EPi — Audit Report / Information 2022

Nov 10, 2022

EPISIL-PRECISION INC. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS AND

INDEPENDENT AUDITORS’ REPORT YEARS ENDED DECEMBER 31, 2022 AND 2021

-----------------------------------------------------------------------------------------------------------------------------------For the convenience of readers and for information purpose only, the auditors’ report and the accompanying financial statements have been translated into English from the original Chinese version prepared and used in the Republic of China. In the event of any discrepancy between the English version and the original Chinese version or any differences in the interpretation of the two versions, the Chinese-language auditors’ report and financial statements shall prevail.

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EPISIL-PRECISION INC.

Declaration of Consolidated Financial Statements of Affiliated Enterprises

For the year ended December 31, 2022, pursuant to “Criteria Governing Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises”, the entities that are required to be included in the consolidated financial statements of the affiliates, are the same as the entities required to be included in the consolidated financial statements of Episil-Precision Inc. and subsidiary in accordance with International Financial Reporting Standard No. 10. Additionally, if relevant information that should be disclosed in the consolidated financial statements of the affiliates has all been disclosed in the consolidated financial statements of Episil-Precision Inc. and subsidiary, it shall not be required to prepare separate consolidated financial statements of affiliates.

Hereby declare,

Episil-Precision Inc.

Representative: Xu, Jian-Hua

February 24, 2023

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INDEPENDENT AUDITORS’ REPORT TRANSLATED FROM CHINESE

PWCR22000396

To the Board of Directors and Shareholders of Episil-Precision Inc.

Opinion

We have audited the accompanying consolidated balance sheets of Episil-Precision Inc. and its subsidiary (the “Group”) as at December 31, 2022 and 2021, and the related consolidated statements of comprehensive income, of changes in equity and of cash flows for the years then ended, 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 years then ended in accordance with the Regulations Governing the Preparations of Financial Reports by Securities Issuers and the International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations that came into effect as endorsed by the Financial Supervisory Commission.

Basis for opinion

We conducted our audits in accordance with the Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants and 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 Code of Professional Ethics for Certified Public Accountants in the Republic of China, and we have fulfilled our other ethical responsibilities in accordance with the these reguirments. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

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Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the Group’s 2022 consolidated financial statements. These matters were addressed in the context of our audit of the consolidated financial statements as a whole and, in forming our opinion thereon, we do not provide a separate opinion on these matters.

Key audit matters for the Group’s 2022 consolidated financial statements are stated as follows:

Inventory valuation

Description

Please refer to Note 4(12) for description of accounting policy on inventory valuation. Please refer to Note 5(2) for accounting estimates and assumption uncertainty in relation to inventory valuation. Please refer to Note 6(4) for description of inventory and allowance for inventory valuation losses. As of December 31, 2022, inventory and allowance for inventory valuation losses amounted to NT$1,006,054 thousand and NT$58,978 thousand, respectively.

The Group primarily engages in research and development, manufacture and sales of silicon epitaxy wafers and compound semiconductor epitaxial wafers. The industry is characterised by rapidly evolving technology and is easily affected by fluctuation in market price, there is a higher risk of incurring inventory valuation losses or having obsolete inventory. The Group’s inventories are measured at the lower of cost and net realisable value, and the calculation of the net realisable value used in individually obsolete inventories or inventories which are over a certain period involves subjective judgement. Since abovementioned inventories and allowance for inventory valuation losses are significant to the financial statements, we identified allowance for inventory valuation losses a key audit matter.

How our audit addressed the matter

For inventory valuation losses against inventories that are over a certain period or individually obsolete, we tailored the audit scope as follows:

1. Obtained an understanding and assessed the reasonableness of Group’s policies and procedures related to the provision of allowance for inventory valuation losses and the identification of obsolete and slow-moving inventory.

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1. Verified whether the systematic logic used in the Group’s inventory aging report is appropriate and in accordance with the Group’s policies.

2. Verified a sample of separately numbered inventory items against the clearance of those inventory items and respective historical data of discounts, and compared the sample to recorded allowance for inventory valuation losses to assess the reasonableness of allowance for inventory valuation losses.

Other matter – Parent company only financial reports

We have audited and expressed an unqualified opinion on the parent company only financial statements of Episil-Precision Inc. as at and for the years ended December 31, 2022 and 2021.

Responsibilities of management and those charged with governance for the consolidated financial statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations that came into effect as endorsed by the Financial Supervisory Commission, and for such internal controls as management determines are necessary to enable the preparation of consolidated 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 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.

Auditors’ responsibilities for the audit of the consolidated financial statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue a report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an

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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 controls.

2. Obtain an understanding of internal controls 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 controls.

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

4. Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our 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 report. However, future events or conditions may cause the Group to cease to continue as a going concern.

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

Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements.

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We are responsible for the direction, supervision and performance of the Group ’ s audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal controls 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 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.

Hsieh, Chih-Cheng Lin, Yu-Kuan For and on behalf of PricewaterhouseCoopers, Taiwan February 24, 2023

------------------------------------------------------------------------------------------------------------------------------------------------The accompanying consolidated financial statements are not intended to present the financial position and results of operations and cash flows in accordance with accounting principles generally accepted in countries and jurisdictions other than the Republic of China. The standards, procedures and practices in the Republic of China governing the audit of such financial statements may differ from those generally accepted in countries and jurisdictions other than the Republic of China. Accordingly, the accompanying consolidated financial statements and independent auditors’ report are not intended for use by those who are not informed about the accounting principles or auditing standards generally accepted in the Republic of China, and their applications in practice.

As the financial statements are the responsibility of the management, PricewaterhouseCoopers, Taiwan cannot accept any liability for the use of, or reliance on, the English translation or for any errors or misunderstandings that may derive from the translation.

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EPISIL-PRECISION INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 2022 AND 2021

(Expressed in thousands of New Taiwan dollars)

Assets	Notes 6(1) 6(2) 6(3) 6(3) and 7 7 6(4) 6(2) and 8 6(5) 6(6) 6(8) 6(9) 6(27) 7	December 31, 2022 AMOUNT % $ 2,841,411 37 - - 1,025,940 14 207,799 3 27,584 - 8,472 - 947,076 12 93,490 1 9,766 - 5,161,538 67 17 - 13,565 - 2,008,385 26 242,625 3 160,320 2 52,520 1 32,095 1 1,109 - 2,510,636 33 $ 7,672,174 100	December 31, 2021	December 31, 2021
		AMOUNT $ 2,841,411 - 1,025,940 207,799 27,584 8,472 947,076 93,490 9,766 5,161,538 17 13,565 2,008,385 242,625 160,320 52,520 32,095 1,109 2,510,636 $ 7,672,174	AMOUNT $ 1,550,172 400,000 1,127,566 192,438 16,159 11,850 868,460 57,446 5,886 4,229,977 17 7,858 1,799,031 253,681 169,579 53,245 34,014 66,133 2,383,558 $ 6,613,535	%
Current assets 1100 Cash and cash equivalents 1136 Current financial assets at amortised cost 1170 Accounts receivable, net 1180 Accounts receivable due from related parties, net 1200 Other receivables 1210 Other receivables due from related parties 130X Inventories 1410 Prepayments 1470 Other current assets 11XX Total current assets Non-current assets 1517 Non-current financial assets at fair value through other comprehensive income 1535 Non-current financial assets at amortised cost 1600 Property, plant and equipment 1755 Right-of-use assets 1760 Investment property - net 1780 Intangible assets 1840 Deferred income tax assets 1920 Refundable guarantee deposits 15XX Total non-current assets 1XXX Total assets				24 6 17 3 - - 13 1 -
				64
				- - 27 4 3 1 - 1
				36
				100

(Continued)

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EPISIL-PRECISION INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 2022 AND 2021

(Expressed in thousands of New Taiwan dollars)

Liabilities and Equity	December 31, 2022 December 31, 2021 Notes AMOUNT % AMOUNT % 6(10) $ 178,624 2 $ 446,283 7 6(20) 42,574 1 38,395 1 6(11) 419,139 5 483,114 7 7 1,885 - 1,616 - 6(12) 621,779 8 350,315 5 7 36,083 1 38,181 1 120,663 2 96,188 1 9,532 - 9,894 - 6(13) - - 46,878 1 22,430 - 19,991 - 1,452,709 19 1,530,855 23 6(20) 77,065 1 95,298 1 6(13) 484,170 6 - - 6(27) 36,148 1 36,549 1 242,962 3 251,452 4 6(14) 67,338 1 81,012 1 8,095 - 8,290 - 915,778 12 472,601 7 2,368,487 31 2,003,456 30 6(16) 2,885,394 38 2,843,767 43 6(17) 1,614,778 21 1,313,939 20 6(18) 101,319 1 63,445 1 910 - - - 702,441 9 389,838 6 6(19) ( 1,155 ) - ( 910) - 5,303,687 69 4,610,079 70 9 $ 7,672,174 100 $ 6,613,535 100	December 31, 2021	December 31, 2021
			%
Current liabilities 2100 Short-term borrowings 2130 Current contract liabilities 2170 Accounts payable 2180 Accounts payable to related parties 2200 Other payables 2220 Other payables to related parties 2230 Current income tax liabilities 2280 Current lease liabilities 2320 Long-term liabilities, current portion 2399 Other current liabilities, others 21XX Total current liabilities Non-current liabilities 2527 Non-current contract liabilities 2530 Bonds payable 2570 Deferred income tax liabilities 2580 Non-current lease liabilities 2640 Net defined benefit liability, non- current 2645 Guarantee deposits received 25XX Total non-current liabilities 2XXX Total liabilities Equity attributable to owners of parent Share capital 3110 Share capital - common stock Capital surplus 3200 Capital surplus Retained earnings 3310 Legal reserve 3320 Special reserve 3350 Unappropriated retained earnings Other equity interest 3400 Other equity interest 3XXX Total equity Significant commitments and contingencies 3X2X Total liabilities and equity			7 1 7 - 5 1 1 - 1 -
			23
			1 - 1 4 1 -
			7
			30
			43 20 1 - 6 -
			70
			100

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

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EPISIL-PRECISION INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME YEARS ENDED DECEMBER 31, 2022 AND 2021

(Expressed in thousands of New Taiwan dollars, except as otherwise indicated)

Items

Year ended December 31 2022 2021 Notes AMOUNT % AMOUNT % 6(20) and 7 $ 5,899,587 100 $ 5,043,332 100 6(4) and 7 ( 4,797,706 )( 81) ( 4,316,899) ( 86) 1,101,881 19 726,433 14 6(25)(26) and 7 ( 61,365 ) ( 1) ( 54,408) ( 1) ( 185,626 ) ( 3) ( 139,392) ( 3) ( 70,091 )( 1) ( 68,520) ( 1) ( 317,082 )( 5) ( 262,320) ( 5) 784,799 14 464,113 9 6(21) 14,058 - 4,956 - 6(22) 44,138 1 45,513 1 6(23) 32,893 - ( 21,249) ( 1) 6(24) ( 21,223 ) - ( 12,664) - 69,866 1 16,556 - 854,665 15 480,669 9 6(27) ( 173,394 )( 3) ( 100,139) ( 2) $ 681,271 12 $ 380,530 7 6(14) $ 11,368 - ($ 1,792) - 6(19) ( 245 ) - ( 1,358) - $ 11,123 - ($ 3,150) - $ 692,394 12 $ 377,380 7 $ 681,271 12 $ 380,530 7 $ 692,394 12 $ 377,380 7 6(28) $ 2.38 $ 1.35 6(28) $ 2.36 $ 1.35

4000 Operating revenue 5000 Operating costs 5900 Gross profit from operation Operating expenses 6100 Selling and marketing expenses 6200 General and administrative expenses 6300 Research and development expenses 6000 Total operating expenses 6900 Operating profit Non-operating income and expenses 7100 Interest income 7010 Other income 7020 Other gains and losses 7050 Finance costs 7000 Total non-operating income and expenses 7900 Profit before income tax 7950 Income tax expense 8200 Profit for the year Other comprehensive income, net 8311 Gains (losses) on remeasurements of defined benefit plans Items may be subsequently reclassified to profit or loss 8361 Exchange differences on translation of foreign operations 8300 Other comprehensive income (loss), net 8500 Total comprehensive income for the year Profit attributable to: 8610 Owners of the parent Comprehensive income attributable to: 8710 Owners of the parent Basic earnings per share 9750 Basic earnings per share (in dollars) Diluted earnings per share 9850 Diluted earnings per share (in dollars)

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

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EPISIL-PRECISION INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY YEARS ENDED DECEMBER 31, 2022 AND 2021

(Expressed in thousands of New Taiwan dollars)

Equity attributable to owners of the parent

2021 Balance at January 1, 2021 Profit for the year Other comprehensive loss Total comprehensive income (loss) Appropriation of 2020 earnings Legal reserve Cash dividends Conversion of corporate bonds Balance at December 31, 2021 2022 Balance at January 1, 2022 Profit for the year Other comprehensive income (loss) Total comprehensive income (loss) Appropriation of 2021 earnings Legal reserve Special reserve Cash dividends Conversion of corporate bonds Issuance of corporate bonds Corporate bonds not converted after the due date Cash capital increase Compensation cost for cash capital increase retained for employees Balance at December 31, 2022	Notes		Share capital - common stock				Capital Reserves	Capital Reserves	Capital Reserves				Retained Earnings	Retained Earnings	Retained Earnings	Retained Earnings		Financial statements translation differences of foreign operations		Total Equity
				Additional paid- in capital			Warrants		Restricted stocks		Others		Legal reserve	Special reserve		Unappropriated retained earnings
	6(19) 6(18) 6(13)(16)(17) 6(19) 6(13)(16)(17) 6(13) 6(15) 6(16) 6(15)		$ 2,796,356 - - - - - 47,411 $ 2,843,767 $ 2,843,767 - - - - - - 8,627 - - 33,000 - $ 2,885,394		$ 1,078,295 - - - - - 222,220 $ 1,300,515 $ 1,300,515 - - - - - - 40,591 - - 235,737 5,000 $ 1,581,843	$ 14,721 - - - - - ( 12,461 ) $ 2,260 $ 2,260 - - - - - - ( 2,246 ) 21,757 ( 14 ) - - $ 21,757			$ 670 - - - - - - $ 670 $ 670 - - - - - - - - - - - $ 670		$ 10,494 - - - - - - $ 10,494 $ 10,494 - - - - - - - - 14 - - $ 10,508		$ 62,093 - - - 1,352 - - $ 63,445 $ 63,445 - - - 37,874 - - - - - - - $ 101,319		$ - - - - - - - $ - $ - - - - - 910 - - - - - - $ 910	$ 82,462 380,530 ( 1,792 ) 378,738 ( 1,352 ) ( 70,010 ) - $ 389,838 $ 389,838 681,271 11,368 692,639 ( 37,874 ) ( 910 ) ( 341,252 ) - - - - - $ 702,441	$ 448 - ( 1,358 ) ( 1,358 ) - - - ($ 910 ) ($ 910 ) - ( 245 ) ( 245 ) - - - - - - - - ($ 1,155 )		$ 4,045,539 380,530 ( 3,150 ) 377,380 - ( 70,010 ) 257,170 $ 4,610,079 $ 4,610,079 681,271 11,123 692,394 - - ( 341,252 ) 46,972 21,757 - 268,737 5,000 $ 5,303,687

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

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EPISIL-PRECISION INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31, 2022 AND 2021

(Expressed in thousands of New Taiwan dollars)

CASH FLOWS FROM OPERATING ACTIVITIES Profit before tax Adjustments Adjustments to reconcile (profit) loss Depreciation expense Amortisation expense Finance costs Interest income Dividend income Share-based payments Changes in operating assets and liabilities Changes in operating assets Notes receivable Accounts receivable Accounts receivable due from related parties Other receivables Other receivables due from related parties Inventories Prepayments Other current assets Changes in operating liabilities Contract liabilities Accounts payable Accounts payable to related parties Other payables Other payables to related parties Other current liabilities Net defined benefit liability Cash inflow generated from operations Interest received Dividends received Interest paid Income taxes (paid) received Net cash flows from operating activities

Year ended December 31 Notes 2022 2021 $ 854,665 $ 480,669 6(5)(6)(8)(25) 452,954 466,502 6(9)(25) 3,857 3,518 6(24) 21,223 12,664 6(21) ( 14,058 ) ( 5,116 ) ( 1 ) ( 1 ) 6(15) 5,000 - - 1,733 101,626 ( 256,598 ) ( 15,361 ) ( 79,289 ) ( 11,484 ) ( 3,530 ) 3,378 792 ( 78,616 ) ( 72,917 ) ( 36,044 ) 9,293 ( 3,880 ) 364 ( 14,054 ) ( 50,868 ) ( 63,975 ) 52,946 269 ( 243 ) 104,810 104,118 ( 2,098 ) 1,976 2,439 1,169 ( 2,306 ) ( 15,317 ) 1,308,344 651,865 14,117 5,116 1 1 ( 14,678 ) ( 9,093 ) ( 147,402 ) 44,573 1,160,382 692,462

(Continued)

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EPISIL-PRECISION INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31, 2022 AND 2021

(Expressed in thousands of New Taiwan dollars)

CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of financial asset at amortized cost Disposal of financial assets measured at amortised cost Acquisition of property, plant and equipment Acquisition of intangible assets Decrease in refundable guarantee deposits Increase in other current financial assets Net cash flows used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Increase in short-term borrowings Decrease in short-term borrowings Proceeds from issuance of corporate bonds Redemption of corporate bonds Decrease in guarantee deposits received Payments of lease liabilities Cash capital increase Cash dividends paid Net cash flows from financing activities Effect of exchange rate changes Net increase in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year

Year ended December 31 Notes 2022 2021 ($ 275,983 ) ($ 400,000 ) 670,276 - 6(29) ( 475,557 ) ( 174,842 ) 6(9) ( 2,847 ) ( 1,667 ) 65,025 83 - ( 97 ) ( 19,086 ) ( 576,523 ) 6(30) 1,411,939 1,770,233 6(30) ( 1,679,598 ) ( 1,624,017 ) 6(30) 500,763 - 6(30) ( 300 ) - 6(30) ( 195 ) - 6(30) ( 9,907 ) ( 9,699 ) 6(16) 268,737 - 6(18) ( 341,252 ) ( 70,010 ) 150,187 66,507 ( 244 ) ( 1,358 ) 1,291,239 181,088 6(1) 1,550,172 1,369,084 6(1) $ 2,841,411 $ 1,550,172

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

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EPISIL-PRECISION INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021

(Expressed in thousands of New Taiwan dollars, except as otherwise indicated)

1. History and Organisation

Episil-Precision Inc. (the “Company”) was incorporated as a company limited by shares on October 15, 1998 and was approved by the regulatory authority on November 9, 1998. The primary business activities have been started since December 1999.

The Company merged with Episil Semiconductor Wafer, Inc. on January 11, 2016 in accordance with the Business Mergers and Acquisitions Act and other related regulations. The Company issued new shares to Episil Semiconductor Wafer, Inc. as consideration for assuming all rights and obligations of Episil Semiconductor Wafer, Inc. The conversion ratio for this merger was one common share of Episil Semiconductor Wafer, Inc. converting to 1.867876 common shares of the Company, totalling 149,523,473 shares, and the Company was the surviving company. This merger was a reverse takeover under comprehensive assessment. Therefore, the consolidated financial statements were issued under the name of the Company, which was an extension of the subject of Episil Semiconductor Wafer, Inc.

The Company and its subsidiary (collectively referred herein as the “Group”) are primarily engaged in development, manufacture and sales of silicon epitaxy wafers and compound semiconductor epitaxial wafers.

Episil Technologies Inc. (former name: Episil Holding Inc.) holds 57.86% of the Company’s outstanding shares. Episil Technologies Inc. is the Company’s ultimate parent company.

1. The Date of and Procedures for Authorisation for Issuance of the Financial Statements

These consolidated financial statements were authorised for issuance by the Board of Directors on February 24, 2023.

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1. Application of New Standards, Amendments and Interpretations

(1) Effect of the adoption of new issuances of or amendments to International Financial Reporting Standards (“IFRS”) that came into effect as endorsed by the Financial Supervisory Commission (“FSC”)

New standards, interpretations and amendments endorsed by FSC and became effective from 2022 are as follows:

andards (“IFRS”) that came into effect as endorsed by the Financial FSC”) New standards, interpretations and amendments endorsed by FSC are as follows:	Supervisory Commission and became effective from 20
New Standards,Interpretations and Amendments	Effective date by International Accounting Standards Board(“IASB”)
Amendments to IFRS 3, ‘Reference to the conceptual framework’ 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	January 1, 2022 January 1, 2022 January 1, 2022 January 1, 2022

The above standards and interpretations have no significant impact to the Group’s financial position and financial performance based on the Group’s assessment.

(2) Effect of new issuances of or amendments to IFRSs as endorsed by the FSC but not yet adopted by the Group

New standards, interpretations and amendments endorsed by the FSC effective from 2023 are as follows:

follows:
New Standards,Interpretations and Amendments	Effective date by IASB
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’	January 1, 2023 January 1, 2023 January 1, 2023

The above standards and interpretations have no significant impact to the Group’s financial position and financial performance based on the Group’s assessment.

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(3) IFRSs issued by IASB but not yet endorsed by the FSC

New standards, interpretations and amendments issued by IASB but not yet included in the IFRSs as endorsed by the FSC are as follows:

endorsed by the FSC are as follows:
New Standards,Interpretations and Amendments	Effective date by IASB
Amendments to IFRS 10 and IAS 28, ‘Sale or contribution of assets between an investor and its associate or joint venture’ Amendments to IFRS 16, ‘Lease liability in a sale and leaseback’ IFRS 17, ‘Insurance contracts’ Amendments to IFRS 17, 'Insurance contracts' Amendment to IFRS 17, 'Initial application of IFRS 17 and IFRS 9 – comparative information' Amendments to IAS 1, ‘Classification of liabilities as current or non- current’ Amendments to IAS 1, ‘Non-current liabilities with covenants’	To be determined by IASB January 1, 2024 January 1, 2023 January 1, 2023 January 1, 2023 January 1, 2024 January 1, 2024

The above standards and interpretations have no significant impact to the Group’s financial position and financial performance based on the Group’s assessment.

4. Summary of Significant Accounting Policies

The principal accounting policies applied in the preparation of these consolidated financial statements

are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated.

(1) Compliance statement

The consolidated financial statements of the Group have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers, International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations that came into effect as endorsed by the FSC (collectively referred herein as the “IFRSs”).

(2) Basis of preparation

• A. Except for the following items, the consolidated financial statements have been prepared under the historical cost convention:

• (a) Financial assets at fair value through other comprehensive income.

• (b) Defined benefit liabilities recognised based on the net amount of pension fund assets less present value of defined benefit obligation.

• B. The preparation of financial statements in conformity with IFRSs requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 5.

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(3) Basis of consolidation

• A. Basis for preparation of consolidated financial statements:

• (a) The subsidiary is included in the Group’s consolidated financial statements. Subsidary is the entity (including structured entities) controlled by the Group. The Group controls an entity when the Group is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Consolidation of the subsidiary begins from the date the Group obtains control of the subsidiary and ceases when the Group loses control of the subsidiary.

• (b) Inter-company transactions, balances and unrealised gain or loses on transactions between companies within the Group are eliminated.

• B. Subsidiary included in the consolidated financial statements:

Name of investor Episil-Precision Inc.	Name of Main business subsidiary activities PRECISION SILICON JAPAN CO., LTD. Sales of silicon epitaxial wafer		December31,2022 December31,2021 100% 100% Ownership (%)	December31,2022 December31,2021 100% 100% Ownership (%)
			December31,2022
			100%	100%

• C. Subsidiaries not included in the consolidated financial statements: None.

• D. Adjustments for subsidiaries with different balance sheet dates: None.

• E. Significant restrictions: None.

• F. Subsidiaries that have non-controlling interests that are material to the Group: None.

• (4) Foreign currency translation

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). The consolidated financial statements are presented in New Taiwan dollars, which is the Company’s functional and the Group’s presentation currency.

• A. Foreign currency transactions and balances

• (a) Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are remeasured. Foreign exchange gains and losses resulting from the settlement of such transactions are recognised in profit or loss in the period in which they arise.

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  - (b) Monetary assets and liabilities denominated in foreign currencies at the period end are retranslated at the exchange rates prevailing at the balance sheet date. Exchange differences arising upon re-translation at the balance sheet date are recognised in profit or loss.

  - (c) Non-monetary assets and liabilities denominated in foreign currencies held at fair value through profit or loss are re-translated at the exchange rates prevailing at the balance sheet date; their translation differences are recognised in profit or loss. Non-monetary assets and liabilities denominated in foreign currencies held at fair value through other comprehensive income are re-translated at the exchange rates prevailing at the balance sheet date; their translation differences are recognised in other comprehensive income. However, nonmonetary assets and liabilities denominated in foreign currencies that are not measured at fair value are translated using the historical exchange rates at the dates of the initial transactions.

  - (d) All foreign exchange gains and losses are presented in the statement of comprehensive income within “Other gains and losses”.

• B. Translation of foreign operations

  • (a) The operating results and financial position of all the group entities that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

    • i. Assets and liabilities for each balance sheet presented are translated at the exchange rates prevailing at the balance sheet date;

    • ii. Income and expenses for each statement of comprehensive income are translated at average exchange rates of that period; and

    • iii. All resulting exchange differences are recognised in other comprehensive income.

  • (b)When the foreign operation partially disposed of or sold is a subsidiary, cumulative exchange differences that were recorded in other comprehensive income are proportionately transferred to the non-controlling interest in this foreign operation. In addition, even when the Group retains partial interest in the former foreign subsidiary after losing control, such transaction should be accounted for as disposal of all interest in the foreign operation.

• (5) Classification of current and non-current items

• A. Assets that meet one of the following criteria are classified as current assets; otherwise they are classified as non-current assets:

  • (a) Assets that are expected to be realised, or are intended to be sold or consumed within the normal operating cycle;

  • (b) Assets held mainly for trading purposes;

  • (c) Assets that are expected to be realised within twelve months from the balance sheet date;

  • (d) Cash and cash equivalents, excluding restricted cash and cash equivalents and those that are to be exchanged or used to settle liabilities more than twelve months after the balance sheet date.

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• B. Liabilities that meet one of the following criteria are classified as current liabilities; otherwise they are classified as non-current liabilities:

  • (a) Liabilities that are expected to be settled within the normal operating cycle;

  • (b) Assets held mainly for trading purposes;

  • (c) Liabilities that are to be settled within twelve months from the balance sheet date;

  • (d) Liabilities for which the repayment date cannot be deferred unconditionally for at least twelve months after the balance sheet date. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.

• (6) Cash equivalents

• Cash equivalents refer to short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Time deposits that meet the definition above and are held for the purpose of meeting short-term cash commitments in operations are classified as cash equivalents.

• (7) Financial assets at fair value through other comprehensive income

• A. Financial assets at fair value through other comprehensive income comprise equity securities which are not held for trading, and for which the Group has made an irrevocable election at initial recognition to recognise changes in fair value in other comprehensive income and debt instruments which meet all of the following criteria:

  • (a) The objective of the Group’s business model is achieved both by collecting contractual cash flows and selling financial assets; and

  • (b) The assets’ contractual cash flows represent solely payments of principal and interest.

• B. On a regular way purchase or sale basis, financial assets at fair value through other comprehensive income are recognised and derecognised using trade date accounting.

• C. At initial recognition, the Group measures the financial assets at fair value plus transaction costs. The Group subsequently measures the financial assets at fair value:

  • (a) The changes in fair value of equity investments that were recognised in other comprehensive income are reclassified to retained earnings and are not reclassified to profit or loss following the derecognition of the investment. Dividends are recognised as income when the right to receive payment is established, future economic benefits associated with the dividend will flow to the Group and the amount of the dividend can be measured reliably.

  • (b) Except for the recognition of impairment loss, interest income and gain or loss on foreign exchange which are recognised in profit or loss, the changes in fair value of debt instruments are taken through other comprehensive income. When the financial asset is derecognised, the cumulative gain or loss previously recognised in other comprehensive income is reclassified from equity to profit or loss.

~19~

(8) Accounts and notes receivable

• A. Accounts and notes receivable entitle the Group a legal right to receive consideration in exchange for transferred goods or rendered services.

• B. The short-term accounts and notes receivable without bearing interest are subsequently measured at initial invoice amount as the effect of discounting is immaterial.

• (9) Impairment of financial assets

• For debt instruments measured at fair value through other comprehensive income and financial assets at amortised cost, at each reporting date, the Group recognises the impairment provision for 12 months expected credit losses if there has not been a significant increase in credit risk since initial recognition or recognises the impairment provision for the lifetime expected credit losses (ECLs) if such credit risk has increased since initial recognition after taking into consideration all reasonable and verifiable information that includes forecasts. On the other hand, for accounts receivable or contract assets that do not contain a significant financing component, the Group recognises the impairment provision for lifetime ECLs.

• (10) Derecognition of financial assets

• The Group derecognises a financial asset when one of the following conditions is met:

• A. The contractual rights to receive the cash flows from the financial asset expire.

• B. The contractual rights to receive cash flows of the financial asset have been transferred and the Group has transferred substantially all risks and rewards of ownership of the financial asset.

• C. The contractual rights to receive cash flows of the financial asset have been transferred, and the Group has not retained control of the financial asset.

• －

• (11) Leasing arrangements (lessor) operating leases

Lease income from an operating lease (net of any incentives given to the lessee) is recognised in profit or loss on a straight-line basis over the lease term.

• (12) Inventories

• Inventories are stated at the lower of cost and net realisable value. Cost is determined using the weighted-average method. The cost of finished goods and work in progress comprises raw materials, direct labour, other direct costs and related production overheads. It excludes borrowing costs. The item by item approach is used in applying the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated cost of completion and applicable variable selling expenses.

• (13) Property, plant and equipment

• A. Property, plant and equipment are initially recorded at cost. Borrowing costs incurred during the construction period are capitalised.

~20~

• B. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to profit or loss during the financial period in which they are incurred.

• C. Property, plant and equipment are measured at cost model subsequently. Land is not depreciated. Other property, plant and equipment are depreciated using the straight-line method over their estimated useful lives. Each part of an item of property, plant, and equipment with a cost that is significant in relation to the total cost of the item must be depreciated separately.

• D. The assets’ residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each financial year-end. If expectations for the assets’ residual values and useful lives differ from previous estimates or the patterns of consumption of the assets’ future economic benefits embodied in the assets have changed significantly, any change is accounted for as a change in estimate under IAS 8, ‘Accounting policies, changes in accounting estimates and errors’, from the date of the change. The estimated useful lives of property, plant and equipment are as follows:

Buildings and structures 3 ~ 61 years

Machinery and equipment 3 ~ 16 years

Other equipment 2 ~ 11 years

(14) Leasing arrangements (lessee) － right-of-use assets/ lease liabilities

• A. Leases are recognised as a right-of-use asset and a corresponding lease liability at the date at which the leased asset is available for use by the Group. For short-term leases or leases of lowvalue assets, lease payments are recognised as an expense on a straight-line basis over the lease term.

• B. Lease liabilities include the net present value of the remaining lease payments at the commencement date, discounted using the incremental borrowing interest rate. Lease payments are comprised of fixed payments, less any lease incentives receivable.

• The Group subsequently measures the lease liability at amortised cost using the interest method and recognises interest expense over the lease term. The lease liability is remeasured and the amount of remeasurement is recognised as an adjustment to the right-of-use asset when there are changes in the lease term or lease payments and such changes do not arise from contract modifications.

~21~

• C. At the commencement date, the right-of-use asset is stated at cost comprising the following:

• (a) The amount of the initial measurement of lease liability;

• (b) Any lease payments made at or before the commencement date;

• (c) Any initial direct costs incurred by the lessee; and

• (d) An estimate of costs to be incurred by the lessee in dismantling and removing the underlying asset, restoring the site on which it is located or restoring the underlying asset to the condition required by the terms and conditions of the lease.

The right-of-use asset is measured subsequently using the cost model and is depreciated from the commencement date to the earlier of the end of the asset’s useful life or the end of the lease term. When the lease liability is remeasured, the amount of remeasurement is recognised as an adjustment to the right-of-use asset.

(15) Investment property

An investment property is stated initially at its cost and measured subsequently using the cost model. Except for land, investment property is depreciated on a straight-line basis over its estimated useful life of 40 ~ 51 years.

• (16) Intangible assets

• A. Computer software

Computer software is stated at cost and amortised on a straight-line basis over its estimated useful life of 2 ~ 5 years.

• B. Goodwill

Goodwill arises in a business combination accounted for by applying the acquisition method.

• C. Other intangible assets

Separately acquired intangible assets with a finite useful life are stated at cost, net of accumulated amortisation and accumulated impairment. Intangible assets acquired in a business combination are recognised at fair value at acquisition date and are amortised on a straight-line basis over their estimated useful lives of 2 ~ 5 years.

• (17) Impairment of non-financial assets

• A. The Group assesses at each balance sheet date the recoverable amounts of those assets where there is an indication that they are impaired. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell or value in use. Except for goodwill, when the circumstances or reasons for recognising impairment loss for an asset in prior years no longer exist or diminish, the impairment loss is reversed. The increased carrying amount due to reversal should not be more than what the depreciated or amortised historical cost would have been if the impairment had not been recognised.

~22~

• B. The recoverable amounts of goodwill, intangible assets with an indefinite useful life and intangible assets that have not yet been available for use are evaluated periodically. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. Impairment loss of goodwill previously recognised in profit or loss shall not be reversed in the following years.

• C. For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the cash-generating units, or groups of cash-generating units, that is/are expected to benefit from the synergies of the business combination.

• (18) Borrowings

Borrowings comprise long-term and short-term bank borrowings. Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in profit or loss over the period of the borrowings using the effective interest method.

• (19) Accounts and notes payable

• A. Accounts payable are liabilities for purchases of raw materials, goods or services and notes payable are those resulting from operating and non-operating activities.

• B. The short-term accounts and notes payable without bearing interest are subsequently measured at initial invoice amount as the effect of discounting is immaterial.

• (20) Convertible corporate bonds

• Convertible corporate bonds issued by the Group contain conversion options (that is, the bondholders have the right to convert the bonds into the Company’s common shares by exchanging a fixed amount of cash for a fixed number of common shares). The Group classifies the bonds payable and derivative features embedded in convertible corporate bonds on initial recognition as a financial asset, a financial liability or an equity in accordance with the substance of the contractual arrangement.

• A. The host contracts of bonds are initially recognised at fair value. Any difference between the initial recognition and the redemption value is accounted for as the premium or discount on bonds payable and subsequently is amortised in profit or loss as an adjustment to “Finance costs” over the period of circulation using the effective interest method.

• B. The embedded conversion options which meet the definition of equity are initially recognised in “Capital surplus—warrants” at the residual amount of total issue price less the amount of bonds payable as stated above. Conversion options are not subsequently remeasured.

• C. Any transaction costs directly attributable to the issuance are allocated to each liability or equity component in proportion to the initial carrying amount of each abovementioned item.

~23~

• D. When bondholders exercise conversion options, the liability component of the bonds (including bonds payable) shall be remeasured on the conversion date. The book value of common shares issued due to the conversion shall be based on the adjusted book value of the abovementioned liability component plus the book value of capital surplus - warrants.

• (21) Derecognition of financial liabilities

Financial liability is derecognised when the obligation under the liability specified in the contract is discharged, cancelled or expires.

(22) Employee benefits

• A. Short-term employee benefits

Short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid and are recognised as expenses in the period in which the employees render service.

• B. Pensions

• (a) Defined contribution plan

For the defined contribution plans, the contributions are recognised as pension expense when they are due on an accrual basis. Prepaid contributions are recognised as an asset to the extent of a cash refund or a reduction in the future payments.

• (b) Defined benefit plan

• i. Net obligation under a defined benefit plan is defined as the present value of an amount of pension benefits that employees will receive on retirement for their services in current period or prior periods. The liability recognised in the balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the balance sheet date less the fair value of plan assets. The net defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The rate used to discount is determined by using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension liability; when there is no deep market in high-quality corporate bonds, the Group uses interest rates of government bonds (at the balance sheet date) instead.

• ii.Remeasurements arising on the defined benefit plans are recognised in other comprehensive income in the period in which they arise and are recorded as retained earnings.

• iii. Past-service costs are recognised immediately in profit or loss.

~24~

C. Termination benefits

  - Termination benefits are employee benefits provided in exchange for the termination of employment as a result from either the Group’s decision to terminate an employee’s employment before the normal retirement date, or an employee’s decision to accept an offer of redundancy benefits in exchange for the termination of employment. The Group recognises expense as it can no longer withdraw an offer of termination benefits or it recognises relating restructuring costs, whichever is earlier. Benefits that are expected to be due more than 12 months after balance sheet date shall be discounted to their present value.

• D. Employees’ compensation and directors’ and supervisors’ remuneration

  • Employees’ compensation and directors’ and supervisors’ remuneration are recognised as expense and liability, provided that such recognition is required under legal or constructive obligation and those amounts can be reliably estimated. Any difference between the resolved amounts and the subsequently actual distributed amounts is accounted for as changes in estimates. If employee compensation is paid by shares, the Group calculates the number of shares based on the closing price at the previous day of the board meeting resolution.

• (23) Employee share based payment

For the equity-settled share-based payment arrangements, the employee services received are measured at the fair value of the equity instruments granted at the grant date, and are recognised as compensation cost over the vesting period, with a corresponding adjustment to equity. The fair value of the equity instruments granted shall reflect the impact of market vesting conditions and nonvesting conditions. Compensation cost is subject to adjustment based on the service conditions that are expected to be satisfied and the estimates of the number of equity instruments that are expected to vest under the non-market vesting conditions at each balance sheet date. Ultimately, the amount of compensation cost recognised is based on the number of equity instruments that eventually vest.

(24) Income taxes

• A. The tax expense for the period comprises current and deferred tax. Tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or items recognised directly in equity, in which cases the tax is recognised in other comprehensive income or equity.

• B. The current income tax expense is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the Company and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in accordance with applicable tax regulations. It establishes provisions where appropriate based on the amounts expected to be paid to the tax authorities. An additional tax is levied on the unappropriated retained earnings and is recorded as income tax expense in the year the stockholders resolve to retain the earnings.

~25~

• C. Deferred tax is recognised, using the balance sheet liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated balance sheet. However, the deferred tax is not accounted for if it arises from initial recognition of goodwill or of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred tax is provided on temporary differences arising on investments in subsidiaries, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax is determined using tax rates (and laws) that have been enacted or substantially enacted at the balance sheet date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.

• D. Deferred tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. At each balance sheet date, unrecognised and recognised deferred tax assets are reassessed.

• E. A deferred tax asset shall be recognised for the carryforward of unused tax credits resulting from acquisitions of equipment or technology and research and development expenditures to the extent that it is possible that future taxable profit will be available against which the unused tax credits can be utilised.

(25) Share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or stock options are shown in equity as a deduction, net of tax, from the proceeds.

(26) Dividends

Dividends are recorded in the Company’s financial statements in the period in which they are approved by the Company’s shareholders. Cash dividends are recorded as liabilities, stock dividends are recorded as stock dividends to be distributed and are reclassified to ordinary shares on the effective date of new shares issuance.

• (27) Revenue recognition

• A. The Group manufactures and sells silicon epitaxy wafers and compound semiconductor epitaxial wafers. Revenue is measured at the fair value of the consideration received or receivable for the sale of goods to external customers in the ordinary course of the Group’s activities. Sales are recognised when control of the products has transferred, being when the products are delivered to the customer, 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, or the Group has objective evidence that all criteria for acceptance have been satisfied.

• B. As the time interval between the transfer of committed goods or service and the payment of customer does not exceed one year, the Group does not adjust the transaction price to reflect the

~26~

time value of money.

• C. A receivable is recognised when the goods are delivered as this is the point in time that the consideration is unconditional because only the passage of time is required before the payment is due.

(28) Operating segments

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The Group’s chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the general manager.

1. Critical Accounting Judgements, Estimates and Key Sources of Assumption Uncertainty

The preparation of these consolidated financial statements requires management to make critical judgements in applying the Group’s accounting policies and make critical assumptions and estimates concerning future events. Assumptions and estimates may differ from the actual results and are continually evaluated and adjusted based on historical experience and other factors. Such assumptions and estimates have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year. The related information is addressed below:

(1) Critical judgements in applying the Group’s accounting policies

None.

(2) Critical accounting estimates and assumptions

Inventory valuation

As inventories are stated at the lower of cost and net realisable value, the Group must determine the net realisable value of inventories on balance sheet date using judgements and estimates. Due to the rapid technology innovation, the Group evaluates the amounts of normal inventory consumption, obsolete inventories or inventories without market selling value on balance sheet date, and writes down the cost of inventories to the net realisable value. Therefore, there might be material changes to the inventory valuation in the future.

As of December 31, 2022, the carrying amount of inventories was $947,076.

6. Details of Significant Accounts

(1) Cash and cash equivalents

Cash on hand and revolving funds Checking accounts and demand deposits Time deposits Bonds sold under repurchase agreements		December31,2022		December31,2021
		422 $ 287,133 1,896,356 657,500 2,841,411 $		394 $ 578,381 683,897 287,500 1,550,172 $

• A. The Group transacts with a variety of financial institutions all with high credit quality to disperse credit risk, so it expects that the probability of counterparty default is remote.

• B. Time deposits with maturity between three months and a year held by the Company were classified

~27~

as current financial assets at amortised cost.

• C. The Company’s cash and cash equivalents pledged to others as collateral for customs guarantee were classified as non-current financial assets at amortised cost. Refer to Note 8.

• (2) Financial assets at amortised cost

Items Current items: Time deposits-maturing in over three months Non-current items: Pledged time deposits	December31,2022 - $ 13,565 13,565 $	December31,2021
		400,000 $ 7,858 407,858 $

• A. As at December 31, 2022 and 2021, without taking into account any collateral held or other credit enhancements, the maximum exposure to credit risk in respect of the amount that best represents the financial assets at amortised cost held by the Group was $13,565 and $407,858, respectively.

• B. The counterparties of the Group’s investments have good credit risk.

(3) Notes and accounts receivable

Notes and accounts receivable
Accounts receivable Accounts receivable due from related parties Less: Loss allowance	December 31,2022	December 31,2021
	1,026,092 $ 207,799 152) ( 1,233,739 $	1,127,718 $ 192,438 152) ( 1,320,004 $

• A. The ageing analysis of accounts receivable is as follows:

The ageing analysis of accounts receivable is as	follows:
Not past due Up to 30 days 31 to 90 days	Accounts receivable (Including related parties) 1,110,105 $ 102,834 20,952 1,233,891 $ December31,2022	Accounts receivable (Including related parties) December31,2021
		1,128,477 $ 138,959 52,720 1,320,156 $

The above ageing analysis was based on past due date.

• B. As of December 31, 2022 and 2021, accounts and notes receivable (including due from related parties) were all from contracts with customers. As of January 1, 2021, the balance of receivables from contracts with customers amounted to $985,850.

• C. As of December 31, 2022 and 2021, collaterals held by the Group as security for accounts receivable both amounted to $5,000.

• D. As of December 31, 2022 and 2021, without taking into account any collateral held or other credit enhancements, the maximum exposure to credit risk in respect of the amount that best represents the Group’s accounts receivable was $1,233,739 and $1,320,004, respectively.

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• E. Information relating to credit risk of accounts receivable and notes receivable is provided in Note 12(2).

(4) Inventories

12(2). Inventories
Raw materials Supplies Work in progress Finished goods Raw materials Supplies Work in progress Finished goods			December31,2022
		Cost 554,341 $ 302,737 80,050 68,926 1,006,054 $	Allowance for valuation loss 30,224) ($ 23,312) ( 3,678) ( 1,764) ( 58,978) ($ December31,2021	Bookvalue 524,117 $ 279,425 76,372 67,162 947,076 $
		Cost 490,324 $ 279,944 81,804 74,475 926,547 $		Bookvalue 458,043 $ 257,896 80,841 71,680 868,460 $

The cost of inventories recognised as expense for the year:

Cost of goods sold Inventory valuation loss (reversal of loss) Inventory scrapped		Year ended December 31,2022	Year ended December 31,2021
		4,795,139 $ 891 1,676 4,797,706 $	4,331,281 $ 30,074) ( 15,692 4,316,899 $

For the year ended December 31, 2021, the Group reversed from a previous inventory write-down which was accounted for as reduction of cost of goods sold because of the sale of certain inventories which were previously provided with allowance.

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(5) Property, plant and equipment

									Construction in process	Construction in process	Construction in process
	Buildings			Machinery				Other		and equipment
	and structures			and equipment			equipment			to beinspected			Total
At January 1, 2022
Cost	$	2,084,553		$	3,919,301		$	69,469	$	128,127		$	6,201,450
Accumulated depreciation
and impairment	(	1,325,785)	(		3,017,606)	(		59,028)		-	(		4,402,419)
	$	758,768		$	901,695		$	10,441	$	128,127		$	1,799,031
2022
At January 1	$	758,768		$	901,695		$	10,441	$	128,127		$	1,799,031
Additions		173,077			195,553			4,264		268,329			641,223
Reclassifications		48,299			81,918			1,888	(	128,127)			3,978
Depreciation expense	(	92,458)	(		337,839)	(		5,550)		-	(		435,847)
At December 31	$	887,686		$	841,327		$	11,043	$	268,329		$	2,008,385
At December 31, 2022
Cost	$	2,301,420		$	4,190,767		$	71,335	$	268,329		$	6,831,851
Accumulated depreciation
and impairment	(	1,413,734)	(		3,349,440)	(		60,292)		-	(		4,823,466)
	$	887,686		$	841,327		$	11,043	$	268,329		$	2,008,385
									Construction in process
		Buildings			Machinery			Other		and equipment
	and structures			and equipment				equipment		to beinspected			Total
At January 1, 2021
Cost	$	2,054,484		$	3,899,029		$	63,190	$	20,375		$	6,037,078
Accumulated depreciation
and impairment	(	1,245,888)		(	2,676,261)		(	55,623)			-	(	3,977,772)
	$	808,596		$	1,222,768		$	7,567	$	20,375		$	2,059,306
2021
At January 1	$	808,596		$	1,222,768		$	7,567	$	20,375		$	2,059,306
Additions		31,685			22,694			6,586		128,127			189,092
Reclassifications		2,800			17,575			-	(	20,375)			-
Depreciation expense	(	84,313)		(	361,342)		(	3,712)			-	(	449,367)
At December 31	$	758,768		$	901,695		$	10,441	$	128,127		$	1,799,031
At December 31, 2021
Cost	$	2,084,553		$	3,919,301		$	69,469	$	128,127		$	6,201,450
Accumulated depreciation
and impairment	(	1,325,785)		(	3,017,606)		(	59,028)			-	(	4,402,419)
	$	758,768		$	901,695		$	10,441	$	128,127		$	1,799,031

• A. The Group has no interest capitalisation for the years ended December 31, 2022 and 2021.

• B. As of December 31, 2022 and 2021, there was no property, plant and equipment pledged to others as collateral.

－ (6) Lease transactions lessee

• A. The Group leases various assets, including land, buildings and structures and machinery and equipment. Lease agreements are typically made for periods of 3 to 50 years. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose covenants, but leased assets may not be used as security for borrowing purposes.

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• B. Short-term leases with a lease term of 12 months or less comprise other equipment.

• C. The carrying amount of right-of-use assets and the depreciation charge are as follows:

Land Buildings and structures Machinery and equipment Land Buildings and structures Machinery and equipment		December 31,2022		December 31,2021
		Book value		Book value
		2022		2021
		Depreciation expense		Depreciation expense
		$ 8,122 3,543 446 12,111 $		8,087 $ 3,553 446 12,086 $

• D. For the years ended December 31, 2022 and 2021, the additions to right-of-use assets were $1,070 and $0, respectively.

• E. For the years ended December 31, 2022 and 2021, the decrease to right-of-use assets were $15 and $0, respectively.

• F. Information on profit or loss in relation to lease agreements is as follows:

Items affecting profit or loss Interest expense on lease liabilities Expense on short-term lease agreements	Year ended December 31,2022	Year ended December 31,2021
	$ 5,858 1,369	$ 6,029 6,942

• G. For the years ended December 31, 2022 and 2021, the Group’s total cash outflow for leases were $17,134 and $22,670, respectively.

• H. Extension and termination options

  • In determining the lease term, the Group takes into consideration all facts and circumstances that create an economic incentive to exercise an extension option. The assessment of lease period is reviewed if a significant event occurs which affects the assessment.

• (7) Leasing arrangements – lessor

• A. The Group leases various assets, including buildings and structures. Lease agreements are typically made for periods of 1 to 20 years. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. To protect the lessor’s ownership rights on the leased assets, leased assets may not be used as security for borrowing purposes, or a residual value guarantee was required from leasees.

• B. For the years ended December 31, 2022 and 2021, the Group recognised rental revenue in the

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amounts of $42,703 and $43,774, respectively, based on the operating lease agreements, which do not include variable lease payments.

C. The maturity analysis of the lease payments under the operating leases is as follows:

2022 2023 2024 2025 2026 2027 After 2028		December 31,2022 $ - 40,960 40,865 40,541 31,527 8,739 78,649 241,281 $	December 31,2021
			42,181 $ 41,511 41,415 41,092 32,078 9,289 83,605 291,171 $

(8) Investment property

nvestment property 2026 31,527 2027 8,739 After 2028 78,649 241,281 $	32,078 9,289 83,605 291,171 $
At January 1 Cost Accumulated depreciation and impairment At January 1 Depreciation expense Transfer At December 31 At December 31 Cost Accumulated depreciation and impairment	2022
	Buildings and Structures $ 211,322 41,743) ( 169,579 $ $ 169,579 4,996) ( 4,263) ( 160,320 $ $ 206,227 45,907) ( 160,320 $

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2021

		2021	2021
		Buildings and Structures
At January 1
Cost	$		211,322
Accumulated depreciation and impairment	(		36,694)
		$	174,628
At January 1	$		174,628
Depreciation expense	(		5,049)
At December 31		$	169,579
At December 31
Cost	$		211,322
Accumulated depreciation and impairment	(		41,743)
		$	169,579

• A. Rental revenue from investment property and direct operating expenses arising from investment property are shown below:

roperty are shown below:
Rental revenue from investment property Direct operating expenses arising from the investment property that generated rental revenue during the year		Year ended December 31,2022	Year ended December 31,2021
		41,607 $ 9,363 $	42,656 $ 9,799 $

• B. The fair value of the investment property held by the Group as at December 31, 2022 and 2021 was $213,458 and $221,272, respectively. Valuations were made using the income approach which is categorised within Level 3 in the fair value hierarchy. Key assumptions are as follows:

Discount rate Annual rent (net income) Duration	December31,2022	December31,2021
	11.01% $36,267 10 years	11.21% $37,896 10 years

• C. The Group has no interest capitalisation for the years ended December 31, 2022 and 2021.

• D. The significant components of investment property include buildings and renovation, which are depreciated over 51 years and 46 years, respectively.

• E. As at December 31, 2022 and 2021, the Group has no investment property pledged to others as collateral.

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(9) Intangible assets

Intangible assets
A. Details of amortisation on intangible assets are as follows: Computer software Goodwill Others Total At January 1 Cost 2,653 $ 48,369 $ 39,104 $ 90,126 $ Accumulated amortisation and impairment 2,653) ( - 34,228) ( 36,881) ( - $ 48,369 $ 4,876 $ 53,245 $ At January 1 - $ 48,369 $ 4,876 $ 53,245 $ Additions 2,680 - 167 2,847 Transfer 285 - - 285 Amortisation expense 348) ( - 3,509) ( 3,857) ( At December 31 2,617 $ 48,369 $ 1,534 $ 52,520 $ At December 31 Cost 5,618 $ 48,369 $ 39,270 $ 93,257 $ Accumulated amortisation and impairment 3,001) ( - 37,736) ( 40,737) ( 2,617 $ 48,369 $ 1,534 $ 52,520 $ 2022 Computer software Goodwill Others Total At January 1 Cost 2,653 $ 48,369 $ 37,437 $ 88,459 $ Accumulated amortisation and impairment 2,653) ( - 30,710) ( 33,363) ( - $ 48,369 $ 6,727 $ 55,096 $ At January 1 - $ 48,369 $ 6,727 $ 55,096 $ Additions - - 1,667 1,667 Amortisation expense - - 3,518) ( 3,518) ( At December 31 - $ 48,369 $ 4,876 $ 53,245 $ At December 31 Cost 2,653 $ 48,369 $ 39,104 $ 90,126 $ Accumulated amortisation and impairment 2,653) ( - 34,228) ( 36,881) ( - $ 48,369 $ 4,876 $ 53,245 $ 2021 Year ended December 31,2022 Year ended December 31,2021 Operating costs 3,857 $ 3,518 $				2022
	Computer software 2,653 $ 2,653) ( - $ - $ 2,680 285 348) ( 2,617 $ 5,618 $ 3,001) ( 2,617 $			Goodwill Others Total 48,369 $ 39,104 $ 90,126 $ - 34,228) ( 36,881) ( 48,369 $ 4,876 $ 53,245 $ 48,369 $ 4,876 $ 53,245 $ - 167 2,847 - - 285 - 3,509) ( 3,857) ( 48,369 $ 1,534 $ 52,520 $ 48,369 $ 39,270 $ 93,257 $ - 37,736) ( 40,737) ( 48,369 $ 1,534 $ 52,520 $ 2021
			3,857 $		3,518 $

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• B. The Group has no interest capitalisation for the years ended December 31, 2022 and 2021.

• C. As of December 31, 2022 and 2021, the Group has no intangible assets pledged to others as collateral.

(10) Short-term borrowings

collateral. Short-term borrowings
Type ofborrowings Bank borrowings Unsecured borrowings Type ofborrowings Bank borrowings Unsecured borrowings		December31,2022 178,624 $ December31,2021 446,283 $	Interestraterange 4.10% ~ 6.04% Interestraterange 0.61% ~ 1.06%	Collateral
				None Collateral
				None

For the years ended December 31, 2022 and 2021, interest expenses arising from short-term borrowings that were recognised in profit or loss amounted to $8,071 and $2,959, respectively.

(11) Accounts payable

Accounts payable
Other payables Accounts payable Estimated accounts payable Payables for equipment Accrued expenses-expendables Accrued expenses-bonus Employees' compensation and directors' remuneration payable Accrued expenses-others	December31,2022		December31,2021
	387,080 $ 32,059 419,139 $ December31,2022		435,563 $ 47,551 483,114 $ December31,2021
	199,347 $ 133,352 122,087 84,428 82,565 621,779 $		33,681 $ 119,114 81,286 59,374 56,860 350,315 $

(12) Other payables

(13) Bonds payable

Bonds payable

The Group’s third domestic unsecured convertible bonds

The Group’s fourth domestic unsecured convertible bonds

Less: Bonds payable converted Discount on bonds payable

Less: Current portion (shown as “Other

current liabilities”)

December31,2022		December31,2021
- $ 500,000 500,000 - 15,830) ( 484,170 - 484,170 $	600,000 $ - 600,000 552,500) ( 622) ( 46,878 46,878) ( - $

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• A. The domestic unsecured convertible bonds issued by the Group

• (a) The issuance terms of the Group’s third domestic unsecured convertible bonds are as follows:

• i. The regulatory authority has approved the third domestic unsecured convertible corporate bonds issued by the Group. The bonds are with a total issuance amount of $600,000 and a coupon rate of 0%, covering a 3-year period of issuance and a circulation period from October 31, 2019 to October 31, 2022, and will be redeemed in cash at face value at the maturity date. The bonds were listed on the Taipei Exchange on October 31, 2019.

• ii. The bondholders have the right to ask for conversion of the bonds into common shares of Episil-Precision Inc. during the period from the date after three month of the bonds issue to the maturity date, except for the stop transfer period as specified in the terms of the bonds or the laws/regulations. The rights and obligations of the new shares converted from the bonds are the same as the issued and outstanding common shares.

• iii. The effective date for the conversion price of the convertible was set on October 23, 2019. The conversion price was set up based on multiplying a benchmark price which was the closing price of the Company’s common share calculated at simple arithmetic mean of $52.93 (in dollars) in 3 business days before the effective date (effective date is excluded) by convertible premium rate of 105.04% (round to the nearest tenth). If there is an ex-right or ex-dividend before the pricing effective date, the closing price adopted to calculate conversion price shall be imputed with ex-right or ex-dividend; if there is an ex-right or exdividend during the period that the conversion price was set up but prior to share issuance, the conversion price shall be adjusted based on the conversion price adjustment formula. The conversion price was NT$55.6 (in dollars) per share based on the aforementioned method.

• iv. All convertible bonds repurchased, redeemed or converted by the Group from securities trading markets shall be retired, which are not allowed to resell or reissue, and conversion rights attached to the bonds are also extinguished.

• (b) The issuance terms of the Company’s fourth domestic unsecured convertible bonds are as follows:

• i. The regulatory authority has approved the fourth domestic unsecured convertible corporate bonds issued by the Company. The bonds are with a total issuance amount of $500,000 and a coupon rate of 0%, covering a 3-year period of issuance and a circulation period from March 29, 2022 to March 29, 2025, and will be redeemed in cash at face value at the maturity date. The bonds were listed on the Taipei Exchange on March 29, 2022.

• ii. The bondholders have the right to ask for conversion of the bonds into common shares of the Company during the period from the date after three months of the bonds issue to the maturity date, except for the stop transfer period as specified in the terms of the bonds or the laws/regulations. The rights and obligations of the new shares converted from the bonds are the same as the issued and outstanding common shares.

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• iii. The effective date for the conversion price of the convertible was set on March 21, 2022. The conversion price was set up based on multiplying a benchmark price which was the closing price of the Company’s common share calculated at simple arithmetic mean in 1, 3 or 5 business day(s) before the effective date (effective date is excluded) by convertible premium rate of 109.22% (round to the nearest tenth). If there is an ex-right or ex-dividend before the pricing effective date, the closing price adopted to calculate conversion price shall be imputed with ex-right or ex-dividend; if there is an ex-right or ex-dividend during the period that the conversion price was set up but prior to share issuance, the conversion price shall be adjusted based on the conversion price adjustment formula. The conversion price was NT$128 (in dollars) per share based on the aforementioned method.

• iv. All convertible bonds repurchased, redeemed or converted by the Company from securities trading markets shall be retired, which are not allowed to resell or reissue, and conversion rights attached to the bonds are also extinguished.

• B. Regarding the issuance of convertible bonds, the equity conversion options were separated from the liability component and were recognised in “Capital surplus-warrants” in accordance with IAS 32. As of December 31, 2022 and 2021, the carrying amounts were $21,757 and $2,260, repectively.

• C. As of December 31, 2022, the bonds totaling $599,700 (face value) had been converted into 10,838 thousand shares of common stock.

(14) Pensions

• A. (a) The Group (excluding overseas subsidiary) has a defined benefit pension plan in accordance with the Labor Standards Act, covering all regular employees’ service years prior to the enforcement of the Labor Pension Act on July 1, 2005 and service years thereafter of employees who chose to continue to be subject to the pension mechanism under the Labor Standards Act. Under the defined benefit pension plan, two units are accrued for each year of service for the first 15 years and one unit for each additional year thereafter, subject to a maximum of 45 units. Pension benefits are based on the number of units accrued and the average monthly salaries and wages of the last month prior to retirement. The Group contributes monthly an amount equal to 2% of the employees’ monthly salaries and wages to the pension fund deposited with Bank of Taiwan, the trustee, under the name of the independent pension fund committee. Also, the Group would assess the balance in the aforementioned labor pension reserve account by December 31, every year. If the account balance is insufficient to pay the pension calculated by the aforementioned method to the employees expected to qualify for retirement in the following year, the Group (excluding overseas subsidiary) will make contributions for the deficit by next March.

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(b) The amounts recognised in the balance sheet are as follows:

Present value of defined benefit obligations Fair value of plan assets Net defined benefit liability	December31,2022	December31,2021
	186,499 $ 119,161) ( 67,338 $	182,232 $ 101,220) ( 81,012 $

(c) Movements in net defined benefit liability are as follows:

2022 At January 1 Current service cost Interest expense (income) Remeasurements: Return on plan assets (excluding amounts included in interest income or expense) Change in demographic assumptions Change in financial assumptions Experience adjustments Change in employee transfers Pension fund contribution Paid pension At December 31		Present value of defined benefit obligations	Fair value of plan assets	Net defined benefit liability
	182,232 $ 153 1,170 183,555 - 200 13,865) ( 10,038 3,627) ( 12,822 - 6,251) ( 186,499 $		101,220) ($ - 607) ( 101,827) ( 7,741) ( - - - 7,741) ( - 15,844) ( 6,251 119,161) ($	81,012 $ 153 563 81,728 7,741) ( 200 13,865) ( 10,038 11,368) ( 12,822 15,844) ( - 67,338 $

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2021 At January 1 Current service cost Interest expense (income) Remeasurements: Return on plan assets (excluding amounts included in interest income or expense) Change in demographic assumptions Change in financial assumptions Experience adjustments Pension fund contribution Paid pension At December 31		Present value of defined benefit obligations	Fair value of plan assets	Net defined benefit liability
	185,996 $ 156 558 186,710 - 6,144 2,040) ( 948) ( 3,156 - 7,634) ( 182,232 $		91,459) ($ - 274) ( 91,733) ( 1,364) ( - - - 1,364) ( 11,864) ( 3,741 101,220) ($	94,537 $ 156 284 94,977 1,364) ( 6,144 2,040) ( 948) ( 1,792 11,864) ( 3,893) ( 81,012 $

(d) The Bank of Taiwan was commissioned to manage the fund of the Group’s defined benefit pension plan in accordance with the fund’s annual investment and utilisation plan and the “Regulations for Revenues, Expenditures, Safeguard and Utilisation of the Labor Retirement Fund” (Article 6: The scope of utilisation for the fund includes deposit in domestic or foreign financial institutions, investment in domestic or foreign listed, over-the-counter, or private placement equity securities, investment in domestic or foreign real estate securitisation products, etc.). With regard to the utilisation of the fund, its minimum earnings in the annual distributions on the final financial statements shall be no less than the earnings attainable from the amounts accrued from two-year time deposits with the interest rates offered by local banks. If the earnings is less than aforementioned rates, government shall make payment for the deficit after being authorised by the Regulator. The Group has no right to participate in managing and operating that fund and therefore, the Company is unable to disclose the classification of plan assets fair value in accordance with IAS 19 paragraph 142. The composition of fair value of plan assets as of December 31, 2022 and 2021 is given in the Annual Labor Retirement Fund Utilisation Report announced by the government.

(e) The principal actuarial assumptions used were as follows:

Discount rate Future salary increases		Years ended December 31,	Years ended December 31,
		2022	2021
		1.30% 3.25%	0.60% 3.25%

For the years ended December 31, 2022 and 2021, future mortality rate was estimated based on the 6th and 5th Taiwan Standard Ordinary Experience Mortality Table.

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Because the main actuarial assumption changed, the present value of defined benefit obligation is affected. The analysis was as follows:

is affected. The analysis was	as follows:	as follows:	as follows:
December 31, 2022 Effect on present value of defined benefit obligations December 31, 2021 Effect on present value of defined benefit obligations	Discount rate			Future salaryincreases
	Increase0.25%	Decrease0.25%		Increase0.25%		Decrease0.25%
	4,562) ($ 4,976) ($		4,725 $ 5,166 $		4,182 $ 4,566 $	4,067) ($ 4,431) ($

The sensitivity analysis above is based on a change in one assumption while the other conditions remain unchanged. In practice, more than one assumption may change all at once. The method utilised in sensitivity analysis is the same as the method utilised in calculating net pension liability on the balance sheet.

The methods and types of assumptions used in preparing the sensitivity analysis were consistent with previous period.

• (f) Expected contributions to the defined benefit pension plan of the Group for the year ending December 31, 2023 amount to $3,129.

• (g) As of December 31, 2022, the weighted average duration of the retirement plan is 11 years.

• B. (a) Effective July 1, 2005, the Group has established a defined contribution pension plan (the “New Plan”) under the Labor Pension Act (the “Act”), covering all regular employees with R.O.C. nationality. Under the New Plan, the Group contributes monthly an amount based on 6% of the employees’ monthly salaries and wages to the employees’ individual pension accounts at the Bureau of Labor Insurance. The benefits accrued are paid monthly or in lump sum upon termination of employment.

• (b) The pension costs under the defined contribution pension plan of the Group for the years ended December 31, 2022 and 2021 were $28,070 and $23,342, respectively.

• (15) Share based payment

• A. For the years ended December 31, 2022 and 2021, the Group’s share-based payment arrangements were as follows:

arrangements were as follows:
Type of arrangement	Grant date	Quantity granted	Contract period	Vesting conditions
Cash capital increase retained for employees' subscription	2022.04.27	495	NA	Immediately vested

• B. The Group increased its capital by issuing 3.3 million common shares and reserved 15% of the shares issued this time, that is 495 thousand shares, for subscription by employees at $82 (in dollars) per share in accordance with the requirements of the Article 267 of the Company Act. The fair value of share-based payment amounting to $5,000 was assessed based on market approach, and was recognised as compensation cost.

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• C. Expenses incurred on share-based payment transactions are shown below:

Equity-settled		Year ended December 31,2022	Year ended December 31,2021
		5,000 $	- $

(16) Share capital

• A. As of December 31, 2022, the Group’s authorised capital was $5,000,000, consisting of 500,000 thousand shares of ordinary stock, and the paid-in capital was $2,885,394 with a par value of $10 (in dollars) per share. All proceeds from shares issued have been collected.

Movements in the number of the Company’s ordinary shares outstanding are as follows: (Unit: thousand shares)

thousand shares)
At January 1 Cash capital increase Conversion of convertible bonds At December 31	2022 284,376 3,300 863 288,539	2021
		279,635 - 4,741
		284,376

• B. The Company’s Board of Directors resolved the capital increase by issuing 3.3 million new shares with a par value of NT$10 (in dollars) per share on February 14, 2022. The capital increase was approved by the regulatory authority on March 15, 2022. In addition, the Chairman was authorised to set the issuance price at NT$82 (in dollars) according to the relevant and market conditions. The total amount of the capital increase was $270,600 and the effective date was set on April 14, 2022. The capital increase had been registered on June 28, 2022.

(17) Capital surplus

Pursuant to the R.O.C. Company Act, capital surplus arising from paid-in capital in excess of par value on issuance of common stocks and donations can be used to cover accumulated deficit or to issue new stocks or cash to shareholders in proportion to their share ownership, provided that the Company has no accumulated deficit. Further, the R.O.C. Securities and Exchange Act requires that the amount of capital surplus to be capitalised mentioned above should not exceed 10% of the paidin capital each year. However, capital surplus should not be used to cover accumulated deficit unless the legal reserve is insufficient.

(18) Retained earnings

• A. Under the Company’s Articles of Incorporation, the current year’s earnings, if any, shall first be used to pay all taxes and offset prior years’ operating losses and then 10% of the remaining amount shall be set aside as legal reserve, and setting aside or reversal for special reserve in accordance with related laws, if any. The Board of Directors should propose the distribution of the remaining earnings as dividends or the reserve of the remaining earnings for the approval of the shareholders. A company may, by a resolution adopted by a majority vote at a meeting of Board of Directors attended by two-thirds of the total number of directors, have the dividends and bonus all or partially distributed in the form of cash; and in addition thereto a report of such distribution shall be

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submitted to the shareholders during their meeting, which is not subject to the rules in relation to the resolution of shareholders’ meeting.

The Company’s dividend policy is summarised below: to take into consideration the business environment and growing stage of the Company and meet future capital requirements, long-term financial plan and fulfil shareholders’ requirement for cash flows. The current year's earnings, if any, shall be distributed in the form of cash dividends not lower than 30% of total cash and stock dividends to be distributed.

• B. Except for covering accumulated deficit or issuing new stocks or cash to shareholders in proportion to their share ownership, the legal reserve shall not be used for any other purpose. The use of legal reserve for the issuance of stocks or cash to shareholders in proportion to their share ownership is permitted, provided that the distribution of the reserve is limited to the portion in excess of 25% of the Company’s paid-in capital.

• A company may, by a resolution adopted by a majority vote at a meeting of Board of Directors attended by two-thirds of the total number of directors, have the dividends and bonus all or partially distributed in the form of cash; and in addition thereto a report of such distribution shall be submitted to the shareholders during their meeting.

• C. In accordance with the regulations, the Company shall set aside special reserve from the debit balance on other equity items at the balance sheet date before distributing earnings. When debit balance on other equity items is reversed subsequently, the reversed amount could be included in the distributable earnings.

• D. On February 14, 2022 and March 8, 2021, the shareholders resolved that total dividends for the distribution of earnings for the year of 2022 and 2021 was $ 341,252 and $70,010 at $1.2 (in dollars) and $0.25 (in dollars) per share, respectively.

• E. On June 21, 2022, the Company recognised dividends distributed to owners amounting for the years ended December 31, 2021 as follows:

Legal reserve Special reserve Cash dividend Total	Amount Earnings per share (in dollars) 37,874 $ 910 341,252 1.2 $ 380,036 $ 2021	Amount Earnings per share (in dollars) 37,874 $ 910 341,252 1.2 $ 380,036 $ 2021
	Amount 37,874 $ 910 341,252 380,036 $
		1.2 $

• F. The Company proposed for the distribution of dividends for the year 2020 earnings on August 19, 2021.

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• G. On February 24, 2023, the Board of Directors proposed for the distribution of dividends of earnings for the year ended December 31, 2021 in the amount of $577,079 at $2 (in dollars) per share.

• H. The number of the Company’s shares outstanding has changed because the Company increased capital by issuing new shares and certain creditors proposed to convert the third domestic unsecured convertible bonds. With the total amount of cash dividends distributed held constant, the Board of Directors resolved to adjust the distribution ratio of cash dividends as NT$1.18483932 (in dollars) per share on June 28, 2022.

• I. The number of the Company’s shares outstanding has changed because certain creditors proposed to convert the third domestic unsecured convertible bonds. With the total amount of cash dividends distributed held constant, the Board of Directors resolved to adjust the distribution ratio of cash dividends as NT$0.24955765 (in dollars) per share on June 25, 2021.

(19) Other equity items

(19)	Other equity items
(20)	Operating revenue At January 1 Currency translation differences: –Group At December 31 Revenue from contracts with customers	Year ended December 31
		2022		2021
		Financial statements translation difference of foreign operations		Financial statements translation difference of foreign operations
			2022	2021
			5,899,587 $	5,043,332 $

• A. Disaggregation of revenue from contracts with customers

The Group derives revenue from the transfer of goods at a point in time in the following major product lines:

Year ended December 31,2022	Sales of silicon epitaxywafer	Sales of silicon epitaxywafer		Others		Total
Revenue from external customer contracts Timing of revenue recognition At a point in time		5,889,033 $ 5,889,033 $		10,554 $ 10,554 $		5,899,587 $ 5,899,587 $

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Year ended December 31,2021	Sales of silicon epitaxywafer	Sales of silicon epitaxywafer		Others		Total
Revenue from external customer contracts Timing of revenue recognition At a point in time		5,008,833 $ 5,008,833 $		34,499 $ 34,499 $		5,043,332 $ 5,043,332 $

B. Contract liabilities

• (a) The Group has recognised the following revenue-related contract liabilities:

Contract liability– advance sales receipts	December31,2022	December31,2022	December31,2021	December31,2021	January1,2021
		119,639 $		133,693 $	184,561 $

• (b) Revenue recognised that was included in the contract liabilities balance at the beginning of the period

period
Revenue recognised that was included in the contract liabilities balance at the beginning of the period		Years ended December 31,
		2022	2021
		79,596 $	76,047 $

(21) Interest income

Interest income
Other income Interest income from bank deposits Rental revenue Dividend income Other income, others		Years ended December 31,
		2022	2021
		2022		2021
		42,703 $ 1 1,434 44,138 $		43,774 $ 1 1,738 $45,513

(22) Other income

(23) Other gains and losses

Other gains and losses
Net currency exchange gain (loss) Depreciation on investment property Other losses	Years ended December 31,
	2022	2021
	46,768 $ 4,996) ( 8,879) ( 32,893 $	7,191) ($ 5,049) ( 9,009) ( 21,249) ($

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(24) Finance costs

Finance costs
Interest expense： Bank borrowings Bonds payable Lease liabilities Others Finance expenses		Years ended December 31,
		2022		2021
		8,071 $ 5,558 5,858 1,564 172 21,223 $		2,959 $ 3,492 6,029 91 93 12,664 $

(25) Expenses by nature

Expenses by nature
Employee benefit expenses Employee benefit expense Depreciation expenses on property, plant and equipment Amortisation expenses on intangible assets Wages and salaries Share-based payments Labour and health insurance fees Pension costs Other personnel expenses		Years ended December 31,
		2022	2021
		2022		2021
		786,552 $ 5,000 57,279 28,786 61,031 938,648 $		564,660 $ - 47,045 23,782 48,489 683,976 $

(26) Employee benefit expenses

• A. According to the Articles of Incorporation of the Company, employees’ compensation and directors’ remuneration shall be calculated based on current year’s earnings, which should first be used to cover accumulated deficits, if any, and then, not less than 5% for employees’ compensation and not more than 2% for directors’ remuneration.

Employees’ compensation can be distributed by stock or dividends, including distributions to certain qualifying employees in affiliate companies.

• B. For the years ended December 31, 2022 and 2021, employees’ compensation was accrued at $75,047 and $53,976, respectively; while directors’ remuneration was accrued at $9,381 and $5,398, respectively. The aforementioned amounts were recognised in salary expenses.

The employees’ compensation and directors’ remuneration were estimated and accrued based on 8%, 1%, 10% and 1% of earnings for the years ended December 31, 2022 and 2021, respectively.

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Employees’ compensation of $53,976 and directors’ remuneration of $5,398 for the year ended December 31, 2021 as resolved by the Board of Directors were in agreement with those amounts recognised in the 2021 financial statements. Abovementioned employees’ compensation of 2021 will be distributed in the form of cash.

Information about employees’ compensation and directors’ remuneration of the Company as resolved at the meeting of Board of Directors and approved by the shareholders will be posted in the “Market Observation Post System”.

(27) Income taxes

A. Income tax benefit expenses

Components of income tax benefit expense:

Current tax: Current tax on profits for the year Prior year income tax underestimation (overestimation) Total current tax Deferred tax: Origination and reversal of temporary differences Total deferred tax Income tax expense		Years ended December 31,	Years ended December 31,
		2022	2021
		170,552 $ 1,324 171,876 1,518 1,518 173,394 $	98,449 $ 249) ( 98,200 1,939 1,939 100,139 $

B. Reconciliation between income tax expense and accounting profit

Tax calculated based on profit before tax and statutory tax rate Expenses disallowed by tax regulation Change in assessment of realisation of deferred tax assets Prior year income tax underestimation (overestimation) Income tax expense	Years ended December 31,	Years ended December 31,
	2022	2021
	171,735 $ 1,112 777) ( 1,324 173,394 $	96,358 $ 699 3,331 249) ( 100,139 $

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C. Amounts of deferred tax assets or liabilities as a result of temporary differences are as follows:

Temporary differences: Deferred income tax assets: Unrealised loss on inventory valuation loss Pension liability Others Deferred income tax liabilities: Income on investments accounted for using equity method Property, plant and equipment - book-tax difference Investment property - book-taxdifference Intangible assets - book-tax difference			2022
		At January1	Recognised in profit or loss		At December 31
	11,618 $ 16,981 5,415 34,014 $ 1,748 19,631) ( 18,151) ( 515) ( 36,549) ( 2,535) ($		178 $ 5,299) ( 3,202 1,919) ($ 455) ( 413 443 - 401 1,518) ($	11,796 $ 11,682 8,617 32,095 $ 1,293 19,218) ( 17,708) ( 515) ( 36,148) ( 4,053) ($

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Temporary differences: Deferred income tax assets: Unrealised loss on inventory valuation loss Pension liability Others Deferred income tax liabilities: Income on investments accounted for using equity method Property, plant and equipment - book-tax difference Investment property - book-taxdifference Intangible assets - book-tax difference			2021
		At January1	Recognised in profit or loss		At December 31
	17,632 $ 18,907 1,586 38,125 $ 2,017 21,215) ( 18,494) ( 1,029) ( 38,721) ( 596) ($		6,014) ($ 1,926) ( 3,829 4,111) ($ 269) ( 1,584 343 514 2,172 1,939) ($	11,618 $ 16,981 5,415 34,014 $ 1,748 19,631) ( 18,151) ( 515) ( 36,549) ( 2,535) ($

D. The Company’s income tax returns through 2020 have been assessed and approved by the Tax Authority.

~48~

(28) Earnings per share

Earnings per share
Basic earnings per share Profit attributable to ordinary shareholders of the parent Diluted earnings per share Profit attributable to ordinary shareholders of the parent Assumed conversion of all dilutive potential ordinary shares Employees’ compensation Convertible bonds Profit attributable to ordinary shareholders of the parent plus assumed conversion of all dilutive potential ordinary shares Basic earnings per share Profit attributable to ordinary shareholders of the parent Diluted earnings per share Profit attributable to ordinary shareholders of the parent Assumed conversion of all dilutive potential ordinary shares Employees’ compensation Profit attributable to ordinary shareholders of the parent plus assumed conversion of all dilutive potential ordinary shares		YearendedDecember31,2022
		Weighted average number of ordinary shares outstanding Earnings per share Amount after tax (share in thousands) (in dollars) 681,271 $ 286,615 2.38 $ 681,271 286,615 - 1,125 4,447 3,426 685,718 $ 291,166 2.36 $ Year ended December31,2021
		Weighted average number of ordinary shares outstanding Amount aftertax (shareinthousands) 380,530 $ 281,253 380,530 281,253 - 414 380,530 $ 281,667	Earnings per share (indollars) 1.35 $ 1.35 $

For the year ended December 31, 2021, the Company’s convertible bonds had anti-dilutive effect, thus, it was not included in the calculation of diluted earnings per share.

~49~

(29) Supplemental cash flow information

A. Investing activities with partial cash payments:

Acquisition of property, plant and equipment Add: Opening balance of payable on equipment Less: Ending balance of payable on equipment Cash paid during the year	Years ended December 31,	Years ended December 31,
	2022	2021
	641,223 $ 33,681 199,347) ( 475,557 $	189,092 $ 19,431 33,681) ( 174,842 $

B. Financing activities with no cash flow effects:

Changes in liabilities from financing activities Convertible bonds being converted to capital stocks $ Short-term borrowings Lease liabilities At January 1 446,283 $ 261,346 $ Changes in cash flow from financing activities 267,659) ( 9,907) ( Interest paid - 5,858) ( Interest expense - 5,858 Conversion option exercised - - Changes in other non-cash items - 1,055 At December 31 178,624 $ 252,494 $ Short-term borrowings Lease liabilities At January 1 300,067 $ 271,045 $ Changes in cash flow from financing activities 146,216 9,699) ( Interest paid - 6,029) ( Interest expense - 6,029 Conversion option exercised - - At December 31 446,283 $ 261,346 $	Changes in liabilities from financing activities Convertible bonds being converted to capital stocks $ Short-term borrowings Lease liabilities At January 1 446,283 $ 261,346 $ Changes in cash flow from financing activities 267,659) ( 9,907) ( Interest paid - 5,858) ( Interest expense - 5,858 Conversion option exercised - - Changes in other non-cash items - 1,055 At December 31 178,624 $ 252,494 $ Short-term borrowings Lease liabilities At January 1 300,067 $ 271,045 $ Changes in cash flow from financing activities 146,216 9,699) ( Interest paid - 6,029) ( Interest expense - 6,029 Conversion option exercised - - At December 31 446,283 $ 261,346 $	Changes in liabilities from financing activities Convertible bonds being converted to capital stocks $ Short-term borrowings Lease liabilities At January 1 446,283 $ 261,346 $ Changes in cash flow from financing activities 267,659) ( 9,907) ( Interest paid - 5,858) ( Interest expense - 5,858 Conversion option exercised - - Changes in other non-cash items - 1,055 At December 31 178,624 $ 252,494 $ Short-term borrowings Lease liabilities At January 1 300,067 $ 271,045 $ Changes in cash flow from financing activities 146,216 9,699) ( Interest paid - 6,029) ( Interest expense - 6,029 Conversion option exercised - - At December 31 446,283 $ 261,346 $			2022 2021 46,972 $257,170 Years ended December 31, Guarantee deposits received Bonds payable Liabilities from financing activities 8,290 $ 46,878 $ 762,797 $ 195) ( 500,463 222,702 - - 5,858) ( - 5,558 11,416 - 46,972) ( 46,972) ( - 21,757) ( 20,702) ( 8,095 $ 484,170 $ 923,383 $ 2022 2021	2022 2021 46,972 $257,170 Years ended December 31, Guarantee deposits received Bonds payable Liabilities from financing activities 8,290 $ 46,878 $ 762,797 $ 195) ( 500,463 222,702 - - 5,858) ( - 5,558 11,416 - 46,972) ( 46,972) ( - 21,757) ( 20,702) ( 8,095 $ 484,170 $ 923,383 $ 2022 2021	2022 2021 46,972 $257,170 Years ended December 31, Guarantee deposits received Bonds payable Liabilities from financing activities 8,290 $ 46,878 $ 762,797 $ 195) ( 500,463 222,702 - - 5,858) ( - 5,558 11,416 - 46,972) ( 46,972) ( - 21,757) ( 20,702) ( 8,095 $ 484,170 $ 923,383 $ 2022 2021	2022 2021 46,972 $257,170 Years ended December 31, Guarantee deposits received Bonds payable Liabilities from financing activities 8,290 $ 46,878 $ 762,797 $ 195) ( 500,463 222,702 - - 5,858) ( - 5,558 11,416 - 46,972) ( 46,972) ( - 21,757) ( 20,702) ( 8,095 $ 484,170 $ 923,383 $ 2022 2021	2022 2021 46,972 $257,170 Years ended December 31, Guarantee deposits received Bonds payable Liabilities from financing activities 8,290 $ 46,878 $ 762,797 $ 195) ( 500,463 222,702 - - 5,858) ( - 5,558 11,416 - 46,972) ( 46,972) ( - 21,757) ( 20,702) ( 8,095 $ 484,170 $ 923,383 $ 2022 2021	2022 2021 46,972 $257,170 Years ended December 31, Guarantee deposits received Bonds payable Liabilities from financing activities 8,290 $ 46,878 $ 762,797 $ 195) ( 500,463 222,702 - - 5,858) ( - 5,558 11,416 - 46,972) ( 46,972) ( - 21,757) ( 20,702) ( 8,095 $ 484,170 $ 923,383 $ 2022 2021	2022 2021 46,972 $257,170 Years ended December 31, Guarantee deposits received Bonds payable Liabilities from financing activities 8,290 $ 46,878 $ 762,797 $ 195) ( 500,463 222,702 - - 5,858) ( - 5,558 11,416 - 46,972) ( 46,972) ( - 21,757) ( 20,702) ( 8,095 $ 484,170 $ 923,383 $ 2022 2021
					2022
				$	46,972 2022					$
					2022
At January 1 Changes in cash flow from financing activities Interest paid Interest expense Conversion option exercised Changes in other non-cash items At December 31 At January 1 Changes in cash flow from financing activities Interest paid Interest expense Conversion option exercised At December 31
	Short-term borrowings 446,283 $ 267,659) ( - - - - 178,624 $	Lease liabilities 261,346 $ 9,907) ( 5,858) ( 5,858 - 1,055 252,494 $			Guarantee deposits received			Bonds payable 46,878 $ 500,463 - 5,558 46,972) ( 21,757) ( 484,170 $
					8,290 $ 195) ( - - - - 8,095 $ 2021
	Short-term borrowings 300,067 $ 146,216 - - - 446,283 $	Lease liabilities 271,045 $ 9,699) ( 6,029) ( 6,029 - 261,346 $			Guarantee deposits received				Bonds payable		Liabilities from financing activities
					8,290 $ - - - - 8,290 $	$ ( $			300,556 - - 3,492 257,170) 46,878		879,958 $ 136,517 6,029) ( 9,521 257,170) ( 762,797 $
							$

(30) Changes in liabilities from financing activities

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7. Related Party Transactions

(1) Parent and ultimate controlling party

The Company’s ultimate parent company is Episil Technologies Inc. (former name: Episil Holding Inc. ) holds 57.86% of the Company’s outstanding shares.

(2) Names of related parties and relationship

Names of relatedparties	Relationshipwith the Company
Episil Technologies Inc. (Note) Episil Technologies Inc. (Shanghai) Hermes-Epitek Corp. Taiwan Hi-Tech Corp.	The parent company The parent company's indirect wholly-owned subsidiary The parent company’s director is the Hermes-Epitek Corp.'s director Investee of the parent company accounted for using equity method

Note : Episil Holding Inc. (former name) merged with its subsidiary, Episil Technologies Inc. Afterthe merger, Episil Holding Inc. was the surviving company while Episil Technologies Inc. was the dissolved company. The merger effective date was set on September 1, 2021. Meanwhile, Episil Holding Inc. was renamed to Episil Technologies Inc.

(3) Significant related party transactions

A. Operating revenue

gnificant related party transactions Operating revenue
Sales of goods: -Episil Technologies Inc. -Affiliate companies -Other related parties		Years ended December 31,
		2022		2021
		688,579 $ - 1,286 689,865 $		181,594 $ 297,702 2,461 481,757 $

The price and terms on sales are available to third parties and the credit term is 30 to 90 days after monthly billings.

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B. Purchases

Purchases
Purchases of goods: -Episil Technologies Inc. -Affiliate companies -Other related parties Purchases of services: -Episil Technologies Inc. -Affiliate companies		Years ended December 31,
		2022		2021
		9,044 $ - 1,059 13,469 - 23,572 $		2,280 $ 7,982 - 71,050 1,189 82,501 $

The price and terms on purchase are available to third parties and the payment term is 30 to 90 days after monthly billings.

• C. Receivables from related parties

days after monthly billings. Receivables from related parties
Accounts receivable: -Episil Technologies Inc. -Affiliate companies Other receivables: -Episil Technologies Inc.	December31,2022 207,799 $ - 207,799 8,472 $ 216,271 $	December31,2021
		191,860 $ 578
		192,438
		11,850 $
		204,288 $

The receivables from related parties arise mainly from sales of goods transactions. The receivables are due 3 months after the date of sale.

• D. Payables to related parties

are due 3 months after the date of sale. Payables to related parties
Accounts payable: -Episil Technologies Inc. -Affiliate companies Other payables: -Episil Technologies Inc. -Other related parties	December31,2022 811 $ 1,074 1,885 5,037 $ 31,046 36,083 37,968 $	December31,2021
		1,616 $ -
		1,616
		15,729 $ 22,452
		38,181
		39,797 $

The payables to related parties arise mainly from purchase of services, and the payment terms are made under mutual agreement.

Other payables mainly refer to payables for service fees and processing fees.

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E. Refundable guarantee deposits

Refundable guarantee deposits
Refundable guarantee deposits: -Other related parties	December31,2022 - $	December31,2021
		65,000 $

F. Lease transactions

• (a) For the years ended December 31, 2022 and 2021, rental revenue arising from leasing certain buildings and structures to affiliate companies amounted to $9,113 and $9,663, respectively, which is collected monthly.

• (b) For the years ended December 31, 2022 and 2021, rental expense due to leasing certain buildings and structures from affiliate companies amounted to $235 and $6,760, respectively, which is paid monthly.

G. Others (Shown as “Operating costs” and “Operating expenses”)

Testing fee: -Other related parties	Years ended December 31,	Years ended December 31,
	2022	2021
	135,316 $	119,271 $

(4) Key management personnel compensation

Key management personnel compensation
Salaries and other short-term employee benefits Post-employment benefits		Years ended December 31,
		2022		2021
		24,892 $ 270 25,162 $		12,879 $ 216 13,095 $

8. Pledged Assets

The Group’s assets pledged as collateral are as follows:

Pledged asset		Book	value	Purpose
		December 31,2022 13,565 $	December 31,2021
Pledged time deposits (shown as "Non-current financial assets at amortised cost)			7,858 $	Customs deposits and guarantee deposits for leases

9. Significant Contingent Liabilities and Unrecognised Contract Commitments

(1) Contingencies

None.

(2) Commitments

Capital expenditures contracted for at the balance sheet date but not yet incurred are as follows:

Property, plant and equipment	December31,2022	December31,2021 109,060 $
	342,084 $

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10. Significant Disaster Loss

None.

11. Significant Events after the Reporting Period

The information regarding the appropriations of 2022 earnings is provide in Note 6(18).

12. Others

(1) Capital management

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and to maintain an optimal capital structure to meet the needs of plant expansion and equipment enhancement. The Group’s capital management is to ensure it has sufficient financial resources and operating plans to maintain or adjust capital structure and to meet operational capital for future needs, capital expenditure, research and development expenses, obligation repayment and dividend distribution within the next year.

(2) Financial instruments

A. Financial instruments by category

nancial instruments Financial instruments by category
Financial assets Financial assets at fair value through other comprehensive income Designation of equity instrument Financial assets at amortised cost Financial assets at amortised cost Cash and cash equivalents Accounts receivable Accounts receivable due from related parties Other receivables Other receivables due from related parties Refundable guarantee deposits Financial liabilities Financial liabilities at amortised cost Short-term borrowings Accounts payable Accounts payable to related parties Other payables Other payables to related parties Bonds payable (including current portion) Guarantee deposits received Lease liability		December31,2022		December31,2021
		17 $ 13,565 $ 2,841,411 1,025,940 207,799 27,584 8,472 1,108 4,125,879 $ 178,624 $ 419,139 1,885 621,779 36,083 484,170 8,095 1,749,775 $ 252,494 $		17 $ 407,858 $ 1,550,172 1,127,566 192,438 16,159 11,850 66,133 3,372,176 $ 446,283 $ 483,114 1,616 350,315 38,181 46,878 8,290 1,374,677 $ 261,346 $

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• B. Policy of risk management

• (a) The Group’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk, interest rate risk and price risk), credit risk and liquidity risk. The Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group’s financial position and financial performance.

• (b) Risk management is carried out by a central treasury department (Group treasury) under policies approved by the Board of Directors. Group treasury identifies, evaluates and hedges financial risks in close co-operation with the Group’s operating units. The Board provides written principles for overall risk management, as well as written policies covering specific areas and matters, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments, and investment of excess liquidity.

• C. Significant financial risks and degrees of financial risks

• (a) Market risk

Exchange rate risk

• i. The Group operates internationally and is exposed to exchange rate risk arising from the transactions of the Company and its subsidiary using various functional currencies, primarily with respect to the USD and RMB. Foreign exchange rate risk arises from future commercial transactions and recognised assets and liabilities.

• ii. Management has set up policies to require group companies to manage their foreign exchange risk against their functional currencies. The companies are required to hedge their entire foreign exchange risk exposure through coordination with the Group treasury. Exchange rate risk is measured through a forecast of highly probable USD and JPY expenditures. Borrowing liabilities denominated in foreign currencies that are adopted to minimise the volatility of the foreign exchange.

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iii. The Group’s businesses involve some non-functional currency operations (the Company’s functional currency: NTD and the subsidiary’s functional currency: JPY). The information on assets and liabilities denominated in foreign currencies whose values would be materially affected by the exchange rate fluctuations is as follows:

(Foreign currency: functional currency) Financial assets Monetary items USD:NTD JPY:NTD RMB:NTD USD:JPY Non-monetary items:None. Financial liabilities Monetary items USD:NTD JPY:NTD RMB:NTD Non-monetary items:None. (Foreign currency: functional currency) Financial assets Monetary items USD:NTD JPY:NTD RMB:NTD USD:JPY Non-monetary items:None. Financial liabilities Monetary items USD:NTD JPY:NTD RMB:NTD USD:JYP Non-monetary items:None.		December31,2022	December31,2022	December31,2022		Book value (NTD)
		Foreign currency amount (in thousands)		Exchange rate
						1,144,658 $ 3,619 58,534 56,310 472,934 $ 9,766 74,127 Book value (NTD) 829,260 $ 6,022 85,323 35,000 673,199 $ 18,899 109,640 1,312
		Foreign currency amount (in thousands)	Exchange rate
		29,948 $ 25,028 19,628 1,264 24,312 $ 78,548 25,222 47	27.690 0.2406 4.347 115.087 27.690 0.2406 4.347 115.087

iv. The total exchange gain (loss), including realised and unrealised, arising from significant

~56~

foreign exchange variations on the monetary items held by the Group for the years ended December 31, 2022 and 2021, amounted to $46,768 and ($7,191), respectively.

• v. Analysis of foreign currency market risk arising from significant foreign exchange variations:

variations:
(Foreign currency: functional currency) Financial assets Monetary items USD:NTD JPY:NTD RMB:NTD USD:JPY Financial liabilities Monetary items USD:NTD JPY:NTD RMB:NTD USD:JPY (Foreign currency: functional currency) Financial assets Monetary items USD:NTD JPY:NTD RMB:NTD USD:JPY Financial liabilities Monetary items USD:NTD JPY:NTD RMB:NTD USD:JPY		Year ended December31,2022
		Sensitivity analysis		Effect on other comprehensive income
		Change in exchange rate	Effect on profit (loss)
		Sensitivity analysis
		Change in exchange rate	Effect on profit (loss)
		1% 1% 1% 1% 1% 1% 1% 1%	8,293 $ 60 853 350 6,732) ($ 189) ( 1,096) ( 13) (

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Price risk

• i. The Group’s investments in equity securities, which are exposed to price risk, are the held financial assets at fair value through other comprehensive income.

• ii. The Group’s investments in equity securities comprise shares issued by a domestic company. The prices of equity securities would change due to the change of the future value of investee company. If the prices of these equity securities had increased /decreased by 10% with all other variables held constant, fair value adjustment would have increased/decreased both by $2, as a result of the price change on equity investment at fair value through other comprehensive income.

Cash flow and fair value interest rate risk

• i. The Group’s main interest rate risk arises from short-term borrowings with floating rates, which expose the Group to cash flow interest rate risk. During 2022 and 2021 the Group’s borrowings at floating rates were mainly denominated in New Taiwan dollars, US dollars and Japanese yen.

• ii. If the borrowing interest rate of New Taiwan dollars, US dollars or Japanese yen had increased/decreased by 0.25% with all other variables held constant, profit after tax for the years ended December 31, 2022 and 2021 would have decreased /increased by $447 and $1,116, respectively. Changes in interest expense mainly due from floating-rate borrowings.

• (b) Credit risk

• i. Credit risk refers to the risk of financial loss to the Group arising from default by the clients or counterparties of financial instruments on the contract obligations. The main factor is that counterparties could not repay in full the accounts receivable based on the agreed terms, and the contract cash flows of debt instruments stated at amortised cost.

• ii.The Group manages their credit risk taking into consideration the entire group’s perspective. Only rated banks and financial institutes with an optimal rating are accepted. According to the Group’s credit policy, each local entity in the Group is responsible for managing and analysing the credit risk for each of their new clients before standard payment and delivery terms and conditions are offered. Internal risk control assesses the credit quality of the customers, taking into account their financial position, past experience and other factors. Individual credit limits are set based on internal or external ratings in accordance with limits set by the Board of Directors. The utilisation of credit limits is regularly monitored.

• iii. The Group adopts the assumptions under IFRS 9, and the default occurs when the contract payments are past due over 90 days.

• iv. The Group adopts following assumptions under IFRS 9 to assess whether there has been a significant increase in credit risk on that instrument since initial recognition:

• (i) If the contract payments were past due over 30 days based on the terms, there has been

• a significant increase in credit risk on that instrument since initial recognition.

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• (ii) For investments in bonds that are traded over the counter, if any external credit rating agency rates these bonds as investment grade, the credit risk of these financial assets is treated as low.

• v. The following indicators are used to determine whether the credit impairment of debt instruments has occurred:

• (i) It becomes probable that the issuer will enter into bankruptcy or other financial reorganisation due to financial difficulties;

• (ii) The disappearance of an active market for that financial asset because of financial difficulties of the issuer ;

• (iii) Default or delinquency in interest or principal repayments;

• (iv) Adverse changes in national or regional economic conditions that are expected to cause a default.

• vi. The Group categorised accounts receivable in accordance with credit risk and applies the modified approach using a provision matrix to estimate the expected credit loss.

• vii. The Group wrote-off the financial assets, which cannot be reasonably expected to be recovered, after initiating recourse procedures. However, the Group will continue executing the recourse procedures to secure their rights.

• viii. The Group used the forecastability to adjust historical and timely information to assess the default possibility of accounts receivable. On December 31, 2022 and 2021, the provision matrix is as follows:

December 31, 2022 Expected loss rate Total book value Loss allowance December 31, 2021 Expected loss rate Total book value Loss allowance	Notpast due	Up to 30 days past due	31~90 days past due	91~180 days past due	Over 180 dayspast due	Individual	Total
	0.01% 1,054,418 $ - $ 0.01% 1,001,526 $ - $	0.01% 76,720 $ - $ 0.01% 114,241 $ - $	0.13% 148 $ - $ 0.15% 52,720 $ - $	0.77% - $ - $ 0.88% - $ - $	0.12% - $ - $ 100% - $ - $	0.12~5.26% 102,605 $ 152) ($ 0.12~6% 151,669 $ 152) ($	1,233,891 $ 152) ($ 1,320,156 $ 152) ($

• ix. Movements in relation to the Group applying the modified approach to provide loss allowance for accounts receivable are as follows:

At January 1 / December 31		2022		2021
		Accounts receivable		Accounts receivable
		152 $		152 $

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(c) Liquidity risk

• i. Cash flow forecasting is performed in the operating entities of the Group and aggregated by Group treasury. Group treasury monitors rolling forecasts of the Group’s liquidity requirements to ensure it has sufficient cash to meet operational needs while maintaining sufficient headroom on its undrawn borrowing facilities at all times so that the Group does not breach borrowing limits or covenants on any of its borrowing facilities. Such forecasting takes into consideration the Group’s debt financing plans, covenant compliance, compliance with internal balance sheet ratio targets and, if applicable, external regulatory or legal requirements, for example, currency restrictions.

• ii. Surplus cash held by the operating entities over and above balance required for working capital management are transferred to the Group treasury. Group treasury invests surplus cash in interest bearing current accounts, time deposits and marketable securities, choosing instruments with appropriate maturities or sufficient liquidity to provide sufficient headroom as determined by the above-mentioned forecasts. As at December 31, 2022 and 2021, the Group held money market position of $2,840,989 and $1,549,778, respectively, that are expected to readily generate cash inflows for managing liquidity risk.

• iii. The Group has the following undrawn borrowing facilities:

Floating rate: Expiring within one year Fixed rate: Expiring beyond one year		December31,2022		December31,2021
		200,000 $ 1,423,438 1,623,438 $		177,988 $ 578,122 756,110 $

• iv. The table below analyses the Group’s non-derivative financial liabilities and net-settled or gross-settled derivative financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date for nonderivative financial liabilities and to the expected maturity date for derivative financial liabilities.

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Non-derivative financial liabilities December 31, 2022 Short-term borrowings Accounts payable (including related parties) Other payables (including related parties) Lease liabilities Bonds payable Deposits received Non-derivative financial liabilities December 31, 2021 Short-term borrowings Accounts payable (including related parties) Other payables (including related parties) Lease liabilities Bonds payable Deposits received	Less than 1year	Between 1 and 2years	Between 2 and 5years	Over 5years
	$ 178,624 421,024 657,862 15,193 - - Less than 1year	$ - - - 12,403 - - Between 1 and 2years	$ - - - 35,185 500,000 8,095 Between 2 and 3years	$ - - - 285,310 - - Over 3years
	$ 446,283 484,730 388,496 15,728 47,500 195	$ - - - 15,144 - -	$ - - - 35,818 - 8,095	$ - - - 295,212 - -

(3) Fair value information

• A. The different levels that the inputs to valuation techniques are used to measure fair value of financial and non-financial instruments have been defined as follows:

• Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. A market is regarded as active where a market in which transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis.

• Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. The fair value of the Group’s convertible bonds payable is included in Level 2.

• Level 3: Unobservable inputs for the asset or liability. The fair value of the Group’s investment in unlisted stocks is included in Level 3.

• B. Fair value information of investment property at cost is provided in Note 6(8).

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• C. Financial instruments not measured at fair value

• (a) Except for those listed in the table below, the carrying amounts of cash and cash equivalents, notes receivable, accounts receivable, other receivables, refundable guarantee deposits, shortterm borrowings, notes payable, accounts payable, other payables and guarantee deposits received are approximate to their fair values.

Financial liabilities: Bonds payable Financial liabilities: Bonds payable			December	31,2022
	Book value			Fair value
			Level 1	Level 2		Level 3
	484,170 $		- $ December	485,450 $ 31,2021		- $
	Book value			Fair value
			Level 1	Level 2		Level 3
	$46,878		$-	$46,973		$-

• (b) The methods and assumptions of fair value estimate are as follows:

  • Bonds payable: The fair value of the convertible bonds issued by the Company was estimated by the Binomial-Tree approach to convertible bonds.

• D. The related information of financial and non-financial instruments measured at fair value by level on the basis of the nature, characteristics and risks of the assets and liabilities are as follows:

• (a) The related information of natures of the assets and liabilities is as follows:

December31,2022 Assets Recurring fair value measurements Financial assets at fair value through other comprehensive income Unlisted stocks December31,2021 Assets Recurring fair value measurements Financial assets at fair value through other comprehensive income Unlisted stocks	Level 1 - $ Level 1 - $	Level 2 - $ Level 2 - $	Level3 17 $ Level3 17 $	Total
				17 $
				Total
				17 $

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• (b) The methods and assumptions the Group used to measure fair value are as follows:

  • i. The instruments the Group used market quoted prices as their fair values (that is, Level 1) are listed below by characteristics:

    • Listed shares Closed-end fund

    • Market quoted price Closing price Closing price

  • ii. Except for financial instruments with active markets, the fair value of other financial instruments is measured by using valuation techniques or by reference to counterparty quotes. The fair value of financial instruments measured by using valuation techniques can be referred to current fair value of instruments with similar terms and characteristics in substance, discounted cash flow method or other valuation methods, including calculated by applying model using market information available at the consolidated balance sheet date (i.e. yield curves on the Taipei Exchange, average commercial paper interest rates quoted from Reuters).

  • iii. The output of valuation model is an estimated value and the valuation technique may not be able to capture all relevant factors of the Group’s financial and non-financial instruments. As a result, the estimate generated by valuation model will be slightly adjusted based on additional inputs, such as model risk and liquidity risk. In accordance with the Group’s management policies and relevant control procedures relating to the valuation models used for fair value measurement, management believes adjustment to valuation is necessary in order to reasonably represent the fair value of financial and non-financial instruments at the consolidated balance sheet. The inputs and pricing information used during valuation are carefully assessed and adjusted based on current market conditions.

  • iv. The Group takes into account adjustments for credit risks to measure the fair value of financial and non-financial instruments to reflect credit risk of the counterparty and the Group’s credit quality.

• E. For the years ended December 31, 2022 and 2021, there was no transfer between Level 1 and Level 2.

• F. The following chart is the movement of Level 3 for the years ended December 31, 2022 and 2021:

At January 1 / December 31	2022 Equityinstruments 17 $	2021
		Equityinstruments
		17 $

• G. For the years ended December 31, 2022 and 2021, there was no transfer into or out from Level 3.

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• H. Group treasury is in charge of valuation procedures for fair value measurements being categorised within Level 3, which is to verify independent fair value of financial instruments. Such assessment is to ensure the valuation results are reasonable by applying independent information to make results close to current market conditions, confirming the resource of information is independent, reliable and in line with other resources and represented as the exercisable price, and frequently calibrating valuation model, performing back-testing, updating inputs used to the valuation model and making any other necessary adjustments to the fair value.

• I. The following is the qualitative information of significant unobservable inputs and sensitivity analysis of changes in significant unobservable inputs to valuation model used in Level 3 fair value measurement:

value measurement:	t:
Fair value at December 31,2022 Valuation technique Unlisted stocks 17 $ Market comparable companies Fair value at December 31,2021 Valuation technique Unlisted stocks 17 $ Market comparable companies Non-derivative equity instrument: Non-derivative equity instrument:	Fair value at December 31,2022	Valuation technique	Significant unobservable input	Range (weighted average)	Relationship of inputs to fair value
			Price to book ratio multiple Significant unobservable input	1 Range (weighted average)	The higher the multiple, the higher the fair value Relationship of inputs to fair value
			Price to book ratio multiple	1	The higher the multiple, the higher the fair value

• J. The Group has carefully assessed the valuation model and assumption used to measure fair value. However, use of different valuation models or assumptions may result in different measurement. The following is the effect of profit or loss or of other comprehensive income from financial assets and liabilities categorised within Level 3 if the inputs used to valuation models have changed:

Financial assets Equity instrument	Input	Change		December	31,2022	31,2022
			Recognised	inprofit or loss	Recognised in other comprehensive income
			Favourable change	Unfavourable change	Favourable change	Unfavourable change
	Price to book ratio multiple	±10%	$-	$-	$2	($2)

~64~

Financial assets Equity instrument	Input	Change		December	31,2021	31,2021
			Recognised	inprofit or loss	Recognised in other comprehensive income
			Favourable change	Unfavourable change	Favourable change	Unfavourable change
	Price to book ratio multiple	±10%	$-	$-	$2	($2)

(4) Others

Impact to the Group’s operations due to COVID-19: Based on the assessment of operations and financial information by the Group, there is no significant effect to the Company’s going concern, assets impairment and financing risk due to COVID-19.

13. Supplementary Disclosures

(1) Significant transactions information

• A. Loans to others: None.

• B. Provision of endorsements and guarantees to others: None.

• C. Holding of marketable securities at the end of the period (not including subsidiaries, associates and joint ventures): Please refer to table 1.

• D. Acquisition or sale of the same security with the accumulated cost exceeding $300 million or 20% of the Company's paid-in capital: None.

• E. Acquisition of real estate reaching NT$300 million or 20% of paid-in capital or more: None.

• F. Disposal of real estate reaching NT$300 million or 20% of paid-in capital or more: None.

• G. Purchases or sales of goods from or to related parties reaching $100 million or 20% of paid-in capital or more: Please refer to table 2.

• H. Receivables from related parties reaching NT$100 million or 20% of paid-in capital or more: table 3.

• I. Trading in derivative instruments undertaken during the reporting period: None.

• J. Significant inter-company transactions during the reporting period: Please refer to table 4.

(2) Information on investees

Names, locations and other information of investee companies (not including investees in Mainland China) ： Please refer to table 5.

(3) Information on investments in Mainland China: None.

(4) Major shareholders information

Major shareholders information: Please refer to table 6.

~65~

14. Segment Information

(1) General information

The Group operates business only in a single industry. The chief operating decision-maker who assesses performance and allocates resources of the Group as a whole, has identified that the Group has only one reportable operating segment.

(2) Measurement of segment information

The Group is a single reportable segment, related segment profit (loss) before tax, assets and liabilities are consistent with consolidated profit (loss), assets and liabilities.

(3) Information about segment profit or loss, assets and liabilities

The segment information provided to the chief operating decision-maker for the reportable segment is as follows:

is as follows:
Revenue from external customers Inter-company revenue Segment income Segment assets		Year ended December 31
		2022		2021
		5,899,587 $ 282,969 $ 854,665 $ 7,672,174 $		5,043,332 $ 188,375 $ 480,669 $ 6,613,535 $

(4) Reconciliation for segment income (loss)

None.

(5) Information on products and services

Revenue from external customers is mainly from silicon epitaxy wafers and epitaxy wafer foundry. Details of revenue balance are as follows:

Details of revenue balance are as follows:
Sales revenue from silicon epitaxy wafer Epitaxy wafer foundry Others		Year ended December 31,2022		Year ended December 31,2021
		4,790,531 $ 1,098,501 10,555 5,899,587 $		4,072,408 $ 936,425 34,499 5,043,332 $

(6) Geographical information

Geographical information for the years ended December 31, 2022 and 2021 is as follows:

Year ended December 31, 2022 Year ended December 31, 2021

Taiwan Japan China Others	Revenue 3,178,107 $ 1,484,141 503,822 733,517 5,899,587 $		Non-current assets 2,463,851 $ - - - 2,463,851 $	Revenue 2,791,166 $ 1,068,995 629,903 553,268 5,043,332 $		Non-current assets
						2,275,536 $ - - - 2,275,536 $

~66~

(7) Major customer information

Major customer information of the Group for the years ended December 31, 2022 and 2021 is as follows:

follows:
A B D		Revenue Segment 688,579 $ All segment B 667,491 $ All segment D 510,145 $ All segment C Year ended December 31,2022		Year ended December 31,2021
		Revenue 688,579 $ 667,491 $ 510,145 $		Revenue 440,150 $ 464,050 $ 369,300 $	Segment All segment All segment All segment

~67~

Episil-Precision Inc. and Subsidiaries

Holding of marketable securities at the end of the period (not including subsidiaries, associates and joint ventures)

December 31, 2022

Table 1

Expressed in thousands of NTD (Except as otherwise indicated)

Securities held by	Marketable securities(Note 1)	Relationship with the securities issuer(Note 2)	General ledger account		As of December31,2022	As of December31,2022		Footnote (Note 4)
				Number of shares (in thousands)	Bookvalue(Note3)	Ownership (%)	Fairvalue
Episil-Precision Inc.	Dah Chung Bills Finance Corp.-common stock	None	Financial assets at fair value through other comprehensive income-non-current	1,109	17 $	-	17 $

Note 1: Marketable securities in the table refer to stocks, bonds, beneficiary certificates and other related derivative securities within the scope of IFRS 9 "Financal instruments". Note 2: Leave the column blank if the issuer of marketable securities is non-related party. Note 3: Fill in the amount after adjusted at fair value and deducted by accumulated impairment for the marketable securities measured at fair value; fill in the

acquisition cost or amortised cost deducted by accumulated impairment for the marketable securities not measured at fair value. Note 4: The number of shares of securities and their amounts pledged as security or pledged for loans and their restrictions on use under some agreements should be stated in the footnote if the securities presented herein have such conditions

Table 1, Page 1

Table 2

Episil-Precision Inc. and Subsidiaries

Purchases or sales of goods from or to related parties reaching $100 million or 20% of paid-in capital or more Year ended December 31, 2022

Expressed in thousands of NTD (Except as otherwise indicated)

Differences in transaction terms

							Differences in transaction terms	Differences in transaction terms
Purchaser/Seller	Counterparty	Relationship with the counterparty		Transaction			compared to third party transactions(Note 1)		Notes/accounts receivable(payable)		Footnote (Note 2)
			Purchases (sales)	Amount	Percentage of total purchases (sales)	Credit term	Unit price	Credit term	Balance	Percentage of total notes/accounts receivable (payable)
Episil-Precision Inc. Episil-Precision Inc.	Episil Technologies Inc. Precision Silicon Japan Co., Ltd.	Parent company Subsidiary	(Sales) (Sales)	688,579 $ 278,416	11.67% 4.72%	30-90 days after monthly billings 30-90 days after monthly billings	$ - -	Gerneral terms Gerneral terms	207,799 $ 74,102	16.34% 5.83%	Note 4

Note 1: If terms of related-party transactions are different from third-party transactions, explain the differences and reasons in the ‘Unit price’ and ‘Credit term’ columns. Note 2: In case related-party transaction terms involve advance receipts (prepayments) transactions, explain in the footnote the reasons, contractual provisions, related amounts, and differences in types of transactions compared to third-party transactions. Note 3: Paid-in capital referred to herein is the paid-in capital of parent company. In the case that shares were issued with no par value or a par value other than NT$10 per share,

the 20 % of paid-in capital shall be replaced by 10% of equity attributable to owners of the parent in the calculation.

Note 4: Episil Holding Inc. (former name) merged with its subsidiary, Episil Technologies Inc. After the merger, Episil Holding Inc. was the surviving company while Episil Technologies Inc. was the dissolved company. The merger effective date was set on September 1, 2021. Meanwhile, Episil Holding Inc. was renamed to Episil Technologies Inc.

Table 2, Page 1

Episil-Precision Inc. and Subsidiaries

Receivables from related parties reaching NT$100 million or 20% of paid-in capital or more

Year ended December 31, 2022

Table 3 Creditor	Counterparty	Relationship with the counterparty	Balance as at December 31, 2022 （Note 1）	Turnover rate	Overdue receivables	Overdue receivables	Amount collected subsequent to the balance sheet date	Allowance for doubtful accounts Expressed in thousands of NTD (Except as otherwise indicated)
					Amount	Action taken
Episil-Precision Inc.	Episil Technologies Inc.	Parent company	207,799 $	3.5	55,553 $	Amount collected subsequent to the balance sheet date	58,030 $	- $

Table 3, Page 1

Table 4

Episil-Precision Inc. and Subsidiaries

Significant inter-company transactions during the reporting period Year ended December 31, 2022

Expressed in thousands of NTD (Except as otherwise indicated)

Number (Note 1)	Companyname	Counterparty	Relationship (Note 2)		Transaction	Transaction
				General ledgeraccount	Amount (Note 3)	Transactionterms	Percentage of consolidated total operating revenues or total assets (Note4)
0 0 0	Episil-Precision Inc. Episil-Precision Inc. Episil-Precision Inc.	Precision Silicon Japan Co., Ltd. Precision Silicon Japan Co., Ltd. Precision Silicon Japan Co., Ltd.	1 1 1	Sales revenue Purchase Accounts receivable	278,416 $ 4,552 74,102	Gerneral terms Gerneral terms 90~180 days after monthly billings	4.72% 0.08% 0.97%

Note 1: The numbers filled in for the transaction company in respect of inter-company transactions are as follows:

• (1)Parent company is ‘0’.

• (2)The subsidiaries are numbered in order starting from ‘1’.

Note 2: Relationship between transaction company and counterparty is classified into the following three categories; fill in the number of category each case belongs to (If transactions between parent company and subsidiaries or between subsidiaries refer to the same transaction, it is not required to disclose twice. For example, if the parent company has already disclosed its transaction with a subsidiary, then the subsidiary is not required to disclose the transaction; for transactions between two subsidiaries, if one of the subsidiaries has disclosed the transaction, then the other is not required to disclose the transaction.):

• (1)Parent company to subsidiary.

• (2)Subsidiary to parent company.

• (3)Subsidiary to subsidiary.

Note 3: Percentage of total consolidated revenues or total assets is calculated using the total consolidated assets at the end of the year when the subject of transaction is an asset/liability,

and is calculated by total consolidated revenues during the year when the subject of transaction is a revenue/expense.

Note 4: Only transaction amount that exceeds $1 million will be disclosed, otherwise will not be disclosed.

Table 4, Page 1

Table 5

Expressed in thousands of NTD

Episil-Precision Inc. and Subsidiaries

Information on investees

Year ended December 31, 2022

(Except as otherwise indicated)

Investor	Investee (Note 1 and 2)	Location	Main business activities	Initial investment amount	Initial investment amount	Shares held	as at December 31,2022	as at December 31,2022	Net profit (loss) of the investee for the year ended December 31, 2022 (Note 2(2))	Investment income (loss) recognised by the Company for the year ended December 31, 2022 (Note 2(3))	Footnote
				Balance as at December 31, 2022	Balance as at December 31, 2021	Number of shares	Ownership (%)	Book value
Episil-Precision Inc.	Precision Silicon Japan Co., Ltd.	Japan	Sales of silicon epitaxy wafer	2,740 $	2,740 $	200	100.00%	12,129 $	2,279 $	2,279 $

Note 1: If a public company is equipped with an overseas holding company and takes consolidated financial report as the main financial report according to the local law rules, it can only disclose the information of the overseas holding company about the disclosure of related overseas investee information.

Note 2: If situation does not belong to Note 1, fill in the columns according to the following regulations:

(1)The columns of ‘Investee’, ‘Location’, ‘Main business activities’, Initial investment amount’ and ‘Shares held as at December 31, 2020’ should fill orderly in the Company’s (public company’s) information on investees and every directly or indirectly controlled investee’s investment information, and note the relationship between the Company (public company) and its investee each (ex. direct subsidiary or indirect subsidiary) in the ‘footnote’ column.

(2)The ‘Net profit (loss) of the investee for the year ended December 31, 2020’ column should fill in amount of net profit (loss) of the investee for this period.

(3)The ‘Investment income (loss) recognised by the Company for the year ended December 31, 2020’ column should fill in the Company (public company) recognised investment income (loss) of its

direct subsidiary and recognised investment income (loss) of its investee accounted for under the equity method for this period. When filling in

recognised investment income (loss) of its direct subsidiary, the Company (public company) should confirm that direct subsidiary’s net profit (loss) for this period has included its investment income (loss) which shall be recognised by regulations.

Table 5, Page 1

Episil-Precision Inc. and Subsidiaries Major shareholders information December 31, 2022

Table 6

Name of major shareholders	Shares	Shares
	Number of shares held	Ownership (%)
Episil Technologies Inc.	166,961,680	57.86%

Table 6, Page 1