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EMC Annual Report 2022

Jun 8, 2023

52046_rns_2023-06-08_a1026f6f-c825-4f75-be79-0d977a0ead04.pdf

Annual Report

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==> picture [215 x 29] intentionally omitted <==

TWSE Stock Code ： 2383

Elite Material Co., Ltd.

2022

ANNUAL REPORT

Printed Date ： 10th May 2023

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

  • 0 -

http://mops.twse.com.tw https://www.emctw.com

1. The Company Spokesperson:

Name : Robert Chuang Job title : Senior Manager 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 : Yi-Chun Chen ; Hsiao-Ling Chiang 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. Remuneration for directors, president and vice presidents .................................................... 22 4. Corporate Governance ........................................................................................................... 30 5. Audit Fees .............................................................................................................................. 59 6. Information for Change of CPAs ........................................................................................... 59 7. 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.............................................................................................................................. 60 8. Shareholding Transferred or Pledged by Directors, Management, and Major Shareholders Who Hold 10% of the Company Shares ................................................................................ 60 9. Top Ten Shareholders Being the Related Party as Defined in Statement of Financial Accounting Standards No. 6. ................................................................................................. 61 10 .Shareholding Proportion of EMC to Investees .................................................................... 61 IV. CAPITAL OVERVIEW 1. Capital and Shares.................................................................................................................. 62 (1) Issued Shares ........................................................................................................................ 62 (2) Composition of Shareholders ................................................................................................... 62 (3) Distribution Profile of Share Ownership .................................................................................... 62 (4) Major Shareholders ............................................................................................................... 63 (5) Net Worth, Earnings, Dividends, and Market Price per Common Share ............................................ 63 (6) Dividend Policy and Its Execution Results ................................................................................. 64 (7) Effects on Business Performance and EPS Resulted from Stock Distribution Proposed by 2017 Annual General Shareholders Meeting ...................................................................................... 64 (8) Employees’ Compensation and Directors Remuneration ............................................................... 64 (9) Share Buyback by the Company ............................................................................................... 65 2. Corporate Bonds .................................................................................................................... 65 3. Preferred Shares ..................................................................................................................... 66 4. Issuance of Overseas Depository Receipts ............................................................................ 66 5. Employee Stock Options........................................................................................................ 66 6. Employee Restricted Stock Option and Share Issued for Merger or Acquisition .................. 66 7. Fund Utilization Plans and Status .......................................................................................... 66 V. OPERATIONAL HIGHLIGHTS 1. Business Activities ................................................................................................................. 67 (1) Business Scope ..................................................................................................................... 67

  2. 2 -

(2) Business Environment ............................................................................................................ 67 (3) Technology and R&D Overview .............................................................................................. 68 (4) Long-Term and Short-Term Business Plan ................................................................................. 69 2. Overview of the Market, Production and Sales Analysis ...................................................... 69 (1) Market Analysis .................................................................................................................... 69 (2) Applications and Production Process of Major Products................................................................ 70 (3) Sources of Major Raw Materials .............................................................................................. 71 (4) Major Suppliers or Customers Who Account for 10% of Purchases /or Revenues in Recent Two Years .................................................................................................................................. 71 (5) Volume and Value of the Production in Recent Two Years ............................................................. 71 (6) Sales Volume and Amount in Recent Two Years .......................................................................... 72 3. Information about Employees ................................................................................................ 72 4. Environmental Protection Measures and Expenses ............................................................... 72 5. Employee Welfare .................................................................................................................. 74 6. Information and communication security management ......................................................... 75 7. Important Contracts and Agreements..................................................................................... 76 VI. FINANCIAL INFORMATION 1. Five-Year Financial Summary ............................................................................................... 77 2. Financial Ratio Analysis for Recent Five Years..................................................................... 81 3. The Audit Committee’s Review Report ................................................................................. 84 4. Financial Reports (Stand-alone) ............................................................................................ 84 5. Financial Reports (Consolidated) .......................................................................................... 84 6. Impact of the Financial Distress Occurred to the Company and Affiliates in Recent Years until the Annual Report Being Published............................................................................... 84 VII.REVIEW AND ANALYSIS OF THE FINANCIAL CONDITION, PERFORMANCE AND RISK MANAGEMENT 1. Review and Analysis of Financial Conditions ....................................................................... 85 2. Review and Analysis of Financial Performance .................................................................... 86 3. Review and Analysis of Cash Flow ....................................................................................... 87 4. Major Capital Expenditures in Recent Years and Impacts on Financial and Operational Situations................................................................................................................................ 87 5. Investment Policies in Recent Years ...................................................................................... 87 6. Risks Management ................................................................................................................. 88 7. Others ..................................................................................................................................... 90 VIII. SPECIAL DISCLOUSE 1. Affiliated Companies ............................................................................................................. 91 2. Private Placement Securities in the Latest Year ..................................................................... 93 3. The Company’s Shares Held or Disposed by Subsidiaries in Recent Years until the Annual Report Being Published............................................................................................. 93 4. Other Supplementary Information ......................................................................................... 93 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 ................................................................................................................................ 93

  • 3 -

I. BUSINESS REPORT TO SHAREHOLDERS

1.Year 2022 Business Results

i. Execution Results of Business Plan

Unit: NT$thousands
Items Year 2022 Year 2021 %
Revenue 38,672,549 38,500,026 0.45%
Gross profit 9,710,062 10,068,554 -3.56%
Operating profit 6,225,247 6,922,620 -10.07%
Income before tax 6,296,055 6,911,896 -8.91%
Net income 5,076,240 5,500,157 -7.71%

Note: Numbers are presented on consolidated basis. The net income of year 2022 includes the net income of NT$3,366 thousand belongs to the minority interests.

The capacity of CCL is as the following:

  • a. Kunshan production site of Jiangsu Province, China: Monthly production capacity has achieved 1.35 million sheets. (Expected capacity of 1.65 million/Month in 1Q23)

  • 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 900,000 sheets.

ii. Status of Budget Execution: Not applicable

iii. Summary of Cash Flow Statements

Summary of Cash Flow Statements
Unit: NT$ thousands
Items Year 2022
Net cash provided by operating activities 7,498,208
Net cash used in investing activities 6,595,595
Net cash used in financing activities 2,687,468
Effects of changes in foreign exchange rate
on cash and cash equivalents 211,468
Increase in cash in reporting period 3,801,549

iv. Analysis of Profitability

Items Year 2022
Year 2021
Return on assets (%) 12.70
17.26
Return on equities (%) 24.26
30.11
Percentage of paid-in capital (%) Operating profit
186.99
207.94
Income before tax
189.12
207.62
Net margin (%) 13.13
14.29
Earningsper share(NT Dollar) 15.24
16.50

  • 4 -

  • v. Results of Research and Development:

EMC is the world's largest supplier of halogen-free and Prepreg laminate material, among which the market share of HDI/SLP laminate materials for handheld devices has ranked number one in the world for several consecutive years, and among high-speed related application products such as servers and switches, global market share also rises from nothing to the top three, and the company's long-term development and growth can be expected.

In addition to continuing to focus on the development of halogen-free laminate materials for handheld and high-speed related applications, the company also extends the development of laminate materials for other applications, in year 2022, the company successfully developed a non-PTFE high-frequency laminate material, which can meet the processability of general PCB wet process and meet the needs of base station antennas and self-driving cars for the Internet of Things; The development of substrate is another key focus, at present, it has been mass-produced, and has been qualified by many customers for its quality, achieving localized supply, breaking the situation that Japanese manufacturers monopolized, and EMC’s market share is rapidly increasing.

The development of substrate materials is also a major focus. At present, products with X, Y-CTE < 6ppm/ ℃ have been developed and promoted to customers for certification, so as to improve the localized supply against the exclusive Japanese manufacturers substrate material for packaging.

New products successfully developed by the Company in 2022:

  1. RCC material adopted in 5G high-end handheld device has been certified by many customers and is actively preparing for mass production.

  2. Non PTFE high frequency laminate material for Self-driving Radar and Antenna has been mass produced.

  3. PCIe 5 II and PCIe 6 high speed data transmission material qualified by various customers and continuously gain market share.

  4. 800GHz Switch material verified and pilot run by global brand companies and ready for mass production.

In addition to product innovation and commercialization, the competitiveness of the company, intellectual property is also an indispensable item. EMC has been developing innovative products with its own technology, and has been constantly protecting its own technology property rights through patent applications. The foil laminate material industry ranks No. 1 in Taiwan and No. 4 in the world. In the future, it will continue to apply for patents to improve the company's technological value and competitiveness.

2.Summary of Year 2023 Business Plan

  • i. Planning of sales and production

  • a Promote eco-friendly laminate material

  • b Capacity expansion

  • c Balancing sales and production, flexible inventory adjustment and active cash management operating strategy

  • ii. Operating strategy

  • 5 -

  • a. 5G infrastructure servers and switch laminate materials continue to be introduced into high-end HDI processes, and EMC has stabilized its top three material suppliers in the infrastructure market.

  • b. The substrate material is an extension of its own substrate material technology. It has been massproduction and shipped, and its quality has been recognized by customers. It will continue to develop this market.

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

  • d. To penetrate into LEO market, aggressively seize the growth of market share.

  • e. To develop laminate material for high end vehicle market.

iii. Sales volume target

Expected sales volume target:

Copper clad laminates (CCLs): 43 million sheets/year

Prepreg (PP): 0.96 million rolls/year Mass Lam (M/L): 1.05 million panels/year

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

i. Future development strategy of EMC:

  • a To develop high speed/ high frequency and low loss materials.

  • b To solidify the leading position of EMC’s materials consumed by HDI PCBs in the global market.

  • c Enlarge offshore market, diversify risks.

  • ii. Perfectness of Internal control, enhance management efficiency

  • iii. Effects from changes in competitions, regulations, and business environment:

Due to the outbreak of Covid-19 in those two years, the company and all sites have been strictly following the quarantine protocol to make sure that the company still operates on the track.

Looking forward, although the overall economic environment is full of uncertainties, technological innovation is still the only way for enterprises to grow. The requirements for the speed and quality of information transmission are getting higher and higher, and the trend of enterprise product specification upgrades will not change. The market share in server and switch products has increased generation by generation with the launch of new generations of products; 5G mobile phone shipments will continue to grow due to the rapid increase in penetration rate. EMC continues to improve self-competitiveness and has a positive view toward the future operating prospects.

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: 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:

  • 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.

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

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

  • 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.
Acquired Arlon EMC, CA, USA as the first manufacturing site in USA for EMC, and the 4th offshore
manufacturing site.
2021 Purchased land and facility located in Taoyuan for further expansion in December.
2022 The 12th term of directors were elected on AGM, and the first meeting of 12th board of directors elected
Mr. Ding-Yu, Dong as chairman and Mr. Fei-Liang Tsai as vice chairman.
The fifth domestic unsecured conversion corporate bond was issued on April..
The board of directors concluded to set up factories in Southeast Asia on August
  • 10 -

III. CORPORATE GOVERNANCE

1. Organization

1.1. Organization Chart

==> picture [483 x 395] intentionally omitted <==

  • 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 To develop the business strategy of the Company and to execute the business plan.
To prepare the annual business budget, targets, and strategic management plan.
To plan the key investment projects.
Audit Office Assist the Board of Directors to perform internal control and examine the auditing,
accounting and internal control system and executions.
Marketing &
Promotion Office		 Be in charge of the market research of the Company’s products and formulation of the
marketing strategies.
  • 11 -
Research &
Development
Division		 Be in charge of the research and development of new products, patent applications and
filings, and promotions of new products.
Group Finance&
Accounting		 Assist the President and be in charge of the management of finance, accounting,
information system, and EHS system.
Group Human
Resources
Division		 Assist the President and be in charge of the management of human resources, information
system, and EHS system.
Group
Procurement		 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.
Group IT To plan and manage the group IT operations.
Group Quality
&Assurance		 Be in charge of the integration of quality system and establish database of related product
characters.
Group operation
management		 Coordinate the improvement of manufacturing and operational efficiency. Optimize capital
support audit work and related benefit tracking mechanism.
Each Business
Unit (Zhongshan,
Kunshan,
Guanyin, and
Huangshi)		 Be in charge of the sales of domestic and overseas markets, the management of inventory,
product engineering design, and customer service.
Be responsible for production, quality assurance, and equipment maintenance affairs.
  • 12 -

2. Directors and Management Team

2.1. Directors

2 April 2023 2 April 2023 2 April 2023 2 April 2023
Title Nationality
or Record
of Birth		 Name
Sex
Age		 Date elected
Term
(years)		 Date first
elected		 Shareholding
when elected		 Current shareholding
Shareholding of
spouse & Minor
children		 Holding
shares in the
name of
another
person		 Curriculum vitae Other positions
in EMC and
other companies
Executives or Directors who
are spouses or within two
degrees of kinship		 Remarks
Share % Share % Share % Share % Title Name Relationship
Chairman ROC Ding-Yu Dong
Male
61-70		 26 May 2022
3 years		 25 May
2001		 5,265,766 1.58
5,265,766		 1.58
15,842
0.00
0
0.00
Ph.D. in Engineering,
Stanford University, USA
Assistant Professor, San
Jose State University, USA		 None None None
Vice
Chairman		 ROC Yu Chang
Investment Co.,
Ltd.
Representative:
Fei-Liang Tsai
Male
61-70		 26 May 2022
3 years		 25 Jun 2004
25,471,477
447,244

7.65
0.13

25,471,477
500,244

7.65
0.15

0
0

0.00
0.00

0
0

000
0.00

Master in Chemical
Engineering, National
Tsing Hua University
President, Taiwan Union
Technology Corp.		 None None None
Director ROC Yu Chang
Investment Co.,
Ltd.
Representative:
Wen-Shiung
Lee
Male
71-80		 26 May 2022
3 years		 25 Jun 2016
25,471,477
0

7.65
0.00

25,471,477
0

7.65
0.00

0
0

0.00
0.00

0
0

000
0.00

Bachelor of Chemical
Engineering, Tamkung
University
Director, Unimicron
Corporation
President, Isola Asia
Pacific(Taiwan)Inc.		 Consultant,
Taiwan Printed
Circuit
Association		 None None
Director ROC Mon-Chong
Hsieh
Male
51-60		 26 May 2022
3 years		 25 Jun 2004
0		 0.00
0		 0.00
0
0.00
0
0.00
Master in International
Affairs, Columbia
University, USAChairman,
Food Industry Research
and Development
InstituteDirector, The
Eisenhower Exchange
Fellowships, Inc.		 Chairman,
Synmax
Biochemical
Co., Ltd.
Vice Chairman,
Royal Chef Co.,
Ltd.		 None None
  • 13 -
Title Nationality
or Record
of Birth		 Name
Sex
Age		 Date elected
Term
(years)		 Date first
elected		 Shareholding
when elected		 Shareholding
when elected		 Current shareholding Current shareholding
Shareholding of
spouse & Minor
children
Shareholding of
spouse & Minor
children		 Holding
shares in the
name of
another
person		 Holding
shares in the
name of
another
person		 Curriculum vitae Other positions
in EMC and
other companies
Executives or Directors who
are spouses or within two
degrees of kinship
Executives or Directors who
are spouses or within two
degrees of kinship
Executives or Directors who
are spouses or within two
degrees of kinship		 Remarks
Share % Share % Share % Share % Title Name Relationship
Independent
Director
ROC		 Bing Shen
Male
71-80		 26 May 2022
3 years		 25 Jun 2016
0		 0.00
0		 0.00
0
0.00
0
0.00
MBA, Harvard University
Financial Analyst, World
Bank
Chief Investment Officer,
International Bank Corp.
Executive Director,
Morgan Stanley & Co.
Vice President, China
Development Industrial
Bank
President, CDIB Partners
Investment Holding
Corporation		 Director, OUC
Corporation
Director,
ECOVE		 None None
Independent
Director
ROC		 Duen-Chian
Cheng
Male
61-70		 26 May 2022
3 years		 10 Jun 2019
0		 0.00
0		 0.00
0
0.00
0
0.00
MBA, Columbia
University,
USA President,
Director, Appier Holdings
Inc.
Independent Director, TA
YA ELECTRIC WIRE &
CABLE CO., LTD
Chairman, LuxNet Corp
Chairman, Clientron
President, UMC Capital
Corporation		 Chairman,
TGVest Capital
Co., Ltd.
Chairman,
TriKnight
Capital
Corporation
Vice Chairman,
LuxNet Corp		 None None
  • 14 -
Title Nationality
or Record
of Birth		 Name
Sex
Age		 Date elected
Term
(years)		 Date first
elected		 Shareholding
when elected		 Shareholding
when elected		 Current shareholding Current shareholding
Shareholding of
spouse & Minor
children
Shareholding of
spouse & Minor
children		 Holding
shares in the
name of
another
person		 Holding
shares in the
name of
another
person		 Curriculum vitae Other positions
in EMC and
other companies
Executives or Directors who
are spouses or within two
degrees of kinship
Executives or Directors who
are spouses or within two
degrees of kinship
Executives or Directors who
are spouses or within two
degrees of kinship		 Remarks
Share % Share % Share % Share % Title Name Relationship
Independent
Director
ROC		 Hsi-Chia Chen
Female
51-60		 26 May 2022
3 years		 26 May
2022		 0 0.00
0		 0.00
0
0.00
0
0.00
Ph.D. in Law, National
Taiwan University
Ph.D. in Law, Peking
University
Partner, Chief
Representative of Beijing
Office, Joint Head of
Office-China & Member of
Asia Pacific Operating
Committed (APOC),
Pinsent Masons LLP
Trainee , King & Wood
Mallesons (previously
known as King & Wood)
Associate &Partner,
Formosan Brothers,
Attorneys-at-Law		 Managing
Partner, Chen &
Chang,
Attorneys-at-
Law.
Member,
Standing
Committee of
ICC
International
Centre for ADR
Convenor,
Taiwan Chapter
of the Chartered
Institute of
Arbitrators
(CIArb) East
Asia Branch.
Independent
Director, Asia
Renewable
Energy
(Cayman)Ltd.		 None None
  • 15 -

2.2. Major shareholders of EMC’s Directors are institutional shareholders

2 April 2023

2 April 2023
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

2 April 2023

2 April 2023
Name of Juridical Persons Major Shareholders of the Juridical Persons
Yu Sheng Investment Ltd. British Virgin Island Daton West Limited

2.4. Professional Qualifications and Independent Analysis of Directors

(1) Professional Qualifications and Independent information disclose of Directors:

Condition
Name		 Professional qualifications
Curriculum Vitae		 Independence situations
(Meet the criteria of Note
1)		 The number of
independent directors
of the other public
offering company
Director
Dong, Ding Yu
Have the work experience
in business, legal, finance,
accounting or corporate
business		 Assistant Professor, San Jose
State University		 （6）（8）（9）（10）
（11）（12）		 1
Director
Tsai, Fei Liang
Have the work experience
in business, legal, finance,
accounting or corporate
business		 President, Taiwan Union
Technology Corporation		 （1）（3）（4）（5）
（6）（8）（9）（10）
（11）		 -
Director
Lee, Wen
Shiung		 Have the work experience
in business, legal, finance,
accounting or corporate
business		 Director, Unimicron
Corporation
President, Isola Asia Pacific
(Taiwan) Inc.		 （1）（2）（3）（4）
（5）（6）（7）（8）
（9）（10）（11）		 -
Director
Hsieh, Mon
Chong		 Have the work experience
in business, legal, finance,
accounting or corporate
business		 Chairman, Food Industry
Research and Development
Institute
Director, The Eisenhower
Exchange Fellowships, Inc.
Director, Chinese National
Federation of Industries		 （1）（2）（3）（4）
（5）（6）（7）（8）
（9）（10）（11）
（12）		 -
  • 16 -
Independent
director
Shen, Bing		 Have the work experience
in business, legal, finance,
accounting or corporate
business		 Financial Analyst, World Bank
Chief Investment Officer,
International Bank Corp.
Executive Director, Morgan
Stanley & Co.
Vice President, China
Development Industrial Bank
President, CDIB Partners
Investment Holding
Corporation
（1）（2）（3）（4）
（5）（6）（7）（8）
（9）（10）（11）
（12）		 -
Independent
director
Cheng, Duen-
Chian		 Have the work experience
in business, legal, finance,
accounting or corporate
business		 Managing Director, Union
Investment Management
Consulting Co, Ltd.
Executive Director/President
of Taiwan Branch, Morgan
Stanley Asia Limited
Executive Director, Goldman
Sachs Asia L.L.C.		 （1）（2）（3）（4）
（5）（6）（7）（8）
（9）（10）（11）
（12）		 2
Independent
director
Chen, Hsi-
Chia		 Have the work experience
in business, legal, finance,
accounting or corporate
busines


Partner of Pinsent Masons,
Chief Representative of
Beijing Office, Co-Head of
China Region and Member of
Asia Pacific Operations
Committee
King & Wood Mallesons
trainee lawyer
Lawyer and Partner of
Huanying Law Firm		 （1）（2）（3）（4）（5）
（6）（7）（8）（9）（10）
（11）（12）		 -

Note 1 : Each director meets the following conditions in the two years prior to the election and during his or her term of office.

  • （ 1 ） An employee who is not employed by the company or its affiliates.

  • （ 2 ） Directors or supervisors who are served as the position of the same company or affiliated enterprises (except where the company and its parent company, subsidiaries or subsidiaries of the same parent company are established as independent directors in accordance with this Act or local national decrees).

  • （ 3 ） A natural person shareholder who is not a natural person who holds more than 1% of the total number of issued shares of the company or holds in the name of others or the top 10 shareholders.

  • （ 4 ） The spouse, second degree or third degree relatives of managers not listed in (1) or (2) or (3) listed persons.

  • （ 5 ） A director, supervisor or employee who does not directly hold more than 5% of the total number of issued shares of the company, the top five shareholders or the legal person shareholders designated as directors or supervisors of the company in accordance with article 27, paragraphs 1 or 2 of the company Act (except where the company and its parent company, subsidiaries or subsidiaries of the same parent company are established by this law or local laws and regulations).

  • （ 6 ） More than half of the shares that are not seated or have voting rights in the directors of the company shall be directors, supervisors or employees of other companies controlled by the same person (except where they are independent directors of the company or its parent, subsidiary or subsidiary of the same parent company established in accordance with this Act or local national decrees).

  • （ 7 ） Directors, supervisors or employees of other companies or institutions that are not the same person as the chairman, president or equivalent of the company or spouse (except where the company and its parent company, subsidiaries or subsidiaries of the same parent company are established as independent directors in accordance with this Law or local national laws).

  • （ 8 ） Directors, supervisors, president or shareholders holding more than 5% of the shares of a particular company or institution that do not have financial or business dealings with the company (unless a particular company or institution holds more than 20% of the total number of issued shares of the company, not more than 50%, and is an independent director of the company and its parent company, subsidiaries or subsidiaries of the same parent company in accordance with this Law or local national laws).

  • 17 -

  • （ 9 ） Professionals, sole proprietors, partners, directors, supervisors, managers and their spouses who do not provide audits for the company or related enterprises or have obtained remuneration in the past two years in the past two years in a commercial, legal, financial, accounting and other related services of NT$500,000. However, this does not apply to members of the Remuneration Committee, the Public Takeover Review Committee or the Special Committee on Mergers and Acquisitions who perform their functions under the Securities and Exchange Act or the relevant laws and regulations of the Mergers and Acquisitions Act.

  • （ 10 ） There is no family relationship with other directors within the scope of a spouse or second-degree relatives.

  • （ 11 ） There is no circumstance under the paragraphs of article 30 of the company act.

  • （ 12 ） There is no any elected directors who is on behalf of a government, a legal person or its representative under the article 27 of company act.

(2)The diversity and independence of board of directors ：

  • (A)Diversity of board of directors ：

The members of the 11th Board of Directors of the company have rich knowledge of management, operational judgment and related industry knowledge, and the company will continue to evaluate the diversified complementarity of the board members, continue to implement the diversification policy, and the specific goals for the future include increasing the number of female directors (at least one seat) or the proportion of independent directors, all of which will be used as a reference for the next director re-election.

The composition of the board of directors of the company is based on the Code of Corporate Governance and the Method of director election to consider the diversity of the board of directors from various aspects. The company has a total of 7 directors, including 3 independent directors, who have extensive experience and expertise in the fields of finance, commerce, industrial technology and management. 1 director with employee status in the Company accounts for 14%, 2 independent directors have a term of less than 3 years, 1 independent director has a term of 4-6 years, 2 directors are over 70 years old, 4 are 60 to 69 years old, and 1 is under 60 years old. All directors are male and of Chinese nationality. More diversity of board members is as follows:

Diversity
Name		 Content Content Content
Nationality Gender Employed
by EMC		 Age Tenure of independent
director
51-60 61-70 71-80 < 3years 3-9 years
Dong Ding-
Yu		 ROC Male
Tsai, Fei
Liang		 ROC Male
Lee, Wen
Shiung		 ROC Male
Hsieh, Mon
Chong		 ROC Male
Shen, Bing ROC Male
Cheng,
Duen-
Chian		 ROC Male
Chen, Hsi-
Chiag		 ROC Female
Name Professional Background Professional Qualification and Experience
Industry Finance and
accounting		 Legal Operating and
Manufacturing		 Leadership
Skill		 Strategic
Decision-
making		 Global
Market
Perspective
Dong Ding-
Yu
Tsai, Fei
Liang
- 18 -
Lee, Wen
Shiung
Hsieh, Mon
Chong
Shen, Bing
Cheng,
Duen-Chian
Chen, Hsi-
Chiag

(B)The independence of board of directors ：

  • a The company has a total of 7 directors, including 3 independent directors, of which 43% are independent directors, and the independent directors do not have the circumstances stipulated in items 3 and 4 of Article 26-3 of the Securities and Exchange Act, and none of the directors of the company have a relationship of kinship within the scope of spouse or second-degree relatives.

  • b All independent directors are compliance with the regulations on independent directors stipulated by the Financial Supervisory Commission. The status of independence is as follows

Name Whether the
person, spouse,
or relative
within the
second degree is
a director,
supervisor, or
employee of the
company or its
affiliated
companies		 The number and
proportion of the
company's
shares held by
myself, spouse,
and relatives
within the
second degree
(or in the name
of others)		 Whether to
serve as a
director,
supervisor or
employee of a
company with
a specific
relationship
with the
company		 The amount of
remuneration
obtained for
providing business,
legal, financial,
accounting and other
services to the
company or its
affiliated companies
in the last 2 years
Shen,Bing No No No No
Cheng, Duen-Chian No No No No
Chen, Hsi-Chiag No No No No
  • 19 -

2.5. President, Vice President, Assistant Vice President, Managers of Departments and Branches

2 2 2 April 2023
Title Natio
nality		 Name
Sex		 Effective
Shareholding		 Shareholding
of Spouse
& Minor
Children		 Holding
shares in the
name of
another
person		 Curriculum Vitae Other Positions
Managers who are
spouses or within two
degrees of kinship
Remarks
Share % Share % Share % Title Name
Relatio
nship
President ROC Guan, En-
Xiang
Male		 16 Aug
2021		 51,222
0.02
29
0.00
None		 Bachelor in Chemistry, National Cheng-Kung
University
Production Director, Pou Li Der Inc.		 President, Elite
Electronic
Material
(Kunshan) Co.,
Ltd.		 None None
Senior
Vice
president		 ROC Sun,
Michael
Male		 9 Aug
2018		 0
0.00
0
0.00
None		 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		 None
Vice
president		 ROC Peng, Yi-
Ren
Male		 1 Apr
2011		 147,774
0.04
0
0.00
None		 Master in Chemistry, University of LAMAR,
USA		 None
Vice
resident		 ROC Chuang,
Michael
Male		 1 Mar
2020		 0 0.00 0 0.00 None Master of Science, Duke University, USA
General manager, PVC, Zhuhai
BU Head, Liteon Mobile		 VP of Elite
Material(Zhongs
han)
Vice
president		 ROC Chou, Li-
Ming
Male		 19 May
2020		 9,791
0.00
0
0.00
None		 Master of Materials Science and Engineering,
NTU
Director, RD division		 None
Vice
president		 ROC
 Lin, Alan
Male		 17 May
2021		 0
0.00
0
0.00
None		 Master of information management, NSYSU
Director Sercom technology
Director, E-Ink		 None
Vice
president		 ROC Yang,
Danny		 6 Sep
2021		 22,049
0.01
0
0.00
None		 Institute of Mechanical Engineering, Taiwan
Institute of Industrial Technology
VP, EMC president office
None
  • 20 -
AVP, EMC (KY)
Vice
president		 ROC

 Lee, De-Na
Male		 13 Sep
2021		 2,000
0.00
0
0.00		 None Institute of Mechanical Engineer,
CKVS AVP, EMC(ZS) AVP, EMC (KS)		 None
Vice
president
Jan 1, 2023		 ROC

 Lin, Michael
Male
1 Jan
2023		 970
0.00
4,000
0.00		 None Master in mechanical engineering, National
Cheng-Kung University
Celxpert energy corporation, COO
EMC (KS), director
None
Vice
president
March 20,
2023		 ROC
 Lee, Stan
Male		 20 Mar
2023		 0
0.00
0
0.00		 None MBA, Georgetown University, US
SKFH, VP, Spokesperson		 None
Director
(Corporate
Goverrnor)
"
March 1,
2023		 ROC Wesley-Lin
Male
1 Mar
2023		 0
0.00		 0 0.00 None Bachelor, Department of Business
administration, Shih Chien University
Manager of Audit Office, Elite Material Co.,
Ltd.		 None
Head of
Accounting
Department		 ROC Yen, Sara
Female		 16 Mar
2015		 0
0.00		 0
0.00		 None Master of Accounting, Chung Yung Christian
University		 None
  • 21 -

3. Remuneration for directors, president and vice president

3.1.1 Remuneration paid to Directors and Independent Directors

Unit ： NTD thousand

Title Name Remuneration Remuneration Remuneration Remuneration Remuneration Remuneration Remuneration Remuneration Ratio of Total
Remuneration
(I+II+III+IV)
over Net
Income (%)		 Ratio of Total
Remuneration
(I+II+III+IV)
over Net
Income (%)		 Relevant Compensation Received by Directors Who Are Also employees Relevant Compensation Received by Directors Who Are Also employees Relevant Compensation Received by Directors Who Are Also employees Relevant Compensation Received by Directors Who Are Also employees Relevant Compensation Received by Directors Who Are Also employees Relevant Compensation Received by Directors Who Are Also employees Relevant Compensation Received by Directors Who Are Also employees Relevant Compensation Received by Directors Who Are Also employees Ratio of Total
Remuneration
(I+II+III+IV+V+
VI+VII) to Net
Income (%)		 Ratio of Total
Remuneration
(I+II+III+IV+V+
VI+VII) to Net
Income (%)		 Remu
nerati
on
Paid
to
Direct
ors
from
an
Invest
ed
Comp
any or
the
Comp
any's
Subsi
diary
Base
Remuneration
(I)		 Severanc
e Pay
and
Pension
(II)		 Directors'
Remuneration
from
Distribution of
Earnings (III)		 Operating
Allowances
(IV)		 Salary, Bonuses,
and Allowances
(V)		 Severance Pay and
Pension (VI)		 Employees' Compensation
from Distribution of Earnings
(VII)
The
Co
mp
any		 All
Compani
es in the
Consolida
ted
Financial
Statement
s		 T
h
e
C
o
m
p
a
n
y		 All
Com
pani
es in
the
Cons
olida
ted
Fina
ncial
State
ment
s		 The
Compa
ny		 All
Comp
anies
in the
Conso
lidated
Financ
ial
State
ments		 The
Co
mp
any		 All
Com
panie
s in
the
Cons
olidat
ed
Fina
ncial
State
ment
s		 The
Comp
any		 All
Comp
anies
in the
Conso
lidated
Financ
ial
State
ments		 The
Compa
ny		 All
Comp
anies
in the
Conso
lidated
Financ
ial
State
ments		 The
Compa
ny		 All
Compan
ies in
the
Consoli
dated
Financia
l
Stateme
nts		 The Company All
Companies
in the
Consolidate
d Financial
Statements		 The
Comp
any
 All
Compa
nies in
the
Consoli
dated
Financi
al
Statem
ents
Cash Stock Cash Stock
Chairman Dong,
Ding
Yu		 0 0 0 0 23,416
23,416
304
304		 23,720
0.47%

23,720
0.47%

9,439
16,911
0
0
1,302
0		 1,302
0
34,461
0.68%

41,933
0.83%

None
Vice
Chairman		 Yu
Chang
Invest
ment
Co.,
Ltd.
Director Yu
Chang
Invest
ment
Co.,
Ltd.
  • 22 -
Director Hsieh,
Mon
Chong
Independent
Director		 Shen,
Bing		 0 0 0 0 14,049
14,049
233
233		 14,282
0.28%

14,282
0.28%

0
0
0
0
0
0
0
0
14,282
0.28%

14,282
0.28%

None
Independent
Director		 Cheng,
Duen-
Chian
Independent
Director
May 26,
2022
Resigned.		 Tsai,
Rong
Dong
Independent
Director
May 26,
2022
Onboard.		 Chen,
Hsi-
Chia

  • (Note 1): Please state the policy, system, standard and structure of the independent director's honorarium payment, and describe the correlation with the amount of remuneration according to the responsibilities, risks, investment time and other factors undertaken: The remuneration of the general directors and independent directors of the company shall be not more than 1.2% of the remuneration of the directors if there is a profit in the year stipulated in the Articles of Association of the Company. The procedures for setting remuneration for directors are based on the Company's "Performance Assessment Method for the Board of Directors", not only with reference to the company's overall operating performance, future operational risks and development trends of the industry, but also to the individual's performance compliance rate and contribution to the company's performance. Considering the reasonable remuneration including the mastery of the company's goals and tasks, the understanding of the responsibilities of the directors, the degree of participation in the company's operations, the operation and communication of internal relationships, the professional and continuous training of directors, internal control, etc., into the performance appraisal and remuneration payment considerations, the relevant performance appraisal and remuneration rationality are reviewed by the Remuneration Committee and the Board of Directors, and the remuneration system is reviewed in a timely manner according to the actual operating conditions and relevant laws and regulations at any time, so as to seek a balance between the company's sustainable operation and risk control.

  • (Note 2): In addition to the above table, the remuneration received by the directors of the Company for the most recent year for the services provided by all companies in the financial report (e.g. as consultants to non-employees, etc.): None.

  • 23 -

3.1.2 Bracket of Remuneration paid to Directors and Independent Directors

Bracket Name of Directors Name of Directors Name of Directors Name of Directors
Total of ( I + II + III + IV) Total of ( I + II + III + IV + V + VI + VII )
The Company All Companies in the
Consolidated Financial
Statements		 The Company All Companies in the
Consolidated Financial
Statements
Under NT$1,000,000
NT$1,000,000 ~ NT$2,000,000
NT$2,000,000 ~ NT$3,500,000 Chen, Hsi-Chia, Tsai, Rong
Dong		 Chen, Hsi-Chia, Tsai, Rong
Dong		 Chen, Hsi-Chia, Tsai, Rong
Dong		 Chen, Hsi-Chia, Tsai, Rong
Dong
NT$3,500,000 ~ NT$5,000,000 Fei-Liang Tsai ;
Mon-Chang Hsieh ;
Wen-Shiung Li ;
Bing Shen ;
Duen-Chian Cheng ;
Fei-Liang Tsai ;
Mon-Chang Hsieh ;
Wen-Shiung Li ;
Bing Shen ;
Duen-Chian Cheng ;		 Fei-Liang Tsai ;
Mon-Chang Hsieh ;
Wen-Shiung Li ;
Bing Shen ;
Duen-Chian Cheng ;
Fei-Liang Tsai ;
Mon-Chang Hsieh ;
Wen-Shiung Li ;
Bing Shen ;
Duen-Chian Cheng ;
NT$5,000,000 ~ NT$10,000,000 Ding-Yu Dong Ding-Yu Dong
NT$10,000,000 ~ NT$15,000,000
NT$15,000,000 ~ NT$30,000,000 Ding-Yu Dong Ding-Yu Dong
NT$30,000,000 ~ NT$50,000,000
NT$50,000,000 ~ NT$100,000,000
NT$100,000,000 and above
Total 8 8 8 8
  • 24 -

3.2.1 Remuneration paid to President, Senior Vice President, and Vice President

Unit：NTD thousand Unit：NTD thousand Unit：NTD thousand
Title Name Salary (I) Severance Pay and Pension (II) Compensation and Allowances
(III)		 Employees' Compensation from
Distribution of Earnings (IV)		 Ratio of Total Compensation
(I+II+III+IV) to Net Income
(%)		 Compensation
paid to President
and Other
Managers in This
Table from an
Invested
Company other
than the
Company's
Subsidiary
The
Company		 All
Companies in
the
Consolidated
Financial
Statements		 The
Company		 All Companies
in the
Consolidated
Financial
Statements		 The
Company		 All Companies
in the
Consolidated
Financial
Statements		 The Company All Companies in
the Consolidated
Financial
Statements		 The
Company		 All
Companies in
the
Consolidated
Financial
Statements
Cash Stock Cash Stock
President Guan, En-Xiang 31,020 35,105 1,094 1,094 37,204 45,248 11,576 0 11,576 0 80,894
1.59%		 93,023
1.83%		 None
SVP Sun, Michael
VP Peng, Yi-Ren
VP Chuang, Michael
VP Chou, Li-Ming
VP Lin, Alan
VP Lin,Chien-Chen
VP Yang, Danny
VP Lee, De-Na
VP
(Sep 2,2022
resigned)		 Randy Yu
VP
(Sep 26,2022
resigned)		 Kenny Su
VP
(Dec 31, 2022
resigned)		 Wang, Gary

Note 1 ： Retirement pension is the amount of the company's retirement pension expense.

Note 2 ： The above is the remuneration of the general manager and vice presidents in the most recent year (Year 2022).

  • 25 -

3.2.2. Bracket of Compensation paid to President, Senior Vice President, and Vice President

Bracket Name of President, and Vice Presidents Name of President, and Vice Presidents
The Company All Companies in the Consolidated Financial
Statements
Under NT$1,000,000
NT$1,000,000 ~ NT$2,000,000 RandyYu RandyYu
NT$2,000,000 ~ NT$3,500,000 Wang, Gary、Su, Kenny、Lee, De-Na Wang, Gary、Su, Kenny
NT$3,500,000 ~ NT$5,000,000 Chuang, Michael
NT$5,000,000 ~ NT$10,000,000 Sun, Michael、Peng, Ri-Ren、Chou,Li-Ming、Lin,
Alan、Yang, Danny、Lin, Chien-Chen		 Sun, Michael、Peng, Ri-Ren、Chou,Li-Ming、Lin,
Alan、Yang, Danny、Lin, Chien-Chen、Lee, De-
Na、Chuang,Michael
NT$10,000,000 ~ NT$15,000,000
NT$15,000,000 ~ NT$30,000,000 Guan, En-Xiang Guan, En-Xiang
NT$30,000,000 ~ NT$50,000,000
NT$50,000,000 ~ NT$100,000,000
NT$100,000,000 and above
Total 12 12
  • 26 -

3.3.1 Compensation Paid to Managers

Unit: NT$ thousands Unit: NT$ thousands
Title Name Compensation
(Stock)		 Compensation
(Cash)		 Total amount Ratio of Total
Amount to Net
Income (%)
Chairman Dong,Ding-Yu 0 14,508 14,508 0.29%
President Guang,En-Xiang
SeniorVice President Sun,Michael
Vice President Peng,Yi-Ren
Vice President Chou,Li-Ming
Vice President ChuangMichael
Vice President Lin,Alan
Vice President Lin, Chien-Chen
Vice President Yang,Danny
Vice President Lee,De-Na
Head of Corporate
Governance
(Dismissed on Mar 1,
2023)		 Chang, Li-Chio
Director of Accounting
Department		 Yen, Sara

3.3.2 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(%)
TheCompany
2021 2022
Total amount Ratio of Total
Amount to Net
Income (%)		 Total amount Ratio of Total Amount
to Net Income (%)
Directors 60,410 1.10% 34,461 0.68%
Independent
Directors		 23,843 0.43% 17,282 0.28%
President &
Vice President		 131,789 2.40% 80,894 1.59%
Net income 5,493,218 - 5,072,874 -
  • 28 -
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(%)
AllCompanies in theConsolidated FinancialStatements
2021 2022
Total amount Ratio of Total
Amount to Net
Income(%)		 Total amount Ratio of Total Amount
to Net Income (%)
Directors 61,270 1.12% 41,933 0.83%
Independent
Directors		 23,843 0.43% 14,282 0.28%
President &
Vice President		 136,895 2.49% 93,023 1.83%
Net income 5,493,218 - 5,072,874

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

  • ⚫ 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. The responsibilities of directors, the degree of participation in the company's operations, internal relationship management and communication, the directors' professional and continuous training, internal control, etc. are included in the performance appraisal and remuneration payment considerations and give reasonable remuneration, and the relevant performance appraisal and remuneration rationality are reviewed by the Remuneration Committee and the Board of Directors, and the remuneration system is reviewed in a timely manner according to the actual operating conditions and relevant laws and regulations at any time, so as to seek a balance between the company's sustainable operation and risk control.

  • ⚫ The company allocated 0.65% of directors' remuneration in the year of 2022 for the amount of NT$ 37,465 thousand and paid director's carriage fee (attendance fee) of NT$ 537 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. For the assessment items within the measures, such as: the revenue and profit of each factory to achieve the budget target, the loss of work hours in each factory is better than that of the previous year, and the internal control audit of each factory

  • ⚫ 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.

  • 29 -

4. Corporate Governance

4.1 Board of Directors

Total eight meetings were convened by the Board of Directors in 2022. Attendance of each Director and Independent Director is as follows:

Title Name Name Name Attendance in
Person		 By
Proxy		 Attendance
Rate		 Remarks Remarks
Chairman Dong,Ding-Yu 8 0 100%
Vice
Chairman		 Tsai, Fei-Liang
Representative of Yu Chang
Investment Co.,Ltd.		 8 0 100%
Director Li, Wen-Shiung
Representative of Yu Chang
Investment Co.,Ltd.		 8 0 100%
Director Hsieh,Mon-Chang 8 0 100%
Independent
Director		 Sheng, Bing 8 0 100%
Independent
Director		 Cheng, Duen-Chian 8 0 100%
Independent
Director		 Chen, Hsi-Chia 5 0 100% May 26th, 2022 on board.
Independent
Director		 Tsai, Rong-Dong 3 0 100% May 26th, 2022 dismissed.
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
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 17th Board
Meeting of the
11th term		 23 Feb 2022 1.
Approved the Year 2021 Declaration of Internal Control
System.
2.
Approved the revision of Procedures of Acquisition and
Disposition of Assets of Elite Material Co., Ltd.”
3.
Approved the fund raising of the affiliates of the company.
4.
Accepted the proposal submitted by the Remuneration
Committee about the directors' remuneration and managers'
compensation of Year 2022.
5.
Approved the proposal of Year 2021 directors' remuneration
and employees' compensation.
6.
Approved the Year 2021 business report and financial
statements.
7.
Approved the proposal of distribution of Year 2021 profits.
8.
Approved the 12th election of the directors of the company
9.
Approved the proposal of convening of the year 2022 annual
general meetings related affairs.		 No objection
Pass the case
The 18th Board
Meeting of the
11th term		 15 Apr 2022 1.
Approved the proposal of the article of incorporation and
meeting rules of the shareholders of the company.
2.
Approved theproposal of conveningtheyear 2022 annual		 No objection
Pass the case
  • 30 -
general shareholders' meeting
3.
Approved the capital expenditure of the company.
4.
Approved the proposal of the nomination of directors
(including independent directors) by more than 1% of
shareholders.
5.
Approved the proposal of exempt of non-compete against
directors.
The 19th Board
Meeting of the
11th term		 27 Apr 2022 1.
Approved the proposal of increase of short -term credit line of
the company.
2.
Approved the proposal of increase the amount of capital
expenditure of KY site.
3.
Approved the changes of accountant, the independence and
competence assessment of the CPAs .
4.
Approved theyear 1Q22 annual financial report.		 No objection
Pass the case
The 1th Board
Meeting of the
12th term		 26 May 2022 To elect chairman and vice chairman. No objection
Pass the case
The 2th Board
Meeting of the
12th term		 27 July 2022 1.
Approved the revision of code of internal authorization of the
company.
2.
Approved the proposal of capital expenditure of EMC
(Kuanshan).
3.
Approved the 1H22 financial report.		 No objection
Pass the case
The 3th Board
Meeting of the
12th term		 25 August 2022 1.
Approved the buyback of minority Great Shanghai stakes.
2.
Approved the set-up of oversea manufacturing site.		 No objection
Pass the case
The 4th Board
Meeting of the
12th term		 28
Oct 2022		 1.
Approved the increase of the company's endorsement to
subsidiaries.
2.
Approved the audit plan for year 2023.
3.
Approved the re-appoint of director of subsidiary.
4.
Approved the amendments to the company's "Board of
Directors' Rules of Procedure" and "Standard Operating
Procedures for Handling Directors' Requests".
5.
Approved the company's consolidated financial report for the
third quarter of 2022
6.
Approved the increase in investment in the mainland subsidiary
"EMC (Kunshan) Co., Ltd."
7.
Approved the change of investment path and equity transfer of
the company's mainland subsidiary.
The 5th Board
Meeting of the
12th term		 21
Dec 2022		 1.
Approved the review of the CPA audit fee for Year 2022.
2.
Approved the general principles of the company's pre-approval
non-confirmation service policy.
3.
Approved the Year 2022 plan of auditing of Elite Material Co.,
Ltd.
4.
Approved the proposal of Year 2023 remuneration committee’s
business plans.
5.
Approved the disposal of investment income of the company's
mainland subsidiary.
6.
Approved the proposal of capital expenditure of EMC(ZS) of
the company.
7.
Approved the proposal of group budget and capital expenditure
ofyear 2022.
  • 31 -

(4) The board of directors (peer) valuation cycles, periods, scopes, ways and content of board of directors:

In accordance with the Code of Practice for Corporate Governance of Listed OTC companies, the company was approved by the board of directors in 2020 to formulate the "Measures for Performance Evaluation of the Board of Directors of EMC Co., Ltd." Every year, the members of the board of directors and the board of directors conduct internal self-evaluation to conduct the performance evaluation of the board of directors of the year, and it is stipulated that the evaluation should be carried out by an external professional independent organization or a team of external experts and scholars at least every three years. In 2022, the company entrusted the "Taiwan Board of Directors Performance Association" to perform an external evaluation of the effectiveness of the board of directors (period 2019/1-2022/9). Structure, selection and training, operation participation, decision-making quality, internal control, and environment, society and corporate governance (ESG) and value creation, etc. 7 aspects, 70 indicators, assessed by means of questionnaires and on-site visits, An evaluation report was issued on Dec 7[th] , 2022, and the company reported the evaluation results to the board of directors on Dec 21, 2022 and sought improvements.

Type Timeframe Scope Evaluation
Self-
Assessment,		 From：Jan 1, 2022
To：Dec 31, 2022		 Nine aspects, 36 indicators
1. The mission and goals of the company
2. Internal control and risks of the
company
3. Management of internal relations
4. Management of external relations
5. Composition and capabilities of the
board of directors
6. Board culture
7. Operation of the board of directors
8. Chairman/Chairperson of the meeting
9. Self-evaluation of directors		 According to the evaluation indicators
and evaluation standards, the
performance evaluation of the
company's board of directors in year
2022 was in the middle to high end
range (96 points).
Board of
Directors		 From：Jan 1, 2022
To：Dec 31, 2022		 Two aspects, 7 indicators
Comply with relevant laws and
regulations
1. Compliance with matters that should be
brought to the board of directors for
discussion according to law
2. Whether the board meeting is held at
least once a quarter
3. Observance of director's avoidance of
interests
Participation in company operations
1. Supervise and understand the
implementation of business plans, the
expression of financial statements, audit
reports and their tracking
2. Assessing the independence of
accountants
  • 32 -
3. Assess and supervise the company's
existing or potential risks
4. Communication and interaction with
the company's management
External
evaluation		 From：Jan 1, 2022
To：Dec 31, 2022		 Seven facets, 70 indicators
1. Composition and structure of the board
of directors
2. Election and continuing education of
directors
3. The degree of participation in the
company's operations
4. Improve the quality of decision-making
of the board of directors
5. Internal Control
6. Environmental, Social and Governance
(ESG)
7. Value Creation		 In conclusion: Overall, the governance
and operation of the company's board of
directors complies with the regulations
set forth by the Taiwan Stock Exchange
on corporate governance practices and
board evaluation. Specifically, the
advantages of board governance
include:
1. The members of the board of
directors of the company have
diversified professional
backgrounds. General directors have
rich industry experience and are
very skilled in company operations.
Independent directors have
financial, operational management
and legal expertise, which are
helpful to the company's operating
strategy and sustainable
development.
2. The management can provide
detailed information on the
company's major operational issues
and communicate fully with the
members of the board of directors,
so that the board of directors can
discuss and make decisions with
sufficient information.
3. In addition to conducting self-
assessment every year, the board of
directors also entrusts an external
independent agency to conduct a
performance evaluation of the board
of directors every three years. The
performance self-assessment results
are also reported to the board of
directors and shareholders' meeting,
which fully demonstrates the self-
  • 33 -

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discipline and responsibility of the
board of directors.
4. The chairman has unique insights
into the talent cultivation and
succession planning of each
business unit, and is able to grasp
the company's growth opportunities
in a timely manner when the
demand for production capacity
expands.
5. The company attaches great
importance to research and
development, and the company's
business development strategy can
be close to the pulse of industry
demand, grasp business
opportunities through continuous
innovation and continue to create
growth curves.
Suggestion:
1. The company can establish an
orientation system for the initial
appointment of directors to facilitate
new directors to perform their duties.
2. It may be considered to set up a
mailbox for independent directors to
send and receive in person, or to
entrust an impartial third-party
professional organization as a
window for receiving reports, so as
to improve the reporting system for
interested parties.
3. The company can change the name of
the "Corporate Social Responsibility
Committee" to the "Sustainable
Development Committee", invite
more than one independent director
as a member, and upgrade its level to
a functional committee to
demonstrate the company's
determination to attach importance
to sustainable development.
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  • 34 -

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

Improvement Program:
1. In 2022, the implementation method
of directors' training was updated,
and the directors of Lili continued
to enrich new knowledge to
maintain their core values and
professional advantages and
capabilities.
2. The existing internal and external
reporting channels are in normal
operation, so in the future, we
will assess the necessity of
setting up a reporting system
with independent
directors/impartial third parties
as recipients based on actual
operational needs.
3. In addition to the subsequent
name change, the need to
upgrade to a functional
committee will be evaluated
based on actual operational
needs in the future.
----- End of picture text -----

(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): The Company has set up the Audit Committee and the Remuneration Committee to assist the Board of Directors in performing their supervisory duties.

  • 35 -

4.2 Audit Committee

The audit committee of the company is composed of 3 independent directors. The audit committee aims to assist the directors to perform their supervision on the company's quality and integrity in the implementation of accounting, auditing, financial reporting processes and financial control.

The Audit Committee met 7 times in 2022, and the matters considered mainly include:

  1. Major asset transactions and foreign investment cases.

  2. Internal control system and related policies and procedures.

  3. Amendments to the procedures for acquiring or disposing of assets.

  4. Endorsement guarantee and capital increase of affiliated enterprises.

  5. Proposal for deliberation of accountants' public expenses.

Review financial reports

  1. The board of directors prepared the company's year 2021 annual business report, financial statements, and profit distribution proposals, among which the financial statements were audited and completed by entrusting Anhou Jianye United Accounting Firm, and an audit report was issued. The above-mentioned business report, financial statements and profit distribution proposal have been checked by the audit committee, and there is no discrepancy

  2. Consolidated financial statements for the first quarter, second quarter, and third quarter of year 2022

Title Name Attendance in Person By Proxy Attendance
Rate		 Remarks
Independent
Director		 Sheng, Bing 7 0 100%
Independent
Director		 Cheng, Duen-Chian 7 0 100%
Independent
Director		 Chen, Hsi-Chia 4 0 100% Elected on May
26th, 2022
Independent
Director		 Tsai, Rong-Dong 3 0 100% Dismissed on
May 26th, 2022
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 17th meeting of the 2nd term dated as
23 Feb 2022
1.
Approved the Year 2021 Declaration
of Internal Control System.
2.
Approved the revision of Procedures
of Acquisition and Disposition of
Assets of Elite Material Co., Ltd.
3.
Approved the company to participate
fund raising of subsidiary.
4.
Approved the Year 2021 business
report and financial statements.
5.
Approved the proposal of distribution
of Year 2021 profits.
Resolved.
All members vote For both
proposals.
The 18th meeting of the 2nd term dated as
15 Apr 2022
1.
Approved the capital expenditure
project of the company.
The 19th meeting of the 2nd term dated as
27 April 2022
1.
Approved the proposal of increase
the amount of capital expenditure of
KY site.
2.
Approved the changes of the CPAs .
3.
Approved the year 1Q22 annual
financial report.
The 1st meeting of the 3nd term dated as
27 July 2022
1.
Approved the revision of code of
internal authorization of the
company.
2.
Approved the proposal of capital
expenditure of EMC (Kuanshan).
  • 36 -
3. Approved the 1H22 financial report.
1. Approved the buyback of minority
The 2nd meeting of the 3nd term dated as Great Shanghai stakes.
25 Aug 2022 2. Approved the set-up of oversea
manufacturing site.
1. Approved the increase of the
company's endorsement to
subsidiaries.
2. Approved the audit plan for year
2022.
3. Approved the year 3Q22 annual
The 3nd meeting of the 3nd term dated as
28 Oct 2022		 4. financial report.
Approved the increase in investment
in the mainland subsidiary "EMC
(Kunshan) Co., Ltd."
5. Approved the change of investment
path and equity transfer of the
company's mainland subsidiary.
6. Approved the proposal of capital
expenditure of Tayuan site
1. Approved the review of the CPA
audit fee for Year 2022.
2. Approved the general principles of
the company's pre-approval non-
confirmation service policy.
3. Approved the revision of the
The 4th meeting of the 3nd term dated as company's "Internal Material
21 Dec 2022 Information Processing Procedures"
4. Approved the disposal of investment
income of the company's mainland
subsidiary.
5. Approved the proposal of capital
expenditure of EMC(ZS) of the
company.
(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.
  • 37 -

4.3 Corporate governance execution results and deviations from “Corporate Governance Best-Practice 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
company website.		 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
  • 38 -
(3)Composition and
Responsibilities of the
Board of Directors:
a. Have members of the board
of directors formulated
diverse policies and
implemented them
accordingly?		 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 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)		 None
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)		 None
- 39 -
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 with
company management)
Conduct the annual board
performance evaluation by means of
internal self-assessment. The results of
the year 2022 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 2022, 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, Ms. Yi-Chun Chen and
Ms. Hsiao-Ling Chiang 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 27
April 2022. (Note 2)		 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 assign Chang, Li-Chao as the
head of corporate governance. Due to
job rotation, re-appoint Wesley Lin as
new head of corporate governance.
The main responsibilities of head of
corporate governance 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 2022
are as follows:
 Convened 8th board of director and
7th audit committee to provide
board meeting and audit committee
meetings with materials to each		 None
- 40 -
director.
⚫ Responsible for the announcement
of major information on major
resolutions on the day after the
board of directors and shareholders'
meeting.
⚫ The AGM held in 26th May, 2022.
⚫ In June 2022, the re-election of
directors and the registration of
amendments to the chapters were
completed.
⚫ Evaluate the purchase of "directors
and important staff insurance" with
an appropriate amount of insurance
and complete the insurance
application on December 21, 2022,
and report the content of the
insurance to the board of directors.
⚫ Irregularly provide directors with
relevant training information,
reminding them to follow the
prescribed hours of training and
complete relevant reporting tasks in
accordance with the
"Implementation Key Points of
Training for Directors and
Supervisors of Listed Companies".
Training record : Please refer to Note
3.
(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		 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		 None
  • 41 -
spokesperson system,
uploaded the investor
conference presentations on
the Company’s website,
etc.)?		 Exchange. The Company also has
established a spokesperson system,
including spokesperson and deputy
spokesperson.
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 monthly
revenue in advanced ?		 V The company's consolidated and
individual financial reports in 2021
and 2022 completed the
announcement and declaration on
February 23, 2022 and February 23,
2023; the financial reports for the
first, second and third quarters of
2022 and the monthly revenue were
all earlier than nnounce and declare at
theMOPS before the specified
deadline, and upload it to the
company's website simultaneously.		 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 staff care		 V In compliance with laws and
regulations, the 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.		 None
  • 42 -
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 by a dedicated person.
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 the
procurement 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
f. The training record of
directors		 V Please refer to Note 3. None
(9)Please explain the improvement of the corporate governance evaluation results released by the Corporate
Governance Center of Taiwan Stock Exchange Corporation in the most recent year, and propose priority
enhancements and measures for those that have not been improved: The company continues to improve
the company's website and website in accordance with the corporate governance blueprint. Annual report
disclosures.
  • 43 -

Note:1

  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):
Accreditation of Accountants Independence Assessment Form Compliance with
independence		 Compliance with
independence
Yes No
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		 V
b.
Not havinga material financial interest in the audit client.		 V
c.
Avoid havingan inappropriate relationshipwith the audit client.		 V
d.
The CPA firm shall ensure its employees follow the requirement of “Integrity, Objectivity, and
Independence”.		 V
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 twoyears.		 V
f.
The CPA shall notpermit others topractice under his or her name.		 V
g.
The CPA does not hold stakes in the Companyor the affiliated entities of the Company.		 V
h.
The CPA shall not borrow from or lend to the Companyor the affiliated entities of the Company.		 V
i.
The CPA shall not cooperate with the Company or the affiliated entities of the Company to
invest in the same business or make profit-sharing arrangement with the Company or the
affiliated entities of the Company.		 V
j.
The CPA shall not be concurrently employed by the Company or the affiliated entities of the
Companyto conduct routine business and receive a consistent salary.		 V
k.
The CPA shall not be involved in the management decision making of the Company or the
affiliated entities of the Company.		 V
l.
The CPA shall not engage in the conduct that couldjeopardize the independence.		 V
m.
The CPA is not the spouse, a lineal consanguinity, a direct affinity, or a collateral consanguinity
within two degree of kinshipof the management team of the Company.		 V
n.
The CPA shall not receive anycommission related to thepracticeperformed.		 V
o.
Matters could compromise or jeopardize the independence of the CPA were not found until the
date the annual reportpublished.		 V
  • 44 -

Note:2

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 2022 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 : Hsiao-Ling Chiang

  • 45 -

Note 3: Training for Directors and Independent Directors

Title Name Study Date Sponsoring
Organization		 Name of the Course Study
Hours
Chairman Dong, Ding-Yu 27 April 22 Taiwan
Corporate
Governance
Association		 Analyze ransomware threats and construct
information security protection strategies for
listed companies		 3
17 Aug 22 Taiwan
Academy of
Banking and
Finance		 Corporate Governance Forum - The
Enlightenment of the Russo-Ukrainian War on
Taiwan		 3
6
Director Tsai, Fei-Liang 27 April 22 Taiwan
Corporate
Governance
Association		 Analyze ransomware threats and construct
information security protection strategies for
listed companies		 3
27 July 22 Independent
Directors
Association,
Taiwan		 Net-zero emissions, carbon neutrality and
corporate compliance		 3
Total 6
Director Hsieh, Mon-Chang 10 June 22 Taiwan
Corporate
Governance
Association		 Insider Trading Prevention Promotion
Conference of year 2022		 3
5 Aug 22 Taiwan
Corporate
Governance
Association		 Impact investing -- enhance corporate
influence, seize opportunities and practice
SDGs		 3
Total 6
Director Li, Wen-Shiung 27 April 22 Taiwan
Corporate
Governance
Association		 Analyze ransomware threats and construct
information security protection strategies for
listed companies		 3
27 July 22 Independent
Directors
Association,
Taiwan		 Net-zero emissions, carbon neutrality and
corporate compliance		 3
Total 6
Independent
Director		 Sheng, Bing 10 Mar 22 Taiwan stock
exchange		 On independent directors and the year 2022
Shareholders' Meeting from an International
Perspective		 1
27 April 22 Taiwan
Corporate
Governance
Association		 Analyze ransomware threats and construct
information security protection strategies for
listed companies		 3
3 Aug 22 Taiwan
Corporate
Governance
Association		 Bureau of Investigation - Thinking of
corporate corruption eradication, experience
in investigation and case sharing		 3
Total 7
Independent
Director		 Cheng, Duen-
Chian		 27 April 22 Taiwan
Corporate
Governance
Association		 Analyze ransomware threats and construct
information security protection strategies for
listed companies		 3
6 May 22 Taiwan
Institute of
Directors		 The Response of the board of directors of
China-US Convergence Future		 3
  • 46 -
14 July 22 Securities and
futures
institute		 Risks and Opportunities of Climate Change
and Net Zero Emissions Policies to Business
Operations		 3
Total 9
Independent
Director		 Chen, Hsi-Chia 20 July 22 Taiwan Stock
Exchange		 Sustainable development roadmap industry
themepublicityconference		 2
27 July 22 Independent
Directors
Association,
Taiwan		 Net-zero emissions, carbon neutrality and
corporate compliance		 3
18 Oct 22 Securities and
futures
institute		 M&A Practice Sharing - Focusing on Hostile
M&A		 3
25 Oct 22 Taiwan
Corporate
Governance
Association		 Interpretation of important judgments on
corporate governance: Focusing on directors'
responsibilities		 3
15 Nov 22 Taiwan
Corporate
Governance
Association		 Analysis of management right contest and
prevention strategies		 3
Total 14
  • 47 -

4.4 Remuneration Committee

4.4.1 Information of Remuneration Committee Members

Condition
Identity
Name		 Condition
Identity
Name
Professional
qualification		 Curriculum Vitae Independence
situations
(Meet the criteria of
Note 1)		 The number of
independent
directors of the
other public
offering
company
Independent
Director
(Commissioner)
Shen, Bing
Have the work
experience in
business, legal,
finance, accounting
or corporate business
Chief Investment Officer,
International Bank
Corporation
Executive Director, Morgan
Stanley & Co.
Vice President, China
Development Industrial Bank
President, CDIB Partners
Investment Holding
Corporation
（1）（2）（3）
（4）（5）（6）
（7）（8）（9）
（10）（11）
（12）
Independent
Director		 Cheng,
Duen-
Chian		 Have the work
experience in
business, legal,
finance, accounting
or corporate business
President, UMC Capital
Corporation
Managing Director, Union
Investment Management
Consulting Co, Ltd.
Executive Director/President
of Taiwan Branch, Morgan
Stanley Asia Limited
Executive Director, Goldman
Sachs Asia L.L.C.		 （1）（2）（3）
（4）（5）（6）
（7）（8）（9）
（10）（11）
（12）		 2
Independent
Director		 Chen, Hsi-
Chia		 Have the work
experience in
business, legal,
finance, accounting
or corporate business
Managing Partner, Chen &
Chang, Attorneys-at-Law.
Member, Standing
Committee of ICC
International Centre for ADR
Convenor, Taiwan Chapter of
the Chartered Institute of
Arbitrators (CIArb) East Asia
Branch.
Independent Director, Asia
Renewable Energy (Cayman)
Ltd.


（1）（2）（3）
（4）（5）（6）
（7）（8）（9）
（10）（11）
（12）

  • Note 1 : Each director meets the following conditions in the two years prior to the election and during his or her term of office.

  • （ 1 ） An employee who is not employed by the company or its affiliates.

  • （ 2 ） Directors or supervisors who are served as the position of the same company or affiliated enterprises (except where the company and its parent company, subsidiaries or subsidiaries of the same parent company are established as independent directors in accordance with this Act or local national decrees).

  • （ 3 ） A natural person shareholder who is not a natural person who holds more than 1% of the total number of issued shares of the company or holds in the name of others or the top 10 shareholders.

  • （ 4 ） The spouse, second degree or third degree relatives of managers not listed in (1) or (2) or (3) listed persons.

  • （ 5 ） A director, supervisor or employee who does not directly hold more than 5% of the total number of issued shares of the company, the top five shareholders or the legal person shareholders designated as directors or supervisors of the company in accordance with article 27, paragraphs 1 or 2 of the company Act (except where the company and its parent company, subsidiaries or subsidiaries of the same parent company are established by this law or local laws and regulations).

  • 43 -

  • （ 6 ） More than half of the shares that are not seated or have voting rights in the directors of the company shall be directors, supervisors or employees of other companies controlled by the same person (except where they are independent directors of the company or its parent, subsidiary or subsidiary of the same parent company established in accordance with this Act or local national decrees).

  • （ 7 ） Directors, supervisors or employees of other companies or institutions that are not the same person as the chairman, president or equivalent of the company or spouse (except where the company and its parent company, subsidiaries or subsidiaries of the same parent company are established as independent directors in accordance with this Law or local national laws).

  • （ 8 ） Directors, supervisors, president or shareholders holding more than 5% of the shares of a particular company or institution that do not have financial or business dealings with the company (unless a particular company or institution holds more than 20% of the total number of issued shares of the company, not more than 50%, and is an independent director of the company and its parent company, subsidiaries or subsidiaries of the same parent company in accordance with this Law or local national laws).

  • （ 9 ） Professionals, sole proprietors, partners, directors, supervisors, managers and their spouses who do not provide audits for the company or related enterprises or have obtained remuneration in the past two years in the past two years in a commercial, legal, financial, accounting and other related services of NT$500,000. However, this does not apply to members of the Remuneration Committee, the Public Takeover Review Committee or the Special Committee on Mergers and Acquisitions who perform their functions under the Securities and Exchange Act or the relevant laws and regulations of the Mergers and Acquisitions Act.

  • （ 10 ） There is no family relationship with other directors within the scope of a spouse or second-degree relatives.

  • （ 11 ） There is no circumstance under the paragraphs of article 30 of the company act.

  • （ 12 ） There is no any elected directors who is on behalf of a government, a legal person or its representative under the article 27 of company act.

  • 44 -

4.4.2 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 26 May 2022 to 25 May 2025.

  • C. The Remuneration Committee held three times in 2022, and the attendance status of members in most recent year is disclosed as follows:

year is disclosed as follows:
Title Name Attendance in
Person		 By Proxy Attendance Rate Remarks
Independent
Director
Commissioner		 Shen, Bing 3 0 100%
Independent
Director		 Cheng,
Duen-
Chian		 3 0 100%
Independent
Director		 Chen, Hsi-Chia 2 0 100% Elected on
May26, 2022
Independent
Director		 Tsai, Rong-Dong 1 0 100% Dismissed on
May26, 2022
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 Company had in responding to such
opinions shall be specified: None

D. Resolutions resolved by the Remuneration Committee in year 2022:

Proposals Resolutions Measures theCompany had
The 6th meeting of
the 4th term dated
as 23 Feb 2022		 1. To approve the planned
remuneration of Directors
and compensation of
employees for year 2022.
2. To approve the distribution
of remuneration of
Directors and
compensation of
employees foryear 2021.		 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 5th term dated
as 28 Oct 2022		 1. Discussion of the Year 2023
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.
The 2nd meeting of
the 5th term dated
as 21 Dec 2022		 1. Discuss director
remuneration allocation
ratios.		 Resolved. All
members vote For
the proposal.		 The resolution was submitted
to the Board of Directors
Meeting and obtain approval
from the Board.

  • 4.4.3 Information on the members of the Nomination Committee and information on their operations: Not applicable

  • 45 -

4.5 Circumstances and reasons for the implementation of sustainable development promotion and the differences with the code of practice for sustainable development of listed companies

ompanies
Item Execution status Differences and
reasons for the code
of practice for
sustainable
development with
listed companies
Yes No Summary
(1)Has the company established
a governance framework to
promote sustainable
development, and set up a full-
time (part-time) unit to promote
sustainable development, which
is handled by senior
management authorized by the
board of directors, and the board
of directors supervises the
situation?		 V In order to fulfill corporate social
responsibility and implement the
sustainable management philosophy,
the Board of Directors has adopted the
Code of Practice for Corporate Social
Responsibility, and since 2020, it has
established a Corporate Social
Responsibility Committee (CSR
Committee) to implement corporate
social responsibility and carry out
specific plans for sustainable
management. The CSR Committee has
four working groups, including the
Corporate Governance/Economics
Group, the Supply Chain/Green
Products Group, the Employee
Care/Social Participation Group, and
the Sustainable Environment Group,
and the members of each group are
composed of the heads of relevant units
and departments or their
representatives, who are responsible for
the collection, planning, evaluation and
implementation of information on
various topics.
The Corporate Social Responsibility
Committee is responsible for
formulating and reviewing corporate
social responsibility policies, systems
and management guidelines. 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 measures, and
submits it to the Board of Directors.		 None
(2)Has the company established
a governance framework to
promote sustainable
development, and set up a
full-time (part-time) unit to
promote sustainable
development, which is
handled by senior
management authorized by
the board of directors, and
the board of directors
supervises the situation?		 V In response to changes in the global
economic environment and perpetual
risks, the Company identifies and
grasps the relevant risks that may affect
the sustainable development of
enterprises according to the three major
aspects of the economy (including
corporate governance), environment
and society, and minimizes possible
risks through relevant management
strategies and countermeasures such as
risk transfer, reduction and avoidance,
and even transforms them into
operational opportunities.
The company's risk management policy
is to define all kinds of risks in		 None
  • 46 -
accordance with the company's overall
operating policy, establish a risk
management mechanism of early
identification, accurate measurement,
effective supervision and strict control,
prevent possible losses within the scope
of bearable risks, continuously adjust
and improve the best risk management
practices according to changes in the
internal and external environment, in
order to protect the interests of
employees, shareholders, partners and
customers, increase the value of the
company, and achieve the optimization
principle of the company's resource
allocation.
(3) Environmental Issues
A. Has the Company
established an appropriate
environmental management
system according to its
industry characteristics?		 V All factories and subsidiaries of the
company follow ISO 14001 to establish
environmental management systems
and continue to pass third-party
verification, and conduct annual
greenhouse gas inventory according to
ISO14064-1 specifications, track
emission reduction results and publicly
disclose them in the sustainability
report.		 None
B. Is the company committed
to improving energy
efficiency and using
recycled materials that have
a low 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 Responsibility Report.		 None
D. Does the company count
greenhouse gas emissions,
water consumption and total
waste weight over the past
two years and establish
policies for greenhouse gas
reduction, water use
reduction or other waste
management?		 V Total greenhouse gas emissions in the
last 2 years
(Our Guanyin Factory and Hsinchu
Factory)
The company Taoyuan and Hsinchu
facility are gradually using natural gas
to replace heavily oil, completed
ISO14064 greenhouse gas inventory
and third-party verification in 2021.
The company has established a baseline
for greenhouse gas emissions, and set
annual carbon reduction targets to
continuously promote emission
reductions.
The company's Guanyin and Hsinchu		 None
  • 47 -
factory completed the ISO14064
greenhouse gas inventory in 2022, and
are expected to complete the third-party
verification in June 2023.
The total greenhouse emission in 2022,
2021 figure is as the following
Total greenhouse gas emissions
(tons)
2022
38,967.62
2021
41,434.99
CO2 equivalent (tons)
Total waste (kg)
Category 1 emission equivalent
2022
14,695.50
2021
15,679.43
CO2 equivalent (tons)
Total waste (kg)
Category II emission
equivalent
2022
24,272.12
2021
25,755.56
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 to promote the
environmental awareness 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.
Water consumption in the last 2 years
(Our Guanyin Factory and Hsinchu
Factory)
Total water consumption (tons)
(degree/year or m3/year)
2022
92,126
2021
101,897
Total revenue
(Individual Financial Report)
(Unit: NT$ thousand)
2022
9,202,695
2021
9,189,939
Total water consumption
intensity
(water consumption/total
revenue)
(Unit: NT$ thousand)
  • 48 -
2022
0.010
2021
0.011
The company’s Guanyin plant and
Hsinchu plant’s water supply sources
are 100% from municipal water (tap
water). The main water is used for
employees’ lives, peripheral equipment
and washing machines, especially for
air conditioners (accounting for 70%).
We believe that water resources are
also precious earth resources, so how to
reduce the use of water resources and
improve the utilization of water
resources is also a very important task.
Evaluate the water quality monitoring
of air-conditioning water; in terms of
domestic water, publicize the concept
of water conservation among
employees, adopt water saving devices
and other measures to achieve energy
saving and carbon reduction, reduce
energy consumption, so as to reduce
carbon emission intensity and fulfill the
responsibility of environmental
protection.
In 2022, rainwater recycling will be
added, and the recycled water will be
used for air-conditioning water after
simple filtration, which can reduce
20m3 of water resources per day during
the rainy season.
Waste output in the last 2 years
(Our Guanyin Factory and Hsinchu
Factory)
hazardous waste
2022
1,636.555
2021
1,824.626
general waste
2022
3,438.336
2021
6,769.889
Total
2022
5,074.891
2021
8,594.515
Waste management measures:
Regularly track and report the amount
of waste generated, and set waste
reduction targets
(1) From time to time, check whether
the disposal site properly handles
the company's waste. In accordance
with the ISO 14001 environmental
management system "Waste
Management Procedures", regularly
(at least once a year) check the
operation and management of
  • 49 -
entrusted waste storage, removal,
treatment, and reuse.
(2) When each batch of waste is cleared
and transported, an online
declaration is required according to
the law, and the waste disposal
situation is reported monthly
according to the requirements of the
Environmental Protection Agency.
(3) Suppliers are required to provide
proper disposal documents for each
batch of waste entrusted for disposal
(4) According to the category of the
announcement, entrust a recycling
organization to deal with the
company's relevant recyclable
(scrap) waste.
(5) Carry out waste sorting and
recycling to reduce the types and
quantities of clearing and
transportation.
(6) Gradually introduce consumables
and raw materials made of
environmentally friendly materials.
(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 2021.		 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		 None
  • 50 -
by a dedicated personnel.
C.. Has the Company offered a
safe and healthy work
environment and routinely
offered employees with
safety and health education
training?		 V The company has a planned
implementation of environmental
measurement and equipment
maintenance, and built an ESH
environmental safety and health
management system, with
environmental safety and health as the
goal to implement ISO45001
(certification date: 2021/8/5, expiration
date: 2021/9/5 ~ 2024/9/4) and
ISO14001 (certification date: 2021/8/5,
effective date: 2021/9/5 ~ 2024/9/4)
two sets of management systems.
New employees are fully trained before
work, and the work site is mostly
supervised by the supervisor to ensure
the safety of the workplace.
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 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
by a dedicated personnel.		 None
E. Prior to conducting business
with suppliers, has the
Company evaluated if such
suppliers have had records
where they made an impact
on the environment and on
society at large?		 V Prior to conducting business with
suppliers, the Company will obtain
“Supplier CSR Commitment
Declaration”. The legality, code of
ethical management, and records of
unethical behavior, if there is any, are
used as a reference in the supplier
selection process.		 None
F. Do the Company's contracts
with its primary suppliers
contain any immediate
termination or cancellation
clauses when suppliers
violate their corporate social
responsibility policies, and
pose a significant impact on
the environment and society?		 V Prior to signing contracts with
suppliers, the Company will audit the
records of suppliers with their
compliance with laws, regulations, and
code of conducts in the relevant
industries. With respect to the
construction contracts, the Company
will make sure the turnkey provider
obey relevant laws, purchase insurance
coverage 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.		 None
(5) Has the company adopted
international standard code		 V In accordance with core options (Core)
of the Sustainable Reporting Guidelines		 None
  • 51 -

or guideline of perpetual (GRI Standards) issued by the Global statement to prepare CSR Sustainability Standards Council, the report to disclose nonCompany has commissioned the financial data? Whether Taiwan branch of the British Standards fore-mentioned report Institute (bsi) to verify the contents of acquired third part assertion the report on the basis of the AA1000 or guarantee opinion? AS (2008) 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 operating conditions and the Code of Practice on Corporate Social Responsibility of Listed Companies.

  • (7) Other important information that will help to promote the implementation of sustainable development

  • (a) Environmental protection: 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.

  • 52 -

4.6 Implementation of Code of Business Conduct

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
(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,		 None
  • 53 -
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.
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 Company to take appropriate
actions.		 None
d. Does the Company establish
an effective operation of the
accounting and internal
control systems, and
periodically conduct internal
audits by internal auditors, or
audit by CPA?		 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, to promote
compliance with ethical and integrity
standards.
The total hours of training courses,
including internally designed and
externally offered, reached 15,016
hours, and each employee on the
average attended relevant programs of
14.55 hours in year 2022. The
aforesaid courses include
“Compliance with Ethical Business
Conduct Regulations”, “Corporate
Social Responsibility and Employees’
Code ofConduct”,“Maternity		 None
  • 54 -
Protection in Working Place”, and
“HazardCommunication 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, follow-up
measures to be taken after the
completion of the
investigation 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 the policy.
(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.

4.7 、 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/

4.8 、 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.

  • 55 -

4.9 Internal Control System execution status

4.9.1 Internal control report

Elite Material Co., Ltd.

Statement of Internal Control System

Date: 23 February 2023

Based on the findings of a self-assessment, Elite Material Co., Ltd. (EMC) states the following with regard to its internal control system during the year 2022:

  1. EMC’s Board of Directors and the management are responsible for establishing, implementing, and maintaining an adequate internal control system. Our internal control is a process designed to provide reasonable assurance over the effectiveness and efficiency of our operations (including profitability, performance and safeguarding of assets), reliability, timeliness, transparency of our reporting, and compliance with applicable rulings, laws and regulations.

  2. An internal control system has inherent limitations. No matter how perfectly designed, an effective internal control system can provide only reasonable assurance of accomplishing its stated objectives. Moreover, the effectiveness of an internal control system may be subject to changes due to extenuating circumstances beyond our control. Nevertheless, our internal control system contains self-monitoring mechanisms, and EMC takes immediate remedial actions in response to any identified deficiencies.

  3. EMC evaluates the design and operating effectiveness of its internal control system based on the criteria provided in the Regulations Governing the Establishment of Internal Control Systems by Public Companies (herein below, the “Regulations”). The criteria adopted by the Regulations identify five key components of managerial internal control: (1) control environment, (2) risk assessment, (3) control activities, (4) information and communication, and (5) monitoring activities.

  4. EMC has evaluated the design and operating effectiveness of its internal control system according to the aforesaid Regulations.

  5. Based on the findings of such evaluation, EMC believes that, on December 31, 2022, it has maintained, in all material respects, an effective internal control system (that includes the supervision and management of our subsidiaries), to provide reasonable assurance over our operational effectiveness and efficiency, reliability, timeliness, transparency of reporting, and compliance with applicable rulings, laws and regulations.

  6. This Statement is an integral part of EMC’s annual report and prospectus, and will be made public. Any falsehood, concealment, or other illegality in the content made public will entail legal liability under Articles 20, 32, 171, and 174 of the Securities and Exchange Law.

  7. This Statement was passed by the Board of Directors in their meeting held on February 23, 2023, with __ of the __ attending directors expressing dissenting opinions, and the remainder all affirming the content of this Statement.

Elite Material Co., Ltd.

Dong, Ding-Yu Chairman

Kuan, En-Hsiang President

  • 4.9.2 The investigative report of Entrusting CPA to examine the internal control system: None 。

  • 56 -

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

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

Shareholders’ Meeting

Date Resolutions and executions of Shareholders’ Meeting
2022 Annual
General
Shareholders’
Meeting		 26 May
2022		 1. To accept the Year 2021 business report and financial statements
2. To approve the proposal for distribution of 2021 profits
The ex-dividend date was set at 2nd September 2022, and the dividend
was paid at 23th September, 2022. (Cash dividend NTD 10.0 per share.)
3. To approve the proposal of revision of the article of incorporation of the
company.
On June 9, 2022, completed the registration of the amendment required
by the ministry of economic affairs and announced it on the company's
website.
4. To approve the proposal of Overview of “Procedures of Acquisition and
Disposition of Assets of Elite Material Co., Ltd.”
It was announced on the company's website on May 26, 2022 and is
handled in accordance with the post-repaired procedures.
5. To Approve the amendments to the "Rules of Procedure for the
Shareholders' Meeting".
It is handled in accordance with the revised procedures.
6.To approve the proposal of election of the 12th Directors of the Company
On June 9, 2022, the registration of reelection and change of directors of
the Ministry of Economic Affairs was completed.
7.To approve the non-compete clause of director

Board Meetings

Board Meetings
Term Date Important Resolutions
The 17th
Board
Meeting of
the 11th term		 23 Feb 2022 1. Approved the Year 2021 Declaration of Internal Control
System.
2. Approved the revision of Procedures of Acquisition and
Disposition of Assets of Elite Material Co., Ltd.”
3. Approved the fund raising of the affiliates of the company.
4. Accepted the proposal submitted by the Remuneration
Committee about the directors' remuneration and managers'
compensation of Year 2022.
5. Approved the proposal of Year 2021 directors' remuneration
and employees' compensation.
6. Approved the Year 2021 business report and financial
statements.
7. Approved the proposal of distribution of Year 2021 profits.
8. Approved the 12th election of the directors of the company
9. Approved the proposal of convening of the year 2022 annual
general meetings related affairs.
The 18th
Board
Meeting of
the 11th term		 15 Apr 2022 1. Approved the proposal of the article of incorporation and
meeting rules of the shareholders of the company.
2. Approved the proposal of convening the year 2022 annual
general shareholders' meeting
3. Approved the capital expenditure of the company.
4. Approved the proposal of the nomination of directors
(includingindependent directors)bymore than 1% of
  • 57 -
shareholders.
5. Approved the proposal of exempt of non-compete against
directors.
The 19th
Board
Meeting of
the 11th term		 27 April 2022 1. Approved the proposal of increase of short -term credit line
of the company.
2. Approved the proposal of increase the amount of capital
expenditure of KY site.
3. Approved the changes of accountant, the independence and
competence assessment of the CPAs .
4. Approved theyear 1Q22 annual financial report.
The 1st
Board
Meeting of
the 12th term		 26 May 2022 To elect chairman and vice chairman.
The 2nd
Board
Meeting of
the 12th term		 27 Jul 2022 1. Approved the revision of code of internal authorization of
the company.
2. Approved the proposal of capital expenditure of EMC
(Kuanshan).
3. Approved the 1H22 financial report.
The 3th
Board
Meeting of
the 12th term		 25 Aug 2022 1. Approved the buyback of minority Great Shanghai stakes.
2. Approved the set-up of oversea manufacturing site.
The 4th
Board
Meeting of
the 12th term		 28 Oct 2022 1. Approved the increase of the company's endorsement to
subsidiaries.
2. Approved the audit plan for year 2023.
3. Approved the re-appoint of director of subsidiary.
4. Approved the amendments to the company's "Board of
Directors' Rules of Procedure" and "Standard Operating
Procedures for Handling Directors' Requests".
5. Approved the company's consolidated financial report for
the third quarter of 2022
6. Approved the increase in investment in the mainland
subsidiary "EMC (Kunshan) Co., Ltd."
7. Approved the change of investment path and equity transfer
of the company's mainland subsidiary.
The 5th
Board
Meeting of
the 12th term		 21 Dec 2022 1. Approved the review of the CPA audit fee for Year 2022.
2. Approved the general principles of the company's pre-
approval non-confirmation service policy.
3. Approved the Year 2022 plan of auditing of Elite Material
Co., Ltd.
4. Approved the proposal of Year 2023 remuneration
committee’s business plans.
5. Approved the disposal of investment income of the
company's mainland subsidiary.
6. Approved the proposal of capital expenditure of EMC(ZS)
of the company.
7. Approved the proposal of group budget and capital
expenditure ofyear 2022.
The 6th
Board
Meeting of
the 12th term		 23 Feb 2023 1. Approved the proposal of increasing the company's short-
term credit line.
2. Approved the formulation of the company's "Directors'
Training Implementation Measures"
3. Approved the company's year 2022 internal control system
statement
4. Approved the company's job rotation case.
5. Approved the capital expenditure proposal of the Guanyin
site of the company.

  • 58 -

    1. Approved the remuneration committee's proposals on various remuneration items for the company's directors and managers in the year 2023.

    2. Approved the company's year 2022 employee and director remuneration distribution proposal.

    3. Approved the company's year 2022 business report and financial report.

    4. Approved the company's year 2022 profit distribution proposal.

  • Approved the convening of the company's year 2023 Annual General Meeting of Shareholders.

  • Approved the proposal of capital expenditure of EMC (KY)

The 7th site. Board 2. Approved the changes of accountant, the independence and 26 Apr 2023

Meeting of competence assessment of the CPAs .

the 12th term 3. Approved the year 1Q23 annual financial report. 4. Approved the subsidiary’s offshore production expansion.

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

  • 4.13 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:

2 April 2023
Position Name Date of appointment Dismissal Date Reason
Financial officer RandyYu July1,2019 Sep2,2023 Resignation
Head of corporate
governance		 Li-Chao Chang Mar 20, 2020 Feb 28, 2023 Job rotation
Head of auditor WesleyLin July31,2018 Feb 28,2023 Job rotation

5. Audit Fees

5.1 Information of Audit Fees

Unit: NT$ thousands

Accounting
Firm		 Name of CPA Audit Period Audit Fee Non-Audit Fee Total Note
KPMG Yi-Chun Chen
Hsiao-Ling Chiang		 1 Jan 22 – 31 Dec 23 3,660 2,703 6,363 None

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

6. Information for change of CPA:

Not Applicable

  • 59 -

7. 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

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

8.1 Shareholding variation

Title Name 2022 2022 1Jan 2023 – 2 April 2023
Shares Increased
(Decreased)		 Pledged Shares
Increased
(Decreased)		 Shares Increased
(Decreased)		 Pledged Shares
Increased
(Decreased)
Chairman Dong, Ding-Yu 0 0 0 0
Vice Chairman Yu Chang Investment
Co.,Ltd.		 0 1,000,000 0 0
Representative:
Tsai,Fei-Liang		 53,000 0 0 0
Director Yu Chang Investment
Co.,Ltd.		 0 1,000,000 0 0
Representative:
Li,Wen-Shiung		 0 0 0 0
Director Hsieh, Mon Chang 0 0 0 0
Independent
Director		 Shen, Bing 0 0 0 0
Independent
Director		 Cheng, Duen-Chian 0 0 0 0
Independent
Director		 Hsi-Chia Chen 0 0 0 0
President Guan, En-Xiang 0 0 0 0
Senior Vice
President		 Sun, Michael 0 0 0 0
Vice President Peng, Yi-Ren 0 0 0 0
Vice President Chou, Li-Ming 0 0 0 0
Vice President Chuang, Michael 0 0 0 0
Vice President Lin, Alan 0 0 0 0
Vice President Yang, Danny 0 0 0 0
Vice President Lee, De-Na 0 0 0 0
Vice President Lin, Michael 0 0 0 0
Vice President Lee, Stan 0 0 0 0
Assistant Vice
President
(Goverrnor)		 Wesley-Lin 0 0 0 0
Director of
Accounting
Department		 Sara Yen 0 0 0 0

8.2 Shareholding transferred:

Not applicable.

  • 60 -

8.3 Shareholding pledged:

Not applicable.

9 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 7.65 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
Cathay life insurance
Representative: Tiaogui,Huang		 17,085,000 5.13 0 0 0 0 None None
0 0 0 0
Yuanta Taiwan High Dividend
Fund		 15,475,182 4.65 0 0 0 0 None None
Standard Chartered International
Commercial Bank, the MTX
Stable Emerging Market Leader
fund.		 13,499,000 4.05 0 0 0 0 None None
Silver TopInvestment 13,014,000 3.91 0 0 0 0 Si, Run-Hong Representative of
Silver topinvestment
Representative: Si,Run-Hong 12,262,303 3.68 0 0 0 0
Si, Run-Hong 12,262,303 3.68 0 0 0 0 None Representative of
Silver topinvestment
Yu ShengInvestment Co.,Ltd. 10,485,000 3.15 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
Dong, Ding-Yu 5,265,766 1.58 0 0 0 0 None None
Mercuries Life Insurance Co.,
Ltd.
Representative: Weng Zhaoxi		 5,095,000 1.53 0 0 0 0 None None
0 0 0 0 0 0 None None
China Life Insurance co., Limited
Representative: Huang Siguo		 4,944,000 1.49 0 0 0 0 None None
0 0 0 0 0 0

10 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.		 27,042,000 100.00 0 0 27,042,000 100.00
Li ChengTechnologyCo.,Ltd. 16,412,918 33.50 250,000 1.53 16,662,918 35.03
  • 61 -

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 332,918,299 267,081,701 600,000,000 None

1.1.1. Shelf registration: None

1.2. Composition of Shareholders

2 April 2023

2 April 2023
Types
Amounts		 Government
Agencies		 Financial
Institutions		 Other
Juridical
Persons		 Domestic
Citizens		 Foreign
Institutions
& Foreign
Persons		 Total
Number 6 31 238 24,423 325 25,023
Number of shares owned
5,848,321		 43,153,527 85,078,548 70,775,802 128,062,101 332,918,299
% holding 1.76% 12.96% 25.56% 21.26% 38.46% 100.00%

1.3. Distribution Profile of Share Ownership

2 April 2023

2 April 2023
ShareholderOwnership Number ofShareholders Number of shares owned Percentage ownership
1–999 14,836 1,779,365 0.53
1,000–5,000 8,542 15,199,777 4.58
5,001–10,000 767 5,859,900 1.76
10,001–15,000 218 2,704,731 0.81
15,001–20,000 130 2,322,572 0.70
20,001–30,000 129 3,196,979 0.96
30,001–40,000 73 2,585,130 0.78
40,001 – 50,000 33 1,506,561 0.45
  • 62 -
50,001–100,000 73 5,073,481 1.52
100,001–200,000 63 9,087,875 2.73
200,001–400,000 48 13,435,560 4.04
400,001–600,000 24 11,720,393 3.52
600,001–800,000 17 11,591,261 3.48
800,001–1,000,000 9 8,171,091 2.45
1,000,001 and over 61 238,683,623 71.69
Total 25,023 332,918,299 100.00

Note: The Company does not issue any preferred shares.

1.4. Major Shareholders

1.4. Major Shareholders
Shareholders Total shares owned Ownership (%)
Yu Chang Investment Co., Ltd. 25,471,477 7.65
Cathay life insurance 17,085,000 5.13
Yuanta Taiwan High Dividend Fund 15,475,182 4.65
Standard Chartered International Commercial Bank, the MTX
Stable Emerging Market Leader fund.		 13,499,000 4.05
Silver Top Investment 13,014,000 3.91
Si, Run-Hong 12,262,303 3.68
Yu Sheng Investment Co., Ltd. 10,485,000 3.15
Ding-Yu Dong 5,265,766 1.58
Mercuries Life Insurance 5,095,000 1.53
China Life Insurance 4,944,000 1.49

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

Unit: NT$ Dollar

Unit: NT$Dollar
Items Year 2021 2022 – 31 Mar 2023
Market Price
per Share
(Note 1)		 Highest 293.50 298.00 196.00
Lowest 141.50 128.00 168.00
Average 204.60 204.17 182.43
Net Worth per
Share(Note 2)		 Before Distribution 59.33 66.31 67.97
After Distribution 52.33 57.81 59.47
Earnings per
Share		 Weighted Average Shares 332,918,299 332,918,299 332,918,299
Adjusted Earningsper Share(Note 3) 16.50 15.24 1.44
Dividends per
Share		 Cash Dividend 10.0 8.5 -
Stock
Dividend		 - - - -
- - - -
Accumulated Undistributed Dividend
(Note 4)		 - - -
Return on
 Price/Earnings Ratio(Note 5) 12.40 13.40 126.69
Price/Dividend Ratio(Note 6) 20.46 24.02 21.46
Investment Cash Dividend Yield(Note 7) 4.90 4.16 4.66

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. 63 -

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

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

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

  9. 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.

  10. To be resolved by the upcoming Year 2022 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 2021 Annual General Shareholders’ Meeting:
Year of Earnings Date the Board Meeting
Resolved to Distribute
Earnings		 Dividends Dividends
Cash Dividend (NT$) Stock Dividend (NT$)
2022 23 Feb 2023 2,829,805,542
(NT$8.5per share)		 0

Note: Cash dividend per share is calculated based on the total number of issued outstanding shares on 23 Feb 2023.

  • 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 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.

  • 64 -

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 2022 employees’ compensation and Directors’ remuneration was resolved in the Board Meeting convened on 23 Feb 2023. The amounts and forms are listed below:

  • a. Employees’ compensation: NT$172,915,727 in cash

  • b. Directors’ remuneration: NT$37,465,074 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 2021 profits actually being paid as employees’ compensation and Directors’ remuneration in 2022:

Employee remuneration: The proposed distribution amount is NT$189,119,949, and the actual payment is NT$155,136,098.

Director's remuneration: The proposed distribution amount is NT$63,039,983, and the actual payment is NT$63,039,983.

The discrepancies will be released in subsequent years.

1.9. Share Buyback by the Company:

The Company did not buyback share in Year 2022 and in Year 2023 as of 2 April.

2. Corporate Bonds:

Corporate Bonds:
Type of bond Year 2022 the 5thDomestic Unsecured Convertible Bond
Issuingdate 25thApril 2022
Place of issuance and transaction Domestic
Issuing price NT$101
Issuing amount NT$3, 465,300,000
Amount received: NT$3,499,953,000.
Coupon rate 0%
Maturity 5years,due on 25thApril 2027
Pledge None
Custodian The Trust Department of Yuanta Bank
Underwriter Yuanta Securities
Certified attorney Not applicable
Certified CPAs Not applicable
Repayment ofprincipal Please refer to Article 6 of Annex III.
  • 65 -
Outstandingamount Outstandingamount NT$3,465,300,000
Redemption Please refer to Article 17 of Annex III.
Restrictions Please refer to Article 16 of Annex III.
Credit rating, credit rating agency, and
credit ratingdate		 Not applicable
Other rights of
bond holders		 Till the publishing of
the annual report,
number of common
shares issued upon
the exercise of the
conversion right		 None
Issuance and
conversion procedures		 Please refer to Annex III.
Effects on shareholders’ equity Not applicable.
Custodian of the underlyingasset Not applicable.

Information of Convertible corporate bond

Type Year 2022 the 5th Domestic Unsecured Convertible
Bond		 Year 2022 the 5th Domestic Unsecured Convertible
Bond

Item		 Year 2022 March 31, 2023
Market
price		 Highest 112.35 105.10
Lowest 97.00 98.00
Average 108.28 103.07
Conversion price 263/246.8 246.8
Issuing date and
conversionprice		 April 25, 2023
$263
Conversion obligations
Issuing new shares

3. Preferred Shares:

None

4. Issuance of Overseas Depository Receipts:

None

5. Employees Stock Option:

None

6. Employee Restricted Stock Options and Share Issued for Merger or Acquisition:

None

7. Fund utilization plans and status:

Not applicable

  • 66 -

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 2021 is as follows:

Unit: NT$ thousands,%
Major Products Revenue Percentage of Revenue
CCLs 21,565,368 55.76
PP 16,447,245 42.53
Mass Lam 574,143 1.49
Others 85,793 0.22
Total 38,672,549 100.00

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. High-frequency mmWave material for autonomous driving vehicle.

  • b. High voltage material adopted EV super charging battery.

  • c. Low loss substrate material for high-end AIP packaging.

  • d. High-speed switch material for 224Gbps (1.6T)

1.2. Business Environment

  • 1.2.1. Current industry situation and prospects

In year 2022, products of the Company were mainly sold in the domestic market of Taiwan, and customers

  • 67 -

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 2023 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 2023 , 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, Brfree, and low CTE properties.

1.2.2. The 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:

Year 2020 1. New eco-friendly laminates, consumed by 5G handheld devices, providing ultra-
low signal loss
2. Out-door antenna substrate material consumed by 5G base-station.
3. High-end substrate material consumed by AIP and SIP package.
4. High frequency material consumed by mmWave laminate
5. Obtained collectively 36 patents from Taiwan, Mainland China, and the United
States

  • 68 -

  • RCC material adopted in high end 5G handheld devices. 2. High end substrate material adopted in SIP package. 3. High speed material for PCIe 5.0 and PCIe 6.0 Year 2021 4. High speed 800G switch continuously verified by customers. 5. Obtained collectively 33 patents from Taiwan, Mainland China, and the United States 1. RCC material adopted in 5G high-end handheld device has been certified by many customers and is actively preparing for mass production. 2. Non PTFE high frequency laminate material for Self-driving Radar and Antenna has been mass produced. Year 2022 3. PCIe 5 II and PCIe 6 high speed data transmission material qualified by various customers and continuously gain market share. 4. 800GHz Switch material verified and pilot run by global brand companies and ready for mass production.

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 2023

  • 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 2022, the Company’s products were mainly sold in Taiwan, Mainland China, and Korea. It is expected that the major market of the Company in Year 2023 would remain as the same. The percentage of sales for the Company’s products in Year 2022 is as follows:

Regions Percentage of total sales
Taiwan 15.25%
Mainland China 76.54%
Others 8.21%
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 2022. According to Prismark, EMC is the global leader in halogen free market with 26% market share, and global CCL market share is 7%.

  • 69 -

  • 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 2022, the Company expected the sales volume in year 2023 as follows:

Expected sales volume target:

Copper clad laminates (CCLs): 43 million sheets/year Prepreg (PP): 0.96 million rolls/year

Mass Lam (M/L): 1.05 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.

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 -----

  • 70 -

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 2021 Year 2022 FirstQuarter of Year 2023
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 2,532,857 10 No A 2,283,631 11 No A 492,827 12 No
Others 21,881,742 90 No Others
19,315,965		 89 No Others 3,509,381 88 No
Net
amount		 24,414,599 100 Net
sales		 21,599,596 100 Net
sales		 4,002,208 100

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

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

Unit: NT$ thousands

Year 2021 Year 2021 Year 2022 Year 2022 FirstQuarter of Year FirstQuarter of Year FirstQuarter of Year 2023
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 4,523,496 12 No A 4,083,290
11		 No A 749,350 10 No
Others 33,976,530 88 No Others 34,589,259
89		 No Others 6,609,777 90 No
Net
sales		 38,500,026 100 Net
sales		 38,672,549
100		 Net
sales		 7,359,127 100

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

Unit Year 2021 Year 2021 Year 2022 Year 2022
Volume Value Volume Value
000 sheets 50,884 17,740,627 41,159 17,653,198
000 meters 183,376 11,041,026 174,801 11,229,143
000 SF 6,428 1,082,612 2,986 684,248
29,864,265 29,566,589
  • 71 -

2.6. Sales volume and revenue in recent two years

Unit: NT$ thousands

Unit Year 2021 Year 2021 Year 2021 Year 2021 Year 2022 Year 2022 Year 2022 Year 2022
Domestic Sales Export Sales Domestic Sales Export Sales
Volume Value Volume Value Volume Value Volume Value
000 sheets 32,376 17,600,730 7,071 3,606,629 28,437 17,570,666 6,050 3,994,702
000 meters 103,519 12,995,948 19,210 2,980,846 90,476 12,787,857 18,202 3,659,388
000 SF 3,856 647,082 2,697 410,974 3,034 471,212 324 102,931
- 35,878 - 221,939 - 69,548 - 16,245
31,279,638 7,220,388 30,899,283 7,773,266

3. Information about Employees

Year Year Year 2021 Year 2022 31 March 2023
Number of Employees
Number of
Employees		 Direct 2,663 2,858 3,020
Indirect 855 968 982
Total 3,518 3,826 4,002
Average age 35.3 35.6 34.9
Averageyears of service 5.5 5.4 5.3
Breakdown of Educational Level(%)
Distribution
of
Educational
Level		 Ph.D. 0.3 0.3 0.2
Master 4.9 5.2 5.1
Bachelor 41.2 42.0 40.5
High School 49.6 48.4 50.5
Below High School 3.9 4.1 3.7

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) 18 Aug 2026 Hsinchu County Huan-Kon-Tsao-Zhen-Zhi
No. J0763-13		 (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. J0764-07
Heating process of heating medium
(M04)		 19 Apr 2026 Hsinchu County Huan-Kon-Tsao-Zhen-Zhi
No. J0763-03
Production process of other electronic
components(M05)		 12 Apr 2026 Hsinchu County Huan-Kon-Tsao-Zhen-Zhi
No. J1009-04
- 72 -
Heating process of heating medium
(M06)		 19 Nov 2027 Hsinchu County Huan-Kon-Tsao-Zhen-Zhi
No. J1017-05
Water pollution control permit 19 Dec 2023 Hsinchu County
Huan-Pai-Hsu-Zhi No. 00424-11		 (2018) Huan-Shu-Hsun-Zhen-Zhi
No. GA130492
Business waste cleaning plan Good till revision Fu-Huan-Yeh-Zhi No. 1108651246 (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)		 14 July 2025 Fu-Huan-Kon-Tsao-Zhen-Zhi No. H6761-
00		 (2008) Huan-Shu-Hsun-Zhen-Zhi
No. FA100052
Heating process of heating medium
(M02)		 26 Sep 2026 Fu-Huan-Kon-Tsao-Zhen-Zhi No. H5122-
05
Water pollution control permit
(Plant 1 & 3)		 14 Jun 2022 Taoyun City
Huan-Pai-Hsu-Zhi No. H1984-07		 (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
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 178
Charges forprevention of airpollution from fixedpollution source 13,984
Treatment ofpolluted water 78
Treatment cost of waste water 2,481
Treatment cost of business waste 89,821
Total 106,542

4.3. List of equipment and investment of the Company for prevention of pollution and their respective purpose

Equipment Number Acquisition Date Purpose
Renewal of outdoor hot kerosenepipe of No. 3 combustion furnace One 30 Sep2022 Prevention ofpollution
Improvement of Dust Collection System in Glue DispensingArea One 30 Jun 2022 Prevention ofpollution
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 Sep2010 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
  • 73 -
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 ofpollution
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: 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 2022 was NT$2,505 thousands. The total training hours amounted to 15,016 hours, and on the average, each employee attended a training program for 14.55 hours.

  • 5.1.3. Pension and retirement plan

In order to encourage employees to provide professional services and stabilize their retirement lives, EMC has

  • 74 -

set up an "Employee Retirement Scheme" to provide each employee with a labor pension. At the same time, the "Pension Supervision and Administration Commission" was established in accordance with the law to be responsible for the implementation of the old pension management and retirement measures, and the old pension was deposited to the old pension reserve account of the Bank of Taiwan on a monthly basis at the 2% monthly salary of each senior pensioner with the old pension system. Actuaries are also commissioned annually to submit actuarial reports to ensure full allocation to protect the rights and interests of employees. 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”. If an employee meets the statutory retirement conditions, he or she may apply for retirement, and after completing the procedures, those who have the old system of seniors can receive the pension of the old system, and the pension of the personal special account can also be withdrawn according to law after reaching the age of 60. In 2022, there was one person who applied for retirement, and the old system pension was settled according to law.

  • 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.

  • 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. Information and communication security management:

6.1.1 List the security risk management structure, the security policy, the specific management plan and the resources invested in the security management of The Security.

  • 6.1.1.1 Security risk management structure:

The company has set up a security risk management team, the president as the convener, the information department at the next level supervisor as the deputy convener, the team members include the heads of various departments and the communication network liaison personnel.

  • 6.1.1.2 The unit responsible for enterprise information security is the IT depatment, which coordinates the security affairs and is responsible for formulating internal information security policies, planning and implementing information security operations and security policies.

  • 6.1.2 The company's audit office is the supervision unit of information security supervision, and the audit office is responsible for supervising the implementation of internal security, regularly checking if there is any defect found, the relevant improvement plan and specific actions are proposed by the responsible unit, and the improvement results are tracked regularly to reduce the

  • 75 -

internal security risks.

  • 6.1.2.1 Information security policy:

  • 6.1.2.2 In order to improve the security and stable operation of the company's information and communication operations, provide secure information and communication services, and ensure the confidentiality, integrity and availability of information assets, the information security policy is specially formulated as the highest guiding principle of the company's information and communications security management.

  • 6.1.2.3 All colleagues of the company have the obligation and responsibility to comply with the laws and regulations of information security, maintain the security of enterprise information, ensure the security and operation of the company's data, information systems, equipment and networks, avoid all kinds of improper use, leakage, tampering, theft, destruction and other accident threats, and reduce possible harm.

6.1.3 Physical management solutions:

At present, the company has not insured information security protection insurance, but has established information security policies and other related operational specifications, which are implemented in accordance with the operational specifications for physical and environmental security, network and computer security, system access control, system sustainable operation, information security publicity and education and training. In fiscal 2021, the company also reviewed the corporate information environment through external consultants, and on December 21, 2021, the board of directors reported the information security risk assessment to further enhance information security operations and ensure the company's continuous operation capabilities.

6.2 Loss occurs due to significant security risk issues in the latest year until the publishing of this annual report:None

7.Important Contracts and Agreements: None

  • 76 -

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

8
Year
Item		 8
Year
Item		 2018 2019 2020 2021 2022 31 Mar 2023
Current assets 16,232,502 18,833,258 19,568,557 25,843,744 26,579,957 29,009,567
Property,plant and equipment 4,937,424 5,857,817 6,531,008 8,468,582 14,679,878 15,189,371
Intangible assets 7,388 10,316 671,900 669,410 744,784 730,862
Other assets 785,149 1,002,940 1,085,341 1,583,325 1,377,868 1,305,003
Total assets 21,962,463 25,704,331 27,856,806 36,565,061 43,382,487 46,234,803
Current liabilities Before distribution 7,201,783 10,321,431 9,613,785 14,485,232 15,760,024 18,119,215
After distribution 8,416,462 12,239,679 11,944,213 (Note) 18,589,830 20,949,021
Non-current liabilities 2,845,890 1,846,331 1,487,512 2,305,942 5,547,899 5,487,009
Total liabilities Before distribution 10,047,673 12,167,762 11,101,297 16,791,174 21,307,923 23,606,224
After distribution 11,262,352 14,086,010 13,431,725 (Note) 24,137,729 26,436,030
Equityattributable to owners of the Company 11,900,197 13,519,931 16,738,630 19,752,846 22,074,564 19,798,773
Common stock 3,196,524 3,197,080 3,329,183 3,329,183 3,329,183 3,329,183
Capital surplus 623,721 628,858 1,868,661 1,868,661 2,076,279 2,076,279
Retained earnings Before distribution 8,503,506 10,526,386 12,297,677 15,458,911 17,218,392 17,698,088
After distribution 7,288,827 8,608,138 9,967,249 (Note) 14,388,586 14,868,282
Other equity (423,554) (832,393) (756,891) (903,909) (549,290) (474,971)
Treasurystocks - - - - - -
Non-controllinginterests 14,593 16,638 16,879 21,041 - -
Total equity Before distribution 11,914,790 13,536,569 16,755,509 19,773,887 22,074,564 22,619,579
After distribution 10,700,111 11,618,321 14,425,081 (Note) 19,244,758 19,798,773

.

  • 77 -

1.1.2. Condensed Consolidated Statements of Comprehensive Income

Unit: NT$ thousands, except earnings per share

Year
Item		 2018 2019 2020 2021 2022 31 Mar 2023
Operatingrevenues 22,890,928 24,865,522 27,200,786 38,500,026 38,672,549 7,359,127
Grossprofit 4,576,250 6,100,303 7,040,029 10,068,554 9,710,062 1,572,042
Operatingincome(losses) 2,755,333 4,079,550 4,683,451 6,922,620 6,225,247 769,154
Non-operatingincome(expenses) 71,537 124,276 160,112 (10,724) 70,808 (40,115)
Income before tax 2,826,870 4,203,826 4,843,563 6,911,896 6,296,055 729,039
Income from continuingoperations 2,826,870 4,203,826 4,843,563 6,911,896 6,296,055 729,039
Loss from discontinued operations - - - - - -
Net income 1,754,433 3,245,301 3,694,270 5,500,157 5,076,240 479,696
Other comprehensive income, net (188,823) (412,750) 76,198 (148,742) 371,065 74,319
Total comprehensive income 1,565,610 2,832,551 3,770,468 5,351,415 5,447,305 554,015
Net income attributable to the owner of the
Company		 1,751,378 3,240,845 3,688,999 5,493,218 5,072,874 479,696
Net income attributable to non-controlling
interests		 3,055 4,456 5,271 6,939 3,366 -
Total comprehensive income attributable to
the owner of the Company		 1,562,850 2,828,721 3,765,041 5,344,644 5,443,283 554,015
Total comprehensive income attributable to
non-controllinginterests		 2,760 3,830 5,427 6,771 4,022 -
Earningsper share(NT$/share) 5.48 10.14 11.33 16.50 15.24 1.44
  • 78 -

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

Year
Item		 Year
Item		 2018 2019 2020 2021 2022
Current assets 3,414,869 4,518,871 4,816,937 6,066,071 5,747,916
Property,plant and equipment 2,126,016 2,015,030 2,007,189 1,957,319 4,252,687
Intangible assets 4,160 5,844 18,019 41,094 40,676
Other assets 12,139,006 13,722,965 15,084,715 18,221,193 19,914,343
Total assets 17,684,051 20,262,710 21,926,860 26,285,677 29,955,622
Current liabilities Before distribution 2,939,988 5,441,993 3,968,647 4,938,265 4,023,300
After distribution 4,154,667 7,360,241 6,299,075 7,268,693 6,853,106
Non-current liabilities 2,843,866 1,300,786 1,219,583 1,594,566 3,857,758
Total liabilities Before distribution 5,783,854 6,742,779 5,188,230 6,532,831 7,881,058
After distribution 6,998,533 8,661,027 7,518,658 8,863,2589 10,710,864
Equityattributable to owners of the Company 11,900,197 13,519,931 16,738,630 19,752,846 22,074,564
Common stock 3,196,524 3,197,080 3,329,183 3,329,183 3,329,183
Capital surplus 623,721 628,858 1,868,661 1,868,661 2,076,279
Retained earnings Before distribution 8,503,506 10,526,386 12,297,677 15,458,911 17,218,392
After distribution 7,288,827 8,608,138 9,967,249 13,128,483 14,388,586
Other equity (423,554) (832,393) (756,891) (903,909) (549,290)
Treasurystocks - - - - -
Non-controllinginterests - - - - -
Total equity Before distribution 11,900,197 13,519,931 16,738,630 19,752,846 22,074,564
After distribution 10,685,518 11,601,683 14,408,202 17,422,418 19,244,758
  • 79 -

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

Unit: NT$ thousands, except earnings per share

Year
Item		 2018 2019 2020 2021 2022
Operatingrevenues 6,221,721 7,186,702 6,930,636 9,189,939 9,202,695
Grossprofit 740,996 1,316,362 1,368,523 2,085,543 2,195,683
Operatingincome(losses) 185,173 591,708 383,753 739,685 784,566
Non-operatingincome(expenses) 2,233,339 3,062,813 3,800,791 5,312,153 4,768,911
Income before tax 2,418,512 3,654,521 4,184,544 6,051,838 5,553,477
Income from continuingoperations 2,418,512 3,654,521 4,184,544 6,051,838 5,553,477
Loss from discontinued operations - - - - -
Net income 1,751,378 3,240,845 3,688,999 5,493,218 5,072,874
Other comprehensive income, net (188,528) (412,124) 76,042 (148,574) 370,409
Total comprehensive income 1,562,850 2,828,721 3,765,041 5,344,644 5,443,283
Earningsper share(NT$/share) 5.48 10.14 11.33 16.50 15.24

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

Year Name of CPA Auditingopinion
2018 Calvin C. Y. Chiang& Yi-Chun,Chen Unqualified opinion
2019 Calvin C. Y. Chiang& Yi-Chun,Chen Unqualified opinion
2020 Yi-Chun,Chen & Calvin C. Y. Chiang Unqualified opinion
2021 Yi-Chun,Chen & Calvin C. Y. Chiang Unqualified opinion
2022 Yi-Chun,Chen & Hsiao-LingChiang 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 2018 and year 2022.

  • 80 -

2. Financial Ratio Analysis for Recent Five Years

2.1. Financial Ratio Analysis (consolidated)

Item Year 2018 2019 2020 2021 2022 31 Mar 23
Financial
structure		 Ratio of liabilities to assets (%) 45.75 47.34 39.85 45.92 49.12 57.18
Ratio of long-term capital to property, plant
and equipment(%)		 274.84 242.24 265.38 247.13 188.17 166.47
Liquidity
analysis		 Current ratio (%) 225.40 182.47 203.55 178.41 168.65 138.48
Quick ratio (%) 194.72 154.33 165.04 140.68 141.78 120.68
Interest coverage ratio (times) 86.89 90.31 80.76 91.56 40.44 12.68
Operating
ability		 Receivables turnover (times) 3.03 2.96 2.84 3.32 3.10 2.74
Average collection period (days) 120.46 123.31 128.52 109.93 117.74 133.21
Inventory turnover (times) 7.63 7.34 6.10 6.20 5.97 5.81
Payables turnover (times) 3.62 3.53 3.50 4.07 3.96 3.70
Averages sales days (days) 47.83 49.72 59.83 58.87 61.13 62.82
Property, plant and equipment turnover (times) 4.64 4.24 4.16 4.55 3.34 1.97
Total assets turnover (times) 1.04 0.97 0.98 1.05 0.97 0.66
Profitability
analysis		 Return on total assets (%) 8.33 13.77 13.98 17.26 12.70 1.07
Return on shareholders’ equity (%) 14.74 25.50 24.39 30.11 24.26 2.29
Ratio of pre-tax income to paid-in capital (%) 88.44 131.49 145.49 207.62 189.12 21.90
Ratio of net income to sales (%) 7.66 13.05 13.58 14.29 13.13 6.52
Earnings per share (NT$/share) 5.48 10.14 11.33 16.50 15.24 1.44
Cash flow Cash flow ratio (%) 28.97 23.89 36.59 27.76 47.58 9.98
Cash flow adequacy ratio (%) 139.30 120.47 92.09 78.25 73.62 77.37
Cash reinvestment ratio (%) 2.71 5.91 6.62 6.03 12.18 6.62
Leverage Operating leverage 1.98 1.78 1.81 1.73 1.89 2.86
Financial leverage 1.01 1.01 1.01 1.01 1.03 1.09
  • 81 -

2.2. Financial Ratio Analysis (Stand-Alone)

Item Year 2018 2019 2020 2021 2022
Financial
Structure		 Ratio of liabilities to assets (%) 32.71 33.28 23.66 24.85 26.31
Ratio of long-term capital to property, plant and
equipment(%)		 637.49 676.30 849.31 1,046.71 597.01
Liquidity
Analysis		 Current ratio (%) 116.15 83.04 121.37 122.84 142.87
Quick ratio (%) 94.41 68.19 94.10 98.41 116.39
Interest coverage ratio (times) 79.86 96.85 181.48 670.38 699.29
Operating
Ability		 Receivables turnover (times) 2.85 2.95 2.87 3.65 3.44
Average collection period (days) 128.07 123.72 127.17 100.00 106.10
Inventory turnover (times) 8.12 8.12 5.88 6.21 6.17
Payables turnover (times) 3.45 3.36 3.14 3.66 3.52
Averages sales days (days) 44.95 44.95 62.07 58.77 59.15
Property, plant and equipment turnover (times) 2.93 3.57 3.45 4.70 2.16
Total assets turnover (times) 0.35 0.35 0.32 0.35 0.31
Profitability
Analysis		 Return on total assets (%) 10.40 17.24 17.58 22.82 18.06
Return on shareholders’ equity (%) 14.73 25.50 24.38 30.11 24.26
Ratio of pre-tax income to paid-in capital (%) 75.66 114.31 125.69 181.78 166.81
Ratio of net income to sales (%) 28.15 45.10 53.23 59.77 55.12
Earnings per share (NT$/share) 5.48 10.14 11.33 16.50 15.24
Cash Flow Cash flow ratio (%) -11.07 34.96 80.04 49.09 95.60
Cash flow adequacy ratio (%) 79.74 86.83 86.05 84.08 71.71
Cash reinvestment ratio (%) -10.77 3.96 6.09 0.39 1.79
Leverage Operating leverage 6.61 3.08 5.07 3.67 3.58
Financial leverage 1.20 1.07 1.06 1.01 1.01
  • 82 -

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)

  • 83 -

3. Review Report of the Audit Committee

To the 2023 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 2022 which had been audited by independent auditors, Ms. Chen, Yi-Chun and Ms. Chiang, Hsiao-Ling 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.

23 February 2023

4. Year 2022 Stand-Alone Financial Report:

Please refer to ANNEX I

5. Year 2022 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

  • 84 -

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

1. Review and Analysis of Financial Condition

Unit: NT$ thousands

Year
Item		 2022 2021 Difference Difference
Dollar Amount %
Current asset 26,579,957 25,843,744 736,213 2.85
Property,plant and equipment 14,679,878 8,468,582 6,211,296 73.35
Intangible assets 744,784 669,410 75,374 11.26
Other assets 1,377,868 1,583,325 (205,457) (12.98)
Total assets 43,382,487 36,565,061 6,817,426 18.64
Current liabilities 15,760,024 14,485,232 1,274,792 8.80
Non-current liabilities 5,547,899 2,305,942 3,241,957 140.59
Total liabilities 21,307,923 16,791,174 4,516,749 26.90
Common stock 3,329,183 3,329,183 0 0.00
Capital surplus 2,076,279 1,868,661 207,618 11.11
Retained earnings 17,218,392 15,458,911 1,759,481 11.38
Other equities (549,290) (903,909) 354,619 39.23
Non-controllinginterests 0 21,041 (21,041) (100.00)
Total equities 22,074,564 19,773,887 2,300,677 11.63
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.
Property, plant and equipment: The main reason is due to the land acquisition and relocation of the factory compared with the same period
last year.
2.
Non-current liabilities: Mainly due to the issuance of convertible corporate bond.
3.
Other equity: Mainly due to adjust the exchange differences in the financial statements of foreign operating institutions based on changes
in exchange rates.
4.
Non-controllinginterests: This was mainlydue to minoritystake buyback.
  • 85 -

2. Review and Analysis of Financial Performance

Unit: NT$ thousands

Year
Item		 2022 2021 Difference Difference
Dollar Amount %
Operatingrevenues – net 38,672,549 38,500,026 172,523 0.45
Cost ofgoods sold 28,962,487 28,431,472 531,015 1.87
Grossprofit 9,710,062 10,068,554 (358,492) (3.56)
Operatingexpenses 3,484,815 3,145,934 338,881 10.77
Operating profit(losses) 6,225,247 6,922,620 (697,373) (10.07)
Non-operating gain(expenses) 70,808 (10,724) 81,532 (760.28)
Pre-taxprofit from continuingoperation 6,296,055 6,911,896 (615,841) (8.91)
Net income(losses) 5,076,240 5,500,157 (423,917) (7.71)
Other comprehensive income – net 371,065 (148,742) 519,807 (349.47)
Total comprehensive income 5,447,305 5,351,415 95,890 1.79
Net income attributable to the owner of the Company 5,072,874 5,493,218 (420,344) (7.65)
Net income attributable to non-controlling interests 3,366 6,939 (3,573) (51.49)
Total comprehensive income attributable to the owner
of the Company		 5,443,283 5,344,644 98,639 1.85
Total comprehensive income attributable to non-
controllinginterests		 4,022 6,771 (2,749) (40.60)
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-core items：The main reason is due to the compensation income.
2.
Other comprehensive income: It is caused by adjusting the exchange difference in the financial statements of foreign operating institutions
based on exchange rate changes.
3.
Total comprehensive income attributable to non-controllinginterests: It was caused bythe repurchase of minorityshares.
  • 86 -

3. Review and Analysis of Cash Flow

3.1. Liquidity Analysis in Recent Two Years

Unit: NT$ thousands

Year
Item		 Year
Item		 Year
Item		 2022 2022 2021 2021 Difference Difference Difference
Dollar amount %
Cash Flows from OperatingActivities 7,498,208 4,021,522 3,476,686 86.45
Cash Flows from InvestingActivities 6,595,595 2,618,127 3,977,468 151.92
Cash Flows from FinancingActivities 2,687,468 (419,758) 3,107,226 740.24
Analysis of variations between two years (should the variation exceed 20% of the numbers in previous year and the dollar):
1.
Cash flows from operating activities: Net inflow is due to the profit is increasing.
2.
Cash flows from investing activities: Net outflow is due to land acquisition, capacity expansion and factory reallocation.
3.
Cash flows from financingactivities: Net inflow is due to the issuance of convertible corporate bond and lending.
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
-
-
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
10,443,618 5,371,463 (8,148,257) 7,666,824 - -

  • 3.2.1. Liquidity analysis for 2023:

  • A. Operating activity: Cash net 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:

In recent years, benefiting from the rise of applications such as 5G communication and high-performance computing, with the continuous growth of server and high-end switch material shipments and the increase in the structural demand of the semiconductor industry, the demand for high-end substrate has been synchronously driven. The company's subsidiary EMC (Huangshi) Co., Ltd. expands its production capacity through local construction to meet the needs of the company's group operating growth, in addition, another subsidiary, EMC (Kunshan) Co., Ltd. cooperates with the local government's factory relocation plan to build and purchase related equipment locally, which will have a positive impact on future financial business.

5. Investment Policies in Recent Years

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

  • 87 -

1. Reinvestment policy for the most recent year:

The main strategy of the company's reinvestment is to expand production capacity in order to increase production capacity and make profits.

2. The main reasons for the profit of the reinvestment:

The company's year 2022 investment income recognized by the equity method was NT$4,626,563,000, mainly due to the good operating conditions of overseas reinvestment companies and profits.

3. Investment plan for the coming year:

The company will carefully evaluate the investment plan from a long-term strategic perspective, in order to meet the needs of future market and production capacity expansion, and continue to strengthen global competitiveness.

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 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 hyperleveraged investments, fund lending to others, endorsement/ guarantee and derivatives and correspondent procedures

  • 88 -

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
High-voltage substrate for fast
chargingof electric vehicles		 NT$900,000Thousand
Dollars		 The 3th Quarter of
2023		 Qualifications
obtained for each
product and the
market demand
Low loss substrate material adopted
byhigh end AIPpackage.		 The 1st Quarter of
2024
Ultra-high-speed switches material The 2st Quarter of
2024

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

The company and its subsidiaries have always complied with relevant current domestic laws and regulations, and relevant personnel also pay attention to changes in laws and regulations at any time for reference by the management. Therefore, the company and its subsidiaries can immediately grasp and effectively respond to important domestic policy and legal changes. No special effects.

6.5. Technology Developments and Impacts on the Company

The company and its subsidiaries always pay attention to the changes in technology and industry changes in the industry in which they are located, and assign special personnel or special teams to evaluate and study the impact on the company's future development and financial business and the corresponding measures. So far, there have been no major technological changes or industrial changes that have a major impact on the company's financial business.

6.6. Changes of Corporate Image and Impacts on the Company's Crisis Management:

The company operates with integrity, and there has been no image change that has caused a crisis to corporate management in recent years.

6.7. Expected Benefits and Risks from Mergers and Acquisitions:

None

  • 89 -

6.8. Expected Benefits and Risks from Plant Expansion:

In response to the growth needs of the company group, EMC (Huangshi) Co., Ltd. has contracted and completed the project according to the schedule. The relocation of EMC (Kunshan) Co., Ltd. is currently in progress, which will help the company's business promotion.

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

The company and its subsidiaries are mainly engaged in the manufacturing, processing and sales of key materials for printed circuit boards. The main products are copper foil substrates, adhesive sheets and multi-layer laminated boards. The sales customers are mainly domestic and foreign PCB manufacturers, and they have maintained good relations with the purchase manufacturers. Judging from the purchase and sales situation in the most recent year and as of the date of publication of the annual report, there is no concentration of purchases and sales

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

  • 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

  • 90 -

VIII. SPECIAL DISCLOSURE

1. Affiliated Companies

1.1. Subsidiaries and Affiliated Companies in the Consolidated Financial Report

==> picture [483 x 288] 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 1996 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 Investment
Elite Electronic Material
(Kunshan) Co., Ltd.		 Sep 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$34,618,060 Investment
Grand Zhongshan
Incorporated		 May 2004 P.O. Box 957, Offshore Incorporations
Center, Road Town, Tortola, British
Virgin Islands		 US$16,437,000 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
  • 91 -
Grand Wuhan
Incorporated		 Jan 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.		 Mar 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 USA Holding
Incorporated		 Nov 2021 P. O. Box 31119 Grand Pavilion,
Hibiscus Way, 802 West Bay Road,
Grand Cayman, KY1-1205 Cayman
Islands		 US$732,000 Investment
EMC Special
Application
Incorporated		 Aug 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		 Dec 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 2023

31 March 2023
Company Title Name or representative Registered shares owned
EMC Overseas Holding
Incorporated		 Director Representative of Elite Material Co., Ltd.:
Dong, Ding-Yu		 100%
Grand Zhuhai Incorporated Director Representative of EMC Overseas Holding
Incorporated:
Dong, Ding-Yu		 100%
Grand Shanghai Incorporated Director Representative of Grand Zhuhai
Incorporated:
Dong, Ding-Yu		 100%
Grand Zhongshan Incorporated Director Representative of Grand Zhuhai
Incorporated:
Dong, Ding-Yu		 100%
Grand Wuhan Incorporated Director Representative of Elite Material Co., Ltd.:
Dong, Ding-Yu		 100%
Elite Electronic Material
(Kunshan) Co., Ltd.		 Director Representatives of Grand Shanghai
Incorporated:
Dong, Ding-Yu
Tsai, Fei-Liang
Wang, Ken		 100%
President Guan, En-Xiang
Elite Electronic Material
(Zhongshan) Co., Ltd.		 Director Representatives of Grand Zhongshan
Incorporated:
Dong, Ding-Yu
Tsai, Fei-Liang
Wang, Ken		 100%
President Chuang, Michael
  • 92 -
Elite Electronic Material
(Huangshi) Co., Ltd.		 Director Representatives of Grand Wuhan
Incorporated:
Dong, Ding-Yu
Tsai, Fei-Liang
Wang, Ken		 100%
EMC International Holding
Incorporated		 Director Representative of Elite Material Co., Ltd.:
Dong, Ding-Yu		 100%
EMC Special Application
Incorporated		 Director Representative of EMC International
Holding Incorporated:
Dong, Ding-Yu		 100%
EMD Specialty Materials,LLC President Brad Foster 100%

1.6. Operating Results of Each Subsidiary and Affiliate:

31 Dec 2022 / Unit: NT$ thousands

Company Paid-in Capital Total Assets Total Liabilities Total Equity OperatingRevenue OperatingProfit Net Income
EMC OVERSEAS HOLDING INC. 1,113,451 18,092,626 50 18,092,576 0 (135) 4,642,989
Grand Shanghai Incorporated 558,922 11,065,350 50 11,065,300 0 (160) 2,688,118
Elite Electronic Material (Kunshan)
Co.,Ltd.		 6,029,812 21,080,079 6,119,309 14,960,771 17,057,126 3,115,193 2,683,726
Grand Zhuhai Incorporated 1,063,121 18,056,880 50 18,056,831 0 (323) 4,642,437
Grand Zhongshan Incorporated 504,780 6,990,114 50 6,990,064 0 (144) 1,961,292
Elite Electronic Material
(Zhongshan)Co.,Ltd.		 672,400 10,894,241 7,821,028 3,073,213 12,295,029 2,183,415 1,958,775
Grand Wuhan Incorporated 614,814 790,595 50 790,546 0 (289) 64,005
Elite Electronic Material (Huangshi)
Co., Ltd.		 580,811 8,372,992 7,598,868 774,123 5,638,285 156,263 64,000
EMC International Holding
Incorporated		 830,460 754,013 50 753,963 0 (275) (80,431)
EMC Special Application
Incorporated		 806,291 752,869 50 752,819 0 (275) (79,888)
EMD SpecialtyMaterials,LLC 0 883,004 776,909 751,662 773,192 (57,180) (64,879)
EMC USA HoldingIncorporated 22,480 72 50 22 0 (276) (276)

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, 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:

  • 93 -

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

  • 94 -

ANNEX I

Year 2022 Stand-Alone Financial Reports Audited by CPA

  • 95 -

Stock Code:2383

ELITE MATERIAL CO., LTD.

PARENT COMPANY ONLY FINANCIAL STATEMENTS

With Independent Auditors’ Report For the Years Ended December 31, 2022 and 2021

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

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
1
2
3
4
5
6
7
8
8
8～9
9～19
20
20～44
44～46
47
47
47
47
48
49～52
53
54
54
55
56～65

〜 2 〜

==> picture [76 x 31] intentionally omitted <==

==> picture [169 x 19] intentionally omitted <==

KPMG

���110615���5�7�68�(��101��) ���� Tel + 886 2 8101 6666 68F., TAIPEI 101 TOWER, No. 7, Sec. 5, ���� Fax + 886 2 8101 6667 Xinyi Road, Taipei City 110615, Taiwan (R.O.C.) ���� Web kpmg.com/tw

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, 2022 and 2021, 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, 2022 and 2021, and its financial performance and its cash flows for the year ended December 31, 2022 and 2021 in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers.

Basis for Opinion

We conducted our audits in accordance with the Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants and the Standards on Auditing of the Republic of China. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the Norm of Professional Ethics for Certified Public Account of Republic of China, and we have fulfilled our other ethical responsibilities in accordance with these requirement. 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(o) "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 〜

KPMG, a Taiwan partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee.

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.

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.

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 Standards on Auditing of the Republic of China will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with the Standards on Auditing of the Republic of China, we exercise professional judgment and 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.

〜 3-1 〜

  1. 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.

  2. 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.

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 Hsiao-Ling Chiang.

KPMG

Taipei, Taiwan (Republic of China) February 23, 2023

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.

〜 3-2 〜

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

ELITE MATERIAL CO., LTD.

Balance Sheets

December 31, 2022 and 2021

(Expressed in Thousands of New Taiwan Dollars)

ASSETS
Current Assets:
1100
Cash and cash equivalents (Note (6)(a))
1150
Notes receivable, net (Note (6)(b))
1170
Accounts receivable, net (Note (6)(b))
1181
Accounts receivable due from related parties (Notes (6)(b) and (7))
1200
Other receivables, net (Note (6)(c))
1210
Other receivables due from related parties, net (Notes (6)(c) and (7))
1310
Inventories (Note (6)(d))
1470
Other current assets
Non-Current Assets:
1550
Investments accounted for using equity method, net (Note (6)(e))
1600
Property, plant and equipment (Note (6)(f))
1780
Intangible assets
1840
Deferred tax assets (Note (6)(l))
1900
Other non-current assets
1920
Guarantee deposits paid
1975
Net defined benefit asset, non-current (Note (6)(k))
Total assets		 2022.12.31
Amount
%
$ 1,220,983
4
88,262
-
2,231,849
8
235,947
1
713,734
2
144,119
-
1,065,204
4
47,818
-
5,747,916
19
19,626,861
66
4,252,687
14
40,676
-
132,957
1
103,027
-
8,656
-
42,842
-
24,207,706
81
$
29,955,622
100		 2021.12.31
Amount
%
1,292,713
5
114,211
-
2,321,410
9
361,577
1
541,377
2
180,489
1
1,206,273
5
48,021
-
6,066,071
23
17,822,990
68
1,957,319
7
41,094
-
238,729
1
136,289
1
8,566
-
14,619
-
20,219,606
77
26,285,677
100
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
2100
Short-term borrowings (Note (6)(g))
2110
Short-term notes payable (Note (6)(h))
2170
Accounts payable
2200
Other payables
2220
Other payables to related parties (Note (7))
2230
Current tax liabilities
2322
Long-term borrowings, current portion (Note (6)(i))
2399
Other current liabilities, others
Non-Current liabilities:
2500
Non-current financial liabilities at fair value through profit or loss
(Note (6)(j))
2530
Bonds payable (Note (6)(j))
2540
Long-term borrowings (Note (6)(i))
2570
Deferred tax liabilities (Note (6)(l))
2645
Guarantee deposits received
Total liabilities
Equity (Note (6)(m)):
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		 2022.12.31 2021.12.31
Amount
%
551,730
2
199,820
1
2,204,281
8
1,212,340
5
453,010
2
147,095
1
128,571
-
41,418
-
4,938,265
19
-
-
-
-
721,429
3
859,997
3
13,140
-
1,594,566
6
6,532,831
25
3,329,183
13
1,868,661
7
2,403,968
9
756,891
3
12,298,052
47
(903,909)
(4)
19,752,846
75
26,285,677
100
Amount
%
$ 34,803
-
-
-
1,774,373
6
1,214,538
4
646,396
2
339,991
1
-
-
13,199
-
4,023,300
13
23,564
-
3,302,140
11
-
-
519,997
2
12,057
-
3,857,758
13
7,881,058
26
3,329,183
11
2,076,279
7
2,953,134
10
903,909
3
13,361,349
45
(549,290)
(2)
22,074,564
74
$
29,955,622
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, 2022 and 2021

(Expressed in Thousands of New Taiwan Dollars)

4000
Operating revenue (Notes (6)(o) and (7))
5000
Operating costs (Notes (6)(d) and (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 (Note (6)(q))
7020
Other gains and losses, net (Note (6)(q))
7370
Share of profit of associates and joint ventures accounted for using equity method
7050
Finance costs (Note (6)(q))
Total non-operating income and expenses
Profit from continuing operations before tax
7950
Less: Income tax expenses (Note (6)(l))
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)(n))(dollars)
Diluted earnings per share (Note (6)(n))(dollars)		 2022 %
100
(76)
24
-
-
24
(4)
(7)
(4)
-
(15)
9
-
2
50
-
52
61
(5)
56
-
-
-
-
5
(1)
4
4
60
15.24
14.86		 2021
Amount
9,189,939
(7,104,396)
2,085,543
(9,316)
4,051
2,080,278
(339,529)
(673,876)
(327,147)
(41)
(1,340,593)
739,685
920
(45,584)
5,365,858
(9,041)
5,312,153
6,051,838
(558,620)
5,493,218
(1,945)
(15,335)
389
(16,891)
(164,604)
32,921
(131,683)
(148,574)
5,344,644		 %
100
(77)
23
-
-
23
(4)
(7)
(4)
-
(15)
8
-
-
58
-
58
66
(6)
60
-
-
-
-
(2)
-
(2)
(2)
58
16.50
16.46
Amount
$ 9,202,695
(7,007,937)
2,194,758
(8,391)
9,316
2,195,683
(380,669)
(618,693)
(411,425)
(330)
(1,411,117)
784,566
3,520
168,832
4,629,006
(32,447)
4,768,911
5,553,477
(480,603)
5,072,874
19,737
(22,173)
(3,947)
(6,383)
470,990
(94,198)
376,792
370,409
$
5,443,283
$
$

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, 2022 and 2021

(Expressed in Thousands of New Taiwan Dollars)

Balance at January 1, 2021
Profit for the year ended December 31, 2021
Other comprehensive income for the year ended December 31, 2021
Total comprehensive income for the year ended December 31, 2021
Earnings distribution:
Legal reserve
Special reserve reversal
Cash dividends on ordinary share
Balance at December 31, 2021
Profit for the year ended December 31, 2022
Other comprehensive income for the year ended December 31, 2022
Total comprehensive income for the year ended December 31, 2022
Earnings distribution:
Legal reserve
Special reserve
Cash dividends on ordinary share
Due to recognition of equity component of convertible bonds (preference
share) issued
Balance at December 31, 2022		 Share capital
Ordinary
Shares
$ 3,329,183
-
-
-
-
-
-
3,329,183
-
-
-
-
-
-
-
$
3,329,183		 Capital
Surplus
1,868,661
-
-
-
-
-
-
1,868,661
-
-
-
-
-
-
207,618
2,076,279		 Retained earnings Retained earnings Total other equity interest
Exchange
Differences on
Unrealized
gains (losses)
on equity
instruments at
fair value
Translation of
Foreign
Statements
through other
comprehensive
income
(756,453)
(438)
-
-
(131,683)
(15,335)
(131,683)
(15,335)
-
-
-
-
-
-
(888,136)
(15,773)
-
-
376,792
(22,173)
376,792
(22,173)
-
-
-
-
-
-
-
-
(511,344)
(37,946)		 Total equity
16,738,630
5,493,218
(148,574)
5,344,644
-
-
(2,330,428)
19,752,846
5,072,874
370,409
5,443,283
-
-
(3,329,183)
207,618
22,074,564
Exchange
Differences on
Translation of
Foreign
Statements
(756,453)
-
(131,683)
(131,683)
-
-
-
(888,136)
-
376,792
376,792
-
-
-
-
(511,344)
Legal
Reserve
2,035,014
-
-
-
368,954
-
-
2,403,968
-
-
-
549,166
-
-
-
2,953,134		 Special
Reserve
832,393
-
-
-
-
(75,502)
-
756,891
-
-
-
-
147,018
-
-
903,909		 Unappropriated
Retained
Earnings
9,430,270

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, 2022 and 2021

(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, plant 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
Other payable
Other payable to related parties
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 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) increase in short-term notes and bills payable
Proceeds from issuing bonds
Proceeds from long-term debt
Repayments of long-term debt
(Decrease) increase in guarantee deposits received
Cash dividends paid
Net cash flows used in financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period		 2022
$ 5,553,477
205,123
15,012
330
13,861
7,953
(3,520)
(4,629,006)
-
24,494
(4,365,753)
25,890
89,290
125,630
(136,002)
141,069
(924)
203
33,262
278,418
(429,908)
(17,333)
193,386
(28,219)
(8,486)
(290,560)
(12,142)
(4,377,895)
1,175,582
3,535
3,295,244
(8,029)
(620,080)
3,846,252
(20,368)
(2,485,690)
-
(90)
(14,594)
(2,520,742)
(516,927)
(200,000)
3,499,953
100,000
(950,000)
(1,083)
(3,329,183)
(1,397,240)
(71,730)
1,292,713
$
1,220,983		 2021
6,051,838
198,379
9,269
41
-
9,041
(920)
(5,365,858)
(338)
-
(5,150,386)
91,917
(604,530)
(49,488)
(221,869)
(123,797)
5,723
(16,481)
(51,287)
(969,812)
528,959
348,299
32,286
13,958
(12,810)
910,692
(59,120)
(5,209,506)
842,332
974
2,151,776
(9,151)
(561,921)
2,424,010
-
(135,259)
338
(2,226)
(32,344)
(169,491)
152,123
200,000
-
750,000
(700,000)
4,467
(2,330,428)
(1,923,838)
330,681
962,032
1,292,713

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, 2022 and 2021

(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 23, 2023.

(3) New Standards and Interpretations Adopted:

  • (a) The impact of the International Financial Reporting Standards (“IFRSs”) endorsed by the Financial Supervisory Commission, R.O.C. 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, 2022:

  • －

  • ●Amendments to IAS 16 “Property, Plant and Equipment Proceeds before Intended Use”

  • －

  • ●Amendments to IAS 37 “Onerous Contracts Cost of Fulfilling a Contract”

  • ●Annual Improvements to IFRS Standards 2018–2020

  • ●Amendments to IFRS 3 “Reference to the Conceptual Framework”

  • (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, 2023, would not have a significant impact on its financial statements:

  • ●Amendments to IAS 1 “Disclosure of Accounting Policies”

  • ●Amendments to IAS 8 “Definition of Accounting Estimates”

  • ●Amendments to IAS 12 “ Deferred Tax related to Assets and Liabilities arising from a Single Transaction”

〜 8 〜

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

For the years ended December 31, 2022 and 2021

(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 Company does not expect the following new and amended standards, which have yet to be endorsed by the FSC, to have a significant impact on its financial statements:

  • ●Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets Between an Investor and Its Associate or Joint Venture”

  • ●IFRS 17 “ Insurance Contracts” and amendments to IFRS 17 “ Insurance Contracts”

  • ●Amendments to IAS 1 “Classification of Liabilities as Current or Non-current”

  • ●Amendments to IAS 1 “Non-current Liabilities with Covenants”

  • ●Amendments to IFRS 17 “Initial Application of IFRS 17 and IFRS 9 – Comparative Information “

  • ●IFRS16 “Requirements for Sale and Leaseback Transactions”

(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

  • 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).

  • 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.

〜 9 〜

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

For the years ended December 31, 2022 and 2021

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

  • (c) Foreign Currency

  • 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.

  1. 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.

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

〜 10 〜

For the years ended December 31, 2022 and 2021

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

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

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

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

〜 11 〜

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

For the years ended December 31, 2022 and 2021

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

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) 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.

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.

〜 12 〜

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

For the years ended December 31, 2022 and 2021

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

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.

  • 3) 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.

  1. Financial liabilities and equity instruments

  2. 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.

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 nonoperating income and expenses.

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

〜 13 〜

For the years ended December 31, 2022 and 2021

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

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

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.

  • (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.

〜 14 〜

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

For the years ended December 31, 2022 and 2021

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

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

  • 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.

  1. 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.

  1. Depreciation

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

Land is not depreciated.

〜 15 〜

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

For the years ended December 31, 2022 and 2021

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

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

1) Buildings 2 years~ 41 years
2) Machineries 2 years~ 14 years
3) Miscellaneous equipment 3 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 1 years~10 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.

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.

〜 16 〜

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

For the years ended December 31, 2022 and 2021

(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.

(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.

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.

〜 17 〜

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

For the years ended December 31, 2022 and 2021

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

  • (o) Employee benefits

  • Defined contribution plans

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

  1. 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.

  • (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.

〜 18 〜

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

For the years ended December 31, 2022 and 2021

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

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:

  3. 1) the same taxable entity; or

  4. 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.

  • (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, 2022 and 2021 for operating segments information.

〜 19 〜

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

For the years ended December 31, 2022 and 2021

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

(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)(d) for further description of the valuation of inventories.

(6) Summary of Major Accounts

  • (a) Cash and cash equivalents
Cash and cash equivalents
Cash on hand
Savings accounts
Time deposits		 2022.12.31
$ 372
1,170,611
50,000
$
1,220,983		 2021.12.31
375
994,218
298,120
1,292,713

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

  • (b) Notes and accounts receivable
Note receivables from operating activities
Trade receivables－measured as amortized cost
Less: Loss allowance		 2022.12.31
$ 88,670
2,469,115
(1,727)
$
2,556,058		 2021.12.31
114,560
2,684,035
(1,397)
2,797,198

〜 20 〜

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

For the years ended December 31, 2022 and 2021

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

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
Current
1 to 30 days past due
31 to 120 days past due
More than 120 days past due		 2022.12.31
Gross carrying
amount
$ 2,531,896
19,739
6,150
-
$
2,557,785		 Weighted-
average
0.04%
0.01%
9.98%
-
2021.12.31		 Loss allowance
provision
1,110
2
615
-
1,727
Weighted-
average
0.04%
0.50%
1.00%
-		 Loss allowance
provision
1,224
98
75
-
1,397

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

The movement in the allowance for notes and trade receivable was as follows: was as follows:
Balance at January 1
Impairment losses recognized
Balance at December 31		 For the years ended December 31,
2022
$ 1,397
330
$
1,727		 2021
1,356
41
1,397

〜 21 〜

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

For the years ended December 31, 2022 and 2021

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

  • (c) Other receivables
Other receivables
Other receivables
Other receivables due related parties, net
Less: Loss allowance		 2022.12.31
$ 713,734
144,119
-
$
857,853		 2021.12.31
541,377
180,489
-
721,866

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.

  • (d) Inventories
Materials
Work-in-process
Finished goods
Inventory in-transit		 2022.12.31
$ 784,491
61,478
185,349
33,886
$
1,065,204		 2021.12.31
871,692
85,816
221,792
26,973
1,206,273

As of December 31, 2022 and 2021, the details of operating cost were as follows:

Cost of goods sold
Loss on physical inventory
Loss on disposal of scrap
(Gains) losses on inventory valuation and obsolescence
Revenue from sales of scraps		 2022
$ 7,072,037
680
1,525
(24,439)
(41,866)
$
7,007,937		 2021
7,148,110
-
6,366
2,932
(53,012)
7,104,396

As of December 31, 2022 and 2021, 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.

  • (e) Investments accounted for using equity method
Subsidiaries
Associates		 2022.12.31
$ 19,626,861
-
$
19,626,861		 2021.12.31
17,822,990
-
17,822,990

Subsidiaries

Please refer to the consolidated financial statements of the year ended 2022.

〜 22 〜

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

For the years ended December 31, 2022 and 2021

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

  • (f) Property, plant and equipment

The cost and depreciation of the property, plant and equipment of the Company for the years ended December 31, 2022 and 2021, were as follows:

Cost:
Balance at January 1, 2022
Additions
Disposals
Reclassification
Balance at December 31, 2022
Balance at January 1, 2021
Additions
Disposals
Reclassification
Balance at December 31, 2021
Depreciation:
Balance at January 1, 2022
Depreciation for the year
Disposals
Balance at December 31, 2022
Balance at January 1, 2021
Depreciation for the year
Disposals
Balance at December 31, 2021
Carrying amounts:
At December 31, 2022
At December 31, 2021
At January 1, 2021		 Land
$ 470,621
2,066,622
-
-
$
2,537,243
$ 470,621
-
-
-
$
470,621
$ -
-
-
$
-
$ -
-
-
$
-
$
2,537,243
$
470,621
$
470,621		 Buildings
874,993
-
(483)
28,135
902,645
866,836
-
(2,662)
10,819
874,993
447,191
31,712
(483)
478,420
415,240
34,613
(2,662)
447,191
424,225
427,802
451,596		 Machinery
2,780,781
-
(55,132)
120,567
2,846,216
2,711,350
-
(43,078)
112,509
2,780,781
2,098,852
118,681
(55,132)
2,162,401
2,029,033
112,897
(43,078)
2,098,852
683,815
681,929
682,317		 Other
equipment
759,005
-
(3,063)
31,675
787,617
710,845
-
(26,360)
74,520
759,005
499,810
54,730
(3,063)
551,477
475,301
50,869
(26,360)
499,810
236,140
259,195
235,544		 Equipment
under
installation and
construction in
progress
117,772
433,869
-
(180,377)
371,264
167,111
148,509
-
(197,848)
117,772
-
-
-
-
-
-
-
-
371,264
117,772
167,111		 Total
5,003,172
2,500,491
(58,678)
-
7,444,985
4,926,763
148,509
(72,100)
-
5,003,172
3,045,853
205,123
(58,678)
3,192,298
2,919,574
198,379
(72,100)
3,045,853
4,252,687
1,957,319
2,007,189

As of December 31, 2022 and 2021, the property, plant and equipment were not pledged as collateral for long-term debt and financing.

Due to operational needs, the Company purchased a parcel of industrial land at a total contract price of $2,160,000 in 2021. As of December 31, 2022, the price had been paid in full, and the transfer was completed on May 20, 2022.

〜 23 〜

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

For the years ended December 31, 2022 and 2021

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

  • (g) Short-term borrowings
Unsecured bank loans
Unused short-term credit lines
Range of interest rates
(h) Short-terms notes payable
Commercial paper payable
Less: discount unamortized
Net amount
Interest rate
(i)
Long-term borrowings
Unsecured bank loans
Less: current portion
Total
Unsecured credit
Range of interest rates
Due year		 2022.12.31
$
34,803
$
5,229,521
5.40%~5.81%
2022.12.31
$ -
-
$
-
-
2022.12.31
$ -
-
$
-
$
4,525,000
-
2023~2025		 2021.12.31
551,730
3,666,707
0.49%~0.85%
2021.12.31
200,000
(180)
199,820
0.58%~0.65%
2021.12.31
850,000
(128,571)
721,429
4,650,000
0.80%~1.05%
2022~2024

For the exposure information of the Company's rate foreign currency and current risk, please refer to Note (6)(r).

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, 2021, the Company did not violate any of the above financial ratio restrictions.

〜 24 〜

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

For the years ended December 31, 2022 and 2021

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

(j) Unsecured convertible bonds

Unsecured convertible bonds
Total convertible corporate bonds issued
Unamortized discounted corporate bonds payable
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 capital surplus – stock options)		 2022.12.31
$ 3,465,300
(163,160)
$
3,302,140
$
23,564
$
207,618		 2021.12.31
-
-
-
-
-
Embedded derivative instruments-call and put rights,
included in financial assets (liabilities) at fair value through
profit or loss
Interest expense		 For the years ended December 31, For the years ended December 31,
2022
$
(13,861)
$
24,494		 2021
-
-

The Company issued 5th 5-year unsecured convertible bonds with a coupon rate of 0% on April 25, 2022, with a total amount of NTD 3,465,300 thousand, issued at 101% of the face value. The actual debt amount was NTD 3,499,953 thousand. The maturity date is April 25, 2027, and the bond discount rate is 1.3057%. Thirty days before the 3-year issuance date, the creditor may request the Company to redeem the convertible bonds held by the Company in cash at the denomination of the bond. The conversion price of convertible bonds shall be handled in accordance with the Company’s issuance agreement.

1. Repayment date and method:

Except for those that are converted into common shares of the Company in advance, or calledback by the Company or repurchased by bond holders in advance, the principal will be repaid in cash in one lump sum upon maturity.

  1. Conversion prices and the adjustments:

The conversion price at the time of issuance is set at NTD 263 per share. In the events of a change in the total number of common shares of the Company, allotment of cash dividends on common shares, a conversion price lower than the current price per share, or reissue of common shares conversion rights, adjustment shall be made. As the Company takes September 2, 2022 as the base date for dividend distribution, according to the provisions of Article 11 of the Company’s 5th domestic unsecured convertible corporate bond issuance and conversion methods, the adjustment conversion price is adjusted from NTD 263 to NTD 246.8. This bond does not have reset feature.

〜 25 〜

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

For the years ended December 31, 2022 and 2021

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

  1. The call-back right of the Company for the convertible corporate bonds:

  2. 1) From the day after the issuance of the convertible corporate bonds for three months to 40 days before the maturity date:

  3. A.If the closing price of the Company’s common shares exceeds 30% of the current conversion price for 30 consecutive business days;

  4. B.If the outstanding balance of the convertible corporate bonds converted by the Company per the requests of the bond holders is less than 10% of total initial issue amount;

The Company may delivery a “Notice to call back bonds” due in 30 days through registered mails (the aforesaid period starts from the date when the Company sends the notice, and the expiry date of the period is the base date for bond call back), and send a letter to TPEX for announcement and call back the current convertible corporate bonds in cash at face value within five business days after the bond call back base date which shall not fall within the period in which the conversion of the convertible corporate bonds is suspended.

  • 2) The Yield to Call are as follows:

From the day after the issuance of the convertible corporate bonds for three months to 40 days before the maturity date, call back by cash at par value.

  • 3) If the bond holders fails to provide a written response to the Company’s agency before the bond call-back date stated in the “Notice to call back bonds” (which takes effect when it is served, and the postmark date for registered mail shall be used as the basis for call-back date), the Company will call-back the bonds in cash within five business days after the bond call back date.

  • The bond holders’ right of repurchase:

30 days before the 3-year issuance date, the bond holder may request the Company to call-back the convertible bonds held by the Company in cash at par value. The conversion price of convertible bonds shall be handled in accordance with the Company’s issuance agreement. The Company accepts the repurchase request and shall call-back the convertible bonds in cash within five business days after the repurchase date.

Please refer to Note 6(r) for information on exposure to interest rate, foreign currency and liquidity risks of the Company.

  • (k) Employee benefits

  • 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		 2022.12.31
$ 88,670
(131,512)
$
(42,842)		 2021.12.31
99,666
(114,285)
(14,619)

〜 26 〜

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

For the years ended December 31, 2022 and 2021

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

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 $131,512 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 Company 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		 2022
$ 99,666
922
(411)
(10,556)
(951)
$
88,670		 2021
104,435
1,209
599
2,657
(9,234)
99,666

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:

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		 2022
$ 114,285
749
8,770
8,659
(951)
$
131,512		 2021
108,189
707
1,311
13,312
(9,234)
114,285

〜 27 〜

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

For the years ended December 31, 2022 and 2021

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

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
Operating costs
Selling expenses
Administrative expenses
Research and development expenses		 2022
$ 306
(133)
$
173
$ 116
7
31
19
$
173		 2021
563
(61)
502
357
21
80
44
502
  • 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		 2022
$ 21,758
(19,737)
$
2,021		 2021
19,813
1,945
21,758

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		 2022.12.31
2021.12.31
%
1.75
%
0.63
%
2.00
%
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 $0.

The weighted average lifetime of the defined benefits plan is 13.09 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.

〜 28 〜

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

For the years ended December 31, 2022 and 2021

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

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

December 31, 2022
Discount rate
Future salary increasing rate
December 31, 2021
Discount rate
Future salary increasing rate		 Influences of defined
benefit obligations
Increased 0.25%
Decreased 0.25%
(2,118)
2,197
2,146
(2,080)
(2,760)
2,871
2,777
(2,685)

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 2022 and 2021, 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, 2022 and 2021, the Company set aside $39,316 and $37,798, respectively, under the pension plan to the Bureau of the Labor Insurance.

  • (l) 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		 2022
$ 911,381
(98,405)
812,976
(332,373)
$
480,603		 2021
634,473
(20,270)
614,203
(55,583)
558,620

〜 29 〜

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

For the years ended December 31, 2022 and 2021

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

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

2022
Items that will not be reclassified subsequently to profit or
loss:
Actuarial losses and gains on defined benefit plans
$
(3,947)
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign financial
statements
$
(94,198)		 2021
389
32,921

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 incentives
Deductible temporary differences
Prior (overestimate) underestimate
Undistributed earnings additional tax
Total		 2022
$
5,553,477
$ 1,110,695
6,907
-
(611,909)
(98,405)
73,315
$
480,603		 2021
6,051,838
1,210,368
13,368
(3,140)
(694,989)
(20,270)
53,283
558,620

2.Deferred tax assets and liabilities

1) Unrecognized Deferred Tax Liabilities

For the years ended December 31, 2022 and 2021, 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		 2022.12.31
$
15,056,281
$
3,011,256		 2021.12.31
11,996,735
2,399,347

〜 30 〜

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

For the years ended December 31, 2022 and 2021

(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 2022 and 2021 are as follows:

Deferred Tax Liabilities:
Balance at January 1, 2022
Debited (Credited) in income statement
Debited (Credited) in equity
Balance at December 31, 2022
Balance at January 1, 2021
Debited (Credited) in income statement
Balance at December 31, 2021
Deferred Tax Assets:
Balance at January 1, 2022
Debited (Credited) in income statement
Exchange differences on translation
of foreign operations
Balance at December 31, 2022
Balance at January 1, 2021
Debited (Credited) in income statement
Debited (Credited) in equity
Exchange differences on translation
of foreign operations
Balance at December 31, 2021		 Unrealized gain on
investment income
Defined Benefit Plans
Total
$ (858,615)
(1,382)
(859,997)
345,645
(1,698)
343,947
-
(3,947)
(3,947)
$
(512,970)
(7,027)
(519,997)
$ (910,910)
-
(910,910)
52,295
(1,382)
50,913
$
(858,615)
(1,382)
(859,997)
Defined
Benefit
Plans
Current
provisions
Unrealized
losses on
inventories
Cumulative
translation
adjustment
Others
Total
$ -
6,632
10,637
218,337
3,123
238,729
-
(6,070)
(4,888)
-
(616)
(11,574)
-
-
-
(94,198)
-
(94,198)
$
-
562
5,749
124,139
2,507
132,957
$ 791
4,139
10,051
185,416
352
200,749
(1,180)
2,493
586
-
2,771
4,670
389
-
-
-
-
389
-
-
-
32,921
-
32,921
$
-
6,632
10,637
218,337
3,123
238,729

  1. The Company’s tax returns for the years through 2020 were examined and approved by the Taipei National Tax Administration.

  2. (m) Capital and other equity

1. Issuance of ordinary shares

As of December 31, 2022 and 2021, the total value of nominal ordinary shares amounted to $6,000,000. The par value of each share is $10. In total, there were 332,918 in thousands of ordinary shares, 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, 2022 and 2021

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

2. Capital surplus

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

The balance of additional paid-in capital was as follows:
Share capital
Premium from convertible bonds
Convertible option		 2022.12.31
$ 95,627
1,773,034
207,618
$
2,076,279		 2021.12.31
95,627
1,773,034
-
1,868,661

According 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.

To consider the characteristics of industrial growth and improve the Company’ s financial structure, the annual earnings distribution may not be made if the year in which the loss occurs, and the dividend policy will give priority to the Company’s future development, financial status, and shareholders’ remuneration where stock dividends will be distributed in consideration of the Company’ s future capital expenditure budget to retain the required cash. The rest will be distributed to shareholders in the form of cash dividends, provided that the distribution of cash dividends shall not be less than 20% of the total distributed dividends.

The earning distribution shall be appropriated with adding 10%-70% of the distributable earning after accumulating the undistributed earnings in the past after setting aside various reserves.

Dividends and bonuses distributed by the Company in whole or in part of the legal reserve and capital surplus are distributed in cash shall be authorized by the Board of Directors meeting attended by more than 2/3 of the Directors with a simple majority of the Directors in session and reported to the General Meeting of Shareholders.

The rest is the same as the undistributed earnings in previous years, and the Board of Directors will formulate a distribution proposal and submit it to the shareholders’meeting for resolution.

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.

〜 32 〜

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

For the years ended December 31, 2022 and 2021

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

2) Special reserve

A portion of current-period earnings and undistributed prior-period earnings shall be reclassified as special earnings reserve during earnings distribution. The amount to be reclassified should equal the difference of the current-period total net reduction of other shareholders’ equity and the balance of the special reserve that mentioned in the previous paragraph. Similarly, a portion of undistributed prior period earnings shall be reclassified as special earnings reserve (and does not qualify for earnings distribution) to account for cumulative changes to other shareholders’ equity pertaining to prior periods. Amounts of subsequent reversals pertaining to the net reduction of other shareholders’equity shall qualify for additional distributions. As of December 31, 2022,the special reserve of $147,018 was reversed and as of December 31, 2021, $75,502 was reclassified as special reserve.

3) Earnings distribution

The earnings distribution for 2021 and 2020 was decided by the general meeting of shareholders held on May 26, 2022, and July 1, 2021.

The relevant dividend distribution to shareholders is as follows:

2021 2020
Dividend Dividend
per Share per Share
(TWD$) Amount (TWD$) Amount
Dividends distributed to
ordinary shareholders
Cash $ 10.00 3,329,183 7.00 2,330,428
Other equity
Unrealized gains
(losses) on equity
Foreign currency instruments at fair
translation value through other
differences for comprehensive
foreign operations income Total
Balance at January 1, 2022 $ (888,136) (15,773) (903,909)
Exchange difference on translation of foreign
financial statements 376,792 - 376,792
Unrealized gains (losses) from financial assets
measured at fair value through other
comprehensive income - (22,173) (22,173)
Balance at December 31, 2022 $ (511,344) (37,946) (549,290)
Balance at January 1, 2021 $ (756,453) (438) (756,891)
Exchange difference on translation of foreign
financial statements (131,683) - (131,683)
Unrealized gains (losses) from financial assets
measured at fair value through other
comprehensive income - (15,335) (15,335)
Balance at December 31, 2021 $ (888,136) (15,773) (903,909)
  1. Other equity

〜 33 〜

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

For the years ended December 31, 2022 and 2021

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

  • (n) 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, 2022 and 2021, 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
2) Weighted-average number of ordinary shares
Weighted-average number of ordinary shares		 2022
$
5,072,874
2022
332,918		 2021
5,493,218
2021
332,918

2. Diluted earnings per share

The calculation of diluted earnings per share for the years ended December 31, 2022 and 2021, were based on profit attributable to ordinary shareholders of the Company and the weightedaverage 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)		 2022
$ 5,072,874
30,684
$
5,103,558		 2021
5,493,218
-
5,493,218

2) Weighted-average number of ordinary shares (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		 2022
332,918
9,361
1,111
343,390		 2021
332,918
-
801
333,719

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.

〜 34 〜

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

For the years ended December 31, 2022 and 2021

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

3.Earnings per share were as follow:

Basic earnings per share
Diluted earnings per share
(o) 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		 2022
$
15.24
$
14.86
2022
$ 5,810,944
1,113,792
2,277,959
$
9,202,695
$ 3,892,850
3,770,362
574,143
965,340
$
9,202,695		 2021
16.50
16.46
2021
5,856,611
1,312,375
2,020,953
9,189,939
3,605,301
3,553,454
1,058,056
973,128
9,189,939
  • (p) 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, 2022 and 2021, rewards of employees of $172,916 and $189,120 and directors of $37,465 and $63,040, 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, 2022 and 2021, 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, 2022 and 2021.

〜 35 〜

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

For the years ended December 31, 2022 and 2021

(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 2022 and 2021.

  • (q) Non-operating income and expenses

  • Interest income

The details of other revenue were as follows:

Interest income 2022
$
3,520		 2021
920
  1. Other gains and losses

The details of other gains and losses were as follows:

Disposal gain on property, plant and equipment
Foreign currency exchange gain (loss), net
Gain on financial assets at fair value through profit or loss
Other profits
Other gains (loss), net		 2022
$ -
73,011
(13,861)
109,682
$
168,832		 2021
338
(46,950)
-
1,028
(45,584)
  1. Finance costs

The details of finance cost were as follows:

Interest expense 2022
$
32,447		 2021
9,041

  • (r) Financial instruments

  • Credit risk

  • 1) Credit risks exposure

As of December 31, 2022 and 2021, 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 USD 15,600 thousands, 12,286 thousands, and USD 10,600 thousands, 12,200 thousands, respectively.

〜 36 〜

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

For the years ended December 31, 2022 and 2021

(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, 2022
Non-derivative financial liabilities
Unsecured bank loans
Accounts payable
Other payable
Bond payable
Balance at December 31, 2021
Non-derivative financial liabilities
Unsecured bank loans
Short-term notes payable
Accounts payable
Other payable		 Carrying
amount
$ 34,803
1,774,373
1,860,934
3,302,140
$
6,972,250
$ 1,401,730
199,820
2,204,281
1,665,350
$
5,471,181		 Contractual
cash flows
35,187
1,774,373
1,860,934
3,465,300
7,135,794
1,418,916
200,000
2,204,281
1,665,350
5,488,547		 Within 6
months
35,187
1,774,373
1,860,934
-
3,670,494
499,494
200,000
2,204,281
1,665,350
4,569,125		 6-12 months
-
-
-
-
-
189,547
-
-
-
189,547		 1-2 years
-
-
-
-
-
427,672
-
-
-
427,672		 More than 2
years
-
-
-
3,465,300
3,465,300
302,203
-
-
-
302,203

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		 2022.12.31 TWD
2,931,700
1,984,934		 2021.12.31
Foreign
currency
(thousands of
dollars)		 Exchange
rate		 Foreign
currency
(thousands
of dollars)		 Exchange
rate
TWD
27.6800
2,895,012
27.6800
2,156,681
$ 95,464
64,635		 30.7100
30.7100		 104,589
77,915

〜 37 〜

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

For the years ended December 31, 2022 and 2021

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

  • 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.

A 1% appreciation or depreciation of the TWD against the USD as at December 31, 2022 and 2021, would have increased or decreased net income by $7,615 and $6,441, 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 2022
Foreign
exchange gains
Average
exchange rate
$ 73,011
-		 2021
Foreign
exchange gains
$ 73,011		 Foreign
exchange losses
Average
exchange rate
(46,950)
-

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 $33 and $8,958 for the years ended December 31, 2022 and 2021, respectively, assuming all other variable factors remain constant. This is mainly due to the Company’s variable rate borrowing.

  1. Fair value

  2. 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, 2022 and 2021

(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 at fair value
through profit or loss
Redemption and repurchase
option of bonds
Financial liabilities measured at
amortized cost
Short-term borrowings
Accounts payable
Other payable
Bond payable
Guarantee deposits receivable
Sub-total
Total
Financial assets measured at
amortized cost
Cash and cash equivalents
Notes and account receivable
Other receivable
Refundable deposits
Total		 2022.12.31 2022.12.31
Book Value
$ 1,220,983
2,556,058
857,853
8,656
$
4,643,550
$ 23,564
34,803
1,774,373
1,860,934
3,302,140
12,057
6,984,307
$
7,007,871		 Fair value
Level 1
-
-
-
-
-
-
-
-
-
-
-
-
-		 Level 2
-
-
-
-
-
-
-
-
-
-
-
-
-
2021.12.31		 Level 3
-
-
-
-
-
23,564
-
-
-
-
-
-
23,564		 Total
-
-
-
-
-
23,564
-
-
-
-
-
-
23,564
Book value
$ 1,292,713
2,797,198
721,866
8,566
$
4,820,343		 Fair value
Level 1
-
-
-
-
-		 Level 2
-
-
-
-
-		 Level 3
-
-
-
-
-		 Total
-
-
-
-
-

〜 39 〜

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

For the years ended December 31, 2022 and 2021

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

Financial liabilities measured at
amortized cost
Short-term borrowings
Short-term notes payable
Account payable
Other payable
Guarantee deposits
Total		 2021.12.31 2021.12.31
Book value
$ 1,401,730
199,820
2,204,281
1,665,350
13,140
$
5,484,321		 Fair value
Level 1
-
-
-
-
-
-		 Level 2
-
-
-
-
-
-		 Level 3
-
-
-
-
-
-		 Total
-
-
-
-
-
-

  • 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.

  • 3) The transfer between Level 1 and Level 2

There was no transfer from Level 1 Level 2 in 2022 and 2021.

  • 4) Quantified information on significant unobservable inputs (Level 3) used in fair value measurement

The Company'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-equity investments".

Most of the Level 3 fair value attributed to the Company only has single significant unobservable input, and only non-listed (non-OTC) equity instrument investments in have multiple significant unobservable inputs. Significant unobservable inputs of non-listed (nonOTC) equity instrument investments are independent of each other, so there is no correlation.

〜 40 〜

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

For the years ended December 31, 2022 and 2021

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

Quantified information of significant unobservable inputs was as follows:

Item
Financial liabilities at
fair value through
profit or loss -
Embedded derivative
financial instruments-
Repurchase right		 Valuation
technique
Binomial tree
convertible bond
pricing model		 Significant
unobservable
inputs
Inter-relationship
between significant
unobservable inputs and
fair value measurement
‧ Volatility(42.55%)
‧ The higher the volatility,
the higher the fair value
  • (s) 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.

〜 41 〜

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

For the years ended December 31, 2022 and 2021

(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, 2022 and 2021, the Company’s unused credit line were amounted to $9,754,521 and $8,316,707, respectively.

〜 42 〜

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

For the years ended December 31, 2022 and 2021

(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.

(t) 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.

〜 43 〜

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

For the years ended December 31, 2022 and 2021

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

  • (u) 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, 2022 and 2021, were as follow:

Short-term borrowings
Long-term borrowings
Short-term notes payable
Bond payable
Total liabilities from
financing activities		 2022.1.1
$ 551,730
850,000
199,820
-
$
1,601,550		 Cash flow
(516,927)
(850,000)
(200,000)
3,499,953
1,933,026		 Non-cash changes
Acquisition
Foreign
exchange
movement
Fair value
changes
-
-
-
-
-
-
-
-
180
-
-
(197,813)
-
-
(197,633)		 Non-cash changes
Acquisition
Foreign
exchange
movement
Fair value
changes
-
-
-
-
-
-
-
-
180
-
-
(197,813)
-
-
(197,633)		 2022.12.31
34,803
-
-
3,302,140
Acquisition
-
-
-
-
-		 Foreign
exchange
movement
-
-
-
-
-
3,336,943
Short-term borrowings
Long-term borrowings
Short-term notes payable
Total liabilities from
financing activities		 2021.1.1
$ 399,607
800,000
-
$
1,199,607		 Cash flow
152,123
50,000
200,000
402,123		 Non-cash changes
Acquisition
Foreign
exchange
movement
Fair value
changes
-
-
-
-
-
-
-
-
(180)
-
-
(180)		 Non-cash changes
Acquisition
Foreign
exchange
movement
Fair value
changes
-
-
-
-
-
-
-
-
(180)
-
-
(180)		 2021.12.31
551,730
850,000
199,820
Acquisition
-
-
-
-		 Foreign
exchange
movement
-
-
-
-
1,601,550

(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

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 Company

The Company its subsidiaries

The Company its subsidiaries The Company its subsidiaries

The Company its sub-subsidiaries The Company its sub-subsidiaries The Company its sub-subsidiaries The Company its sub-subsidiaries

〜 44 〜

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

For the years ended December 31, 2022 and 2021

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

Name of related party Relationship with the Company 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 EMC USA HOLDING INCORPORATED The Company its sub-subsidiaries TECHNICA USA

The Company its sub-subsidiaries The Company its sub-subsidiaries The Company its sub-subsidiaries The Company its sub-subsidiaries The Company its sub-subsidiaries The Company associates

  • (c) Significant transactions with related parties

1. Sales

The amounts of significant sales and royalties sales by the Company to related parties were as follows:

Sub-Subsidiaries
Associates		 For the years ended December 31, For the years ended December 31,
2022
$ 1,189,617
46,974
$
1,236,591		 2021
1,292,023
97,953
1,389,976

The selling price for related parties and general customers are negotiated by both parties. The credit terms ranged from 90 to 120 days, which approximated those for routine sales transactions; the royalties are negotiated by both parties.

2. Purchases

The amounts of significant purchases by the Company from related parties were as follows:

The amounts of significant purchases by the
Company from		 related parties were as follows: related parties were as follows:
Sub-Subsidiaries For the years ended December 31,
2022
$
143,273		 2021
100,592

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 2022.12.31
$ 229,530
6,417
144,119
-
$
380,066		 2021.12.31
Accounts receivable
Accounts receivable
Other receivables
Other receivables		 Sub-Subsidiaries
Associates
Sub-Subsidiaries
Associates		 310,458
51,119
177,122
45
538,744

〜 45 〜

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

For the years ended December 31, 2022 and 2021

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

The receivables from related parties were uncollateralized, and no provisions for doubtful debt were required after the assessment by the management.

  1. Payables to related parties
Account Relationship 2022.12.31
$ 79,220
644,129
2,267
$
725,616		 2021.12.31
Accounts payable
Other payables
Other payables		 Sub-Subsidiaries
Sub-Subsidiaries
Associates		 63,394
450,082
2,928
516,404

5. Loans to related parties

The loans to related parties were as follow:

The loans to related parties were as follow:
Associates 2022.12.31
$
-		 2021.12.31
3,322

The interest charged by the Company to related parties is based on the average interest rate charged by financial institutions on the Company's borrowings. The loans to related parties are unsecured.

6. Guarantee

As of December 31, 2022, the Company had provided a guarantee for loans taken out by its subsidiaries, please refer to Note 13(a) for further explanations.

  • 7.Other transactions to related parties
Account Relationship 2022.12.31
$ 589
4,175
$
4,764		 2021.12.31
Selling expenses
Selling expenses		 Sub-Subsidiaries
Associates		 -
3,891
3,891
  • (d) Key management personal compensation

Key management personnel compensation comprised:

Key management personnel compensation comprised:
Short-term employee benefits
Termination benefits		 For the years ended December 31,
2022
$ 128,543
1,094
$
129,637		 2021
192,538
2,774
195,312

〜 46 〜

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

For the years ended December 31, 2022 and 2021

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

(8) Pledged Assets

The carrying values of pledged assets were as follows:

Assets Purpose of Pledge
Deposits for lease and natural
gas, etc.
 2022.12.31
$
8,656		 2021.12.31
Refundable deposits 8,566

(9) Significant Contingencies and Commitments

  • (a) Major Commitments and contingencies were as follows:

  • 1.Unused standby letters of credit

Unused standby letters of credit
TWD
USD		 2022.12.31
2021.12.31
$ 43,440
69,047
2,702
5,384
  • 2.The royalties of eco-material technique treatment with Company A, etc., the paid royalties were as follows:
2022
$
6,287		 2021
14,401

  • 3.As of December 31, 2022 and 2021, 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 $7,000 and $5,000.

  • 4.As of December 31, 2022, the Company planned to get a government grant and obtained the performance guarantee letter issued by the bank. The amount of the guarantee letter was $5,286.

(10) Significant Catastrophic Losses: None.

(11) Significant Subsequent Events

The Company suffered a major fire accident on January 15, 2023, which caused damage to some of the Company's buildings, equipment and inventory. Since the losses are still being evaluated by the insurance company, the Company is unable to verify the total cost of the damage. Hence, the subsequent insurance claim has yet to be recognized. After the Company's preliminary assessment of the relevant losses and subsequent claims settlement, there is no significant impact on the overall operation.

〜 47 〜

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

For the years ended December 31, 2022 and 2021

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

(12) Others

  • (a) Employee benefits, depreciation, and amortization expenses, categorized as operating cost or expense, were as follows:
Categorized as
Nature		 For the year ended December 31, 2022 For the year ended December 31, 2022 For the year ended December 31, 2022 For the year ended December 31, 2021 For the year ended December 31, 2021 For the year ended December 31, 2021
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		 629,217
54,664
25,155
-
31,083
186,875
66		 524,503
31,422
14,334
38,002
13,286
18,248
14,946		 1,153,720
86,086
39,489
38,002
44,369
205,123
15,012		 618,111
54,972
24,735
-
37,842
184,643
249		 575,146
25,850
13,565
63,522
12,194
13,736
9,020		 1,193,257
80,822
38,300
63,522
50,036
198,379
9,269

As of December 31, 2022 and 2021, 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
  • 1.The Company's salary and remuneration policy (including directors, 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.

  • 2.The Company did not have supervisors, therefore, there was no remunerations of supervisors.

〜 48 〜

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

For the years ended December 31, 2022 and 2021

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

(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, 2022:

  1. Fund financing to other parties:

(Expressed in thousands of New Taiwan dollars, 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 Collateral Individual
funding
loan limits		 Maximum
limit of fund
financing
Item Value
0
1
2		 Elite Material Co.,
Ltd.
Elite Electronic
Material (Kunshan)
Co., Ltd.
Elite Electronic
Material (Zhongshan)
Co., Ltd.		 TECHNICA USA
Elite Electronic
Material (Huangshi)
Co., Ltd.
Elite Electronic
Material (Huangshi)
Co., Ltd.		 Other
receivables-
related parties
Other
receivables-
related parties
Other
receivables-
related parties		 Y
Y
Y		 12,881
3,068,478
1,982,640		 -
3,023,888
1,939,520		 -
1,586,880
886,008		 2.00%
2.00%~
3.00%
2.00%~
3.00%		 1
2
2		 46,974
-
-		 -
Operating
demand
Operating
demand		 -
-
-		 -
-
-		 -
-
-		 23,487
(Note 3)
4,488,230
(Note 4)
921,965
(Note 5)		 6,622,369
(Note 3)
4,488,230
(Note 4)
921,965
(Note 5)

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.

Note 3:The company with business contact, the amount of each fund financing cannot exceed 50% of total amount of purchase (sales) transactions in the recent year and cannot exceed 3% of the Company's net asset value; the total amount of fund financing cannot exceed 30% of the Company's net asset value.

Note 4:The total amount of fund financing could not exceed 30% of the lender's net asset value and the Company's net asset value, while the maximum financing amount for a single company could not exceed 30% of the lender's net asset value .

Note 5:The total maximum financing amount cannot exceed 30% of the lender's net asset value, while the maximum financing amount for a single company cannot exceed 30% of the lender's net value.

Note 6:The total amount cannot exceed 100% of the Company's net worth in its lates financial statements.

2. Guarantees and endorsements for other parties:

(Expressed in thousands of New Taiwan dollars, unless otherwise specified)

No.
(Note 1)		 Name of
company		 Counter-party 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
1
2		 Elite Material
Co., Ltd.
〞
Elite Electronic
Material
(Kunshan) Co.,
Ltd. (Note 4)
Elite Electronic
Material
(Zhongshan) Co.,
Ltd.		 EMD SPECIALTY
MATERIALS,LLC
TECHNICA USA
Elite Electronic Material
(Huangshi) Co., Ltd.
Elite Electronic Material
(Huangshi) Co., Ltd.		 2
6
4
4		 11,037,282
11,037,282
7,480,384
1,536,608		 483,225
19,329
811,080
2,706,463		 460,650
18,426
793,440
2,207,071		 337,810
18,426
700,465
1,718,923		 -
-
-
-		 %
2.09
%
0.08
%
5.30
%
71.82		 22,074,564
22,074,564
14,960,767
3,073,215		 Y Y
Y

〜 49 〜

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

For the years ended December 31, 2022 and 2021

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

Note 1: 0 is the Company.

Note 2:1. Entities with business relationship with the Company. 

  2. A subsidiary in which the Company directly holds more than 50% of its voting shares.

  3. A investee in which the Company and subsidiary holds more than 50% of its voting shares.

  4. A parent company in which the Company directly or Subsidiaries indirectly holds more than 90% of its voting shares.

  5. 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.

  6. Shareholders making endorsements and/or guarantees for their mutually invested company in proportion to their shareholding percentage.

  7. Companies in same type of business providing guarantees of pre-sale contracts according to the regulation.

  • 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.

  • Information regarding securities held at balance sheet date:

(Expressed in thousands of New Taiwan dollars, unless otherwise specified)

Name of holder Category and
name of security		 Category and name
of security		 Account title Ending balance Ending balance Ending balance Ending balance Note
Number Book value Percentage Market value
EMC OVERSEAS
HOLDING
INCORPORARTED
EMC USA HOLDING
INCORPORATED		 PROUD STAR
INTERNATIIONAL
LIMITED
TECHNICA USA
(preference stock)		 -
Associates		 Non-current
financial assets at
fair value through
other comprehensive
income
〞		 500,000
722,000		 -
-		 %
3.26
%
87.76		 -

-

  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 :

(In Thousands (In Thousands of New Tai wan Dollars)
Name of
Company		 Name of
property		 Transaction
date		 Transactio
amount		 n
Status of
payment		 Counterparty Relationship
with the
Company		 If the co
 untry is a relat
previous transf		 ed party, d
er informati		 isclose the
on		 References
for
determining
price
 Purpose of
acquisition and
current
condition		 Others
Owner Relationship
with the
Company		 Date of
transfer		 Amount
Elite Material Co.,
Ltd.		 Land and plant 2021.12.31 2,160,000 Paid Tehchang Leather
Products Co., Ltd.		 None - - - - Professional
valuation report


 Required for
company
operations		 None
  1. Disposition of real estate for which the dollar amount reaches $300 million or 20% or more of paid-in capital: None.

〜 50 〜

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

For the years ended December 31, 2022 and 2021

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

  1. Buying/selling products with the dollar amount reaches $100 million or 20% or more of paid-in capital:
capital:
(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		 Credit period Unit price Credit period 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
(Kunshan) Co., Ltd.
Elite Material Co., Ltd.
Elite Electronic Material
(Kunshan) 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 Material
Co., Ltd.
Elite Electronic
Material
(Kunshan) Co.,
Ltd.
Elite Electronic
Material
(Zhongshan)
Co., Ltd.
Elite Electronic
Material
(Kunshan) 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
Sale
Purchase
Sale
Purchase		 (464,954)
464,954
(264,767)
264,767
(123,610)
123,610
(177,705)
177,705
(2,503,481)
2,503,481
(2,210,121)
2,210,121		 %
(5)
%
4
%
(3)
%
3
%
(1)
%
2
%
(1)
%
2
%
(44)
%
24
%
(39)
%
29		 Depends on
subsidiaries'
financial
condition
〞
〞
〞
Depends on the
company's
financial
condition
〞
Depends on
subsidiaries'
financial
condition
〞
〞
〞
〞
〞		 -
-
-
-
-
-
-
-
-
-
-
-		 93,723
(93,723)
85,100
(85,100)
68,803
(68,803)
32,856
(32,856)
478,690
(478,690)
681,549
(681,549)		 %
4
%
(3)
%
3
%
(4)
%
1
%
(4)
%
1
%
(2)
%
28
%
(18)
%
40
%
(35)

〜 51 〜

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

For the years ended December 31, 2022 and 2021

(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:
20% or more of paid-in capital: capital:
(In Th ousands of New T aiwan Dollars
Name of
related party		 Counter-party Relationship Balance of
receivables
from related
party		 Turnover
days		 Past-due re
relate		 ceivables from
d party		 Subsequently
received amount
of receivables
from related
party		 Allowances
for bad debts
Amount Action taken
Elite Material Co.,
Ltd.
Elite Material Co.,
Ltd. (note 1)
Elite Material Co.,
Ltd.
Elite Material Co.,
Ltd. (note 1)
Elite Electronic
Material (Kunshan)
Co., Ltd.
Elite Electronic
Material (Kunshan)
Co., Ltd. (note 1)
Elite Electronic
Material (Kunshan)
Co., Ltd.
Elite Electronic
Material (Kunshan)
Co., Ltd. (note 1)
Elite Electronic
Material (Zhongshan)
Co., Ltd.
Elite Electronic
Material (Zhongshan)
Co., Ltd. (Note 1)
Elite Electronic
Material (Zhongshan)
Co., Ltd.
Elite Electronic
Material (Zhongshan)
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 Material
Co., Ltd.
〞
Elite Electronic
Material
(Huangshi) Co.,
Ltd.
〞
Elite Material
Co., Ltd.
〞
Elite Electronic
Material
(Huangshi) Co.,
Ltd.
〞
Elite Electronic
Material
(Kunshan) Co.,
Ltd.
Elite Electronic
Material
(Zhongshan) Co.,
Ltd.		 Investee company
on equity method
by the Company
〞
〞
〞
Investcc company
on equity method
by the Company
〞
Actual related party
〞
Investee company
on equity method
by the Company
〞
Actual related party
〞
〞
〞		 93,723
89,300
85,100
42,749
68,803
350,663
14,556
1,610,173
10,414
292,586
5,856
899,610
478,690
681,549		 4.45
Not
applicable
1.89
Not
applicable
2.02
Not
applicable
1.90
Not
applicable
2.03
Not
applicable
5.71
Not
applicable
3.48
3.62		 -
-
-
-
-
-
-
-
-
-
-
-
-
-		 36,099
89,300
40,299
42,749
8,237
177,470
9,574
-
2,505
156,591
5,222
-
287,268
403,284		 -
-
-
-
-
-
-
-
-
-
-
-
-
-

Note 1: Account for other receivable due from related parties.

  1. Derivative transactions: None.

〜 52 〜

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

For the years ended December 31, 2022 and 2021

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

  • (b) Information on investees:

For the years ended December 31, 2022, the following was the information on investees (excluding 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 investm ent (Amount) Ending balanc e Net income
(loss) of the
investee		 Investment
income (losses)		 Note
Ending
balance		 Beginning
balance		 Shares Ratio of
shares		 Book
value
Elite Material Co.,
Ltd.
〞
〞
〞
EMC OVERSEAS
HOLDING
INCORPORATED
〞
Grand Zhuhai
Incorporated
〞
EMC
INTERNATIONAL
HOLDING
INCORPORATED
〞
EMC SPECIAL
APPLICATION
INCORPORATED
EMC USA
HOLDING
INCORPORATED		 EMC OVERSEAS
HOLDING
INCORPORATED
Grand Wuhan
Incorporated
EMC
INTERNATIONAL
HOLDING
INCORPORATED
Li Cheng Tech Co.,
Ltd.
Grand Zhuhai
Incorporated
Li Cheng Tech Co.,
Ltd.
Grand Shanghai
Incorporated
Grand Zhongshan
Incorporated
EMC SPECIAL
APPLICATION
INCORPORATED
EMC USA
HOLDING
INCORPORATED
EMD SPECIALTY
MATERIALS,LLC
TECHNICA USA		 British Virgin
Islands
Cayman
Islands
〞
Taiwan
Cayman
Islands
Taiwan
British Virgin
Islands
〞
Cayman
Islands
〞
USA
〞		 Investment business
Investment business
Investment business
Electronics,
Telecommunications
equipment, Wholesale,
Retails, Batteries, Power
generation and
Distribution machinery
manufacturing business
Investment business
Electronics,
Telecommunications
equipment, Wholesale,
Retails, Batteries, Power
generation and
Distribution machinery
manufacturing business
Investment business
Investment business
Investment business
Investment business
Copper clad laminate and
prepreg business
Import/export business		 1,179,111
602,440
781,850
173,694
1,063,121
7,311
1,039,558
504,780
806,291
22,480
804,514
18,426		 1,179,111
602,440
761,482
173,694
1,037,962
7,311
1,014,399
504,780
806,291
-
804,514
18,426		 36,256,950
20,020,000
27,042,000
16,412,918
34,618,060
250,000
18,200,000
16,437,000
26,255,000
732,000
-
600,000		 %
100.00
%
100.00
%
100.00
%
33.50
%
100.00
%
1.53
%
100.00
%
100.00
%
100.00
%
100.00
%
100.00
%
30.00		 18,092,576
790,546
753,963
-
18,056,831
-
11,065,300
6,990,064
752,819
22
751,662
-		 4,642,989
64,005
(80,431)
-
4,642,437
-
2,688,119
1,961,292
(79,888)
(276)
(64,879)
(4,949)		 4,642,989
64,005
(80,431)
-
4,642,437
-
2,684,753
1,961,292
(79,888)
(276)
(64,879)
-		 Subsidiaries
Subsidiaries
Subsidiaries
Note 5
Sub-subsidiaries
Note 5
Third-tier
subsidiary
〞
Sub-subsidiaries
〞
Third-tier
subsidiary
Note 3, 4

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:On October 27, 2021, the Company's Board of Directors resolved to adjust the investment structure. The initial investment of $16,608 that was invested in Technica USA through EMC Overseas Holding Incorporated was adjusted to be invested in Technica USA through EMC USA Holding Incorporated.

  • Note 4: Because other shareholders hold more than 70% of the shares and the Company only accounts for 30%, the Company has no control. Note 5: The investment value had been impaired, the Company recognized all losses and the book value was offset to zero.

  • Note 6: The difference between the ending balance and the net equity value is mainly due to the unrealized gross profit and the amortization of equipment purchased on behalf of others.

〜 53 〜

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

For the years ended December 31, 2022 and 2021

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

  • (c) Information on investment in Mainland China:

  • Information on investment in Mainland China:

(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 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
〞
〞		 1,940,872
620,342
614,200		 (2)
(2)
(2)		 650,816
440,613
601,858		 -
-
-		 -
-
-		 650,816
440,613
601,858		 2,683,726
1,958,775
64,000		 %
100.00
%
100.00
%
100.00		 2,680,469
1,958,775
64,000		 14,960,767
3,073,215
774,123		 9,786,464
5,410,555
-
  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 4,398,463 13,244,738

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, also USD 10,000, and USD 35,000, which were recognized as capital increase out of earnings, respectively.

  • 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 30.7100 and 29.7181, respectively, for the year ended December 31, 2022.

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, 2022. (The transactions were eliminated in the consolidated financial statements.)

〜 54 〜

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

For the years ended December 31, 2022 and 2021

(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
Cathay Life Insurance Co., Ltd. 18,610,000 %
5.58

  • 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 2022.

〜 55 〜

ELITE MATERIAL CO., LTD.

STATEMENT OF CASH AND CASH

EQUIVALENTS

December 31, 2022

(In Thousands of New Taiwan Dollars)

Item Description
Amount
Cash on hand
$ 372
Check account deposits
168
Saving accounts
944,544
Foreign deposits(USD7,321 Thousands of Dollars、
CNY245 Thousands of Dollars)
225,899
Time deposits
50,000
Sub total
1,220,611
$
1,220,983
Cash
Saving accounts
Total

STATMENT OF NOTES RECEIVABLES

Client name Description Amount
Note
$ 38,265
30,184
9,066
11,155
Client included in others
does not exceed 5% of the
account balance.
(408)
$
88,262
A Company
B Company
C Company
Others
Less: Loss allowance
Total		 Current portion
〞
〞
〞

〜 56 〜

ELITE MATERIAL CO., LTD.

STATEMENT OF ACCOUNT RECEIVABLES

December 31, 2022

(In Thousands of New Taiwan Dollars)

Client name Description Amount
Note
$ 93,723
85,100
50,707
6,417
235,947
455,393
412,613
358,889
200,156
193,894
612,223
Client included in others
does not exceed 5% of the
account balance.
2,233,168
2,469,115
(1,319)
$
2,467,796
Related-parties:
Elite Electronic Material
(Kunshan) Co., Ltd.
Elite Electronic Material
(Zhongshan) Co., Ltd.
EMD Specialty Materials, LLC
TECHNICA USA
Sub total
Non-related-parties:
D Company
E Company
F Company
G Company
H Company
Others
Sub total
Total
Less: Loss allowance
Accounts receivable, net

〜 57 〜

ELITE MATERIAL CO., LTD. STATEMENT OF INVENTORY

December 31, 2022

(In Thousands of New Taiwan Dollars)

Item Amount
Cost
Net Realizable
Value
Note
$ 776,376
(18,070)
758,306
784,565
26,185
26,185
62,574
(1,096)
61,478
68,851
194,925
(9,576)
185,349
257,905
33,886
33,886
$
1,065,204
Cost
$ 776,376
(18,070)
758,306
26,185
62,574
(1,096)
61,478
194,925
(9,576)
185,349
33,886
$
1,065,204
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

〜 58 〜

ELITE MATERIAL CO., LTD.

STATEMENT OF INVESTMENTS ACCOUNTED FOR USING

EQUITY METHOD

For the Year Ended December 31, 2022

(In Thousands of New Taiwan Dollars)

Investee Company
EMC OVERSEAS HOLDING
INCORPORATED
Grand Wuhan Incorporated
EMC INTERNATIONAL
HOLDING INCORPORATED
Licheng Technology (Stock)
Company		 Beginning Balance
Number
of
shares
Amount
36,257 $ 16,358,381
20,020
710,397
26,310
754,212
16,413
-
$
17,822,990		 I ncrease
Amount
1,732,558
78,314
20,368
-
1,831,240		 D ecrease
Amount
-
-
27,369
-
27,369		 Ending Balanc e
Amount
18,090,939
788,711
747,211
-
19,626,861		 Mark
N		 et Price or
et Value
Total price
18,092,576
790,546
753,963
-
19,637,085		 Pledged as
collateral
Note
No
Note 1
No
〞
No
〞
No
Number
of
shares		 Number
of
shares
-
-
732
-		 Number
of
shares
-
-
-
-		 Number
of
shares
36,257
20,020
27,042
16,413		 Proportion of
shareholding
%
100.00
%
100.00
%
100.00
%
33.50		 Unit
price
-
-
-
-
36,257
20,020
26,310
16,413

Note1: The difference between the ending balance and the net equity value is mainly due to the unrealized gross profit and the amortization of equipment purchased on behalf of others.

〜 59 〜

ELITE MATERIAL CO., LTD.

STATEMENT OF SHORT-TERM LOANS

December 31, 2022

(In Thousands of New Taiwan Dollars)

Type of loans

Short-term loans

Description

Financial institution

Ending Balance Contract Period $ 34,803 2022.12.12~2023.3.12

Range of Loan Collaterals or Interest Rates Commitments Pledged Assets Note 5.40%~5.81% 5,740,825 Guarantee Notes

〜 60 〜

ELITE MATERIAL CO., LTD.

STATEMENT OF ACCOUNT PAYABLES

December 31, 2022

(In Thousands of New Taiwan Dollars)

Suppliers Description Amount
Note
$ 68,803
10,414
3
79,220
191,777
148,331
134,612
124,755
119,386
117,777
111,672
111,160
96,342
539,341
Client included in others
does not exceed 5% of the
account balance.
1,695,153
$
1,774,373
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:
A Company
B Company
C Company
D Company
E Company
F Company
G Company
H Company
I Company
Others
Sub total
Total

〜 61 〜

ELITE MATERIAL CO., LTD.

STATEMENT OF OTHER PAYABLES

December 31, 2022

(In Thousands of New Taiwan Dollars)

Item Description
Amount
Payables for equipment
$ 83,709
Payroll payables and bonuses payable
374,193
Work in progress-outsourced payable
47,064
Employees compensations payable
206,900
Directors' compensations payable
37,465
Pension expenses payable
20,988
Other expenses payable
1,090,615
$
1,860,934
Other payables
Total

STATEMENT OF NET REVENUE For the Year Ended December 31, 2022

(In Thousands of New Taiwan Dollars)

Item
Prepreg
Capper clad laminate
Mass lam foundry
Others		 Quantity Amount
Note
$ 3,892,850
3,770,362
574,143
965,340
$
9,202,695
19,653,552
5,590,957
3,358,109

〜 62 〜

ELITE MATERIAL CO., LTD.

STATEMENT OF OPERATING COSTS

For the Year Ended December 31, 2022

(In Thousands of New Taiwan Dollars)

Item
Materials, beginning of the year
Plus: Purchases
Less: Material sold
Materials, end of the year
Loss on physical inventory
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
Cost of goods sold－Material sold
Loss on physical inventory
Loss on disposal of scrap
Gains on inventory valuation and obsolescence
Revenue from sales of scraps
Costs of sales		 Amount
Sub total
Total
$ 873,764
5,119,935
(476,172)
(776,729)
(680)
(1,525)
(130,708)
(54,069)
4,553,816
479,764
1,611,041
6,644,621
91,829
4,459
(62,574)
(42,152)
(131,401)
(139,839)
6,504,782
261,680
134,481
(228,458)
(10,407)
(66,213)
91,083
6,595,865
476,172
680
1,525
(24,439)
(41,866)
$
7,007,937

〜 63 〜

ELITE MATERIAL CO., LTD.

STATEMENT OF SELLING EXPENSES

For the Year Ended December 31, 2022

(In Thousands of New Taiwan Dollars)

Item Description Amount Note
Commission expenses $ 180,739
Shipping expenses 85,694
Payroll expenses 41,932
Administrative expenses 40,228
Other expenses 32,076 Client included in others
does not exceed 5% of the
account balance.
Total $ 380,669
STATEMENT OF ADMINISTRATIVE
EXPENSES
Item Description Amount Note
Payroll expenses $ 351,441
Consultant fees 44,851
Remuneration of directors 37,465
Other expenses 184,936 Client included in others
does not exceed 5% of the
account balance.
Total $ 618,693

〜 64 〜

ELITE MATERIAL CO., LTD.

STATEMENT OF RESEARCH AND DEVELOPMENT EXPENSES

For the Year Ended December 31, 2022

(In Thousands of New Taiwan Dollars)

Item Description Amount
Note
$ 211,127
131,130
69,168
Client included in others
does not exceed 5% of the
account balance.
$
411,425
Research and development
expenses
Payroll expenses
Other expenses
Total

〜 65 〜

ANNEX II

Year 2022 Consolidated Financial Reports Audited by CPA

  • 96 -

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, 2022 and 2021

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

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
26
27～56
56～58
58
58～59
59
59
59
60～64
64～65
66
66
67～69

〜 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, 2022 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 23, 2023

〜 3 〜

==> picture [76 x 31] intentionally omitted <==

==> picture [169 x 19] intentionally omitted <==

KPMG

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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, 2022 and 2021, and the consolidated statement of comprehensive income, changes in equity and cash flows for the year ended December 31, 2022 and 2021, 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, 2022 and 2021, and its consolidated financial performance and its consolidated cash flows for the year ended December 31, 2022 and 2021 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 audits in accordance with the Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants and the Standards on Auditing of the Republic of China. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the Norm of Professional Ethics for Certified Public Account of Republic of China, and we have fulfilled our other ethical responsibilities in accordance with these requirement. 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)(r) "Revenue" of the consolidated financial statements.

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.

〜 4 〜

KPMG, a Taiwan partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee.

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.

Other Matter

Elite Material Co., Ltd. has additionally prepared its parent company only financial statements as of and for the years ended December 31, 2022 and 2021, on which we have issued an unqualified opinion.

Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with 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 Standards on Auditing of the Republic of China will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with the Standards on Auditing of the Republic of China, we exercise professional judgment and 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.

〜 4-1 〜

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

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

  3. 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.

  4. 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.

  5. 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 Hsiao-Ling Chiang.

KPMG

Taipei, Taiwan (Republic of China) February 23, 2022

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.

〜 4-2 〜

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) ELITE MATERIAL CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

December 31, 2022 and 2021

(Expressed in Thousands of New Taiwan Dollars)

ASSETS
Current Assets:
1100
Cash and cash equivalents (Note (6)(a))
1150
Notes receivable, net (Note (6)(b))
1170
Accounts receivable, net (Note (6)(b) and (7))
1200
Other receivables, net (Note (6)(c) and (7))
1310
Inventories (Note (6)(d))
1479
Other current assets, others
1220
Current tax assets
Non-Current Assets:
1600
Property, plant and equipment (Note (6)(f))
1755
Right-of-use assets (Note (6)(g))
1780
Intangible assets
1840
Deferred tax assets (Note (6)(o))
1900
Other non-current assets
1920
Guarantee deposits paid (Note (8))
1975
Net defined benefit asset, non-current (Note (6)(n))
Total assets		 2022.12.31
Amount
%
$ 10,443,618
24
212,623
1
11,470,512
26
49,423
-
4,235,908
10
160,478
-
7,395
-
26,579,957
61
14,679,878
34
609,176
1
744,784
2
192,172
1
464,196
1
69,482
-
42,842
-
16,802,530
39
$
43,382,487
100		 2021.12.31
Amount
%
6,642,069
18
146,612
-
13,127,064
36
97,758
-
5,465,411
15
364,830
1
-
-
25,843,744
70
8,468,582
23
600,189
2
669,410
2
281,368
1
625,368
2
61,781
-
14,619
-
10,721,317
30
36,565,061
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
2200
Other payables (Note (7))
2230
Current tax liabilities
2280
Current lease liabilities (Note (6)(l))
2322
Long-term borrowings, current portion (Note (6)(j))
2399
Other current liabilities, others
Non-Current liabilities:
2500
Non-current financial liabilities at fair value through profit or loss
(Note (6)(k))
2530
Bonds payable (Note (6)(k))
2540
Long-term borrowings (Note (6)(j))
2570
Deferred tax liabilities (Note (6)(o))
2580
Non-current lease liabilities (Note (6)(l))
2600
Other non-current liabilities (Note (6)(m))
Total liabilities
Equity attributable to owners of parent (Note (6)(p)):
3100
Capital stock
3200
Capital surplus
Retained earnings:
3310
Legal reserve
3320
Special reserve
3350
Unappropriated retained earnings
3400
Other equity interest
Total equity attributable to owners of parent:
36XX
Non-controlling interests
Total equity
Total liabilities and equity		 2022.12.31 2021.12.31
Amount
%
2,588,894
7
199,820
1
8,127,533
22
2,841,515
8
424,343
1
11,604
-
128,571
-
162,952
-
14,485,232
39
-
-
-
-
721,429
2
859,997
2
291,641
1
432,875
1
2,305,942
6
16,791,174
45
3,329,183
9
1,868,661
5
2,403,968
7
756,891
2
12,298,052
34
(903,909)
(2)
19,752,846
55
21,041
-
19,773,887
55
36,565,061
100
Amount
%
$ 5,209,815
12
-
-
6,513,281
15
3,288,347
8
542,458
1
12,834
-
89,657
-
103,632
-
15,760,024
36
23,564
-
3,302,140
8
916,132
2
519,997
1
310,732
1
475,334
1
5,547,899
13
21,307,923
49
3,329,183
7
2,076,279
5
2,953,134
7
903,909
2
13,361,349
31
(549,290)
(1)
22,074,564
51
-
-
22,074,564
51
$
43,382,487
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, 2022 and 2021

(Expressed in Thousands of New Taiwan Dollars)

4000
Operating revenue (Note (6)(r) and (7))
5000
Operating costs (Note (6)(d) and (7))
Gross profit from operations
Operating expenses:
6100
Total selling expenses
6200
Total administrative expenses
6300
Total research and development expenses
6450
Impairment (loss) gain (Note (6)(b))
Total operating expenses
Net operating income
Non-operating income and expenses (Note (6)(t)):
7100
Total interest income
7020
Other gains and losses, net
7050
Finance costs, net
7770
Share of loss 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)(o))
8200
Profit
Other comprehensive income:
8310
Components of other comprehensive income that will not be reclassified to profit or
loss
8311
Gains (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)(q))
Basic earnings per share (dollars)
Diluted earnings per share (dollars)		 2022 %
100
(75)
25
(3)
(3)
(3)
-
(9)
16
-
-
-
-
-
16
(3)
13
-
-
-
-
1
-
1
1
14
13
-
13
14
-
14
15.24
14.86		 2021
Amount
38,500,026
(28,431,472)
10,068,554
(1,114,301)
(1,264,567)
(770,530)
3,464
(3,145,934)
6,922,620
52,252
23,291
(76,323)
(9,944)
(10,724)
6,911,896
(1,411,739)
5,500,157
(1,945)
(15,335)
389
(16,891)
(164,772)
32,921
(131,851)
(148,742)
5,351,415
5,493,218
6,939
5,500,157
5,344,644
6,771
5,351,415		 %
100
(74)
26
(3)
(3)
(2)
-
(8)
18
-
-
-
-
-
18
(4)
14
-
-
-
-
-
-
-
-
14
14
-
14
14
-
14
16.50
16.46
Amount
$ 38,672,549
(28,962,487)
9,710,062
(1,227,895)
(1,303,681)
(953,132)
(107)
(3,484,815)
6,225,247
62,410
192,521
(184,123)
-
70,808
6,296,055
(1,219,815)
5,076,240
19,737
(22,173)
(3,947)
(6,383)
471,646
(94,198)
377,448
371,065
$
5,447,305
$ 5,072,874
3,366
$
5,076,240
$ 5,443,283
4,022
$
5,447,305
$
$

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, 2022 and 2021

(Expressed in Thousands of New Taiwan Dollars)

Balance at January 1, 2021
Profit for the year ended December 31, 2021
Other comprehensive income for the year ended December 31, 2021
Total comprehensive income for the year ended December 31, 2021
Earnings distribution:
Legal reserve
Special reserve reversal
Cash dividends on ordinary share
Changes in non-controlling interests
Balance at December 31, 2021
Profit for the year ended December 31, 2022
Other comprehensive income for the year ended December 31, 2022
Total comprehensive income for the year ended December 31, 2022
Earnings distribution:
Legal reserve
Special reserve
Cash dividends on ordinary share
Due to recognition of equity component of convertible bonds (preference
share) issued
Changes in non-controlling interests
Balance at December 31, 2022		 Equity attributable t Equity attributable t o owners of parent o owners of parent o owners of parent Total Equity
Attributable to
Owners of
Parent
16,738,630
5,493,218
(148,574)
5,344,644
-
-
(2,330,428)
-
19,752,846
5,072,874
370,409
5,443,283
-
-
(3,329,183)
207,618
-
22,074,564		 Non-controlling
Interests
16,879
6,939
(168)
6,771
-
-
-
(2,609)
21,041
3,366
656
4,022
-
-
-
-
(25,063)
-		 Total equity
16,755,509
5,500,157
(148,742)
Share capital
Ordinary
Shares
$ 3,329,183
-
-
-
-
-
-
-
3,329,183
-
-
-
-
-
-
-
-
$
3,329,183		 Capital
Surplus
1,868,661
-
-
-
-
-
-
-
1,868,661
-
-
-
-
-
-
207,618
-
2,076,279		 Retained earnings Total other equity interest
Exchange
Differences on
Unrealized
gains (losses)
Translation of
Foreign
Statements
on available for
sale financial
assets
(756,453)
(438)
-
-
(131,683)
(15,335)
(131,683)
(15,335)
-
-
-
-
-
-
-
-
(888,136)
(15,773)
-
-
376,792
(22,173)
376,792
(22,173)
-
-
-
-
-
-
-
-
-
-
(511,344)
(37,946)
Exchange
Differences on
Translation of
Foreign
Statements
(756,453)
-
(131,683)
(131,683)
-
-
-
-
(888,136)
-
376,792
376,792
-
-
-
-
-
(511,344)
Legal
Reserve
2,035,014
-
-
-
368,954
-
-
-
2,403,968
-
-
-
549,166
-
-
-
-
2,953,134		 Special
Reserve
832,393
-
-
-
-
(75,502)
-
-
756,891
-
-
-
-
147,018
-
-
-
903,909		 Unappropriated
Retained
Earnings
5,351,415
-
-
(2,330,428)
(2,609)
19,773,887
5,076,240
371,065
5,447,305
-
-
(3,329,183)
207,618
(25,063)
22,074,564

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, 2022 and 2021

(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(gain)
Net loss on financial assets or liabilities at fair value through profit or loss
Interest expense
Interest income
Share of loss of associates and joint ventures accounted for using equity method
Loss on disposal of property, plant and equipment
Amortized discounted corporate bonds payable-interest expense
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
Other current liabilities
Other non-current liabilities
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 financial assets at fair value through other comprehensive income
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
Increase in refundable deposits
Other investing activities
Net cash flows used in investing activities
Cash flows from (used in) financing activities:
Increase in short-term loans
(Decrease) increase in short-term notes and bills payable
Proceeds from issuing bonds
Proceeds from long-term debt
Repayments of long-term debt
Increase in guarantee deposits received
Payment of lease liabilities
Cash dividends paid
Net cash flows from (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		 2022
$ 6,296,055
730,251
44,232
107
13,861
159,629
(62,410)
-
699
24,494
-
910,863
(65,691)
1,842,422
70,498
1,304,734
221,208
168,524
3,541,695
(1,728,200)
63,042
(72,177)
26,516
(1,710,819)
1,830,876
2,741,739
9,037,794
69,824
-
(148,044)
(1,461,366)
7,498,208
(20,670)
(24,741)
(6,492,914)
-
(50,858)
-
(6,412)
-
(6,595,595)
2,574,933
(200,000)
3,499,953
1,114,834
(957,956)
1,313
(12,459)
(3,333,150)
2,687,468
211,468
3,801,549
6,642,069
$
10,443,618		 2021
6,911,896
690,156
29,238
(3,464)
-
76,323
(52,252)
9,944
540
-
(24,243)
726,242
144,696
(3,523,108)
(92,635)
(1,783,772)
(230,475)
(56,045)
(5,541,339)
2,318,681
539,398
8,735
402,345
3,269,159
(2,272,180)
(1,545,938)
5,365,958
60,664
24,243
(74,417)
(1,354,926)
4,021,522
-
-
(2,470,150)
7,942
(44,622)
(74,843)
(36,681)
227
(2,618,127)
1,983,991
200,000
-
750,000
(1,014,529)
5,179
(11,362)
(2,333,037)
(419,758)
(73,430)
910,207
5,731,862
6,642,069

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. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2022 and 2021

(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 23, 2023.

(3) New Standards and Interpretations Adopted:

  • (a) The impact of the International Financial Reporting Standards (“IFRSs”) endorsed by the Financial Supervisory Commission, R.O.C. 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, 2022:

  • －

  • ●Amendments to IAS 16 “Property, Plant and Equipment Proceeds before Intended Use”

  • －

  • ●Amendments to IAS 37 “Onerous Contracts Cost of Fulfilling a Contract”

  • ●Annual Improvements to IFRS Standards 2018–2020

  • ●Amendments to IFRS 3 “Reference to the Conceptual Framework”

  • (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, 2023, would not have a significant impact on its consolidated financial statements:

  • ●Amendments to IAS 1 “Disclosure of Accounting Policies”

  • ●Amendments to IAS 8 “Definition of Accounting Estimates”

  • ●Amendments to IAS 12 “Deferred Tax related to Assets and Liabilities arising from a Single Transaction”

〜 9 〜

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) ELITE MATERIAL CO., LTD. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2022 and 2021

(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 Group does not expect the following new and amended standards, which have yet to be endorsed by the FSC, to have a significant impact on its consolidated financial statements:

  • ●Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets Between an Investor and Its Associate or Joint Venture”

  • ●IFRS 17 “ Insurance Contracts” and amendments to IFRS 17 “ Insurance Contracts”

  • ●Amendments to IAS 1 “Classification of Liabilities as Current or Non-current”

  • ●Amendments to IAS 1 “Non-current Liabilities with Covenants”

  • ●Amendments to IFRS 17 “Initial Application of IFRS 17 and IFRS 9 – Comparative Information “

  • ●IFRS16 “Requirements for Sale and Leaseback Transactions”

(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

  • 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;

  • 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(q).

  • 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.

〜 10 〜

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) ELITE MATERIAL CO., LTD. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2022 and 2021

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

  • (c) Basis of consolidation

  • 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.

  1. List of subsidiaries in the consolidated financial statements:
Name of
investor		 Name of subsidiary Principal
activity		 Shareholding
2022.12.31
2021.12.31
Note
The Company
The Company
The Company		 EMC OVERSEAS
HOLDING
INCORPORATED
Grand Wuhan
Incorporated
EMC
INTERNATIONAL
HOLDING
INCORPORATED		 Investment business
Investment business
Investment business		 %
100.00
%
100.00
Established in British
Virgin Islands in July
1996. As of December
31, 2022, the authorized
issued capital of the
Company was USD
36,257 thousand.
%
100.00
%
100.00
Established in Cayman
Islands in January 2018.
As of December 31,
2022, the authorized
issued capital of the
Company was USD
20,020 thousand.
%
100.00
%
100.00
Established in Cayman
Islands in July 2020. As
of December 31, 2022,
the paid-in capital of the
Company was USD
27,042 thousand.

〜 11 〜

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) ELITE MATERIAL CO., LTD. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2022 and 2021

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

Name of
investor		 Name of subsidiary Principal
activity		 Shareholding
2022.12.31
2021.12.31
Note
EMC OVERSEAS
HOLDING
INCORPORATED
Grand Zhuhai
Incorporated
Grand Zhuhai
Incorporated
Grand Shanghai
Incorporated
Grand Zhongshan
Incorporated
Grand Wuhan
Incorporated		 Grand Zhuhai
Incorporated
Grand Shanghai
Incorporated
Grand Zhongshan
Incorporated
Elite Electronic
Material (Kunshan)
Co., Ltd.
Elite Electronic
Material (Zhongshan)
Co., Ltd.
Elite Electronic
Material (Huangshi)
Co., Ltd.		 Investment business
Investment business
Investment business
Copper clad laminate
and prepreg business
Copper clad laminate
and prepreg business
Copper clad laminate
and prepreg business		 %
100.00
%
100.00
Established in Cayman
Islands in April 2004. As
of December 31, 2022,
the authorized issued
capital of the Company
was USD 34,618
thousand.
%
100.00
%
99.79
Established in British
virgin Islands in May
1997. As of December
31, 2022, the authorized
issued capital of the
Company was USD
18,200 thousand.
%
100.00
%
100.00
Established in British
virgin Islands in 2004.
As of December 31,
2022, the authorized
issued capital of the
Company was USD
16,437 thousand.
%
100.00
%
100.00
Established in Kunshan
Economic and
Technological
Development Zone,
Jiangsu, Mainland China
in September 1997. As
of December 31, 2022,
the authorized issued
capital of the Company
was USD 63,200
thousand.
%
100.00
%
100.00
Established in
Zhongshan Torch
Development Zone,
Guangdong province,
Mainland China in July
2004. As of December
31, 2022, the authorized
issued capital of the
Company was USD
20,200 thousand.
%
100.00
%
100.00
Established in Huangshi
Economic and
Technological
Development Zone,
Hubei, Mainland China
in March 2018. As of
December 31, 2022, the
authorized issued capital
of the Company was
USD 20,000 thousand.

〜 12 〜

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) ELITE MATERIAL CO., LTD. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2022 and 2021

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

Name of
investor		 Name of subsidiary Principal
activity		 Shareholding
2022.12.31
2021.12.31
Note
EMC
INTERNATIONAL
HOLDING
INCORPORATED
EMC
INTERNATIONAL
HOLDING
INCORPORATED
EMC SPECIAL
APPLICATION
INCORPORATED		 EMC SPECIAL
APPLICATION
INCORPORATED
EMC USA
HOLDING
INCORPORATED
EMD SPECIALTY
MATERIALS, LLC		 Investment business
Investment business
Copper clad laminate
and prepreg business		 %
100.00
%
100.00
Established in Cayman
Islands in August 2020.
As of December 31,
2022, where the
investment of equity
capital taken place in
December 2022, the
paid-in capital of the
Company was USD
26,255 thousand.
%
100.00
%
100.00
100% invested by EMC
INTERNATIONAL
HOLDING
INCORPORATED in
December 2021.As of
December 31 2022, the
paid-in capital of the
Company was USD 732
thousand.
%
100.00
%
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. 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.

  1. 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. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2022 and 2021

(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) Financial instruments

  • 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. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2022 and 2021

(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.

〜 15 〜

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) ELITE MATERIAL CO., LTD. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2022 and 2021

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

Dividend income is recognized in profit or loss on the date on which the Group’ s right to receive payment is established.

  • 3) 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.

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 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.

〜 16 〜

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) ELITE MATERIAL CO., LTD. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2022 and 2021

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

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.

  • 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 Group transfers substantially all the risks and rewards of ownership of the financial assets.

  1. Financial liabilities and equity instruments

  2. 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.

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.

〜 17 〜

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) ELITE MATERIAL CO., LTD. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2022 and 2021

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

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.

The consolidated financial statements include the Group’ 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 Group, from the date on which significant influence commences until the date on which significant influence ceases. The Group 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 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 recognizing its share of further losses. After the recognized interest is reduced 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.

〜 18 〜

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) ELITE MATERIAL CO., LTD. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2022 and 2021

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

  • (j) Property, plant, and equipment

  • 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.

  1. 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.

  1. Depreciation

Depreciation is calculated on the cost of an asset less its residual value and is recognized in profit or loss on a straight-line 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~41 years 2) Machineries 2 years~14 years 3) Miscellaneous equipment 1 years~14 years

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

  • (k) 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.

(i) 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.

〜 19 〜

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) ELITE MATERIAL CO., LTD. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2022 and 2021

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

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.

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, including in-substance 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.

〜 20 〜

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) ELITE MATERIAL CO., LTD. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2022 and 2021

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

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.

From January 1, 2021, when the basis for determining future lease payments changes as required by interest rate benchmark reform, the Group will remeasure the lease liability by discounting the revised lease payments using the revised discount rate that reflects the change to an alternative benchmark interest rate.

(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.

  1. 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.

  1. 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.

〜 21 〜

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) ELITE MATERIAL CO., LTD. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2022 and 2021

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

(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.

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

  • 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.

〜 22 〜

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) ELITE MATERIAL CO., LTD. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2022 and 2021

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

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.

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) Government grants

The Group recognizes an unconditional government grant related to factory relocation of Elite Electronic Material (Kunshan) Co., Ltd. in profit or loss as other income when the grant becomes receivable. Other government grants related to assets are initially recognized as deferred income at fair value if there is reasonable assurance that they will be received, and the Group will comply with the conditions associated with the grant; they are then recognized in deduction of depreciation on a systematic basis over the useful life of the asset. Grants that compensate the Group for expenses or losses incurred are recognized in profit or loss on a systematic basis in the periods in which the expenses or losses are recognized.

  • (q) Employee benefits

  • 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 is 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.

〜 23 〜

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) ELITE MATERIAL CO., LTD. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2022 and 2021

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

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.

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.

  1. 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 profitsharing 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.

  • (r) 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.

〜 24 〜

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) ELITE MATERIAL CO., LTD. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2022 and 2021

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

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.

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.

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.

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:

  3. 1) levied by the same taxing authority; or

  4. 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.

  5. (s) 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.

〜 25 〜

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) ELITE MATERIAL CO., LTD. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2022 and 2021

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

All acquisition-related transaction costs are expensed as incurred, except for the issuance of debt or equity instruments.

(t) 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 potentially dilutive ordinary shares, such as convertible bonds.

(u) 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.

(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)(d) for further description of the valuation of inventories.

〜 26 〜

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) ELITE MATERIAL CO., LTD. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2022 and 2021

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

(6) Summary of Major Accounts

  • (a) Cash and cash equivalents
Cash on hand
Savings accounts
Time deposits
Cash equivalents
Cash and cash equivalents shown in the consolidated
statement of cash flows		 2022.12.31
$ 522
8,643,269
254,714
1,545,113
$
10,443,618		 2021.12.31
520
5,034,224
877,965
729,360
6,642,069

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

  • (b) Notes and accounts receivable
Note receivables from operating activities
Trade receivables-measured as amortized cost
Less: Loss allowance		 2022.12.31
$ 213,032
11,475,143
(5,040)
$
11,683,135		 2021.12.31
146,961
13,131,350
(4,635)
13,273,676

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		 2022.12.31
Gross carrying
amount
$ 11,572,071
97,689
18,415
-
$
11,688,175		 Weighted-
average
0.04%
0.01%
3.98%
-		 Loss allowance
provision
4,301
6
733
-
5,040

〜 27 〜

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) ELITE MATERIAL CO., LTD. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2022 and 2021

(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		 2021.12.31
Gross carrying
amount
$ 13,061,161
209,480
7,670
-
$
13,278,311		 Weighted-
average
0.03%
0.06%
0.98%
-		 Loss allowance
provision
4,441
119
75
-
4,635

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

Balance at January 1
Impairment losses (gain) reversed
Foreign exchange gains/(losses)
Balance at December 31
(c) Other receivables
Other receivables
Other receivables due related parties, net
Less: Loss allowance		 For the years ended December 31,
2022
2021
$ 4,635
8,209
107
(3,464)
298
(110)
$
5,040
4,635
2022.12.31
2021.12.31
$ 49,423
94,391
-
3,367
-
-
$
49,423
97,758
2022
$ 4,635
107
298
$
5,040
2022.12.31
$ 49,423
-
-
$
49,423

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

  • (d) Inventories
Materials
Work-in-process
Finished goods		 2022.12.31
$ 2,831,081
238,474
1,166,353
$
4,235,908		 2021.12.31
3,525,433
272,089
1,667,889
5,465,411

〜 28 〜

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) ELITE MATERIAL CO., LTD. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2022 and 2021

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

As of December 31, 2022 and 2021, the details of operating cost were as follows:

Cost of goods sold
Loss on physical inventory
Loss on disposal of scrap
Losses on inventory valuation and obsolescence
Revenue from sales of scraps
Total		 2022
$ 29,110,863
680
1,525
68,560
(219,141)
$
28,962,487		 2021
28,661,243
-
6,366
16,709
(252,846)
28,431,472

As of December 31, 2022 and 2021, 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.

  • (e) 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 $18,426 thousand)
Attributable to the Group:
Loss from continuing operations
Other comprehensive income
Total comprehensive income		 2022.12.31
$
-
2022
$ -
-
$
-		 2021.12.31
-
2021
(9,944)
-
(9,944)
  • (f) Property, plant and equipment

The cost and depreciation of the property, plant and equipment of the Group for the years ended December 31, 2022 and 2021, were as follows:

Cost:
Balance at January 1, 2022
Additions(including capitalized interest expense)
Disposals
Reclassification
Effect of changes in foreign exchange rates
Balance at December 31, 2022		 Land
$ 470,621
2,066,622
-
-
-
$
2,537,243		 Buildings
2,786,073
-
(483)
1,295,529
26,786
4,107,905		 Machineries
7,948,500
-
(59,046)
1,825,849
76,400
9,791,703		 Other
equipment
2,179,534
-
(7,580)
762,632
26,837
2,961,423		 Equipment
under
installation
and
construction
in progress
2,622,734
4,741,837
-
(3,884,010)
39,769
3,520,330		 Total
16,007,462
6,808,459
(67,109)
-
169,792
22,918,604

〜 29 〜

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) ELITE MATERIAL CO., LTD. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2022 and 2021

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

Balance at January 1, 2021
Additions
Disposals
Reclassification
Effect of changes in foreign exchange rates
Balance at December 31, 2021
Depreciation and impairment loss:
Balance at January 1, 2022
Depreciation for the year
Disposals
Effect of changes in foreign exchange rates
Balance at December 31, 2022
Balance at January 1, 2021
Depreciation for the year
Disposals
Effect of movements in exchange rates
Balance at December 31, 2021
Carrying amounts:
At December 31, 2022
At January 1, 2021
At December 31, 2021		 Land
$ 470,621
-
-
-
-
$
470,621
$ -
-
-
-
$
-
$ -
-
-
-
$
-
$
2,537,243
$
470,621
$
470,621		 Buildings
2,792,434
-
(2,662)
10,819
(14,518)
2,786,073
1,098,834
136,454
(483)
9,488
1,244,293
975,102
130,549
(2,662)
(4,155)
1,098,834
2,863,612
1,817,332
1,687,239		 Machineries
7,416,342
-
(62,007)
629,465
(35,300)
7,948,500
5,173,292
372,683
(58,655)
39,709
5,527,029
4,905,298
342,798
(54,502)
(20,302)
5,173,292
4,264,674
2,511,044
2,775,208		 Other
equipment
1,934,789
-
(42,306)
297,198
(10,147)
2,179,534
1,266,754
193,805
(7,272)
14,117
1,467,404
1,122,276
191,062
(41,329)
(5,255)
1,266,754
1,494,019
812,513
912,780		 Equipment
under
installation
and
construction
in progress
919,498
2,645,562
-
(937,482)
(4,844)
2,622,734
-
-
-
-
-
-
-
-
-
-
3,520,330
919,498
2,622,734		 Total
13,533,684
2,645,562
(106,975
-
(64,809
16,007,462
7,538,880
702,942
(66,410
63,314
8,238,726
7,002,676
664,409
(98,493
(29,712
7,538,880
14,679,878
6,531,008
8,468,582

As of December 31, 2022 and 2021, the property, plant and equipment were not pledged as collateral for long-term debt and financing.

Due to operational needs, the Consolidated Company purchased a parcel of industrial land at a total contract price of $ 2,160,000 in 2021. As of December 31, 2022, the price had been paid in full, and the transfer was completed on May 20, 2022.

For the purpose of expanding production capacity and cooperating with the local government's relocation plan, the Group purchased relevant equipment and constructions in progress. Please refer to Note (9)(a).

Please refer to Note 6 (t) for capitalized interest expense.

〜 30 〜

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) ELITE MATERIAL CO., LTD. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2022 and 2021

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

(g) Right-of-use assets

Information about leases for which the Group as a lessee is presented below:

Cost:
Balance as of January 1, 2022
Effect of changes in foreign exchange rates
Balance as of December 31, 2022
Balance as of January 1, 2021
Additions
Effect of changes in foreign exchange rates
Balance as of December 31, 2021
Accumulated depreciation and impairment
losses:
Balance as of January 1, 2022
Depreciation for the year
Effect of changes in foreign exchange rates
Balance as of December 31, 2022
Balance as of January 1, 2021
Depreciation for the year
Effect of changes in foreign exchange rates
Balance as of December 31, 2021
Carrying amount:
Balance as of December 31, 2022
Balance as of January 1, 2021
Balance as of December 31, 2021		 Land
$ 357,364
5,265
$
362,629
$ 284,615
74,843
(2,094)
$
357,364
$ 53,684
8,016
782
$
62,482
$ 46,458
7,571
(345)
$
53,684
$
300,147
$
238,157
$
303,680		 Buildings
314,479
34,424
348,903
-
318,084
(3,605)
314,479
17,970
19,293
2,611
39,874
-
18,176
(206)
17,970
309,029
-
296,509		 Total
671,843
39,689
711,532
284,615
392,927
(5,699)
671,843
71,654
27,309
3,393
102,356
46,458
25,747
(551)
71,654
609,176
238,157
600,189

As of December 31, 2022 and 2021, the right-of-use assets were not pledged as collateral for long term debt and financing.

〜 31 〜

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) ELITE MATERIAL CO., LTD. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2022 and 2021

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

  • (h) Short-term borrowings
Unsecured bank loans
Unused short-term credit lines
Range of interest rates		 2022.12.31
$
5,209,815
$
13,206,472
3.00%~5.81%		 2021.12.31
2,588,894
11,763,907
0.49%~3.85%

For the exposure information of the Group's rate foreign currency and current risk, please refer to Note (6)(u).

  • (i) Short-term notes payable
Commercial paper payable
Less: discount unamortized
Net amount
Interest rate		 2022.12.31
$ -
-
$
-
-		 2021.12.31
200,000
(180)
199,820
0.58%~0.65%

For the exposure information of the Group's rate foreign currency and current risk, please refer to Note (6)(u).

(j) Long-term borrowings

Unsecured bank loans
Less: current portion
Total
Unused short-term credit lines
Range of interest rates
Due year		 2022.12.31
$ 1,005,789
(89,657)
$
916,132
$
6,021,262
3.60%~4.35%
2023~2025		 2021.12.31
850,000
(128,571)
721,429
4,650,000
0.80%~1.05%
2022~2024

For the exposure information of the Group's rate foreign currency and current risk, please refer to Note (6)(u).

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, 2022 and 2021, the Group did not violate any of the financial ratio restrictions.

〜 32 〜

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) ELITE MATERIAL CO., LTD. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2022 and 2021

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

(k) Unsecured convertible bonds

Total convertible corporate bonds issued
Unamortized discounted corporate bonds payable
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 capital surplus – stock options)
Embedded derivative instruments-call and put rights,
included in financial assets (liabilities) at fair value through
profit or loss
Interest expense		 2022.12.31
2021.12.31
$ 3,465,300
-
(163,160)
-
$
3,302,140
-
$
23,564
-
$
207,618
-
For the years ended December 31,		 2021.12.31
-
-
-
-
-
2022
$
(13,861)
$
24,494		 2021
-
-

The Company issued 5th 5-year unsecured convertible bonds with a coupon rate of 0% on April 25, 2022, with a total amount of NTD 3,465,300 thousand, issued at 101% of the face value. The actual debt amount was NTD 3,499,953 thousand. The maturity date is April 25, 2027, and the bond discount rate is 1.3057%. Thirty days before the 3-year issuance date, the creditor may request the Company to redeem the convertible bonds held by the Company in cash at the denomination of the bond. The conversion price of convertible bonds shall be handled in accordance with the Company’s issuance agreement.

1. Repayment date and method:

Except for those that are converted into common shares of the Company in advance, or calledback by the Company or repurchased by bond holders in advance, the principal will be repaid in cash in one lump sum upon maturity.

2. Conversion prices and the adjustments:

The conversion price at the time of issuance is set at NTD 263 per share. In the events of a change in the total number of common shares of the Company, allotment of cash dividends on common shares, a conversion price lower than the current price per share, or reissue of common shares conversion rights, adjustment shall be made. As the Company takes September 2, 2022 as the base date for dividend distribution, according to the provisions of Article 11 of the Company’s 5th domestic unsecured convertible corporate bond issuance and conversion methods, the adjustment conversion price is adjusted from NTD 263 to NTD 246.8. This bond does not have reset feature.

〜 33 〜

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) ELITE MATERIAL CO., LTD. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2022 and 2021

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

  1. The call-back right of the Company for the convertible corporate bonds:

  2. 1) From the day after the issuance of the convertible corporate bonds for three months to 40 days before the maturity date:

  3. A.If the closing price of the Company’s common shares exceeds 30% of the current conversion price for 30 consecutive business days;

  4. B.If the outstanding balance of the convertible corporate bonds converted by the Company per the requests of the bond holders is less than 10% of total initial issue amount;

The Company may delivery a “Notice to call back bonds” due in 30 days through registered mails (the aforesaid period starts from the date when the Company sends the notice, and the expiry date of the period is the base date for bond call back), and send a letter to TPEX for announcement and call back the current convertible corporate bonds in cash at face value within five business days after the bond call back base date which shall not fall within the period in which the conversion of the convertible corporate bonds is suspended.

  • 2) The Yield to Call are as follows:

From the day after the issuance of the convertible corporate bonds for three months to 40 days before the maturity date, call back by cash at par value.

  • 3) If the bond holders fails to provide a written response to the Company’s agency before the bond call-back date stated in the “Notice to call back bonds” (which takes effect when it is served, and the postmark date for registered mail shall be used as the basis for call-back date), the Company will call-back the bonds in cash within five business days after the bond call back date.

  • The bond holders’ right of repurchase:

30 days before the 3-year issuance date, the bond holder may request the Company to call-back the convertible bonds held by the Company in cash at par value. The conversion price of convertible bonds shall be handled in accordance with the Company’s issuance agreement. The Company accepts the repurchase request and shall call-back the convertible bonds in cash within five business days after the repurchase date.

Please refer to Note 6(u) for information on exposure to interest rate, foreign currency and liquidity risks of the Company.

  • (l) Lease liabilities

The Group lease liabilities were as follows:

Current
Non-current		 2022.12.31
$
12,834
$
310,732		 2021.12.31
11,604
291,641

For the maturities analysis, please refer to Note (6)(u).

〜 34 〜

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) ELITE MATERIAL CO., LTD. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2022 and 2021

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

The amounts recognized in profit or loss were as follows:

Interest on lease liabilities
Expenses relating to short-term leases		 For the years ended December 31, For the years ended December 31,
2022
$
10,335
$
40,186		 2021
10,111
36,913

The amounts recognized in the statement of cash flows for the Group was as follows:

The amounts recognized in the statement of cash flows for the Group was as follows: Group was as follows:
Total cash outflow for leases For the years ended December 31,
2022
$
62,980		 2021
58,386

1. Real estate leases

As of January 1 2021, the Group leases land and buildings for its factory and office space. The leases typically run for a period of 17.5 years. The Group has no option to purchase the assets at the end of the contract term.

  1. Other leases

The Group leases machinery and equipment, and transportation equipment with lease terms of one years.These leases are short-term and/or leases of low-value items. The Group has elected not to recognize right-of-use assets and lease liabilities for these leases.

  • (m) Other non-current liabilities

The details of other non-current liabilities for the Group were as follows:

Advance receipts
Guarantee deposits
Total		 2022.12.31
$ 456,527
18,807
$
475,334		 2021.12.31
415,442
17,433
432,875

Due to the relocation of the Kunshan Youbi Factory, the consolidated company received an advance payment of $ 347,978 as of December 31, 2022. Please refer to Note (9)(b) for details.

  • (n) Employee benefits

  • 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:

Present value of defined benefit obligation
Fair value of plan assets
Net defined benefit assets		 2022.12.31
$ 88,670
(131,512)
$
(42,842)		 2021.12.31
99,666
(114,285)
(14,619)

〜 35 〜

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) ELITE MATERIAL CO., LTD. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2022 and 2021

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

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 $131,512 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 (gains) losses arising from experience
adjustments
－Actuarial (gains) losses arising from changes in
financial assumptions
Benefit pay under the plan
Defined benefit obligation at December 31		 2022
$ 99,666
922
(411)
(10,556)
(951)
$
88,670		 2021
104,435
1,209
599
2,657
(9,234)
99,666

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		 2022
$ 114,285
749
8,770
8,659
(951)
$
131,512		 2021
108,189
707
1,311
13,312
(9,234)
114,285

〜 36 〜

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) ELITE MATERIAL CO., LTD. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2022 and 2021

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

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		 2022
$ 306
(133)
$
173
$ 116
7
31
19
$
173		 2021
563
(61)
502
357
21
80
44
502
  • 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		 2022
$ 21,758
(19,737)
$
2,021		 2021
19,813
1,945
21,758

6) Actuarial assumptions

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

Discount rate
Future salary increases		 2022.12.31
2021.12.31
%
1.75
%
0.63
%
2.00
%
2.00

The expected allocation payment to be made by the Group to the defined benefit plans for the one-year period after the reporting date is $0.

The weighted average duration of the defined benefit obligation is 13.09 years.

〜 37 〜

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) ELITE MATERIAL CO., LTD. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2022 and 2021

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

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:

obligation shall be as follows:
December 31, 2022
Discount rate
Future salary increasing rate
December 31, 2021
Discount rate
Future salary increasing rate		 Influences of defined benefit obligations
Increased 0.25%
Decreased 0.25%
(2,118)
2,197
2,146
(2,080)
(2,760)
2,871
2,777
(2,685)

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 2022 and 2021, respectively.

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, 2022 and 2021, the Group set aside $39,316 and $37,798, respectively, under the pension plan to the Bureau of the Labor Insurance. For the years ended December 31, 2022 and 2021, Elite Electronic Material (Zhongshan) Co., Ltd., Elite Electronic Material (Kunshan) Co., Ltd. and Elite Electronic Material (Huangshi) Co., Ltd. set aside $70,375, $59,311, $25,084 and $61,933, $45,742, $16,505, respectively, under the pension plan to local Regulation.

〜 38 〜

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) ELITE MATERIAL CO., LTD. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2022 and 2021

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

  • (o) Income taxes (profits)

  • Income tax expense recognized in profits or losses

The amount of income tax was as follows:

2022
Current income tax expense:
Current period
$ 1,683,419
Adjustment for prior periods
(115,266)
1,568,153
Deferred tax expense:
Origination and reversal of temporary differences
(348,338)
Income tax expense
$
1,219,815
Income tax expense recognized in other comprehensive income:
2022
Items that will not be reclassified subsequently to profit or
loss:
Actuarial losses and gains on defined benefit plans
$
(3,947)
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign financial
statements
$
(94,198)
The reconciliation of income tax and profit before tax was as follows:
2022
Profit excluding income tax
$
6,296,055
Income tax using the Company's domestic tax rate
$ 1,259,211
Effect of tax rates in foreign jurisdiction
677,958
Non-deductible expenses
19,359
Tax incentives
(82,853)
Deductible temporary differences
(611,909)
Prior (overestimate) underestimate
(115,266)
Undistributed earnings additional tax
73,315
Total
$
1,219,815		 2021
1,545,755
(59,886)
1,485,869
(74,130)
1,411,739
2021
389
32,921
2021
6,911,896
1,382,379
777,438
12,683
(59,169)
(694,989)
(59,886)
53,283
1,411,739

〜 39 〜

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) ELITE MATERIAL CO., LTD. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2022 and 2021

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

  1. Deferred tax assets and liabilities

  2. 1) Unrecognized Deferred Tax Liabilities

As of December 31, 2022 and 2021, 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		 2022.12.31
$
15,056,281
$
3,011,256		 2021.12.31
11,996,735
2,399,347
  • 2) Recognized deferred tax assets and liabilities

Changes in the amount of deferred tax assets and liabilities for 2022 and 2021 are as follows:

Unrealized
gain on
investment
income
Defined
Benefit
Plans
Others
Deferred Tax Liabilities:
Balance at January 1, 2022
$ (858,615)
(1,382)
-
Debited (Credited) in Income
statement
345,645
(1,698)
-
Debited (Credited) in equity
-
(3,947)
-
Balance at December 31, 2022
$
(512,970)
(7,027)
Balance at January 1, 2021
$ (910,910)
-
(41)
Debited (Credited) in Income
statement
52,295
(1,382)
41
Balance at December 31, 2021
$
(858,615)
(1,382)
-
Defined
Benefit Plans
Current
provisions
Unrealized
losses on
inventories
Cumulative
translation
adjustment
Others
Deferred Tax Assets:
Balance at January 1, 2022
$ -
22,762
16,312
218,337
23,957
Debited (Credited) in Income
statement
-
(12,329)
8,371
-
8,349
Debited (Credited) in equity
-
-
-
-
-
Exchange differences on translation
-
244
70
(94,198)
297
of foreign operations
Balance at December 31, 2022
$
-
10,677
24,753
124,139
32,603		 Total
(859,997)
343,947
(3,947)
(519,997)
(910,951)
50,954
(859,997)
Total
281,368
4,391
-
(93,587)
192,172

〜 40 〜

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) ELITE MATERIAL CO., LTD. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2022 and 2021

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

Balance at January 1, 2021
Debited (Credited) in Income
statement
Debited (Credited) in equity
Exchange differences on translation
of foreign operations
Balance at December 31, 2021		 Defined
Benefit Plans
$ 791
(1,180)
389
-
$
-		 Current
provisions		 Unrealized
losses on
inventories		 Cumulative
translation
adjustment
185,416
-
-
32,921
218,337		 Others
2,318
21,641
-
(2)
23,957		 Total
22,975
(69)
-
(144)
22,762		 13,552
2,784
-
(24)
16,312		 225,052
23,176
389
32,751
281,368

  1. The Group's tax returns for the years through 2020 were examined and approved by the Taipei National Tax Administration.

  2. (p) Capital and other equity

  3. Issuance of ordinary shares

As of December 31, 2022 and 2021, the total value of nominal ordinary shares amounted to $6,000,000. The par value of each share is $10. In total, there were 332,918 in thousands of ordinary shares, issued. All issued shares were paid up upon issuance.

  1. Capital surplus

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

Share capital
Premium from convertible bonds
Convertible option		 2022.12.31
$ 95,627
1,773,034
207,618
$
2,076,279		 2021.12.31
95,627
1,773,034
-
1,868,661

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.

〜 41 〜

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) ELITE MATERIAL CO., LTD. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2022 and 2021

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

To consider the characteristics of industrial growth and improve the Consolidated Company’ s financial structure, the annual earnings distribution may not be made if the year in which the loss occurs, and the dividend policy will give priority to the Consolidated Company’ s future development, financial status, and shareholders’ remuneration where stock dividends will be distributed in consideration of the Consolidated Company’ s future capital expenditure budget to retain the required cash. The rest will be distributed to shareholders in the form of cash dividends, provided that the distribution of cash dividends shall not be less than 20% of the total distributed dividends.

The earning distribution shall be appropriated with adding 10%-70% of the distributable earning after accumulating the undistributed earnings in the past after setting aside various reserves.

Dividends and bonuses distributed by the Consolidated Company in whole or in part of the legal reserve and capital surplus are distributed in cash shall be authorized by the Board of Directors meeting attended by more than 2/3 of the Directors with a simple majority of the Directors in session and reported to the General Meeting of Shareholders.

The rest is the same as the undistributed earnings in previous years, and the Board of Directors will formulate a distribution proposal and submit it to the shareholders’meeting for resolution.

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) Special reserve

A portion of current-period earnings and undistributed prior-period earnings shall be reclassified as special earnings reserve during earnings distribution. The amount to be reclassified should equal the difference of the current-period total net reduction of other shareholders’ equity and the balance of the special reserve that mentioned in the previous paragraph. Similarly, a portion of undistributed prior period earnings shall be reclassified as special earnings reserve (and does not qualify for earnings distribution) to account for cumulative changes to other shareholders’ equity pertaining to prior periods. Amounts of subsequent reversals pertaining to the net reduction of other shareholders’equity shall qualify for additional distributions. As of December 31, 2022,the special reserve of $147,018 was reversed and as of December 31, 2021, $75,502 was reclassified as special reserve.

3) Earnings distribution

The earnings distribution for 2021 and 2020 was decided by the general meeting of shareholders held on May 26, 2022, and July 1, 2021.

〜 42 〜

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) ELITE MATERIAL CO., LTD. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2022 and 2021

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

The relevant dividend distribution to shareholders is as follows:

2021 2020
Dividend Dividend
per Share per Share
(TWD$) Amount (TWD$) Amount
Dividends distributed to
common shareholders
Cash $ 10.00 3,329,183 7.00 2,330,428
Other equity
Unrealized gain
Foreign (loss) from
currency financial assets
translation at fair value
differences for through other
foreign comprehensive
operations income Total
Balance at January 1, 2022 $ (888,136) (15,773) (903,909)
Exchange difference on translation of
foreign financial statements 376,792 - 376,792
Unrealized losses from financial assets - (22,173) (22,173)
measured at fair value through other
comprehensive income
Balance at December 31, 2022 $ (511,344) (37,946) (549,290)
Balance at January 1,2021 $ (756,453) (438) (756,891)
Exchange difference on translation of
foreign financial statements (131,683) - (131,683)
Unrealized losses from financial assets - (15,335) (15,335)
measured at fair value through other
comprehensive income
Balance at December 31, 2021 $ (888,136) (15,773) (903,909)

  1. Other equity

  2. (q) 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, 2022 and 2021, were based on the profit attributable to ordinary shareholders of the Company and the weighted-average number of ordinary shares outstanding, calculated as follows:

〜 43 〜

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) ELITE MATERIAL CO., LTD. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2022 and 2021

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

1) Profit attributable to ordinary shareholders

Profit attributable to ordinary shareholders of the
Company
2) Weighted-average number of ordinary shares
Weighted-average number of ordinary shares		 2022
$
5,072,874
2022
332,918		 2021
5,493,218
2021
332,918
  1. Diluted earnings per share

The calculation of diluted earnings per share at December 31, 2022 and 2021, 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)
2) Weighted-average number of ordinary shares (diluted)
Weighted-average number of ordinary shares (basic)
Effect of conversion of convertible bonds
Effect of convertible bond
Weighted-average number of ordinary shares (diluted)
at December 31		 2022
$ 5,072,874
30,684
$
5,103,558
2022
332,918
9,361
1,111
343,390		 2021
5,493,218
-
5,493,218
2021
332,918
-
801
333,719

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.

  1. Earnings per share were as follow:
Basic earnings per share
Diluted earnings per share		 2022
$
15.24
$
14.86		 2021
16.50
16.46

〜 44 〜

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) ELITE MATERIAL CO., LTD. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2022 and 2021

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

  • (r) Revenue from contracts with customers

  • Disaggregation of revenue

Primary geographical
markets:
Taiwan
China
Others countries
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		 2022 2022
Domestic
$ 5,810,944
1,113,792
2,277,959
$
9,202,695
$ 3,892,850
3,770,362
574,143
965,340
$
9,202,695		 Foreign
Adjustment
and
Elimination
149,393
(63,791)
34,637,238
(6,152,835)
976,754
(76,905)
35,763,385
(6,293,531)
14,668,235
(2,113,840)
20,791,180
(2,996,174)
-
-
303,970
(1,183,517)
35,763,385
(6,293,531)
2021		 Total
5,896,546
29,598,195
3,177,808
38,672,549
16,447,245
21,565,368
574,143
85,793
38,672,549
Foreign
100,751
34,561,251
983,566
35,645,568
14,641,492
20,762,983
-
241,093
35,645,568		 Adjustment
and
Elimination
(49,985)
(6,285,496)
-
(6,335,481)
(2,269,999)
(3,109,078)
-
(956,404)
(6,335,481)		 Total
5,907,377
29,588,130
3,004,519
38,500,026
15,976,794
21,207,359
1,058,056
257,817
38,500,026

〜 45 〜

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) ELITE MATERIAL CO., LTD. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2022 and 2021

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

  • (s) 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, 2022 and 2021, rewards of employees of $172,916 and $189,120, and directors of $37,465 and $63,040, 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, 2022 and 2021, 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, 2022 and 2021.

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 2022 and 2021.

  • (t) 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
Disposal loss on property, plant and equipment
Financial assets at fair value through profit or loss
Dividend income
Other profits
Other profits and losses		 2022
$
62,410
2022
$ 57,610
(699)
(13,861)
-
149,471
$
192,521		 2021
52,252
2021
(42,837)
(540)
-
24,243
42,425
23,291

2. Other gains and losses, net

〜 46 〜

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) ELITE MATERIAL CO., LTD. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2022 and 2021

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

3. Finance costs

The details of finance cost were as follows:

Interest expense
Less:Capitalized interest expense		 2022
$ 195,696
(11,573)
$
184,123		 2021
76,323
-
76,323

(u) 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, 2022
Non-derivative financial liabilities
Unsecured bank loans
Accounts payable
Other payables
Bonds payable
Lease liabilities
Balance at December 31, 2021
Non-derivative financial liabilities
Unsecured bank loans
Short-term notes payable
Accounts payable
Other payable
Lease liabilities		 Carrying
amount
$ 6,215,604
6,513,281
3,288,347
3,302,140
323,566
$
19,642,938
$ 3,438,894
199,820
8,127,533
2,841,515
303,245
$
14,911,007		 Contractual
cash flows
6,359,104
6,513,281
3,288,347
3,465,300
417,615
20,043,647
3,481,867
200,000
8,127,533
2,841,515
397,642
15,048,557		 Within 6
months
3,109,303
6,513,281
3,288,347
-
11,777
12,922,708
2,179,078
200,000
8,127,533
2,841,515
10,615
13,358,741		 6-12 months
2,307,343
-
-
-
11,316
2,318,659
572,914
-
-
-
10,615
583,529		 1-2 years
460,988
-
-
-
22,915
483,903
427,672
-
-
-
20,815
448,487		 More than 2
years
481,470
-
-
3,465,300
371,607
4,318,377
302,203
-
-
-
355,597
657,800

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. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2022 and 2021

(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		 2022.12.31
Foreign currency
(In thousand)
$ 83,297
71,930
41,085
88,327		 Exchange rate
Functional
currency
USD：TWD
30.7100
2,558,051
USD：CNY
6.9669
2,208,977
USD：TWD
30.7100
1,261,732
USD：CNY
6.9669
2,712,532
2021.12.31
Foreign currency
(In thousand)
$ 86,974
81,428
59,290
87,083		 Exchange rate
Functional
currency
USD：TWD
27.6800
2,407,432
USD：CNY
6.3720
2,253,931
USD：TWD
27.6800
1,641,136
USD：CNY
6.3720
2,410,458

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, 2022 and 2021, would have increased or decreased net income by $6,384 and $5,414, 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 $57,610 and $42,837 in 2022 and 2021, respectively.

〜 48 〜

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) ELITE MATERIAL CO., LTD. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2022 and 2021

(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 $18,863 and $12,314 for the years ended December 31, 2022 and 2021, 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.

5. Fair value

  • 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):

markets):
Financial assets measured at
amortized cost
Cash and cash equivalents
Notes and accounts receivable
Other receivables
Refundable deposits
Sub-total
Total		 2022.12.31
Book Value
$ 10,443,618
11,683,135
49,423
69,482
22,245,658
$ 22,245,658		 Fair Value
Level 1
-
-
-
-
-
-		 Level 2
-
-
-
-
-
-		 Level 3
-
-
-
-
-
-		 Total
-
-
-
-
-
-

〜 49 〜

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) ELITE MATERIAL CO., LTD. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2022 and 2021

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

Financial liabilities at fair value
through profit or loss
Redemption and repurchase
option of bonds
Financial liabilities measured at
amortized cost
Short-term borrowings
Accounts payable
Other payable
Guarantee deposit received
Bonds payable
Lease liabilities
Sub-total
Total
Financial assets measured at
amortized cost
Cash and cash equivalents
Notes and accounts receivable
Other receivables
Refundable deposits
Total
Financial liabilities measured at
amortized cost
Short-term borrowings
Short-term notes payable
Accounts payable
Other payable
Guarantee deposits received
Lease liabilities
Total		 2022.12.31 2022.12.31
Book Value
$ 23,564
6,215,604
6,513,281
3,288,347
18,807
3,302,140
323,566
19,661,745
$ 19,685,309		 Fair Value
Level 1
-
-
-
-
-
-
-
-
-		 Level 2
-
-
-
-
-
-
-
-
-
2021.12.31		 Level 3
23,564
-
-
-
-
-
-
-
23,564		 Total
23,564
-
-
-
-
-
-
-
23,564
Book Value
$ 6,642,069
13,273,676
97,758
61,781
$ 20,075,284
$ 3,438,894
199,820
8,127,533
2,841,515
17,433
303,245
$ 14,928,440		 Fair Value
Level 1
-
-
-
-
-
-
-
-
-
-
-
-		 Level 2
-
-
-
-
-
-
-
-
-
-
-
-		 Level 3
-
-
-
-
-
-
-
-
-
-
-
-		 Total
-
-
-
-
-
-
-
-
-
-
-
-

〜 50 〜

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) ELITE MATERIAL CO., LTD. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2022 and 2021

(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

The valuations are based on valuation models widely accepted by market users, such as discounted cash flow and option pricing models.

  • 3) Transfers between Level 1 and Level 2

There was no transfer from Level 1 Level 2 in 2022 and 2021.

  • 4) Reconciliation of Level 3 fair values

The change in level 3 at fair value in the years ended December 31, 2022 and 2021, were as follow:

Balance on January 1, 2022
Total losses recognized in other comprehensive income
Additions
Effect in exchange rates
Balance on December 31, 2022
Balance on January 1, 2021
Total losses recognized in other comprehensive income
Effect in exchange rates
Balance on December 31, 2021		 Financial assets at fair
value through other
comprehensive income
$ -
20,670
(22,173)
1,503
$
-
$ 15,681
(15,335)
(346)
$
-

〜 51 〜

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) ELITE MATERIAL CO., LTD. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2022 and 2021

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

  • 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-equity 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
Financial liabilities at
fair value through
profit or loss
Embedded derivative
financial instruments -
Repurchase right		 Valuation technique
Discounted Cash
Flow
Binomial tree
convertible bond
pricing model		 Significant
unobservable inputs
Inter-relationship
between significant
unobservable inputs
and fair value
measurement
‧
Weighted Average
Cost of Capital
‧ Sustainable growth
‧ The higher the
weighted average
cost of capital, the
lower the fair value
‧ The higher the
sustainable growth
rate, the higher the
fair value
‧ Volatility (42.55%)
‧ The higher the
volatility, the
higher the fair
value

  • (v) Financial risk management

  • 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.

  1. 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. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2022 and 2021

(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. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2022 and 2021

(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, 2022 and 2021, the Group's unused credit line were amounted to $19,227,734 and $16,413,907, 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. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2022 and 2021

(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.

  • (w) 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:

  • (x) 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, 2022 and 2021, were as follows:

  1. For right-of-use assets under leases, please refer to note (6)(g).

  2. Reconciliation of liabilities arising from financing activities were as follows:

Short-term borrowings
Long -term borrowings
Lease liabilities
Short-term notes payables
Bonds payable
Total liabilities from
financing activities		 January 1,
2022
$ 2,588,894
850,000
303,245
199,820
-
$
3,941,959		 Cash flow
2,574,933
156,878
(12,459)
(200,000)
3,499,953
6,019,305		 Non-cash changes
Acquisition
Foreign
exchange
movement
Fair value
changes
-
45,988
-
-
(1,089)
-
-
32,780
-
-
-
180
-
-
(197,813)
-
77,679
(197,633)		 Non-cash changes
Acquisition
Foreign
exchange
movement
Fair value
changes
-
45,988
-
-
(1,089)
-
-
32,780
-
-
-
180
-
-
(197,813)
-
77,679
(197,633)		 December 31,
2022
Acquisition
-
-
-
-
-
-		 Foreign
exchange
movement
45,988
(1,089)
32,780
-
-
77,679
5,209,815
1,005,789
323,566
-
3,302,140
9,841,310

〜 55 〜

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) ELITE MATERIAL CO., LTD. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2022 and 2021

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

Short-term borrowings
Long -term borrowings
Lease liabilities
Short-term notes payables
Total liabilities from
financing activities		 January 1,
2021
$ 608,724
1,117,137
323,568
-
$
2,049,429		 Cash flow
1,983,991
(264,529)
(11,362)
200,000
1,908,100		 Non-cash changes
Acquisition
Foreign
exchange
movement
Fair value
changes
-
(3,821)
-
-
(2,608)
-
-
(8,961)
-
-
-
(180)
-
(15,390)
(180)		 Non-cash changes
Acquisition
Foreign
exchange
movement
Fair value
changes
-
(3,821)
-
-
(2,608)
-
-
(8,961)
-
-
-
(180)
-
(15,390)
(180)		 December 31,
2021
Acquisition
-
-
-
-
-		 Foreign
exchange
movement
(3,821)
(2,608)
(8,961)
-
(15,390)
2,588,894
850,000
303,245
199,820
3,941,959

(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.

the consolidated financial statements.
Name of related party Relationship with the Group
TECHNICA USA The Group's associates

  • (c) Significant transactions with related parties

  • Sales

The amounts of significant sales by the Group to related parties were as follows:

The amounts of significant sales by the
Group to related par		 ties were as follows: ties were as follows:
Associates For the years ended December 31,
2022
$
46,974		 2021
97,953

The selling price for related parties and general customers are negotiated by both parties. The credit terms 90 and 120 days, which approximated those for routine sales transactions.The royalty is negotiated by both parties

2. Purchases

The amounts of significant purchase transactions and outstanding balances between the consolidated entity and related parties were as follows:

Associates For the years ended December 31, For the years ended December 31,
2022
$
37,085		 2021
-

〜 56 〜

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) ELITE MATERIAL CO., LTD. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2022 and 2021

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

The term and pricing of purchase transactions with the related parties were not significantly different from those offered by other vendors. The payment terms is 90 days, which were not significantly different from the payment terms given by other vendors.

  1. Receivables from related parties
Item Related party categories 2022.12.31
$ 6,417
-
$
6,417		 2021.12.31
Accounts receivable
Other receivable		 Associates
Associates		 51,119
45
51,164

Receivables between related parties have not received collateral, and after assessment, no bad debt charges are required.

  1. Payables to related parties
Item Related party categories 2022.12.31
$ 6,528
2,267
$
8,795		 2021.12.31
Accounts payable
Other payables		 Associates
Associates		 -
2,928
2,928
  1. Loans to related parties

The loans to related parties were as follow:

The loans to related parties were as follow:
Associates 2022.12.31
$
-		 2021.12.31
3,322

The interest charged by the Group to related parties is based on the average interest rate charged by financial institutions on the Group's borrowings. The loans to related parties are unsecured.

6. Guarantee

As of December 31, 2022, the Group had provided a guarantee for loans taken out by its subsidiaries, please refer to Note 13(a) for further explanations.

  1. Other transactions to related parties
Account Relationship For the years ended December 31, For the years ended December 31,
2022
$ 1,679
3,206
4,175
$
9,060		 2021
Other profit
Other expenses
Selling expenses		 Associates
Associates
Associates		 -
-
3,891
3,891

〜 57 〜

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) ELITE MATERIAL CO., LTD. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2022 and 2021

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

(d) Transactions with key management personnel

Key management personnel compensation comprised:

Short-term employee benefits
Termination benefits		 For the years ended December 31, For the years ended December 31,
2022
$ 148,144
1,094
$
149,238		 2021
197,734
2,774
200,508

(8) Pledged Assets

The following assets were restricted in use:

Assets Purpose of Pledge 2022.12.31
$
69,482		 2021.12.31
Guarantee deposit Deposits for lease and natural gas, etc. 61,781

(9) Significant Contingencies and Commitments

  • (a) Major Commitments and contingencies were as follows:

  • Unused standby letters of credit

Unused standby letters of credit
TWD
USD		 2022.12.31
2021.12.31
$ 43,440
69,047
20,351
29,542
  1. The significant contracts for engineering construction and purchase of properties in order to extend factories and machineries by the Group, were as follows:
extend factories and machineries by the
 Group, were as follo ws:
2022.12.31 2021.12.31
Total contract price
JPY $ 642,000 642,000
USD 56,278 90,749
TWD 1,047,957 753,542
Unpaid contract price
JPY $ 57,780 417,300
USD 19,650 84,254
TWD 500,444 299,326
3. The royalties of eco-material technic treatment with supplier, the paid royalties were as follows:
2022 2021
$ 76,767 118,325

〜 58 〜

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) ELITE MATERIAL CO., LTD. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2022 and 2021

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

  1. As of December 31, 2022 and 2021, 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 $7,000 and $5,000.

  2. As of December 31, 2022, the Group planned to get a government grant and obtained the performance guarantee letter issued by the bank. The amount of the guarantee letter was $5,286.

(b) Commitments

The subsidiary, Elite electronic Material (Kunshan) Co., Ltd., formally signed a relocation compensation agreement with the Kunshan local government. According to the local government's land planning, the Group was required to relocate the plant and equipment on Youbi Road, Zhoushi Town, Kunshan City, and return the use rights of land to the government. The government allocates compensation to the Group according to the progress of the contract. The total amount of compensation is CNY 195,000.

As of December 31, 2022, the disposal of the land use rights, plant and equipment has not been completed. The Group have received CNY 78,942 (TWD 347,978) in advance based on the contract, and the remaining compensation will be collected when the new plant is constructed, and the land is handed over. The Group expects to complete the plant construction by the end of March 31 2023. and relocates in 2024. In addition, the Group expects that the relocation will be completed, and the old factory will be demolished by the end of 2024.

(10) Significant Catastrophic Losses: None.

(11) Significant Subsequent Events

The Consolidated Company suffered a major fire accident on January 15, 2023, which caused damage to some of the Consolidated Company's buildings, equipment and inventory. Since the losses are still being evaluated by the insurance company, the Consolidated Company is unable to verify the total cost of the damage. Hence, the subsequent insurance claim has yet to be recognized. After the Consolidated Company's preliminary assessment of the relevant losses and subsequent claims settlement, there is no significant impact on the overall operation.

(12) Others

  • (a) Employee benefits, depreciation, and amortization expenses, categorized as operating cost or expense, were as follows:
Categorized as
Nature		 For the year ended December 31, 2022 For the year ended December 31, 2022 For the year ended December 31, 2022 For the year ended December 31, 2021 For the year ended December 31, 2021 For the year ended December 31, 2021
Operating
Cost		 Operating
Expense		 Total Operating
Cost		 Operating
Expense		 Total
Employee benefits
Salary
Labor and health insurance
Pension
Others employee benefits
Depreciation
Amortization		 1,941,688
109,471
153,888
139,558
643,368
750		 989,066
42,147
40,371
60,102
86,883
43,482		 2,930,754
151,618
194,259
199,660
730,251
44,232		 1,777,681
96,770
128,843
133,394
614,733
412		 1,002,708
33,720
33,637
50,562
75,423
28,826		 2,780,389
130,490
162,480
183,956
690,156
29,238

〜 59 〜

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) ELITE MATERIAL CO., LTD. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2022 and 2021

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

(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, 2022:

  1. Fund financing to other parties:

(Expressed in thousands of New Taiwan dollars, 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 Collateral Individual
funding loan
limits		 Maximum
limit of fund
financing
Item Value
0
1
2		 Elite Material Co., Ltd.
Elite Electronic Material
(Kunshan) Co., Ltd.
Elite Electronic Material
(Zhongshan) Co., Ltd.		 TECHNICA
USA

r
Elite Electronic
Material
(Huangshi) Co.,
Ltd.

r
Elite Electronic
Material
(Huangshi) Co.,
Ltd.

r		 Other receivables-
elated parties
Other receivables-
elated parties
Other receivables-
elated parties		 Yes
Yes
Yes		 12,881
3,068,478
1,982,640		 -
3,023,888
1,939,520		 -
1,586,880
886,008		 2.00%
2.00%~3.00%
2.00%~3.00%		 1
2
2		 46,974
-


-

d		 -
Operating
Capital
Operating
emand		 -
-
-		 -
-
-		 -
-
-		 23,487
(Note 3)
4,488,230
(Note 4)
921,965
(Note 5)		 6,622,369
(Note 3)
4,488,230
(Note 4)
921,965
(Note 5)

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 company with business contact, the amount of each fund financing cannot exceed 50% of total amount of purchase (sales) transactions in the recent year, and cannot exceed 3% of the Company's net asset value; the total amount of fund financing cannot exceed 30% of the Company's net asset value.

  3. Note 4: The total amount of fund financing could not exceed 30% of the lender's net asset value and the Company's net asset value, while the maximum financing amount for a single company could not exceed 30% of the lender's net asset value .

  4. Note 5: The total maximum financing amount cannot exceed 30% of the lender's net asset value, while the maximum financing amount for a single company cannot exceed 30% of the lender's net value.

Note 6: The total amount cannot exceed 100% of the Company's net worth in its lates financial statements.

Note 7: The transactions with the Group were eliminated in the consolidated financial statements.

  1. Guarantees and endorsements for other parties:

(Expressed in thousands of New Taiwan dollars, unless otherwise specified)

No.
(Note 1)		 Name of
company		 Counter-party 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 ne
worth of the latest
financial statements		 Maximum
t
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
1		 Elite Material
Co., Ltd.
〞
Elite Electronic
Material
(Kunshan) Co.,
Ltd. (Note 4)		 EMD SPECIALTY
MATERIALS,LLC
TECHNICA USA
Elite Electronic Material
(Huangshi) Co., Ltd.		 2
6
4		 11,037,282
11,037,282
7,480,384		 483,225
19,329
811,080		 460,650
18,426
793,440		 337,810
18,426
700,465		 -
-
-		 %
2.09
%
0.08
%
5.30		 22,074,564
22,074,564
14,960,767		 Y Y

〜 60 〜

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) ELITE MATERIAL CO., LTD. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2022 and 2021

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

==> picture [459 x 114] intentionally omitted <==

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

Limitation on Subsidiary Endorsements/guar
Counter-party amount of Highest Balance of Ratio of accumulated Maximum Parent Company endorsement/ antees
Relationship guarantees and balance for guarantees and Property pledged amounts of guarantees amount for endorsement/ guarantees to third
with the endorsements for a guarantees endorsements Actual usage on guarantees and endorsements to net guarantees and guarantees to third parties on parties on
No. Name of Company specific enterprise and endorsements as of reporting amount during and endorsements worth of the latest endorsements to third parties on behalf of parent behalf of companies
(Note 1) company Name (Note 2) (Note 3) during the period date the period (Amount) financial statements (Note 3) behalf of subsidiary company in Mainland China
2 Elite Electronic Elite Electronic Material 4 1,536,608 2,706,463 2,207,071 1,718,923 - 71.82 % 3,073,215 Y
Material (Huangshi) Co., Ltd.
(Zhongshan) Co.,
Ltd.
Note 1: 0 is the Company.
Note 2:1. Entities with business relationship with the Company.
2. A subsidiary in which the Company directly holds more than 50% of its voting shares.
3. A investee in which the Company and subsidiary holds more than 50% of its voting shares.
----- End of picture text -----

  1. A parent company in which the Company directly or Subsidiaries indirectly holds more than 90% of its voting shares.

  2. 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.

  3. Shareholders making endorsements and/or guarantees for their mutually invested company in proportion to their shareholding percentage.

  4. Companies in same type of business providing guarantees of pre-sale contracts according to the regulation.

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. Note 4: The transactions with the Group were eliminated in the consolidated financial statements.

  1. Information regarding securities held at balance sheet date:

(Expressed in thousands of New Taiwan dollars, unless otherwise specified)

Name of holder Category and
name of security		 Category and name
of security		 Account title Ending balance Ending balance Note
Number Book value Percentage Market value
EMC OVERSEAS
HOLDING
INCORPORARTED
EMC USA HOLDING
INCORPORATED		 PROUD STAR
INTERNATIIONAL
LIMITED
TECHNICA USA
(preference stock)		 -
Associates		 Non-current at fair
value through other
comprehensive
income financial
assets
"		 500,000
722,000		 -
-		 %
3.26
%
87.76		 -

-

  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 :

(In Thousands (In Thousands of New Taiw an Dollars)
Name of
Company		 Name of
property		 Transaction
date		 Transactio
amount		 n
Status of
payment		 Counterparty Relationship
with the
Company		 If the co
 untry is a relat
previous transf		 ed party, d
er informati		 isclose the
on		 References
for
determining
price
 Purpose of
acquisition and
current
condition		 Others
Owner Relationship
with the
Company		 Date of
transfer		 Amount
Elite Material Co.,
Ltd.		 Land and plant 2021.12.31 2,160,000 Paid

 Tehchang Leather
Products Co., Ltd.		 None - - - - Professional
valuation report


 Required for
company
operations		 None
  1. Disposition of real estate for which the dollar amount reaches $300 million or 20% or more of paid-in capital: None.

〜 61 〜

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) ELITE MATERIAL CO., LTD. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2022 and 2021

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

  1. Buying/selling products with the dollar amount reaches $100 million or 20% or more of paid-in capital:
capital:
(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		 Credit period Unit price Credit period 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
(Kunshan) Co., Ltd.
Elite Material Co., Ltd.
Elite Electronic Material
(Kunshan) 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 Material
Co., Ltd.
Elite Electronic
Material
(Kunshan) Co.,
Ltd.
Elite Electronic
Material
(Zhongshan)
Co., Ltd.
Elite Electronic
Material
(Kunshan) 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
Sale
Purchase
Sale
Purchase		 (464,954)
464,954
(264,767)
264,767
(123,610)
123,610
(177,705)
177,705
(2,503,481)
2,503,481
(2,210,121)
2,210,121		 %
(5)
%
4
%
(3)
%
3
%
(1)
%
2
%
(1)
%
2
%
(44)
%
24
%
(39)
%
29		 Depends on
subsidiarie's
financial
condition
〞
〞
〞
Depends on the
company's
financial
condition
〞
〞
〞
〞
〞
〞
〞		 -
-
-
-
-
-
-
-
-
-
-
-		 93,723
(93,723)
85,100
(85,100)
68,803
(68,803)
32,856
(32,856)
478,690
(478,690)
681,549
(681,549)		 %
4
%
(3)
%
3
%
(4)
%
1
%
(4)
%
1
%
(2)
%
28
%
(18)
%
40
%
(35)

Note 1: The transactions with the Group were eliminated in the consolidated financial statements.

〜 62 〜

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) ELITE MATERIAL CO., LTD. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2022 and 2021

(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:
20% or more of paid-in capital: of paid-in capital: of paid-in capital:
(In Th ousands of New T aiwan Dollars
Name of
related party		 Counter-party Relationship Balance of
receivables
from related
party		 Turnover
days		 Past-due re
relate		 ceivables from
d party		 Subsequently
received amount
of receivables
from related
party		 Allowances
for bad debts
Amount Action taken
Elite Material Co.,
Ltd.
Elite Material Co.,
Ltd. (note 1)
Elite Material Co.,
Ltd.
Elite Material Co.,
Ltd. (note 1)
Elite Electronic
Material (Kunshan)
Co., Ltd.
Elite Electronic
Material (Kunshan)
Co., Ltd. (Note 1)
Elite Electronic
Material (Kunshan)
Co., Ltd.
Elite Electronic
Material (Kunshan)
Co., Ltd. (Note 1)
Elite Electronic
Material (Zhongshan)
Co., Ltd. (Note 1)
Elite Electronic
Material (Zhongshan)
Co., Ltd. (Note 1)
Elite Electronic
Material (Zhongshan)
Co., Ltd.
Elite Electronic
Material (Zhongshan)
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 Material
Co., Ltd.
〞
Elite Electronic
Material
(Huangshi) Co.,
Ltd.
〞
Elite Material
Co., Ltd.
〞
Elite Electronic
Material
(Huangshi) Co.,
Ltd.
〞
Elite Electronic
Material
(Kunshan) Co.,
Ltd.
Elite Electronic
Material
(Zhongshan) Co.,
Ltd.		 Investee company
on equity method
by the Company
〞
〞
〞
Investcc company
on equity method
by the Company
〞
Actual related party
〞
Investee company
on equity method
by the Company
〞
Actual related party
〞
〞
〞		 93,723
89,300
85,100
42,749
68,803
350,663
14,556
1,610,173
10,414
292,586
5,856
899,610
478,690
681,549		 4.45
Not
applicable
1.89
Not
applicable
2.02
Not
applicable
1.90
Not
applicable
2.03
Not
applicable
5.71
Not
applicable
3.48
3.62		 -
-
-
-
-
-
-
-
-
-
-
-
-
-		 36,099
89,300
40,299
42,749
8,237
177,470
9,574
-
2,505
156,591
5,222
-
287,268
403,284		 -
-
-
-
-
-
-
-
-
-
-
-
-
-

Note 1: Financial statement account: Other receivables.

Note 2: The transactions with the Group were eliminated in the consolidated financial statements.

  1. Derivative transactions: None.

〜 63 〜

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) ELITE MATERIAL CO., LTD. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2022 and 2021

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

  1. Business relationships and significant inter-company transactions:
No.
(Note 1)		 Name of company Name of counter-party Existing
relationship
with the
counter-
party
(Note 2)		 Transaction Transaction Transaction Transaction
Account name Amount Terms of trading Percentage of the total
consolidated revenue or
total assets
0
1
2
3
3
3
3		 Elite Material Co., Ltd.
Elite Electronic Material
(Kunshan) 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
(Kunshan) Co., Ltd.
〞
Elite Electronic Material
(Zhongshan) Co., Ltd.
〞		 1
3
3
3
3
3
3		 Sales
Other Accounts
Receivable
Other Accounts
Receivable
Sales
Accounts Receivable
Sales
Accounts Receivable		 464,954
1,610,173
899,610
2,503,481
478,690
2,210,121
681,549		 Note 3
Note 4
〞
Note 3
〞
〞
〞		 %
1.20
%
3.71
%
2.07
%
6.47
%
1.10
%
5.71
%
1.57

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

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.

Note 6: The transactions with the Group were eliminated in the consolidated financial statements.

(b) Information on investees:

For the year ended December 31, 2022, the following was the information on investees (excluding 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) Initial investment (Amount) Ending balance Ending balance Ending balance Peak Holding
Percentage		 Net income
(loss) of the
investee		 Investment
income (losses)
(Note 7)		 Note
Ending
balance		 Beginning
balance		 Shares Ratio of
shares		 Book
value
(Note 7)
Elite Material Co.,
Ltd.
〞
〞		 EMC OVERSEAS
HOLDING
INCORPORATED
Grand Wuhan
Incorporated
EMC
INTERNATIONAL
HOLDING
INCORPORATED		 British
Virgin
Islands
Cayman
Islands
〞		 Investment business
Investment business
Investment business		 1,179,111
602,440
781,850		 1,179,111
602,440
761,482		 36,256,950
20,020,000
27,042,000		 %
100.00
%
100.00
%
100.00		 18,092,576
790,546
753,963		 %
100.00
%
100.00
%
100.00		 4,642,989
64,005
(80,431)		 4,642,989
64,005
(80,431)		 Subsidiaries
Subsidiaries
Subsidiaries

〜 64 〜

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) ELITE MATERIAL CO., LTD. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2022 and 2021

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

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 7)		 Note
Ending
balance		 Beginning
balance		 Shares Ratio of
shares		 Book
value
(Note 7)
Elite Material Co.,
Ltd.
EMC OVERSEAS
HOLDING
INCORPORATED
〞
Grand Zhuhai
Incorporated
〞
EMC
INTERNATIONAL
HOLDING
INCORPORATED
〞
EMC SPECIAL
APPLICATION
INCORPORATED
EMC USA
HOLDING
INCORPORATED		 Li Cheng Tech Co.,
Ltd.
Grand Zhuhai
Incorporated
Li Cheng Tech Co.,
Ltd.
Grand Shanghai
Incorporated
Grand Zhongshan
Incorporated
EMC SPECIAL
APPLICATION
INCORPORATED
EMC USA
HOLDING
INCORPORATED
EMD SPECIALTY
MATERIALS,LLC
TECHNICA USA		 Taiwan
Cayman
Islands
Taiwan
British
Virgin
Islands
〞
Cayman
Islands
〞
USA
〞		 Electronics,
Telecommunications
equipment, Wholesale,
Retails, Batteries, Power
generation and
Distribution machinery
manufacturing business
Investment business
Electronics,
Telecommunications
equipment, Wholesale,
Retails, Batteries, Power
generation and
Distribution machinery
manufacturing business
Investment business
Investment business
Investment business
Investment business
Copper clad laminate
and prepreg business
Import/export business		 173,694
1,063,121
7,311
1,039,558
504,780
806,291
22,480
804,514
18,426		 173,694
1,037,962
7,311
1,014,399
504,780
806,291
-
804,514
18,426		 16,412,918
34,618,060
250,000
18,200,000
16,437,000
26,255,000
732,000
-
600,000		 %
33.50
%
100.00
%
1.53
%
100.00
%
100.00
%
100.00
%
100.00
%
100.00
%
30.00		 -
18,056,831
-
11,065,300
6,990,064
752,819
22
751,662
-		 %
33.50
%
100.00
%
1.53
%
100.00
%
100.00
%
100.00
%
100.00
%
100.00
%
30.00		 -
4,642,437
-
2,688,119
1,961,292
(79,888)
(276)
(64,879)
(4,949)		 -
4,642,437
-
2,684,753
1,961,292
(79,888)
(276)
(64,879)
-		 Note 6
Sub-subsidiaries
Note 6
Third-tier
subsidiary
〞
Sub-subsidiaries
〞
Third-tier
subsidiary
Note 4, 5

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.

Note 4: Because other shareholders hold more than 70% of the shares and the Company only accounts for 30%, the Company has no control. Note 5: On October 27, 2021, the Company's Board of Directors resolved to adjust the investment structure. The initial investment of $16,608 that was invested in Technica USA through EMC Overseas Holding Incorporated was adjusted to be invested in Technica USA through EMC USA Holding Incorporated.

  • Note 6:The investment value had been impaired, the Company recognized all losses and the book value was offset to zero.

Note 7:The difference between the ending balance and the net equity value is mainly due to the realization gross profit and the amortization of equipment purchases on behalf of other.

〜 65 〜

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) ELITE MATERIAL CO., LTD. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2022 and 2021

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

  • (c) Information on investment in Mainland China:

  • Information on investment in Mainland China:

(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.)		 Investme nt 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
〞
〞		 1,940,872
620,342
614,200		 (2)
(2)
(2)		 650,816
440,613
601,858		 -
-
-		 -
-
-		 650,816
440,613
601,858		 2,683,726
1,958,775
64,000		 %
100.00
%
100.00
%
100.00		 %
100.00
%
100.00
%
100.00		 2,680,469
1,958,775
64,000		 14,960,767
3,073,215
774,123		 9,786,464
5,410,555
-
  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)
Elite Material Co., Ltd. 1,710,734 4,398,463 13,244,738

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, also USD 10,000, and USD 35,000, which were recognized as capital increase out of earnings, respectively.

  • 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 30.7100 and 29.7181, respectively, for the year ended December 31, 2022.

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, 2022. (The transactions were eliminated in the consolidated financial statements.)

  • (d) Major shareholders:
Shareholding
Shareholder’s Name		 Shares Percentage
Yu Chang Investment Co., Ltd. 25,471,477 %
7.65
Cathay Life Insurance Co., Ltd. 18,610,000 %
5.58

〜 66 〜

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) ELITE MATERIAL CO., LTD. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2022 and 2021

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

  • 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.

(2) 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.

〜 67 〜

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) ELITE MATERIAL CO., LTD. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2022 and 2021

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

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.

The Group's operating segment information and reconciliations were as follows:

2022 Domestic
$ 8,013,078
1,189,617
$
9,202,695
$
5,553,477
$ 19,626,861
4,396,390
$
29,955,622
$
7,881,058
$ 7,897,916
1,292,023
$
9,189,939
$
6,051,838
$ 17,822,990
2,134,702
$
26,285,677
$
6,532,831		 Foreign
30,659,471
5,103,914
35,763,385
5,380,834
-
11,457,909
41,230,310
22,316,109
30,602,110
5,043,458
35,645,568
6,202,481
-
7,637,520
31,453,681
14,433,626		 Other
Segments
-
-
-
13,838,246
52,517,027
-
56,502,521
777,459
-
-
-
15,852,912
51,149,945
-
49,728,940
540,075		 Adjustment
and
Elimination
-
(6,293,531)
(6,293,531)
(18,476,502)
(72,143,888)
643,735
(84,305,966)
(9,666,703)
-
(6,335,481)
(6,335,481)
(21,195,335)
(68,972,935)
591,327
(70,903,237)
(4,715,358)		 Total
38,672,549
-
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
2021
38,672,549
6,296,055
-
16,498,034
43,382,487
21,307,923
38,500,026
-
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
38,500,026
6,911,896
-
10,363,549
36,565,061
16,791,174

〜 68 〜

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) ELITE MATERIAL CO., LTD. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2022 and 2021

(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
Prepreg
Capper clad laminate
Mass lam foundry
Other
Total		 2022
$ 16,447,245
21,565,368
574,143
85,793
$
38,672,549		 2021
15,976,794
21,207,359
1,058,056
257,817
38,500,026
  • (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		 2022
$ 5,896,546
29,598,195
3,177,808
$
38,672,549
2022.12.31
$ 4,396,390
10,951,603
1,150,041
$
16,498,034		 2021
5,907,377
29,588,130
3,004,519
38,500,026
2021.12.31
2,134,702
7,196,751
1,032,096
10,363,549

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
2022 Ratio
%
11
%
9		 2021
Customer Sales
$ 4,083,290
3,546,718		 Customer Sales
4,523,496
2,953,361		 Ratio
A
B		 A
B		 %
12
%
8

〜 69 〜

ANNEX III

Elite Materials Co., Ltd. The Fifth Domestic Unsecured Convertible Corporate Bonds Issuance and Conversion Measures

1. Name of Bond

Elite Materials Co., Ltd.'s fifth domestic unsecured conversion of corporate bonds.

2. Issue Date

April 25, 2022.

3. Total Issue Amount and Face Value per Bond

The Bonds issued at 100% of par value in NTD $100,000 and a total issuance of 34,655 bonds, with a total denomination issued of NTD $3,465,530,000. The issuance is made at 101% of the face value.

4. Maturity Date

The Maturity Date was set at 5 years from the Issue Date.

  • Issue date: April 25, 2022

  • Expiration date: April 25, 2027

  • Duration: 5 years

5. Coupon Rate

  • Coupon rate: Fixed 0%

6. Repayment Date and Method

Except for bondholders who convert their bonds into the company's common shares under Article 10 of these Regulations, or for the company to exercise its put option under Article 18, or for the company to redeem the bonds early under Article 17, or for the bonds to be repurchased and cancelled by securities dealerships designated by the company, the company shall redeem the converted bonds held by bondholders in cash within 10 business days after the maturity date of the convertible bonds, based on the face value of the bonds. If the date falls on a day when the Taipei Exchange is closed for trading, the redemption will be made on the next business day.

7. Collateral Status

The convertible bonds are unsecured bonds. However, if the company issues or privately places other secured convertible bonds or convertible bonds with attached warrants after the issuance of the convertible bonds, the convertible bonds will also be subject to the same level of creditor's rights or collateral rights as those of the secured convertible bonds or convertible bonds with attached warrants of the same rank.

8. Converted Securities

The newly-issued common shares of Elite Materials Co. It will be delivered through book-entry transfer without printing physical certificates.

9. Conversion Period

From July 26, 2022 (the day after three months from the issuance date of this convertible bond) to April 25, 2027 (the maturity date), bondholders can request to convert this convertible bond into common stocks of the company at any time, except during the following periods: (1) the period of suspension of stock transfer due to legal reasons; (2) fifteen business days prior to the record date for the distribution of free stocks, cash dividends, or new shares from a capital increase; (3) the period from the record date of capital reduction to the day before the first trading day of the new stocks issued in exchange for the capital reduction; and (4) the period from the date of suspension of conversion due to stock split to the day before the first trading day of the new stocks issued in exchange for the stock split.

The date of suspension of conversion due to stock split refers to the day before the application for registration of the change with the Ministry of Economic Affairs. The company will announce the period of suspension of conversion four business days prior to the start of the period. Bondholders can convert the convertible bond into common stocks of the company in accordance with Articles 10, 11, 13, and 15 of this convertible bond agreement.

10. Conversion Request Process

(I) Bondholders shall fill out the "Convertible Bond Account

Transfer/Conversion/Redemption Application" (with a note of "conversion") with the original broker and apply to the Taiwan Depository & Clearing Corporation (TDCC). After TDCC accepts the application, it will electronically notify the Company's stock transfer agent. The conversion will take effect upon receipt of notification and cannot be revoked. The stock transfer agent shall complete the conversion process and directly

transfer the common shares of the Company to the bondholder's TDCC account within five business days after receipt of notification.

(II) For overseas Chinese and foreigners who apply to convert their holdings of the Convertible Bonds into the common shares of the Company, the distribution shall be carried out uniformly by the Taiwan Depository & Clearing Corporation (TDCC) through book-entry transfer.

11. Conversion Price and Its Adjustments

(I) Determination of Conversion Price

The conversion price of the convertible bonds shall be determined with reference to the conversion price determination reference date of April 15, 2022. The conversion price shall be calculated by taking the simple arithmetic average of the closing prices of the Company's common shares on the trading day immediately preceding, three trading days preceding, and five trading days preceding the reference date (excluding the reference date itself), and multiplying the result by a conversion premium rate of 110.19% (rounded to the nearest TWD cent). If there is an ex-right or ex-dividend event prior to the reference date, the closing price used to calculate the conversion price shall be adjusted for the ex-right or ex-dividend price. If there is an ex-right or ex-dividend event between the determination of the conversion price and the actual issuance date, the conversion price shall be adjusted in accordance with the conversion price adjustment formula in item (2) below. Based on the above calculation, the reference price for the Company's common shares on the trading day immediately preceding, three trading days preceding, and five trading days preceding the reference date was TWD 238.67 per share, and the conversion price was set at TWD 263 per share.

(II) Adjustment of Conversion Price

  • (1) After the issuance of the convertible corporate bonds by this conversion company, except for various valuable securities with ordinary stock conversion rights or subscription rights issued by the company (or privately placed) to exchange for ordinary shares or newly issued shares for employee compensation, if the number of ordinary shares issued by the company (or privately placed) increases (including but not limited to cash capital increases conducted through fundraising or private placement, capital surplus increases, mergers or acquisitions of other companies' shares to issue new shares, stock splits, and cash participation in overseas depositary receipts), this company shall adjust the conversion price of the convertible corporate bonds according to the following formula (calculated up to the nearest New Taiwan Dollar unit, rounded down but not up), and request the

Taiwan Stock Exchange Corporation (hereinafter referred to as the "TSEC") to announce the adjustment on the ex-dividend date of new shares (Note 1) (for those who have completed payment, the adjustment shall be made on the stock payment due date). If the increase in the number of ordinary shares issued is due to a change in the stock face value, the adjustment shall be made on the new share exchange reference date. If the new stock issuance price changes after the exdividend date of cash capital increase and new stock issuance, then the adjustment shall be made according to the following formula based on the new stock issuance price and the market price per share (with the date on which this company determines the new stock issuance price as the benchmark date for determining the market price per share after the update). If the adjusted conversion price after calculation is lower than the conversion price already announced and adjusted before the ex-dividend date, then TSEC shall be requested to announce the adjustment again.

  • Adjusted conversion price = Conversion price before adjustment (Note 2) x [ENS+((PNI (Note 3) x NNS)/P)]/[ENS+NNS]

ENS ＝ Number of outstanding shares before issuance

NNS ＝ Number of new shares

PNI ＝ Offering price of new shares

P ＝ Market price per share on relevant record date

RCR = Ratio of cash refund per share

Note 1: In the case of stock splits, adjustment should be made on the split record date. In the case of mergers or acquisition of capital increases, adjustment should be made on the merger or acquisition record date. For cash capital increases or cash participation in the issuance of overseas depositary receipts through the book-building process, since there is no ex-rights record date, adjustment should be made on the date of full payment of the stock. In the case of cash capital increases carried out by way of private placement, or shares issued by way of private placement securities, adjustment should be made on the date of delivery of the private placement securities.

Note 2: The number of issued shares refers to the total number of common shares issued (including publicly offered shares and privately placed shares), minus the

number of treasury shares that the Company has repurchased but has not yet cancelled or transferred.

Note 3: If the payment per share belongs to a free stock dividend or a stock split, the payment per share is zero. If it belongs to the issuance of new shares for capital increase by merger, the payment per share is the net asset value per share calculated according to the most recent financial statements signed or reviewed by the Company's accountant before the merger record date, multiplied by the exchange ratio. If it belongs to the issuance of new shares by acquiring the shares of another company, the payment per share is the net asset value per share calculated according to the most recent financial statements signed or reviewed by the accountant of the acquired company before the record date, multiplied by the exchange ratio.

Note 4: The determination of the market price per share should be based on the simple arithmetic average of the closing price of the Company's common shares calculated based on one, three, or five trading days before the ex-rights record date, pricing record date, stock split record date, or the delivery date of the private placement securities.

  • (2) After the issuance of the Convertible Corporate Bonds, if the company distributes cash dividends on its common shares, the conversion price shall be adjusted downwards based on the ratio of the average closing price of the company's common shares on the Taiwan Stock Exchange on the first, third, and fifth business days prior to the ex-dividend date (rounded to the nearest TWD 0.01). The adjusted conversion price shall be announced by the company to the Taipei Exchange on the ex-dividend date, and a request shall be made to the Taiwan Depository & Clearing Corporation to adjust the conversion price accordingly. This adjustment formula does not apply to those who have already requested conversion prior to the ex-dividend date. The adjustment formula is as follows:

  • Adjusted conversion price = Conversion price before adjustment x (1Dividend payout ratio (Note 5))

Note 5: The share price is determined based on the simple arithmetic mean of the closing prices of the Company's common stock on the first, third, and fifth business days prior to the ex-dividend date of the cash dividend announcement, and is selected at the discretion of the Company.

  • (3) After the issuance of this convertible bond, if the company issues any convertible or equity securities with conversion or subscription prices lower than the per share market price (Note 1), the conversion price of this convertible bond shall be adjusted by the following formula (calculated to the nearest tenth of a New Taiwan Dollar, rounded down if the decimal is less than 5, and rounded up if the decimal is 5 or greater). The company shall notify the Taiwan Stock Exchange or the Taipei Exchange to announce the adjustment on the date of issuance or delivery of such securities or subscription rights:

  • Adjusted conversion price = Conversion price before adjustment x [ENS (Note 7)+(( PNI x NNS)/(P (Note 6))]/[ENS+NNS]

Note 6: The market price per share shall be calculated by taking the simple arithmetic average of the closing prices of the Company's common shares for the preceding one, three, or five business days prior to the pricing date of the equitylinked securities with common share conversion rights or subscription rights or the delivery date for privately placed equity-linked securities, whichever is applicable. If there is any ex-rights or ex-dividend date prior to the pricing date, the closing price used for calculating the conversion price shall be adjusted to the ex-rights or ex-dividend price.

Note 7: The outstanding shares refer to the total number of issued shares excluding the number of treasury shares repurchased by the Company but not yet cancelled or transferred. If equity-linked securities with common share conversion rights or subscription rights are supported by treasury shares, the number of convertible or subscribable shares of the newly issued or privately placed securities should be deducted from the outstanding shares in the adjustment formula.

  • (4) After the issuance of this convertible bond, if there is a reduction in the number of outstanding common shares due to a reduction in capital not resulting from the cancellation of treasury shares, the adjusted conversion price should be calculated according to the following formula (rounded to the nearest TWD 0.10), and the Taiwan Stock Exchange (TWSE) should be requested to announce the adjusted conversion price on the capital reduction reference date. If the reduction is due to a change in the face value of the shares, the adjustment should be made on the new share issuance reference date.

  • Capital reduction for cover accumulated deficits

  • Adjusted conversion price = Conversion price before adjustment x ENS / NNS (Note 8)

  • Capital reduction by cash

  • Adjusted conversion price = Conversion price before adjustment x (1RCR)* ENS / (ENS+NNS) (Note 8)

  • Change in par value of stocks

  • Adjusted conversion price = Conversion price before adjustment x ENS / (ENS+NNS)

Note 8: The issued common shares refer to the total number of common shares that have been issued (including those issued through public offering and private placement), less the number of treasury shares that have been repurchased by the company but not yet cancelled or transferred.

12. Listing and Delisting of Convertible Corporate Bonds

Prior to the issue date, the convertible corporate bonds shall apply for listing on the OverThe-Counter (OTC) market. The listing shall be terminated upon the full conversion of the bonds into ordinary shares or the full repurchase or redemption of the bonds by the company. All of these matters shall be announced after the company has obtained approval from the OTC market.

13. Listing of New Shares After Conversion

After the convertible corporate bonds have been converted into ordinary shares, the converted ordinary shares shall be listed for trading on the Taiwan Stock Exchange (TWSE) from the delivery date. The above matters shall be announced after the company has obtained approval from the TWSE. The ordinary shares of the company are issued in a non-physical form and the converted ordinary shares shall also be listed for trading on the TWSE in a non-physical form from the delivery date.

14. Procedures for Capital Change Registration

The company shall announce the number of ordinary shares issued due to the conversion of the convertible corporate bonds for the previous quarter within 15 days after the end of

each quarter. Additionally, the company shall apply for registration of capital change at least once per quarter with the competent authority responsible for company registration.

15. Handling of Fractional Shares Upon Conversion

In the event that there is a fractional share amount upon conversion into the company's ordinary shares, the company shall settle the fractional shares with cash (calculated up to the New Taiwan Dollar and rounded to the nearest cent). This is in addition to offsetting the Taiwan Securities Central Depository Corporation's handling fees.

16. Attribution of annual cash dividends and stock dividends upon conversion

(I) Cash Dividends

Holders of this convertible bond who request conversion from January 1 of the current year to 15 business days before the date when the transfer of cash dividends stops by our company to Taiwan Stock Exchange shall be entitled to participate in the resolution of the shareholders' meeting to distribute the cash dividends for the previous year.

This convertible bond shall cease to convert from the 15th business day before the date when the transfer of cash dividends stops by our company to Taiwan Stock Exchange until the ex-dividend date of the cash dividends for the current year, from the current year to the ex-dividend date (inclusive).

Holders of this convertible bond who request conversion from the day after the exdividend date of the cash dividends for the current year to December 31 of the current year (inclusive) shall waive the cash dividends for the previous year, but shall be entitled to participate in the resolution of the shareholders' meeting to distribute the cash dividends for the current year to be declared at the next year's shareholders' meeting. (see Appendix 1, item 6)

(II) Stock Dividends

Holders of this convertible corporate bond who request conversion from January 1st of the current year to fifteen business days prior to the date on which the company stops registration of free stock dividends with Taiwan Stock Exchange, shall be entitled to participate in the distribution of the previous year's stock dividends as resolved by the shareholders' meeting of the current year.

Conversion of this convertible corporate bond shall cease during the period from fifteen business days prior to the date on which the company stops registration of free stock dividends with Taiwan Stock Exchange (inclusive) to the ex-dividend date of the free stock dividends in the current year.

Holders of this convertible corporate bond who request conversion from the day following the ex-dividend date of the free stock dividends in the current year to December 31st of the current year (inclusive) shall waive the right to receive the previous year's stock dividends as resolved by the shareholders' meeting of the current year, but shall be entitled to participate in the distribution of the current year's stock dividends as resolved by the shareholders' meeting of the next year.

17. Early Redemption Rights of Convertible Corporate Bonds

(I) Starting from the day after the expiration of three months from the issue date of the convertible corporate bonds (July 26, 2022) until forty days prior to the expiration of the issuance period (the maturity date) (March 16, 2027), if the closing price of the common stock of the Company listed on the Taiwan Stock Exchange exceeds 30% (inclusive) of the conversion price of the convertible corporate bonds for thirty consecutive business days, the Company may, within thirty business days thereafter, send a registered "Notice of Bond Redemption" (based on the bondholder list five business days prior to the mailing date, and for bondholders who acquire the convertible corporate bonds later due to trading or other reasons, public announcement will be made) to the bondholders, with the period of thirty days from the date of the Company's mailing as the basis for bond redemption (the period shall not be included in the conversion suspension period stipulated in Article 9). The Company shall also request the Taiwan Stock Exchange to make an announcement. Within five business days after the bond redemption basis date, the Company shall redeem the convertible corporate bonds from the bondholders in cash at face value.

(II) From the day after three months have passed since the issuance date of the convertible bonds (July 26, 2022) until 40 days before the end of the issuance period (March 16, 2027), if the closing price of the company's common stock on the Taiwan Stock Exchange has continuously exceeded 30% of the conversion price of the convertible bonds for 30 consecutive business days, the company can issue a "Bond Redemption Notice" by registered mail to the bondholders within 30 business days. The redemption date will be the last day of the 30-day period, and the company will announce the redemption on the GreTai Securities Market. The company will redeem the convertible bonds in cash at face value within five business days after the redemption date.

Additionally, if the outstanding balance of the convertible bonds falls below 10% of the original issuance amount between the day after three months have passed since the issuance date of the convertible bonds and 40 days before the end of the issuance period,

the company can issue a "Bond Redemption Notice" at any time by registered mail to the bondholders. The redemption date and procedure will be the same as described above.

(III) If the bondholders fail to reply in writing to the company's stock agency before the bond redemption reference date specified in the "Bond Redemption Notice" (which shall be effective upon delivery, and the postmark date shall prevail for mailed responses), the company will redeem the convertible bonds in cash at face value within five business days after the bond redemption reference date.

(IIII) If the company exercises the redemption request, the deadline for bondholders to request conversion is the second business day after the termination of the over-thecounter trading of the convertible bonds.

18. Bondholders' Put Option

The early redemption date for the convertible bonds of this conversion company is three years after the issuance date (April 25, 2025), which is the put option date for bondholders to sell back the convertible bonds. The following principles shall apply:

Appendix 1, Section 7 shall apply to the exercise of the bondholders' put option.

The Company shall send a "Notice of Exercise of Bondholders' Put Option" by registered mail to the holders of the convertible bonds of this conversion company thirty days before the put option date (March 26, 2025). The mailing date of the "Notice of Exercise of Bondholders' Put Option" shall be based on the fifth business day before the bondholders' register listed on the notice. For bondholders who acquire the convertible bonds of this conversion company later due to trading or other reasons, the notice shall be given by announcement. The Company shall request the Taiwan Stock Exchange Corporation to announce the exercise of bondholders' put option for the convertible bonds of this conversion company. Bondholders may request the Company to redeem their convertible bonds in cash at the face value by notifying the Company's stock transfer agent in writing within thirty days before the put option date (which shall be effective upon receipt, and if sent by mail, the postmark shall be used as proof, and cannot be revoked). The Company shall redeem the convertible bonds of this conversion company in cash at the face value within five business days after the put option date upon acceptance of the put option request. If the above-mentioned dates coincide with a day on which the Taipei Exchange is closed, the dates shall be postponed to the next business day.

19. Rights and obligations after conversion

Unless otherwise agreed in these regulations, the holder of the converted bonds, after the conversion has become effective, shall have the same rights and obligations as a shareholder holding common shares already issued by the Company.

  1. All the redeemed (including those bought back by securities dealers), repaid, or converted bonds of the Company will be cancelled and cannot be resold or issued again. The conversion rights attached to them will be eliminated at the same time.

  2. Both the convertible bonds and the common shares issued upon conversion are registered, and their transfer, registration, pledge, and loss shall be handled in accordance with the "Guidelines for the Handling of Shareholder Services of Publicly Issued Stock Companies" and relevant provisions of the Company Act. Tax matters shall be handled in accordance with the relevant tax laws at the time.

  3. The trustee for the bondholders of this convertible corporate bond is the Trust Department of Yuanta Commercial Bank Co., Ltd. The trustee represents the interests of the bondholders and supervises the company's compliance with the issuance and conversion of this convertible corporate bond. All holders of this convertible corporate bond, regardless of whether they subscribed at the time of issuance or purchased it later, agree to recognize and accept the provisions of the trust agreement between the company and the trustee, the rights and obligations of the trustee, and the issuance and conversion method of this corporate bond. The bondholders grant full power of attorney to the trustee regarding the matters entrusted to them, and this authorization cannot be revoked midway. Bondholders may check the contents of the trust agreement at any time during the specified business hours by visiting the company or the trustee's business premises.

  4. The repayment of principal and interest and conversion of the convertible corporate bonds shall be handled by the shareholder services agent of the Company.

  5. The issuance of the convertible corporate bonds shall be delivered through book-entry transfer in accordance with Article 8 of the Securities and Exchange Act, and no physical bonds will be printed.

  6. Any matters not covered by these issuance and conversion rules for the convertible corporate bonds shall be handled in accordance with relevant laws and regulations.

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