanguinityto each other
Shares % Shares % Shares % Name Relationship
Yu ChangInvestment Co.,Ltd. 25,471,477 7.97 0 0 0 0 Yu Sheng
Investment Co.,
Ltd.		 100%-owned
subsidiary of Yu Sheng
Investment Co. Ltd.
Representative:
Su-Moon Wu		 3,548,859 1.07 0 0 0 0
CathayLife Insurance Co.,Ltd. 23,260,000 6.99 0 0 0 0 None None
Representative:
Diao-Gui Huang		 0 0.00 0 0 0 0 None None
New Labor Pension Fund-Taiwan 20,613,000 6.19 0 0 0 0 None None
Run-HongSi 12,262,303 3.68 0 0 0 0 None None
Yu ShengInvestment Co.,Ltd. 9,198,000 2.76 0 0 0 0 Yu Chang
Investment Co.,
Ltd.		 Yu Chang Investment is
100% owned by Yu
ShengInvestment.
Representative:
Su-Moon Wu		 3,548,859 1.07 0 0 0 0
JPMorgan APG Equity Emerging
Markets		 6,737,000 2.02 0 0 0 0 None None
Old Labor Pension Fund - Taiwan 6,298,000 1.89 0 0 0 0 None None
China Life Insurance Co., Ltd. 5,627,000 1.69 0 0 0 0 None None
Ding-Yu Dong 5,265,766 1.58 0 0 0 0 Yu Chang
Investment Co.,
Ltd		 Director of Yu Chang
Investment Co., Ltd.
Management Committee of the
Public Service Retirement
Pension Fund		 5,252,000 1.58 0 0 0 0 None None

9. Shareholding proportion of EMC to Investees:

Investees by equity method The Company’s Holdings Direct and Indirect Holding of
Directors and Managers of EMC		 Direct and Indirect Holding of
Directors and Managers of EMC		 Total Holdings Total Holdings
Shares % Shares % Shares %
EMC Overseas HoldingInc. 36,256,950 100.00 0 0 36,256,950 100.00
Grand Wuhan Incorporated 20,020,000 100.00 0 0 20,020,000 100.00
EMC INTERNATIONAL
HOLDING INCORPORATED.		 26,310,000 100.00 0 0 26,310,000 100.00
Li ChengTechnologyCo.,Ltd. 16,412,918 33.50 5,342,644 10.90 21,755,562 44.40
  • 57 -

IV. CAPITAL OVERVIEW

1. Capital and Shares

1.1. Issued Shares

Month/Year Par
Value		 Authorized Capital Authorized Capital Paid-in Capital Paid-in Capital Remarks Remarks
Shares Amount (NT$) Shares Amount (NT$) Sources of Capital Capital
Increased
by Assets
other than
Cash		 Other
Nov 2019 10 400,000,000 4,000,000,000 319,708,064 3,197,080,640 Conversion of
Corporate Bond		 None Note
1
Aug 2010 10 400,000,000 4,000,000,000 324,868,357 3,248,683,570 Conversion of
Corporate Bond		 None Note
2
Nov 2010 10 400,000,000 4,000,000,000 332,918,299 3,329,182,990 Conversion of
Corporate Bond		 None Note
3

Note: Dates and letter numbers capital increase approvals received from the regulatory authority:

  1. 21 April 2017 Financial Supervisory Commission Ruling Ref No. 1060012443 approved the issue of CB certificates. 14 Nov 2019 Ministry of Economic Affairs Jing-Sho-Shan-Zhi No. 10801157610.

  2. 21 April 2017 Financial Supervisory Commission Ruling Ref No. 1060012443 approved the issue of CB certificates. 17 Aug 2020 Ministry of Economic Affairs Jing-Sho-Shan-Zhi No. 10901154260.

  3. 21 April 2017 Financial Supervisory Commission Ruling Ref No. 1060012443 approved the issue of employees’ option certificates. 9 Nov 2020 Ministry of Economic Affairs Jing-Sho-Shan-Zhi No. 10901194470.

Type of Stock Authorized Share Capital Authorized Share Capital Authorized Share Capital Remarks
Issued outstanding
shares		 Unissued shares Total
Common Stock 332,918,299 67,081,701 400,000,000 None

1.1.1. Shelf registration: None

1.2. Composition of Shareholders

30 March 2021

Types
Amounts		 Government
Agencies		 Financial
Institutions		 Other
Juridical
Persons		 Domestic
Citizens		 Foreign
Institutions
& Foreign
Persons		 Total
Number 6 33 244 30,364 292 30,939
Number of shares owned 32,704,008 47,584,147 60,618,714 96,769,211 95,242,219 332,918,299
% holding 9.82% 14.29% 18.21% 29.07% 28.61% 100.00%

1.3. Distribution Profile of Share Ownership

30 March 2021

ShareholderOwnership Number ofShareholders Number of shares owned Percentage ownership
1–999 14,923 1,738,955 0.52
1,000–5,000 13,656 23,930,098 7.19
5,001–10,000 1,181 9,152,443 2.75
10,001 – 15,000 329 4,107,470 1.23
  • 58 -
15,001–20,000 188 3,466,386 1.04
20,001–30,000 191 4,767,128 1.43
30,001–40,000 89 3,196,028 0.96
40,001–50,000 51 2,347,832 0.71
50,001–100,000 112 8,124,677 2.44
100,001–200,000 69 9,702,544 2.91
200,001–400,000 54 15,616,791 4.69
400,001–600,000 22 10,819,900 3.25
600,001–800,000 13 8,974,641 2.70
800,001–1,000,000 9 8,079,294 2.43
1,000,001 and over 52 218,894,112 65.75
Total 30,939 332,918,299 100.00

Note: The Company does not issue any preferred shares.

1.4. Major Shareholders

20 April 2020
Shareholders Total shares owned Ownership (%)
Yu Chang Investment Co., Ltd. 25,471,477 7.65
Cathay Life Insurance Co., Ltd. 23,260,000 6.99
New Labor Pension Fund-Taiwan 20,613,000 6.19
Run-Hong Si 12,262,303 3.68
Yu Sheng Investment Co., Ltd. 9,198,000 2.76
JPMorgan APG Equity Emerging Markets 6,737,000 2.02
Old Labor Pension Fund-Taiwan 6,298,000 1.89
China Life Insurance Co., Ltd. 5,627,000 1.69
Ding-Yu Dong 5,265,766 1.58
Management Committee of the Public Service Retirement
Pension Fund		 5,252,000 1.58

1.5. Net worth, earnings, dividends, and market price per common share

Unit: NT$ Dollar

Unit: NT$ Dollar
Items Year 2019 2020 1 Jan 2021 – 31 Mar 2021
Market Price per
Share
(Note 1)		 Highest 142 183.5 177.5
Lowest 63.3 90 150
Average 108.53 145.16 163.57
Net Worth per
Share(Note 2)		 Before Distribution 42.29 50.28 52.91
After Distribution 36.29 (Note 9) -
Earnings per
Share		 Weighted Average Shares 319,666,359 325,593,929 332,918,299
Adjusted Earningsper Share(Note 3) 10.14 11.33 2.89
Dividends per
Share		 Cash Dividend 5.76191933 (Note 9) Not applicable
Stock
Dividend		 - - (Note 9) Not applicable
- - (Note 9) Not applicable
Accumulated Undistributed Dividend
(Note 4)		 - - Not applicable
Return on
 Price/Earnings Ratio(Note 5) 10.70 12.81 Not applicable
Price/Dividend Ratio(Note 6) 18.84 (Note 9) Not applicable
Investment Cash Dividend Yield(Note 7) 5.31% (Note 9) Not applicable
  • 59 -

Note:

  1. List the highest and lowest prices of each common share, and calculate the average price per common share by using the turnover and transaction volume in each year.

  2. Based on the total number of issued outstanding shares at end of each year. Net worth per share before and after distribution is calculated based on the profit distribution resolved in the annual general shareholders’ meeting held in the next year.

  3. The adjusted EPS is calculated based on the number of shares after the stock dividends being distributed.

  4. Should the terms of issuance allow the earnings to be accumulated and not to be distributed until the year the Company realizes profits, the total amount of accumulated undistributed dividend need to be disclosed.

  5. Price/Earnings Ratio = Average closing share price of the period/ Earnings per share.

  6. Price/Dividend ratio = Average closing share price of the period / Cash dividend per share.

  7. Cash dividend yield = Cash dividend per share / average closing share price of that year.

  8. Net worth per share and earnings per share are listed until the latest quarter financial statements audited by CPA. The other numbers are listed until the date the annual report being published.

  9. To be resolved by the upcoming Year 2020 annual general shareholders’ meeting.

1.6. Dividend Policy and Execution

1. Dividend Policy

Apart from paying all its income taxes in the case where there are profits at the end of the year, the Company shall make up for accumulated losses in past years. Where there is still balance, ten per cent (10%) of which shall be set aside by the Company as legal reserve. The Company shall also set aside certain portion of the profits as special reserve as required by Article 41 of the Securities and Stock Exchange Act, or by resolutions of Shareholders’ Meetings.

While the Company distributes earnings to the shareholders, the paid-out amount shall be more than ten per cent (10%) but less than seventy per cent (70%) of the distributable earnings, which equals to earnings realized after deducting legal, special and all other required reserves, but together with undistributed profits from previous years.

Depending on the business operating results, the earnings to be distributed to shareholders shall be proposed by the Board of Directors, and submitted to the Shareholders’ Meeting and decided by the resolution from in the Shareholder’s Meeting.

Judging from the actual business circumstances, the Board of Directors may propose to adjust the amount of earnings to be distributed to shareholders, and submit to the Shareholders’ Meetings for the resolution to distribute.

  • 1.6.1. Proposed dividend to be resolved in the upcoming 2020 Annual General Shareholders’ Meeting:
Year of Earnings Date the Board Meeting
Resolved to Distribute
Earnings		 Dividends Dividends
Cash Dividend (NT$) Stock Dividend (NT$)
2020 25 Feb 2021 2,330,428,093
(NT$7per share)		 0

Note: Cash dividend per share is calculated based on the total number of issued outstanding shares on 25 Feb 2021. This proposal is subjected to the resolution of the upcoming 2021 annual general shareholders’ meeting convened on 28 May 2021, and to be executed accordingly.

  • 1.6.2. If the Dividend Policy Is Expected to Change Substantially: None

  • 1.7. Effects on business performance and EPS resulted from stock distribution proposed by 2018

  • 60 -

Annual General Shareholders’ Meeting:

Not applicable.

1.8. Employees’ Compensation and Directors’ Remuneration:

  • 1.8.1. Employees’ Compensation and Directors’ Remuneration under Articles of Incorporation:

In case the Company makes profits for the year, three per cent (3%) shall be allocated for the employees’ compensation, and no more than one point two per cent (1.2%) for the remuneration of Directors. However, in case there are accumulated losses carried on the accounting book of the Company, profits shall be reserved for the make-up of accumulated losses before distribution.

In case shares or cash is distributed as employees’ compensation, those employees can be distributed shall include the employees of affiliated enterprises meeting certain criteria. The distribution method shall otherwise be formed by the Board of Directors.

  • 1.8.2. The discrepancy, if there is any, between the total amount of estimated employees’ compensation, Directors’ remuneration, stock dividends and total amount actually being paid:

Treated as the changes at the accounting estimate, and such changes are adjusted in the coming year.

  • 1.8.3. Proposed employees’ compensation and Directors’ remuneration:

The 2020 employees’ compensation and Directors’ remuneration was resolved in the Board Meeting convened on 25 Feb 2021, and will be submitted to the 2021 shareholders' meeting for approval. The amounts and forms are listed below:

  • a. Employees’ compensation: NT$130,767,014 in cash

  • b. Directors’ remuneration: NT$43,589,005 in cash

  • c. Regarding the amount of employees’ compensation and Directors’ remuneration in cash or in shares, the discrepancy, if there is any, between the estimated amount and the amount being actually paid, and the reason for such discrepancy: None

  • d. Proposed employees’ compensation in shares as percentage of net income and total employees’ compensation: Not applicable

  • 1.8.4. The total proposed amount of 2019 profits actually being paid as employees’ compensation and Directors’ remuneration in 2020:

Unit: NT$ Dollar Unit: NT$ Dollar Unit: NT$ Dollar Unit: NT$ Dollar Unit: NT$ Dollar Unit: NT$ Dollar
Item Actual Amount Being
Paid in 2020		 Estimated Amount
in 2019		 Discrepancies Reason Adjustment
Directors’ and Supervisors’
Remuneration		 38,067,920 38,067,920 0 Not
 Not
applicable
Employees’ Compensation 114,203,761 114,203,761 0 applicable

1.9. Share Buyback by the Company

The Company did not buyback share in Year 2020 and in Year 2021 as of 30 March.

2. Corporate Bonds

  • 61 -

The company issued the domestic 4th unsecured CB in year 2017, and fully converted to common shares on August 14th, 2020, and terminated transaction in OTC market in August 18th, 2020.

3. Preferred Shares

None

4. Issuance of Overseas Depository Receipts

None

5. Employees’ Stock Option Certificates

None

6. Employees’ restricted stock options and shares issued for merger or acquisition:

None

7. Fund utilization plans and status:

Not applicable

  • 62 -

V. OPERATIONAL HIGHLIGHTS

1. Business Activities

1.1. Business Scope

  • 1.1.1. Current Business Scope

  • CC01080 Manufacturing of electronic components

  • CB01020 Manufacturing of business machines

  • CC01110 Manufacturing of computers and the peripherals

  • C801010 Basic chemical industry

  • C801990 Manufacturing of other chemical materials

  • C901990 Manufacturing of other non-metallic mineral products

  • F401010 International commerce

  • ZZ99999 Except where permits are required, to run operations not forbidden or limited by laws and regulations

  • 1.1.2. Current products and services provided by the Company and subsidiaries

  • Copper Clad Laminates (CCLs) consumed by double-sided PCBs (Printed Circuit Boards)

  • Core CCLs and Prepreg (PP) consumed by multilayer PCBs

  • Mass Lamination Panel (Mass Lam)

1.1.3. Sales Breakdown

The factory of the Company was built in 1993, and its capacity was expanded in the mid of 2005. Since the inception of the Company, it has been focusing on the manufacturing and sales of CCLs and PP, and providing the Mass Lam service for the downstream PCB makers. The sales breakdown of major business segment of 2019 is as follows:

Unit: NT$ thousands,%
Major Products Revenue Percentage of Revenue
CCLs 14,009,825 51.51%
PP 12,334,689 45.35%
Mass Lam 758,423 2.79%
Others 97,849 0.36%
Total 27,200,786 100.00%
  • 1.1.4. Products and services planned to be developed and launched by the Company and subsidiaries

The Company will continue to develop eco-friendly products and create new applications for the said products to ensure the leading position in eco-friendly materials and maintain global number one ranking. Products under development at current stage:

  • a. Substrate material consumed by high frequency mmWave.

  • b. Low loss substrate material consumed by package.

  • c. Insulation material consumed by ABF-like laminate

  • d. High speed environmental materials consumed by 5G device

  • 63 -

1.2. Business Environment

1.2.1. Current industry situation and prospects

In year 2020, products of the Company were mainly sold in the domestic market of Taiwan, and customers located in Mainland China are served by the subsidiaries of the Company, Elite Electronic Materials (Zhongshan) Co., Ltd. and Elite Electronic Materials (Kunshan) Co., Ltd. The major exporting market was Korea. The Company expects that most of demand in year 2021 would still derive from Taiwan and mainland China. Korea would remain as the major exporting market. The Company set up a target to upgrade its product mix in 2020, aiming to increase the percentage of revenue from advanced products to 60% of the total revenue. The advanced products include, but not limited to, laminates with high-Tg, Br-free, and low CTE properties.

1.2.2. The supply chain analysis

he supply chain analysis
Upstream
Glass Fiber/ Glass Cloth
Epoxy
Phenolic Resin
Copper Foil
Polyimide Resin
Production Process and Testing
Equipment		 Midstream
Copper Clad Laminate
Manufactruing of Rigid, Flexible, IC
Substrate
Lamination Assembly & Processing and
Related Manufacturing		 Dow nstream
All Kinds of Electronic Products
Lamination Assembly & Processing and
Related Manufacturing
Production Process and Testing
Equipment

1.2.3. Industry trends and competition

Consumer electronic devices, especially for handheld and wearable devices, are trending toward thinner, lighter, and easier to carry; meanwhile, incorporating multi-functions in one single device, furthermore, the trend of high frequency/high speed and green environmental materials are rising. Therefore, the applications of HDI (High-Density Interconnect) structure, high layer-count laminates, IC substrate, rigid-flexible PCBs are experiencing increase in demand. In the meantime, the evolution of wireless transmission and the emerging cloud services are also driving the changes of the laminate industry. In order to meet the demand for highspeed data transmission, more and more laminate products and base materials are created to serve for highspeed transmission purpose in the high-frequency bandwidth. Also, improving thermal reliability and dimensional reliability is a must for high-speed high-frequency radio signal transmission applications.

1.3. Technology Innovation and R&D Overview

Products and technologies the Company has successfully developed in previous three years:

  • 64 -
Year 2018 a.
New eco-friendly laminates, consumed by PCB fabricators for 5G purpose,
providing ultra-low signal loss and low CTE properties
b. Advanced eco-friendly laminates, used for 5G base stations, providing ultra-low
signal loss and high-Tg properties
c.
High thermal resistance eco-friendly prepreg consumed by camera module in
handheld devices
d. Measurement technology used for signal transmission by millimeter wave at high
frequency
e.
Obtained collectively 23 patents from Taiwan, Mainland China, Japan, and the
United States
Year 2019 a.
New environmental-friendly laminates, consumed by 5G handheld devices,
providing ultra-low signal loss
b. Advanced ultra low loss eco-friendly laminates, used for 5G base stations,
c.
Antenna laminate material consumed by millimeter wave and Sub 6G
d. Eco-friendly laminate materials for 400/800 switches.
e.
Obtained collectively 20 patents from Taiwan, Mainland China, Japan, and the
United States
Year 2020 a. New eco-friendly laminates, consumed by 5G handheld devices, providing ultra-
low signal loss
b. Out-door antenna substrate material consumed by 5G base-station.
c. High-end substrate material consumed by AIP and SIP package.
d. High frequency material consumed by mmWave laminate
e.
Obtained collectively 36 patents from Taiwan, Mainland China, Japan, and the
United States

1.4. Long-term and Short-term Business Plan

The Company conducts business with ethics and integrity in order to build a long-term cooperative relationship with customers. The long-term and short-term business plans that the management team makes are as follows:

1.4.1. Short-term Business Plan

  • a. Achieve the targets of the operating and financial budgets of Year 2021

  • b. Increase the percentage revenue derived from High-Tg low-CTE base materials, base materials consumed by electronic devices used for automotive vehicles, and thermal conductive base materials

  • c. Coordinate the sales team and customer service activities to better serve customers

1.4.2. Mid-and Long-term Business Plan

  • a. Expand the international market and enhance the long-term competitiveness of the Company b. Diversify the applications of the Company’s products and diversify the sales channels

2. Overview of Market, Production, and Sales

2.1. Market Analysis

2.1.1. Sales regions of the Company’s products

In Year 2019, the Company’s products were mainly sold in Taiwan, Mainland China, and Korea. It is expected

  • 65 -

that the major market of the Company in Year 2020 would remain as the same. The percentage of sales for the Company’s products in Year 2019 is as follows:

Regions Percentage of total sales
Taiwan 17.48%
Mainland China 76.66%
Others 5.86%
Total 100.00%
  • 2.1.2. Domestic market share of major products

There are a lot of companies, including EMC, NYP, ITEQ, TUC and Taiwan Panasonic, producing FR-4 CCL, PP, and providing mass lamination service located in Taiwan in year 2020. According to Prismark, EMC’s global market share is 6%.

  • 2.1.3. Future supply/demand situation and the prospects of the market

The demand for high-speed and high-frequency data transmission would continue to rise in the Taiwan market.

2.1.4. The expected sales volume and the key assumption

Based on the actual sales volume, the expectation of the Company about the demand in the future, and the actual supply/demand situation in the first quarter of 2021, the Company expected the sales volume in year 2021 as follows:

Expected sales volume target: Copper clad laminates (CCLs): 43 million sheets/year Prepreg (PP): 900 thousand rolls/year Mass Lam (M/L): 1.9 million panels/year

  • 2.1.5. Positive factors, negative factors, and the Company’s measures to counteract the negative measures

  • A. Positive factors

    • CCLs are base materials for many sorts of electronic devices. The product life cycle is long, and at this moment, there is no product can replace the usage of CCLs.

    • The penetration rate of halogen-free CCL is proliferating, and the market share is rising. Halogenfree products created much higher value for the Company.

    • The Company has diversified the applications of its products, meeting the demand of different customers.

    • The Company owns production base across the strait, and which are close to customers. In addition, the Company has established sales representative offices in Korea and the United States.

  • B. Negative factors

    • The price volatility of raw materials can be significant, and therefore, has a negative impact on the gross margin of the Company.

  • C. Company’s measures to counteract the negative factors

    • Increase the sales percentage derived from high value-added products.

    • Diversify the sources of raw materials to lower the risk. In addition, negotiate with vendors based on the total volume needed for all production sites of the Company to increase the bargaining power of the Company, in order to secure a consistent volume of supply with a relatively stable price.

  • 66 -

2.2. Applications and Production Process of Major Products

  • 2.2.1. Applications of major products

  • a. CCLs: used for the production of double-sided PCBs and multi-layer PCBs

  • b. Prepreg: used for the production of multi-layer PCBs

  • c. Mass lamination: an OEM service provided to PCB makers for the production of multi-layer PCBs.

2.2.2. Production process of major products

==> picture [495 x 81] intentionally omitted <==

----- Start of picture text -----

Mixing & Impregnation Dry up Lay up & Lamination Inspection Finished
compounding Composing products
Chemical resins, Glass fiber
solvents, fabrics Copper foils
additives, etc.
----- End of picture text -----

2.3. Source of Major Raw Materials

Major raw materials of the Company include, but not limited to, copper foils, glass fiber fabrics, and epoxy resins.

Table of major raw material sources and supply situations

Raw Materials Major Sources Supply Situation
Copper foil Domestic Normal
Glass fiber fabrics Japan,domestic Normal
Epoxyresins Japan,domestic Normal

2.4. Major suppliers or customers who account for 10% (inclusive) or above of purchases/or

revenues in recent two years

  • 2.4.1. Suppliers who account for 10% (inclusive) or above of purchases in recent two years:

Unit: NT$ thousands

Unit: NT$ thousands Unit: NT$ thousands Unit: NT$ thousands Unit: NT$ thousands
Year 2019 Year 2020 FirstQuarter of Year 2021
Name Purchase
amount		 Percentage
of total
purchase		 Subsidiary
or
affiliates
of the
Company		 Name Purchase
amount		 Percentage
of total
purchase		 Subsidiary
or
affiliates
of the
Company		 Name Purchase
amount		 Percentage
of total
purchase		 Subsidiary
or
affiliates
of the
Company
A 1,691,780 11% No A 1,434,746 9% No A 490,263 9% No
Others 14,185,568 89% No Others 15,277,217 91% No Others 4,944,332 91% No
Net
amount		 15,877,348 100% Net
sales		 16,711,963 100% Net
sales		 5,434,595 100%

The reasons why percentage of purchase of major suppliers has changed: None

  • 67 -

2.4.2. Customers who account for 10% (inclusive) or above of revenues in recent two years:

Unit: NT$ thousands Unit: NT$ thousands Unit: NT$ thousands
Year 2019 Year 2020 FirstQuarter of Year 2021
Name Sales
revenue		 Percentage
of total
revenue		 Subsidiary
or affiliates
of the
Company		 Name Sales revenue Percentage
of total
revenue		 Subsidiary
or affiliates
of the
Company		 Name Sales
revenue		 Percentage of
total revenue		 Subsidiary
or affiliates
of the
Company
A 3,229,386 13% No A 3,330,318 12% No A 952,617 12% No
Others 21,636,136 87% No Others 23,870,468 88% No Others 7,051,106 88% No
Net
sales		 24,865,522 100% Net
sales		 27,200,786 100% Net
sales		 8,003,723 100%

The reasons why percentage of sales of major customers has changed: None

2.5. Volume and value of production in recent two years

Unit: NT$ thousands

Year
Products		 Unit Year 2019 Year 2019 Year 2020 Year 2020
Volume Value Volume Value
CCLs 000 sheets 34,643 11,070,820 38,217 12,052,259
Prepreg 000 meters 127,526 7,367,400 153,257 8,568,460
Mass Lam 000 SF 4,404 956,930 4,237 771,979
Total 19,395,150 21,392,698

2.6. Sales volume and revenue in recent two years

Unit: NT$ thousands

Year
Products		 Unit Year 2019 Year 2019 Year 2019 Year 2019 Year 2020 Year 2020 Year 2020 Year 2020
Domestic Sales Export Sales Domestic Sales Export Sales
Volume Value Volume Value Volume Value Volume Value
CCLs 000 sheets 24,426 10,115,480 6,450 3,013,261 26,303 11,565,985 5,749 2,443,840
Prepreg 000 meters 72,357 8,355,356 22,479 2,421,140 78,704 9,917,438 14,702 2,417,251
Mass Lam 000 SF 5,058 893,792 169 51,758 3,874 620,414 883 138,010
Others - 4,740 - 9,995 - 43,817 - 54,031
Total 19,369,368 5,496,154 22,147,654 5,053,132
  • 68 -

3. Information about Employees

Year Year Year 2019 Year 2020 31 March 2021
Number of Employees
Number of
Employees		 Direct 2,411 2,565 2,641
Indirect 595 682 746
Total 3,006 3,247 3,387
Average age 32.84 33.77 33.21
Averageyears of service 4.62 4.45 4.37
Breakdown of Educational Level(%)
Distribution
of
Educational
Level		 Ph.D. 0.13 0.18 0.22
Master 3.86 4.59 5.42
Bachelor 38.46 37.67 40.28
High School 55.62 55.13 55.28
Below High School 1.93 2.43 3.11

4. Environmental Protection Measures and Expenses

  • 4.1. License or permission granted by the regulatory authority to install equipment, the fee paid to the regulatory authority for prevention of pollution, and the license number of dedicated person responsible for environmental protection
Hsinchu Factory
License Expiry Date License Number License Number of
Dedicated Person
Production process of PCBs (M01) 1 Aug 2021 Hsinchu County Huan-Kon-Tsao-Zhen-Zhi
No. J0763-08		 (2016) Huan-Shu-Hsun-Zhen-Zhi
No. FA100460
Heating process of heating medium
(M02)		 21 Sep 2024 Hsinchu County Huan-Kon-Tsao-Zhen-Zhi
No. J0764-05
Heating process of heating medium
(M04)		 19 Apr 2022 Hsinchu County Huan-Kon-Tsao-Zhen-Zhi
No. J0789-00
Production process of other electronic
components(M05)		 27 Nov 2022 Hsinchu County Huan-Kon-Tsao-Zhen-Zhi
No. J1009-01
Heating process of heating medium
(M06)		 19 Nov 2022 Hsinchu County Huan-Kon-Tsao-Zhen-Zhi
No. J1017-00
Water pollution control permit 19 Dec 2023 Hsinchu County
Huan-Pai-Hsu-Zhi No. 00424-07		 (2018) Huan-Shu-Hsun-Zhen-Zhi
No. GA130492
Business waste cleaning plan Good till revision Fu-Huan-Yeh-Zhi No. 1070103650 (2017) Huan-Shu-Hsun-Zhen-Zhi
No. HB011022
Guanyin Factory
License Expiry Date License Number License Number of
Dedicated Person
Production process of other electronic
components(M01)		 23 Jun 2020 Fu-Huan-Kon-Tsao-Zhen-Zhi No. H4164-
05		 (2008) Huan-Shu-Hsun-Zhen-Zhi
No. FA100052
Heating process of heating medium
(M02)		 26 Sep 2021 Fu-Huan-Kon-Tsao-Zhen-Zhi No. H5122-
01
Water pollution control permit
(Plant 1 & 3)		 14 Jun 2022 Taoyun City
Huan-Pai-Hsu-Zhi No. H1984-06		 (2015) Huan-Shu-Hsun-Zhen-Zhi
No. GA230798
Water pollution control permit
(Plant 2)		 16 Jul 2022 Taoyun City
Huan-Pai-Hsu-Zhi No. H3094-02		 Not applicable
  • 69 -
Business waste cleaning plan
(Plant 1 & 3)		 Good till revision Fu-Huan-Yeh-Zhi No. 1060305324 (2015) Huan-Shu-Hsun-Zhen-Zhi
No. HA050746
Business waste cleaning plan
(Plant 2)		 Good till revision Fu-Huan-Yeh-Zhi No. 1060048502 (2017) Huan-Shu-Hsun-Zhen-Zhi
No. HB180146

4.2. Expenses on environment protection

Unit: NT$ thousands

Unit: NT$ thousands
Item Amount
Waste treatment fee for earth and underground water 261
Charges forprevention of airpollution from fixedpollution source 10,296
Treatment ofpolluted water 602
Treatment cost of waste water 2,932
Treatment cost of business waste 86,403
Total 100,494
  • 4.3. List of equipment and investment of the Company for prevention of pollution and their respective purpose
Equipment Number Acquisition Date Purpose
Dust collector One 31 Aug2018 Prevention ofpollution
RTO equipment One 31 July2017 Prevention ofpollution
MIL-1040 RTO equipment One 31 Dec 2017 Prevention ofpollution
No. 2 RTO Factory One 31 Dec 2013 Prevention ofpollution
RTO equipment – Zone 3 One 29 Dec 2011 Prevention ofpollution
RTO equipment improvement – Zone 3 One 30 Nov 2014 Prevention ofpollution
PLC Scan, Monitoring & Controlling system for hazardous
chemical substances		 One 31 Jan 2014 Prevention of pollution
Improvement of equipment for waste water treatment One 30 Sep2000 Prevention ofpollution
SCR-6 pumping system for exhaust air One 30 Apr 2007 Prevention ofpollution
180CM treatment equipment for exhaust air form black
oxide treatment		 One 30 Sep 2006 Prevention of pollution
Improvement of equipment for waste water treatment One 12 Apr 2006 Prevention ofpollution
Equipment for waste water treatment One 28 Feb 2006 Prevention ofpollution
Exhaust air monitoring system – Plant 2 One 22 Sep2000 Prevention ofpollution
Flow meter of waste water – Plant 2 One 31 Aug2000 Prevention ofpollution
Flow meter of waste water One 24 Sep1997 Prevention ofpollution
Exhaust fan and water circulation equipment for etching
room		 One 31 Oct 1994 Prevention of pollution
Waste water storage of etching room One 30 Sep1993 Prevention ofpollution

  • 4.4. Process the Company takes to reduce pollution, and to deal with the pollution related dispute in latest two years till the publishing of the annual report:

  • None

  • 4.5. Loss or penalty due to pollution in latest two years till the publishing of the annual report:

  • 70 -

None

  • 4.6. Effects on the profit, competitiveness, and capital expenditure plan of the Company from the current environment pollution and expected substantial capital expenditure for environmental protection over next two years:

None

5. Employee Welfare

5.1. Current Agreements with Employees and Employee Welfare

5.1.1. Employee welfare procedures

  • a. The Company has an employee welfare committee that, in compliance with laws and regulations, appropriates welfare funds, and manages various welfare activities for employees. The said activities include, but are not limited to, employee domestic and overseas travelling trips. The Company also organizes a variety of clubs and games on periodical basis. In addition, the Company provides subsidy to individual employee for vacation travelling.

  • b. The Company provides holiday bonuses for traditional festival holidays, birthdays, weddings, and funerals for its employees.

  • c. The Company organizes and holds training program for its employees on periodical basis.

  • d. The Company provides free health checkup, labor insurance program, health insurance program, and a variety of group insurance programs for employees to choose among from.

  • e. The Company organizes year-end party on annual basis.

  • f. The Company has an employee bonus system, allowing employees to participate in the sharing of management results.

  • g. The Company had issued employee stock option certificates.

5.1.2. Employee training programs

The Company provides its employees training programs designed and organized both internally and externally. A study report is required to submit for each attendee of the training courses. The training programs are integrated with the promotion system of the Company. The cost for employee training in year 2020 was NT$1,745 thousands. The total training hours amounted to 17,499 hours, and on the average, each employee attended a training program for 18.9 hours.

5.1.3. Pension and retirement plan

Pension funds are appropriated monthly, 6% of the monthly salary to individual pension accounts for those who are qualified or voluntarily choose the new pension fund system in accordance with the “Labor Pension Act”.

5.1.4. The agreement between labor and management

All regulations and procedures regarding labor and management relationship are implemented in good condition pursuant to the “Handbook of EMC Employees” and related laws. Since the inception of the Company, there has never been severe dispute between the labor and the management team. In addition, the Company has established an internal communication channel for employees and encourage employees to express their opinions and suggestions to the management team, in order to achieve a better cooperative relationship between labor and the management.

  • 71 -

5.1.5. Various measures regarding protection of employees’ rights

  • Each department of the Company has established protocols and procedures to protect employees’ rights, especially to ensure a safety working environment. In addition, the Company value the opinions and suggestions from employees, and has dedicated personnel to handle such opinions and suggestions in a way as appropriate as possible.

5.2. Loss occurs due to labor issues in the latest year until the publishing of this annual report:

  • None

6. Important Contracts and Agreements

Type Counter Party Duration Period Major Contents Covenants
Technology
License and
Sales
Cooperation		 A Company 21 Jan 2002 –
31 Mar 2022		 Authorization of
usage of patents and
recipes, and
cooperation at sales
activities.		 None

VI. FINANCIAL INFORMATION

1. Five-Year Financial Summary

1.1. Condensed Balance Sheet and Statements of Comprehensive Income – IFRS

1.1.1. Condensed Consolidated Balance Sheet

Unit: NT$ thousands

Year
Item		 Year
Item
2016		 2017 2018 2019 2020 31 Mar 2021
Current assets 14,132,084
15,480,404
16,232,502
18,833,258
19,568,557
21,690,980
Property, plant and equipment 4,622,571
4,803,458
4,937,424
5,857,817
6,531,008
6,729,127
Intangible assets 5,062
7,344
7,388
10,316
671,900
667,652
Other assets 473,058
509,508
785,149
1,002,940
1,085,341
1,521,021
Total assets 19,232,775
20,800,714
21,962,463
25,704,331
27,856,806
30,608,780
Current liabilities Before distribution 7,246,837
6,947,012
7,201,783
10,321,431
9,613,785
11,197,050
After distribution 8,745,893
8,481,344
8,416,462
12,239,679
(Note)
(Note)
Non-current liabilities 1,473,966
1,970,190
2,845,890
1,846,331
1,487,512
1,778,803
Total liabilities Before distribution 8,720,803
8,917,202
10,047,673
12,167,762
11,101,297
12,975,853
After distribution 10,219,859
10,451,534
11,262,352
14,086,010
(Note)
(Note)
Equity attributable to owners of the Company 10,500,913
11,871,679
11,900,197
13,519,931
16,738,630
17,614,900
Common stock 3,189,211
3,196,524
3,196,524
3,197,080
3,329,183
3,329,183
  • 72 -
Capital surplus 443,632
623,721
623,721
628,858
1,868,661
1,868,661
Retained earnings Before distribution 6,994,656
8,288,626
8,503,506
10,526,386
12,297,677
13,260,957
After distribution 5,495,600
6,754,294
7,288,827
8,608,138
(Note)
(Note)
Other equity (126,586)
(237,192)
(423,554)
(832,393)
(756,891)
(843,901)
Treasury stocks -
-
-
-
-
-
Non-controlling interests 11,059
11,833
14,593
16,638
16,879
18,027
Total equity Before distribution 10,511,972
11,883,512
11,914,790
13,536,569
16,755,509
17,632,927
After distribution 9,012,916
10,349,180
10,700,111
11,618,321
(Note)
(Note))

Note: The distribution of 2020 earnings is subject to the approval at the upcoming 2021 Annual General Shareholders’ Meeting.

1.1.2. Condensed Consolidated Statements of Comprehensive Income

Unit: NT$ thousands, except earnings per share

Year
Item		 2016 2017 2018 2019 2020 31 Mar 2021
Operating revenues 22,069,584 23,609,983 22,890,928 24,865,522 27,200,786 8,003,723
Gross profit 5,765,539 5,827,978 4,576,250 6,100,303 7,040,029 1,887,015
Operating income (losses) 3,938,694 4,006,558 2,755,333 4,079,550 4,683,451 1,233,199
Non-operating income (expenses) (21,503) 21,894 71,537 124,276 160,112 (8,988)
Income before tax 3,917,191 4,028,452 2,826,870 4,203,826 4,843,563 1,224,211
Income from continuing operations 3,917,191 4,028,452 2,826,870 4,203,826 4,843,563 1,224,211
Loss from discontinued operations - - - - - -
Net income 2,774,009 2,795,176 1,754,433 3,245,301 3,694,270 964,562
Other comprehensive income, net (608,166) (108,679) (188,823) (412,750) 76,198 (87,144)
Total comprehensive income 2,165,843 2,686,497 1,565,610 2,832,551 3,770,468 877,418
Net income attributable to the owner of the
Company		 2,770,355 2,790,957 1,751,378 3,240,845 3,688,999 963,280
Net income attributable to non-controlling
interests		 3,654 4,219 3,055 4,456 5,271 1,282
Total comprehensive income attributable to
the owner of the Company		 2,162,981 2,682,420 1,562,850 2,828,721 3,765,041 876,270
Total comprehensive income attributable to
non-controllinginterests		 2,862 4,077 2,760 3,830 5,427 1,148
Earnings per share (NT$/share) 8.70 8.74 5.48 10.14 11.33 2.89
  • 73 -

1.2. Condensed Balance Sheet and Statements of Comprehensive Income – IFRS (Stand-alone basis)

1.2.1. Condensed Stand-Alone Balance Sheet - IFRS

Unit: NT$ thousands
2020
4,816,937
2,007,189
18,019
15,084,715
21,926,860
3,968,647
(Note)
1,219,583
5,188,230
(Note)
16,738,630
3,329,183
1,868,661
12,297,677
(Note)
(756,891)
-
-
16,738,630
(Note)
Year
Item		 2016 2017 2018 2019 2020
Current assets 3,229,548 4,517,524 3,414,869 4,518,871 4,816,937
Property,plant and equipment 1,839,614 2,141,028 2,126,016 2,015,030 2,007,189
Intangible assets 2,591 2,795 4,160 5,844 18,019
Other assets 9,622,910 9,792,430 12,139,006 13,722,965 15,084,715
Total assets 14,694,663 16,453,777 17,684,051 20,262,710 21,926,860
Current liabilities Before distribution 2,724,307 2,616,366 2,939,988 5,441,993 3,968,647
After distribution 4,223,363 4,150,698 4,154,667 7,360,241 (Note)
Non-current liabilities 1,469,443 1,965,732 2,843,866 1,300,786 1,219,583
Total liabilities Before distribution 4,193,750 4,582,098 5,783,854 6,742,779 5,188,230
After distribution 5,692,806 6,116,430 6,998,533 8,661,027 (Note)
Equityattributable to owners of the Company 10,500,913 11,871,679 11,900,197 13,519,931 16,738,630
Common stock 3,189,211 3,196,524 3,196,524 3,197,080 3,329,183
Capital surplus 443,632 623,721 623,721 628,858 1,868,661
Retained earnings Before distribution 6,994,656 8,288,626 8,503,506 10,526,386 12,297,677
After distribution 5,495,600 6,754,294 7,288,827 8,608,138 (Note)
Other equity (126,586) (237,192) (423,554) (832,393) (756,891)
Treasurystocks - - - - -
Non-controllinginterests - - - - -
Total equity Before distribution 10,500,913 11,871,679 11,900,197 13,519,931 16,738,630
After distribution 9,001,857 10,337,347 10,685,518 11,601,683 (Note)

Note: The distribution of 2020 earnings is subject to the approval at the upcoming 2021 Annual General Shareholders’ Meeting.

  • 74 -

1.2.2. Condensed Stand-Alone Statements of Comprehensive Income - IFRS

Unit: NT$ thousands, except earnings per share

Year
Item		 2016 2017 2018 2019 2020
Operatingrevenues 6,025,659 6,181,352 6,221,721 7,186,702 6,930,636
Grossprofit 1,311,788 1,009,314 740,996 1,316,362 1,368,523
Operatingincome(losses) 668,510 380,576 185,173 591,708 383,753
Non-operatingincome(expenses) 2,751,678 3,079,457 2,233,339 3,062,813 3,800,791
Income before tax 3,420,188 3,460,033 2,418,512 3,654,521 4,184,544
Income from continuingoperations 3,420,188 3,460,033 2,418,512 3,654,521 4,184,544
Loss from discontinued operations - - - - -
Net income 2,770,355 2,790,957 1,751,378 3,240,845 3,688,999
Other comprehensive income, net (607,374) (108,537) (188,528) (412,124) 76,042
Total comprehensive income 2,162,981 2,682,420 1,562,850 2,828,721 3,765,041
Earningsper share(NT$/share) 8.70 8.74 5.48 10.14 11.33

1.3. Names and Opinions of Independent Auditors in Recent Five Years

Year Name of CPA Auditingopinion
2016 Leou FongYang& Celia Chen Unqualified opinion
2017 Calvin C. Y. Chiang& Celia Chen Unqualified opinion
2018 Calvin C. Y. Chiang& Celia Chen Unqualified opinion
2019 Calvin C. Y. Chiang& Yi-Chun,Chen Unqualified opinion
2020 Yi-Chun,Chen & Calvin C. Y. Chiang Unqualified opinion

Should the CPA change in recent five years, the reason for such change: Due to the internal job rotation of the auditing firm KPMG, the CPA changed in year 2017 and year 2018.

  • 75 -

2. Financial Ratio Analysis for Recent Five Years

2.1. Financial Ratio Analysis (consolidated)

Item Year 2016 2017 2018 2019 2020 31 Mar 21
Financial
structure		 Ratio of liabilities to assets (%) 45.34 42.87 45.75 47.34 39.85 42.39
Ratio of long-term capital to property, plant and
equipment(%)		 246.57 275.20 274.84 242.24 265.38 266.68
Liquidity
analysis		 Current ratio (%) 195.01 222.84 225.40 182.47 203.55 193.72
Quick ratio (%) 166.38 186.10 194.72 154.33 165.04 154.55
Interest coverage ratio (times) 144.95 116.61 86.89 90.31 80.76 107.24
Operating
ability		 Receivables turnover (times) 3.03 3.09 3.03 2.96 2.84 3.13
Average collection period (days) 120.46 118.12 120.46 123.31 128.52 116.61
Inventory turnover (times) 8.23 7.57 7.63 7.34 6.10 6.05
Payables turnover (times) 3.43 3.48 3.62 3.53 3.50 3.80
Averages sales days (days) 44.34 48.21 47.83 49.72 59.83 60.33
Property, plant and equipment turnover (times) 4.77 4.92 4.64 4.24 4.16 4.76
Total assets turnover (times) 1.15 1.14 1.04 0.97 0.98 1.05
Profitability
analysis		 Return on total assets (%) 15.14 14.11 8.33 13.77 13.98 3.33
Return on shareholders’ equity (%) 27.46 24.96 14.74 25.50 24.39 5.61
Ratio of pre-tax income to paid-in capital (%) 122.83 126.03 88.44 131.49 145.49 36.77
Ratio of net income to sales (%) 12.57 11.84 7.66 13.05 13.58 12.05
Earnings per share (NT$/share) 8.70 8.74 5.48 10.14 11.33 2.89
Cash flow Cash flow ratio (%) 35.89 44.05 28.97 23.89 36.59 10.76
Cash flow adequacy ratio (%) 134.37 144.58 139.30 120.47 92.09 89.23
Cash reinvestment ratio (%) 7.20 8.06 2.71 5.91 6.62 4.84
Leverage Operating leverage 1.60 1.63 1.98 1.78 1.81 1.90
Financial leverage 1.01 1.01 1.01 1.01 1.01 1.01
  • 76 -

2.2. Financial Ratio Analysis (Stand-Alone)

Item Year 2016 2017 2018 2019 2020
Financial
Structure		 Ratio of liabilities to assets (%) 28.54 27.85 32.71 33.28 23.66
Ratio of long-term capital to property, plant and
equipment(%)		 618.73 616.67 637.49 676.30 849.31
Liquidity
Analysis		 Current ratio (%) 118.55 172.66 116.15 83.04 121.37
Quick ratio (%) 98.48 146.45 94.41 68.19 94.10
Interest coverage ratio (times) 127.65 101.58 79.86 96.85 181.48
Operating
Ability		 Receivables turnover (times) 3.07 3.01 2.85 2.95 2.87
Average collection period (days) 118.89 121.26 128.07 123.72 127.17
Inventory turnover (times) 8.81 8.08 8.12 8.12 5.88
Payables turnover (times) 3.38 3.51 3.45 3.36 3.14
Averages sales days (days) 41.43 45.17 44.95 44.95 62.07
Property, plant and equipment turnover (times) 3.28 2.89 2.93 3.57 3.45
Total assets turnover (times) 0.41 0.38 0.35 0.35 0.32
Profitability
Analysis		 Return on total assets (%) 19.60 18.10 10.40 17.24 17.58
Return on shareholders’ equity (%) 27.45 24.95 14.73 25.50 24.38
Ratio of pre-tax income to paid-in capital (%) 107.24 108.24 75.66 114.31 125.69
Ratio of net income to sales (%) 45.98 45.15 28.15 45.10 53.23
Earnings per share (NT$/share) 8.7 8.74 5.48 10.14 11.33
Cash Flow Cash flow ratio (%) 72.63 101.49 -11.07 34.96 80.04
Cash flow adequacy ratio (%) 89.74 108.00 79.74 86.83 86.05
Cash reinvestment ratio (%) 4.26 7.11 -10.77 3.96 6.09
Leverage Operating leverage 2.48 3.82 6.61 3.08 5.07
Financial leverage 1.04 1.10 1.20 1.07 1.06
  • 77 -

The Formula used for the Calculation of Numbers in the Table Above:

1. Financial Structure

  • (1) Liabilities to assets ratio = Total liabilities / Total assets

  • (2) Long-term capital to property, plant and equipment ratio = (Net shareholders' equity + Long-term liabilities) / Net value of property, plant and equipment

2. Liquidity Analysis

  • (1) Current ratio = Current assets / Current liabilities

  • (2) Quick ratio = (Current assets - Inventory - Prepaid expenses) / Current liabilities

  • (3) Interest coverage ratio = Net income before income tax and interest expenses / Interest expenses

3. Operating Ability

  • (1) Receivables turnover (including accounts and notes receivable) = Net sales / Average receivables (including accounts and notes receivable)

  • (2) Average collection days = 365/ Receivables turnover

  • (3) Inventory turnover = Costs of goods sold / Average inventory

  • (4) Average sales days = 365 / Inventory turnover

  • (5) Payables turnover (including accounts and notes payable) = Costs of goods sold / Average payables (including accounts and notes payable)

  • (6) Property, plant and equipment turnover ratio = Net sales / Net value of property, plant and equipment

  • (7) Total assets turnover ratio = Net sales / Total assets

4. Profitability Analysis

  • (1) Return on assets = [Net income +Interest expenses × (1-Tax rate)] / Average total assets

  • (2) Return on shareholders' equity =Net income / Average shareholders' equity

  • (3) Net income to sales ratio = Net income / Net sales

  • (4) Earnings per share = (Net income attributable to owner of the Company - Preferred stock dividend) / Weighted average number of outstanding shares

5. Cash Flow

  • (1) Cash flow ratio = Cash flows from operating activities / Current liabilities

  • (2) Cash flow adequacy ratio = Net cash flow from operating activities for the past 5 years / (Capital expenditures + Increase in inventory + Cash dividends) for the past 5 years

  • (3) Cash reinvestment ratio = (Net cash flow from operating activities - Cash dividends) / (Gross value of property, plant and equipment + Long-term Investment + Other noncurrent assets + Working capital)

6. Leverage

  • (1) Operating leverage = (Net sales - Variable operating costs and expenses) / Operating income

  • (2) Financial leverage = Operating income / (Operating income-Interest expenses)

  • 78 -

3. Review Report of the Audit Committee

To the 2021 General Shareholders’ Meeting of Elite Material Co., Ltd.,

In accordance with Article 219 of the Company Act, we have examined the Business Report, the Resolution for Allocation of Surplus Profit, the Financial Statements submitted by the Board of Directors for the year ending 2020 which had been audited by independent auditors, Ms. Chen, YiChun and Mr. Calvin C. Y. Chiang of KPMG, and the auditing report signed by the said independent auditors, and found them in order. We thereby submit the report.

==> picture [170 x 67] intentionally omitted <==

Convener of the Audit Committee of Elite Material Co., Ltd.

25 February 2021

4. Year 2020 Stand-Alone Financial Report:

Please refer to ANNEX I

5. Year 2020 Consolidated Financial Report Reviewed and Attested by CPA:

Please refer to ANNEX II

6. Impact of the Financial Distress Occurred to the Company and Affiliates in Recent Years until the Annual Report Being Published:

None

  • 79 -

VII. REVIEW AND ANALYSIS OF THE FINANCIAL CONDITION, PERFORMANCE, AND RISK MANAGEMENT

1. Review and Analysis of Financial Condition

Unit: NT$ thousands

Year
Item		 2020 2019 Difference Difference
Dollar Amount %
Current asset 19,568,557 18,833,258 735,299 3.90
Property,plant and equipment 6,531,008 5,857,817 673,191 11.49
Intangible assets 671,900 10,316 661,584 6413.18
Other assets 1,085,341 1,002,940 82,401 8.22
Total assets 27,856,806 25,704,331 2,152,475 8.37
Current liabilities 9,613,785 10,321,431 (707,646) (6.86)
Non-current liabilities 1,487,512 1,846,331 (358,819) (19.43)
Total liabilities 11,101,297 12,167,762 (1,066,465) (8.76)
Common stock 3,329,183 3,197,080 132,103 4.13
Capital surplus 1,868,661 628,858 1,239,803 197.15
Retained earnings 12,297,677 10,526,386 1,771,291 16.83
Other equities (756,891) (832,393) 75,502 (9.07)
Non-controllinginterests 16,879 16,638 241 1.45
Total equities 16,755,509 13,536,569 3,218,940 23.78
Analysis of variations between two years (should the variation exceed 20% of the numbers in previous year and the dollar amount difference exceed
NT$10 millions):
1.
Intangible assets: mainly due to acquired EMD.
2.
Capital surplus: mainly due to conversion of convertible corporate bonds
3.
Total equities: mainly due to business profit and conversion of convertible corporate bonds.
  • 80 -

2. Review and Analysis of Financial Performance

Unit: NT$ thousands

Year
Item		 2020 2019 Difference Difference
Dollar Amount %
Operatingrevenues – net 27,200,786 24,865,522 2,335,264 9.39
Cost ofgoods sold 20,160,757 18,765,219 1,395,538 7.44
Grossprofit 7,040,029 6,100,303 939,726 15.40
Operatingexpenses 2,356,578 2,020,753 335,825 16.62
Operating profit(losses) 4,683,451 4,079,550 603,901 14.80
Non-operating gain(expenses) 160,112 124,276 35,836 28.84
Pre-taxprofit from continuingoperation 4,843,563 4,203,826 639,737 15.22
Net income(losses) 3,694,270 3,245,301 448,969 13.83
Other comprehensive income – net 76,198 (412,750) 488,948 (118.46)
Total comprehensive income 3,770,468 2,832,551 937,917 33.11
Net income attributable to the owner of the Company 3,688,999 3,240,845 448,154 13.83
Net income attributable to non-controlling interests 5,271 4,456 815 18.29
Total comprehensive income attributable to the owner
of the Company		 3,765,041 2,828,721 936,320 33.10
Total comprehensive income attributable to non-
controllinginterests		 5,427 3,830 1,597 41.70
Analysis of variations between two years (should the variation exceed 20% of the numbers in previous year and the dollar amount difference exceed
NT$10 millions):
1.
Non-operating gain (expenses): This period is due to an increase in other interests and losses.
2.
Other comprehensive income – net: This period is due to an increase in the exchange difference in the financial statements of foreign
operating institutions.
3.
Total comprehensive income、Total comprehensive income attributable to the owner of the Company、Total comprehensive income
attributable to non-controlling interests: This period is due to an increase in net income and in the exchange difference in the financial
statements of foreign operatinginstitutions.
  • 81 -

3. Review and Analysis of Cash Flow

3.1. Liquidity Analysis in Recent Two Years

Unit: NT$ thousands

Year
Item		 2020 2019 Difference Difference
Dollar amount %
Cash Flows from OperatingActivities 3,517,212 2,465,906 1,051,306 42.63
Cash Flows from InvestingActivities 1,959,127 1,179,968 779,159 66.03
Cash Flows from FinancingActivities 2,113,193 759,393 1,353,800 178.27
Analysis of variations between two years (should the variation exceed 20% of the numbers in previous year and the dollar):
1.
Cash flows from investing activities: Net increase is due to the higher profit for the current period than in the previous period.
2.
Cash flows from investing activities: Net outflow is due to the acquisition of subsidiaries.
3.
Cash flows from financing activities: Net outflow is due to the repayment of loans and the issuance of dividends.

3.2. Liquidity Analysis for the Coming One Year

Unit: NT$ thousands
Remedy Plans for Negative Balance of
Cash and Cash Equivalents
Investment Plan
Financing Plan
-
-		 Unit: NT$ thousands
Remedy Plans for Negative Balance of
Cash and Cash Equivalents
Investment Plan
Financing Plan
-
-
Cash and Cash
Equivalents –
beginning balance		 Cash Flows from
Operating
Activities		 Cash Flows from
Investing and
Financing
Activities		 Cash and Cash
Equivalents –
Ending Balance		 Remedy Plans for Negative Balance of
Cash and Cash Equivalents
Investment Plan Financing Plan
5,731,862 3,713,713 (3,878,213) 5,567,362 - -

  • 3.2.1. Liquidity analysis for 2021:

  • A. Operating activity: Cash inflow from operating activities is expected to derive mainly from the cash payment from accounts receivables made by customers.

  • B. Investment activity: It is expected that the investing activity will lead a net cash outflow, as the Company plans to increase the acquisition of property, plant, and equipment.

  • C. Financing activities: It is expected that the dividends paid will result in a net cash outflow from financing activities.

  • 3.2.2. Remedy plans for negative balance of cash and cash equivalents:

It is expected that the ending balance of cash and cash equivalents will be positive in the coming year.

4. Major Capital Expenditures in Recent Years and Impacts on Financial and Operational Situations:

None

5. Investment Policies in Recent Years

5.1. Investment Policies

  • “Procedures in Controlling Investment Cycle of the Internal Control System”, “Procedures for Handling the Related

  • 82 -

Party Transaction”, “Procedures for Monitoring the Operation of Subsidiaries”, and “Procedures for Acquisition and Disposition of Assets” are major standards for the Company to manage and monitor the performance of subsidiaries. Each subsidiary is also required to submit its financial information and operating data to the Company, allowing the Parent Company to closely know the financial and operating situation of each subsidiary in time. In addition, the Audit Office of the Company from time to time perform due diligence on each subsidiary, and the audit report will be subsequently submitted to the Board of Directors, assisting the board members to follow and monitor the operating situation of subsidiaries.

5.2. Reasons for Profit/Loss in Recent Years and Plans for Improvement

Unit: NT$ thousands

Unit: NT$ thousands
Investee Investment Income
Recognized in 2020		 Percentage
Holding		 Reasons for Profit/Loss Improvement
Plans		 Other Investment
Plans in the Future
EMC Overseas Holding
Incorporated		 3,708,854
100.00%		 Operating normally, no loss
occurred.		 NA NA
Grand Wuhan Incorporated 132,357 100.00% Operating normally, no loss
occurred.		 NA NA
EMC International
Holding Incorporated		 (3,038)
100.00%		 Operating normally. NA NA

5.3. Investment Plan over the Coming One Year:

None.

6. Sources of Risks and Management

6.1. Impacts from fluctuations of interest rate and currency exchange rate and inflation on the Company in recent years, and measures the Company undertake to manage the risks

6.1.1. Interest Rate

The Company's borrowings were on the basis of floating interest rate. The Company is not involved in the situation of changing floating interest rate into fixed rate with interest rate swap agreement. The Company periodically assessed the borrowing rates of the banks and every currency to make provisions for interest-changed rate risk. In addition, the Company creates favorable relationship with banks to get lower financial costs from borrowings in order for it to strengthen its working capital to lower its dependency on bank borrowings, as well as situation of changing floating interest rate and scatter interest-changed rate risk.

6.1.2. Foreign Currency Exchange Rate

The Company is exposed to currency risk on sales, purchases, and borrowings that are denominated in a currency other than the respective functional currencies of each entity owned by the Company, primarily the New Taiwan Dollar (TWD), US Dollar (USD), and China Yuan (CNY). Besides, the Company uses natural hedging principle to hedge by controlling the net amount of each currency of the Company in accordance with the condition of the exchange rate market. The Company hedges the currency risk with forward foreign currency whose mature date is in a year from report date.

The interest is denominated in the currency used in the borrowings. Generally, borrowings are denominated in currencies that match the cash flows generated by the underlying operations of the Company, primarily the TWD, USD, and CNY. This provides an economic hedge without derivatives being entered into, and therefore, hedge

  • 83 -

accounting is not applied in these circumstances.

In respect of other monetary assets and liabilities denominated in foreign currencies, the Company ensures that its net exposure is kept to an acceptable level by buying or selling foreign currencies at spot rates when necessary to address short-term imbalances.

  • 6.1.3. Inflation and Inflationary Expectations

The Company’s profit/loss was little affected by the inflation and inflationary expectations.

6.2. Major reasons for transaction policies, gain or loss from engaging in high-risk and hyper-leveraged investments, fund lending to others, endorsement/ guarantee and derivatives and correspondent procedures

The Company and subsidiaries did not engage in any high-risk or hyper-leveraged investments. The trading of derivative products is to hedge the risks from fluctuations stemming from our exposure to interest and currency exchange rates. Under this policy, all positions of derivative products are covered by physical holdings of assets and liabilities owned by the Company and subsidiaries; in other words, these positions are not naked positions. Therefore, the risks of trading derivatives are minimized and can be effectively controlled. Gains or losses, if occurred, often resulting from reasons such as investment horizon miss-matches, are therefore, little and negligible. The Company and subsidiaries will maintain this policy, and will not proactively engage in naked positions of highrisk or hyper-leveraged derivative products. All trading of derivative products will be managed in accordance with the “Procedures for Acquisition and Disposition of Assets”, “Procedures of Capital Lending to Others”, “Procedures of Endorsements and Guarantees”, and “Procedures for Handling Transactions of Derivative Products” approved by the Board of Directors and Shareholders’ Meeting.

6.3. R&D Plans and Estimated Expenses in Coming Years

The Company believes that eco-friendly material is an irreversible trend in the laminate industry. Therefore, the R&D plans in the future will continue to focus on the development of eco-friendly materials.

Products and Items under R&D Expected R&D
Expenditure		 Expected Time for
Commercial Operation
and Promotion		 Major Factors
Affect the R&D
Results
Substrate material consumed by high
frequencymmWave		 NT$750,000Thousand
Dollars		 The 4thQuarter of 2021 Qualifications
obtained for each
product and the
market demand
Low loss substrate material consumed
by package
Insulation material consumed by
ABF-like laminate
High speed environmental materials
consumed by5G devices

6.4. Impacts and responses of the company in regard to material changes of policies and regulations in Taiwan and foreign countries

  • 84 -

The management team closely monitors and evaluates the changes and impacts of policies and regulations in domestic and overseas markets on the Company. Responsive measures will be planned and implemented accordingly.

6.5. Technology Developments and Impacts on the Company

The Company and subsidiaries pay closely attention to the changes of technology about the relevant industries, and assign dedicated person or team to monitor and evaluate their impact on the financial and operational situation of the Company and subsidiaries. In recent years till the publishing of the annual report, the impact from technology developments on the Company is neither adverse nor material.

  • 6.6. Changes of Corporate Image and Impacts on the Company's Crisis Management: None

  • 6.7. Expected Benefits and Risks from Mergers and Acquisitions: None

6.8. Expected Benefits and Risks from Plant Expansion:

None

6.9. Risks from concentration in supply and sales and measures the Company undertake:

Products of the Company and subsidiaries have varieties of functions, and were sold to a diversified customer base. The Company also maintains a solid and consistent relationship with a diversified list of vendors. Risks from concentration in supply and sales are negligible.

  • 6.10. Impacts and risks from changes in Directors, Supervisors and shareholders with greater than 10% shareholding or their selling of a large number of shares in recent years until the annual report being published:

None

  • 6.11. Impact and risks from change of ownership in recent year until the annual report being published: None

  • 6.12. Litigations, Non-litigations, and Administrative Actions:

  • 6.12.1. Material Impacts on shareholders’ equity or share price from litigations, non-litigations or administrative actions in recent year until the annual report being published:

None

  • 6.12.2. Material Impacts on shareholders’ equity or share price from litigations, non-litigations or administrative actions in Directors, Supervisors, Chairman, President, shareholders with greater than 10% shareholding and subsidiaries in recent year until the annual report being published: None

  • 85 -

  • 6.12.3. Violations of Article 157 of Stock Exchange Act Directors, Supervisors, Chairman, President, managers, and shareholders with greater than 10% shareholding and subsidiaries in recent year until the annual report being published:

  • None

6.13. Other major risks:

None

7. Other Important Matters:

None

  • 86 -

VIII. SPECIAL DISCLOSURE

1. Affiliated Companies

1.1. Subsidiaries and Affiliated Companies in the Consolidated Financial Report

==> picture [438 x 372] intentionally omitted <==

1.2. Information of Subsidiaries and Affiliates

Company Name Date of
Incorporation		 Address Paid-in Capital Major Business
Activities
EMC Overseas Holding
Inc.		 July 1999 P.O. Box 957, Offshore Incorporations
Center, Road Town, Tortola, British
Virgin Islands		 US$36,256,950 Investment
Grand Shanghai
Incorporated		 May 1997 P.O. Box 957, Offshore Incorporations
Center, Road Town, Tortola, British
Virgin Islands		 US$18,200,000 Trading business and
investment
Elite Electronic Material
(Kunshan) Co., Ltd.		 September 1997 No. 368 Yubi Road, Zhoushi Town,
Kunshan City, Jiangsu Province, China		 US$63,200,000 Production and sales
of CCLs and prepreg
Grand Zhuhai
Incorporated		 April 2004 Scotia Center, 4thFloor, P.O. Box 2804,
George Town, Grand Cayman, Cayman
Islands		 US$33,798,821 Trading business and
investment
  • 87 -
Grand Zhongshan
Incorporated		 May 2004 P.O. Box 957, Offshore Incorporations
Center, Road Town, Tortola, British
Virgin Islands		 US$16,437,000 Trading business and
investment
Elite Electronic Material
(Zhongshan) Co., Ltd.		 July 2004 No. 7, Technology Avenue, Huo-Ju
Development Zone, Zhongshan City,
GuangdongProvince,China		 US$20,200,000 Production and sales
of CCLs and prepreg
Grand Wuhan
Incorporated		 March 2018 P.O. Box 31119, Grand Pavilion,
Hibiscus Way, 802 West Bay Road,
Grand Cayman, KY1-1205 Cayman
Islands		 US$20,020,000 Trading business and
investment
Elite Electronic Material
(Huangshi) Co., Ltd.		 March 2018 No. 189, Jingshan Avenue, Economic
and Technology Development Zone,
Huangshi City,Hubei Province,China		 US$20,000,000 Production and sales
of CCLs and prepreg
EMC International
Holding Incorporated		 December 2020 P. O. Box 31119 Grand Pavilion,
Hibiscus Way, 802 West Bay Road,
Grand Cayman, KY1-1205 Cayman
Islands		 US＄26,310,000 Investment
EMC Special
Application
Incorporated		 December 2020 P. O. Box 31119 Grand Pavilion,
Hibiscus Way, 802 West Bay Road,
Grand Cayman, KY1-1205 Cayman
Islands		 US＄26,255,000 Investment
EMD Specialty
Materials,LLC		 December 2020 9433 Hyssop Drive Rancho
Cucamonga, CA 91730-USA		 - Production and sales
of CCLs and prepreg

1.3. Companies presumed to have a relationship of control and subordination with Elite Material Co., Ltd. under Article 369-3 of the R.O.C. Company Act:

None

1.4. Industries Covered by the Business Operated by the Affiliates:

Please refer to the table mentioned above.

1.5. Information about the Directors, Supervisors, and Managers at Each Subsidiary and Affiliate:

31 March 2021

31 March 2021
Company Title Name or representative Registered shares owned
EMC Overseas Holding
Incorporated		 Director Representative of Elite Material Co., Ltd.:
Ding-Yu Dong		 100%
Grand Zhuhai Incorporated Director Representative of EMC Overseas Holding
Incorporated:
Ding-Yu Dong		 100%
Grand Shanghai Incorporated Director Representative of Grand Zhuhai
Incorporated:
Ding-Yu Dong		 99.79%
Grand Zhongshan Incorporated Director Representative of Grand Zhuhai
Incorporated:
Ding-Yu Dong		 100%
Grand Wuhan Incorporated Director Representative of Elite Material Co., Ltd.:
Ding-Yu Dong		 100%
Elite Electronic Material
(Kunshan) Co., Ltd.		 Director Representatives of Grand Shanghai
Incorporated:
Ding-Yu Dong,
Fei-Liang Tsai
Randy Yu		 100%
  • 88 -
President En-Xiang Guan
Elite Electronic Material
(Zhongshan) Co., Ltd.		 Director Representatives of Grand Zhongshan
Incorporated:
Ding-Yu Dong
Fei-Liang Tsai
Randy Yu		 100%
President Wen-Xing Chang
Elite Electronic Material
(Huangshi) Co., Ltd.		 Director Representatives of Grand Wuhan
Incorporated:
Ding-Yu Dong
Fei-Liang Tsai
Randy Yu		 100%
EMC International Holding
Incorporated		 Director Representative of Elite Material Co., Ltd.:
Ding-Yu Dong		 100%
EMC Special Application
Incorporated		 Director Representative of EMC International
Holding Incorporated:
Ding-Yu Dong		 100%
EMD Specialty Materials,LLC President Brad Foster 100%

1.6. Operating Results of Each Subsidiary and Affiliate:

31 Dec 2020 / Unit: NT$ thousands

Company Paid-in Capital Total Assets Total Liabilities Total Equity OperatingRevenue OperatingProfit Net Income
EMC OVERSEAS HOLDING INC. 1,032,598 13,432,376 49 13,432,327 0 (160) 3,708,854
Grand Shanghai Incorporated 518,336 7,982,145 49 7,982,096 0 (184) 2,492,443
Elite Electronic Material (Kunshan)
Co.,Ltd.		 952,490 11,328,483 3,345,477 7,983,006 12,740,569 2,805,345 2,477,715
Grand Zhuhai Incorporated 962,590 13,375,253 49 13,375,204 0 (278) 3,719,497
Grand Zhongshan Incorporated 468,126 5,408,311 49 5,408,262 0 (147) 1,232,601
Elite Electronic Material
(Zhongshan)Co.,Ltd.		 667,671 7,865,554 2,456,275 5,409,279 8,510,994 1,360,050 1,222,109
Grand Wuhan Incorporated 570,170 624,390 49 624,341 0 (297) 132,357
Elite Electronic Material (Huangshi)
Co.,Ltd.		 576,727 3,958,501 3,340,765 617,736 2,069,666 111,873 124,469
EMC International Holding
Incorporated		 749,309 746,382 0 746,382 0 (1) (3,038)
EMC Special Application
Incorporated		 747,742 744,816 0 744,816 0 (52) (3,037)
EMD SpecialtyMaterials,LLC 0 344,066 227,830 743,441 16,527 (3,107) (2,985)

1.7. Consolidated Financial Statements of Subsidiaries and Affiliates:

The affiliates that should be included in the combined financial statements of Elite Material Co., Ltd. as of and for the year ended 31 December 2018 in accordance with the “Criteria Governing Preparation of Affiliation Reports,

  • 89 -

Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises” in the Republic of China (ROC) are the same as those already included in the consolidated financial report of Elite Material Co., Ltd. and its subsidiaries as of and for the year ended 31 December 2018. The consolidated financial report has been prepared under the International Accounting Standard 27 - “Consolidated and Separate Financial Statements.” The information required to be disclosed in the combined financial statements has already been disclosed in the consolidated financial report. Therefore, Elite Material Co. Ltd. and its subsidiaries do not prepare a separate set of combined financial statements.

2. Private Placement in the Latest Year till the Publishing of the Annual Report:

None

3. The Company’s Shares Held or Disposed by Subsidiaries in the Latest Year till the Publishing of the Annual Report:

None

4. Other Supplementary Information:

None

5. Pursuant to the Article 36-3-2 of Security Exchange Act, event having material impact on shareholders' equity or share price in the latest year until the annual report being published

None

  • 90 -

ANNEX I

Year 2020 Stand-Alone Financial Reports Audited by CPA

  • 91 -

Stock Code:2383

ELITE MATERIAL CO., LTD.

PARENT COMPANY ONLY FINANCIAL STATEMENTS

With Independent Auditors ’ Report For the Years Ended December 31, 2020 and 2019

Address: No.18, Datong 1st Rd., Guanyin Dist., Taoyuan City 328, Taiwan (R.O.C.) Telephone: (03)483-7937

The independent auditors’ report and the accompanying parent company only financial statements are the English translation of the Chinese version prepared and used in the Republic of China. If there is any conflict between, or any difference in the interpretation of the English and Chinese language independent auditors’ report and parent company only financial statements, the Chinese version shall prevail.

～ 1 ～

Table Of Contents

Table Of Contents
Contents
1.Cover Page
2.Table of Contents
3.Independent Auditors’Report
4.Balance Sheets
5.Statements of Comprehensive Income
6.Statements of Changes in Equity
7.Statements of Cash Flows
8.Notes to the Financial Statements
(1) Organization and Business
(2) Approval Date and Procedures of the Financial Statements
(3) New Standards and Interpretations Adopted
(4) Significant Accounting Policies
(5) Major Sources of Accounting Assumptions, Judgments and Estimation
Uncertainty
(6) Summary of Major Accounts
(7) Related-Party Transactions
(8) Pledged Assets
(9) Significant Contingencies and Commitments
(10) Significant Catastrophic Losses
(11) Significant Subsequent Events
(12) Others
(13) Additional Disclosures
a) Information on significant transactions
b) Information on investees
c) Information on investment in Mainland China
d) Major shareholders
(14) Segment Information
9.Statements of Important Account		 Page

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2
3
4
5
6
7
8
8
8～9
9～20
20
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43～45
45
45～46
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47～50
51
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～ 2 ～

Independent Auditors ’ Report

To the Board of Directors of ELITE MATERIAL CO., LTD.:

Opinion

We have audited the financial statements of ELITE MATERIAL CO., LTD.(“the Company”), which comprise the statement of financial position as of December 31, 2020 and 2019, and the statement of comprehensive income, changes in equity and cash flows for the years ended, and notes to the financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2020 and 2019, and its financial performance and its cash flows for the year ended December 31, 2020 and 2019 in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers.

Basis for Opinion

We conducted our audit of the consolidated financial statements as of and for the year ended December 31, 2020 in accordance with the Regulations Governing Auditing and Certification of Financial Statements by Certified Public Accountants, and the auditing standards generally accepted in the Republic of China. Furthermore, we conducted our audit of the financial statements as of and for the year ended December 31, 2019 in accordance with the Regulations Governing Auditing and Certification of Financial Statements by Certified Public Accountants, Rule No. 1090360805 issued by the Financial Supervisory Commission, and the auditing standards generally accepted in the Republic of China. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Company in accordance with the Certified Public Accountants Code of Professional Ethics in Republic of China (“the Code”), and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis of our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

1.Revenue recognition

Please refer to Note 4(n) "Revenue" and Note 6(q) "Revenue" of the consolidated financial statements.

Description of key audit matter:

The recognition of revenue is based on the fact that the Company has transferred all its ownership and the significant risk of its products to the customers. The judgment on the arrival date of the products involves uncertainty under the FOB destination which is stated in the sales contracts between the Company and the customers. The Company still needs to take the risk of the products before they are delivered to customers.

Therefore, the recognition of revenue was considered to be one of the key audit matters in the audit.

～ 3 ～

How the matter was addressed in our audit:

In relation to the key audit matter above, we have performed certain key audit procedures that included: assessing the accounting policies on the recognition timing of sales revenue and the appropriateness of related internal controls; testing the effectiveness of implementation of internal control ; performing cut-off test for recognition of revenue on the period before and after the reporting date to assess the rationality to the recognition timing of sales revenue.

  1. Allowance for Inventory Valuation

Please refer to Note (4)(g) "Inventories" and Note (6)(e)” Inventories” of the consolidated financial statements.

Description of key audit matter:

The printed circuit board and other electronic components are the major products of the Company. Inventories have specific life cycle due to their attributes. Apart from this, the Company prepared certain amounts of security stock to meet the delivery date required by the customers. Inventories are stated at the lower of cost or net realizable value. Consequently, there may be situations that the net realizable value of inventory will exceed its cost. In addition, the Company would purchase the materials in advance for the expected sales orders. The cancellation or the change of orders, and the change of the material used or quantities of the material may lead to product obsolescence. Therefore, the recognition on allowance for inventory valuation and obsolescence loss was considered to be one of the key audit matters in the audit.

How the matter was addressed in our audit:

In relation to the key audit matter above, we have performed certain key audit procedures that included: assessing the allowance for loss due to price decline, obsolete, and slow moving inventories to determine whether policy of the Company is applied; selecting samples to examine their net realizable values to verify the accuracy and completeness of inventory aging report; reassessing the accuracy of allowance for inventory valuation and obsolescence loss according to the Company’ s accounting policy; performing a retrospective review to evaluate the completeness of disclosure for allowance for inventories.

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 Regulations Governing the Preparation of Financial Reports by Securities Issuers and IFRSs, IASs, interpretation as well as related guidance endorsed 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 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 are responsible for overseeing the Company’s financial reporting process.

～ 3-1 ～

Auditor ’ s 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 auditor’s 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 auditing standards generally accepted in the Republic of China, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

  1. Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

  2. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.

  3. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

  4. Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern.

  5. Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

  6. Obtain sufficient appropriate audit evidence regarding the financial information of the investment in other entities accounted for using the equity method to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the audit.

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.

～ 3-2 ～

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 of the current period and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partners on the audit resulting in this independent auditors’ report are Yi-Chun Chen and Chung-Yi Chiang.

KPMG

Taipei, Taiwan (Republic of China) February 25, 2021

Notes to Readers

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

The independent auditors’ audit report and the accompanying parent company only financial statements are the English translation of the Chinese version prepared and used in the Republic of China. If there is any conflict between, or any difference in the interpretation of the English and Chinese language independent auditors’ audit report and parent company only financial statements, the Chinese version shall prevail.

～ 3-3 ～

(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese) ELITE MATERIAL CO., LTD.

Balance Sheets

December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars)

2020.12.31
ASSETS
Amount
%
Current Assets:
1100
Cash and cash equivalents (Note (6)(a))
$ 962,032
5
1110
Total current financial assets at fair value through profit or loss (Note (6)(b))
-
-
1150
Notes receivable, net (Note (6)(c))
206,128
1
1170
Accounts receivable, net (Note (6)(c))
1,752,295
8
1181
Accounts receivable due from related parties (Notes (6)(c) and (7))
276,715
1
1200
Other receivables, net (Note (6)(d))
500,051
2
1310
Inventories (Note (6)(e))
1,082,476
5
1470
Other current assets
37,240
-

4,816,937
22
Non-Current Assets:
1550
Investments accounted for using equity method, net (Note (6)(f))
14,794,570
68
1600
Property, plant and equipment (Note (6)(g))
2,007,189
9
1780
Intangible assets
18,019 -
1840
Deferred tax assets (Note (6)(n))
200,749
1
1900
Other non-current assets
85,002 -
1920
Guarantee deposits paid
640 -
1975
Net defined benefit asset, non-current (Note (6)(m))
3,754
-

17,109,923
78
Total assets
$
21,926,860
100		 2020.12.31
ASSETS
Amount
%
Current Assets:
1100
Cash and cash equivalents (Note (6)(a))
$ 962,032
5
1110
Total current financial assets at fair value through profit or loss (Note (6)(b))
-
-
1150
Notes receivable, net (Note (6)(c))
206,128
1
1170
Accounts receivable, net (Note (6)(c))
1,752,295
8
1181
Accounts receivable due from related parties (Notes (6)(c) and (7))
276,715
1
1200
Other receivables, net (Note (6)(d))
500,051
2
1310
Inventories (Note (6)(e))
1,082,476
5
1470
Other current assets
37,240
-

4,816,937
22
Non-Current Assets:
1550
Investments accounted for using equity method, net (Note (6)(f))
14,794,570
68
1600
Property, plant and equipment (Note (6)(g))
2,007,189
9
1780
Intangible assets
18,019 -
1840
Deferred tax assets (Note (6)(n))
200,749
1
1900
Other non-current assets
85,002 -
1920
Guarantee deposits paid
640 -
1975
Net defined benefit asset, non-current (Note (6)(m))
3,754
-

17,109,923
78
Total assets
$
21,926,860
100		 2019.12.31
Amount
%
480,252
2
4,561 -
207,212
1
1,905,642
9
485,669
3
583,581
3
808,051
4
43,903
-
4,518,871
22
13,432,065
67
2,015,030
10
5,844 -
218,002
1
72,265 -
633 -
-
-
15,743,839
78
20,262,710
100
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
2100
Short-term borrowings (Note (6)(h))
2110
Short-term notes payable (Note (6)(i))
2170
Accounts payable
2180
Accounts payable to related parties (Note (7))
2200
Other payables
2230
Current tax liabilities
2321
Bonds payable, current portion (Note (6)(k))
2365
Current refund liabilities (Note (6)(l))
2322
Long-term borrowings, current portion (Note (6)(j))
2399
Other current liabilities, others

Non-Current liabilities:
2540
Long-term borrowings (Note (6)(j))
2551
Non-current provisions for employee benefits (Note (6)(m))
2570
Deferred tax liabilities (Note(6)(n))
2645
Guarantee deposits received

Total liabilities
Equity attributable to owners of parent (Note (6)(o)):
3100
Capital stock
3200
Capital surplus
Retained earnings:
3310
Legal reserve
3320
Special reserve
3351
Accumulated profit and loss
3400
Other equity interest
Total equity
Total liabilities and equity		 2020.12.31 2019.12.31
Amount % Amount

4,816,937
22

14,794,570
68
2,007,189
9
18,019 -
200,749
1
85,002 -
640 -
3,754
-


3,968,647
18
5,441,993
27


300,000
2
100,000 -
-
-
7,567 -
910,910
4
1,185,403
6
8,673
-
7,816
-


1,219,583
6
1,300,786
6

17,109,923
78

5,188,230
24
6,742,779
33


3,329,183
15
3,197,080
16
1,868,661
8
628,858
3
2,035,014
9
1,710,929
9
832,393
4
423,554
2
9,430,270
43
8,391,903
41
(756,891)
(3)
(832,393)
(4)




16,738,630
76
13,519,931
67
$
21,926,860
100		 $
21,926,860
100
20,262,710
100

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

～ 4 ～

(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese) ELITE MATERIAL CO., LTD.

Statements of Comprehensive Income

For the Years Ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars)

4000
Operating revenue (Note (6)(q) and Note (7))
5000
Operating costs (Note (6)(e) and Note (7))
Gross profit from operations
5910
Less: Unrealized profit from sales
5920
Add: Realized profit on from sales
Gross profit from operations
Operating expenses:
6100
Total selling expenses
6200
Total administrative expenses
6300
Total research and development expenses
6450
Expected credit loss
6300
Total operating expenses
Net operating income
Non-operating income and expenses:
7100
Total interest income
7020
Other gains and losses, net (Note (6)(s))
7370
Share of profit of associates and joint ventures accounted for using equity method
7050
Finance costs (Note (6)(s))
Total non-operating income and expenses
Profit from continuing operations before tax
7950
Less: Income tax expenses (Note (6)(n))
Profit
8300
Other comprehensive income:
8310
Components of other comprehensive income that will not be reclassified to profit or
loss
8311
Losses on remeasurements of defined benefit plans
8316
Unrealized losses from investments in equity instruments measured at fair value
through other comprehensive income
8349
Income tax related to components of other comprehensive income that will not be
reclassified to profit or loss
Components of other comprehensive income that will not be reclassified to
profit or loss
8360
Components of other comprehensive income (loss) that will be reclassified to profit
or loss
8361
Exchange differences on translation of foreign financial statements
8399
Income tax related to components of other comprehensive income that will be
reclassified to profit or loss
Components of other comprehensive income that will be reclassified to profit
or loss
8300
Other comprehensive income, net
Total comprehensive income
Basic earnings per share (Note (6)(p))(dollars)
Diluted earnings per share (Note (6)(p))(dollars)		 2020 %
100
(80)		 2019 %
100
(82)
Amount
$ 6,930,636
(5,562,113)		 Amount
7,186,702
(5,877,528)

1,368,523
(4,051)
4,300
20
-
-
1,309,174
(4,300)
11,488
18
-
-

1,368,772		 20
1,316,362		 18

(256,032)
(473,491)
(255,430)
(66)		 (4)
(7)
(4)
-
(198,994)
(356,637)
(168,928)
(95)		 (3)
(5)
(2)
-

(985,019)		 (15)
(724,654)		 (10)

383,753
5
591,708
8

1,026
(15,223)
3,838,173
(23,185)		 -
-
55
-
1,248
13,268
3,086,423
(38,126)		 -
-
43
-

3,800,791		 55
3,062,813		 43

4,184,544
(495,545)		 60
(7)
3,654,521
(413,676)		 51
(6)

3,688,999
53
3,240,845
45

675
-
(135)		 -
-
-
(4,106)
(369)
821		 -
-
-

540		 - (3,654) -
94,378
(18,876)		 1
-
(510,587)
102,117		 (7)
1

75,502		 1
(408,470)		 (6)

76,042		 1
(412,124)
(6)

$
3,765,041		 54
2,828,721
39

$		 11.33 10.14
$ 11.07 9.73

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

～ 5 ～

(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese) ELITE MATERIAL CO., LTD.

Statements of Changes in Equity

For the Years Ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars)

Balance at January 1, 2019
Profit for the year ended December 31, 2019
Other comprehensive income for the year ended December 31, 2019
Total comprehensive income for the year ended December 31, 2019
Earnings distribution:
Legal reserve
Special reserve
Cash dividends on ordinary share
Conversion of convertible bonds
Balance at December 31, 2019
Profit for the year ended December 31, 2020
Other comprehensive income for the year ended December 31, 2020
Total comprehensive income for the year ended December 31, 2020
Earnings distribution:
Legal reserve
Special reserve
Cash dividends on ordinary share
Conversion of convertible bonds
Balance at December 31, 2020		 Share capital
Ordinary
Shares
$ 3,196,524		 Capital
Surplus

623,721		 Retained earnings Retained earnings Total other equity interest
Exchange
Differences on
Unrealised
gains (losses)
on equity
instruments at
fair value
Translation of
Foreign
Statements
through other
comprehensive
income
(423,485)
(69)		 Total other equity interest
Exchange
Differences on
Unrealised
gains (losses)
on equity
instruments at
fair value
Translation of
Foreign
Statements
through other
comprehensive
income
(423,485)
(69)		 Total equity
11,900,197
3,240,845
(412,124)
2,828,721
-
-
(1,214,680)
5,693
13,519,931
3,688,999
76,042
3,765,041
-
-
(1,918,248)
1,371,906
16,738,630
Exchange
Differences on
Translation of
Foreign
Statements
(423,485)
Legal
Reserve

1,535,792		 Special
Reserve

237,192		 Unappropriated
Retained
Earnings

-
-

-
-

-
-

-
-

3,240,845
(3,285)
-
(408,470)

-

(369)
- - - -
3,237,560
(408,470)


(369)
-
-
-
556		 -
-
-

5,137		 175,137
-
-

-
-
186,362
-
-
(175,137)

(186,362)
(1,214,680)
-
-
-
-
-

-
-
-
-
3,197,080
-
-

628,858
-
-

1,710,929
-
-
423,554
-
-
8,391,903
3,688,999
540		 (831,955)
-
75,502
(438)
-

-
- - - - 3,689,539
75,502

-
-
-
-
132,103		 -
-
-

1,239,803		 324,085
-
-

-
-
408,839
-
-
(324,085)

(408,839)
(1,918,248)
-
-
-
-
-
-
-
-
-

$
3,329,183

1,868,661
2,035,014		 832,393
9,430,270		 (756,453) (438)

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

～ 6 ～

(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese) ELITE MATERIAL CO., LTD.

Statements of Cash Flows

For the Years Ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars)

Cash flows from (used in) operating activities:
Profit before tax
Adjustments:
Adjustments to reconcile profit :
Depreciation expense
Amortization expense
Expected credit loss
Net gain on financial assets or liabilities at fair value through profit or loss
Interest expense
Interest income
Share of loss of subsidiaries,associates and joint ventures accounted for using equity method
Gain on disposal of property, plan and equipment
Amortized discounted corporate bonds payable-interest expense
Total adjustments to reconcile profit
Changes in operating assets and liabilities:
Changes in operating assets:
Notes receivable
Accounts receivable
Accounts receivable due from related parties
Other receivable
Inventories
Deferred revenues
Other current assets
Other assets
Total changes in operating assets
Changes in operating liabilities:
Accounts payable
Accounts payable to related parties
Other payable
Current refund liabilities
Other current liabilities
Net defined benefit liability
Total changes in operating liabilities
Total changes in operating assets and liabilities
Total adjustments
Cash inflow generated from operations
Interest received
Dividends received
Interest paid
Income taxes paid
Net cash flows from (used in) operating activities
Cash flows from investing activities:
Acquisition of investments accounted for using equity method
Acquisition of property, plant and equipment
Proceeds from disposal of property, plant and equipment
(Increase) decrease in refundable deposits
Acquisition of intangible assets
Net cash flows used in investing activities
Cash flows from financing activities:
(Decrease) increase in short-term loans
Decrease in short-term notes and bills payable
Proceeds from long-term debt
Repayments of long-term debt
(Increase) decrease in guarantee deposits received
Cash dividends paid
Net cash flows used in financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period		 2020
$ 4,184,544
191,491
5,095
66
(1,853)
9,145
(1,026)
(3,838,173)
(34)
14,040		 2019

3,654,521

179,258

2,451

95

(15,606)

13,030

(1,248)

(3,086,423)

(5)

25,096

(3,621,249)


(2,883,352)

1,084
153,281
208,954
83,596
(274,425)
3,667
6,663
(12,737)

26,960
(349,038)
3,038
(529,411)
(168,931)
(6,675)
(11,991)
2,504

170,083
(1,033,544)

(174,679)
(22,056)
85,475
6,948
1,165
(10,646)
215,838
32,005
678,325
7,773
85
(9,255)

(113,793)
924,771

56,290
(108,773)

(3,564,959)
(2,992,125)

619,585
960
3,327,861
(9,076)
(762,834)
662,396
1,248
1,430,538
(13,371)
(178,542)

3,176,496
1,902,269

(761,482)
(168,639)
34
(7)
(17,270)

(329,412)

(61,893)

5

1,262

(4,135)

(947,364)


(394,173)

(179,961)
(100,000)
950,000
(500,000)
857
(1,918,248)

61,810
(100,000)
450,000
(500,000)
(271)
(1,214,680)

(1,747,352)
(1,303,141)

481,780
480,252
204,955
275,297

$
962,032
480,252

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

～ 7 ～

(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese) ELITE MATERIAL CO., LTD.

Notes to the Financial Statements

For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

(1) Organization and Business

ELITE MATERIAL CO., LTD. (the "Company") was incorporated on March 24, 1992 as a company limited by shares under the Company Act of the Republic of China (R.O.C.). The main operating activities are the manufacturing and selling of copper clad laminates, electronic-industrial specialty chemical and raw materials, work-in-process, and finished goods of electronic components. The manufacturing and selling of printed circuit board is the main source of sales revenue.

The Company's common shares were traded on the Taipei Exchange (TPEx) on December 26, 1996, and its shares were publicly listed and traded on the Taiwan Stock Exchange (TSE) on November 27, 1998. The Company's registered office is on No.18, Datong 1st Rd., Guanyin Dist., Taoyuan City 328, Taiwan (R.O.C.).

(2) Approval Date and Procedures of the Financial Statements

The Board of Directors approved and issued the financial statements on February 25, 2021.

(5) New Standards and Interpretations Adopted:

  • (a) The impact of the International Financial Reporting Standards (“IFRSs”) endorsed by the Financial Supervisory Commission, R.O.C. (“FSC”) which have already been adopted.

The Company has initially adopted the following new amendments, which do not have a significant impact on its financial statements, from January 1, 2020:

  • Amendments to IFRS 3 “Definition of a Business”

  • Amendments to IFRS 9, IAS39 and IFRS7 “Interest Rate Benchmark Reform”

  • Amendments to IAS 1 and IAS 8 “Definition of Material”

  • Amendments to IFRS 16 “COVID-19-Related Rent Concessions”

  • (b) The impact of IFRS issued by the FSC but not yet effective

The Company assesses that the adoption of the following new amendments, effective for annual period beginning on January 1, 2021, would not have a significant impact on its consolidated financial statements:

  • Amendments to IFRS 4 “Extension of the Temporary Exemption from Applying IFRS 9”

  • Amendments to IFRS 9, IAS39, IFRS7, IFRS 4 and IFRS 16 “Interest Rate Benchmark Reform － ” Phase 2

～ 8 ～

(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese) ELITE MATERIAL CO., LTD. For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

  • (c) The impact of IFRS issued by IASB but not yet endorsed by the FSC

The following new and amended standards, which may be relevant to the Company, have been issued by the International Accounting Standards Board (IASB), but have yet to be endorsed by the FSC:

Standards or
Interpretations
Amendments to IAS 37
“Onerous Contracts－Cost
of Fulfilling a Contract”		 Content of amendment
Effective date per
IASB
The amendments clarify that the‘costs of
fulfilling a contract’comprises the costs
that relate directly to the contract as follows:
●the incremental costs – e.g. direct labor
and materials; and
●an allocation of other direct costs – e.g. an
allocation of the depreciation charge for an
item of property, plant and equipment used
in fulfilling the contract.
January 1, 2022		 Effective date per
IASB

The Company is evaluating the impact of its initial adoption of the abovementioned standards or interpretations on its financial position and financial performance. The results thereof will be disclosed when the Company completes its evaluation.

The Company does not expect the other new and amended standards, which have yet to be endorsed by the FSC, to have a significant impact on its consolidated financial statements.

(4) Significant Accounting Policies

The significant accounting policies adopted in the financial statements are as follows. Except for those described individually.

  • (a) Statement of compliance

The financial statements have been prepared in accordance with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers (the Guidelines).

  • (b) Basis of preparation

  • 1.Basis of measurement

The financial statements have been prepared on a historical cost basis except for the following material items in the statement of financial position:

  • 1) Financial assets and liabilities at fair value through profit or loss in fair value measurement;

  • 2) The net defined benefit liabilities (or assets) is recognized as the fair value of plan assets, net of aggregation of the present value of the defined benefit obligation, with a limit based on a defined benefit assets as disclosed in Note 4(o).

～ 9 ～

(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese) ELITE MATERIAL CO., LTD. For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

  • 2.Functional and presentation currency

The functional currency of the Company is determined based on the primary economic environment in which the Company operates. The financial statements are presented in New Taiwan Dollars, which is the Company's functional currency. All financial information presented in New Taiwan Dollars has been rounded to the nearest thousand.

  • (c) Foreign Currency

  • 1.Foreign currency transaction

Transactions in foreign currencies are translated into the respective functional currencies of Company entities at the exchange rates at the dates of the transactions. At the end of each subsequent reporting period, monetary items denominated in foreign currencies are translated into the functional currencies using the exchange rate at that date. Non-monetary items denominated in foreign currencies that are measured at fair value are translated into the functional currencies using the exchange rate at the date that the fair value was determined. Nonmonetary items denominated in foreign currencies that are measured based on historical cost are translated using the exchange rate at the date of the transaction.

Exchange differences are generally recognized in profit or loss.

  • 2.Foreign operations

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated into the presentation currency at the exchange rates at the reporting date. The income and expenses of foreign operations are translated into the presentation currency at the average exchange rate. Exchange differences are recognized in other comprehensive income.

When the Company disposes of any part of its interest in a subsidiary that includes a foreign operation while retaining control, the relevant proportion of the cumulative amount is reattributed to non-controlling interest. When the Company disposes of only part of investment in an associate of a joint venture that includes a foreign operation while retaining significant or joint control, the relevant proportion of the cumulative amount is reclassified to profit or loss.

When the settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor likely in the foreseeable future, Exchange differences arising from such items are considered to form part of a net investment in the foreign operation and are recognized in other comprehensive income, and presented in the translation reserve in equity.

  • (d) Assets and liabilities classified as current and non-current

An asset is classified as current under one of the following criteria, and all other assets are classified as non-current.

  1. It is expected to be realized, or intended to be sold or consumed, in the normal operating cycle;

  2. It is held primarily for the purpose of trading;

  3. It is expected to be realized within twelve months after the reporting period; or

  4. The asset is cash or a cash equivalent (as defined in IAS 7) unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.

～ 10 ～

(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese)

ELITE MATERIAL CO., LTD. For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

A liability is classified as current under one of the following criteria, and all other liabilities are classified as non-current.

An entity shall classify a liability as current when:

  1. It is expected to be settled in the normal operating cycle;

  2. It is held primarily for the purpose of trading;

  3. It is due to be settled within twelve months after the reporting period; or

  4. The Company does not have an unconditional right to defer settlement of the liability for at least twelve months after the reporting period. Terms of a liability that could, at the option of the counterparty, result in its settlement by issuing equity instruments do not affect its classification.

  5. (e) Cash and cash equivalents

Cash comprises cash on hand and demand deposits. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and are subject to an insignificant risk of changes in value. Time deposits which meet the above definition and are held for the purpose of meeting short-term cash commitments rather than for investment or other purposes should be recognized as cash equivalents.

  • (f) Financial instruments

Trade receivables and debt securities issued are initially recognized when they are originated. All other financial assets and financial liabilities are initially recognized when the Company becomes a party to the contractual provisions of the instrument. A financial asset (unless it is a trade receivable without a significant financing component) or financial liability is initially measured at fair value plus, for an item not at fair value through profit or loss (FVTPL), transaction costs that are directly attributable to its acquisition or issue. A trade receivable without a significant financing component is initially measured at the transaction price.

1.Financial assets

All regular way purchases or sales of financial assets are recognized and derecognized on a trade date basis.

On initial recognition, a financial asset is classified as measured at: amortized cost; Fair value through other comprehensive income (FVOCI) – debt investment; FVOCI – equity investment; or FVTPL. Financial assets are not reclassified subsequent to their initial recognition unless the Company changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model.

  • 1) Financial assets measured at amortized cost

A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated as at FVTPL:

  • ‧it is held within a business model whose objective is to hold assets to collect contractual cash flows; and

～ 11 ～

(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese) ELITE MATERIAL CO., LTD. For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

  • ‧its contractual terms give rise on specified dates to cash flows that are solely payments of principal amount outstanding.

These assets are subsequently measured at amortized cost, which is the amount at which the financial asset is measured at initial recognition, plus/minus, the cumulative amortization using the effective interest method, adjusted for any loss allowance. Interest income, foreign exchange gains and losses, as well as impairment, are recognized in profit or loss. Any gain or loss on derecognition is recognized in profit or loss.

  • 2) Fair value through profit or loss (FVTPL)

All financial assets not classified as amortized cost or FVOCI described as above are measured at FVTPL, including derivative financial assets and trade receivable, that the Company intends to sell immediately or in the near term are measured at FVTPL: however they are included in the 'trade receivables' line item. On initial recognition, the Company may irrevocably designate a financial asset, which meets the requirements to be measured at amortized cost or at FVOCI, as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

These assets are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognized in profit or loss.

  • 3) Impairment of financial assets

The Company recognizes loss allowances for expected credit losses (ECL) on financial assets measured at amortized cost (including cash and cash equivalents, amortized costs, notes and accounts receivable, other receivable, guarantee deposit paid and other financial assets), debt investments measured at FVOCI and contract assets.

The Company measures loss allowances at an amount equal to lifetime ECL, except for the following which are measured as 12-month ECL:

  • ‧debt securities that are determined to have low credit risk at the reporting date; and

  • ‧other debt securities and bank balances for which credit risk (i.e. the risk of default occurring over the expected life of the financial instrument) has not increased significantly since initial recognition.

Loss allowance for trade receivables are always measured at an amount equal to lifetime ECL.

When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECL, the Company considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis based on the Company’s historical experience and informed credit assessment as well as forward-looking information.

ECL are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls. The difference between the cash flows due to the Group in accordance with the contract and the cash flows that the Company expects to receive. ECL are discounted at the effective interest rate of the financial asset.

～ 12 ～

ELITE MATERIAL CO., LTD. For the years ended December 31, 2020 and 2019

(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese)

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

At each reporting date, the Company assesses whether financial assets carried at amortized cost and debt securities at FVOCI are credit-impaired. A financial asset is ‘credit-impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. Evidence that a financial assets is credit-impaired includes the following observable data:

  • ‧significant financial difficulty of the borrower or issuer;

  • ‧a breach of contract;

  • ‧the lender of the borrow, for economic or contractual reasons relating to the borrower's financial difficulty, having granted to the borrower a concession that the lender would not otherwise consider;

  • ‧it is probable that the borrower will enter bankruptcy or other financial reorganization;or

  • ‧the disappearance of an active market for a security because of financial difficulties.

Loss allowances for financial assets measured at amortized cost are deducted from the gross carrying amount of the assets. For debt securities at FVOCI, the loss allowance is charged to profit or loss and is recognized in other comprehensive income instead of reducing the carrying amount of the asset.

The gross carrying amount of a financial asset is written off when the Company has no reasonable expectations of recovering a financial asset in its entirety or a portion thereof. For corporate customers, the Company individually makes an assessment with respect to the timing and amount of write-off based on whether there is a reasonable expectation of recovery. The Company expects no significant recovery from the amount written off. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Company’s procedures for recovery of amounts due.

  • 4) Derecognition of financial assets

Financial assets are derecognized when the contractual rights of the cash inflow from the assets are terminated, or when the Company transfers substantially all the risks and rewards of ownership of the financial assets.

  • 2.Financial liabilities and equity instruments

  • 1) Classification of debt or equity

Debt and equity instruments issued by the Company are classified as financial liabilities or equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

An equity instrument is any contract that evidences residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued are recognized as the amount of consideration received, less the direct cost of issuing.

Compound financial instruments issued by the Company comprise convertible notes that can be converted to share capital at the option of the holder when the number of shares to be issued is fixed.

～ 13 ～

(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese) ELITE MATERIAL CO., LTD. For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

The liability component of a compound financial instrument is recognized initially at the fair value of a similar liability that does not have an equity conversion option. The equity component is recognized initially at the difference between the fair value of the compound financial instrument as a whole and the fair value of the liability component. Any directly attributable transaction costs are allocated to the liability and equity components in proportion to their initial carrying amounts.

Subsequent to initial recognition, the liability component of a compound financial instrument is measured at amortized cost using the effective interest method. The equity component of a compound financial instrument is not re-measured subsequent to initial recognition.

Interest related to the financial liability is recognized in profit or loss, and included in non-operating income and expenses.

On conversion, the financial liability is reclassified to equity, and no gain or loss is recognized.

2) Financial liabilities

Financial liabilities are classified as measured at amortized cost or FVTPL. A financial liability is classified as at FVTPL if it is classified as held-for-trading, it is a derivative or it is designated as such on initial recognition. Financial liabilities at FVTPL are measured at fair value and net gains and losses, including any interest expense, are recognized in profit or loss.

3) Other financial liabilities

Subsequent to initial recognition, they are measured at amortized cost calculated using the effective interest method. Interest expense not capitalized as capital cost is recognized in profit or loss, and is included in the statement of comprehensive income.

4) Derecognizing of financial liabilities

The Company derecognizes a financial liability when its contractual obligation has been discharged or cancelled or expires. The difference between the carrying amount of a financial liability removed and the consideration paid (including any non-cash assets transferred or liabilities assumed) is recognized in profit or loss, and is included in the statement of comprehensive income.

5) Financial guarantee contract

A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of a debt instrument.

A financial guarantee contract not designated as at fair value through profit or loss issued by the Company is recognized initially at fair value plus any directly attributable transaction costs. After initial recognition, it is measured at the higher of (a) the contractual obligation amount determined in accordance with IAS 37, or (b) the amount initially recognized less, when appropriate, cumulative amortization recognized in accordance with IAS 18.

～ 14 ～

(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese) ELITE MATERIAL CO., LTD. For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

  • (g) Inventories

Inventories are measured at the lower of cost or net realizable value. The cost of inventories consists of all costs of purchase and other costs incurred in bringing them to their present location and condition. Inventory cost is calculated using the weighted-average-cost formula.

Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

  • (h) Investment in associates

Associates are those entities in which the Company has significant influence, but not control or joint control, over their financial and operating policies.

Investments in associates are accounted for using the equity method and are recognized initially at cost. The cost of the investment includes transaction costs. The carrying amount of the investment in associates includes goodwill arising from the acquisition, less any accumulated impairment losses.

The financial statements include the Company’s share of the profit or loss and other comprehensive income of those associates, after adjustments to align their accounting policies with those of the Company, from the date on which significant influence commences until the date on which significant influence ceases. The Company recognizes any changes, of its proportionate share in the investee within capital surplus, when an associate’s equity changes due to reasons other than profit and loss or comprehensive income, which did not result in changes in actual significant influence.

Gains and losses resulting from transactions between the Company and an associate are recognized only to the extent of undated Company's interests in the associate.

When the Company’s share of losses of an associated equals or exceeds its interests in an associate, it discounters recognizing its share of further losses. After the recognized interest is redact to zero. Additional losses are provided for and a liability is recognized, only to the extent that the Company has incurred legal or constructive obligations or made payments on behalf of the associate.

  • (i) Investment in subsidiaries

The subsidiaries in which the Company holds controlling interest are accounted for under equity method in the non-consolidated financial statements. Under equity method, the net income, other comprehensive income and equity in the non-consolidated financial statement are the same as those attributable to the owners of parent in the consolidated financial statements.

The changes in ownership of the subsidiaries are recognized as equity transaction.

  • (j) Property, plant, and equipment

  • 1.Recognition and measurement

Items of property, plant and equipment are measured at cost, which includes capitalized borrowing costs, less accumulated depreciation and any accumulated impairment losses.

If significant parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

Any gain or loss on disposal of an item of property, plant and equipment is recognized in profit or loss.

～ 15 ～

ELITE MATERIAL CO., LTD. For the years ended December 31, 2020 and 2019

(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese)

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

  • 2.Subsequent expenditure

Subsequent expenditure is capitalized only if it is probable that the future economic benefits associated with the expenditure will flow to the Company.

  • 3.Depreciation

Depreciation is calculated on the cost of an asset less its residual value and is recognized in profit or loss on a straightline basis over the estimated useful lives of each component of an item of property, plant and equipment.

Land is not depreciated.

The estimated useful lives of property, plant and equipment for current and comparative periods are as follows:

1) Buildings 2 years~56 years 2) Machineries 3 years~19 years 3) Miscellaneous equipment 2 years~14 years

Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.

  • (k) Intangible assets

Software that is acquired by the Company is measured at cost less accumulated amortization and any accumulated impairment losses.

Subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure is recognized in profit or loss as incurred.

The depreciable amount is the cost of an asset, or other amount substituted for cost, less its residual value.

Amortization is recognized in profit or loss on a straight-line basis over the estimated useful lives of intangible assets, from the date that they are available for use. The estimated useful lives for the current and comparative periods are as follows:

1.Softwares 2years~5 years

2.Loyalties 9 years

Amortization methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.

  • (l) Impairment – non financial assets

At each reporting date, the Company reviews the carrying amounts of its non-financial assets (other than inventories, contract assets, deferred tax assets and investment properties and biological assets, measured at fair value, less costs) to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. Goodwill is tested annually for impairment.

～ 16 ～

(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese) ELITE MATERIAL CO., LTD. For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGUs. Goodwill arising from a business combination is allocated to CGUs or groups of CGUs that are expected to benefit from the synergies of the combination.

The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. Value in use is based on the estimated future cash flows, discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU.

An impairment loss is recognized if the carrying amount of an asset or CGU exceeds its recoverable amount.

Impairment losses are recognized in profit or loss. They are allocated first to reduce the carrying amount of any goodwill allocated to the CGU, and then to reduce the carrying amounts of the other assets in the CGU on a pro rata basis.

An impairment loss in respect of goodwill is not reversed. For other assets, an impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.

  • (m) Provisions

A provision is recognized if, as a result of a past event, the Company has a present obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects the current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognized as finance cost.

The provision of sales discounts from defective products is recognized when selling. The provision is estimated and measured on related probabilities of historical experience data and all possible results.

  • (n) Revenue

1.Revenue from contracts with customers

Revenue is measured based on the consideration to which the Company expects to be entitled in exchange for transferring goods or services to a customer. The Company recognizes revenue when it satisfies a performance obligation by transferring control of a good or a service to a customer. The accounting policies for the Company’s main types of revenue are explained below.

  • 1) Sale of goods-electronic components

The Company manufactures and sells electronic components to computer, automobile, and tele-communication manufacturers. The Company recognizes revenue when control of the products has transferred, being when the products are delivered to the customer, the customer has full discretion over the channel and price to sell the products, and there is no unfulfilled obligation that could affect the customer’s acceptance of the products. Delivery occurs when the products have been shipped to the specific location, the risks of obsolescence and loss have been transferred to the customer, and either the customer has accepted the products in accordance with the sales contract, the acceptance provisions have lapsed, or the Company has objective evidence that all criteria for acceptance have been satisfied.

～ 17 ～

(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese) ELITE MATERIAL CO., LTD. For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

The Company’s obligation to provide a refund for faulty products is recognized at the time of sale. Accumulated experience is used to estimate such returns at the time of sale. The amount estimated is recognized as a provision for warranty at reporting date.

A receivable is recognized when the goods are delivered as this is the point in time that the Company has a right to an amount of consideration that is unconditional.

  • (o) Employee benefits

  • 1.Defined contribution plans

Obligations for contributions to defined contribution plans are expensed as the related service is provided.

  • 2.Defined benefit plans

The Company’s net obligation in respect of defined benefit plans is calculated separately for each the plan by estimating the amount of future benefit that employees have earned in the current and prior periods, discounting that amount and deducting the fair value of any plan assets.

The calculation of defined benefit obligations is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a potential asset for the Company, the recognized asset is limited to the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. To calculate the present value of economic benefits, consideration is given to any applicable minimum funding requirements.

Remeasurements of the net defined benefit liability, which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognized immediately in other comprehensive income, and accumulated in retained earnings within equity. The Company determines the net interest expense (income) on the net defined benefit liability (asset) for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the then-net defined benefit liability (asset). Net interest expense and other expenses related to defined benefit plans are recognized in profit or loss.

When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service or the gain or loss on curtailment is recognized immediately in profit or loss. The Company recognizes gains and losses on the settlement of a defined benefit plan when the settlement occurs.

  • 3.Short-term employee benefits

Short-term employee benefits are expensed as the related service is provided. A liability is recognized for the amount expected to be paid if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

～ 18 ～

(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese) ELITE MATERIAL CO., LTD. For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

  • (p) Income taxes

Income taxes comprise current taxes and deferred taxes. Except for expenses related to business combinations or recognized directly in equity or other comprehensive income, all current and deferred taxes are recognized in profit or loss.

Current taxes comprise the expected tax payables or receivables on the taxable profits (losses) for the year and any adjustment to the tax payable or receivable in respect of previous years. The amount of current tax payables or receivables are the best estimate of the tax amount expected to be paid or received that reflects uncertainty related to income taxes, if any. It is measured using tax rates enacted or substantively enacted at the reporting date.

Deferred taxes arise due to temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and their respective tax bases. Deferred taxes are recognized except for the following:

  • 1.temporary differences on the initial recognition of assets and liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profits (losses) at the time of the transaction;

  • 2.temporary differences related to investments in subsidiaries, associates and joint arrangements to the extent that the Company is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future; and

  • 3.taxable temporary differences arising on the initial recognition of goodwill.

Deferred taxes are measured at tax rates that are expected to be applied to temporary differences when they reserve, using tax rates enacted or substantively enacted at the reporting date, and reflect uncertainty related to income taxes, if any.

Deferred tax assets and liabilities are offset if the following criteria are met:

  • 1.the Company has a legally enforceable right to set off current tax assets against current tax liabilities; and

  • 2.the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same taxation authority on either:

  • 1) the same taxable entity; or

  • 2) different taxable entities which intend to settle current tax assets and liabilities on a net basis, or to realize the assets and liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered.

Deferred tax assets are recognized for the carry forward of unused tax losses, unused tax credits, and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be utilized. Deferred tax assets are reviewed at each reporting date, and are reduced to the extent that it is no longer probable that the related tax benefits will be realized; such reductions are reversed when the probability of future taxable profits improves.

～ 19 ～

(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese) ELITE MATERIAL CO., LTD. For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

  • (q) Earnings per share

The Company discloses the Company's basic and diluted earnings per share attributable to ordinary equity holders. The basic earnings per share are calculated as the profit attributable to the ordinary shareholders of the Company divided by the weighted average number of ordinary shares outstanding, after adjustment for the effects of all potential dilutive ordinary shares, such as convertible bonds.

  • (r) Operating segments

Please refer to the consolidated financial report of Elite Material Co., Ltd. for the years ended December 31, 2020 and 2019 for operating segments information.

(5) Major Sources of Accounting Assumptions, Judgments and Estimation Uncertainty

The preparation of the financial statements in conformity with the IFRSs endorsed by the FSC requires management to make judgments, estimates, and assumptions that affect the application of the accounting policies and the reported amount of assets, liabilities, income, and expenses. Actual results may differ from these estimates.

The management continues to monitor the accounting estimates and assumptions. The management recognizes any changes in accounting estimates during the period and the impact of those changes in accounting estimates in the next period.

Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment within the next financial year is as follows:

  • (a) Valuation of inventories

As inventories are stated at the lower of cost or net realizable value, the Company estimates the net realizable value of inventories for obsolescence and unmarketable items at the end of the reporting period and then writes down the cost of inventories to net realizable value. The net realizable value of the inventory is mainly determined based on assumptions as to future demand within a specific time horizon. Due to the rapid industrial transformation, there may be significant changes in the net realizable value of inventories. Refer to note (6)(e) for further description of the valuation of inventories.

  • (6) Summary of Major Accounts

  • (a) Cash and cash equivalents

Cash on hand
Savings accounts
Time deposits		 2020.12.31
$ 469
639,155
322,408		 2019.12.31

530

430,722

49,000

$
962,032


480,252

Please refer to Note 6(t) for the interest analysis of financial assets and liabilities.

～ 20 ～

(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese) ELITE MATERIAL CO., LTD. For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

  • (b) Financial assets and liabilities at fair value through profit or loss

2020.12.31 2019.12.31

Current financial assets at fair value through profit or loss:
Non-hedged derivatives
Redemption and repurchase option of bonds		 $
-
4,561

As of December 31, 2019, the Company did not provide any financial assets for using equity method as collaterals for its loans.

  • (c) Notes and accounts receivable

as collaterals for its loans.
Notes and accounts receivable
Note receivables from operating activities
Trade receivables－measured as amortized cost
Less: Loss allowance		 2020.12.31
$ 206,477
2,030,017
(1,356)		 2019.12.31

207,561

2,392,354

(1,392)

$
2,235,138

2,598,523

The Company has assessed a portion of its trade receivables that was held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; therefore, such trade receivables were measured at fair value through other comprehensive income. In addition, trade receivables, which did not qualify to be measured at amortized costs and FVOCI, were measured at fair value through profit or loss.

The Company applies the simplified approach to provide for its expected credit losses, i.e. the use of lifetime expected loss provision for all receivables. To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and the days past due, as well as incorporated forward looking information, including macroeconomic and relevant industry information. The loss allowance provision in Taiwan were determined as follows:

Current
1 to 30 days past due
31 to 120 days past due
More than 120 days past due		 2020.12.31 Loss allowance
provision
1,232
63
61
-
Gross carrying
amount
$ 2,187,030
40,457
9,007
-		 Weighted-aver
age

0.06%

0.16%

0.68%
-
$
2,236,494		 1,356

～ 21 ～

(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese) ELITE MATERIAL CO., LTD. For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

Current
1 to 30 days past due
31 to 120 days past due
More than 120 days past due		 2019.12.31 Loss allowance
provision
1,207
33
48
104
Gross carrying
amount		 Weighted-aver
age

0.05%

0.05%

1.00%

100.00%
$ 2,532,229
62,745
4,837
104
$
2,599,915		 1,392

The movement in the allowance for notes and trade receivable was as follows:

Balance at January 1, 2020 and 2019
Impairment losses recognized
Amounts written off
Balance at December 31, 2020 and 2019
Other receivables
Other receivables
Less: Loss allowance		 For the years ended December 31,
2020
2019
$ 1,392
1,297
66
95
(102)
-		 For the years ended December 31,
2020
2019
$ 1,392
1,297
66
95
(102)
-
2020
$ 1,392
66
(102)

$
1,356
1,392

2020.12.31
$ 500,051
-
2019.12.31

583,581
-
$
500,051		 583,581
  • (d) Other receivables

Based on historical experience, the Company expects no credit losses by event of default from the aforementioned other receivables, therefore the expected credit loss rate is 0.

  • (e) Inventories
Materials
Work-in-process
Finished goods
Inventory in-transit		 2020.12.31
$ 708,831
117,952
247,652
8,041		 2019.12.31

562,877

65,428

168,191

11,555

$
1,082,476


808,051

～ 22 ～

(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese) ELITE MATERIAL CO., LTD. For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

As of December 31, 2020 and 2019, the details of operating cost were as follows:

Cost of goods sold
Loss on disposal of scrap
Losses on inventory valuation and obsolescence
Revenue from sales of scraps		 2020
$ 5,568,722
12,448
11,619
(30,676)		 2019

5,890,190

1,527

20,958

(35,147)

$
5,562,113


5,877,528

As of December 31, 2020 and 2019, the Company's inventories were not pledged as collateral.

Losses on inventory valuation and obsolescence are due to obsolescence or out of use, which results in net realizable value being lower than historical cost. Therefore, it’s classified as operating cost.

  • (f) Investments accounted for using equity method
Subsidiaries
Associates		 2020.12.31
$ 14,794,570
-		 2019.12.31

13,432,065
-
$
14,794,570
13,432,065

1.Subsidiaries

Please refer to the consolidated financial statements of the year ended 2020.

  • 2.Associates

The Company's investee company, Licheng Technology (Stock) Company, (formerly ELITE IONERGY CO., Ltd., with an investment of $173,694) closed down at the end of year 2005, with liabilities exceeding its assets. Because the investment value had been impaired, the Company recognized all losses and the book value was offset to zero.

  • (g) Property, plant and equipment

The cost and depreciation of the property, plant and equipment of the Company for the years ended December 31, 2020 and 2019, were as follows:

Cost:
Balance at January 1, 2020
Additions
Disposals
Reclassification
Balance at December 31, 2020		 Land
$ 470,621
-
-
-		 Buildings
860,706
-
-
6,130		 Machinery
2,661,788
-
(20,704)
70,266		 Other
equipment
698,169
-
(29,773)
42,449		 Equipment
under
installation and
construction in
progress
102,306
183,650
-
(118,845)		 Total
4,793,590
183,650
(50,477)
-
$
470,621
866,836
2,711,350
710,845
167,111		 4,926,763

～ 23 ～

(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese) ELITE MATERIAL CO., LTD. For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

Balance at January 1, 2019
Additions
Disposals
Reclassification
Balance at December 31, 2019
Depreciation:
Balance at January 1, 2020
Depreciation for the year
Disposals
Balance at December 31, 2020
Balance at January 1, 2019
Depreciation for the year
Disposals
Balance at December 31, 2019
Carrying amounts:
At December 31, 2020
At December 31, 2019
At January 1, 2019		 Land
$ 470,621
-
-
-		 Buildings
859,356
-
-
1,350		 Machinery
2,654,970
-
(38,496)
45,314		 Other
equipment
646,327
-
(7,040)
58,882		 Equipment
under
installation and
construction in
progress
139,580
68,272
-
(105,546)		 Total
4,770,854
68,272
(45,536)
-
$
470,621
860,706
2,661,788
698,169
102,306		 4,793,590

$ -
-
-
380,872
34,368
-
1,941,034
108,703
(20,704)
456,654
48,420
(29,773)
-
-
-
2,778,560
191,491
(50,477)
$
-		 415,240
2,029,033
475,301		 -
2,919,574
$ -
-
-
350,679
30,193
-
1,876,145
103,385
(38,496)
418,014
45,680
(7,040)		 -
-
-
2,644,838
179,258
(45,536)
$
-		 380,872
1,941,034
456,654		 -
2,778,560
$
470,621
451,596
682,317
235,544		 167,111
2,007,189

$
470,621
479,834
720,754
241,515
102,306
2,015,030

$
470,621
508,677
778,825
228,313
139,580
2,126,016

As of December 31, 2020 and 2019, the property, plant and equipment were not pledged as collateral for long-term debt and financing.

  • (h) Short-term borrowings
Unsecured bank loans
Unused short-term credit lines
Range of interest rates
Short-terms notes payable
Commercial paper payable
Less: Discount
Net amount
Interest rate		 2020.12.31
$
399,607		 2020.12.31
$
399,607		 2019.12.31
579,568

$
2,495,383
1,393,377

0.97%~2.83%
2019.12.31
100,000
(31)
$
-
99,969
-
1.02%
  • (i) Short-terms notes payable

～ 24 ～

(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese) ELITE MATERIAL CO., LTD. For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

  • (j) Long-term borrowings
Unsecured bank loans
Less: Current portion
Total
Unsecured credit
Range of interest rates
Due year		 2020.12.31
$ 800,000
(500,000)		 2020.12.31
$ 800,000
(500,000)		 2019.12.31
350,000
(250,000)

$
300,000
100,000

$
4,000,000
2,950,000

0.89%~1.25%
2021~2023
1.00%~1.30%
2020~2021

For the exposure information of the Company's rate foreign currency and current risk, please refer to Note (6)(t).

The Company signed a loan contract with the financial institution. According to the provisions of the contract, the Company’s financial statements must maintain specific current ratios, debt ratios, net tangible assets, and interest coverage ratios on the balance sheet date during the loan period. If such financial ratios breached specific conditions of the loan contract, they shall be improved by means of cash capital increase or other means in accordance with the agreement. As of December 31, 2020, the Company did not violate any of the above financial ratio restrictions.

  • (k) Unsecured convertible bonds
2020.12.31
2019.12.31
Total convertible corporate bonds issued
$ -
1,500,000
Unamortized discounted corporate bonds payable
-
(61,120)
Cumulative converted amount
-
(74,600)
Corporate bonds issued balance at year-end
$
-
1,364,280
Embedded derivative – call and put options, included in
financial assets at fair value through profit or loss
$
-
4,561
Equity component – conversion options
(included in paid-in capital – stock options)
$
-
115,499
For the years ended December 31,
2020
2019
Profit or loss revalued by fair value of Embedded derivative
instruments – call and put rights, included in financial assets at
fair value through profit or loss
$
1,853
15,606
Interest expense
$
14,040
25,096		 2020.12.31
$ -
-
-		 2019.12.31
1,500,000
(61,120)
(74,600)
$
-
1,364,280
$
-
4,561
$
-
115,499

For the years ended December 31,
2020
2019
$
1,853
15,606
2020
$
1,853
15,606

25,096

～ 25 ～

(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese) ELITE MATERIAL CO., LTD. For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

The Company issued the fourth unsecured 5-year convertible bonds which bear no interest on May 16, 2017, with the maturity date on May 16, 2022. The total convertible corporate bonds issued amounted to TWD1,500,000, with an effective interest rate of 1.80%. The Holders have the right to require the Company to redeem their convertible bonds in cash at an amount equal to the principal amount of the Bonds (with interest) at any time during the forty days after May 16, 2020. The conversion price of the convertible bonds were set based on the issued regulation. The fourth unsecured convertible bonds have been fully converted as of August 17, 2019.

  • (l) Refund liabilities

The Details of refund liabilities were as follows:

Refund liabilities-current 2020.12.31
$
20,694		 2019.12.31

13,746

The management estimated the possibility of refund liabilities, historic experience and other a known information and recognized the numbers into the deduction of related products’ operating revenue for expected discounts payable to customers.

  • (m) Employee benefits

  • 1.Defined benefit plans

The Company determined the movement in the present value of the defined benefit obligations and fair value of plan assets as follows:

Present value of defined benefit obligation
Fair value of plan assets
Net defined benefit (assets) liabilities		 2020.12.31
$ 104,435
(108,189)		 2019.12.31

122,754

(115,187)

$
(3,754)


7,567

The Company makes defines benefit plan contributions to the pension fund account at Bank of Taiwan that provides pensions for employees upon retirement. The plans (covered by the Labor Standards Law) entitle a retired employee to receive an annual payment based on years or service and average salary for the six months prior to retirement.

1) Composition of plan assets

The Company sets aside pension funds in accordance with the regulations of the Council of Labor Affairs, and the pension funds are managed by the Pension Supervisory Committee. The annual budget for the allocation of the minimum income cannot be lower than the income calculated based on the interest rate of the banks’ two-year time deposit in accordance with the Management and Utilization of Labor Pension Funds regulations.

The Company’s Bank of Taiwan pension reserve account balance amounted to $108,189 at the end of the reporting period. The information used to calculate pension fund assets includes the asset allocation and yield of the fund. Please refer to the information published on the website of the Council of Labor Affairs and the Labor Pension Supervisory Committee.

～ 26 ～

(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese) ELITE MATERIAL CO., LTD. For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

  • 2) Movements in present value of the defined benefit obligations

The movements in present value of defined benefit obligations for the Company were as follows:

Defined benefit obligation at January 1
Current service costs and interest
Remeasurement on the net defined benefit liabilities
(assets)
－Actuarial losses (gains) arising from experience
adjustments
－Actuarial losses (gains) arising from changes in
financial assumptions
Benefit pay under the plan
Defined benefit obligation at December 31		 2020
$ 122,754
2,047
(3,455)
6,085
(22,996)		 2019

124,651

2,636

4,032

3,633

(12,198)

$
104,435


122,754
  • 3) Movements of defined benefit plan assets

The movements in the present value of the defined benefit plan assets for the Company were as follows:


follows:
Fair value of plan assets at January 1
Interest income
Remeasurement on the net defined benefit liabilities
－Return on plan assets (excluding current interest)
Contribution paid by the employer
Benefit paid
Fair value of plan assets at December 31		 2020
$ 115,187
1,313
3,306
11,379
(22,996)		 2019

111,935

1,589

3,560

10,301

(12,198)

$
108,189


115,187
  • 4) Expenses recognized in profit or loss

The expenses recognized in profit or loss for the Company were as follows:

Current service costs
Net interest of net defined benefit liabilities		 2020
$ 709
24		 2019

933

114
$
733
1,047

～ 27 ～

(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese) ELITE MATERIAL CO., LTD. For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

Operating costs
Selling expenses
Administrative expenses
Research and development expenses		 2020
$ 543
30
115
45		 2019

842

40

113

52
$
733
1,047
  • 5) Remeasurement on the net defined benefit liabilities recognized in other comprehensive income

The Company’s remeasurement on the net defined benefit liabilities recognized in other comprehensive income as follows:

Cumulative amount at January 1
Recognized during the period
Cumulative amount at December 31		 2020
$ 20,488
(675)		 2019

16,382

4,106

$
19,813


20,488

6) Actuarial assumptions

The following are the Company’s principal actuarial assumptions of Present Value of defined benefit obligations:

Discount rate
Future salary increase rate		 2020.12.31
0.63%
2.00%		 2019.12.31

1.13%

2.00%

The expected allocation payment to be made by the Company to the defined benefit plans for the one-year period after the reporting date is $11,888.

The weighted average lifetime of the defined benefits plan is 14.70 years.

7) Sensitivity analysis

When calculating the present value of the defined benefit obligations, the Company uses judgments and estimations to determine the actuarial assumptions, including discount rate and future salary changes, as of the financial statement date. Any changes in the actuarial assumptions may significantly impact the amount of the defined benefit obligations.

If the actuarial assumptions had changed, the impact on the present value of the defined benefit obligation shall be as follows:

December 31, 2020
Discount rate
Future salary increasing rate		 Influences of defined
benefit obligations
Increased 0.25%
Decreased 0.25%		 Influences of defined
benefit obligations
Increased 0.25%
Decreased 0.25%
Increased 0.25%
(3,104)
3,128
3,233

(3,020)

～ 28 ～

(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese) ELITE MATERIAL CO., LTD. For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

December 31, 2019
Discount rate
Future salary increasing rate		 Influences of defined
benefit obligations
Increased 0.25%
Decreased 0.25%		 Influences of defined
benefit obligations
Increased 0.25%
Decreased 0.25%
Increased 0.25%
(3,633)
3,682
3,785

(3,553)

Reasonably possible changes at the reporting date to one of the relevant actuarial assumptions, holding other assumptions remain constant, would have affected the defined benefit obligation by the amounts shown above. The method used in the sensitivity analysis is consistent with the calculation of pension liabilities in the balance sheets.

There is no change in the method and assumptions used in the preparation of sensitivity analysis for 2020 and 2019, respectively.

2.Defined contribution plans

The Company set aside 6% of the employees’ monthly wages to the Labor Pension personal accounts at the Bureau of the Labor Insurance in accordance with the provisions of the Labor Pension Act.

The Company set aside a fixed amount to the Bureau of the Labor Insurance without the payment of additional legal or constructive obligations.

For the years ended December 31, 2020 and 2019, the Company set aside $33,453 and $29,718, respectively, under the pension plan to the Bureau of the Labor Insurance.

  • (n) Income taxes (profits)

  • 1.Income tax expense recognized in profits or losses

The amount of income tax was as follows:

Current income tax expense:
Current period
Adjustment for prior periods
Deferred tax expense:
Origination and reversal of temporary differences
Income tax expense		 2020
$ 771,796
-		 2019

402,857
(3,671)
771,796

399,186

(276,251)


14,490

$
495,545


413,676

～ 29 ～

(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese) ELITE MATERIAL CO., LTD. For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

Income tax expense (benefit) recognized in other comprehensive income:

2020 2019

2020 2019
Items that will not be reclassified subsequently to profit or
loss:
Actuarial losses and gains on defined benefit plans $ (135) 821
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign financial $ (18,876) 102,117
statements

The reconciliation of income tax and profit before tax was as follows:

Profit excluding income tax
Income tax using the Company’s domestic tax rate
Non-deductible expenses
Tax-exempt income
Tax incentives
Deductible temporary differences
Undistributed earnings additional tax
Prior overestimate (underestimate)
Total		 2020
$
4,184,544		 2019
3,654,521

$ 836,909
15,871
-
(9,998)
(376,556)
29,319
-

730,904

2,063
(11,357)

-

(312,915)

8,652
(3,671)
$
495,545
413,676

  • 2.Deferred tax assets and liabilities

  • 1) Unrecognized Deferred Tax Liabilities

For the years ended December 31, 2020 and 2019, deferred tax liabilities are not recognized for taxable temporary differences associated with investments in subsidiaries, except where the Company is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. The relevant amounts are as follow:

Consolidated amount of taxable temporary differences
associated with investments in subsidiaries
Amounts are not recognized as deferred tax liabilities		 2020.12.31
$
8,521,793		 2019.12.31

6,639,016

$
1,704,359


1,327,803

～ 30 ～

(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese) ELITE MATERIAL CO., LTD. For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

2) Recognized deferred tax assets and liabilities

Changes in the amount of deferred tax assets and liabilities for 2020 and 2019 are as follows:

Deferred Tax Liabilities:
Balance at January 1, 2020
Debited (Credited) in income statement
Balance at December 31, 2020
Balance at January 1, 2019
Debited (Credited) in income statement
Balance at December 31, 2019		 Unrealized gain on
investment income
$ (1,185,403)
274,493
$
(910,910)
$ (1,167,141)
(18,262)
$
(1,185,403)
Deferred Tax Assets:
Balance at January 1, 2020
Debited (Credited) in income statement
Debited (Credited) in equity
Exchange differences on translation
of foreign operations
Balance at December 31, 2020
Balance at January 1, 2019
Debited (Credited) in income statement
Debited (Credited) in equity
Exchange differences on translation
of foreign operations
Balance at December 31, 2019		 Defined
Benefit
Plans		 Current
provisions		 Unrealized
losses on
inventories		 Cumulative
translation
adjustment		 Others **Total **
$ 3,055
(2,129)
(135)
-
2,749

1,390

-
-
7,727

2,324
-
-
204,292

-
-
(18,876)
179
173
-

-
218,002

1,758
(135)
(18,876)
$
791
4,139
10,051
185,416
352
200,749
$ 4,084
(1,850)
821
-

1,195

1,554

-
-


3,535

4,192
-
-


102,175

-
-
102,117

303
(124)
-

-

111,292

3,772
821
102,117
$
3,055
2,749
7,727
204,292
179
218,002

3.The Company’s tax returns for the years through 2017 were examined and approved by the Taipei National Tax Administration.

(o) Capital and other equity

1. Issuance of common stock

As of December 31, 2020 and 2019, the total value of nominal ordinary shares amounted to $4,000,000. The face value of each share is $10. In total, there were 332,918 and 319,708 in thousands of ordinary shares, respectively, issued. All issued shares were paid up upon issuance.

～ 31 ～

(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese) ELITE MATERIAL CO., LTD. For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

Reconciliation of shares outstanding for the years ended December 31, 2020 and 2019 was as follows:


follows:
Balance at January 1
Conversion of convertible bonds
Balance at December 31		 Ordinary shares
(in thousands of shares)
2020
2019
319,708
319,652
13,210
56
2020
319,708
13,210

332,918

319,708

As of December 31, 2020 and 2019, the convertible bonds were converted to 13,210 and 56 new common shares of stock, which were issued at the amount of $1,425,400 and $6,000, respectively. The registration procedures were completed.

2. Capital surplus

The balance of additional paid-in capital was as follows:

Share capital
Premium from convertible bonds
Convertible option		 2020.12.31
$ 95,627
1,773,034
-		 2019.12.31

95,627

417,732
115,499
$
1,868,661
628,858

According the the R.O.C company Act, capital reserves can only be reclassified as share capital or be distributed as cash dividends after offsetting against losses. The aforementioned capital reserves include share premiums and donation gains. In accordance with the Securities Offering and Issuance Guidelines, the amount of capital reserves to be reclassified under share capital shall not exceed 10 percent of the actual share capital amount.

3. Retained earnings

The Company's article of incorporation stipulate that Company's net earnings should first be used to offset the prior years' deficits, if any, before paying any income taxes. Of the remaining balance, 10% is to be appropriated as legal reserve, and then any remaining profit together with any undistributed retained earnings shall be distributed according to the distribution plan proposed by the Board of Directors and submitted to the stockholders’ meeting for approval.

Taking into account the characteristics of industrial growth and stabilizing the financial structure of the Company, the Company will not distribute dividends when in deficit.

Under the policy of dividend distribution, the Company shall first take into consideration its future development, financial situation and shareholders' rewards, as well as its programs to meet its capital expenditure budget in determining the cash in need. After the aforementioned consideration, the Company will distribute the cash dividends to its shareholders. Cash dividends shall not be more than 20% of the total dividends.

～ 32 ～

(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese) ELITE MATERIAL CO., LTD. For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

Surplus distributed should be, on principle, 10% to 70% of distributable surplus. Distributable surplus is accounted for as profit, after setting aside reserves, plus, prior-year undistributed earnings. Any remaining profit shall be distributed according to the stockholders' meeting for approval.

1) Legal reserve

10 percent of net income should be set aside as statutory earnings reserve until it is equal to share capital. If the Company experienced profit for the year, the meeting of shareholders shall decide on the distribution of the statutory earnings reserve, either by new shares or by cash, of up to 25 percent of the actual share capital.

2) Earnings distribution

The earnings distribution for 2019 and 2018 was decided by the general meeting of shareholders held on June 10, 2020, and June 10, 2019.

The relevant dividend distribution to shareholders is as follows:

Dividends distributed to
common shareholders
Cash		 2019 2019 2018
Dividend
per Share
(TWD$)
Amount
3.80
1,214,680		 2018
Dividend
per Share
(TWD$)
Amount
3.80
1,214,680
Dividend
per Share
(TWD$)		 Amount Dividend
per Share
(TWD$)
$ 5.76 1,918,248 3.80

4. Other equity

Other equity
Balance at January 1, 2020
Exchange difference on translation of foreign
financial statements
Balance at December 31, 2020
Balance at January 1, 2019
Exchange difference on translation of foreign
financial statements
FVOCI-financial assets
Balance at December 31, 2019		 Foreign currency
translation
differences for
foreign operations		 Unrealized gains
(losses) on equity
instruments at fair
value through other
comprehensive
income		 **Total **
$ (831,955)
75,502
(438)

-
(832,393)
75,502

$
(756,453)

(438)

(756,891)

$ (423,485)
(408,470)
-


(69)

-
(369)


(423,554)
(408,470)

(369)
$
(831,955)

(438)


(832,393)

～ 33 ～

(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese) ELITE MATERIAL CO., LTD. For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

(p) Earnings per share

The Company calculated the basic and diluted EPS as follows:

1.Basic earnings per share

The calculation of basic earnings per share for the years ended December 31, 2020 and 2019, were based on the profit attributable to ordinary shareholders of the Company and the weighted-average number of ordinary shares outstanding, calculated as follows:

1) Profit attributable to ordinary shareholders

Profit attributable to ordinary shareholders of the
Company
Weighted-average number of ordinary shares
Issued ordinary shares at January 1
Effect of convertible notes
Weighted-average number of ordinary shares at
December 31		 2020
$
3,688,999		 2019

3,240,845

2020
319,708
5,886

2019

319,652

14

325,594
319,666

2) Weighted-average number of ordinary shares

2.Diluted earnings per share

The calculation of diluted earnings per share for the years ended December 31, 2020 and 2019, were based on profit attributable to ordinary shareholders of the Company and the weighted-average number of ordinary shares outstanding after adjustment for the effects of all dilutive potential ordinary shares, calculated as follows:

  • 1) Profit attributable to ordinary shareholders of the Company (diluted)
Profit attributable to ordinary shareholders of the
Company (basic)
Convertible preference shares dividends
Profit attributable to ordinary shareholders of the
Company (diluted)
Weighted-average number of ordinary shares (diluted)
Weighted-average number of ordinary shares (basic)
Effect of convertible bond
Effect of employee stock compensation
Weighted-average number of ordinary shares (diluted) at
December 31		 2020
$ 3,688,999
9,749		 2019

3,240,845

7,592

$
3,698,748


3,248,437

325,594
7,324
1,110


319,666

13,252

1,005

334,028


333,923

2) Weighted-average number of ordinary shares (diluted)

～ 34 ～

(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese) ELITE MATERIAL CO., LTD. For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

For calculation of the dilutive effect of the stock option, the average market value is assessed based on the quoted market price where the Company’s option is outstanding.

3.Earnings per share were as follow:

Earnings per share were as follow:
Basic earnings per share
Diluted earnings per share		 2020
$
11.33		 2019
10.14
$
11.07		 9.73

  • (q) Revenue from contracts with customers

  • 1.Disaggregation of revenue

Primary geographical markets
Taiwan
China
Other
Major products
Prepare
Capper clad laminate
Mass lam foundry
Other		 2020
$ 4,726,774
868,560
1,335,302		 2019

4,374,352

1,426,526

1,385,824

$
6,930,636


7,186,702

$ 3,036,645
2,696,485
758,502
439,004


3,055,073

2,889,715

946,202

295,712

$
6,930,636


7,186,702
  • (r) Rewards of employees, directors and supervisors

In accordance with the Company's article, which was approved by the shareholders, the Company shall assign 3% as rewards to employees, and less than 1.2% as rewards to directors and supervisors, if there are earnings during the year. However, the Company has to retain the amount while there are accumulated loss.

The employees mentioned before include the employees in the subsidiaries who meet the specific conditions.

For the years ended December 31, 2020 and 2019, rewards of employees of $130,767 and $114,204 and directors of $43,589 and $38,068, respectively, were estimated and recognized as current expense. These amounts were calculated using the Company’s profit before tax before rewards of employees and directors for the year ended December 31, 2020 and 2019, and using the earnings allocation method which was stated under the Company’s article. These rewards were charged to profit or loss under operating costs or operating expenses for the year ended December 31, 2020 and 2019.

～ 35 ～

(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese)

ELITE MATERIAL CO., LTD. For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

Related information of distributions of remuneration to employees and directors can be accessed from the Market Observation Post System on the website.

There is no difference between the rewards of employees and directors that was decided by the Board of Directors and the financial report’s estimated amounts in 2020 and 2019.

  • (s) Non-operating income and expenses

  • Interest income

The details of other revenue were as follows:

Interest income 2020
$
1,026		 2019
1,248

2. Other gains and losses

The details of other gains and losses were as follows:

Disposal gain on property, plant and equipment
Foreign currency exchange loss, net
Financial assets (liabilities) at fair value through profit
Other (losses) profits
Other gains (loss), net		 2020
$ 34
(15,807)
1,853
(1,303)		 2019

5

(3,568)

15,606

1,225

$
(15,223)


13,268

3. Finance costs

The details of finance cost were as follows:

Interest expense 2020
$
23,185		 2019
38,126

(t) Financial instruments

  • 1.Credit risk

1) Credit risks exposure

As of December 31, 2020 and 2019, the maximum exposure to credit risk arising from failure of performance of the counter-party and from financial guarantee made by the Company were as follows:

  • A.The carrying amount of financial assets recognized in the financial statements;

  • B.Financial guarantee made by the Company amounting to USD54,600, USD5,000, and USD61,100, USD5,000, respectively.

～ 36 ～

(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese) ELITE MATERIAL CO., LTD. For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

2.Liquidity risk

The following are the contractual maturities of financial liabilities of the Company, including estimated interest payments and excluding the impact of netting arrangements:

Balance at December 31, 2020
Non-derivative financial liabilities
Unsecured bank loans
Accounts payable
Balance at December 31, 2019
Non-derivative financial liabilities
Convertible bonds
Unsecured bank loans
Short-term notes payable
Accounts payable		 Carrying
amount		 Contractual
cash flows		 Within 6
months		 6-12 months 1-2years More than 2
years

303,127
-
$ 1,199,607
1,675,322
1,210,112

1,675,322
902,239

1,675,322
1,596

-
3,150
-

$
2,874,929


2,885,434


2,577,561

1,596
3,150
303,127

$ 1,364,280
929,568
99,969
1,872,057


1,425,400

933,578

100,000

1,872,057


1,425,400

732,124

100,000

1,872,057


-

100,898

-

-

-

100,556
-
-

-

-
-
-

$
4,265,874


4,331,035


4,129,581

100,898
100,556
-

The Company does not expect that the cash flows included in the maturity analysis could occur significantly earlier or in significantly different amounts.

3.Currency risk

1) Currency risk exposure

The Company’s significant exposure to foreign currency risk was as follows:

Financial assets
Monetary items
USD
Financial liabilities
Monetary items
USD		 2020.12.31 2019.12.31 TWD

2,273,124

1,960,909
Foreign
currency
(thousands of
dollars)
Exchange
rate		 TWD Foreign
currency
(thousands
of dollars)		 Exchange
rate
$ 78,336
28.480
61,240
28.480
2,231,010

1,744,118
75,821
29.980

65,407
29.980

2) Sensitivity analysis

The Company’s exposure to foreign currency risk arises from the translation of the foreign currency exchange gains and losses on cash and cash equivalents, accounts receivable, other receivables, bank loans, accounts payable and other payable that are denominated in foreign currency.

～ 37 ～

(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese) ELITE MATERIAL CO., LTD. For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

A 1% appreciation or depreciation of the TWD against the USD as at December 31, 2020 and 2019, would have increased or decreased net income by $4,059 and $2,519, respectively. This analysis assumes that all other variables remain constant.

  • 3) Foreign exchange gain and loss on monetary items

The foreign exchange gains (losses) of Company monetary items converted into the functional currency amount and converted to parent Company’s functional currency Taiwan Dollar exchange rate information were as follows:

TWD 2020
Foreign
exchange losses
Average
exchange rate
$ (15,807)
-		 2019 2019
Foreign
exchange losses
$ (15,807)		 Foreign
exchange losses
(3,568)		 Average
exchange rate

-
  • 4.Interest analysis

The interest rate exposure of the Company’s financial assets and liabilities is described on liquidity risk management.

The following sensitivity analysis is based on the exposure to interest rate risk of the financial assets and liabilities on the reporting date.

For variable rate instruments, the sensitivity analysis assumes the variable rate liabilities are outstanding for the whole year on the reporting date. The Company’s internal management reported the increases or decreases in the interest rates and the exposure to changes in interest rates of 0.5% is considered by management to be a reasonable change of interest rate.

If the interest rate increases or decreases by 0.5%, the Company’s net income will decrease /increase by $5,127 and $1,756 for the years ended December 31, 2020 and 2019, respectively, ’ assuming all other variable factors remain constant. This is mainly due to the Company s variable rate borrowing and the financial assets evaluation of risk-free interest rate changes on corporate bonds.

5. Fair value

  • 1) The kinds of financial instruments and fair value

The fair value of financial assets and liabilities at fair value through profit or loss is measured on a recurring basis. The carrying amount and fair value of the Company’s financial assets and liabilities, including the information on fair value hierarchy were as follows; however, except as described in the following paragraphs, for financial instruments not measured at fair value whose carrying amount is reasonably close to the fair value, and for equity investments that has no quoted prices in the active markets and whose fair value cannot be reliably measured, disclosure of fair value information is not required :

～ 38 ～

(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese) ELITE MATERIAL CO., LTD. For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

Financial assets measured at
amortized cost
Cash and cash equivalents
Notes and account receivable
Other receivable
Refundable deposits
Total
Financial liabilities measured at
amortized cost
Short-term borrowings
Accounts payable
Other payable
Guarantee deposits receivable
Total
Financial assets at fair value
through profit or loss
Redemption and repurchase
option of bonds
Financial assets measured at
amortized cost
Cash and cash equivalents
Notes and account receivable
Other receivable
Refundable deposits
sub-total
Total
Financial liabilities measured at
amortized cost
Short-term borrowings
Short-term notes and bill
payable
Account payable
Other payable
Convertible bonds
Guarantee deposits
Total		 2020.12.31 2020.12.31 Total
-
-
-
-
Book Value
$ 962,032
2,235,138
500,051
640		 Fair value
Level 1

-

-

-

-		 Level 2
-
-
-
-		 Level 3
-
-
-
-
$ 3,697,861
-		 - - -

$ 1,199,607
1,675,322
1,271,445
8,673

-

-

-

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

$ 4,155,047

-		 - - -
2019.12.31 Total
4,561
Book value
$ 4,561		 Fair value
Level 1

-		 Level 2
4,561		 Level 3

-

480,252
2,598,523
583,581
633

-

-

-

-
-
-
-
-
-
-
-
-
-
-
-
-
3,662,989
-		 - - -

$ 3,667,550

-		 4,561
-		 4,561

$ 929,568
99,969
1,872,057
1,170,921
1,364,280
7,816

-

-

-

-

-

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

$ 5,444,611

-		 - - -

～ 39 ～

(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese) ELITE MATERIAL CO., LTD. For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

  • 2) Valuation techniques for financial instruments measured at fair value

  • A.Non-derivative financial instruments

A financial instrument is regarded as being quoted in an active market. The major exchange and the Over-the-Counter of Central Government’s bonds is the basis to the fair value of listing equity instruments and liability instruments in active market.

If quoted price of a financial instrument can be obtained in time and often from exchanges, brokers, underwriters, industrial union, pricing institute, or authorities and such price can reflect those actual trading and frequently happen in the market, then the financial instrument is considered to have quoted price in active market. If a financial instrument does not accord with the definition aforementioned, then it is considered to be without quoted price in active market. In general, market with low trading volume or high bid-ask spreads is an indication of non-active market.

  • (u) Financial risk management

1.Overview

The nature and the extent of the Company’s risks arising from financial instruments, which ’ include credit risk, liquidity risk and market risk, are discussed below. Also, the Company s objectives, policies and procedures of measuring and managing risks are discussed below.

For more quantitative information about the financial instruments, please refer to the other related notes of the financial statements.

2.Risk management framework

The financial management department, which provides intra-company services, is responsible for coordinating domestic and international financial market operations, as well as monitoring and managing operation-related financial risks through the internal risk report. The internal risk report analyzes risk exposure of the Company through range and depth. The Company uses derivative financial instruments to hedge risks and to alleviate their impacts. Usage of derivative financial instruments is subject to regulations approved of by the Board of Directors. The regulation is a written document pertaining the usage of exchange risk, interest risk, credit risk, derivative and non-derivative financial instruments, as well as the investment of the remaining working capital. The internal auditors review the policy compliance and risk exposure on a regular basis. The Company does not engage in opportunistic operations of financial instruments (including derivative financial instruments). The financial management department reports to The Company Risk management Committee quarterly. The Company Risk Management Committee is an independent organization that is responsible for monitoring risk management and enforcing policies to reduce risk exposure.

3.Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial ’ instrument fails to meet its contractual obligations, and arises principally from the Company s receivables from customers and investment.

～ 40 ～

(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese) ELITE MATERIAL CO., LTD. For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

1) Accounts receivable and other receivables

The Company’s exposure to credit risk is influenced mainly by the individual characteristics ’ of each customer. However, management also considers the demographics of the Company s customer base, including the default risk of the industry in which customers operate, as these factors may have an influence on credit risk.

The management has established a credit policy under which each new customer is analyzed individually for creditworthiness before the Company’s standard payment terms are offered. The Company’s review includes external ratings, when available, and in some cases bank references. Credit limits are established for each customer, which represent the maximum open amount without requiring approval from the General Manager’s office; these limits are reviewed quarterly. Customers that fail to meet the Company’s benchmark creditworthiness may transact with the Company only on a cash basis.

In monitoring customer credit risk, customers are grouped according to their credit characteristics, including whether they are an individual or a legal entity, whether they are a wholesale, retail or end-user customer, geographic location, industry, aging profile, maturity and “ ” existence of previous financial difficulties. Customers that are graded as high risk are placed on a restricted customer list and monitored by the General Manager’s office. If customers default, the Company will stop transactions with those customers or trade on a cash basis.

The Company established an allowance for impairment that represents its estimate of incurred losses in respect of trade and other receivables and investments. The main components of this allowance are a specific loss component that relates to individually significant exposures, and a collective loss incurred but not yet identified. The collective loss allowance is determined based on historical data on payment statistics for similar financial assets.

2) Bank deposit

The credit risk exposure in the bank deposits and transaction contract of foreign derivation instruments is measured and monitored by the General Manager's office. The Company only deals with financial institutions; therefore, there are no significant doubts regarding default on the above financial instruments, and as a result, there is no significant credit risk.

4.Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company’s approach to managing liquidity is to ensure, as far as possible, that it always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation.

The Company uses activity-based costing to cost its products, which assists it in monitoring cash flow requirements. The Company aims to maintain the level of its cash and cash equivalents at an amount in excess of expected cash flows on financial liabilities over the succeeding 90 days. This excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters. As of December 31, 2020 and 2019, the Company’s unused credit line were amounted to $6,495,383 and $4,343,377, respectively.

～ 41 ～

(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese) ELITE MATERIAL CO., LTD. For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

5.Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates, and equity prices, will affect the Company’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return.

The Company buys and sells derivatives, and also incurs financial liabilities, in order to manage market risk. All such transactions are carried out within the guidelines set by the Risk Management Committee.

1) Currency risk

The Company is exposed to currency risk on sales, purchases, and borrowings that are ’ denominated in a currency other than the respective functional currencies of the Company s entities, primarily the New Taiwan Dollar (TWD), and US Dollar (USD). Besides, the Company uses natural hedging principle to hedge by controlling the net amount of each currency of the Company in accordance with the condition of the exchange rate market. The Company hedges the currency risk with forward foreign currency whose mature date is in a year from report date and currency swap contract.

The interest is denominated in the currency used in the borrowings. Generally, borrowings are denominated in currencies that match the cash flows generated by the underlying operations of the Company, primarily the TWD, and USD. This provides an economic hedge without derivatives being entered into, and therefore, hedge accounting is not applied in these circumstances.

2) Interest risk

The Company’s borrowings were on the basis of floating interest rate. The Company is not involved in the situation of changing floating interest rate into fixed rate with interest rate swap agreement. The Company periodically assessed the borrowing rates of the banks and every currency to make provisions for interest-changed rate risk. In addition, the Company creates favorable relationship with banks to get lower financial costs from borrowings in order for it to strengthen its working capital to lower its dependency on bank borrowings, as well as situation of changing floating interest rate and scatter interest-changed rate risk.

  • 3) Other market price risk

’ The Company does not enter into any commodity contracts other than to meet the Company s expected usage and sales requirements; such contracts are not settled on a net basis.

(v) Capital management

The Company maintains and manages its capital to meet the minimum paid-in capital required by the competent authority, and to optimize the balance of liabilities and equity in order to maximize shareholders' return. By periodically reviewing and measuring relative cost, risk, and rate of return to ensure profit and to maintain adequate financial ratios, the Company may adopt various financing approaches to balance its capital structure in order to meet the demands for capital expenditures, working capital, settlements of liabilities, and dividend payments in normal course of business for the future.

～ 42 ～

(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese)

ELITE MATERIAL CO., LTD. For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

  • (w) Investing and financing activities not affecting current cash flow

The Company investing and financing activities which did not affect the current flow in the years ended December 31, 2020 and 2019, were as follow:

Short-term borrowings
Long-term borrowings
Total liabilities from
financing activities
Short-term borrowings
Long-term borrowings
Total liabilities from
financing activities		 2020.1.1
Cash flow
$ 579,568
(179,961)
350,000
450,000		 Non-cash changes
Acquisition
Foreign
exchange
movement
Fair value
changes
2020.12.31
-
-
-
399,607
-
-
-
800,000


$
929,568
270,039
-
-
-
1,199,607


2019.1.1
Cash flow
$ 517,758
61,810
400,000
(50,000)
Non-cash changes
Acquisition
Foreign
exchange
movement
Fair value
changes
2019.12.31
-
-
-
579,568
-
-
-
350,000


$
917,758
11,810
-
-
-
929,568

(7) Related-Party Transactions

  • (a) Parent company and ultimate controlling company

The Company is both the parent company and the ultimate controlling party of the Group.

  • (b) Names and relationship with related parties

The followings are entities that have had transactions with related party during the periods covered in the financial statements.

Name of related party

Relationship with the Company

EMC OVERSEAS HOLDING INCORPORATED

The Company its subsidiaries

Grand Wuhan Incorporated

The Company its subsidiaries The Company its subsidiaries

EMC INTERNATIONAL HOLDING INCORPORATED

Grand Zhuhai Incorporated

The Company its sub-subsidiaries The Company its sub-subsidiaries The Company its sub-subsidiaries The Company its sub-subsidiaries

Grand Shanghai Incorporated

Grand Zhongshan Incorporated EMC SPECIAL APPLICATION INCORPORATED

Elite Electronic Material (Kunshan) Co., Ltd. The Company its sub-subsidiaries Elite Electronic Material (Zhongshan) Co., Ltd. The Company its sub-subsidiaries Elite Electronic Material (Huangshi) Co., Ltd. The Company its sub-subsidiaries EMD SPECIALTY MATERIALS, LLC The Company its sub-subsidiaries

The Company its sub-subsidiaries The Company its sub-subsidiaries The Company its sub-subsidiaries

～ 43 ～

(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese) ELITE MATERIAL CO., LTD. For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

  • (c) Significant transactions with related parties

1.Sales

The amounts of significant sales by the Company to related parties were as follows:

Sub-Subsidiaries For the years ended December 31,
2020
2019
$
659,064
1,305,114
2020
$
659,064

The selling price for related parties approximated the market price. The credit terms ranged from 90 to 120 days, which approximated those for routine sales transactions.

The royalties receivable from sub-subsidiaries for using specific products and the service fee amounted to $108,196 and $20,641, respectively.

2.Purchases

The amounts of significant purchases by the Company from related parties were as follows:

Sub-Subsidiaries For the years ended December 31,
2020
2019
$
78,834
110,707
2020
$
78,834

The terms and pricing of purchase transactions with related parties were not significantly different from those offered by other vendors. The payment terms ranged from 90 to 120 days, which were no different from the payment terms given by other vendors.

3.Receivables from related parties

The receivables from related parties were as follows:

Account Relationship 2020.12.31
$ 150,975
125,720
20
50,433		 2019.12.31

268,284

217,385

-

57,259
Accounts receivable

Accounts receivable

Accounts receivable

Other receivables
 Elite Electronic Material
(Zhongshan) Co., Ltd.
Elite Electronic Material
(Kunshan) Co., Ltd.
Elite Electronic Material
(Huangshi) Co., Ltd.
Sub-Subsidiaries

$
327,148


542,928

Amounts receivable from related parties were uncollateralized, and no provisions for doubtful debt were required after the assessment by the management.

～ 44 ～

(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese)

ELITE MATERIAL CO., LTD. For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

4.Payables to related parties

Account Relationship 2020.12.31
$ 19,569
417,889		 2019.12.31

41,625

512,379
Accounts payable

Other payables
 Sub-Subsidiaries
Elite Electronic Material
(Kunshan) Co., Ltd.
$
437,458
554,004
  • 5.Guarantee

As of December 31, 2020, the Company had provided a guarantee for loans taken out by its subordinates, please refer to Note 13(a) for further explanations.

  • (d) Key management personal compensation

Key management personnel compensation comprised:

For the years ended December 31, For the years ended December 31, For the years ended December 31,
2020 2019
Short-term employee benefits $ 136,535 106,558
Termination benefits 2,891 2,814
$ 139,426 109,372
**Pledged Assets **
The carrying values of pledged assets were as follows:
Assets Purpose of Pledge 2020.12.31 2019.12.31
Refundable deposits Staff dormitory $ 640 633
Significant Contingencies and Commitments
(a) Major Commitments and contingencies were as follows:
1.Unused standby letters of credit
2020.12.31 2019.12.31
Unused standby letters of credit
TWD $ 85,193 112,489
USD 2,987 5,977
2.The royalties of eco-material technique treatment with Company A, the paid royalties were as
follows:
2020 2019
$ 14,109 23,997

(8) Pledged Assets

The carrying values of pledged assets were as follows:

(9) Significant Contingencies and Commitments

  • 2.The royalties of eco-material technique treatment with Company A, the paid royalties were as follows:

～ 45 ～

(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese) ELITE MATERIAL CO., LTD. For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

  • 3.As of December 31, 2020 and 2019, the amounts of Performance Letter of Guarantee issued by Mega International Commercial Bank-Zhongli Branch for the purpose of Customs for guaranty of domestic tariff and for guaranty of hiring foreigners to be employed both were NT$5,000, respectively.

  • (10) Significant Catastrophic Losses: None.

(11) Significant Subsequent Events: None.

(12) Others

Employee benefits, depreciation, and amortization expenses, categorized as operating cost or expense, were as follows:

Categorized as
Nature
For the year ended December 31, 2020
For the year ended December 31, 2020
For the year ended December 31, 2020		 For the year ended December 31, 2019 For the year ended December 31, 2019 For the year ended December 31, 2019
Operating
Cost		 Operating
Expense		 Total Operating
Cost		 Operating
Expense		 Total
Employee benefits
Salary
Labor and health insurance
Pension
Remuneration of directors
Others employee benefits
Depreciation
Amortization		 561,617

47,455
23,046
-
28,143
180,730
209
374,956

18,749

11,140
44,071

7,489

10,761

4,886
936,573

66,204

34,186

44,071

35,632

191,491

5,095
565,553

48,112

22,744

-

23,052

168,967

70
285,995

13,000

8,021
38,510

4,626

10,291

2,381
851,548

61,112

30,765

38,510

27,678

179,258

2,451

As of December 31, 2020 and 2019, the additional information about the numbers of employees and employee benefit were as follows:

Number of employees
Number of directors who were not employees
The average employee benefit
The average salaries and wages
Adjustment of average salaries and wages
Supervisors’remuneration		 2020
927		 2019
879
6
1,112
975
31.58%
-
6
$
1,165

$
1,017

4.31%
$
-

～ 46 ～

(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese)

ELITE MATERIAL CO., LTD. For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

The Company's salary and remuneration policy (including directors, supervisors, managers and employees) are as follows:

The remunerations to directors, managers and employees are in accordance with the principles of fairness and competition. In addition, the wages of the employees of the Company are paid based on the grade table set according to the complexity of their work, the degree of their responsibilities, and the professional skills required. Furthermore, the remuneration of the Company’s directors and employees is determined by reference to the Company’s overall operating performance, future risks and development trends of the industry, as well as the individual’s performance achievement rate and contribution to the Company; reasonable remuneration is also taken into consideration.

(13) Additional Disclosures

  • (a) Information on significant transactions

The following is the information on significant transactions required by the “ Regulations Governing the Preparation of Financial Reports by Securities Issuers” for the Company for the year ended December 31, 2020:

  1. Fund financing to other parties:
1. Fund financing to other parties: 1. Fund financing to other parties: 1. Fund financing to other parties: 1. Fund financing to other parties: 1. Fund financing to other parties: 1. Fund financing to other parties: 1. Fund financing to other parties: 1. Fund financing to other parties: 1. Fund financing to other parties: 1. Fund financing to other parties: 1. Fund financing to other parties: 1. Fund financing to other parties: 1. Fund financing to other parties: 1. Fund financing to other parties: 1. Fund financing to other parties: 1. Fund financing to other parties: 1. Fund financing to other parties:
(Expressedinthousands ofNewTaiwandollars, unless otherwise specified)
No Name
of lender		 Name of
borrower		 Account
name		 Related
party
Highest
balance of
financing to
other parties
during the
period
Ending
balance		 Actual usage
amount
during the
period
Range of
interest
rates during
the
period
Purposes of
fund
financing for
the
borrower
Transaction
amount for
business
between two
parties

Reasons for
short-term
financing		 Allowance
?for
bad debt		 Collateral Individual
funding
loan limits		 Maximum
limit of fund
financing
Item Value
1

2
 Elite Electronic
Material (Kunshan)
Co., Ltd.
Elite Electronic
Material (Zhongshan)
Co., Ltd.		 Elite Electronic
Material
(Huangshi) Co.,
Ltd.
Elite Electronic
Material
(Huangshi) Co.,
Ltd.		 Other
receivable
s-related
parties
Other
receivable
s-related
parties		 Y
Y		 1,199,846
1,401,280
1,199,298

1,400,640
1,199,298

437,700
3.50%
3%~3.50%
2

2		 -

-
 Operating
demand
Operating
demand		 -
-		 -
-		 -
-		 1,197,451
(Note 3)
1,622,784
(Note 4)
2,394,902
(Note 3)

1,622,784
(Note 4)

Note 1: The number is filled as follows:

  1. 0 is the Company.

  2. Subsidiaries are numbered as 1 sequentially.

Note 2:1. Having dealings with the Company.

  1. Those who have the needs in short-term financing.

  2. Note 3:The total maximum financing amount cannot exceed 30% of the Company's net worth in its latest financial statements, while the maximum financing amount for a single company cannot exceed 15% of the Company's net worth in its latest financial statements.

  3. Note 4:The total maximum financing amount cannot exceed 30% of the Company's net worth in its latest financial statements, while the maximum financing amount for a single company cannot exceed 30% of the Company's net worth in its latest financial statements.

  4. Note 5:The total amount cannot exceed 100% of the Company's net worth in its lates financial statements.

～ 47 ～

(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese) ELITE MATERIAL CO., LTD. For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

2. Guarantees and endorsements for other parties:

(Expressedinthousands ofNewTaiwandollars, unless otherwise specified) (Expressedinthousands ofNewTaiwandollars, unless otherwise specified) (Expressedinthousands ofNewTaiwandollars, unless otherwise specified) (Expressedinthousands ofNewTaiwandollars, unless otherwise specified) (Expressedinthousands ofNewTaiwandollars, unless otherwise specified) (Expressedinthousands ofNewTaiwandollars, unless otherwise specified) (Expressedinthousands ofNewTaiwandollars, unless otherwise specified) (Expressedinthousands ofNewTaiwandollars, unless otherwise specified) (Expressedinthousands ofNewTaiwandollars, unless otherwise specified) (Expressedinthousands ofNewTaiwandollars, unless otherwise specified) (Expressedinthousands ofNewTaiwandollars, unless otherwise specified) (Expressedinthousands ofNewTaiwandollars, unless otherwise specified)
No.
(Note 1)		 Name of
company		 Counter-party Limitation on
amount of
guarantees and
endorsements for a
specific enterprise
(Note 3)		 Highest
balance for
guarantees
and endorsements
during theperiod		 Balance of
guarantees and
endorsements
as of reporting
date		 Actual usage
amount during
theperiod		 Property pledged
on guarantees
and endorsements
(Amount)		 Ratio of accumulated
amounts of guarantees
and endorsements to net
worth of the latest
financial statements		 Maximum

amount for
guarantees and
endorsements
(Note 3)		 Parent Company
endorsement/
guarantees
to third parties on
behalf of subsidiary		 Subsidiary
endorsement/
guarantees
to third parties on
behalf of parent
company		 Endorsements/guar
antees
to third
parties on
behalf of companies
in Mainland China
Name Relationship
with the
Company
(Note 2)
0

0
0
0
0
0
0
0
1


(

1


(
 The Company

〞

〞

〞

〞

〞

〞

〞

Elite Electronic
Material
Zhongshan)
Co., Ltd.
Elite Electronic
Material
Kunshan) Co.,
Ltd.(Note 4)		 Grand Wuhan
Incorporated
Grand Shanghai
Incorporated
Grand Zhongshan
Incorporated
EMD SPECIALTY
MATERIALS, LLC
Elite Electronic
Material (Zhongshan)
Co., Ltd.
Elite Electronic
Material (Kunshan)
Co., Ltd.
Elite Electronic
Material (Huangshi)
Co., Ltd.
TECHNICA USA
Elite Electronic
Material (Huangshi)
Co., Ltd.
Elite Electronic
Material (Huangshi)
Co., Ltd.		 2
2
2
2
2
2
2
6
4
4		 8,369,315
8,369,315
8,369,315
8,369,315
8,369,315
8,369,315
8,369,315
8,369,315
2,704,639
798,301
599,600

224,850

149,900

170,880

151,125

90,675

1,185,200

18,135

669,987

656,850
-

-

-

170,880

142,400

85,440

1,139,200

17,088

669,681

656,550		 -
-
-

170,880

-

-

-

17,088

222,571

120,699		 -
-
-

-
-
-
-

-

-

-		 -
%
-
%
-
%
1.02%
0.85%
0.51%
6.81%
0.10%
12.38%
8.22%		 16,738,630
16,738,630
16,738,630
16,738,630
16,738,630
16,738,630
16,738,630
16,738,630
5,409,278
7,983,006		 Y
Y
Y
Y
Y
Y
Y		 Y
Y
Y
Y
Y

Note 1: 0 is the Company.

Note 2:1. Entities with business relationship with the Company.

  1. A subsidiary in which the Company directly holds more than 50 percent of its voting shares.

  2. A investee in which the Company and subsidiary holds more than 50 percent of its voting shares.

  3. A parent company in which the Company directly or Subsidiaries indirectly holds more than 90 percent of its voting shares.

  4. Companies in same type of business and providing mutual endorsements/ guarantees in favor of each other in accordance with the contractual obligations in order to fulfill the needs of the construction project.

  5. Shareholders making endorsements and/or guarantees for their mutually invested company in proportion to their shareholding percentage.

  6. Companies in same type of business providing guarantees of pre-sale contracts according to the regulation.

  7. Note 3: The total maximum endorsement / guarantee cannot exceed 100% of the Company's net worth in its latest financial statements, while the maximum endorsement / guarantee amount for a single company cannot exceed 50% of the Company's net worth in its latest financial statements.

  8. Note 4: The Company or the company in which directly or indirectly holds more than 90% of the voting shares may be endorsed and the amount shall not exceed 10% of the company’s net worth.

3. Information regarding securities held at balance sheet date:

Information regarding securities held at balance sheet date: Information regarding securities held at balance sheet date: Information regarding securities held at balance sheet date: Information regarding securities held at balance sheet date: Information regarding securities held at balance sheet date: Information regarding securities held at balance sheet date: Information regarding securities held at balance sheet date: Information regarding securities held at balance sheet date: Information regarding securities held at balance sheet date:
(Expressedinthousands ofNewTaiwandollars, unless otherwise specified)
Name of holder Category and
name of security		 Category and name
of security		 Account title Ending balance Note
Number Book value **Percentage ** Market value
EMC OVERSEAS
HOLDING
INCORPORARTED		 PROUD STAR
INTERNATIIONAL
LIMITED		 - Non-current
financial assets at
fair value through
other comprehensive
income
500,000
15,681
3.26%
15,681

～ 48 ～

(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese) ELITE MATERIAL CO., LTD. For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

  1. Accumulated buying/selling of the same marketable securities for which the dollar amount reaches $300 million or 20% or more of paid-in capital: None.

  2. Acquisition of real estate for which the dollar amount reaches $300 million or 20% or more of paid-in capital : None.

  3. Disposition of real estate for which the dollar amount reaches $300 million or 20% or more of paid-in capital: None.

  4. Buying/selling products with the dollar amount reaches $100 million or 20% or more of paid-in capital:

(In Thousands of New Taiwan Dollars) (In Thousands of New Taiwan Dollars) (In Thousands of New Taiwan Dollars) (In Thousands of New Taiwan Dollars) (In Thousands of New Taiwan Dollars) (In Thousands of New Taiwan Dollars) (In Thousands of New Taiwan Dollars) (In Thousands of New Taiwan Dollars) (In Thousands of New Taiwan Dollars)
Name of company **Counter-party ** Relationship Transaction details Reasons why and
description of how the
transaction conditions
differ from general
transactions		 Account/note receivable
(payable)		 Notes
Purchase
/Sale		 Amount Percentage of
total
purchases
/sales
Creditperiod		 Unitprice Creditperiod Balance Percentage of
total
accounts/notes
receivable
(payable)
Elite Material Co., Ltd.

Elite Electronic Material
(Kunshan) Co., Ltd.
Elite Material Co., Ltd.

Elite Electronic Material
(Zhongshan) Co., Ltd.
Elite Electronic Material
(Huangshi) Co., Ltd.
Elite Electronic Material
(Kunshan) Co., Ltd.
Elite Electronic Material
(Huangshi) Co., Ltd.
Elite Electronic Material
(Zhongshan) Co., Ltd.		 Elite Electronic
Material
(Kunshan) Co.,
Ltd.
Elite Material
Co., Ltd.
Elite Electronic
Material
(Zhongshan)
Co., Ltd.
Elite Material
Co., Ltd.
Elite Electronic
Material
(Kunshan) Co.,
Ltd.
Elite Electronic
Material
(Huangshi) Co.,
Ltd.
Elite Electronic
Material
(Zhongshan)
Co., Ltd.
Elite Electronic
Material
(Huangshi) Co.,
Ltd.		 Investee
company on
equity method
by the Company
〞

〞
〞

Actual related
party

〞

〞

〞
Sale

Purchase
Sale

Purchase
Sale

Purchase
Sale

Purchase		 (356,168)

356,168
(302,876)

302,876
(977,577)

977,577
(1,086,563
)
1,086,563
(5)%

4%

(4)%

5%

(47)%

12%
(52)%

19%		 Depends on the
company's
financial
condition

〞

〞

〞

〞

〞

〞

〞
-
-
-
-
-
-
-
-		 125,720
(125,720)
150,975
(150,975)
455,821
(455,821)
501,166
(501,166)
6%

(5)%

7%

(8)%

48%

(17)%

52%

(27)%

～ 49 ～

(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese) ELITE MATERIAL CO., LTD. For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

  1. Accounts receivable from related parties for which the dollar amount reaches $100 million or 20% or more of paid-in capital:
(In Thousands of New Taiwan Dollars) (In Thousands of New Taiwan Dollars) (In Thousands of New Taiwan Dollars) (In Thousands of New Taiwan Dollars)
Name of
related party		 Counter-party
Relationship		 Balance of
receivables
from related
party		 Turnover
days		 Past-due receivables from
related party		 Subsequently
received amount
of receivables
from related
party
Allowances
for bad debts
Amount Action taken
The Company

The Company (note
1)
The Company

The Company (note
1)
Elite Electronic
Material (Kunshan)
Co., Ltd. (note 1)
Elite Electronic
Material (Zhongshan)
Co., Ltd. (note 1)
Elite Electronic
Material (Kunshan)
Co., Ltd.
Elite Electronic
Material (Kunshan)
Co., Ltd. (note 1)
Elite Electronic
Material (Huangshi)
Co., Ltd.
Elite Electronic
Material (Huangshi)
Co., Ltd.		 Elite Electronic
Material
(Kunshan) Co.,
Ltd.
〞
Elite Electronic
Material
(Zhongshan)
Co., Ltd.
〞
Elite Electronic
Material
(Huangshi) Co.,
Ltd.
Elite Electronic
Material
(Huangshi) Co.,
Ltd.
The Company

〞
Elite Electronic
Material
(Kunshan) Co.,
Ltd.
Elite Electronic
Material
(Zhongshan)
Co., Ltd.		 Investee company
on equity method
by the Company
〞
〞
〞
Actual related party
〞
Investee company
on equity method
by the Company
〞
Actual related party
〞		 125,720
28,505
150,975
21,793

1,226,316
440,280
3,343
417,889

455,821
501,166
2.08
Not
applicable

1.44
Not
applicable
Not
applicable
Not
applicable

5.21
Not
applicable

2.98

3.96
-
-

-
-
-
-

-
-

-

-		 90,039
28,505
44,901
21,793
9,005
-
560
220,141
272,276
355,650
-

-

-

-

-
-

-

-

-

-

Note 1: Account for other receivable due from related parties.

  1. Derivative transactions: None.

～ 50 ～

(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese) ELITE MATERIAL CO., LTD. For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

  • (b) Information on investees:

For the years ended December 31, 2020, the following was the information on investees (excluding investees in Mainland China) :


investees in Mainland China) :
investees in Mainland China) :
investees in Mainland China) :
investees in Mainland China) :
(Amounts Expressed in Thousands of New Taiwan Dollars, Except for Share Data)
Name of
investor		 Name of investee Location Major operations Initial investment (Amount) Ending balance Net income
(loss) of the
investee		 Investment
income (losses)		 Note
Ending
balance		 Beginning
balance		 Shares Ratio of
shares		 Book
value
The Company

〞

〞

〞

EMC
INTERNATIONAL
HOLDING
INCORPORATED
EMC SPECIAL
APPLICATION
INCORPORATED
EMC OVERSEAS
HOLDING
INCORPORATED
EMC OVERSEAS
HOLDING
INCORPORATED
〞

Grand Zhuhai
Incorporated
〞
 EMC OVERSEAS
HOLDING
INCORPORATED
Li Cheng Tech Co.,
LTD.
Grand Wuhan
Incorporated
EMC
INTERNATIONAL
HOLDING
INCORPORATED
EMC SPECIAL
APPLICATION
INCORPORATED
EMD SPECIALTY
MATERIALS, LLC
Grand Zhuhai
Incorporated
Li Cheng Tech Co.,
LTD.
TECHNICA USA
Grand Zhongshan
Incorporated
Grand Shanghai
Incorporated		 British virgin
Islands
Taiwan

Cayman
Islands
〞

〞

USA

Cayman
Islands
Taiwan

USA

British Virgin
Islands
British virgin
Islands		 Investment business
Electronics、
Telecommunications
equipment、Wholesale、
Retails、Batteries、Power
generation and
Distribution machinery
manufacturing business
Import / export business
and investment business
Import / export business
and investment business
Import / export business
and investment business
Copper clad laminate and
prepreg business
Import / export business
and investment business
Electronics、
Telecommunications
equipment、Wholesale、
Retails、Batteries、Power
generation and
Distribution machinery
manufacturing business
Import/ export service
Import / export business
and investment business
Import / export business
and investment business		 1,179,111

173,694
602,440
761,482
747,742
746,317
962,590

7,311
17,088
468,126
940,739
1,179,111

173,694

602,440

-

-

-

962,590

7,311

17,088

468,126

940,739
36,256,950

16,412,918

20,020,000
26,310,000
26,255,000
-

33,798,821

250,000

600,000

16,437,000

18,161,515
100.00%

33.50%

100.00%

100.00%

100.00%
100.00%

100.00%

1.53%

30.00%

100.00%

99.79%
13,432,327

-

624,341

746,382

744,816

743,441

13,375,204

-

10,115

5,408,262

7,965,217
3,708,854
-

132,357

(3,038)

(3,037)

(2,985)

3,719,497
-

(36,372)

1,232,601

2,492,443
3,708,854
-

132,357

(3,038)

(3,037)

(2,985)

3,719,497
-


(10,912)

1,232,601

2,487,172		 Subsidiaries
Subsidiaries
Subsidiaries
Sub-subsidiaries
Third-tier
subsidiary

〞
Sub-subsidiaries
Note 3
Third-tier
subsidiary

〞

Note 1:The amounts of book value recognized using the equity method include investment income(losses) and the exchange differences on translation of foreign statements.

Note 2: The amount above is evaluated based on the independent audit report of the investee under equity method .

Note 3: Because other shareholders hold more than 60% of the shares and the Company only accounts for 30%, the Company has no control.

～ 51 ～

(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese)

ELITE MATERIAL CO., LTD. For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

(c) Information on investment in Mainland China:

  1. Information on investment in Mainland China:
(Amounts Expressed in Thousands of New Taiwan Dollars) (Amounts Expressed in Thousands of New Taiwan Dollars) (Amounts Expressed in Thousands of New Taiwan Dollars) (Amounts Expressed in Thousands of New Taiwan Dollars) (Amounts Expressed in Thousands of New Taiwan Dollars) (Amounts Expressed in Thousands of New Taiwan Dollars) (Amounts Expressed in Thousands of New Taiwan Dollars) (Amounts Expressed in Thousands of New Taiwan Dollars)
Investee
Company		 Main Businesses
and Products		 Total Amount
of
Paid-in Capital		 Method of
Investment
(Note 1)		 Accumulated
Outflow of
Investment
from Taiwan
(R.O.C.)		 Investment Flows Accumulated
Outflow of
Investment from
Taiwan		 Net income
(loss) of the
investee		 Percentage of
Ownership		 Investment

Income
(Loss) Recognized
(Note 2)		 Carrying
Amount		 Accumulated
Inward
Remittance of
Earnings
Outflow Inflow
Elite Electronic
Material (Kunshan)
Co.Ltd.
Elite Electronic
Material (Zhongshan)
Co., Ltd.
Elite Electronic
Material (Huangshi)
Co., Ltd.		 Copper clad laminate
and prepreg business
〞
〞		 803,136
575,296
569,600
(2)

(2)

(2)		 650,816
440,613
601,858
-

-

-		 -
-
-		 650,816
440,613
601,858
2,477,715

1,222,109

124,469
99.79%

100.00%

100.00%
2,472,476

1,222,109

124,469
7,983,006

5,409,279

617,736
6,632,936

3,117,063

-
  1. Limitation on investment in Mainland China:
Limitation on investment in Mainland China:
Aggregate investment amount
remitted from Taiwan to Mainland
China at the end of the period		 Approved investment (amount)
by Ministry of Economic Affairs Investment
Commission		 Limitation on investment in
Mainland China in accordance
with regulations of Ministry of
Economic Affairs Investment
Commission
1,710,734 4,373,813 10,043,178

Note 1: There are three investment approach of categories:

  • (1) Direct Investment in Mainland China.

  • (2) Investment in Mainland China by a third party.

  • (3) Other approach.

Note 2: The financial statements were audited by the Certified Public Accountants of the Company.

  • Note 3: The difference between the paid-in capital of Elite Electronic Material (Kunshan) Co. Ltd. and the investment amount remitted from Taiwan amounted to USD$6,012, which was invested overseas by the subsidiary.

  • Note 4: The difference between the paid-in capital of Elite Electronic Material (Zhongshan) Co. Ltd. and the investment amount remitted from Taiwan amounted to USD$6,255, which was recognized as capital increase out of earnings.

  • Note 5: The difference between the paid-in capital and investment amount remitted from Taiwan amounted to USD$110, which was invested overseas by the subsidiary.

  • Note 6: The items in the balance sheet and those in the income statements were translated at the exchange rate of 28.4800 and 29.5604, respectively, for the year ended December 31, 2020.

3. Significant transactions ：

Please refer to the related disclosures above captioned as “Related information on material transaction items” for direct or indirect significant transactions between the Company and its investees in Mainland China for the year ended December 31, 2020. (The transactions were eliminated in the consolidated financial statements.)

～ 52 ～

(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese) ELITE MATERIAL CO., LTD. For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

  • (d) Major shareholders:
Major shareholders:
Shareholding
Shareholder’s Name		 Shares Percentage
Yu Chang Investments Co., Ltd. 25,471,477
7.65%
New Labor Pension Fund- Taiwan 20,014,000
6.01%
Cathay Life Insurance Co., Ltd. 17,521,000
5.26%

  • Note: (1)The main shareholder information of this table is calculated by the insurance company on the last business day at the end of each quarter. The above information. As for the share capital recorded in the company's financial report and the number of shares actually delivered by the company without physical registration, the calculation basis may be different or different.

    • (2)If the information on the Shanghai Stock Exchange is a shareholder's shareholding delivery to the trust, it will be disclosed by the trustee who opened the trust account separately. As for shareholders who handle the declaration of insider equity holding more than 10% of their shares in accordance with the Securities Exchange Act, their shareholdings include their shareholdings plus their delivery of trust and shares with the right to make decisions on trust property, etc. For information on insider equity declaration, please refer to Open Information Observatory.

  • (14) Segment Information

Please refer to the consolidated financial statements of the year ended 2020.

～ 53 ～

ELITE MATERIAL CO., LTD.

STATEMENT OF CASH AND EQUIVALENTS

December 31, 2020

(In Thousands of New Taiwan Dollars)

Item Description Amount
$ 469
297
406,953
231,905
322,408
961,563
$
962,032
Cash
Saving accounts
Total		 Cash on hand
Check account deposits
Saving accounts
Foreign deposits(USD7,965 Thousands of Dollars、
CNY1,155 Thousands of Dollars)
Time deposits
Sub total

STATMENT OF NOTES RECEIVABLES

Client name Description Amount
$ 65,116
49,026
37,424
33,455
21,456
(349)		 Note
A Company
B Company
C Company
D Company
Others
Less: Loss allowance
Total		 Current portion
〞
〞
〞
〞



Client included in others
does not exceed 5% of the
account balance.

$
206,128

～ 54 ～

ELITE MATERIAL CO., LTD.

STATEMENT OF ACCOUNT RECEIVABLES

December 31, 2020

(In Thousands of New Taiwan Dollars)

Client name Description Amount
$ 125,720
150,975
20
276,715		 Note
Related-parties:
Elite Electronic Material
(Kunshan) Co., Ltd.
Elite Electronic Material
(Zhongshan) Co., Ltd.
Elite Electronic Material
(Huangshi) Co., Ltd.
Sub total
Non-related-parties:
E Company
F Company
G Company
Others
Sub total
Total
Less: Loss allowance
Accounts receivable, net







Client included in others
does not exceed 5% of the
account balance.

451,276
297,786
135,230
869,010
1,753,302

2,030,017
(1,007)

$
2,029,010

～ 55 ～

ELITE MATERIAL CO., LTD.

STATEMENT OF INVENTORY

December 31, 2020

(In Thousands of New Taiwan Dollars)

**Item ** Amount
Cost
Net Realizable
Value
$ 696,775
(14,956)
681,819
710,416		 Amount
Cost
Net Realizable
Value
$ 696,775
(14,956)
681,819
710,416		 Amount
Cost
Net Realizable
Value
$ 696,775
(14,956)
681,819
710,416
Cost
$ 696,775
(14,956)
Materials
Less: Loss allowance
Sub total
Supplies
Work in progress
Less: Loss allowance
Sub total
Finished goods
Less: Loss allowance
Sub total
Inventory in-transit
Inventory, net

681,819

27,012



27,012

126,585
(8,633)




139,234

117,952

274,312
(26,660)




377,840

247,652

8,041



8,041

$
1,082,476

Note

～ 56 ～

ELITE MATERIAL CO., LTD.

STATEMENT OF INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD

For the Year Ended December 31, 2020

(In Thousands of New Taiwan Dollars)

Investee Company
EMC OVERSEAS HOLDING
INCORPORATED
EMC INTERNATIONAL
HOLDING INCORPORATED
Licheng Technology (Stock)
Company
Grand Wuhan Incorporated		 Beginning Balance
Number
of
shares
Amount
36,257 $ 12,950,773
-
-
16,413
-
20,020
481,292
$
13,432,065		 Beginning Balance
Number
of
shares
Amount
36,257 $ 12,950,773
-
-
16,413
-
20,020
481,292
$
13,432,065		 I I ncrease
Amount
473,074
746,382
-
143,049		 D ecrease
Amount
-
-
-
-		 Ending Balan c e
Amount
13,423,847
746,382
-
624,341		 Mar
 k
Ne		 et Price or
t Value
Total price
13,432,327
746,382
-
624,341		 Pledged as
collateral
No
No
No
No		 Note
Number
of
shares
-
26,310
-
-		 Number
of
shares		 Number
of
shares
36,257
26,310
16,413
20,020		 Proportion of
shareholding


Unit
price
-
-
-
-		 100.00%
100.00%
33.50%
100.00%		 -
-
-
-

$
13,432,065
1,362,505		 -
14,794,570
14,803,050

～ 57 ～

ELITE MATERIAL CO., LTD.

STATEMENT OF SHORT-TERM LOANS

December 31, 2020

(In Thousands of New Taiwan Dollars)

Type of loans Description Ending Balance
$
399,607		 Contract Period
2020.10.16~2021.03.18		 Range of
Interest Rates

0.51%~0.90%		 Loan
Commitments
3,241,120		 Collaterals or
Pledged Assets
Guarantee Notes		 Note
Short-term loans Financial institution

～ 58 ～

ELITE MATERIAL CO., LTD.

STATEMENT OF ACCOUNT PAYABLES

December 31, 2020

(In Thousands of New Taiwan Dollars)

Suppliers Description Amount
$ 3,343
16,226		 Note










Client included in others
does not exceed 5% of the
account balance.
related-parties:
Elite Electronic Material
(Kunshan) Co., Ltd.
Elite Electronic Material
(Zhongshan) Co., Ltd.
Sub total
Non-related-parties:
A Company
B Company
C Company
D Company
E Company
F Company
Others
Sub total
Total
19,569

183,678
156,803
92,235
145,923
198,108
102,089
776,917
1,655,753

$
1,675,322

～ 59 ～

ELITE MATERIAL CO., LTD.

STATEMENT OF OTHER PAYABLES

December 31, 2020

(In Thousands of New Taiwan Dollars)

Item Description Amount
$ 55,658
304,089
46,831
130,767
43,589
17,290
673,221
$
1,271,445
Other payables
Total		 Payables for equipment
Payroll payables and bonuses payable
Work in progress-outsourced payable
Employees compensations payable
Directors' compensations payable
Pension expenses payable
Other expenses payable

～ 60 ～

ELITE MATERIAL CO., LTD.

STATEMENT OF LONG-TERM LOAN

December 31, 2020

(In Thousands of New Taiwan Dollars)

Creditor Description Loan Amount
$ 150,000
100,000
100,000
50,000
100,000
100,000
200,000		 Contract Period
2020.10.29~2021.02.26
2020.11.17~2021.01.05
2020.11.20~2021.01.20
2020.12.16~2021.03.16
2020.12.23~2021.03.23
2020.12.25~2023.12.25

2020.12.30~2023.12.30

 Interest

0.89%

1.25%

0.89%

0.90%

0.90%

1.05%

1.05%		 Collaterals or
Pledged Assets
None
〞
〞
〞
〞
〞
〞		 Note
A Bank
B Bank
C Bank
D Bank
D Bank
E Bank
E Bank
Sub total
Less: Long-term borrowings,
current portion
Long-term loans		 Financial institution
Financial institution
Financial institution
Financial institution
Financial institution
Financial institution
Financial institution

800,000
(500,000)
$
300,000

～ 61 ～

ELITE MATERIAL CO., LTD. STATEMENT OF NET REVENUE

For the Year Ended December 31, 2020

(In Thousands of New Taiwan Dollars)

Item Quantity Amount Note
Capper clad laminate 5,801,087 $ 2,696,485
Prepreg 23,360,298 3,036,645
Mass lam foundry 4,757,596 758,502
Others 439,004
$ 6,930,636

～ 62 ～

ELITE MATERIAL CO., LTD.

STATEMENT OF OPERATING COSTS

For the Year Ended December 31, 2020

(In Thousands of New Taiwan Dollars)

Item
Materials, beginning of the year
Plus: Purchases
Less: Material sold
Materials, end of the year
Material scraps
Transferred to manufacturing expenses
Transferred to operating expenses
Direct materials
Direct labor
Manufacturing expenses
Total Manufacturing costs
Plus: Work-in-process, beginning of the year
Purchased work-in-process
Less: Work-in-process, end of the year
Transferred to manufacturing expenses
Transferred to operating expenses
Cost of finished goods
Plus: Finished goods, beginning of the year
Purchased finished goods
Less: Finished goods, end of the year
Transferred to manufacturing expenses
Transferred to operating expenses
Inventory scraps
Cost of goods sold－Material sold
Loss on disposal of scrap
Losses on inventory valuation and obsolescence
Revenue from sales of scraps
Costs of sales		 Amount
Sub total
Total
$ 555,050
4,348,833
(248,042)
(697,578)
(10,392)
(63,676)
(22,392)
3,861,803
440,725
1,301,218
5,603,746
66,792
2,404
(126,585)
(29,175)
(130,720)
(217,284)
5,386,462
201,661
68,751
(281,550)
(5,980)
(46,608)
(2,056)
(65,782)
5,320,680
248,042
12,448
11,619
(30,676)
$
5,562,113		 Amount
Sub total
Total
$ 555,050
4,348,833
(248,042)
(697,578)
(10,392)
(63,676)
(22,392)
3,861,803
440,725
1,301,218
5,603,746
66,792
2,404
(126,585)
(29,175)
(130,720)
(217,284)
5,386,462
201,661
68,751
(281,550)
(5,980)
(46,608)
(2,056)
(65,782)
5,320,680
248,042
12,448
11,619
(30,676)
$
5,562,113
Sub total
$ 555,050
4,348,833
(248,042)
(697,578)
(10,392)
(63,676)
(22,392)

66,792
2,404
(126,585)
(29,175)
(130,720)

201,661
68,751
(281,550)
(5,980)
(46,608)
(2,056)

～ 63 ～

ELITE MATERIAL CO., LTD.

STATEMENT OF SELLING EXPENSES

For the Year Ended December 31, 2020

(In Thousands of New Taiwan Dollars)

Item Description Amount
$ 35,903
61,516
40,081
76,356
14,109
16,600
11,467
$
256,032		 Note
Payroll expenses
Shipping expenses
Administrative expenses
Commission expenses
Royalty
Export expenses
Other expenses
Total





Client included in others
does not exceed 5% of the
account balance.

STATEMENT OF ADMINISTRATIVE EXPENSES

Item Description Amount
$ 282,525
43,589
32,710
114,667
$
473,491		 Note
Payroll expenses
Remuneration of directors
Consultant expenses
Other expenses
Total


Client included in others
does not exceed 5% of the
account balance.

～ 64 ～

ELITE MATERIAL CO., LTD.

STATEMENT OF RESEARCH DEVELOPMENT EXPENSES

For the Year Ended December 31, 2020

(In Thousands of New Taiwan Dollars)

Item Description Amount Note Research and development $ 165,539 expenses Payroll expenses 56,527 Other expenses 33,364 Client included in others does not exceed 5% of the account balance. Total $ 255,430

～ 65 ～

ANNEX II

Year 2020 Consolidated Financial Reports Audited by CPA

  • 92 -

Stock Code:2383

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese)

ELITE MATERIAL CO., LTD. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

With Independent Auditors ’ Report For the Years Ended December 31, 2020 and 2019

Address: No.18, Datong 1st Rd., Guanyin Dist., Taoyuan City 328, Taiwan (R.O.C.) Telephone: (03)483-7937

The independent auditors’ report and the accompanying consolidated financial statements are the English translation of the Chinese version prepared and used in the Republic of China. If there is any conflict between, or any difference in the interpretation of the English and Chinese language independent auditors’ report and consolidated financial statements, the Chinese version shall prevail.

～ 1 ～

Table Of Contents

Table Of Contents
Contents
1.Cover Page
2.Table of Contents
3.Representation Letter
4.Independent Auditors’Report
5.Consolidated Statements of Financial Position
6.Consolidated Statements of Comprehensive Income
7.Consolidated Statements of Changes in Equity
8.Consolidated Statements of Cash Flows
9.Notes to the Consolidated Financial Statements
(1) Organization and Business
(2) Approval Date and Procedures of the Consolidated Financial Statements
(3) New Standards and Interpretations Adopted
(4) Significant Accounting Policies
(5) Major Sources of Accounting Assumptions, Judgments and Estimation
Uncertainty
(6) Summary of Major Accounts
(7) Related-Party Transactions
(8) Pledged Assets
(9) Significant Contingencies and Commitments
(10) Significant Catastrophic Losses
(11) Significant Subsequent Events
(12) Others
(13) Additional Disclosures
a) Information on significant transactions
b) Information on investees
c) Information on investment in Mainland China
d) Major shareholders
(14) Segment Information		 Page

1
2
3
4
5
6
7
8
9
9
9～10
10～26
27
27～55
56
57
57
58
58
58
58～62
62～63
63～64
63～64
65～67

～ 2 ～

Representation Letter

The entities that are required to be included in the combined financial statements of Elite Material Co., Ltd. as of and for the year ended December 31, 2020 under the Criteria Governing the Preparation of Affiliation Reports, Consolidated Business Reports, and Consolidated Financial Statements of Affiliated Enterprises are the same as those included in the consolidated financial statements prepared in conformity with International Financial Reporting Standards No. 10 by the Financial Supervisory Commission, "Consolidated Financial Statements." In addition, the information required to be disclosed in the combined financial statements is included in the consolidated financial statements. Consequently, Elite Material Co., Ltd. and Subsidiaries do not prepare a separate set of combined financial statements.

Company name: Elite Material Co., Ltd. Chairman: Ding-Yu Dong Date: February 25, 2021

～ 3 ～

Independent Auditors ’ Report

To the Board of Directors of Elite Material Co., Ltd.:

Opinion

We have audited the consolidated financial statements of Elite Material Co., Ltd. and its subsidiaries (“the Group”), which comprise the consolidated statement of financial position as of December 31, 2020 and 2019, and the consolidated statement of comprehensive income, changes in equity and cash flows for the year ended December 31, 2020 and 2019, and notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at December 31, 2020 and 2019, and its consolidated financial performance and its consolidated cash flows for the year ended December 31, 2020 and 2019 in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and with the International Financial Reporting Standards (“IFRSs”), International Accounting Standards (“IASs”), Interpretations developed by the International Financial Reporting Interpretations Committee (“IFRIC”) or the former Standing Interpretations Committee (“SIC”) endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China.

Basis for Opinion

We conducted our audit of the consolidated financial statements as of and for the year ended December 31, 2020 in accordance with the Regulations Governing Auditing and Certification of Financial Statements by Certified Public Accountants, and the auditing standards generally accepted in the Republic of China. Furthermore, we conducted our audit of the Consolidated financial statements as of and for the year ended December 31, 2019 in accordance with the Regulations Governing Auditing and Certification of Financial Statements by Certified Public Accountants, Rule No. 1090360805 issued by the Financial Supervisory Commission, and the auditing standards generally accepted in the Republic of China. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the Certified Public Accountants Code of Professional Ethics in Republic of China (“the Code”), and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis of our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

1. Revenue recognition

Please refer to Note 4(o) "Revenue" and Note 6(s) "Revenue" of the consolidated financial statements.

～ 4 ～

Description of key audit matter:

The recognition of revenue is based on the fact that the Group has transferred all its ownership and the significant risk of its products to the customers. The judgment on the arrival date of the products involves uncertainty under the FOB destination which is stated in the sales contracts between the Group and the customers. The Group still needs to take the risk of the products before they are delivered to customers.

Therefore, the recognition of revenue was considered to be one of the key audit matters in the audit.

How the matter was addressed in our audit:

In relation to the key audit matter above, we have performed certain key audit procedures that included: assessing the accounting policies on the recognition timing of sales revenue and the appropriateness of related internal controls; testing the effectiveness of implementation of internal control ; performing cut-off test for recognition of revenue on the period before and after the reporting date to assess the rationality to the recognition timing of sales revenue.

2. Allowance for Inventory Valuation

Please refer to Note (4)(h) "Inventories" and Note (6)(f)” Inventories” of the consolidated financial statements.

Description of key audit matter:

The printed circuit board and other electronic components are the major products of the Group. Inventories have specific life cycle due to their attributes. Apart from this, the Group prepared certain amounts of security stock to meet the delivery date required by the customers. Inventories are stated at the lower of cost or net realizable value. Consequently, there may be situations that the net realizable value of inventory will exceed its cost. In addition, the Group would purchase the materials in advance for the expected sales orders. The cancellation or the change of orders, and the change of the material used or quantities of the material may lead to product obsolescence. Therefore, the recognition on allowance for inventory valuation and obsolescence loss was considered to be one of the key audit matters in the audit.

How the matter was addressed in our audit:

In relation to the key audit matter above, we have performed certain key audit procedures that included: assessing the allowance for loss due to price decline, obsolete, and slow moving inventories to determine whether policy of the Group is applied; selecting samples to examine their net realizable values to verify the accuracy and completeness of inventory aging report; reassessing the accuracy of allowance for inventory valuation and obsolescence loss according to the Group’ s accounting policy; performing a retrospective review to evaluate the completeness of disclosure for allowance for inventories.

Other Matter

Elite Material Co., Ltd. has additionally prepared its parent company only financial statements as of and for the years ended December 31, 2020 and 2019, on which we have issued an unqualified opinion.

～ 4-1 ～

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 Regulations Governing the Preparation of Financial Reports by Securities Issuers and IFRSs, IASs, interpretation as well as related guidance endorsed 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 are responsible for overseeing the Group’s financial reporting process.

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

As part of an audit in accordance with 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 auditor’s 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.

～ 4-2 ～

  1. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the group financial statements. We are responsible for the direction, supervision and performance of the group audit.

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 of the current period and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partners on the audit resulting in this independent auditors’ report are Yi-Chun Chen and Chung-Yi Chiang.

KPMG

Taipei, Taiwan (Republic of China) February 25, 2021

Notes to Readers

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

The independent auditors’ audit report and the accompanying consolidated financial statements are the English translation of the Chinese version prepared and used in the Republic of China. If there is any conflict between, or any difference in the interpretation of the English and Chinese language independent auditors’ audit report and consolidated financial statements, the Chinese version shall prevail.

～ 4-3 ～

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese)

ELITE MATERIAL CO., LTD.

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars)

ASSETS
Current Assets:
1100
Cash and cash equivalents (Note (6)(a))
1110
Current financial assets at fair value through profit or loss (Note (6)(b))
1150
Notes receivable, net (Note (6)(d))
1170
Accounts receivable, net (Note (6)(d))
1200
Other receivables, net (Note (6)(e))
1310
Inventories, manufacturing business, net (Note (6)(f))
1479
Other current assets, others

Non-Current Assets:
1517
Non-current financial assets at fair value through other comprehensive
income (Note (6)(g))
1550
Investments accounted for using equity method, net (Note (6)(c))
1600
Property, plant and equipment (Note (6)(i))
1755
Right-of-use assets (Note (6)(j))
1805
Goodwill (Note (6)(h))
1822
Other intangible assets (Note (6)(h))
1840
Deferred tax assets (Note (6)(q))
1900
Other non-current assets
1920
Guarantee deposits paid
1975
Net defined benefit asset, non-current (Note (6)(p))

Total assets		 2020.12.31
Amount
%
$ 5,731,862
20
-
-
291,991
1
9,642,069
35
49,011 -
3,702,172
13
151,452
1		 2019.12.31
Amount
%
6,350,790
25
4,561 -
293,914
1
8,898,138
35
56,946 -
2,904,701
11
324,208
1
18,833,258
73
16,507 -
21,714 -
5,857,817
23
240,188
1
-
-
10,316 -
231,497
1
471,050
2
21,984 -
-
-
6,871,073
27
25,704,331
100
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
2100
Short-term borrowings (Note (6)(k))
2110
Short-term notes payable (Note (6)(l))
2170
Accounts payable
2200
Other payables
2230
Current tax liabilities
2321
Bonds payable, current portion (Note (6)(n))
2322
Long-term borrowings, current portion (Note (6)(m))
2365
Current refund liability (Note (6)(o))
2399
Other current liabilities, others

Non-Current liabilities:
2540
Long-term borrowings (Note (6)(m))
2551
Non-current provisions for employee benefits (Note (6)(p))
2570
Deferred tax liabilities (Note (6)(q))
2645
Guarantee deposits received

Total liabilities
Equity attributable to owners of parent (Note (6)(r)):
3100
Capital stock
3200
Capital surplus
Retained earnings:
3310
Legal reserve
3320
Special reserve
3351
Accumulated profit and loss
3400
Other equity interest
36XX
Non-controlling interests
Total equity
Total liabilities and equity		 2020.12.31 2019.12.31
Amount % Amount

19,568,557
70

15,681 -
10,115 -
6,531,008
23
238,157
1
436,589
2
235,311
1
225,052
1
572,999
2
19,583 -
3,754
-


9,613,785
35
10,321,431
40


564,281
2
643,014
2
-
-
7,567 -
910,951
3
1,185,403
5
12,280
-
10,347
-


1,487,512
5
1,846,331
7


11,101,297
40
12,167,762
47


3,329,183
12
3,197,080
12
1,868,661
7
628,858
2
2,035,014
7
1,710,929
7
832,393
3
423,554
2
9,430,270
34
8,391,903
33
(756,891)
(3)
(832,393)
(3)
16,879
-
16,638
-

8,288,249
30


16,755,509
60
13,536,569
53
$
27,856,806
100

$
27,856,806
100
25,704,331
100

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

～ 5 ～

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) ELITE MATERIAL CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the Years Ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars)

4000
Operating revenue (Note (6)(t))
5000
Operating costs (Note (6)(f))
Gross profit from operations
Operating expenses:
6100
Total selling expenses
6200
Total administrative expenses
6300
Total research and development expenses
6450
Impairment loss (Note (6)(d))
Total operating expenses
Net operating income
Non-operating income and expenses (Note (6)(v)):
7100
Total interest income
7020
Other gains and losses, net
7050
Finance costs, net
7370
Share of profit of associates and joint ventures accounted for using equity method
Total non-operating income and expenses
7900
Profit from continuing operations before tax
7950
Less: Income tax expenses(Note (6)(q))
8200
Profit
Other comprehensive income:
8310
Components of other comprehensive income that will not be reclassified to profit or
loss
8311
Losses on remeasurements of defined benefit plans
8316
Unrealized losses from investments in equity instruments measured at fair value
through other comprehensive income
8349
Income tax related to components of other comprehensive income that will not be
reclassified to profit or loss
Components of other comprehensive income that will not be reclassified to
profit or loss
8360
Components of other comprehensive income (loss) that will be reclassified to profit
or loss
8361
Exchange differences on translation of foreign financial statements
8399
Income tax related to components of other comprehensive income that will be
reclassified to profit or loss
Components of other comprehensive income that will be reclassified to profit
or loss
Other comprehensive income
Total comprehensive income
Loss attributable to:
Owners of the parent company
Non-controlling interests
Comprehensive income attributable to:
Owners of the parent company
Non-controlling interests
Earnings per share (Note (6)(s))
Basic earnings per share (dollars)
Diluted earnings per share (dollars)		 2020 %
100
(74)		 2019 %
100
(75)
Amount
$ 27,200,786
(20,160,757)		 Amount
24,865,522
(18,765,219)

7,040,029
26
6,100,303
25

(866,698)
(914,229)
(582,679)
7,028		 (3)
(3)
(2)
-
(745,045)
(767,916)
(500,441)
(7,351)		 (3)
(3)
(2)
-

(2,356,578)		 (8)
(2,020,753)		 (8)

4,683,451
74,266
157,482
(60,724)
(10,912)
18
-
-
-
-
4,079,550
90,439
77,072
(47,069)
3,834
17
-
-
-
-

160,112		 -
124,276		 -

4,843,563
(1,149,293)		 18
(4)
4,203,826
(958,525)		 17
(4)

3,694,270
14
3,245,301
13

675
-
(135)		 -
-
-
(4,106)
(369)
821		 -
-
-

540		 - (3,654) -
94,534
(18,876)		 -
-
(511,213)
102,117		 (2)
-

75,658		 -
(409,096)		 (2)

76,198		 -
(412,750)
(2)

$
3,770,468		 14
2,832,551
11

$ 3,688,999
5,271		 14
-
3,240,845
4,456		 13
-

$
3,694,270		 14
3,245,301		 13

$ 3,765,041
5,427		 14
-
2,828,721
3,830		 11
-

$
3,770,468		 14
2,832,551		 11

$		 11.33 10.14
$ 11.07 9.73

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

～ 6 ～

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) REVIEWED ONLY, NOT AUDITED IN ACCORDANCE WITH GENERALLY ACCEPTED AUDITING STANDARDS ELITE MATERIAL CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

For the Years Ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars)

Balance at January 1, 2019
Profit for the year ended December 31, 2019
Other comprehensive income for the year ended December 31, 2019
Total comprehensive income for the year ended December 31, 2019
Earnings distribution:
Legal reserve
Special reserve
Cash dividends on ordinary share
Other changes in capital surplus:
Conversion of convertible bonds
Changes in non-controlling interests
Balance at December 31, 2019
Profit for the year ended December 31, 2020
Other comprehensive income for the year ended December 31, 2020
Total comprehensive income for the year ended December 31, 2020
Earnings distribution:
Legal reserve
Special reserve
Cash dividends on ordinary share
Conversion of convertible bonds
Changes in non-controlling interests
Balance at December 31, 2020		 Equity attributable to owners of parent Equity attributable to owners of parent Equity attributable to owners of parent Equity attributable to owners of parent Equity attributable to owners of parent Equity attributable to owners of parent Total Equity
Attributable to
Owners of
Parent
11,900,197		 Non-controlling
Interests

14,593		 Total equity

11,914,790

3,245,301

(412,750)

2,832,551
-
-
(1,214,680)
5,693

(1,785)

13,536,569

3,694,270

76,198

3,770,468
-
-
(1,918,248)
1,371,906

(5,186)
16,755,509
Share capital
Ordinary
Shares
$ 3,196,524		 Capital
Surplus

623,721		 Retained earnings Total other equity interest
Exchange
Differences on
Unrealised
gains (losses)
Translation of
Foreign
Statements
on available for
sale financial
assets

(423,485)
(69)
Exchange
Differences on
Translation of
Foreign
Statements

(423,485)
Legal
Reserve

1,535,792		 Special
Reserve
237,192		 Unappropriated
Retained
Earnings

-
-

-
-

-
-
-
-

3,240,845
(3,285)


-

(408,470)

-

(369)
3,240,845
(412,124)


4,456

(626)
- - - -
3,237,560


(408,470)


(369)
2,828,721


3,830
-
-
-
556
-		 -
-
-

5,137
-		 175,137
-
-

-
-		 -
186,362
-
-
-
(175,137)

(186,362)
(1,214,680)
-
-


-

-

-
-
-

-
-
-
-
-
-
-
(1,214,680)
5,693
-

-
-

-

-
(1,785)
3,197,080
-
-
628,858
-
-
1,710,929
-
-		 423,554
-
-
8,391,903
3,688,999
540
(831,955)

-

75,502
(438)
-

-		 13,519,931
3,688,999
76,042

16,638

5,271

156
- - - - 3,689,539

75,502

-
3,765,041

5,427
-
-
-
132,103
-		 -
-
-

1,239,803
-		 324,085
-
-

-
-		 -
408,839
-
-
-
(324,085)

(408,839)
(1,918,248)
-
-


-

-

-
-
-
-
-
-
-
-
-
-
(1,918,248)
1,371,906
-

-
-

-

-
(5,186)
$
3,329,183		 1,868,661 2,035,014 832,393
9,430,270		 (756,453) (438) 16,738,630
16,879

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

～ 7 ～

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) ELITE MATERIAL CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Years Ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars)

Cash flows from (used in) operating activities:
Profit before tax
Adjustments:
Adjustments to reconcile profit (loss):
Depreciation expense
Amortization expense
Expected credit loss
Net (gain) loss on financial assets or liabilities at fair value through profit or loss
Interest expense
Interest income
Share of loss (profit) of associates and joint ventures accounted for using equity method
Loss on disposal of property, plan and equipment
Others
Dividend income
Total adjustments to reconcile profit (loss)
Changes in operating assets and liabilities:
Changes in operating assets:
Notes receivable
Accounts receivable
Other receivable
Inventories
Other current assets
Other operating assets
Total changes in operating assets
Changes in operating liabilities:
Accounts payable
Other payable
Receipts in advance
Other current liabilities
Net defined benefit liability
Total changes in operating liabilities
Total changes in operating assets and liabilities
Total adjustments
Cash inflow generated from operations
Interest received
Dividends received
Interest paid
Income taxes paid
Net cash flows from operating activities
Cash flows from (used in) investing activities:
Acquisition of investments accounted for using equity method
Net cash flow from acquisition of subsidiaries
Acquisition of property, plant and equipment
Proceeds from disposal of property, plant and equipment
Acquisition of intangible assets
Acquisition of right-of-use assets
Decrease in refundable deposits
Net cash flows used in investing activities
Cash flows from (used in) financing activities:
Decrease in short-term loans
Decrease in short-term notes and bills payable
Proceeds from long-term debt
Repayments of long-term debt
Increase in guarantee deposits received
Cash dividends paid
Net cash flows used in financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period		 2020
$ 4,843,563
599,222
9,391
(7,028)
(1,853)
46,684
(74,266)
10,912
571
14,040
-		 2019

4,203,826

486,420

5,637

7,351

(15,606)

21,973

(90,439)

(3,834)

533

25,096
(29,778)
597,673

407,353

3,321
(484,607)
17,424
(647,818)
175,253
(93,425)

14,415
(1,873,862)
(36,652)
(776,384)
(148,980)
(90,407)

(1,029,852)
(2,911,870)

46,714
343,235
74,823
(4,295)
(10,646)
897,045
408,199
53,727
27,039
(9,254)

449,831
1,376,756

(580,021)
(1,535,114)

17,652
(1,127,761)

4,861,215
97,697
-
(47,189)
(1,394,511)
3,076,065
93,444
29,778
(36,346)
(697,035)

3,517,212
2,465,906

-
(719,072)
(1,199,655)
101
(43,197)
-
2,696
(18,624)

-

(1,128,155)

412

(8,738)
(27,176)

2,313

(1,959,127)


(1,179,968)

(226,374)
(100,000)
1,052,712
(917,965)
1,868
(1,923,434)

(46,268)
(100,000)
1,103,005
(500,000)
335
(1,216,465)

(2,113,193)
(759,393)

(63,820)
(618,928)
6,350,790
(198,722)
327,823
6,022,967

$
5,731,862
6,350,790

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

～ 8 ～

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese)

ELITE MATERIAL CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

(1) Organization and Business

ELITE MATERIAL CO., LTD. (the "Company") was incorporated on March 24, 1992 as a company limited by shares under the Company Act of the Republic of China (R.O.C.). The main operating activities are the manufacturing and selling of copper clad laminates, electronic-industrial specialty chemical and raw materials, work-in-process, and finished goods of electronic components. The manufacturing and selling of printed circuit board is the main source of sales revenue.

The Company's common shares were traded on the Taipei Exchange (TPEx) on December 26, 1996, and its shares were publicly listed and traded on the Taiwan Stock Exchange (TSE) on November 27, 1998. The Company's registered office is on No.18, Datong 1st Rd., Guanyin Dist., Taoyuan City 328, Taiwan (R.O.C.).

(2) Approval Date and Procedures of the Consolidated Financial Statements

The Board of Directors approved and issued the consolidated financial statements on February 25, 2021.

(5) New Standards and Interpretations Adopted:

  • (a) The impact of the International Financial Reporting Standards (“IFRSs”) endorsed by the Financial Supervisory Commission, R.O.C. (“FSC”) which have already been adopted.

The Group has initially adopted the following new amendments, which do not have a significant impact on its consolidated financial statements, from January 1, 2020:

  • Amendments to IFRS 3 “Definition of a Business”

  • Amendments to IFRS 9, IAS39 and IFRS7 “Interest Rate Benchmark Reform”

  • Amendments to IAS 1 and IAS 8 “Definition of Material”

  • Amendments to IFRS 16 “COVID-19-Related Rent Concessions”

  • (b) The impact of IFRS issued by the FSC but not yet effective

The Group assesses that the adoption of the following new amendments, effective for annual period beginning on January 1, 2021, would not have a significant impact on its consolidated financial statements:

  • Amendments to IFRS 4 “Extension of the Temporary Exemption from Applying IFRS 9”

  • Amendments to IFRS 9, IAS39, IFRS7, IFRS 4 and IFRS 16 “Interest Rate Benchmark － ”

  • Reform Phase 2

～ 9 ～

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) ELITE MATERIAL CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

  • (c) The impact of IFRS issued by IASB but not yet endorsed by the FSC

The following new and amended standards, which may be relevant to the Group, have been issued by the International Accounting Standards Board (IASB), but have yet to be endorsed by the FSC:

Standards or
Interpretations
Amendments to IAS 37
“Onerous Contracts－Cost
of Fulfilling a Contract”		 Content of amendment
Effective date per
IASB
The amendments clarify that the‘costs of
fulfilling a contract’comprises the costs
that relate directly to the contract as follows:
●the incremental costs – e.g. direct labor
and materials; and
●an allocation of other direct costs – e.g. an
allocation of the depreciation charge for an
item of property, plant and equipment used
in fulfilling the contract.
January 1, 2022		 Effective date per
IASB

The Group is evaluating the impact of its initial adoption of the abovementioned standards or interpretations on its consolidated financial position and consolidated financial performance. The results thereof will be disclosed when the Group completes its evaluation.

The Group does not expect the other new and amended standards, which have yet to be endorsed by the FSC, to have a significant impact on its consolidated financial statements.

(4) Significant Accounting Policies

The significant accounting policies adopted in the consolidated financial statements are as follows. Except for those specially indicated, the following accounting policies were applied consistently throughout the periods presented in the consolidated financial statements.

  • (a) Statement of compliance

These consolidated financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers (hereinafter referred to as “the Regulations ” ) and the International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations endorsed and issued into effect by the Financial Supervisory Commission, R.O.C..

  • (b) Basis of preparation

  • 1.Basis of measurement

The consolidated financial statements have been prepared on a historical cost basis except for the following material items in the statement of financial position:

  • 1) Financial assets and liabilities at fair value through profit or loss in fair value measurement;

  • 2) Available-for-sale financial assets in fair value measurement;

～ 10 ～

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese)

ELITE MATERIAL CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

  • 3) The net defined benefit liabilities (or assets) is recognized as the fair value of plan assets, net of aggregation of the present value of the defined benefit obligation, with a limit based on a defined benefit assets as disclosed in Note 4(p).

  • 2.Functional and presentation currency

The functional currency of each Group entity is determined based on the primary economic environment in which the entity operates. The consolidated financial statements are presented in New Taiwan Dollars, which is the Company's functional currency. All financial information presented in New Taiwan Dollars has been rounded to the nearest thousand.

  • (c) Basis of consolidation

  • 1.Principle of preparation of the consolidated financial statements

The consolidated financial statements comprise the Company and its subsidiaries. The Group controls an entity when it is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its control over the entity.

The financial statements of the subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on which control ceases. Intragroup balances and transactions, and any unrealized income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Losses applicable to the non-controlling interests in a subsidiary are allocated to non-controlling interests even if doing so causes the non-controlling interests to have a deficit balance.

Accounting policies of subsidiaries have been adjusted to ensure consistency with the policies adopted by the Group.

Changes in the Group’s ownership interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. Any differences between the Group’s share of net assets before and after the change, and any considerations received or paid, are adjusted to or against the Group reserves.

  • 2.List of subsidiaries in the consolidated financial statements:
Name of
investor		 Name of subsidiary Principal
activity		 Shareholding
2020.12.31
2019.12.31
Note
The Company

The Company
 EMC OVERSEAS
HOLDING
INCORPORATED
Grand Wuhan
Incorporated		 Investment business
Import/export business
and Investment
business		 100.00%
100.00% Established in British
Virgin Islands in July
1996. As of December
31, 2020, the authorized
issued capital of the
Company was
USD$36,257.

100.00%
100.00% Established in Cayman
Islands in January 2018.
As of December 31,
2020, the authorized
issued capital of the
Company was
USD$20,020.

～ 11 ～

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese)

ELITE MATERIAL CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

Name of
investor		 Name of subsidiary Principal
activity		 Shareholding
2020.12.31
2019.12.31
Note
The Company

Grand Wuhan
Incorporated
EMC OVERSEAS
HOLDING
INCORPORATED
Grand Zhuhai
Incorporated
Grand Zhuhai
Incorporated
Grand Shanghai
Incorporated		 EMC
INTERNATIONAL
HOLDING
INCORPORATED
Elite Electronic
Material (Huangshi)
Co., Ltd.
Grand Zhuhai
Incorporated
Grand Shanghai
Incorporated
Grand Zhongshan
Incorporated
Elite Electronic
Material (Kunshan)
Co., Ltd.		 Investment business
Copper clad laminate
and prepreg business
Import/export business
and Investment
business
Import/export
business and
Investment business
Import/export
business and
Investment business
Copper clad laminate
and prepreg business		 100.00%
-
% Established in Cayman
Islands in August 2020.
As of December 31,
2020, the paid-in capital
of the Company was
USD$26,310.
100.00%
100.00% Established in Huangshi
Economic and
Technological
Development Zone,
Hubei, Mainland China
in March 2018. As of
December 31, 2020, the
authorized issued capital
of the Company was
USD$20,000.

100.00%
100.00% Established in Cayman
Islands in April 2004. As
of December 31, 2020,
the authorized issued
capital of the Company
was USD$33,799.
99.79%
99.79% Established in British
virgin Islands in May
1997. As of December
31, 2020, the authorized
issued capital of the
Company was
USD$18,200.
100.00%
100.00% Established in British
virgin Islands in 2004.
As of December 31,
2020, the authorized
issued capital of the
Company was
USD$16.437.
100.00%
100.00% Established in Kunshan
Economic and
Technological
Development Zone,
Jiangsu, Mainland China
in September 1997. As
of December 31, 2020,
the authorized issued
capital of the Company
was USD$28,200.

～ 12 ～

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese)

ELITE MATERIAL CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

Name of
investor		 Name of subsidiary Principal
activity		 Shareholding
2020.12.31
2019.12.31
Note
Grand Zhongshan
Incorporated
EMC
INTERNATIONAL
HOLDING
INCORPORATED
EMC SPECIAL
APPLICATION
INCORPORATED		 Elite Electronic
Material (Zhongshan)
Co., Ltd.
EMC SPECIAL
APPLICATION
INCORPORATED
EMD SPECIALTY
MATERIALS, LLC		 Copper clad laminate
and prepreg business
Investment business
Copper clad laminate
and prepreg business		 100.00%
100.00% Established in
Zhongshan Torch
Development Zone,
Guangdong province,
Mainland China in July
2004. As of December
31, 2020, the authorized
issued capital of the
Company was
USD$20,200.
100.00%
-
% Established in Cayman
Islands in August 2020.
As of December 31,
2020, the paid-in capital
of the Company was
USD$26,255.
100.00%
-
% 100% invested by EMC
SPECIAL
APPLICATION
INCORPORATED in
December 2020.

  1. List of subsidiaries which are not included in the consolidated interim financial statements: None.

  2. (d) Foreign Currency

  3. 1.Foreign currency transaction

Transactions in foreign currencies are translated into the respective functional currencies of Group entities at the exchange rates at the dates of the transactions. At the end of each subsequent reporting period, monetary items denominated in foreign currencies are translated into the functional currencies using the exchange rate at that date. Non-monetary items denominated in foreign currencies that are measured at fair value are translated into the functional currencies using the exchange rate at the date that the fair value was determined. Nonmonetary items denominated in foreign currencies that are measured based on historical cost are translated using the exchange rate at the date of the transaction.

Exchange differences are generally recognized in profit or loss.

2.Foreign operations

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated into the presentation currency at the exchange rates at the reporting date. The income and expenses of foreign operations are translated into the presentation currency at the average exchange rate. Exchange differences are recognized in other comprehensive income.

～ 13 ～

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese)

ELITE MATERIAL CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

When the Group disposes of any part of its interest in a subsidiary that includes a foreign operation while retaining control, the relevant proportion of the cumulative amount is reattributed to non-controlling interest. When the Group disposes of only part of investment in an associate of a joint venture that includes a foreign operation while retaining significant or joint control, the relevant proportion of the cumulative amount is reclassified to profit or loss.

When the settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor likely in the foreseeable future, Exchange differences arising from such items are considered to form part of a net investment in the foreign operation and are recognized in other comprehensive income, and presented in the translation reserve in equity.

  • (e) Assets and liabilities classified as current and non-current

An asset is classified as current under one of the following criteria, and all other assets are classified as non-current.

  1. It is expected to be realized, or intended to be sold or consumed, in the normal operating cycle;

  2. It is held primarily for the purpose of trading;

  3. It is expected to be realized within twelve months after the reporting period; or

  4. The asset is cash or a cash equivalent (as defined in IAS 7) unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.

A liability is classified as current under one of the following criteria, and all other liabilities are classified as non-current.

An entity shall classify a liability as current when:

  1. It is expected to be settled in the normal operating cycle;

  2. It is held primarily for the purpose of trading;

  3. It is due to be settled within twelve months after the reporting period; or

  4. The Group does not have an unconditional right to defer settlement of the liability for at least twelve months after the reporting period. Terms of a liability that could, at the option of the counterparty, result in its settlement by issuing equity instruments do not affect its classification.

  5. (f) Cash and cash equivalents

Cash comprises cash on hand and demand deposits. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and are subject to an insignificant risk of changes in value. Time deposits which meet the above definition and are held for the purpose of meeting short-term cash commitments rather than for investment or other purposes should be recognized as cash equivalents.

  • (g) Financia instrumentsl

  • 1.Financial assets

All regular way purchases or sales of financial assets are recognized and derecognized on a trade date basis.

～ 14 ～

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese)

ELITE MATERIAL CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

On initial recognition, a financial asset is classified as measured at: amortized cost; Fair value through other comprehensive income (FVOCI) – financial assets or FVTPL. Financial assets are not reclassified subsequent to their initial recognition unless the Group changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model.

  • 1) Financial assets measured at amortized cost

A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated as at FVTPL:

  • ‧it is held within a business model whose objective is to hold assets to collect contractual cash flows; and

  • ‧its contractual terms give rise on specified dates to cash flows that are solely payments of principal amount outstanding.

These assets are subsequently measured at amortized cost, which is the amount at which the financial asset is measured at initial recognition, plus/minus, the cumulative amortization using the effective interest method, adjusted for any loss allowance. Interest income, foreign exchange gains and losses, as well as impairment, are recognized in profit or loss. Any gain or loss on derecognition is recognized in profit or loss.

  • 2) Fair value through other comprehensive income (FVOCI )

A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL:

  • ‧it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and

  • ‧its contractual terms give rise on specified dates to cash flows that are solely payments of principal amount outstanding.

On initial recognition of an equity investment that is not held for trading, the Group may irrevocably elect to present subsequent changes in the investment’s fair value in other comprehensive income. This election is made on an investment-by-investment basis.

Debt investments at FVOCI are subsequently measured at fair value. Interest income calculated using the effective interest method, foreign exchange gains and losses and impairment are recognized in profit or loss. Other net gains and losses are recognized in other comprehensive income. On derecognition, gains and losses accumulated in other comprehensive income are reclassified to profit or loss.

Equity investments at FVOCI are subsequently measured at fair value. Dividends are recognized as income in profit or loss unless the dividend clearly represents a recovery of part of the cost of the investment. Other net gains and losses are recognized in other comprehensive income and are never reclassified to profit or loss.

Dividend income is recognized in profit or loss on the date on which the Group’s right to receive payment is established.

～ 15 ～

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese)

ELITE MATERIAL CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

  • 3) Fair value through profit or loss (FVTPL)

All financial assets not classified as amortized cost or FVOCI described as above are measured at FVTPL, including derivative financial assets Trade receivables that the Group intends to sell immediately or in the near term are measured at FVTPL; however they are included in the "trade receivables" lint item. On initial recognition, the Group may irrevocably designate a financial asset, which meets the requirements to be measured at amortized cost or at FVOCI, as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

These assets are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognized in profit or loss.

  • 4) Business model assessment

Financial assets that are held for trading or are managed and whose performance is evaluated on a fair value basis are measured at FVTPL.

  • 5) Impairment of financial assets

The Group recognizes loss allowances for expected credit losses (ECL) on financial assets measured at amortized cost (including cash and cash equivalents, amortized costs, notes and accounts receivable, leases receivable, other receivable, guarantee deposit paid and other financial assets), debt investments measured at FVOCI and contract assets.

The Group measures loss allowances at an amount equal to lifetime expected credit loss (ECL), except for the following which are measured as 12-month ECL:

  • ‧debt securities that are determined to have low credit risk at the reporting date; and

  • ‧other debt securities and bank balances for which credit risk (i.e. the risk of default occurring over the expected life of the financial instrument) has not increased significantly since initial recognition.

Loss allowance for trade receivables and contract assets are always measured at an amount equal to lifetime ECL.

When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECL, the Group considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis based on the Group ’ s historical experience and informed credit assessment as well as forward-looking information.

ECL are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls. The difference between the cash flows due to the Group in accordance with the contract and the cash flows that the Group expects to receive. ECL are discounted at the effective interest rate of the financial asset.

～ 16 ～

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese)

ELITE MATERIAL CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

At each reporting date, the Group assesses whether financial assets carried at amortized cost and debt securities at FVOCI are credit-impaired. A financial asset is ‘credit-impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. Evidence that a financial assets is credit-impaired includes the following observable data:

  • ‧significant financial difficulty of the borrower or issuer;

  • ‧a breach of contract such as a default or being more than 90 days past due;

  • ‧the lender of the borrow, for eononic or contractual rqasons relating to the borrower's finanical difficulty, having granted to the borrower a concession that the lender would not otherwise consider;

  • ‧it is probable that the borrower will enter bankruptcy or other financial reorganization;or

  • ‧the disappearance of an active market for a security because of financial difficulties.

Loss allowances for financial assets measured at amortized cost are deducted from the gross carrying amount of the assets. For debt securities at FVOCI, the loss allowance is recognized in other comprehensive income instead of reducing the carrying amount of the asset. The Group recognizes the amount of expected credit losses (or reversal) in profit or loss, as an impairment gain or loss.

The gross carrying amount of a financial asset is written off either partially or in full to the extent that there is no realistic prospect of recovery. For corporate customers, the Group individually makes an assessment with respect to the timing and amount of write-off based on whether there is a reasonable expectation of recovery. The Group expects no significant recovery from the amount written off. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Group’s procedures for recovery of amounts due.

  • 6) Derecognition of financial assets

Financial assets are derecognized when the contractual rights of the cash inflow from the assets are terminated, or when the Group transfers substantially all the risks and rewards of ownership of the financial assets.

  • 2.Financial liabilities and equity instruments

  • 1) Classification of debt or equity

Debt and equity instruments issued by the Group are classified as financial liabilities or equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

An equity instrument is any contract that evidences residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued are recognized as the amount of consideration received, less the direct cost of issuing.

Compound financial instruments issued by the Group comprise convertible notes that can be converted to share capital at the option of the holder when the number of shares to be issued is fixed.

～ 17 ～

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese)

ELITE MATERIAL CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

The liability component of a compound financial instrument is recognized initially at the fair value of a similar liability that does not have an equity conversion option. The equity component is recognized initially at the difference between the fair value of the compound financial instrument as a whole and the fair value of the liability component. Any directly attributable transaction costs are allocated to the liability and equity components in proportion to their initial carrying amounts.

Subsequent to initial recognition, the liability component of a compound financial instrument is measured at amortized cost using the effective interest method. The equity component of a compound financial instrument is not re-measured subsequent to initial recognition.

Interest related to the financial liability is recognized in profit or loss.

On conversion, the financial liability is reclassified to equity, and no gain or loss is recognized.

2) Financial liabilities

Financial liabilities are classified as measured at amortized cost or FVTPL. A financial liability is classified as at FVTPL if it is classified as held-for-trading, it is a derivative or it is designated as such on initial recognition. Financial liabilities at FVTPL are measured at fair value and net gains and losses, including any interest expense, are recognized in profit or loss.

Other financial liabilities are subsequently measured at amortized cost using the effective interest method. Interest expense and foreign exchange gains and losses are recognized in profit or loss. Any gain or loss on derecognition is also recognized in profit or loss.

  • 3) Derecognizing of financial liabilities

The Group derecognizes a financial liability when its contractual obligation has been discharged or cancelled or expires. The difference between the carrying amount of a financial liability removed and the consideration paid (including any non-cash assets transferred or liabilities assumed) is recognized in profit or loss, and is included in the statement of comprehensive income.

  • (h) Inventories

Inventories are measured at the lower of cost or net realizable value. The cost of inventories consists of all costs of purchase and other costs incurred in bringing the inventories to a salable and useable location and condition. Inventory cost is calculated using the weighted-average-cost formula.

Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

  • (i) Investment in associates

Associates are those entities in which the Group has significant influence, but not control or joint control, over their financial and operating policies.

Investments in associates are accounted for using the equity method and are recognized initially at cost. The cost of the investment includes transaction costs. The carrying amount of the investment in associates includes goodwill arising from the acquisition, less any accumulated impairment losses.

～ 18 ～

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese)

ELITE MATERIAL CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

The consolidated financial statements include the Group’s share of the profit or loss and other comprehensive income of thsoe associates after adjustments to align their accounting policies with those of the Group, from the date on which significant influence commences until the date on which significant influence ceases. The Group recognizes any changes of its propertionate share in the investee within capital surplus, when an associate’s equity changes due to reasons other than profit and loss or comprehensive income, which did not result in changes in actual significant influence.

Gains and losses resulting from transactions between the Group and an associate are recognized only to the extent of unrelated Group’s interests in the associate.

When the Group’s share of losses exceeds its interests in an associate, it discontinues ecognizing its share of further losses. After the recognized interest is veduct to zeor, additional losses are provided for, and a libaility is recognized, only to the extent that the Company has incurred legal or constructive obligations or made payments on behalf of the associate.

  • (j) Property, plant, and equipment

  • 1.Recognition and measurement

Items of property, plant and equipment are measured at cost, less accumulated depreciation and any accumulated impairment losses.

If significant parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

Any gain or loss on disposal of an item of property, plant and equipment is recognized in profit or loss.

  • 2.Subsequent expenditure

Subsequent expenditure is capitalized only if it is probable that the future economic benefits associated with the expenditure will flow to the Group.

  • 3.Depreciation

Depreciation is calculated on the cost of an asset less its residual value and is recognized in profit or loss on a straightline basis over the estimated useful lives of each component of an item of property, plant and equipment.

Land is not depreciated.

The estimated useful lives of property, plant and equipment for current and comparative periods are as follows:

1) Buildings 2years~56 years
2) Machineries 2years~19 years
3) Miscellaneous equipment 2years~14 years

Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.

～ 19 ～

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese)

ELITE MATERIAL CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

  • (k) Lease

  • (i) Identifying a lease

At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Group assesses whether:

  • 1) the contract involves the use of an identified asset – this may be specified explicitly or implicitly, and should be physically distinct or represent substantially all of the capacity of a physically distinct asset. If the supplier has a substantive substitution right, then the asset is not identified; and

  • 2) the customer has the right to obtain substantially all of the economic benefits from use of the asset throughout the period of use; and

  • 3) the customer has the right to direct the use of the asset throughout the period of use only if either:

    • the customer has the right to direct how and for what purpose the asset is used throughout the period of use; or

    • the relevant decisions about how and for what purpose the asset is used are predetermined and:

      • － the customer has the right to operate the asset throughout the period of use, without the supplier having the right to change those operating instructions; or

      • － the customer designed the asset in a way that predetermines how and for what purpose it will be used throughout the period of use.

  • (ii) As a leasee

The Group recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

～ 20 ～

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese)

ELITE MATERIAL CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be reliably determined, the Group’s incremental borrowing rate. Generally, the Group uses its incremental borrowing rate as the discount rate.

Lease payments included in the measurement of the lease liability comprise the following:

  • －

  • fixed payments;

  • － variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;

  • － amounts expected to be payable under a residual value guarantee; and

  • － payments for purchase or termination options that are reasonably certain to be exercised.

The lease liability is measured at amortized cost using the effective interest method. It is remeasured when:

  • －

  • there is a change in future lease payments arising from the change in an index or rate; or

  • － ’ there is a change in the Group s estimate of the amount expected to be payable under a residual value guarantee; or

  • － there is a change in the lease term resulting from a change of its assessment on whether it will exercise an option to purchase the underlying asset, or

  • － there is a change of its assessment on whether it will exercise a extension or termination option; or

  • －

  • there is any lease modifications

When the lease liability is remeasured, other than lease modifications, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or in profit and loss if the carrying amount of the right-of-use asset has been reduced to zero.

When the lease liability is remeasured to reflect the partial or full termination of the lease for lease modifications that decrease the scope of the lease, the Group accounts for the remeasurement of the lease liability by decreasing the carrying amount of the right-of-use asset to reflect the partial or full termination of the lease, and recognize in profit or loss any gain or loss relating to the partial or full termination of the lease.

The Group presents right-of-use assets that do not meet the definition of investment and lease liabilities as a separate line item respectively in the statement of financial position.

The Group has elected not to recognize right-of-use assets and lease liabilities for short-term leases. The Group recognizes the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

～ 21 ～

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese)

ELITE MATERIAL CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

  • (l) Intangible assets

  • 1.Recognition and measurement

Goodwill arising on the acquisition of subsidiaries is measured at cost, less accumulated impairment losses.

Other intangible assets, that are acquired by the Group and have finite useful lives are measured at cost less accumulated amortization and any accumulated impairment losses.

  • 2.Subsequent expenditure

Subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, is recognized in profit or loss as incurred.

  • 3.Amortization

Amortization is calculated over the cost of the asset, less its residual value, and is recognized in profit or loss on a straight-line basis over the estimated useful lives of intangible assets, other than goodwill, from the date that they are available for use.

The estimated useful lives for current and comparative periods are as follows:

1) Softwares
 1 years~10 years
2) Loyalties 9 years
3) Customer relationships 13 years
4) Trademarks 15 years

Amortization methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.

  • (m) Impairment – non financial assets

At each reporting date, the Group reviews the carrying amounts of its non-financial assets (other than inventories, contract assets, deferred tax assets and investment properties and biological assets, measured at fair value, less costs) to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. Goodwill is tested annually for impairment.

For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGUs. Goodwill arising from a business combination is allocated to CGUs or groups of CGUs that are expected to benefit from the synergies of the combination.

The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. Value in use is based on the estimated future cash flows, discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU.

～ 22 ～

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese)

ELITE MATERIAL CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

An impairment loss is recognized if the carrying amount of an asset or CGU exceeds its recoverable amount.

Impairment losses are recognized in profit or loss. They are allocated first to reduce the carrying amount of any goodwill allocated to the CGU, and then to reduce the carrying amounts of the other assets in the CGU on a pro rata basis.

An impairment loss in respect of goodwill is not reversed. For other assets, an impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.

  • (n) Provisions

A provision is recognized if, as a result of a past event, the Group has a present obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects the current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognized as finance cost.

The provision of sales discounts from defective products is recognized when selling. The provision is estimated and measured on related probabilities of historical experience data and all possible results.

  • (o) Revenue

  • 1.Revenue from contracts with customers

Revenue is measured based on the consideration to which the Group expects to be entitled in exchange for transferring goods or services to a customer. The Group recognizes revenue when it satisfies a performance obligation by transferring control of a good or a service to a customer. The accounting policies for the Group’s main types of revenue are explained below.

  • 1) Sale of goods-electronic components

The Group manufactures and sells electronic components to computer manufacturers. The Group recognizes revenue when control of the products has transferred, being when the products are delivered to the customer, the customer has full discretion over the channel and ’ price to sell the products, and there is no unfulfilled obligation that could affect the customer s acceptance of the products. Delivery occurs when the products have been shipped to the specific location, the risks of obsolescence and loss have been transferred to the customer, and either the customer has accepted the products in accordance with the sales contract, the acceptance provisions have lapsed, or the Group has objective evidence that all criteria for acceptance have been satisfied.

The Group’s obligation to provide a refund for faulty products is recognized at the time of sale. Accumulated experience is used to estimate such returns. The amount estimated is recognized as a provision for warranty at reporting date.

～ 23 ～

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese)

ELITE MATERIAL CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

A receivable is recognized when the goods are delivered as this is the point in time that the Group has a right to an amount of consideration that is unconditional.

  • (p) Employee benefits

  • 1.Defined contribution plans

Obligations for contributions to the defined contribution pension plans are recognized as employee benefit expense in profit or loss in the periods during which services are rendered by the employees.

  • 2.Defined benefit plans

A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The Group’s net obligation with respect to the defined benefit pension plans is calculated separately for each plan by estimating the amount of the future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value.

Any fair value of any plan assets are deducted. The discount rate is the yield at the reporting date ’ on government bonds that have maturity dates approximating the terms of the Group s obligations and that are denominated in the same currency in which the benefits are expected to be paid.

The calculation is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a benefit to the Group, the recognized asset is limited to the total of the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. In order to calculate the present value of economic benefits, consideration is given to any minimum funding requirements that apply to any plan in the Group. An economic benefit is available to the Group if it is realizable during the life of the plan, or on settlement of the plan liabilities.

When the benefits of a plan are amended, the relating expenses, resulting from the portion of the increased benefit relating to past services provided by the employees, are recognized immediately in profit or loss to the extent that the benefits are vested immediately.

Remeasurement of the net defined benefit liability (asset), which comprise (1) actuarial gains and losses, (2) the return on plan assets (excluding interest) and (3) the effect of the asset ceiling (if any, excluding interest), are recognized immediately in other comprehensive income. The Group can reclassify the amounts recognized in other comprehensive income to retained earnings or other equity. If the amounts recognized in other comprehensive income are transferred to other equity, they shall not be reclassified to profit or loss or recognized in retained earnings in a subsequent period.

Net interest expense and other expenses related to the defined benefit plans are recognized in retained earnings.

～ 24 ～

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese)

ELITE MATERIAL CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

The Group recognizes gains or losses on the curtailment or settlement of a defined benefit plan when the curtailment or settlement occurs. The gain or loss on curtailment comprises any resulting change in the fair value of plan assets and any change in the present value of the defined benefit obligation.

  • 3.Short-term employee benefits

Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided.

A liability is recognized for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee, and the obligation can be estimated reliably.

  • (q) Income taxes

Income tax expenses include both current taxes and deferred taxes. Except for expenses related to business combinations or recognized directly in equity or other comprehensive income, all current and deferred taxes shall be recognized in profit or loss.

The Group has determined that interest and penalties related to income taxes, including uncertain tax treatment, do not meet the definition of income taxes, and therefore accounted for them under IAS37.

Current taxes include tax payables and tax deduction receivables on taxable gains (losses) for the year calculated using the statutory tax rate on the reporting date or the actual legislative tax rate, as well as tax adjustments related to prior years.

The 10% surtax on undistributed retained earnings is recognized as income tax expense in the subsequent year when the distribution proposal is approved by the shareholders' meeting.

Deferred taxes arise due to temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and their respective tax bases. Deferred taxes shall not be recognized for the below exceptions:

  • 1.temporary differences on the initial recognition of assets and liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profits (losses) at the time of the transaction;

  • 2.temporary differences related to investments in subsidiaries, associates and joint arrangements to the extent that the Group is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future; and

  • 3.taxable temporary differences arising on the initial recognition of goodwill.

Deferred tax assets and liabilities shall be measured at the tax rates that are expected to be applied to the period when the asset is realized or the liability is settled, based on tax rates that have been enacted or substantively enacted by the end of the reporting period.

～ 25 ～

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese)

ELITE MATERIAL CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

Deferred tax assets and liabilities may be offset against each other if the following criteria are met:

  • 1.the entity has the legal right to settle tax assets and liabilities on a net basis; and

  • 2.the taxing of deferred tax assets and liabilities fulfill one of the below scenarios:

  • 1) levied by the same taxing authority; or

  • 2) levied by different taxing authorities, but where each such authority intends to settle tax assets and liabilities (where such amounts are significant) on a net basis every year of the period of expected asset realization or debt liquidation, or where the timing of asset realization and debt liquidation is matched.

A deferred tax asset should be recognized for the carry-forward of unused tax losses, unused tax credits, and deductible temporary differences to the extent that it is probable that future taxable profit will be available against which the unused tax losses, unused tax credits, and deductible temporary differences can be utilized. Such unused tax losses, unused tax credits, and deductible temporary differences shall also be re-evaluated every year on the financial reporting date, and adjusted based on the probability that future taxable profit will be available against which the unused tax losses, unused tax credits, and deductible temporary differences can be utilized.

  • (r) Business combination

The Group accounts for business combinations using the acquisition method. The goodwill arising from an acquisition is measured as the excess of (i) the consideration transferred (which is generally measured at fair value) and (ii) the amount of non-controlling interest in the acquiree, both over the identifiable net assets acquired at the acquisition date. If the amount calculated above is a deficit balance, the Group recognized that amount as a gain on a bargain purchase in profit or loss immediately after reassessing whether it has correctly identified all of the assets acquired and all of the liabilities assumed.

All acquisition-related transaction costs are expensed as incurred, except for the issuance of debt or equity instruments.

  • (s) Earnings per share

The Group discloses the Company's basic and diluted earnings per share attributable to ordinary equity holders of the Company. The basic earnings per share are calculated as the profit attributable to the ordinary shareholders of the Company divided by the weighted-average number of ordinary shares outstanding after adjustment for the effects of all potentialy dilutive ordinary shares, such as convertible bonds.

  • (t) Operating segments

An operating segment is a component of the Group that engages in business activities from which it may incur revenues and incur expenses (including revenues and expenses relating to transactions with other components of the Group). Operating results of the operating segment are regularly reviewed by the Group’s chief operating decision maker to make decisions about resources to be allocated to the segment and to assess its performance. Each operating segment consists of standalone financial information.

～ 26 ～

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese)

ELITE MATERIAL CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

(5) Major Sources of Accounting Assumptions, Judgments and Estimation Uncertainty

The preparation of the consolidated financial statements in conformity with the IFRSs endorsed by the FSC requires management to make judgments, estimates, and assumptions that affect the application of the accounting policies and the reported amount of assets, liabilities, income, and expenses. Actual results may differ from these estimates.

The management continues to monitor the accounting estimates and assumptions. The management recognizes any changes in accounting estimates during the period and the impact of those changes in accounting estimates in the next period.

Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment within the next financial year is as follows:

(a) Valuation of inventories

As inventories are stated at the lower of cost or net realizable value, the Group estimates the net realizable value of inventories for obsolescence and unmarketable items at the end of the reporting period and then writes down the cost of inventories to net realizable value. The net realizable value of the inventory is mainly determined based on assumptions as to future demand within a specific time horizon. Due to the rapid industrial transformation, there may be significant changes in the net realizable value of inventories. Refer to note (6)(f) for further description of the valuation of inventories.

(6) Summary of Major Accounts

  • (a) Cash and cash equivalents
mary of Major Accounts
Cash and cash equivalents
Cash on hand
Savings accounts
Time deposits
Cash equivalents		 2020.12.31
$ 616
3,392,914
2,015,834
322,498		 2019.12.31

647

3,538,386

2,553,545

258,212

$
5,731,862


6,350,790

Please refer to Note (6)(w) for the interest analysis of financial assets and liabilities.

  • (b) Financial assets and liabilities
Current financial assets at fair value through profit or loss:
Redemption and repurchase option of bonds		 2020.12.31
$
-		 2019.12.31
4,561

The Group's credit currency and interest risk were disclose in Note (6)(w).

As of December 31, 2019, the Group did not provide any financial assets through other comprehensive income as collaterals for its loans.

～ 27 ～

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese)

ELITE MATERIAL CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

  • (c) Financial assets at fair value through other comprehensive income
Equity investments at fair value through other
comprehensive income:
Stock unlisted in domestic markets－Proud Star
International Limited		 2020.12.31 2019.12.31

16,507
$
15,681

1.Equity investments at fair value through other comprehensive income

The purpose that the Group invests in the abovementioned equity securities is for long-term strategies, but rather for trading purpose. Therefore, these equity securities are designated as at FVOCI, whereas, were presented under available-for-sale financial assets.

No strategic investments were disposed as of December 31, 2020 and 2019, and there were no transfers of any cumulative gain or loss within equity relating to these investments.

2.The Group’s information of credit risk and market risk please refer to note (6)(w).

3.The above financial assets did not have any long loans and financing facilities guarantee.

  • (d) Notes and accounts receivable
Notes and accounts receivable
Note receivables from operating activities
Trade receivables-measured as amortized cost
Less: Loss allowance		 2020.12.31 2019.12.31

294,263

8,910,385

(12,596)
$ 292,341
9,649,928
(8,209)

$
9,934,060


9,192,052

The Group applies the simplified approach to provide for its expected credit losses, i.e. the use of lifetime expected loss provision for all receivables. To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and the days past due, as well as incorporated forward looking information, including macroeconomic and relevant industry information. The loss allowance provision in Taiwan were determined as follows:

Current
1 to 30 days past due
31 to 120 days past due
More than 121 days past due		 2020.12.31 Loss allowance
provision
7,886
261
62
-
Gross carrying
amount		 Weighted-aver
age

0.08%

0.14%

0.65%
-
$ 9,743,121
189,555
9,593
-
$
9,942,269		 8,209

～ 28 ～

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese)

ELITE MATERIAL CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

Current
1 to 30 days past due
31 to 120 days past due
More than 121 days past due		 2019.12.31 Loss allowance
provision
12,139
304
49
104
Gross carrying
amount
$ 8,983,457
214,025
7,062
104		 Weighted-aver
age

0.14%

0.14%

0.69%
100%
$
9,204,648		 12,596

The movement in the allowance for notes and trade receivable was as follows:

Balance at January 1
(Reversed) recognized impairment losses
Amounts written off
Foreign exchange gains/(losses)
Balance at December 31
Other receivables
Other receivables
Less: Loss allowance		 For the years ended December 31,
2020
2019
$ 12,596
5,674
(4,305)
7,351
(102)
-
20
(429)		 For the years ended December 31,
2020
2019
$ 12,596
5,674
(4,305)
7,351
(102)
-
20
(429)
2020
$ 12,596
(4,305)
(102)
20
$
8,209
12,596

2020.12.31
$ 49,011
-
2019.12.31

56,946
-
$
49,011		 56,946
  • (e) Other receivables

The above other receivables are based on historical experience that expected there are no expected credit losses by event of default during the effective period, therefor the rate of expected credit losses is 0.

  • (f) Inventories
Materials
Work-in-process
Finished goods		 2020.12.31
$ 2,411,316
287,625
1,003,231		 2019.12.31

1,874,373

187,842

842,486

$
3,702,172


2,904,701

～ 29 ～

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese)

ELITE MATERIAL CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

As of December 31, 2020 and 2019, the details of operating cost were as follows:

Cost of goods sold
Unamortized manufacturing expenses
Loss on disposal of scrap
Losses on inventory valuation and obsolescence
Revenue from sales of scraps
Total		 2020
$ 20,273,105
13,741
12,448
17,303
(155,840)		 2019

18,895,737

-

1,527

21,786

(153,831)

$
20,160,757


18,765,219

As of December 31, 2020 and 2019, the Group's inventories were not pledged as collateral.

Losses on inventory valuation and obsolescence are due to obsolescence or out of use, which results in that the net realizable value is lower than the cost. Therefore, it's classified as operating cost.

  • (g) Investments accounted for using equity method

A summary of the Group's financial information for investments accounted for using the equity method at the reporting date is as follows:

Associates-TECHNICA USA
(with cost of an investment of $18,624)
Joint ventures- Licheng Technology (Stock) Company
(Former ELITE IONERGY CO., Ltd., with cost of an
investment of $173,694)
Attributable to the Group:
(Loss) profit from continuing operations
Other comprehensive income
Total comprehensive income		 2020.12.31
$ 10,115
-		 2019.12.31

21,714
-
$
10,115
21,714

2020
$ (10,912)
-

2019

3,834
-
$
(10,912)
3,834

The Group's investee company, Licheng Technology (Stock) Company, (formerly ELITE IONERGY CO., Ltd., with an investment of $173,694) closed down at the end of year 2005, with liabilities exceeding its assets. Because the investment value had been impaired, the Group recognized all losses and the book value was offset to zero.

～ 30 ～

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese)

ELITE MATERIAL CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

  • (h) Business combination

On December 23, 2020, the Group obtained full control of EMD SPECIALTY MATERIALS, LLC, a company who engages in the manufacturing of copper clad laminate and prepreg business. Taking control of EMD Specialty Materials, LLC will enable the Group to increase its market share. The Group also expects to reduce its costs through economies of scale.

From the acquisition date to December 31, 2020, EMD SPECIALTY MATERIALS, LLC ’ contributed the revenue of $16,527 thousand and profit after tax of $2,985 thousand to the Group s results. If the acquisition had occurred on January 1, 2020,the management estimates that the consolidated revenue would have been $698,670 thousand and consolidated profit after income tax would have been $22,133 thousand. In determining these amounts, the management has assumed that the fair value adjustments, determined provisionally, that arose on the acquisition date would have been the same if the acquisition had occurred on January 1, 2020.

The Group incurred acquisition-related costs of $7,369 thousand on legal fees and due diligence costs. These costs have been included in administrative expenses in the statement of comprehensive income.

The main types of consideration transferred, assets acquired and liabilities assumed on the acquisition date, and the amount of goodwill recognized, are as following：

  • 1.The following table summarizes the acquisition date fair value of major class of consideration transferred.

transferred.
Cash $ 747,627
Assets acquired and liabilities assumed on the acquisition date
The following table summarizes the recognized amounts of assets acquired and
at the acquisition date：
Property, plant and equipment $ 98,047
Goodwill 437,355
Identifiable intangible assets 190,951
Inventories 105,034
Accounts receivable 97,147
Cash and cash equivalents 38,743
Other current assets 7,056
Short-term borrowing (171,180)
Accounts payable and other payables (55,526)
Total identifiable net assets acquired $ 747,627

2. Assets acquired and liabilities assumed on the acquisition date

The following table summarizes the recognized amounts of assets acquired and liabilities assumed at the acquisition date：

The gross contractual amounts of accounts receivable totaled $99,870, of which $2,723 was expected to be uncollectible at the acquisition date.

～ 31 ～

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) ELITE MATERIAL CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

The following fair values of the assets and liabilities have been determined on a provisional basis:

The fair value of identifiable intangible assets (including customer relationships and free trademark licensing agreements) was $190,951.

3.Goodwill

Goodwill arising from the acquisition has been recognized as follows:

Consideration transferred
Less: Fair value of identifiable net assets
Goodwill		 $ 747,627
(310,272)
$
437,355

The goodwill is attributable mainly to the profitability and the employees of EMD SPECIALTY MATERIALS, LLC, as well as the synergies expected to be achieved from integrating the company into the Group’s business.

  • (i) Property, plant and equipment

The cost and depreciation of the property, plant and equipment of the Group for the years ended December 31, 2020 and 2019, were as follows:

Cost:
Balance at January 1, 2020
Derecognition of acquisition of subsidiaries
Additions
Disposals
Reclassification
Effect of changes in foreign exchange rates
Balance at December 31, 2020
Balance at January 1, 2019
Additions
Disposals
Reclassification
Effect of changes in foreign exchange rates
Balance at December 31, 2019
Depreciation and impairment loss:
Balance at January 1, 2020
Derecognition of acquisition of subsidiaries
Depreciation for the year
Disposals
Effect of changes in foreign exchange rates
Balance at December 31, 2020		 Land
$ 470,621
-
-
-
-
-		 Buildings
2,647,230
-
-
-
112,871
32,333		 Machineries
6,880,319
124,108
-
(16,980)
343,450
85,445		 Other
equipment
1,602,055
38,567
-
(35,830)
308,794
21,203		 Equipment
under
installation
and
construction
inprogress
573,893
5,141
1,091,451
-
(765,115)
14,128		 Total
12,174,118
167,816
1,091,451
(52,810)
-
153,109
$
470,621
2,792,434
7,416,342
1,934,789
919,498
13,533,684

$ 470,621
-
-
-
-
1,960,811
-
-
755,130
(68,711)
6,482,859
-
(1,669)
564,453
(165,324)
1,333,514
-
(14,390)
317,846
(34,915)
679,014
1,550,850
-
(1,637,429)
(18,542)
10,926,819
1,550,850
(16,059)
-
(287,492)
$
470,621
2,647,230
6,880,319
1,602,055
573,893
12,174,118

$ -
-
-
-
-
845,291
-
120,074
-
9,737
4,498,106
49,245
320,031
(16,742)
54,658
972,904
20,525
153,205
(35,396)
11,038
-
-
-
-
-
6,316,301
69,770
593,310
(52,138)
75,433
$
-
975,102
4,905,298
1,122,276		 -
7,002,676

～ 32 ～

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese)

ELITE MATERIAL CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

Balance at January 1, 2019
Depreciation for the year
Disposals
Effect of movements in exchange rates
Balance at December 31, 2019
Carrying amounts:
At December 31, 2020
At January 1, 2019
At December 31, 2019		 Land
$ -
-
-
-		 Buildings
782,206
81,061
-
(17,976)		 Machineries
4,309,733
290,368
(1,405)
(100,590)		 Other
equipment
897,456
109,179
(13,709)
(20,022)		 Equipment
under
installation
and
construction
inprogress
-
-
-
-		 Total
5,989,395
480,608
(15,114)
(138,588)
$
-
845,291
4,498,106
972,904		 -
6,316,301
$
470,621
1,817,332
2,511,044
812,513		 919,498
6,531,008

$
470,621
1,178,605
2,173,126
436,058
679,014
4,937,424

$
470,621
1,801,939
2,382,213
629,151
573,893
5,857,817

As of December 31, 2020 and 2019, the property, plant and equipment were pledged as collateral for long-term debt and financing. Please refer to Notes (8).

  • (j) Right-of-use assets

Information about leases for which the Group as a lessee is presented below:

Cost:
Balance as of January 1, 2020
Effect of changes in foreign exchange rates
Balance as of December 31, 2020
Balance as of January 1, 2019
Additions
Effect of changes in foreign exchange rates
Balance as of December 31, 2019
Accumulated depreciation and impairment losses:
Balance as of January 1, 2020
Depreciation for the year
Effect of changes in foreign exchange rates
Balance as of December 31, 2020
Balance as of January 1, 2019
Depreciation for the year
Transferred to non-current assets held for sale
Balance as of December 31, 2019		 Land
$ 279,933
4,682

$
284,615

$ 263,595
27,176
(10,838)

$
279,933

$ 39,745
5,912
801
$
46,458

$ 35,470
5,812
(1,537)

$
39,745

～ 33 ～

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese)

ELITE MATERIAL CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

Carrying amount:
Balance as of December 31, 2020

Balance as of January 1, 2019

Balance as of December 31, 2019
 Land
$
238,157

$
228,125

$
240,188

As of December 31, 2020 and 2019, the right-of-use assets were pledged as collateral for long term debt and financing. Pleaserfer to Notes (8).

  • (k) Short-term borrowings
Unsecured bank loans
Unused short-term credit lines
Range of interest rates
(l) Short-term notes and bills payable
Commercial paper payable
Less: discount unamortized
Net amount
Interest rate
(m) Long-term borrowings
Unsecured bank loans
Secured bank loans
Less: current portion
Total
Unused short-term credit lines
Range of interest rates
Due year		 2020.12.31
$
608,724		 2020.12.31
$
608,724		 2019.12.31

663,874

$
9,766,218


5,019,323


0.97%~2.83%
2019.12.31
100,000
(31)
$
-
99,969

1.02%
2019.12.31

350,000

629,114

(336,100)

$
564,281


643,014

$
4,000,000


2,950,000

0.89%~5.23%
2021~2024

1.00%~5.23%
2020~2024

For the exposure information of the Group's rate foreign currency and current risk, please refer to Note (6)(w).

～ 34 ～

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese)

ELITE MATERIAL CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

The Group signed a loan contract with the financial institution. According to the provisions of the contract, the Group's financial statements must maintain specific current ratios, debt ratios, net tangible assets, and interest coverage ratios on the balance sheet date during the loan period.

If such financial ratios breached specific conditions of the loan contract, they shall be improved by means of cash capital increase or other means in accordance with the agreement. As of December 31, 2020, the Company did not violate any of the financial ratio restrictions.

  • (n) Unsecured convertible bonds
Total convertible corporate bonds issued
Unamortized discounted corporate bonds payable
Cumulative converted amount
Corporate bonds issued balance at year-end
Embedded derivative－call and put options, included in
financial assets at fair value through profit or loss
Equity component – conversion options
(included in paid-in capital – stock options)
Profit or loss revalued by fair value of Embedded derivative
instruments-call and put rights, included in financial
liabilities at fair value through profit or loss
Interest expense		 2020.12.31
$ -
-
-		 2019.12.31
1,500,000
(61,120)
(74,600)
$
-
1,364,280
$
-
4,561
$
-
115,499

For the years ended December 31,
2020
2019
$
1,853
15,606
2020
$
1,853

$
14,040


25,096

The Company issued the fourth unsecured 5-year convertible bonds which bear no interest on May 16, 2017, with the maturity date on May 16, 2022. The total convertible corporate bonds issued amounted to TWD1,500,000, with an effective interest rate of 1.80%. The Holders have the right to require the Company to redeem their convertible bonds in cash at an amount equal to the principal amount of the Bonds (with interest) at any time during the forty days after May 16, 2020. The fourth unsecured convertible bonds have been fully converted as of August 17, 2019.

  • (o) Refund liabilities

The details of refund liabilities for the Group were as follows:

Refund liabilities-current 2020.12.31
$
146,265		 2019.12.31

68,959

The management estimated the possibility of refund liabilities, historic experience and other a known information and recognized the numbers into the deduction of related products' operating revenue for expected discounts payable to customers.

～ 35 ～

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese)

ELITE MATERIAL CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

  • (p) Employee benefits

  • 1.Defined benefit plans

The Group determined the movement in the present value of the defined benefit obligations and fair value of plan assets as follows:


fair value of plan assets as follows:
Present value of defined benefit obligation
Fair value of plan assets
Net defined benefit (assets) liabilities		 2020.12.31
$ 104,435
(108,189)		 2019.12.31

122,754

(115,187)

$
(3,754)


7,567

The Group makes defines benefit plan contributions to the pension fund account at Bank of Taiwan that provides pensions for employees upon retirement. The plans (covered by the Labor Standards Law) entitle a retired employee to receive an annual payment based on years or service and average salary for the six months prior to retirement.

1) Composition of plan assets

The Group sets aside pension funds in accordance with the regulations of the Council of Labor Affairs, and the pension funds are managed by the Pension Supervisory Committee. The annual budget for the allocation of the minimum income cannot be lower than the income calculated based on the interest rate of the banks’ two-year time deposit in accordance with the Management and Utilization of Labor Pension Funds regulations.

The Group’s Bank of Taiwan pension reserve account balance amounted to $108,189 at the end of the reporting period. The information used to calculate pension fund assets includes the asset allocation and yield of the fund. Please refer to the information published on the website of the Council of Labor Affairs and the Labor Pension Supervisory Committee.

  • 2) Movements in present value of the defined benefit obligations

The movements in present value of defined benefit obligations for the Group were as follows:

Defined benefit obligation at January 1
Current service costs and interest
Remeasurement on the net defined benefit liabilities
－Actuarial losses (gains) arising from experience
adjustments
－Actuarial losses (gains) arising from changes in
financial assumptions
Benefit pay under the plan
Defined benefit obligation at December 31		 2020
$ 122,754
2,047
(3,455)
6,085
(22,996)		 2019

124,651

2,636

4,032

3,633

(12,198)

$
104,435


122,754

～ 36 ～

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese)

ELITE MATERIAL CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

3) Movements of defined benefit plan assets

The movements in the present value of the defined benefit plan assets for the Group were as follows:

Fair value of plan assets at January 1
Interest income
Remeasurement on the net defined benefit liabilities
－Return on plan assets (excluding current interest)
Contribution paid by the employer
Benefit paid
Fair value of plan assets at December 31		 2020
$ 115,187
1,313
3,306
11,379
(22,996)		 2019

111,935

1,589

3,560

10,301

(12,198)

$
108,189


115,187
  • 4) Expenses recognized in profit or loss

The expenses recognized in profit or loss for the Group were as follows:

Current service costs
Net interest of net defined benefit liabilities
Operating costs
Selling expenses
Administrative expenses
Research and development expenses		 2020
$ 709
24		 2019

933

114
$
733
1,047
$ 543
30
115
45

842

40

113

52
$
733
1,047
  • 5) Remeasurement on the net defined benefit liabilities recognized in other comprehensive income

The Group’ s remeasurement on the net defined benefit liabilities recognized in other comprehensive income as follows:

Cumulative amount at January 1
Recognized during the period
Cumulative amount at December 31		 2020
$ 20,488
(675)		 2019

16,382

4,106

$
19,813


20,488

～ 37 ～

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese)

ELITE MATERIAL CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

6) Actuarial assumptions

The following are the Group’s principal actuarial assumptions of Present Value of defined benefit obligations:

Discount rate
Future salary increases		 2020.12.31
0.63%
2.00%		 2019.12.31

1.13%

2.00%

The expected allocation payment to be made by the Group to the defined benifit plans for the one-year perrod after the reporting date is $11,888.

The weighted average duration of the defined benefit obligation is 14.70 years.

7) Sensitivity analysis

When calculating the present value of the defined benefit obligations, the Group uses judgments and estimations to determine the actuarial assumptions, including discount rate and future salary changes, as of the financial statement date. Any changes in the actuarial assumptions may significantly impact the amount of the defined benefit obligations.

If the actuarial assumptions had changed, the impact on the present value of the defined benefit obligation shall be as follows:

December 31, 2020
Discount rate
Future salary increasing rate
December 31, 2019
Discount rate
Future salary increasing rate		 Influences of defined benefit obligations Influences of defined benefit obligations
Increased 0.25%
(3,104)
3,128
(3,633)
3,682		 Decreased 0.25%
3,233
(3,020)
3,785
(3,553)

Reasonably possible changes at the reporting date to one of the relevant actuarial assumptions, holding other assumptions remain constant, would have affected the defined benefit obligation by the amounts shown above. The method used in the sensitivity analysis is consistent with the calculation of pension liabilities in the balance sheets.

There is no change in the method and assumptions used in the preparation of sensitivity analysis for 2020 and 2019, respectively.

～ 38 ～

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese)

ELITE MATERIAL CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

  • 2.Defined contribution plans

The Group set aside 6% of the employees’ monthly wages to the Labor Pension personal accounts at the Bureau of the Labor Insurance in accordance with the provisions of the Labor Pension Act.

The Group set aside a fixed amount to the Bureau of the Labor Insurance without the payment of additional legal or constructive obligations.

For the years ended December 31, 2020 and 2019, the Group set aside $33,453 and $29,718, respectively, under the pension plan to the Bureau of the Labor Insurance. For the years ended December 31, 2020 and 2019, Elite Electronic Material (Zhongshan) Co., Ltd., Elite Electronic Material (Kunshan) Co., Ltd. and Elite Electronic Material (Huangshi) Co., Ltd. set aside $5,564, $4,512, $701 and $43,697, $35,943, $3,396, respectively, under the pension plan to local Regulation.

  • (q) Income taxes (profits)

  • 1.Income tax expense recognized in profits or losses

The amount of income tax was as follows:

2020
Current income tax expense:
Current period
$ 1,452,855
Adjustment for prior periods
(17,007)
1,435,848
Deferred tax expense:
Origination and reversal of temporary differences
(286,555)
Income tax expense
$
1,149,293
Income tax expense recognized in other comprehensive income:
2020
Items that will not be reclassified subsequently to profit or
loss:
Actuarial losses and gains on defined benefit plans
$
(135)
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign financial
statements
$
(18,876)		 2020
$ 1,452,855
(17,007)		 2019

967,044

(16,272)

1,435,848


950,772

(286,555)


7,753

$
1,149,293


958,525


2019

821


102,117

～ 39 ～

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese)

ELITE MATERIAL CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

The reconciliation of income tax and profit before tax was as follows:

Profit excluding income tax
Income tax using the Company's domestic tax rate
Effect of tax rates in foreign jurisdiction
Non-deductible expenses
Tax incentives
Tax-exempt income
Deductible temporary differences
Recognition of previously unrecognised tax losses
Prior overestimate (underestimate)
Undistributed earnings additional tax
Total		 2020
$
4,843,563		 2019
4,203,826

$ 968,713
553,691
22,139
(9,998)
-
(376,556)
(21,008)
(17,007)
29,319

840,765

444,207

5,445

-
(11,357)

(312,915)

-

(16,272)

8,652

$
1,149,293

958,525

  • 2.Deferred tax assets and liabilities

  • 1) Unrecognized Deferred Tax Liabilities

As of December 31, 2020 and 2019, deferred tax liabilities are not recognized for taxable temporary differences associated with investments in subsidiaries, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. The relevant amounts are as follow:

Consolidated amount of taxable temporary differences
associated with investments in subsidiaries
Amounts are not recognized as deferred tax liabilities		 2020.12.31
$
8,521,793		 2019.12.31

6,639,016

$
1,704,359


1,327,803
  • 2) Recognized deferred tax assets and liabilities

Changes in the amount of deferred tax assets and liabilities for 2020 and 2019 are as follows:

Deferred Tax Liabilities:
Balance at January 1, 2020
Debited (Credited) in Income
statement
Balance at December 31, 2020		 Unrealized gain
on investment
income		 Others

-

(41)		 Total
(1,185,403)

274,452
$ (1,185,403)
274,493

$
(910,910)


(41)

(910,951)

～ 40 ～

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese)

ELITE MATERIAL CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

Unrealized gain
on investment
income
Balance at January 1, 2019
$ (1,167,141)
Debited (Credited) in Income
statement
(18,262)
Balance at December 31, 2019
$
(1,185,403)
Defined
Benefit Plans
Current
provisions
Unrealized
losses on
inventories
Deferred Tax Assets:
Balance at January 1, 2020
$ 3,055
11,032
10,094
Debited (Credited) in Income statement
(2,129)
11,571
3,394
Debited (Credited) in other
comprehensive income
(135)
-
-
Exchange differences on translation
-
372
64
of foreign operations
Balance at December 31, 2020
$
791
22,975
13,552
Balance at January 1, 2019
$ 4,084
2,899
6,123
Debited (Credited) in Income statement
(1,850)
8,448
4,063
Debited (Credited) in equity
821
-
-
Exchange differences on translation
-
(315)
(92)
of foreign operations
Balance at December 31, 2019
$
3,055
11,032
10,094		 Unrealized gain
on investment
income
Balance at January 1, 2019
$ (1,167,141)
Debited (Credited) in Income
statement
(18,262)
Balance at December 31, 2019
$
(1,185,403)
Defined
Benefit Plans
Current
provisions
Unrealized
losses on
inventories
Deferred Tax Assets:
Balance at January 1, 2020
$ 3,055
11,032
10,094
Debited (Credited) in Income statement
(2,129)
11,571
3,394
Debited (Credited) in other
comprehensive income
(135)
-
-
Exchange differences on translation
-
372
64
of foreign operations
Balance at December 31, 2020
$
791
22,975
13,552
Balance at January 1, 2019
$ 4,084
2,899
6,123
Debited (Credited) in Income statement
(1,850)
8,448
4,063
Debited (Credited) in equity
821
-
-
Exchange differences on translation
-
(315)
(92)
of foreign operations
Balance at December 31, 2019
$
3,055
11,032
10,094		 Unrealized gain
on investment
income
$ (1,167,141)
(18,262)		 Unrealized gain
on investment
income
$ (1,167,141)
(18,262)		 Unrealized gain
on investment
income
$ (1,167,141)
(18,262)		 Others Total
(1,167,141)
(18,262)		 Total
(1,167,141)
(18,262)
$
-
-
$

(1,185,403)		 -
(1,185,403)

Current
provisions
Unrealized
losses on
inventories		 Cumulative
translation
adjustment
Others
Total

231,497

12,103
(135)

(18,413)
$ 3,055
t
(2,129)
(135)
-
11,032

11,571

-
372
10,094

3,394
-

64
204,292

-
-

(18,876)
3,024
(733)
-

27
$
791
22,975
13,552
185,416
2,318
225,052
$ 4,084
t
(1,850)
821
-

2,899

8,448

-
(315)


6,123

4,063
-

(92)


102,175

-
-

102,117


3,287
(152)
-

(111)


118,568

10,509
821

101,599
$
3,055
11,032
10,094
204,292
3,024
231,497

3.The Group's tax returns for the years through 2017 were examined and approved by the Taipei National Tax Administration.

  • (q) Capital and other equity

  • Issuance of common stock

As of December 31, 2020 and 2019, the total valne of nominal ordinary shares amounted to $4,000,000. The face value of each share is $10. In total, there were $332,918 and 319,708 in thousands of ordinary shares, respectively, issued. All issued shares were paid up upon issuance.

For the year ended December 31, 2020 and 2019, the convertible bonds were converted to 13,210 and 56 new common shares of stock, which were issued at the amount of $1,425,400 and $6,000. The registration procedures were completed.

～ 41 ～

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese)

ELITE MATERIAL CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

2. Capital surplus

The balance of additional paid-in capital was as follows:

Capital surplus
The balance of additional paid-in capital was as follows:
Share capital
Premium from convertible bonds
Convertible option		 2020.12.31
$ 95,627
1,773,034
-		 2019.12.31

95,627

417,732
115,499
$
1,868,661
628,858

Capital reserves can only be reclassified as share capital or be distributed as cash dividends after offsetting against losses. The aforementioned capital reserves include share premiums and donation gains. In accordance with the Securities Offering and Issuance Guidelines, the amount of capital reserves to be reclassified under share capital shall not exceed 10 percent of the actual share capital amount.

3. Retained earnings

The Company's article of incorporation stipulate that Company's net earnings should first be used to offset the prior years' deficits, if any, before paying any income taxes. Of the remaining balance, 10% is to be appropriated as legal reserve, and then any remaining profit together with any undistributed retained earnings shall be distributed according to the distribution plan proposed by the Board of Directors and submitted to the stockholders’ meeting for approval.

Taking into account the characteristics of industrial growth and stabilizing the financial structure of the Company, the Company will not distribute dividends when in deficit.

Under the policy of dividend distribution, the Company shall first take into consideration its future development, financial situation and shareholders' rewards, as well as its programs to meet its capital expenditure budget in determining the cash in need. After the aforementioned consideration, the Company will distribute the cash dividends to its shareholders. Cash dividends shall not be more than 20% of the total dividends.

Surplus distributed should be, on principle, 10% to 70% of distributable surplus. Distributable surplus is accounted for as profit, after setting aside reserves, plus, prior-year undistributed earnings. Any remaining profit shall be distributed according to the stockholders' meeting for approval.

1) Legal reserve

10 percent of net income should be set aside as statutory earnings reserve until it is equal to share capital. If the Company experienced profit for the year, the meeting of shareholders shall decide on the distribution of the statutory earnings reserve, either by new shares or by cash, of up to 25 percent of the actual share capital.

2) Earnings distribution

The earnings distribution for 2019 and 2018 was decided by the general meeting of shareholders held on June 18, 2020, and June 10, 2019.

～ 42 ～

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese)

ELITE MATERIAL CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

The relevant dividend distribution to shareholders is as follows:

2019
2018
Dividend
per Share
(TWD$)
Amount
Dividend
per Share
(TWD$)
Amount
Dividends distributed to
common shareholders
Cash
$ 5.76
1,918,248
3.80
1,214,680
Other equity
Foreign
currency
translation
differences for
foreign
operations
Unrealized gain
(loss) from
financial assets
at fair value
through other
comprehensive
income
Total
Balance at January 1, 2020
$ (831,955)
(438)
(832,393)
Exchange difference on translation of
foreign financial statements
75,502
-
75,502
Balance at December 31, 2020
$
(756,453)
(438)
(756,891)
Balance at January 1, 2019
$ (423,485)
(69)
(423,554)
Exchange difference on translation of
foreign financial statements
(408,470)
-
(408,470)
FVOCI - financial assets
-
(369)
(369)
Balance at December 31, 2019
$
(831,955)
(438)
(832,393)		 2019 2019 2019 2019
Dividend
per Share
(TWD$)		 Amount Dividend
per Share
(TWD$)
5.76
1,918,248
3.80
Foreign
currency
translation
differences for
foreign
operations
Unrealized gain
(loss) from
financial assets
at fair value
through other
comprehensive
income
$ (831,955)
(438)
75,502
-		 1,918,248

Total
(832,393)
75,502

$
(756,453)
(438)
(756,891)

$ (423,485)
(408,470)
-

(69)

-
(369)

(423,554)
(408,470)
(369)
$
(831,955)
(438)
(832,393)

4. Other equity

  • (r) Earnings per share

The Group calculated the basic and diluted EPS as follows:

1.Basic earnings per share

The calculation of basic earnings per share at December 31, 2020 and 2019, were based on the profit attributable to ordinary shareholders of the Company and the weighted-average number of ordinary shares outstanding, calculated as follows:

  • 1) Profit attributable to ordinary shareholders
Profit attributable to ordinary shareholders of the
Company		 2020
$
3,688,999		 2019

3,240,845

～ 43 ～

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese)

ELITE MATERIAL CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

2) Weighted-average number of ordinary shares

Issued ordinary shares at January 1
Effect of convertible notes
Weighted-average number of
ordinary shares at December 31		 2020
319,708
5,886		 2019

319,652

14

325,594
319,666

2.Diluted earnings per share

The calculation of diluted earnings per share at December 31, 2020 and 2019, were based on profit attributable to ordinary shareholders of the Company and the weighted-average number of ordinary shares outstanding after adjustment for the effects of all dilutive potential ordinary shares, calculated as follows.

  • 1) Profit attributable to ordinary shareholders of the Company (diluted)
Profit attributable to ordinary shareholders of the
Company (basic)
Convertible preference shares dividends
Profit attributable to ordinary shareholders of the
Company (diluted)		 2020
$ 3,688,999
9,749		 2019

3,240,845

7,592

$
3,698,748


3,248,437

  • 2) Weighted-average number of ordinary shares (diluted)
Weighted-average number of ordinary shares (basic)
Effect of employee shares bonus
Effect of convertible bond
Weighted-average number of ordinary shares (diluted)
at December 31		 2020
325,594
1,110
7,324		 2019

319,666

1,005

13,252

334,028


333,923

For calculation of the dilutive effect of the stock option, the average market value is assessed based on the quoted market price where the Company's option is outstanding.

  • 3.Earnings per share were as follow:
Basic earrings per share
Diluted earrings per share		 2020
$
11.33		 2019
5.48
$
11.07		 5.32

～ 44 ～

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese)

ELITE MATERIAL CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

  • (s) Revenue from contracts with customers

  • 1.Disaggregation of revenue

Primary geographical
markets:
Taiwan
China
Others
Major products:
Prepreg
Capper clad laminate
Mass lam foundry
Others
Primary geographical
markets:
Taiwan
China
Others
Major products:
Prepreg
Capper clad laminate
Mass lam foundry
Others		 2020 2020 Total

4,754,162

20,852,192
1,594,432

27,200,786

12,334,689

14,009,825

758,423

97,849

27,200,786
Total

4,389,317

18,778,005
1,698,200

24,865,522

10,776,495

13,128,741

945,550

14,736

24,865,522
Domestic
$ 4,726,774
868,560
1,335,302		 Foreign

85,433

22,992,935

259,130		 Adjustment
and
Elimination

(58,045)

(3,009,303)

-

$
6,930,636


23,337,498

(3,067,348)

$ 3,036,645
2,696,485
758,502
439,004


10,657,558

12,550,684

-

129,256


(1,359,514)

(1,237,344)
(79)

(470,411)

$
6,930,636


23,337,498


(3,067,348)



2019
Domestic
$ 4,374,352
1,426,526
1,385,824		 Foreign

112,854

19,306,473

312,376		 Adjustment
and
Elimination

(97,889)

(1,954,994)

-

$
7,186,702


19,731,703

(2,052,883)

$ 3,055,073
2,889,715
946,202
295,712


8,578,547

11,067,802

-

85,354


(857,125)

(828,776)
(652)

(366,330)

$
7,186,702


19,731,703


(2,052,883)

～ 45 ～

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese)

ELITE MATERIAL CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

  • (t) Rewards of employees, directors and supervisors

In accordance with the Company's article, which was approved by the shareholders, the Company shall assign 3% as rewards to employees, and less than 1.2% as rewards to directors and supervisors, if there are earnings during the year. However, the Company has to retain the amount while there are accumulated loss.

The employees mentioned before include the employees in the subsidiaries who meet the specific conditions.

For the years ended December 31, 2020 and 2019, rewards of employees of $130,767 and $114,204, and directors of $43,589 and $38,068, respectively, were estimated and recognized as current expense. These amounts were calculated using the Company's profit before tax before rewards of employees and directors for the years ended December 31, 2020 and 2019, and using the earnings allocation method which was stated under the Company's article. These rewards were charged to profit or loss under operating costs or operating expenses for the years ended December 31, 2020 and 2019.

Related information of distributions of remuneration to employees and directors can be accessed from the Market Observation Post System on the website.

There is no difference between the rewards of employees and directors that was decided by the Board of Directors and the financial report’s estimated amounts in 2020 and 2019.

  • (u) Non-operating income and expenses

  • Interest income

The details of interest income were as follows:

Interest income
Other gains and losses, net
The details of other gains and losses were as follows:
Foreign currency exchange gain (loss), net
Finacial assets at fair value through profit or loss
Disposal loss on property, plant and equipment
Other profits
Other losses		 2020
$
74,266		 2019

90,439

2020
$ 15,494
1,853
(571)
147,625
(6,919)

2019

8,294

15,606

(533)

54,523

(818)

$
157,482

77,072
  1. Other gains and losses, net

～ 46 ～

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese)

ELITE MATERIAL CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

3. Finance costs

The details of finance cost were as follows:

Interest expense

==> picture [172 x 25] intentionally omitted <==

----- Start of picture text -----

2020 2019
$ 60,724 47,069
----- End of picture text -----

(v) Financial instruments

1.Credit risk

1) Credit risks exposure

The carrying amount of financial assets represents the maximum exposure to credit risk.

2.Liquidity risk

The following are the contractual maturities of financial liabilities of the Group, including estimated interest payments and excluding the impact of netting arrangements:

Balance at December 31, 2020
Non-derivative financial liabilities
Secured bank loans
Unsecured bank loans
Accounts payable
Balance at December 31, 2019
Non-derivative financial liabilities
Secured bank loans
Unsecured bank loans
Convertible bonds
Short-term notes payable
Accounts payable		 Carrying
amount		 Contractual
cash flows		 Within 6
months		 6-12 months 1-2years More than 2
years

167,698

303,127
-
$ 317,137
1,408,724
5,846,870
352,851

1,419,290

5,846,870
24,864

940,536

5,846,870
41,984

172,477

-
118,305

3,150
-

$
7,572,731


7,619,011


6,812,270

214,461
121,455
470,825

$ 629,114
1,013,874
1,364,280
99,969
5,672,098


735,151

1,018,082

1,425,400

100,000

5,672,098


58,598

816,628

1,425,400

100,000

5,672,098


57,882

100,898

-

-

-


157,326

100,556
-
-
-


461,345

-
-
-
-

$
8,779,335


8,950,731


8,072,724

158,780
257,882
461,345

The Group does not expect that the cash flows included in the maturity analysis could occur significantly earlier or in significantly different amounts.

～ 47 ～

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese)

ELITE MATERIAL CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

3.Currency risk

  • 1) Currency risk exposure

The Group’s significant exposure to foreign currency risk was as follows:

Financial assets
Monetary items
USD
Financial Liabilities
Monetary items
USD
Financial assets
Monetary items
USD
Financial Liabilities
Monetary items
USD		 2020.12.31 Functional
currency
1,903,862
1,488,387
1,306,396
1,667,125
Functional
currency
1,730,196
1,263,569
1,406,905
1,502,221
Foreign currency
(In thousand)
$ 66,849
52,261
45,871
58,537		 Exchange rate
USD：TWD 28.4800
USD：CNY 6.5067
USD：TWD 28.4800
USD：CNY 6.5067
2019.12.31
Foreign currency
(In thousand)
$ 57,712
42,147
46,928
50,107		 Exchange rate
USD：TWD 29.9800
USD：CNY 6.9640
USD：TWD 29.9800
USD：CNY 6.9640

2) Sensitivity analysis

The Group’s exposure to foreign currency risk arises from the translation of the foreign currency exchange gains and losses on cash and cash equivalents, accounts receivable, other receivables, bank loans, accounts payable and other payable that are denominated in foreign currency.

A 1% appreciation or depreciation of the TWD against the USD as at December 31, 2020 and 2019, would have increased or decreased net income by $3,514 and $698, respectively. This analysis assumes that all other variables remain constant.

Due to the variety of functional currency, the group disclosed the foreign currency gain or loss on monetary items aggregately. The foreign currency gain (loss) (include realized and unrealized) were $15,494 and $8,294 in 2020 and 2019, respectively.

～ 48 ～

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese)

ELITE MATERIAL CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

4.Interest analysis

The interest rate exposure of the Group’s financial assets and liabilities is described on liquidity risk management.

The following sensitivity analysis is based on the exposure to interest rate risk of the financial assets and liabilities on the reporting date.

For variable rate instruments, the sensitivity analysis assumes the variable rate liabilities are outstanding for the whole year on the reporting date. The Group’s internal management reported the increases or decreases in the interest rates and the exposure to changes in interest rates of 0.5% is considered by management to be a reasonable change of interest rate.

If the interest rate increases or decreases by 0.5%, the Group’s net income will decrease /increase by $8,901 and $12,012 for the years ended December 31, 2020 and 2019, respectively, assuming all other variable factors remain constant. This is mainly due to the Group’s variable rate borrowing and the financial assets evaluation of risk-free interest rate changes on corporate bonds.

  1. Fair value

  2. 1) The kinds of financial instruments and fair value

Financial assets and liabilities at fair value through profit or loss, derivative financial instruments used for hedging, and available for sale financial assets is measured on a recurring basis. The fair value of financial assets and liabilities were as follows (including information on fair value hierarchy, but excluding measurements that have similarities to fair value but are not fair value and those fair value cannot be reliably measured or inputs are unobservable in active markets):

Financial assets at fair value
through other comprehensive
income
Stocks unlisted on domestic
and foreign markets
Financial assets measured at
amortized cost
Cash and cash equivalents
Notes and accounts receivable
Other receivables
Refundable deposits
Sub-total
Total		 2020.12.31 2020.12.31 Total

15,681
Book Value
$ 15,681		 Fair Value
Level 1

-		 Level 2
-		 Level 3
15,681

5,731,862
9,934,060
49,011
19,583

-

-

-

-		 -
-
-
-
-
-
-
-

-
-
-
-

15,734,516

-		 - - -

$ 15,750,197

-		 - 15,681
15,681

～ 49 ～

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese)

ELITE MATERIAL CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

Financial liabilities measured at
amortized cost
Short-term borrowings
Accounts payable
Other payable
Guarantee deposits received
Total
Financial assets at fair value
through profit or loss
Redemption and repurchase
option of bonds
Financial assets at fair value
through other comprehensive
income
Stocks unlisted on domestic
and foreign markets
Cash and cash equivalents
Notes and accounts receivable
Other receivables
Refundable deposits
Sub-total
Total
Financial liabilities measured at
amortized cost
Short-term borrowings
Short-term notes payable
Accounts payable
Other payable
Total bonds payable
Guarantee deposits received
Total		 2020.12.31 2020.12.31 Total
-
-
-
-
Book Value
$ 1,725,861
5,846,870
2,144,715
12,280		 Fair Value
Level 1

-

-

-

-		 Level 2
-
-
-
-		 Level 3
-
-
-
-

$ 9,729,726

-		 - - -
2019.12.31 Total
4,561
Book Value
$ 4,561		 Fair Value
Level 1

-		 Level 2
4,561		 Level 3

-

16,507

-
-
16,507

16,507

6,350,790
9,192,052
56,946
21,984

-

-

-

-		 -
-
-
-
-
-
-
-

-
-
-
-

15,621,772

-		 - - -

$ 15,642,840

-		 4,561
16,507
21,068

$ 1,642,988
99,969
5,672,098
1,837,119
1,364,280
10,347

-

-

-

-

-

-
-
-
-
-
-
-

-
-
-
-
-
-

-
-
-
-
-
-

$ 10,626,801

-		 - - -

～ 50 ～

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese)

ELITE MATERIAL CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

  • 2) Valuation techniques for financial instruments measured at fair value

  • A. Non-derivative financial instruments

A financial instrument is regarded as being quoted in an active market if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency and those prices represent actual and regularly occurring market transactions on an arm’s-length basis. Whether transactions are taking place ‘regularly’ is a matter of judgment and depends on the facts and circumstances of the market for the instrument.

Quoted market prices may not be indicative of the fair value of an instrument if the activity in the market is infrequent, the market is not well-established, only small volumes are traded, or bid-ask spreads are very wide. Determining whether a market is active involves judgment.

Measurements of fair value of financial instruments without an active market are based on a valuation technique or quoted price from a competitor. Fair value measured by a valuation technique can be extrapolated from similar financial instruments, the discounted cash flow method, or other valuation technique including a model using observable market data at the reporting date.

B.Derivative financial instruments

Fair value of forward currency exchange is usually determined by using the forward currency rate.

  • 3) Transfers between Level 1 and Level 2

There was no transfer from Level 1 Level 2 in 2020 and 2019.

  • 4) Reconciliation lf Level 3 fair values

The change in level 3 at fair value in the years ended December 31, 2020 and 2019, were as follow:

Balance on January 1, 2020
Effect in exchange rates
Balance on December 31, 2020
Balance on January 1, 2019
Total gains and losses recognized
Effect in exchange rates
Balance on December 31, 2019		 Financial assets at fair v
$ 16,507
(826)

$
15,681

$ 17,291
(369)
(415)

$
16,507

～ 51 ～

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese)

ELITE MATERIAL CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

For the years ended 2020 , total gains and losses that were included in, “other comprehensive income, before tax, equity instruments at fair value through other comprehensive income” were as follows:

Total gains and losses recognized:
In other comprehensive income (as“other
comprehensive income, before tax, equity
instruments at fair value through other
comprehensive income”)		 2020
$ -		 2019
(369)
  • 5) Quantified information on significant unobservable inputs (Level 3) used in fair value measurement

The Group's financial instruments that use Level 3 inputs to measure fair value include "financial asses measured at fair value through profit or loss-debt investment" and "fair value through other comprehensive income-eqity investments".

Quantified information of significant unobservable inputs was as follows:

Item
Financial assets at fair
value through other
comprehensive
income-equity
investments without
an active market		 Valuation technique
Net Assets Value
Method		 Significant
unobservable inputs
‧Net Asset Value		 Inter-relationship
between significant
unobservable inputs
and fair value
measurement
Not applicable
  • (w) Financial risk management

1.Overview

The nature and the extent of the Group’s risks arising from financial instruments, which include credit risk, liquidity risk and market risk, are discussed below. Also, the Group’s objectives, policies and procedures of measuring and managing risks are discussed below.

For more quantitative information about the financial instruments, please refer to the other related notes of the notes to the financial statements.

  • 2.Risk management framework

The Board of Directors has overall responsibility for the establishment and oversight of the risk management framework.

～ 52 ～

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese)

ELITE MATERIAL CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

The Group’s risk management policies are established to identify and analyze the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s activities. The Group, through their training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations.

The Board of Directors oversees how management monitors compliance with the Group’s risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Group. Internal auditors assist the Board of Directors as the supervisors. Internal Audit undertakes both regular and ad hoc reviews of risk management controls and procedures and exception management, the results of which are reported to the Board of Directors.

3.Credit risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial ’ instrument fails to meet its contractual obligations, and arises principally from the Group s receivables from customers and investment.

1) Accounts receivable and other receivables

The Group’s exposure to credit risk is influenced mainly by the individual characteristics of ’ each customer. However, management also considers the demographics of the Group s customer base, including the default risk of the industry in which customers operate, as these factors may have an influence on credit risk.

The management has established a credit policy under which each new customer is analyzed individually for creditworthiness before the Group’s standard payment terms are offered. The Group’s review includes external ratings, when available, and in some cases bank references. Credit limits are established for each customer, which represent the maximum open amount without requiring approval from the General Manager’s office; these limits are reviewed quarterly. Customers that fail to meet the Group’s benchmark creditworthiness may transact with the Group only on a cash basis.

In monitoring customer credit risk, customers are grouped according to their credit characteristics, including whether they are an individual or a legal entity, whether they are a wholesale, retail or end-user customer, geographic location, industry, aging profile, maturity and “ ” existence of previous financial difficulties. Customers that are graded as high risk are placed on a restricted customer list and monitored by the General Manager’s office. If customers default, the Group will stop transactions with those customers or trade on a cash basis.

The Group established an allowance for impairment that represents its estimate of incurred losses in respect of trade and other receivables and investments. The main components of this allowance are a specific loss component that relates to individually significant exposures, and a collective loss incurred but not yet identified. The collective loss allowance is determined based on historical data on payment statistics for similar financial assets.

～ 53 ～

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese)

ELITE MATERIAL CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

  • 2) Bank deposit and transaction contract of foreign derivative instruments

The credit risk exposure in the bank deposits and transaction contract of foreign derivation instruments is measured and monitored by the General Manager's office. The Group only deals with financial institutions; therefore, there are no significant doubts regarding default on the above financial instruments, and as a result, there is no significant credit risk.

4.Liquidity risk

Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Group’s approach to managing liquidity is to ensure, as far as possible, that it always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.

The Group uses activity-based costing to cost its products, which assists it in monitoring cash flow requirements. The Group aims to maintain the level of its cash and cash equivalents at an amount in excess of expected cash flows on financial liabilities over the succeeding 90 days. This excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters. As of December 31, 2020 and 2019, the Group's unused credit line were amounted to $13,766,218 and $7,969,323, respectively.

5.Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates, and equity prices, will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return.

The Group buys and sells derivatives, and also incurs financial liabilities, in order to manage market risk. All such transactions are carried out within the guidelines set by the Risk Management Committee.

1) Currency risk

The Group is exposed to currency risk on sales, purchases, and borrowings that are denominated in a currency other than the respective functional currencies of the Group’s entities, primarily the New Taiwan Dollar (TWD), US Dollar (USD), and China Yuan (CNY). Besides, the Group uses natural hedging principle to hedge by controlling the net amount of each currency of the Group in accordance with the condition of the exchange rate market. The Group hedges the currency risk with forward foreign currency whose mature date is in a year from report date and currency swap contract.

The interest is denominated in the currency used in the borrowings. Generally, borrowings are denominated in currencies that match the cash flows generated by the underlying operations of the Group, primarily the TWD, USD, and CNY. This provides an economic hedge without derivatives being entered into, and therefore, hedge accounting is not applied in these circumstances.

～ 54 ～

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese)

ELITE MATERIAL CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

In respect of other monetary assets and liabilities denominated in foreign currencies, the Group ensures that its net exposure is kept to an acceptable level by buying or selling foreign currencies at spot rates when necessary to address short-term imbalances.

  • 2) Interest risk

The Group's borrowings were on the basis of floating interest rate. The Group is not involved in the situation of changing floating interest rate into fixed rate with interest rate swap agreement. The Group periodically assessed the borrowing rates of the banks and every currency to make provisions for interest-changed rate risk. In addition, the Group creates favorable relationship with banks to get lower financial costs from borrowings in order for it to strengthen its working capital to lower its dependency on bank borrowings, as well as situation of changing floating interest rate and scatter interest-changed rate risk.

3) Other market price risk

The Group does not enter into any commodity contracts other than to meet the Group's expected usage and sales requirements; such contracts are not settled on a net basis.

  • (x) Capital management

The Group maintains and manages its capital to meet the minimum paid-in capital required by the competent authority, and to optimize the balance of liabilities and equity in order to maximize shareholders' return. By periodically reviewing and measuring relative cost, risk, and rate of return to ensure profit and to maintain adequate financial ratios, the Group may adopt various financing approaches to balance its capital structure in order to meet the demands for capital expenditures, working capital, settlements of liabilities, and dividend payments in normal course of business for the future. The Group’s debt to equity ratios at the balance sheet date were as follows:

  • (y) Investing and financing activities not affecting current cash flow

The Group’s investing and financing activities which did not affect the current cash flow in the years ended December 31, 2020 and 2019, were as follows:

Reconciliation of liabilities arising from financing activities were as follows:

Short-term borrowings
Long -term borrowings
Total liabilities from
financing activities
Short-term borrowings
Long -term borrowings
Total liabilities from
financing activities		 January 1,
2020
Cash flow
$ 663,874
(226,374)
979,114
134,747		 Non-cash changes
Acquisition
Foreign
exchange
movement
Fair value
changes
December 31,
2020
171,180
44
-
608,724
-
3,276
-
1,117,137


$
1,642,988
(91,627)

171,180
3,320
-
1,725,861


January 1,
2019
Cash flow
$ 713,498
(46,268)
400,000
603,005


Non-cash changes
Acquisition
Foreign
exchange
movement
Fair value
changes
December 31,
2019
-
(3,356)
-
663,874
-
(23,891)
-
979,114


$
1,113,498
556,737

-
(27,247)
-
1,642,988


～ 55 ～

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese)

ELITE MATERIAL CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

(7) Related-Party Transactions

  • (a) Parent company and ultimate controlling company

The Company is both the parent company and ultimate controlling party of the Group.

  • (b) Names and relationship with related parties

The followings are entities that have had transactions with related party during the periods covered in the consolidated financial statements.

Name of related party

EMC OVERSEAS HOLDING INCORPORATED

Grand Wuhan Incorporated EMC INTERNATIONAL HOLDING INCORPORATED

Grand Zhuhai Incorporated Grand Shanghai Incorporated Grand Zhongshan Incorporated EMC SPECIAL APPLICATION INCORPORATED

Relationship with the Group

The Group its subsidiaries

The Group its subsidiaries The Group its subsidiaries

The Group its sub-subsidiaries The Group its sub-subsidiaries The Group its sub-subsidiaries The Group its sub-subsidiaries

Elite Electronic Material (Kunshan) Co., Ltd. The Group its sub-subsidiaries Elite Electronic Material (Zhongshan) Co., Ltd. The Group its sub-subsidiaries Elite Electronic Material (Huangshi) Co., Ltd. The Group its sub-subsidiaries EMD SPECIALTY MATERIALS, LLC The Group its sub-subsidiaries

  • (c) Transactions with key management personnel

Key management personnel compensation comprised:

Short-term employee benefits
Termination benefits		 For the years ended December 31,
2020
2019
$ 144,765
122,578
2,891
2,814		 For the years ended December 31,
2020
2019
$ 144,765
122,578
2,891
2,814
2020
$ 144,765
2,891

$
147,656


125,392

～ 56 ～

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese)

ELITE MATERIAL CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

(8) Pledged Assets

The following assets were restricted in use:

Assets Purpose of Pledge 2020.12.31
$ 809,693
135,726
19,583		 2019.12.31

726,202

136,304

21,984
Buildings
Rignt-of-use asset
Refundable deposits		 Pledged as collateral for
long-term debt
Pledged as collateral for
long-term debt
Mailbox and leases, etc.

$
965,002


884,490

(9) Significant Contingencies and Commitments

  • (a) Major Commitments and contingencies were as follows:

  • 1.Unused standby letters of credit

2020.12.31 2019.12.31
Unused standby letters of credit
TWD $ 85,193 112,489
USD 29,581 27,985
The significant contracts for engineering construction and purchase of properties in order to extend
factories and machineries by the Group, were as follows:
**2020.12.31 ** **2019.12.31 **
Total contract price
USD $ 5,120 8,620
TWD 104,852 634,372
Unpaid contract price
USD $ 789 4,070
TWD 61,773 512,994

  • 2.The significant contracts for engineering construction and purchase of properties in order to extend factories and machineries by the Group, were as follows:

  • 3.The royalties of eco-material technic treatment with Japanese Company A, the paid royalties were as follows:

2019
$
107,342		 2019
137,639

4.As of December 31, 2020 and 2019, the amounts of Performance Letter of Guarantee issued by Mega International Commercial Bank-Zhongli Branch for the purpose of Customs for guaranty of domestic tariff and for guaranty of hiring foreigners to be employed were NT$5,000, respectively.

～ 57 ～

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese)

ELITE MATERIAL CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

  • (10) Significant Catastrophic Losses: None.

(11) Significant Subsequent Events: None.

(12) Others

Employee benefits, depreciation, and amortization expenses, categorized as operating cost or expense, were as follows:

Categorized as
Nature
For the year ended December 31, 2020
For the year ended December 31, 2020
For the year ended December 31, 2020		 For the year ended December 31, 2019 For the year ended December 31, 2019 For the year ended December 31, 2019
Operating
Cost		 Operating
Expense		 Total Operating
Cost		 Operating
Expense		 Total
Employee benefits
Salary
Labor and health insurance
Pension
Others employee benefits
Depreciation
Amortization		 1,376,599

69,753
32,073
108,956
542,752
432
668,337

22,431

12,890

41,026

56,470

8,959
2,044,936

92,184

44,963

149,982

599,222

9,391
1,260,750

68,849

91,370

88,944

443,973

344
568,178

18,374

22,433

33,511

42,447

5,293
1,828,928

87,223

113,803

122,455

486,420

5,637
  • (13) Additional Disclosures

(a) Information on significant transactions

The following is the information on significant transactions required by the “ Regulations Governing the Preparation of Financial Reports by Securities Issuers” for the Group for the year ended December 31, 2020:

1. Fund financing to other parties:

Fund financing to other parties: Fund financing to other parties: Fund financing to other parties: Fund financing to other parties: Fund financing to other parties: Fund financing to other parties: Fund financing to other parties: Fund financing to other parties: Fund financing to other parties: Fund financing to other parties: Fund financing to other parties: Fund financing to other parties: Fund financing to other parties: Fund financing to other parties: Fund financing to other parties: Fund financing to other parties: Fund financing to other parties:
(Expressedinthousands ofNewTaiwandollars, unless otherwise specified)
No Name of
lender		 Name of
borrower		 Account
name		 Related
party		 Highest balance
of financing to
other parties
during the
period
Ending
balance		 Actual usage
amount
during the
period		 Range of
interest rates
during the
period		 Purposes
of fund
financing
for the
borrower		 Transaction
amount for
business
between two
parties		 Reasons
for
short-term
financing
Allowance for
bad debt		 Collateral Individual
funding loan
limits		 Maximum
limit of fund
financing
Item Value
1

2
 Elite Electronic
Material (Kunshan) Co.,
Ltd.
Elite Electronic
Material (Zhongshan)
Co., Ltd.
Elite Electronic
Material
(Huangshi) Co.,
Ltd.
Elite Electronic
Material
(Huangshi) Co.,
Ltd.		 Other
receivables-related
parties
Other
receivables-related
parties		 Yes
Yes		 1,199,846
1,401,280
1,199,298

1,400,640		 1,199,298
437,700
3.50%

3%~3.50%
2

2		 -

-
 Operating
Capital
Operating
Capital		 -
-		 -
-		 -
-		 1,197,451
(Note 3)
1,622,784
(Note 4)
2,394,902
(Note 3)

1,622,784
(Note 4)

Note 1: Numbers denote the following:

  1. 0 represents the Company.

  2. Subsidiaries are listed by names and numbered starting with 1.

Note 2: 1. Entities with business relationship with the Company.

  1. Those who have the needs in short-term financing.

  2. Note 3: During to the Company's funding capital, the total amount of the Company loaning could not over 30 percent of the net worth of the Company's latest financial statement; the total amount of the other company loaning could not over 15 percent of the net worth of the Company's latest financial statement.

Note 4: The total maximum financing amount cannot exceed 30% of the Company's net worth in its latest financial statements, while the maximum financing amount for a single company cannot exceed 30% of the Company's net worth in its latest financial statements.

Note 5: The total amount cannot exceed 100% of the Company's net worth in its lates financial statements.

～ 58 ～

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese)

ELITE MATERIAL CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

2. Guarantees and endorsements for other parties:

(Expressedinthousands ofNewTaiwandollars, unless otherwise specified) (Expressedinthousands ofNewTaiwandollars, unless otherwise specified) (Expressedinthousands ofNewTaiwandollars, unless otherwise specified) (Expressedinthousands ofNewTaiwandollars, unless otherwise specified) (Expressedinthousands ofNewTaiwandollars, unless otherwise specified) (Expressedinthousands ofNewTaiwandollars, unless otherwise specified) (Expressedinthousands ofNewTaiwandollars, unless otherwise specified) (Expressedinthousands ofNewTaiwandollars, unless otherwise specified) (Expressedinthousands ofNewTaiwandollars, unless otherwise specified) (Expressedinthousands ofNewTaiwandollars, unless otherwise specified) (Expressedinthousands ofNewTaiwandollars, unless otherwise specified) (Expressedinthousands ofNewTaiwandollars, unless otherwise specified)
No.
(Note 1)		 Name of
company		 Counter-party Limitation on
amount of
guarantees and
endorsements for a
specific enterprise
(Note 3)		 Highest
balance for
guarantees
and endorsements
during theperiod		 Balance of
guarantees and
endorsements
as of reporting
date		 Actual usage
amount during
theperiod		 Property pledged
on guarantees
and endorsements
(Amount)		 Ratio of accumulated
amounts of guarantees
and endorsements to net
worth of the latest
financial statements		 Maximum

amount for
guarantees and
endorsements
(Note 3)		 Parent Company
endorsement/
guarantees
to third parties on
behalf of subsidiary		 Subsidiary
endorsement/
guarantees
to third parties on
behalf of parent
company		 Endorsements/guar
antees
to third
parties on
behalf of companies
in Mainland China
Name Relationship
with the
Company
(Note 2)
0
0
0
0
0
0
0
0
1
1		 The Company

〞

〞

〞

〞

〞

〞

〞

Elite Electronic
Material
(Zhongshan)
Co., Ltd.
Elite Electronic
Material
(Kunshan) Co.,
Ltd.(Note 4)		 Grand Wuhan
Incorporated
Grand Shanghai
Incorporated
Grand Zhongshan
Incorporated
EMD SPECIALTY
MATERIALS, LLC
Elite Electronic
Material (Zhongshan)
Co., Ltd.
Elite Electronic
Material (Kunshan)
Co., Ltd.
Elite Electronic
Material (Huangshi)
Co., Ltd.
TECHNICA USA
Elite Electronic
Material (Huangshi)
Co., Ltd.
Elite Electronic
Material (Huangshi)
Co., Ltd.		 2
2
2
2
2
2
2
6
4
4		 8,369,315
8,369,315
8,369,315
8,369,315
8,369,315
8,369,315
8,369,315
8,369,315
2,704,639
798,301
599,600

224,850

149,900

170,880

151,125

90,675

1,185,200

18,135

669,987

656,850
-

-

-

170,880

142,400

85,440

1,139,200

17,088

669,681

656,550		 -
-
-

170,880

-

-

-

17,088

222,571

120,699		 -
-
-

-
-
-
-

-

-

-		 -
%
-
%
-
%
1.02%
0.85%
0.51%
6.81%
0.10%
12.38%
8.22%		 16,738,630
16,738,630
16,738,630
16,738,630
16,738,630
16,738,630
16,738,630
16,738,630
5,409,278
7,983,006		 Y
Y
Y
Y
Y
Y
Y		 Y
Y
Y
Y
Y

Note 1: 0 is the Company.

Note 2:1. Entities with business relationship with the Company.

  1. A subsidiary in which the Company directly holds more than 50 percent of its voting shares.

  2. A investee in which the Company and subsidiary holds more than 50 percent of its voting shares.

  3. A parent company in which the Company directly or Subsidiaries indirectly holds more than 90 percent of its voting shares.

  4. Companies in same type of business and providing mutual endorsements/ guarantees in favor of each other in accordance with the contractual obligations in order to fulfill the needs of the construction project.

  5. Shareholders making endorsements and/or guarantees for their mutually invested company in proportion to their shareholding percentage.

  6. Companies in same type of business providing guarantees of pre-sale contracts according to the regulation.

  7. Note 3: The total maximum endorsement / guarantee cannot exceed 100% of the Company's net worth in its latest financial statements, while the maximum endorsement / guarantee amount for a single company cannot exceed 50% of the Company's net worth in its latest financial statements.

  8. Note 4: The Company or the company in which directly or indirectly holds more than 90% of the voting shares may be endorsed and the amount shall not exceed 10% of the company’s net worth.

Note 5: The transactions with the Group were eliminated in the consolidated financial statements.

  1. Information regarding securities held at balance sheet date:
Information regarding securities held at balance sheet date: Information regarding securities held at balance sheet date: Information regarding securities held at balance sheet date: Information regarding securities held at balance sheet date: Information regarding securities held at balance sheet date: Information regarding securities held at balance sheet date: Information regarding securities held at balance sheet date: Information regarding securities held at balance sheet date: Information regarding securities held at balance sheet date: Information regarding securities held at balance sheet date:
(Expressedinthousands ofNewTaiwandollars, unless otherwise specified)
Name of holder Category and
name of security		 Category and name
of security
Account title		 Ending balance Peak Holding
**Percentage **
Note
Number Book value **Percentage ** Market value
EMC OVERSEAS
HOLDING
INCORPORARTED		 PROUD STAR
INTERNATIIONAL
LIMITED		 -
 Non-current
available-for-sale
financial assets		 500,000
15,681
3.26%
15,681
3.26%
  1. Accumulated buying/selling of the same marketable securities for which the dollar amount reaches $300 million or 20% or more of paid-in capital: None.

～ 59 ～

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese)

ELITE MATERIAL CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

  1. Acquisition of real estate for which the dollar amount reaches $300 million or 20% or more of paid-in capital : None.

  2. Disposition of real estate for which the dollar amount reaches $300 million or 20% or more of paid-in capital: None.

  3. Buying/selling products with the dollar amount reaches $100 million or 20% or more of paid-in capital:

(In Thousands of New Taiwan Dollars) (In Thousands of New Taiwan Dollars) (In Thousands of New Taiwan Dollars) (In Thousands of New Taiwan Dollars) (In Thousands of New Taiwan Dollars) (In Thousands of New Taiwan Dollars) (In Thousands of New Taiwan Dollars) (In Thousands of New Taiwan Dollars) (In Thousands of New Taiwan Dollars)
Name of company **Counter-party ** Relationship Transaction details Reasons why and
description of how the
transaction conditions
differ from general
transactions		 Account/note receivable
(payable)		 Notes
Purchase
/Sale		 Amount Percentage of
total
purchases
/sales
Creditperiod		 Unitprice Creditperiod Balance Percentage of
total
accounts/notes
receivable
(payable)
Elite Material Co., Ltd.

Elite Electronic Material
(Kunshan) Co., Ltd.
Elite Material Co., Ltd.

Elite Electronic Material
(Zhongshan) Co., Ltd.
Elite Electronic Material
(Huangshi) Co., Ltd.
Elite Electronic Material
(Kunshan) Co., Ltd.
Elite Electronic Material
(Huangshi) Co., Ltd.
Elite Electronic Material
(Zhongshan) Co., Ltd.		 Elite Electronic
Material
(Kunshan) Co.,
Ltd.
Elite Material
Co., Ltd.
Elite Electronic
Material
(Zhongshan)
Co., Ltd.
Elite Material
Co., Ltd.
Elite Electronic
Material
(Kunshan) Co.,
Ltd.
Elite Electronic
Material
(Huangshi) Co.,
Ltd.
Elite Electronic
Material
(Zhongshan)
Co., Ltd.
Elite Electronic
Material
(Huangshi) Co.,
Ltd.		 Investee
company on
equity method
by the Company
〞

Investee
company on
equity method
by the Company
〞

Actual related
party

〞

〞

〞
Sale

Purchase

Sale

Purchase
Sale

Purchase
Sale

Purchase		 (356,168)

356,168
(302,876)

302,876
(977,577)

977,577
(1,086,563
)
1,086,563
(5)%

4%

(4)%

5%

(47)%

12%
(52)%

19%		 Depends on the
company's
financial
condition

〞

〞

〞

〞

〞

〞

〞
-
-
-
-
-
-
-
-		 125,720
(125,720)
150,975
(150,975)
455,821
(455,821)
501,166
(501,166)
6%

(5)%

7%

(8)%

48%

(17)%

52%

(27)%

Note 1: The transactions with the Group were eliminated in the consolidated financial statements.

～ 60 ～

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese)

ELITE MATERIAL CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

  1. Accounts receivable from related parties for which the dollar amount reaches $100 million or 20% or more of paid-in capital:
(In Thousands of New Taiwan Dollars) (In Thousands of New Taiwan Dollars) (In Thousands of New Taiwan Dollars) (In Thousands of New Taiwan Dollars)
Name of
related party		 Counter-party
Relationship		 Balance of
receivables
from related
party		 Turnover
days		 Past-due receivables from
related party		 Subsequently
received amount
of receivables
from related
party
Allowances
for bad debts
Amount Action taken
The Company

The Company (note
1)
The Company

The Company (note
1)
Elite Electronic
Material (Kunshan)
Co., Ltd. (note 1)
Elite Electronic
Material (Zhongshan)
Co., Ltd. (note 1)
Elite Electronic
Material (Kunshan)
Co., Ltd.
Elite Electronic
Material (Kunshan)
Co., Ltd. (note 1)
Elite Electronic
Material (Huangshi)
Co., Ltd.
Elite Electronic
Material (Huangshi)
Co., Ltd.		 Elite Electronic
Material
(Kunshan) Co.,
Ltd.
〞
Elite Electronic
Material
(Zhongshan)
Co., Ltd.
〞
Elite Electronic
Material
(Huangshi) Co.,
Ltd.
Elite Electronic
Material
(Huangshi) Co.,
Ltd.
The Company

〞
Elite Electronic
Material
(Kunshan) Co.,
Ltd.
Elite Electronic
Material
(Zhongshan)
Co., Ltd.		 Investee company
on equity method
by the Company
〞
〞
〞
Actual related party
〞
Investee company
on equity method
by the Company
〞
Actual related party
〞		 125,720
28,505
150,975
21,793

1,226,316
440,280
3,343
417,889

455,821
501,166
2.08
Not
applicable

1.44
Not
applicable
Not
applicable
Not
applicable

5.21
Not
applicable

2.98

3.96
-
-

-
-
-
-

-
-

-

-		 90,039
28,505
44,901
21,793
9,005
-
560
220,141
272,276
355,650
-

-

-

-

-
-

-

-

-

-

Note 1: Financial statement account: Other receivables.

Note 2: The transactions with the Group were eliminated in the consolidated financial statements.

9. Derivative transactions:

For the Company's transaction information of derivative goods, please refer to Note 6(w) "financial instruments" to consolidated financial statement.

～ 61 ～

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese)

ELITE MATERIAL CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

10. Business relationships and significant inter-company transactions:

No.
(Note 1)
Name of company		 Name of counter-party Existing
relationship
with the
counter-part
y
(Note 2)		 Transaction Transaction Transaction Transaction
Account name Amount Terms of trading Percentage of the total
consolidated revenue or
total assets
0

0
1


1


2


2


2
2
2		 Elite Material Co., Ltd.

〞

Elite Electronic Material
(Kunshan) Co., Ltd.
Elite Electronic Material
(Kunshan) Co., Ltd.
Elite Electronic Material
(Zhongshan) Co., Ltd.
Elite Electronic Material
(Huangshi) Co., Ltd.
〞
〞

〞		 Elite Electronic Material
(Zhongshan) Co., Ltd.
Elite Electronic Material
(Kunshan) Co., Ltd.
Elite Material Co., Ltd.
Elite Electronic Material
(Huangshi) Co., Ltd.
Elite Electronic Material
(Huangshi) Co., Ltd.
Elite Electronic Material
(Zhongshan) Co., Ltd.
〞
Elite Electronic Material
(Kunshan) Co., Ltd.
〞		 1
1
2
3
3
3
3
3
3		 Sales
Sales
Other Accounts
Receivable
Other Accounts
Receivable
Other Accounts
Receivable
Sales
Accounts Receivable
Sales
Accounts Receivable		 302,876
356,168
417,889
1,226,316
440,280
1,086,563
501,166
977,577
455,821
Note 3

〞


Note 4

〞


〞


Note 3

〞


〞


〞
 1.11%

1.31%
1.50%

4.40%

1.58%
3.99%

1.80%

3.59%

1.64%

Note 1: Numbers denote the following:

  1. 0 represents the Company.

  2. Subsidiaries are listed by names and numbered starting with 1.

Note 2: Relationship with the listed companies:

  1. The Company to subsidiary

  2. Subsidiary to the Company

  3. Subsidiary to subsidiary

  4. Note 3: Sales price is negotiated by vendor and purchaser. Payment Term ranges from 90-day to 120-day or depending on the financial condition of the subsidiaries.

Note 4: No other trading partners are available for comparison.

Note 5: Transaction amounts exceeding 1% of the total assets on the balance sheet accounts or 1% of the total operating revenue on the income statement accounts of the Group will not be disclosed.

(b) Information on investees:

For the year ended December 31, 2020, the following was the information on investees (excluding investees in Mainland China) :

(Amounts Expressed in (Amounts Expressed in (Amounts Expressed in Thousands of New Thousands of New Taiwan Dollars, Except for Share Data) Taiwan Dollars, Except for Share Data) Taiwan Dollars, Except for Share Data) Taiwan Dollars, Except for Share Data)
Name of
investor		 Name of investee Location Major operations Initial investm ent (Amount) E nding balanc e Peak Holding
Percentage		 Net income
(loss) of the
investee		 Investment
income (losses)		 Note
Ending
balance		 Beginning
balance		 Shares Ratio of
shares		 Book
value
The Company
〞		 EMC OVERSEAS
HOLDING
INCORPORATED
Li Cheng Tech Co.,
LTD.		 British virgin
Islands
Taiwan
Investment business
Electronics、
Telecommunications
equipment、Wholesale、
Retails、Batteries、Power
generation and
Distribution machinery
manufacturing business		 1,179,111


173,694
1,179,111

173,694
36,256,950

16,412,918
100.00%

33.50%
13,432,327

-
100.00%
33.50%
3,708,854

-
3,708,854
-		 Subsidiaries

～ 62 ～

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese)

ELITE MATERIAL CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

==> picture [481 x 229] intentionally omitted <==

----- Start of picture text -----

Initial investment (Amount) Ending balance
Peak Holding Net income
Name of investor Name of investee Location Major operations balance Ending Beginning balance Shares Ratio of shares value Book Percentage (loss) of the investee income (losses) Investment Note
The Company Grand Wuhan Cayman Import / export business 602,440 602,440 20,020,000 100.00% 624,341 100.00% 132,357 132,357 Subsidiaries
Incorporated Islands and investment business
〞 EMC 〞 Investment business 761,482 - 26,310,000 100.00% 746,382 100.00% (3,038) (3,038) Subsidiaries
INTERNATIONAL
HOLDING
INCORPORATED
EMC EMC SPECIAL 〞 Investment business 747,742 - 26,255,000 100.00% 744,816 100.00% (3,037) (3,037) Sub-subsidiaries
INTERNATIONAL APPLICATION
HOLDING INCORPORATED
INCORPORATED
EMC SPECIAL EMD SPECIALTY USA Copper clad laminate 746,317 - - 100.00% 743,441 100.00% (2,985) (2,985) Third-tier
APPLICATION MATERIALS, LLC and prepreg business subsidiary
INCORPORATED
EMC OVERSEAS Grand Zhuhai Cayman Import / export business 962,590 962,590 33,798,821 100.00% 13,375,204 100.00% 3,719,497 3,719,497 Sub-subsidiaries
HOLDING Incorporated Islands and investment business
INCORPORATED
〞 Li Cheng Tech Co., Taiwan Electronics、 7,311 7,311 250,000 1.53% - 1.53% - -
LTD. Telecommunications
equipment、Wholesale、
Retails、Batteries、Power
generation and
Distribution machinery
manufacturing business
〞 TECHNICA USA USA Import/export service 17,088 17,088 600,000 30.00% 10,115 30.00% (36,372) (10,912) Note 4
Grand Zhuhai Grand Zhongshan British Import / export business 468,126 468,126 16,437,000 100.00% 5,408,262 100.00% 1,232,601 1,232,601 Third-tier
Incorporated Incorporated Virgin and investment business subsidiary
Islands
〞 Grand Shanghai British virgin Import / export business 940,739 940,739 18,161,515 99.79% 7,965,217 99.79% 2,492,443 2,487,172 〞
Incorporated Islands and investment business
----- End of picture text -----

Note 1:The amounts of book value recognized using the equity method include investment income(losses) and the exchange differences on translation of foreign statements.

Note 2: The amount above is evaluated based on the independent audit report of the investee under equity method .

Note 3: The transactions with the Group were eliminated in the consolidated financial statements.

  • (c) Information on investment in Mainland China:

  • Information on investment in Mainland China:

(Amounts Expressed in Thousands of New Taiwan Dollars) (Amounts Expressed in Thousands of New Taiwan Dollars) (Amounts Expressed in Thousands of New Taiwan Dollars) (Amounts Expressed in Thousands of New Taiwan Dollars) (Amounts Expressed in Thousands of New Taiwan Dollars) (Amounts Expressed in Thousands of New Taiwan Dollars) (Amounts Expressed in Thousands of New Taiwan Dollars) (Amounts Expressed in Thousands of New Taiwan Dollars) (Amounts Expressed in Thousands of New Taiwan Dollars)
Investee
company		 Main Businesses
and Products		 Total Amount
of
Paid-in Capital		 Method of
Investment
(Note 1)		 Accumulated
Outflow of
Investment
from Taiwan
(R.O.C.)		 Investment Flows Accumulated
Outflow of
Investment from
Taiwan
Net income
(loss) of the
investee		 Percentage of
Ownership		 Peak Holding
Percentage		 Investment
Income
(Loss) Recognized
(Note 2)
Carrying
Amount		 Accumulated
Inward
Remittance of
Earnings
Outflow Inflow
Elite Electronic
Material (Kunshan)
Co., Ltd.
Elite Electronic
Material (Zhongshan)
Co.Ltd.
Elite Electronic
Material (Huangshi)
Co., Ltd.		 Copper clad
laminate and
prepreg business
〞
〞		 803,136
575,296
569,600
(2)

(2)

(2)		 650,816
440,613
601,858
-

-

-		 -
-
-		 650,816
440,613
601,858
2,477,715

1,222,109

124,469
99.79%

100.00%

100.00%
99.79%

100.00%

100.00%
2,472,476

1,222,109

124,469
7,983,006

5,409,279

617,736
6,632,936

3,117,063

-

～ 63 ～

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese)

ELITE MATERIAL CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

  1. Limitation on investment in Mainland China:
Company Aggregate investment amount
remitted from Taiwan to Mainland
China at the end of the period		 Approved investment (amount)
by Ministry of Economic Affairs Investment
Commission(Note 3)		 Limitation on investment in
Mainland China in accordance
with regulations of Ministry of
Economic Affairs Investment
Commission (Note 4)
The Company 1,710,734 4,373,813 10,043,178

  • Note 1: There are three investment approach of categories: (1) Direct Investment in Mainland China.

  • (2) Investment in Mainland China by a third party.

  • (3) Other approach.

  • Note 2: The financial statements were audited by the Certified Public Accountants of the Company.

Note 3: The difference between the paid-in capital of Elite Electronic Material (Kunshan) Co. Ltd. and the investment amount remitted from Taiwan amounted to USD$6,012, which was invested overseas by the subsidiary. Note 4: The difference between the paid-in capital of Elite Electronic Material (Zhongshan) Co. Ltd. and the investment amount remitted from Taiwan amounted to USD$6,255, which was recognized as capital increase out of earnings. Note 5: The difference between the paid-in capital and investment amount remitted from Taiwan amounted to USD$110, which was invested overseas by the subsidiary. Note 6: The items in the balance sheet and those in the income statements were translated at the exchange rate of 28.480 and 29.560, respectively, for the year ended December 31, 2019.

Note 7: The transactions with the Group were eliminated in the consolidated financial statements.

  1. Significant transactions ：

Please refer to the related disclosures above captioned as “Related information on material transaction items” for direct or indirect significant transactions between the Group and its investees in Mainland China for the year ended December 31, 2019. (The transactions were eliminated in the consolidated financial statements.)

  • (d) Major shareholders:

eliminated in the consolidated financial statements.)
Major shareholders:
Shareholding
Shareholder’s Name		 Shares Percentage
Yu Chang Investment Co., Ltd. 25,471,477
7.65%
New Labor Pension Fund- Taiwan 20,014,000
6.01%
Cathay Life Insurance Co., Ltd. 17,521,000
5.26%

Note: (1)The main shareholder information of this table is calculated by the insurance company on

the last business day at the end of each quarter. The above information. As for the share capital recorded in the company's financial report and the number of shares actually delivered by the company without physical registration, the calculation basis may be different or different.

～ 64 ～

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese)

ELITE MATERIAL CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

  • (2)If the information on the Shanghai Stock Exchange is a shareholder's shareholding delivery to the trust, it will be disclosed by the trustee who opened the trust account separately. As for shareholders who handle the declaration of insider equity holding more than 10% of their shares in accordance with the Securities Exchange Act, their shareholdings include their shareholdings plus their delivery of trust and shares with the right to make decisions on trust property, etc. For information on insider equity declaration, please refer to Open Information Observatory.

(14) Segment Information

  • (a) General information

The Group has three reportable segments: Segment domestic, foreign, and other segments. domestic produces and sales different types of printed circuit board products, electronic-industrial specialty chemical, and electronic components. Segment foreign produces and sales prepreg for printed circuit board and copper clad laminate. Other segments engage in investment and product exchange business.

The reportable segments are the Group's strategic divisions. They offer different products and services, and are managed separately because they require different technological and marketing strategies. Most of the strategic divisions were acquired separately. The management of the acquired divisions remains employed by the Group.

  • (b) Information about reportable segments' profit and loss, assets, and liabilities and their measurement and reconciliations

The Group uses the internal management report that the chief operating decision maker reviews as the basis to determine resource allocation and make a performance evaluation. The internal management report includes profit before taxation, but not including any extraordinary activity and foreign exchange gain or losses because taxation, extraordinary activity, and foreign exchange gain or losses are managed on a group basis, and hence they are not able to be allocated to each reportable segment. In addition, not all reportable segments include depreciation and amortization of significant non-cash items. The reportable amount is similar to that in the report used by the chief operating decision maker.

The operating segment accounting policies are similar to those described in note (4) "significant accounting policies" except for the recognition and measurement of pension cost, which is on a cash basis.

The Group treated intersegment sales and transfers as third-party transactions. They are measured at market price.

～ 65 ～

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) ELITE MATERIAL CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

The Group's operating segment information and reconciliations were as follows:

2020 Domestic
$ 6,142,734
787,901		 Foreign
21,058,052
2,279,447		 Other
Segments
-
-		 Adjustment
and
Elimination
-
(3,067,348)		 Total
27,200,786
-
Revenue:
Revenue from external customers
Intersegment revenues
Total Revenue
Reportable Segment net operating
income (loss)
Assets:
Investments accounted for using
equity method
Capital expenditure of non-current
assets
Reportable segment assets
Reportable segment liabilities
2019

$
6,930,635
23,337,499		 -
(3,067,348)		 27,200,786

$
4,184,544
4,475,056		 11,279,676
(15,095,713)
4,843,563

$ 14,794,570
2,110,210
$
21,926,860
-
5,206,501
23,152,537
42,233,968
97,686
40,822,477
(57,018,423)
163,079
(58,045,068)
10,115
7,577,476
27,856,806

$
5,188,230
9,142,516
228,076
(3,457,525)
11,101,297

$ 5,768,281
1,418,421
19,097,241
634,463
-
-
-
(2,052,884)
24,865,522
-
Revenue:
Revenue from external customers
Intersegment revenues
Total Revenue
Reportable Segment net operating
income (loss)
Assets:
Investments accounted for using
equity method
Capital expenditure of non-current
assets
Reportable segment assets
Reportable segment liabilities

$
7,186,702
19,731,704		 -
(2,052,884)		 24,865,522

$
3,654,520
3,618,020		 9,397,767
(12,466,481)
4,203,826

$ 13,432,065
2,093,140
$
20,262,710
-
4,539,146
21,022,369
39,145,685
-
39,279,933
(52,556,036)
(52,915)
(54,860,681)
21,714
6,579,371
25,704,331

$
6,742,779
7,613,222
59,192
(2,247,431)
12,167,762

～ 66 ～

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese)

ELITE MATERIAL CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

  • (c) Product and service information

Revenue from external customers of the Group was as follows:

Product and Services
Capper clad laminate
Prepreg
Mass lam foundry
Other
Total		 2020
$ 14,009,825
12,334,689
758,423
97,849		 2019

13,128,741

10,776,495

945,550

14,736

$
27,200,786


24,865,522
  • (d) Geographic information

In presenting information on the basis of geography, the revenue is based on the geographical location of customers and non-current assets are based on the geographical location of the assets.

Geographic information
Revenue from external revenue:
Taiwan
Mainland China
Other countries
Total
Geographic information
Non-current assets:
Taiwan
Mainland China
Other countries
Total		 2020
$ 4,754,162
20,852,192
1,594,432		 2019

4,389,317

18,778,005

1,698,200

$
27,200,786


24,865,522

2020.12.31
$ 2,110,210
5,178,963
294,255

2019.12.31

2,093,140

4,486,231

-

$
7,583,428

6,579,371

Non-current assets include property, plant and equipment, intangible assets, and other assets, not including financial instruments, deferred tax assets, and guarantee deposits.

  • (e) Major customers
2020 Ratio

12%

8%		 2019
Customer
Sales
$ 3,330,318
2,264,262		 Customer
Sales
3,229,386
2,145,453		 Ratio
A
B		 A
B
13%

9%

～ 67 ～

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