ESMT — Audit Report / Information 2020

Nov 12, 2020

ELITE SEMICONDUCTOR MICROELECTRONICS TECHNOLOGY INC.

Parent Company Only Financial Statements and

Independent Auditors’ Report December 31, 2020 and 2019 (Stock Code: 3006)

(English Translation of a Report Originally Issued in Chinese)

Company Address: No.23, Industry E Rd. IV Science-Based Industrial Park, Hsinchu 300, Taiwan, R.O.C.

Tel: +886-3-578-1970

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Elite Semiconductor Microelectronics Technology Inc.

Parent Company Only Financial Statements and Independent Auditors’ Report for

December 31, 2020 and 2019

Table of Contents

		Items	Page
I.	Cover		1
II.	Table of Contents		2 ~ 3
III.	Representation Letter		4 ~ 8
IV.	Independent Auditors’ Report		9 ~ 10
V.	Parent Company Only Balance Sheets		11
VI.	Parent Company Only Statements of Comprehensive Income		12
VII.	Parent Company Only Statements of Changes in Equity		13 ~ 14
VIII.	Parent Company Only Statements of Cash Flows		15 ~ 67
	1.	History and Organization	15
	2.	The Date of Authorization for Issuance of the Parent Company Only
		Financial Statements and Procedures for Authorization	15
	3.	Application of New Standards, Amendments and Interpretations	15 ~ 16
	4.	Summary of Significant Accounting Policies	17 ~ 28
	5.	Critical Accounting Judgments, Estimates and Key Sources of
		Assumption Uncertainty	28
	6.	Details of Significant Accounts	29 ~ 53
	7.	Related-Party Transactions	54 ~ 55
	8.	Pledged Assets	56
	9.	Significant Contingent Liabilities and Unrecognized Contractual
		Commitments	56

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	Items	Page
	10. Significant Disaster Losses	56
	11. Significant Events after the End of the Balance Sheet Date	56
	12. Others	56 ~ 66
	13. Supplementary Disclosures	66 ~ 67
IX.	Statement of Significant Accounts
	Statement of Cash and Cash Equivalents	Statement 1
	Statement of Accounts Receivable	Statement 2
	Statement of Inventory	Statement 3
	Movement Statement of Investment Accounted for Under the Equity Method	Statement 4
	Movement Statement of Property, Plant and Equipment	Statement 5
	Movement Statement of Accumulated Depreciation of Property, Plant and
	Equipment	Statement 6
	Statement of Accounts Payable	Statement 7
	Statement of Operating Revenue	Statement 8
	Statement of Operating Costs	Statement 9
	Statement of Manufacturing Overheads	Statement 10
	Statement of Selling Expenses	Statement 11
	Statement of Administrative Expenses	Statement 12
	Statement of Research and Development Expenses	Statement 13
	Summary of Employee Benefit, Depreciation and Amortization charges by
	Function	Statement 14

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Independent Auditors’ Report

(2021) Finance-Audit-Letter No.20003729

To the Board of Directors and Shareholders of Elite Semiconductor Microelectronics Technology Inc.

Opinion

We have audited the accompanying parent company only balance sheets of Elite Semiconductor Microelectronics Technology Inc. as at December 31, 2020 and 2019, and the related parent company only statements of comprehensive income, of changes in equity and of cash flows for the years then ended, and notes to the parent company only financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying parent company only financial statements present fairly, in all material respects, the parent company only financial position of Elite Semiconductor Microelectronics Technology Inc. as at December 31, 2020 and 2019, and its parent company only financial performance and its parent company only cash flows for the years then ended in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers.

Basis for opinion

We conducted our audits in accordance with the “Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants” and Generally Accepted Auditing Standards in the Republic of China (ROC GAAS). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Parent Company Only Financial Statements section of our report. We are independent of Elite Semiconductor Microelectronics Technology Inc. in accordance with the Code of Professional Ethics for Certified Public Accountants in the Republic of China (the “Code”), and we have fulfilled our other ethical responsibilities in accordance with the Code. Based on our audits and the audit reports of other independent accountants, 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 judgment, were of most significance in our audit of the parent company only financial statements of the current period. These matters were addressed in the context of our audit of the parent company only 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 Elite Semiconductor Microelectronics Technology Inc. parent company only financial statements of the current period are stated as follows:

Evaluation of inventories

Description

Refer to Note 4 (13) for the accounting policies on the evaluation of inventories, Note 5 (2) for the uncertainty of accounting estimations and assumptions for evaluation of inventories, Note 6 (5) for the Details of inventory. As at December 31,2020, the inventory and allowance for inventory valuation loss amounted to NT$6,068,415 thousand and NT$98,771 thousand. Elite Semiconductor Microelectronics Technology Inc is primarily engaged in research, development, production, manufacture, and sales of integrated circuit. Elite Semiconductor Microelectronics Technology Inc evaluates inventories stated at lower of cost and net realizable value. Since the evaluation of net realizable value of the inventories exceed specific period and obsolete inventories is subject to management’s judgment and uncertainty of estimations. Consequently, we consider the evaluation of inventories as a key audit matter.

How our audit addressed the matter

We have performed primary audit procedures for the above key audit matter included assessed the rationality of policy and procedure on allowance for inventory valuation loss based on our understanding of Elite Semiconductor Microelectronics Technology Inc.’s operations and industry, the historical data of product marginalization in the market and judged the rationality of obsolete inventories. We inspected the appropriateness of inventory aging report to confirm the consistency of report and policy, selected samples to compare the historical data of product marginalization in the market which determine the net realizable value of the obsolete inventories and net realizable value of the obsolete inventories to assessed the rationality of the allowance for inventory valuation loss.

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Responsibilities of management and those charged with governance for the parent company only financial statements

Management is responsible for the preparation and fair presentation of the parent company only financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers, and for such internal control as management determines is necessary to enable the preparation of parent company only financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the parent company only financial statements, management is responsible for assessing Elite Semiconductor Microelectronics Technology Inc.’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 Elite Semiconductor Microelectronics Technology Inc. or to cease operations, or has no realistic alternative but to do so.

Those charged with governance, including audit committee, are responsible for overseeing Elite Semiconductor Microelectronics Technology Inc.’s financial reporting process.

Auditor’s responsibilities for the audit of the parent company only financial statements

Our objectives are to obtain reasonable assurance about whether the parent company only financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ROC GAAS 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 parent company only financial statements.

As part of an audit in accordance with ROC GAAS, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• A. Identify and assess the risks of material misstatement of the parent company only 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,

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intentional omissions, misrepresentations, or the override of internal control;

• B. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Elite Semiconductor Microelectronics Technology Inc.’s internal control;

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

• D. 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 Elite Semiconductor Microelectronics Technology Inc.’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the parent company only financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause Elite Semiconductor Microelectronics Technology Inc. to cease to continue as a going concern;

• E. Evaluate the overall presentation, structure and content of the parent company only financial statements, including the disclosures, and whether the parent company only financial statements represent the underlying transactions and events in a manner that achieves fair presentation; and

• F. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within Elite Semiconductor Microelectronics Technology Inc. to express an opinion on the parent company only financial statements. We are responsible for the direction, supervision and performance of parent company only audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

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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 parent company only financial statements of the current year and are therefore the key audit matters. We describe these matters in our auditor’s 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.

Cheng, Ya-Huei

Li, Tien-Yi

for and on behalf of PricewaterhouseCoopers, Taiwan

February 26, 2021

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Elite Semiconductor Microelectronics Technology Inc. and Subsidiaries Consolidated Balance Sheets December 31, 2020 and 2019

Assets	Notes 6(1) 6(2) 6(4) 7(2) 6(5) 8 6(3) 6(6) 6(7) 6(8) 6(9) 6(10)(11) 6(26) 8	December 31,2020 Amount % $ 2,719,155 21 168,548 1 136,704 1 - - 1,505,780 12 94,611 1 5,969,644 46 23,477 - 5,183 - 10,623,102 82 32,418 - 1,291,337 10 776,013 6 72,090 - 17,701 - 111,688 1 3,813 - 77,055 1 2,382,115 18 $ 13,005,217 100	Unit: NT$ thousand December 31,2019 Amount % $ 1,817,377 17 150,841 2 140,906 1 34 - 1,160,173 11 79,745 1 4,968,524 48 21,863 - 6,602 - 8,346,065 80 25,388 - 1,225,036 12 695,067 6 72,798 1 18,671 - 81,177 1 4,174 - 10,357 - 2,132,668 20 $ 10,478,733 100
		Amount $ 2,719,155 168,548 136,704 - 1,505,780 94,611 5,969,644 23,477 5,183 10,623,102 32,418 1,291,337 776,013 72,090 17,701 111,688 3,813 77,055 2,382,115 $ 13,005,217	Amount $ 1,817,377 150,841 140,906 34 1,160,173 79,745 4,968,524 21,863 6,602 8,346,065 25,388 1,225,036 695,067 72,798 18,671 81,177 4,174 10,357 2,132,668 $ 10,478,733
Current assets 1100 Cash and cash equivalents 1110 Financial assets at fair value through profit or loss - current 1136 Financial assets at amortized cost - current 1150 Notes receivable, net 1170 Accounts receivable, net 1200 Other receivables 130X Inventories 1410 Prepayments 1470 Other current assets 11XX Total current assets Non-current assets 1517 Financial assets at fair value through other comprehensive income - non-current 1550 Investment accounted for under the equity method 1600 Property, plant and equipment 1755 Right-of-use assets 1760 Investment property, net 1780 Intangible assets 1840 Deferred income tax assets 1900 Other non-current assets 15XX Total non-current assets 1XXX Total assets

(Continued)

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Elite Semiconductor Microelectronics Technology Inc. and Subsidiaries Consolidated Balance Sheets December 31, 2020 and 2019

Liabilities and equity

Unit: NT$ thousand December 31,2020 December 31,2019 Notes Amount % Amount % 6(12) $ 1,340,000 10 $ 270,000 3 149,756 1 - - 6(19) 5,336 - 3,949 - 2,115 - 1,890 - 2,281,658 18 2,134,680 20 6(13) 688,630 5 450,874 4 147,677 1 39,960 1 6,368 - 6,695 - 9,250 - 4,325 - 4,630,790 35 2,912,373 28 16,495 - 15,083 - 6(26) 12,442 - 4,731 - 66,561 1 66,540 1 6(14) 14,886 - 18,546 - 110,384 1 104,900 1 4,741,174 36 3,017,273 29 6(16) 2,857,589 22 2,857,589 27 6(17) 109,677 1 104,305 1 6(18) 1,409,039 11 1,359,235 13 8,524 - - - 4,019,327 31 3,286,176 31 5,536 - ( 8,524) - 6(16) ( 145,649) ( 1) ( 137,321) ( 1 ) 8,264,043 64 7,461,460 71 11 $ 13,005,217 100 $ 10,478,733 100

Current liabilities 2100 Short-term borrowings 2110 Short-term notes and bills payable 2130 Contract liabilities - current 2150 Notes payable 2170 Accounts payable 2200 Other payables 2230 Current income tax liabilities 2280 Lease liabilities - current 2300 Other current liabilities 21XX Total current liabilities Non-current liabilities 2550 Provisions - non-current 2570 Deferred income tax liabilities 2580 Lease liabilities – non-current 2600 Other non-current liabilities 25XX Total non-current liabilities 2XXX Total liabilities Equity Share capital 3110 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 3500 Treasury shares 3XXX Total equity Significant Events after the End of the Balance Sheet Date 3X2X Total liabilities and equity

The accompanying notes are an integral part of these parent company only financial statements.

Chairman: Hsing-Hai Chen

Accounting Manager: Candy Chu

Manager: Ming-Chien Chang

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Elite Semiconductor Microelectronics Technology Inc. and Subsidiaries Parent Company Only Statements of Comprehensive Income Years ended December 31, 2020 and 2019

Items

Unit: NT$ thousand (Except earnings per share) 2020 2019 Notes Amount % Amount % 6(19) 7(2) $ 15,252,723 100 $ 11,964,770 100 6(5) (24) (25) 7(2)( 12,675,087) ( 83)( 10,219,721) ( 85 ) 2,577,636 17 1,745,049 15 2,577,636 17 1,745,049 15 6(24) (25) 7(2) ( 273,154 ) ( 2) ( 200,427) ( 2 ) ( 276,844 ) ( 2) ( 228,753) ( 2 ) 7(2) ( 935,087 ) ( 6) ( 726,964) ( 6 ) 12(2) 8,582 - ( 10,006) - ( 1,476,503 ) ( 10)( 1,166,150) ( 10 ) 1,101,133 7 578,899 5 6(20) 17,540 - 27,979 - 6(21) 7(2) 64,940 - 50,718 - 6(22) ( 35,218 ) - ( 55,191) - 6(23) ( 11,308 ) - ( 8,715) - 6(6) 106,002 1 ( 30,257) - 141,956 1 ( 15,466) - 1,243,089 8 563,433 5 6(26) ( 166,663 ) ( 1)( 66,028) ( 1 ) $ 1,076,426 7 $ 497,405 4 6(14) $ 812 - $ 636 - 6(3) 7,030 - ( 4,262) - 7,030 - ( 4,262) - $ 14,872 - ($ 7,888) - $ 1,091,298 7 $ 489,517 4 6(27) $ 3.85 $ 1.78 6(27) $ 3.83 $ 1.77

4000 Operating revenue 5000 Operating costs 5900 Gross profit 5950 Gross profit - net Operating expenses 6100 Selling expenses 6200 Administrative expenses 6300 Research and development expenses 6450 Expected credit impairment gain (loss) 6000 Total operating expenses 6900 Operating profit Non-operating income and expenses 7100 Interest income 7010 Other income 7020 Other gains or losses 7050 Financial costs 7070 Share of profit (loss) of associates and joint ventures accounted for under equity method 7000 Total non-operating income and expenses 7900 Profit before income tax 7950 Income tax expenses 8200 Profit for the period Other comprehensive income (loss) - net Items not reclassified to profit or loss 8311 Gain on remeasurements of defined benefit plans 8316 Unrealized gain (loss) on valuation of equity instruments at fair value through other comprehensive income 8330 Share of other comprehensive income (loss) of associates and joint ventures accounted for under equity method - items not reclassified to profit or loss 8300 Other comprehensive income (loss) - net 8500 Total comprehensive income for the period Basic earnings per share 9750 Basic earnings per share Diluted earnings per share 9850 Diluted earnings per share

The accompanying notes are an integral part of these parent company only financial statements.

Manager: Ming-Chien Chang

Accounting Manager: Candy Chu

Chairman: Hsing-Hai Chen

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Elite Semiconductor Microelectronics Technology Inc. and Subsidiaries Parent Company Only Statements of Changes in Equity Years ended December 31, 2020 and 2019

Unit: NT$ thousand

Retained earnings

									Retained earnings
2019 Balance at January 1, 2019 Profit for the period Other comprehensive income for the period Comprehensive income for the period Distribution of 2018 earnings Legal reserve appropriated Cash dividends of ordinary share Reversal of special reserve Recognition of effects from change in ownership interests in subsidiaries - cash dividends distribution from subsidiaries Disposal of subsidiaries Adjustment of capital reserve due to cash dividends that subsidiaries received from paren Change in associates and joint ventures accounted for under equity method Expired cash dividends transferred to capital surplus Adjustment of payments of expired cash dividends Balance at December 31, 2019 2020 Balance at January 1, 2020 Profit for the period Other comprehensive income for the period Comprehensive income for the period Distribution of 2019 earnings Legal reserve appropriated Cash dividends of ordinary share Special reserve appropriated Acquisition of company's share by subsidiary recognized as treasury share Recognition of effects from change in ownership interests in subsidiaries - cash dividends distribution from subsidiaries Adjustment of capital reserve due to cash dividends that subsidiaries received from parent Recognition of effects from change in ownership interests in subsidiaries - subsidiary acquired non-controlling interest Expired cash dividends transferred to capital surplus Balance at December 31, 2020	Note		Common stock		Capital surplus		Legal reserve		Special reserve		Unappropriated retained earnings	Unrealized gain (loss) on financial assets measured at fair value through other comprehensive income			Treasury share		Total equity
	6(18) 6(17) 6(17) t 6(17) 6(17) 6(17) 6(17) 6(18) 6(17) 6(17) 6(17) 6(17)		$ 2,857,589 - - - - - - - - - - - - $ 2,857,589 $ 2,857,589 - - - - - - - - - - - $ 2,857,589		$ 59,072 - - - - - - 1,146 35,475 8,438 180 39 ( 45 ) $ 104,305 $ 104,305 - - - - - - - 1,146 5,925 ( 1,781 ) 82 $ 109,677		$ 1,288,584 - - - 70,651 - - - - - - - - $ 1,359,235 $ 1,359,235 - - - 49,804 - - - - - - - $ 1,409,039		$ 194,377 - - - - - ( 194,377 ) - - - - - - $ - $ - - - - - - 8,524 - - - - - $ 8,524		$ 3,093,047 497,405 636 498,041 ( 70,651 ) ( 428,638 ) 194,377 - - - - - - $ 3,286,176 $ 3,286,176 1,076,426 812 1,077,238 ( 49,804 ) ( 285,759 ) ( 8,524 ) - - - - - $ 4,019,327		$ - - ( 8,524 ) ( 8,524 ) - - - - - - - - - ($ 8,524 ) ($ 8,524 ) - 14,060 14,060 - - - - - - - - $ 5,536		($ 137,321 ) - - - - - - - - - - - - ($ 137,321 ) ($ 137,321 ) - - - - - - ( 8,328 ) - - - - ($ 145,649 )		$ 7,355,348 497,405 ( 7,888 ) 489,517 - ( 428,638 ) - 1,146 35,475 8,438 180 39 ( 45 ) $ 7,461,460 $ 7,461,460 1,076,426 14,872 1,091,298 - ( 285,759 ) - ( 8,328 ) 1,146 5,925 ( 1,781 ) 82 $ 8,264,043

The accompanying notes are an integral part of these parent company only financial statements.

Chairman: Hsing-Hai Chen

Manager: Ming-Chien Chang

Accounting Manager: Candy Chu

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Elite Semiconductor Microelectronics Technology Inc. and Subsidiaries Consolidated Statements of Cash Flows Years ended December 31, 2020 and 2019

Cash flows from operating activities Profit before income tax for the period Adjustments Income and expenses having no effect on cash flows Depreciation Amortization Expected credit impairment loss (gain) Net loss (gain) on financial assets at fair value through profit or loss Interest expenses Interest income Dividend income Impairment loss Share of (loss) profit of associates and joint ventures accounted for under equity method Gains arising from lease modifications Changes in assets/liabilities relating to operating activities Net changes in assets relating to operating activities Financial assets at fair value through profit and loss Notes receivable Accounts receivable Other receivables Inventories Prepayments Other current assets Net changes in liabilities relating to operating activities Notes payable Accounts payable Contract liabilities - current Other payables Other current liabilities Other non-current liabilities Cash inflow generated from operations Interest received Interest paid Income taxes paid Net cash flows from operating activities

Unit: NT$ thousand Notes 2020 2019 $ 1,243,089 $ 563,433 6(7) (8) (9) (24) 306,407 392,093 6(10) (24) 111,401 84,226 12(2) ( 8,582 ) 10,006 6(2) (22) ( 17,707 ) 19,145 6(23) 11,308 8,715 6(20) ( 17,540 ) ( 27,979 ) 6(21) ( 3,473 ) ( 11,498 ) 6(10) (11) (22) 25,352 12,057 ( 106,002 ) 30,257 6(22) ( 91 ) - - 40,915 34 ( 34 ) ( 337,025 ) ( 110,776 ) ( 15,468 ) ( 6,889 ) ( 1,001,120 ) 796,007 ( 1,614 ) 52,706 ( 2,550 ) ( 3,844 ) 225 90 146,978 283,737 1,387 1,509 148,355 ( 53,299 ) 4,925 509 386 392 488,675 2,081,478 18,142 27,053 ( 10,093 ) ( 7,388 ) ( 50,874 ) ( 151,522 ) 445,850 1,949,621

(Continued)

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Elite Semiconductor Microelectronics Technology Inc. and Subsidiaries Consolidated Statements of Cash Flows Years ended December 31, 2020 and 2019

Cash flows from investing activities Acquisition of financial assets at amortized cost Disposal of financial assets at amortized cost Proceeds from capital withdrawal from liquidation of subsidiaries Acquisition of property, plant and equipment (Increase) decrease in prepayments for equipment Acquisition of intangible assets (Increase) Decrease in guarantee deposit paid Dividends received Net cash flows from investing activities Cash flows from financing activities Increase (decrease) in short-term borrowings Increase (decrease) in short-term notes and bills payable Lease principal repayment (Decrease) Increase in guarantee deposit received Cash dividends paid Expired cash dividends Payments of expired cash dividends Net cash flows from (used in) financing activities Net (decrease) increase in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period

Unit: NT$ thousand Notes 2020 2019 ( $ 140,157 ) ( $ 140,906 ) 144,359 - 19,408 42,782 6(28) ( 291,692 ) ( 268,048 ) ( 62,673 ) 52,996 6(10) ( 167,264 ) ( 44,832 ) ( 56 ) 340 27,760 32,538 ( 470,315 ) ( 325,130 ) 6(28) 1,070,000 ( 100,000 ) 6(28) 150,476 ( 99,932 ) 6(28) ( 5,320 ) ( 7,956 ) 6(28) ( 3,236 ) 110 6(18) ( 285,759 ) ( 428,638 ) 6(17) 82 39 6(17) - ( 45 ) 926,243 ( 636,422 ) 901,778 988,069 6(1) 1,817,377 829,308 6(1) $ 2,719,155 $ 1,817,377

The accompanying notes are an integral part of these parent company only financial statements.

Manager: Ming-Chien Chang

Chairman: Hsing-Hai Chen

Accounting Manager: Candy Chu

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Elite Semiconductor Microelectronics Technology Inc. Notes to the Parent Company Only Financial Statements Years Ended December 31, 2020 and 2019

Unit: NT$ thousand (Unless otherwise indicated)

1. History and Organization

Elite Semiconductor Microelectronics Technology Inc. (the Company) was founded in May 1998 and started operation in December of the same year. The core business of the Company includes research, development, production, manufacture, and sales of dynamic and static random access memory, flash memory, analog integrated circuit, analog and digital mixed integrated circuit. The Group also provides technical services related to product design and R&D.

The Company merged with Ji Xin Technology Co., Ltd. On December 5, 2005, and merged with Eon Silicon Solution Inc. on June 8, 2016, and the Company is the surviving company.

2. The Date of Authorization for Issuance of the Consolidated Financial Statements and Procedures for Authorization

The consolidated financial statements were reported to the Board of Directors on February 26, 2021.

3. Application of New Standards, Amendments and Interpretation s

• (1) Effect of the adoption of new issuance of or amendments to International Financial Reporting Standards ( “IFRS”) as endorsed by the Financial Supervisory Commission ( “FSC”)

New standards, interpretations and amendments endorsed by the FSC effective from 2020 are as follows:

	Effective Date by
	International Accounting
New Standards,AmendmentsandInterpretations	StandardsBoard
Amendments to IAS 1 and IAS 8, “Disclosure Initiative - Definition of Material”	January 1, 2020
Amendments to IFRS 3, “Definition of a Business”	January 1, 2020
Amendments to IFSR 9, IAS 39, and IFRS 7, “Interest rate benchmark reform”	January 1, 2020
Amendments to IFRS 16, “Covid-19-Related Rent Concessions”	June 1, 2020 (Note)

Note: Earlier application from January 1, 2020 is allowed by FSC.

The above standards and interpretations have no significant impact to the Company's financial condition and financial performance based on the Company's assessment.

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• (2) Effect of New Issuances of or Amendments to IFRSs as Endorsed by the FSC but not yet Adopted by the Company

New standards, interpretations and amendments endorsed by the FSC effective from 2021 are as follows:

from 2021 are as follows:
	Effective Date by
	International
	Accounting Standards
New Standards, Amendments and Interpretations	Board
Amendments to IFRS 4, “Extension of the Temporary Exemption from Applying IFRS 9”	January 1, 2021
Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16,
“Interest Rate Benchmark Reform— Phase 2”	January 1, 2021

The above standards and interpretations have no significant impact to the Company’s financial condition and financial performance based on the Company's assessment.

• (3) Effects of IFRSs Issued by IASB but not yet Endorsed by the FS C

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

	Effective Date
	by International
	Accounting
New Standards,AmendmentsandInterpretations	StandardsBoard
Amendments to IFRS 3, “Reference to the Conceptual Framework”	January 1, 2022
Amendments to IFRS 10 and IAS 28, “Sale or Contribution of Assets	To be
between an Investor and its Associate or Joint Venture”	determined by
	IASB
IFRS 17, “Insurance Contracts”	January 1, 2023
Amendments to IFRS 17, “Insurance Contracts”	January 1, 2023
Amendments to IAS 1, “Classification of Liabilities as Current or Non-	January 1, 2023
current”
Amendments to IAS 1, “Disclosure of accounting policies”	January 1, 2023
Amendments to IAS 8, “Definition of accounting estimates”	January 1, 2023
Amendments to IAS 16, “Property, Plant and Equipment -Proceeds	January 1, 2022
before Intended Use”
Amendments to IAS 37, “Onerous Contracts - Cost of Fulfilling a	January 1, 2022
Contract”
Annual Improvements to IFRSs 2018-2020 Cycle	January 1, 2022

The above standards and interpretations have no significant impact to the Company's financial condition and financial performance based on the Company's assessment.

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1. Summary of Significant Accounting Policies

The principal accounting policies applied in the preparation of these parent company only financial statements are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated.

• (1) Compliance statement

The parent company only financial statements of the Company have been prepared in accordance with the “Regulations Governing the Preparation of Financial Reports by Securities Issuers”.

• (2) Basis of preparation

• A. Except for the following items, these parent company only financial statements have been prepared under the historical cost convention:

  • (a) Financial assets (including derivatives instruments) at fair value through profit or loss.

  • (b) Financial assets at fair value through other comprehensive in come.

  • (c) Defined benefit liabilities recognized based on the net amount of pension fund assets less present value of defined benefit obligations.

• B. The preparation of financial statements in conformity with the “Regulations Governing the Preparation of Financial Reports by Securities Issuers”, International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the FSC (collectively referred herein as the “IFRSs”), requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Company’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are estimates are significant to the consolidated financial statements are disclosed in Note 5.

(3) Foreign currency translation

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

Foreign currency transactions and ba lances

• 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 recognized in profit or loss in the period in which they arise.

• 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 recognized in profit or loss.

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• 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 recognized 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 recognized 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’.

• (4) 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 arising from operating activities that are expected to be realized, 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 realized 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.

• 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) Liabilities arising mainly from trading activities;

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

    • sheet date;

  • (d) Liabilities for which the repayment date cannot be extended unconditionally to more than 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 no t affect its classification.

• (5) 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.

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• (6) Financial assets at fair value through profit or loss

• A. Financial assets at fair value through profit or loss are financial assets that are not measured at amortized cost or fair value through other comprehensive income.

• B. On a regular way purchase or sale basis, financial assets at fair value through profit or loss are recognized and derecognized using trade date acc ounting.

• C. At initial recognition, the Group measures the financial assets at fair value and recognizes the transaction costs in profit or loss. The Company subsequently measures the financial assets at fair value, and recognizes the gain or loss in profit or loss.

• D. The Company recognizes the dividend 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.

• (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 recognize 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 a ssets; 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 recognized and derecognized using trade date accounting.

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

The changes in fair value of equity investments that were recognized 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 recognized as revenue when the right to receive payment is established, future economic benefits associated with the dividend will flow to the Company and the amount of the dividend can be measured reliably.

• (8) Financial assets at amortized cost

• A. Financial assets at amortized cost are those that meet all of the following criteria:

  • (a) The objective of the Group’s business model is achieved by collecting contractual cash flows.

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

~19~

• B. On a regular way purchase or sale basis, financial assets at a mortized cost are recognized and derecognized using trade date accounting.

• C. At initial recognition, the Company measures the financial assets at fair value plus transaction costs. Interest income from these financial assets is included in finance income using the effective interest method. A gain or loss is recognized in profit or loss when the asset is derecognized or impaired.

• D. The Company’s time deposits which do not fall under cash equivalents are those with a short maturity period and are measured at initial investment amount as the effect of discounting is immaterial.

• (9) Accounts and notes receivable

• A. Accounts and notes receivable entitle the Company 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.

(10) Impairment of financial assets

For financial assets at amortized cost, at each reporting dat e, the Company recognizes the impairment provision for 12 months expected credit losses if there has not been a significant increase in credit risk since initial recognition or recognizes 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 Company recognizes the impairment provision for lifetime ECLs.

(11) Derecognition of financial assets

The Company derecognizes a financial asset when the contractual rights to receive the cash flows from the financial asset expire.

(12) Operating leases(lessee)

Rental income under an operating lease (net of any incentives received from the lessor) are recognized in profit or loss on a straight -line basis over the lease term.

(13) Inventories

Inventories are stated at the lower of cost and net realizable value. Cost is determined using the weighted-average method. The cost of finished goods and work in progress comprises raw materials, direct labor, 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 realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated cost of completion and applicable variable selling expenses.

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(14) Investments accounted for using equity method / subsidiaries and associates

• A. Subsidiaries are entities controlled by the Company (including structured entities). The Company controls the entity when the Company 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.

• B. All unrealized profit or loss resulting from transactions between the Company and its subsidiaries have been eliminated in full. Accounting policies of subsidiaries have been adjusted when necessary in order to be consistent with those of the Company.

• C. The Company’s share of profit or loss in subsidiaries after acquisition is recognized in profit or loss, whereas its share of other comprehensive income in subsidiaries after acquisition is recognized in other comprehensive income. If the Company’s share of loss in a subsidiary exceeds its share of equity in such a subsidiary, the Company continues to recognize losses in its shareholding percentage.

• D. If a change in shareholding in a subsidiary does not result in a loss of control (i.e. transactions with non-controlling interests), such a change is accounted for as an equity transaction, that is, a transaction with owners in their capacity as owners. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognized directly in equity.

• E. Associates are all entities over which the Company has significant influence but not control. In general, it is presumed that the investor has significant influence, if an investor holds, directly or indirectly 20 percent or more of the voting power of the investee. Investments in associates are accounted for using the equity method and are initially recognized at cost.

• F. The Company’s share of its associates’ post-acquisition profits or losses is recognized in profit or loss, and its share of post -acquisition movements in other comprehensive income is recognized in other compreh ensive income. When the Company’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognize further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the associate.

• G. When changes in an associate’s equity do not arise from profit or loss or other comprehensive income of the associate and such changes do not affect the Company’s ownership percentage of the associate, the Company recognizes the Company’s share of change in equity of the associate in ‘capital surplus’ in proportion to its ownership.

• H. Unrealized gains on transactions between the Company and its associates are eliminated to the extent of the Company’s interest in the associates. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been adjusted where necessary to ensure consistency with the policies adopted by the Company.

~21~

• I. In the case that an associate issues new shares and the Company does not subscribe or acquire new shares proportionately, which results in a change in the Company’s ownership percentage of the associate but maintains significant influence on the associate, then ‘capital surplus’ and ‘investments accounted for under the equity method’ shall be adjusted for the increase or decrease of its share of equity interest. If the above condition causes a decrease in the Company’s ownership percentage of the associate, in addition to the above adjustment, the amounts previously recognized in other comprehensive income in relation to the associate are reclassified to profit or loss proportionately on the same basis as would be required if the relevant assets or liabilities were disposed of.

• J. Upon loss of significant influence over an associate, the Company remeasures any investment retained in the former associate at its fair value. Any difference between fair value and carrying amount is reco gnized in profit or loss.

• K. When the Company disposes its investment in an associate and loses significant influence over this associate, the amounts previously recognized in other comprehensive income in relation to the associate, are reclassified to profit or loss, on the same basis as would be required if the relevant assets or liabilities were disposed of. If it retains significant influence over this associate, the amounts previously recognized in other comprehensive income in relation to the associat e are reclassified to profit or loss proportionately in accordance with the aforementioned approach.

• L. According to Regulations Governing the Preparation of Financial Reports by Securities Issuers, the profit or loss of the period and other comprehensive income presented in parent company only financial statements shall be the same as the allocations of profit or loss of the period and of other comprehensive income attributable to owners of the parent presented in the financial statements prepared on a consolidated basis, and the owners' equity presented in the parent company only financial statements shall be the same as the equity attributable to owners of the parent presented in the financial statements prepared on a consolidated basis.

(15) Property, plant and equipment

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

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

• C. Land is not depreciated. Other property, plant and equipment apply cost model and are depreciated using the straight -line method to allocate their cost 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.

~22~

• 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 a s follows

  • Buildings and structures 3~20 years Machinery and equipment 3~8 years Testing equipment 3~8 years Other 3~10 years

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

• A. Leases are recognized 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 Company. For short-term leases or leases of low value assets, lease payments are recognized 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 amortized cost using the interest method and recognizes interest expense over the lease term.

Starting from the lease date, the Group assesses whether it can reasonably determine its option to extend the lease or purchase the underlying asset, or not to terminate the lease. The Group considers all relevant facts and circumstances that will generate economic incentives to exercise or not exercise the options. Such circumstances include all expected changes in facts and situations from the start of the lease to the day when the option is exercised. Main factors to consider include contractual terms and conditions within the period of options and the importance of the underlying asset to the lessee’s operations, etc. The lease term will be reassessed if a significant change or a major change in circumstances occurs within the Company's control range.

The lease liability is remeasured and the amount of remeasurement is recognized 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.

• C. At the commencement date, the right-of-use asset is stated at cost. The cost is the amount of the initial measurement of lease liability. 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 a sset’s useful life or the end of the lease term. When the lease liability is remeasured, the amount of remeasurement is recognized as an adjustment to the right -of-use asset.

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(17) Investment property

An investment property is stated initially at its cost and me asured subsequently using the cost model. Investment property is depreciated on a straight -line basis over its estimated useful life of 20 years.

• (18) Intangible assets

• A. Patent and technical skill, customer relationship

Separately acquired patent is stated at historical cost. Patent and technical skill, customer relationship acquired in a business combination are recognized at fair value at the acquisition date and amortized on a straight - line basis over their estimated useful lives of 3 years.

• B. Goodwill

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

• C. Other intangible assets, mainly computer software, are stated at cost and amortized on a straight-line basis over their estimated useful lives of 1 ~ 3 years.

• (19) Impairment of non- financial assets

• A. The Company 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 recognized 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 recognizing 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 amortized historical cost would have been if the impairment had not been recognized.

• B. The recoverable amount of goodwill is evaluated periodically. An impairment loss is recognized for the amount by which the asset ’s carrying amount exceeds its recoverable amount. Impairment loss of goodwill previously recognized 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. Each unit or group of units to which the goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes. Goodwill is monitored at the operating segment level.

~24~

(20) Borrowings

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

(21) Notes and accounts payable

Notes and accounts payable are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. They are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method. However, for short -term accounts payable without bearing interest, as the effect of discounting is insignificant, they are measured subsequently at original invoice amount.

(22) Derecognition of financial liabilities

A financial liability is derecognized when the obligation specified in the contract is either discharged or cancelled or expires.

(23) Provisions

Provisions of decommissioning are recognized when the Group has a present legal or constructive obligation as a result of past events, and it is probable that an outflow of economic resources will be required to settle the obligation and the amount of the obligation can be reliably estimated. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation on the balance sheet date, which is discounted using a pre - tax discount rate that reflects the current market assessments of the time value of money and the risks specific to the obligation. When discounting is used, the increase in the provision due to passage of time is recognized as interest expense. Provisions are not recognized for future operating losses.

(24) Employee benefits

A. Short-term employee benefits

Short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in respect of service rendered by employees in a period and should be recognized as expense in that period when the employees render service.

• B. Pensions

• (a) Defined contribution plans

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

• (b) Defined benefit plans

• 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 with the Group in current period or prior periods. The liability recognized in the balance sheet in respect of defined benefit pension plans is the present value of the defined

~25~

benefit obligation at the balance sheet date less the fa ir 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 government bonds at the balance sheet date of a currency and term consistent with the currency and term of the employment benefit obligations.

• II. Remeasurements arising on defined benefit plans are recognized in other comprehensive income in the period in which they arise and are recorded as other equity.

• III. Past service costs are recognized immediately in profit or loss.

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

Employees’ compensation and directors’ and supervisors’ remuneration are recognized 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.

- (25) 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 recognized 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 non-vesting 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 recognized is based on the number of equity instruments that eventually vest.

(26) Income tax

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

• B. The current income tax expense is calculated on the basis of the tax laws substantively enacted at the balance sheet date in the countries where the Company operate and generate taxable income. Management periodic ally 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.

~26~

• C. Deferred tax is recognized, using the balance sheet liability method, on temporary differences arising between t he 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 by the balance sheet date and are expected to apply when the related deferred tax asset is realized or the deferred tax liability is settled.

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

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

• F. If a change in tax rate is enacted, the Group recognizes the effect of the change immediately in the interim period in which the change occurs. The effect of the change on items recognized outside profit or loss is recognized in other comprehensive income or equity while the effect of the ch ange on items recognized in profit or loss is recognized in profit or loss.

(27) Share capital

• A. 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.

• B. Where the Company repurchases the Company’s equity share capital that has been issued, the consideration paid, including any directly attributable incremental costs (net of income taxes) is deducted from equity attributable to the Company’s equity holders. Where such shares are subsequently reissued, the difference between their book value and any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, is included in equity attributable to the Company’s equity holders.

(28) Dividends

Dividends are recorded in the Company’s financial statements in the period in which they are resolved 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.

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(29) Revenue recognition

• A. The Group manufactures and sells integrated circuit. Sales are recognized 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. The Group accepts sales orders from customers. Sales revenue is recognized according to the contract price, and the Group transfers the promised goods or services to customers. Since the customer's payment period does not exceed one year, the Group has not adjusted the monetary time value of the transaction price.

• C. A receivable is recognized 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.

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

The preparation of these parent company only financial statements requires management to make critical judgements in applying the Company’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; and the related information is addressed below:

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

None.

(2) Critical accounting estimates and assumptions

Evaluation of inventories

As inventories are stated at the lower of cost and net realizable value, the Group must determine the net realizable value of inventories on balance sheet date using judgements and estimates. Due to the rapid technology innovation, the Group evaluates the amounts of obsolete inventories or inventories without market selling value on balance sheet date, and writes down the cost of inventories to the net realizable value. Such an evaluat ion of inventories is principally based on the demand for the products within the specified period in the future. Therefore, there might be material changes to the evaluation. As of December 31, 2020, the carrying amount of inventories was $5,969,644.

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6. Details of Significant Accounts

(1) Cash and cash equivalents

Cash on hand and revolving funds Checking accounts and demand deposits Time deposits	December31,2020 December31,2019	December31,2020 December31,2019	December31,2020 December31,2019
		$ 115 879,139 1,839,901 $ 2,719,155	$ 115 343,791 1,473,471
			$ 1,817,377

• A. The Group associates 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. Details of the Group's cash and cash equivalents pledged to others as collateral are provided in Note 8.

(2) Financial assets at fair value through profit or loss

Item December 31, 2020 December 31, 2019	Item December 31, 2020 December 31, 2019	Item December 31, 2020 December 31, 2019
Current items: Financial assets mandatorily measured at fair value through profit or loss Listed stock Emerging stocks Beneficiary certificates Bonds Subtotal Valuation adjustment Total	$ 286 115,673 45,465 31,226 192,650 ( 24,102) $ 168,548	$ 286 115,673 45,465 31,226
		192,650 ( 41,809)
		$ 150,841

• A. Amounts recognised in profit or loss in relation to financial assets at fair value through profit or loss are listed below:

Financial assets mandatorily measured at fair value through profit or loss Equity instruments Debt instruments Beneficiary certificates Total	Year ended December 31,	Year ended December 31,
	2020	2019
	$ 9,300 2,991 5,416 $ 17,707	($ 24,397) 2,750 2,502 ($ 19,145)

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• B. The Company has no financial assets at fair value through profit or loss pledged to others.

• C. Information relating to credit risk is provided in Note 12(2)C(b).

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

Item	December31,2020	December31,2019
Non-current items: Equity instruments Unlisted stock Valuation adjustment	$ 29,650 2,768 $ 32,418	$ 29,650 ( 4,262) $ 25,388

The Company has elected to classify equity investments that are considered to strategic investments as financial assets at fair value through other comprehensive income. The fair value of such investments amounted to$32,418 and $25,388 as at December 31, 2020 and 2019, respectively.

(4) Accounts receivable

Accounts receivable - general customers Accounts receivable - related parties Less: Allowance for losses	December 31, 2020 December 31, 2019 $ 1,510,520 $ 1,174,227 973 241 1,511,493 1,174,468 ( 5,713) ( 14,295) $ 1,505,780 $ 1,160,173	December 31, 2020 December 31, 2019 $ 1,510,520 $ 1,174,227 973 241 1,511,493 1,174,468 ( 5,713) ( 14,295) $ 1,505,780 $ 1,160,173	December 31, 2020 December 31, 2019 $ 1,510,520 $ 1,174,227 973 241 1,511,493 1,174,468 ( 5,713) ( 14,295) $ 1,505,780 $ 1,160,173	December 31, 2020 December 31, 2019 $ 1,510,520 $ 1,174,227 973 241 1,511,493 1,174,468 ( 5,713) ( 14,295) $ 1,505,780 $ 1,160,173
		$ 1,510,520 973 1,511,493 ( 5,713) $ 1,505,780	$ 1,174,227 241
			1,174,468 ( 14,295)
				$ 1,160,173

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

Not past due Past due-within 30 days Past due-31-90 days Past due-91-180 days Past due-over 180 days	December 31, 2020 December 31, 2019 $ 1,505,780 $ 1,159,935 - 238 - - - - 5,713 14,295 $ 1,511,493 $ 1,174,468	December 31, 2020 December 31, 2019 $ 1,505,780 $ 1,159,935 - 238 - - - - 5,713 14,295 $ 1,511,493 $ 1,174,468	December 31, 2020 December 31, 2019 $ 1,505,780 $ 1,159,935 - 238 - - - - 5,713 14,295 $ 1,511,493 $ 1,174,468
			$ 1,505,780 - - - 5,713 $ 1,511,493

The above aging analysis was based on past due date.

• B. As at December 31, 2020 and 2019, without taking into account any collateral held or other credit enhancements, the maximum hedge to credit risk in respect of the amount that best represents the Group ’s accounts receivable were$1,505,780 and $1,160,173, respectively.

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• C. The collaterals and fair value held by the Group as guarantee for accounts receivable are as follows:

receivable are as follows:
Bank guarantee Pledged certificate of deposit Guarantee deposits received (shown as “other non-current liabilities”) Letters of credit Company promissory note/check	December 31, 2020 December 31, 2019 $ 33,044 $ 43,494 4,272 7,500 5,526 8,794 760,162 546,672 555,221 366,621 $ 1,358,225 $ 973,081
		$ 33,044 4,272 5,526 760,162 555,221 $ 1,358,225

• D. Information relating to credit risk is provided in Note 12(2).

• E. As at December 31, 2020 and 2019, accounts receivable were all from contracts with customers. As at January 1, 2019, the balance of receivables from contracts with customers amounted to $1,059,404.

• F. The Group has no accounts receivable pledged to others as collateral.

• (5) Inventories

Raw materials Work in progress Finished goods Inventory in transit Raw materials		December31,2020	December31,2020	Bookvalue $ 127,378 4,704,280 1,131,505 6,481 $ 5,969,644
		Cost	Allowance for valuation loss
		$ 138,104 4,724,546 1,199,284 6,481 $ 6,068,415	($ 10,726) ( 20,266) ( 67,779) - ($ 98,771)

Raw materials Work in progress Finished goods Inventory in transit		December 31, 2019	December 31, 2019	Bookvalue $ 146,724 3,942,623 874,835 4,342 $ 4,968,524
		Cost	Allowance for valuation loss
		$ 156,518 4,013,286 963,140 4,342 $ 5,137,286	($ 9,794) ( 70,663) ( 88,305) - ($ 168,762)

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The Group recognized as expense or loss:

Cost of goods sold Reversal of allowance on market value decline and obsolete and slow-moving inventories		Year ended December 31, 2020 2019 $ 12,745,078 $ 10,305,310 ( 69,991) ( 85,589) $ 12,675,087 $ 10,219,721	Year ended December 31, 2020 2019 $ 12,745,078 $ 10,305,310 ( 69,991) ( 85,589) $ 12,675,087 $ 10,219,721
		2020
		$ 12,745,078 ( 69,991) $ 12,675,087

The reversal of allowance were recognized due to sale of certain inventories which were previously provided with allowance for price decline.

(6) Investments accounted for under the equity method

December 31, 2020 Subsidiaries: Elite Semiconductor Memory Technology Inc. $ 24,236 Charng Feng Investment Ltd. 511,029 Elite Investment Services Ltd. 620,500 Elite Semiconductor (B.V.I.) Ltd. - Jie Yong Investment Ltd. 136,983 Eon Silicon Solution Inc. USA ( 1,411) $ 1,291,337	December 31, 2020	December 31, 2019
		$ 30,179 394,670 627,721 26,627 147,009 ( 1,170) $ 1,225,036

Information about subsidiaries of the Company is provided in Note 4(3) in 2020 consolidated financial statements.

~32~

(7) Property, plant and equipment

At January 1, 2020 Cost Accumulated depreciation and impairment 2020 At January 1 Additions Transfer (Note) Depreciation charge At December 31 At December 31, 2020 Cost Accumulated depreciation and impairment At January 1, 2019 Cost Accumulated depreciation and impairment 2019 At January 1 Additions Transfer (Note) Depreciation charge At December 31 At December 31, 2019 Cost Accumulated depreciation and impairment			Land Buildings and structures Machinery equipment Testing equipment	Land Buildings and structures Machinery equipment Testing equipment	Land Buildings and structures Machinery equipment Testing equipment	Land Buildings and structures Machinery equipment Testing equipment	Others
			$ 9,023 $635,941 $429,694 $250,644 - ( 364,888) ( 352,538) ( 148,491) $ 9,023 $271,053 $ 77,156 $102,153 $ 9,023 $271,053 $ 77,156 $102,153 - 505 85,605 38,091 - - 2,719 1,455 - ( 34,055) ( 22,509) ( 22,333) $ 9,023 $237,503 $142,971 $119,366 $ 9,023 $636,446 $518,018 $284,731 - ( 398,943) ( 375,047) ( 165,365) $ 9,023 $237,503 $142,971 $119,366 Land Buildings and structures Machinery equipment Testing equipment				$1,228,482 ( 992,800) $ 235,682 $ 235,682 252,195 - ( 220,727) $ 267,150 $1,480,677 ( 1,213,527) $ 267,150 Others
			$ 9,023 - $ 9,023 $ 9,023 - - - $ 9,023 $ 9,023 - $ 9,023	$615,250 ( 332,185) $283,065 $283,065 5,496 15,195 ( 32,703) $271,053 $635,941 ( 364,888) $271,053	$393,787 ( 313,872) $ 79,915 $ 79,915 35,908 - ( 38,667) $ 77,156 $429,694 ( 352,538) $ 77,156	$181,379 ( 128,711) $ 52,668 $ 52,668 10,059 59,205 ( 19,779) $102,153 $250,644 ( 148,491) $102,153	$1,069,371 ( 701,219) $ 368,152 $ 368,152 159,111 - ( 291,581) $ 235,682 $1,228,482 ( 992,800) $ 235,682

~33~

• Note: Transferred from prepayments for equipment (shown as “other noncurrent assets”).

• A. For the years ended December 31, 2020 and 2019 no interest expense was capitalized on property, plant and equipment in the Company.

• B. The Group has no property, plant and equipment pledged to others.

• (8) Leasing arrangements- lessee

• A. The Company leases various assets including land, buildings and structures, business vehicles, printers. Rental contracts are typically made for periods of 2 to 20 years. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. Short -term leases with a lease term of 12 months or less comprise business vehicles.

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

as follows:
Land Buildings and structures Business vehicles Printers	December31,2020 December31,2019
		Book value
		$ 62,221 6,496 3,083 290 $ 72,090	$ 65,641 5,701 470 986
			$ 72,798

Land Buildings and structures Business vehicles Printers		YearendedDecember31, 2020 2019 Depreciationcharge $ 3,420 $ 3,420 986 2,545 711 1,732 696 696 $ 5,813 $ 8,393
		2020
		Depreciation
		$ 3,420 986 711 696 $ 5,813

• C. For the years ended December 31, 2020 and 2019, the additions to right -ofuse assets were $10,410 and $0, respectively.

• D. The information on profit and loss accounts relating to lease contracts is as follows:

follows:
Items affecting profit or loss Interest expense on lease liabilities Expense on short-term lease contracts	YearendedDecember31,
	2020	2019
	$ 1,046 $ 1,436	$ 1,075 $ 1,232

~34~

• E. For years ended December 31, 2020 and 2019, the Group’s total cash outflow for leases were $7,802 and $10,263, respectively.

• (9) Investment property

for leases were $7,802 and $10,263, respectively. Investment property
At January 1, 2020 Cost Accumulated depreciation and impairment 2020 At January 1 Depreciation charge At December 31 At December 31, 2020 Cost Accumulated depreciation and impairment At January 1, 2019 Cost Accumulated depreciation and impairment 2019 At January 1 Depreciation charge At December 31 At December 31, 2019 Cost Accumulated depreciation and impairment		Buildings and structures $ 20,369 ( 1,698) $ 18,671 $ 18,671 970) $ 17,701 $ 20,369 ( 2,668) $ 17,701 Buildings and structures $ 20,369 ( 728) $ 19,641 $ 19,641 ( 970) $ 18,671 $ 20,369 ( 1,698) $ 18,671
	(

~35~

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

Rental income from investment property Direct operating expenses arising from the investment property that generated rental income during the period		Year ended December 31, 2020 2019 $ 2,470 $ 2,436 $ 970 $ 970
		2020
		$ 2,470 $ 970

• B. The fair value of the investment property held by the Group as at December 31, 2020 and 2019 was $10,516 and $10,538, respectively, which was valued by income approach. Key assumptions are as follows:

	December 31, 2020	December 31, 2019
Rate of net return on capital (Note)	13.29%	13.86%
Note: Calculated based on the	weighted average capital	cost of the issuer.

• C. For the years ended December 31, 2020 and 2019 no interest expense was capitalized on investment property in the Group.

• D. The Group has no investment property pledged to others.

(10) Intangible assets

Patents and Customer Technical skill Relationship Goodwill At January 1, 2020 Cost $ 34,478 $ 11,000 $ 80,758 Accumulated depreciation and impairment ( 25,556) ( 11,000) ( 37,104) $ 8,922 $- $ 43,654 2020 At January 1 $ 8,922 $ - $ 43,654 Additions - - - Amortization charge ( 5,098) - - Impairment loss - - ( 25,352) At December 31 $ 3,824 $- $ 18,302 At December 31, 2020 Cost $ 34,478 $ 11,000 $ 80,758 Accumulated depreciation and impairment ( 30,654) ( 11,000) ( 62,456) $ 3,824 $- $ 18,302	Patents and Customer Technical skill Relationship Goodwill	Patents and Customer Technical skill Relationship Goodwill	Patents and Customer Technical skill Relationship Goodwill	Patents and Customer Technical skill Relationship Goodwill	Others	Total $ 494,080 ( 412,903) $ 81,177 $ 81,177 167,264 ( 111,401) ( 25,352) $ 111,688 $ 661,344 ( 549,656) $ 111,688
		$ 34,478 ( 25,556) $ 8,922 $ 8,922 - ( 5,098) - $ 3,824 $ 34,478 ( 30,654) $ 3,824	$ 11,000 ( 11,000) $- $ - - - - $- $ 11,000 ( 11,000) $-	$ 80,758 ( 37,104) $ 43,654 $ 43,654 - - ( 25,352) $ 18,302 $ 80,758 ( 62,456) $ 18,302	$ 367,844 ( 339,243) $ 28,601 $ 28,601 167,264 ( 106,303) - $ 89,562 $ 535,108 ( 445,546) $ 89,562

~36~

Patents and Customer Technical skill Relationship Goodwill At January 1, 2019 Cost $ 34,478 $ 11,000 $ 80,758 Accumulated depreciation and impairment ( 16,596) ( 9,473) ( 25,047) $ 17,882 $ 1,527 $ 55,711 2019 At January 1 $ 17,882 $ 1,527 $ 55,711 Additions - - - Amortization charge ( 8,960) ( 1,527) - Impairment loss - - ( 12,057) At December 31 $ 8,922 $- $ 43,654 At December 31, 2019 Cost $ 34,478 $ 11,000 $ 80,758 Accumulated depreciation and impairment ( 25,556) ( 11,000) ( 37,104) $ 8,922 $- $ 43,654	Patents and Customer Technical skill Relationship Goodwill	Patents and Customer Technical skill Relationship Goodwill	Patents and Customer Technical skill Relationship Goodwill	Patents and Customer Technical skill Relationship Goodwill	Others	Total $ 449,248 ( 316,620) $ 132,628 $ 132,628 44,832 ( 84,226) ( 12,057) $ 81,177 $ 494,080 ( 412,903) $ 81,177
		$ 34,478 ( 16,596) $ 17,882 $ 17,882 - ( 8,960) - $ 8,922 $ 34,478 ( 25,556) $ 8,922	$ 11,000 ( 9,473) $ 1,527 $ 1,527 - ( 1,527) - $- $ 11,000 ( 11,000) $-	$ 80,758 ( 25,047) $ 55,711 $ 55,711 - - ( 12,057) $ 43,654 $ 80,758 ( 37,104) $ 43,654	$ 323,012 ( 265,504) $ 57,508 $ 57,508 44,832 ( 73,739) - $ 28,601 $ 367,844 ( 339,243) $ 28,601

A. Details of amortization on intangible assets are as follows:

Operating costs Selling expenses Administrative expenses Research and development expenses		YearendedDecember31, 2020 2019 $ 5,098 $ 8,404 21 1,528 909 711 105,373 73,583 $ 111,401 $ 84,226
		2020
		$ 5,098 21 909 105,373 $ 111,401

• B. For the years ended December 31, 2020 and 2019 no interest expense was capitalized on intangible assets in the Company.

• C. Impairment information about the intangible assets is provided in 6(11).

• D. The Company has no intangible assets pledged to others.

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(11) Impairment of non- financial assets

The Group performs impairment tests on the recoverable amount of goodwill on the balance sheet date. The recoverable amount of cash-generating units has been determined based on value-in-use calculations. These calculations use cash flow projections approved by the management covering a five-year period as the basis for estimation. The relevant discount rates for 2020 and 2019 were 13.29% and 13.86%, respectively. The value-in-use used by the Group to calculate cash-generating units is derived from historical information on estimated future revenue growth rates, gross profit margins, and operating expense ratios, with reference to future industrial economic trends. The recoverable amount calculated based on the above key assumptions is lower than the book value of goodwill. Thus, the Group recognized impairment losses of $25,352 and $12,057 in 2020 and 2019, respectively.

(12) Short -term borrowings

Type of borrowings Bank borrowings Credit loans Type of borrowings Bank borrowings Credit loans		December 31, 2020 Interest rate range Collateral
		$ 1,340,000 0.75%～1.05% None December 31, 2019 Interest raterange Collateral
		$ 270,000 0.98%～1.00% None

Interest expense recognized in profit or loss amounted to $8,1 22 and $5,340 for the years ended December 31,2020 and 2019, respectively.

(13) Other payables

Salary and bonus payables Payable on equipment Payable on employees and director remuneration Others	December 31, 2020	December 31, 2019
	$ 376,625 146,904 79,349 85,752 $ 688,630	$ 288,090 58,026 35,964 68,794 $ 450,874

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(14) Pensions

• A.(a) The Company and its domestic subsidiaries have 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 6 months prior to retirement. The Company and its domestic subsidiaries contribute monthly an amount equal to 2% of the employees’ monthly salaries and wages to the retirement fund deposited with Bank of Taiwan, the trustee, under the name of the independent retirement fund committee. Also, the Company and its domestic subsidiaries 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 Company and its domestic subsidiaries will make contributions for the deficit by next March.

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

Present value of defined benefit obligations Fair value of plan assets Unadjusted amount for the period Net liability recognized in the balance sheet		December31,2020	December31,2019 $ 12,739 ( 2,409) 10,330 ( 21) $ 10,309
		$ 14,033 ( 2,663) 11,370 ( 850) $ 10,520

~39~

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

Movements in net	defined benefit liabilities are as follows:	defined benefit liabilities are as follows:	defined benefit liabilities are as follows:	defined benefit liabilities are as follows:
2020 At January 1 Current service cost Interest (expense) income Remeasurements: Return on plan assets (excluding amounts included in interest income or expense) Change in financial assumptions Experience adjustments Pension fund contribution Unadjusted amount for the period At December 31 2019 At January 1 Current service cost Interest (expense) income Remeasurements: Return on plan assets (excluding amounts included in interest income or expense) Change in financial assumptions Experience adjustments Pension fund contribution Unadjusted amount for the period At December 31	Present value of defined benefit obligations Fair value of plan assets Net defined benefit liability
	($ 12,739) $ 2,409 ( 314) - ( 88) 18 ( 13,141) 2,427 - 80 ( 524) - ( 368) - ( 892) 80 - 156 - - ($ 14,033) $ 2,663 Present value of defined benefit obligations Fair value of plan assets Ne			($ 10,330) ( 314) ( 70) ( 10,714) 80 ( 524) ( 368) ( 812) 156 850 ($ 10,520) t defined benefit liability ($ 9,450) 299) 95) ( 9,844) 74 385) 325) 636) 150 21 ($ 10,309)
		($ 11,614) ( 299) ( 116) ( 12,029) - ( 385) ( 325) ( 710) - - ($ 12,739)	$ 2,164 - ( 21 ( 2,185 74 - ( - ( 74 ( 150 - $ 2,409

~40~

• (d) The Bank of Taiwan was commissioned to manage the Fund of the Company’s and domestic subsidiaries’ defined benefit pension plan in accordance with the Fund’s annual investment and utilization plan and the “Regulations for Revenues, Expenditures, Safeguard and Utilization of the Labor Retirement Fund” (Article 6: The scope of utilization 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 securitization products, etc.). With regard to the utilization 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 authorized by the Regulator. The Company and domestic subsidiaries have no right to participate in managing and operating that fund and hence the Company and domestic subsidiaries are 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, 2020 and 2019 is given in the Annual Labor Retirement Fund Utilization Report announced by the government.

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

Discount rate Future salary increases	YearendedDecember31,	YearendedDecember31,
	2020	2019
	0.30% 3.00%	0.70%
		3.00%

Assumptions regarding future mortality experience are set based on the fifth life experience table in Taiwan for the years ended 2020 and 2019. Because the main actuarial assumption changed, the present value of defined benefit obligation is affected. The analysis was as follows:

defined benefit obligation is affected. The analysis was as follows:	obligation is affected. The analysis was as follows:	obligation is affected. The analysis was as follows:	obligation is affected. The analysis was as follows:	obligation is affected. The analysis was as follows:	obligation is affected. The analysis was as follows:
Discount rate Future salaryincreases Increase 0.25% Decrease 0.25% Increase 0.25% Decrease 0.25% December 31, 2020 Effect on present value of defined benefit obligation ($ 330) $ 341 $ 296 ($ 289) December 31, 2019 Effect on present value of defined benefit obligation ($ 322) $ 332 $ 292 ($ 285)	Discount rate Future salaryincreases
	Increase 0.25% Decrease 0.25% Increase 0.25% Decrease 0.25%
		($ 330) ($ 322)	$ 341 $ 332	$ 296 $ 292	($ 289) ($ 285)

~41~

The sensitivity analysis above is based on one assumption which changed while the other conditions remain unchanged. In practice, more than one assumption may change all at once. The method of analysing sensitivity and the method of calculating net pension liability in the balance sheet are the same.

The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the previous period.

• (f) Expected contributions to the defined benefit pension plans of the Group for the year ending December 31, 2021 amount to $158.

• (g) As of December 31, 2020, the weighted average duration of the retirement plan is 10 years. The analysis of timing of the future pension payment was as follows:

Within 1 year 1-2 years 2-5 years Over 5 years	$ 147 145 3,201 6,458 $ 9,951

• B.(a) Effective July 1, 2005, the Company and its domestic subsidiaries have 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 Company and its domestic subsidiaries contribute 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 defined contribution pension plans of the Company for the years ended December 31, 2020 and 2019, were $30,121 and $28,097, respectively.

(15) Share- based payment

• A. For the years ended December 31, 2020 and 2019, the Group’s share-based payment arrangements were as follows:

				Vesting
Type of arrangement	Grant date	Quantity granted	Contract period	condition
Succeed to 2010 Eon	August 10, 2010,	4,000 thousand	10 years	Note 1
Silicon Solution Inc.’s	October 15, 2010 and	shares
employee stock options	January 13, 2011	(Note 2)
Succeed to 2013 Eon	August 19, 2013	7,500 thousand	10 years	Note 1
Silicon Solution Inc.’s		shares
employee stock options		(Note 2)

Note 1: The accumulative proportion of the new shares that can be obtained after the two-year, three-year and four-year service expirations are 50%, 75% and 100%, respectively.

~42~

• Note 2: The number of grants given by the Company to the Eon Silicon Solution Inc. employee stock option plan is the amount given on the original plan grant date. After the merger, Eon Silicon Solution Inc.'s 2010 and 2013 employee stock option plans have 219 thousand shares and 688 thousand shares in circulation.

• Among the share-based payment arrangements above are settled by equity.

• B. Details of the share-based payment arrangements are as follows: Succeed to Eon Silicon Solution Inc. ’s employee stock options:

Options outstanding at January 1 Options forfeited Options expired Options outstanding at December 31 Options exercisable at December 31	2020	2019 Weighted-average No. of options exercise price (in dollars) 621 $ 62.3~319.0 ( 78) 59.2~303.4 - - 543 $ 59.2~303.4 543
	Weighted-average No. of options exercise price (in dollars)
	543 $ 59.2~303.4 ( 4) 217.4 ( 21) 241.2~295.4 518 $ 57.6~217.4 518

• C. No options exercised for the years ended December 31, 2020 and 2019, respectively.

• D. As of December 31, 2020 and 2019, the range of exercise prices of stock options outstanding was $57.6~$217.4 and $59.2~$303.4 (in dollars), respectively; the weighted-average remaining contractual period was 2.64 years and 3.64 years, respectively.

• E. Expenses incurred on share-based payment transactions for the years ended December 31, 2020 and 2019, were all $0.

• (16) Share capital

• A. As of December 31, 2020, the Company’s authorized capital was $3,500,000, consisting of 350,000 thousand shares of ordinary stock (including 20,000 thousand shares reserved for employee stock options), and the paid-in capital was $2,857,589 with a par value of $10 (in dollars) per share.

~43~

Movements in the number of the Company’s ordinary shares outstanding are as follows:

Shares: thousand shares

2020 Shares outstanding at January 1 272,320 Subsidiary acquired parent company's shares is regarded as treasury shares transaction ( 715) Shares outstanding at December 31 271,605 Treasury shares at the end of the period 14,154 Shares issued at December 31 285,759	2020	2019
		272,320 - 272,320 13,439 285,759

B. Treasury shares

The Company's shares held by the Company's subsidiary, J ie Young Investment Ltd., as of December 31, 2020 and 2019 due to the parent company's business strategy, were 14,154 thousand shares and 13,439 thousand shares, with carrying amounts of $347,942 and $328,048, respectively; the average book value per share were $24.58 and $24.41, and the fair value per share were $64.70 and $38.90.

(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 capitalized mentioned above should not exceed 10% of the paid-in capital each year. Capital surplus should not be used to cover accumulated deficit unless the legal reserve is insufficient.

~44~

2020 Changes in Treasury share ownership interests in Employee stock transactions subsidiaries options At January 1 $ 1,661 $ 94,949 $ 3,913 Recognition of effects from change in ownership interests in subsidiaries - cash dividends distribution from subsidiaries - 1,146 - Adjustment of capital reserve due to cash dividends that subsidiaries received from parent - 5,925 - Recognition of effects from change in ownership interests in subsidiaries - subsidiary acquired non- controlling interest - ( 1,781) - Expired cash dividends transferred to capital surplus - - - At December 31 $ 1,661 $ 100,239 $ 3,913 2019 Changes in Treasury share ownership interests in Employee stock transactions subsidiaries options At January 1 $ 1,661 $ 49,710 $ 3,913 Recognition of effects from change in ownership interests in subsidiaries - cash dividends distribution from subsidiaries - 1,146 - Disposal of subsidiaries - 35,475 - Adjustment of capital reserve due to cash dividends that subsidiaries received from parent - 8,438 - Change in associates and joint ventures accounted for under equity method - 180 - Expired cash dividends transferred to capital surplus - - - Adjustment of payments of expired cash dividends - - - At December 31 $ 1,661 $ 94,949 $ 3,913	2020	2020	2020	2020		Total $ 104,305 1,146 5,925 ( 1,781) 82 $ 109,677 Total $ 59,072 1,146 35,475 8,438 180 39 ( 45) $ 104,305
	Changes in Treasury share ownership interests in transactions subsidiaries			Employee stock options	Others
		$ 1,661 - - - - $ 1,661	$ 94,949 1,146 5,925 ( 1,781) -	$ 3,913 - - - -	$ 3,782 - - - 82
			$ 100,239	$ 3,913	$ 3,864
			2019
	Changes in Treasury share ownership interests in Employee stock transactions subsidiaries options				Others
		$ 1,661 - - - - - - $ 1,661	$ 49,710 1,146 35,475 8,438 180 - -	$ 3,913 - - - - - - $ 3,913	$ 3,788 - - - - 39 ( 45) $ 3,782
			$ 94,949

~45~

(18) Retained earning

• A. Under the Company’s Articles of Incorporation, the current year’s earnings, if any, shall be appropriated in the following order:

• (a) Payment of all taxes and dues.

• (b) Offset against prior years’ operating losses, if any.

• (c) Set aside 10% of remaining amount as legal reserve.

• (d) Setting aside a special reserve when necessary.

• (e) The remainder shall be stockholders’ bonus, which will be appropriated in proportion or be retained shall be resolved by the stockholders at the stockholders’ meeting.

• B. Dividend policy

The Company is still in the growth stage, the appropriation of stockholders ’ bonus will be appropriated as cash, the remainder will be appropriated as shares when over 5%.

• C. 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.

• D.(a) 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 equit y items is reversed subsequently, the reversed amount could be included in the distributable earnings.

• (b) The amounts previously set aside by the Company as special reserve on initial application of IFRSs in accordance with Order No. FinancialSupervisory-Securities-Corporate1010012865, dated April 6, 2012, shall be reversed proportionately when the relevant assets are used, disposed of or reclassified subsequently. Such amounts are reversed upon disposal or reclassified if the assets are investment property of land, and reversed over the use period if the assets are investment property other than land.

• E. As approved by Board of Directors on March 18, 2019, the appropriations of 2018 earnings would be legal reserve $70,651 and cash dividend $428,638, constituting $1.5(in dollars) per share. Aforementioned appropriations had been approved by stockholders’ meeting on June 13, 2019.

• F. As approved by Board of Directors on March 20, 2020, the appropriations of 2019 earnings would be legal reserve $49,804 and cash dividend $285,759, constituting $1(in dollars) per share. Aforementioned appropriations had been approved by stockholders’ meeting on June 15, 2020.

• G. As approved by Board of Directors on February 26, 2021, the appropriations of 2020 earnings would be legal reserve $107,724 and cash dividend $2(in dollars) per share. Aforementioned appropriations had not yet been approved by stockholders’ meeting.

~46~

(19) Operating revenue

Revenue from contracts with customers	Years endedDecember31,	Years endedDecember31,
	2020	2019
	$ 15,252,723	$ 11,964,770

• 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 geographical regions:

Years ended December 31,2020 Integrated circuits Years ended December 31,2019 Integrated circuits	Domestic	Domestic	Asia	Others	Total $15,252,723 Total $11,964,770
	$6,133,005 Domestic		$9,061,325 Asia	$ 58,393 Others
		$5,145,958	$6,633,214	$ 185,598

B.Contract liabilities

The Group has recognised the following revenue-related contract liabilities:

liabilities:
Contract liabilities- advance sales receipts	December 31, 2020	December 31, 2019	January 1, 2019
	$ 5,336	$ 3,949	$ 2,440

Revenue recognised that was included in the contract liability balance at the beginning of the period:

Contract liabilities-advance sales receipts

Years endedDecember31,	Years endedDecember31,
2020	2019
$ 3,888	$ 2,405

(20) Interest revenue

Years ended December 31,

Interest income from bank deposits Interest income from financial assets at amortized cost Other interest income	2020	2019
	$ 15,722 1,207 611 $ 17,540	$ 24,706 1,982 1,291
		$ 27,979

~47~

(21) Other income

Rent income Dividend income Other income, others	Years endedDecember31,	Years endedDecember31,
	2020	2019
	$ 6,341 3,473 55,126 $ 64,940	$ 6,532 11,498 32,688
		$ 50,718

(22) Other gains and losses

Gains arising from lease modifications Foreign exchange losses Gains (Losses) on financial assets at fair value through profit or loss Impairment loss Miscellaneous disbursements		Years endedDecember31, 2020 2019 $ 91 $ - ( 26,694) (,23,019) 17,707 (,19,145) (,25,352) (,12,057) ( 970) ( 970) ($ 35,218) ($ 55,191)
		2020
		$ 91 ( 26,694) 17,707 (,25,352) ( 970) ($ 35,218)

(23) Financial costs

Interest expense: Bank borrowings Provisions for liabilities - unwinding of discount Lease liability Total of interest expense Others		Years endedDecember31, 2020 2019 $ 8,122 $ 5,340 1,412 1,291 1,046 1,075 10,580 7,706 728 1,009 $ 11,308 $ 8,715
		2020
		$ 8,122 1,412 1,046 10,580 728 $ 11,308

~48~

(24) Expenses by nature

Employee benefit expense Depreciation charges on property, plant and equipment Depreciation charges on right-of-use assets Depreciation charges on investment property Amortization charges on intangible assets		Years endedDecember31, 2020 2019 $ 1,085,436 $ 841,063 $ 299,624 $ 382,730 $ 5,813 $ 8,393 $ 970 $ 970 $ 111,401 $ 84,226
		2020
		$ 1,085,436
		$ 299,624
		$ 5,813
		$ 970
		$ 111,401

(25) Employee benefit expense

Wages and salaries Labor and health insurance fees Pension costs Director remuneration Other personnel expenses	Years endedDecember31,	Years endedDecember31,
	2020	2019
	$ 975,203 48,483 30,662 15,938 15,150 $ 1,085,436	$ 744,290 46,474 28,641 7,326 14,332 $ 841,063

• A. In accordance with the Articles of Incorporation of the Company, the profit before income tax of the current year, before covering employees’ compensation and directors’ remuneration, shall be distributed as employees’ compensation and directors’ remuneration. The ratio shall not be lower than 5% for employees’ compensation and 1% for directors’ remuneration.

• B.For the years ended December 31, 2020 and 2019, employees’ compensation was accrued at $66,124 and $29,970, respectively; while directors’ remuneration was accrued at $13,225 and $5,994, respectively. The aforementioned amounts were recog nized in salary expenses.

The employees’ compensation and directors’ remuneration were estimated and accrued based on 5% and 1% of distributable profit for the years ended December 31, 2020.

• C. The employees’ compensation and directors’ remuneration of 2019 as resolved by the Board of Directors were in agreement with those amounts recognised in the 2019 financial statements.

• D. Information about employees’ compensation and directors’ remuneration of the Company as resolved by the Board of Directors will be posted in the “Market Observation Post System” at the website of the Taiwan Stock Exchange.

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(26) Income tax

A. Income tax expense

• (a) Components of income tax expense:

Current tax: Current tax on profits for the period Tax on undistributed earnings Prior year income tax underestimation Total current tax Deferred tax: Origination and reversal of temporary differences Total deferred tax Income tax expense		Years ended December 31, 2020 2019 $ 151,804 $ 50,682 - 10,378 6,787 316 158,591 61,376 8,072 4,652 8,072 4,652 $ 166,663 $ 66,028
		2020
		$ 151,804 - 6,787 158,591 8,072 8,072 $ 166,663

• (b) The income tax charge relating to components of other comprehensive income: None.

• (c) The income tax charged to equity during the period: None.

• B. Reconciliation between income tax expense and accounting profit:

Tax calculated based on profit before tax and statutory tax rate Tax exempt income by tax regulation Prior year income tax underestimation Temporary differences not recognized as deferred tax assets Effect from investment tax credits Effect from Alternative Minimum Tax Effect from tax exempt income Tax on undistributed earnings Income tax expense		Years ended December 31,	Years ended December 31,
		2020	2019
		$ 248,618 ( 16,824) 6,787 ( 6,859) ( 65,059) - - - $ 166,663	$ 112,686 ( 1,479) 316 ( 23,013) - 3,870 ( 36,730) 10,378
			$ 66,028

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

Deferred tax assets: - Temporary differences: Bad debt expense Unrealized exchange loss Loss on market value decline and obsolete and slow-moving inventories Pension liability Others Subtotal -Deferred tax liabilities: Unrealized exchange gain Gain on financial assets at fair value through profit o loss Subtotal Total Deferred tax assets: - Temporary differences: Bad debt expense Unrealized exchange loss Loss on market value decline and obsolete and slow-moving inventories Pension liability Others Subtotal -Deferred tax liabilities: Unrealized exchange gain Subtotal Total		2020 Recognized in Recognized in other January 1 profit or loss comprehensive income December 31 $ 48 $ - $ - $ 48 153 195 - 348 1,688 ( 700) - 988 61 20 - 81 2,224 124 - 2,348 4,174 ( 361) - 3,813 ( 4,731) ( 3,202) - ( 7,933) - ( 4,509) - ( 4,509) ( 4,731) ( 7,711) - ( 12,442) ($ 557) ($ 8,072) $- ($ 8,629) 2019 Recognized in Recognized in other January 1 profit or loss comprehensive income December 31 $ 48 $ - $ - $ 48 60 93 - 153 2,545 ( 857) - 1,688 57 4 - 61 2,464 ( 240) - 2,224 5,174 ( 1,000) - 4,174 ( 1,078) ( 3,653) - ( 4,731) ( 1,078) ( 3,653) - ( 4,731) $ 4,096 ($ 4,653) $- ($ 557)	2020 Recognized in Recognized in other January 1 profit or loss comprehensive income December 31 $ 48 $ - $ - $ 48 153 195 - 348 1,688 ( 700) - 988 61 20 - 81 2,224 124 - 2,348 4,174 ( 361) - 3,813 ( 4,731) ( 3,202) - ( 7,933) - ( 4,509) - ( 4,509) ( 4,731) ( 7,711) - ( 12,442) ($ 557) ($ 8,072) $- ($ 8,629) 2019 Recognized in Recognized in other January 1 profit or loss comprehensive income December 31 $ 48 $ - $ - $ 48 60 93 - 153 2,545 ( 857) - 1,688 57 4 - 61 2,464 ( 240) - 2,224 5,174 ( 1,000) - 4,174 ( 1,078) ( 3,653) - ( 4,731) ( 1,078) ( 3,653) - ( 4,731) $ 4,096 ($ 4,653) $- ($ 557)	2020 Recognized in Recognized in other January 1 profit or loss comprehensive income December 31 $ 48 $ - $ - $ 48 153 195 - 348 1,688 ( 700) - 988 61 20 - 81 2,224 124 - 2,348 4,174 ( 361) - 3,813 ( 4,731) ( 3,202) - ( 7,933) - ( 4,509) - ( 4,509) ( 4,731) ( 7,711) - ( 12,442) ($ 557) ($ 8,072) $- ($ 8,629) 2019 Recognized in Recognized in other January 1 profit or loss comprehensive income December 31 $ 48 $ - $ - $ 48 60 93 - 153 2,545 ( 857) - 1,688 57 4 - 61 2,464 ( 240) - 2,224 5,174 ( 1,000) - 4,174 ( 1,078) ( 3,653) - ( 4,731) ( 1,078) ( 3,653) - ( 4,731) $ 4,096 ($ 4,653) $- ($ 557)	2020 Recognized in Recognized in other January 1 profit or loss comprehensive income December 31 $ 48 $ - $ - $ 48 153 195 - 348 1,688 ( 700) - 988 61 20 - 81 2,224 124 - 2,348 4,174 ( 361) - 3,813 ( 4,731) ( 3,202) - ( 7,933) - ( 4,509) - ( 4,509) ( 4,731) ( 7,711) - ( 12,442) ($ 557) ($ 8,072) $- ($ 8,629) 2019 Recognized in Recognized in other January 1 profit or loss comprehensive income December 31 $ 48 $ - $ - $ 48 60 93 - 153 2,545 ( 857) - 1,688 57 4 - 61 2,464 ( 240) - 2,224 5,174 ( 1,000) - 4,174 ( 1,078) ( 3,653) - ( 4,731) ( 1,078) ( 3,653) - ( 4,731) $ 4,096 ($ 4,653) $- ($ 557)
	r	$ 48 153 1,688 61 2,224 4,174 ( 4,731) - ( 4,731) ($ 557)	$ - 195 ( 700) 20 124 ( 361) ( 3,202) ( 4,509) ( 7,711) ($ 8,072)		$ - - - - - - - - - $- 2019
		$ 48 60 2,545 57 2,464 5,174 ( 1,078) ( 1,078) $ 4,096	$ - 93 ( 857) 4 ( 240) ( 1,000) ( 3,653) ( 3,653) ($ 4,653)	$ - - - - - - - - $- (

• D. The amounts of deductible temporary difference that are not recognized as deferred tax assets are as follows:

December 31, 2020 December 31,2019 Deductible temporary differences $ 362,221 $ 381,969

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• E. The Company’s products qualify for “Regulations for Encouraging Manufacturing Enterprises and Technical Service Enterprises in the Newly Emerging, Important and Strategic Industries” and the Company is entitled to the income tax exemption for 5 consecutive years (ends on December, 2019).

• F. The Company’s income tax returns through 2018 have been assessed and approved by the Tax Authority.

• (27) Earnings per share

Basic earnings per share Profit attributable to ordinary shareholders of the parent Assumed conversion of all dilutive potential ordinary shares (Note) Employees’ compensation Diluted earnings per share Profit attributable to ordinary shareholders of the parent plus assumed conversion of all dilutive potential ordinary shares	Year ended December 31, 2020	Year ended December 31, 2020	Year ended December 31, 2020
	Amount after tax	Weighted average number of ordinary Earnings per shares outstanding (share in thousands) share (in dollars)
	$1,076,426 $1,076,426	279,909 1,295 281,204	$ 3.85 $ 3.83

	YearendedDecember31,	YearendedDecember31,	2019
		Weighted average
		number of ordinary	Earnings per
	Amount	shares outstanding	share
	after tax	(sharein thousands)	(indollars)
Basic earnings per share
Profit attributable to ordinary
shareholders of the parent	$ 497,405	280,133	$ 1.78
Assumed conversion of all dilutive
potential ordinary shares (Note)
Employees’ compensation		1,057
Diluted earnings per share
Profit attributable to ordinary
shareholders of the parent plus
assumed conversion of all dilutive
potential ordinary shares	$ 497,405	281,190	$ 1.77
Note: The employee stock options not calculate for years ended December
31, 2020 and 2019 due to the effect of anti-dilution.

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(28) Supplemental cash flow informatio n

A. Investing activities with partial cash payments:

Purchase of property, plant and equipment (including amount of transfer) Add: Opening balance of payable on equipment Less: Ending balance of payable on equipment Cash paid during the period	Year ended December 31, 2020 2019 $ 380,570 $ 284,974 58,026 41,100 ( 146,904) ( 58,026) $ 291,692 $ 268,048
	2020
	$ 380,570 58,026 ( 146,904) $ 291,692

B. Changes in liabilities from financing activities:

At January 1, 2020 Changes in cash flow from financing activities Interest paid Interest expense Changes in other non-cash items Changes from lease modifications At December 31,2020		Short-term borrowings Short-term notes and bills payable	Lease liabilities Guarantee deposits received Liabilities from financing activities-gross $ 73,235 $ 10,067 $ 353,302 ( 5,320) ( 3,236) 1,211,920 ( 1,046) - ( 1,046) 1,046 - 1,046 10,410 - 9,690 ( 5,396) - ( 5,396) $ 72,929 $ 6,831 $ 1,569,516	Lease liabilities Guarantee deposits received Liabilities from financing activities-gross $ 73,235 $ 10,067 $ 353,302 ( 5,320) ( 3,236) 1,211,920 ( 1,046) - ( 1,046) 1,046 - 1,046 10,410 - 9,690 ( 5,396) - ( 5,396) $ 72,929 $ 6,831 $ 1,569,516	Lease liabilities Guarantee deposits received Liabilities from financing activities-gross $ 73,235 $ 10,067 $ 353,302 ( 5,320) ( 3,236) 1,211,920 ( 1,046) - ( 1,046) 1,046 - 1,046 10,410 - 9,690 ( 5,396) - ( 5,396) $ 72,929 $ 6,831 $ 1,569,516
		$ 270,000 $ - 1,070,000 150,476 - - - - ( 720) - - $ 1,340,000 $149,756	$ 73,235 ( 5,320) ( 1,046) 1,046 10,410 ( 5,396) $ 72,929	$ 10,067 ( 3,236) - ( - - - (
				$ 6,831	$ 1,569,516

At January 1, 2019 Changes in cash flow from financing activities Interest paid Interest expense At December 31,2019	Short-term borrowings Short-term notes and bills payable $ 370,000 $ 99,932 ( 100,000) ( 99,932) - - - - $ 270,000 $-	Short-term borrowings Short-term notes and bills payable $ 370,000 $ 99,932 ( 100,000) ( 99,932) - - - - $ 270,000 $-	Lease liabilities Guarantee deposits received Liabilities from financing activities-gross $ 81,191 $ 9,957 $ 561,080 ( 7,956) 110 ( 207,778) ( 1,075) - ( 1,075) 1,075 - 1,075 $ 73,235 $ 10,067 $ 353,302	Lease liabilities Guarantee deposits received Liabilities from financing activities-gross $ 81,191 $ 9,957 $ 561,080 ( 7,956) 110 ( 207,778) ( 1,075) - ( 1,075) 1,075 - 1,075 $ 73,235 $ 10,067 $ 353,302
		$-		$ 353,302

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7. Related Party Transactions

(1) Names of related parties and relationship

Names of related parties and relationship
	Relationship with the
Names of related parties	Company
Elite Semiconductor Memory Technology Inc.	Subsidiary
CML Inc. (Note 1)	＂
Charng Feng Investment Ltd.	＂
Jie Yong Investment Ltd.	＂
Elite Investment Services Ltd.	＂
Elite Semiconductor (B.V.I.) Ltd. (Note 4)	＂
Eon Silicon Solution (Samoa) Inc. (Note 2)	＂
Eon Silicon Solutions Inc. USA	＂
3R Semiconductor Technology Inc.	Sub-subsidiary
Elite Silicon Technology Inc.	＂
Elite Innovation Japan Ltd.	＂
Elite Semiconductor Microelectronics Technology (Shenzhen) Inc.	＂
Elite Innovation (B.V.I.) Ltd. (Note 3)	＂
Elite Semiconductor Microelectronics (Shanghai) Technology Inc. (Note 5)	＂
CHI Microelectronics Limited (Note 6)	＂
	The Company’s subsidiary is
Arima Lasers Corporation	this company’s director
	Investee indirectly accounted
Canyon Semiconductor Inc.	for under equity method

Note 1: This company had been liquidated in May 2020.

Note 2: This company had been liquidated in September 2019. Note 3: This company had been liquidated in March 2020. Note 4: This company began liquidation process in November 2020. Note 5: This company had been established on November 27, 2019. Note 6: This company had been established on August 31, 2020.

(2) Significant transactions and balances with related parties

A. Operating revenue

Operating revenue
Sales of goods: -Subsidiaries -Associates	YearendedDecember31,
	2020	2019
	$ - 6,021 $ 6,021	$ 71 5,789 $ 5,860

Goods are sold based on the price lists in force and terms that would be available to third parties.

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B. Purchases

Purchases
Purchases of goods: -Subsidiaries	YearendedDecember31,
	2020 2019
	$ 3,828 $-

Goods are purchased from subsidiaries on normal commercial terms and conditions.

C. Others

Others
Other income-support service -Subsidiaries Research and development expenses: -Subsidiaries Selling expenses: -Subsidiaries	Year ended December 31,
	2020	2019
	$ 48,178 $ 76,375 $ 46,797	$ 25,177 $ 65,336 $-

D. Other receivables

December 31, 2020 December 31, 2019 Other receivables-related party: -Subsidiaries $ - $ 296

(3) Key management compensation

Salaries and other short-term employee benefits Post-employment benefits		YearendedDecember31, 2020 2019 $ 54,409 $ 36,572 432 432 $ 54,841 $ 37,004
		2020
		$ 54,409 432 $ 54,841

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8. Pledged Assets

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

Book value

	Book value
Assets item	December 31, 2020 December 31, 2019 Purpose $ 3,969 $ 3,969 Guarantee deposits for lease of land
Time deposits (shown as “other current assets and other non-current assets ”)	$ 3,969

9. Significant Contingent Liabilities and Unrecognized Contract Commitment s

None.

10. Significant Disaster Loss

None.

11. Significant Events after the Balance Sheet Date

Information about the appropriations of earnings of the Company which had been approved by Board of Directors on February 26, 2021 is provided in Note 6(18).

12. Others

(1) Capital management

Considering the industrial characteristics, future development, and changes in the environment, the Group plans the demand of working capital, research and development expenses and dividends to safeguard the Group ’s ability to continue as a going concern, to provide returns for shareholders, to take care of the benefit of other related parties, and to maintain an optimal capital structure, so as to promote shareholder value in the long-term.

To maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, issue new shares or pay cash to shareholders, or repurchase shares.

The gearing ratios at December 31, 2020 and 2019 were as follows:

Total assets Total liabilities Total equity Gearing ratio	December31,2020 December31,2019 $ 13,005,217 $ 10,478,733 ( 4,741,174) ( 3,017,273) $ 8,264,043 $ 7,461,460 57% 40%	December31,2020 December31,2019 $ 13,005,217 $ 10,478,733 ( 4,741,174) ( 3,017,273) $ 8,264,043 $ 7,461,460 57% 40%
		$ 13,005,217 ( 4,741,174) $ 8,264,043 57%

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(2) Financial instruments

A. Financial instruments by category

	December 31, 2020	December 31, 2019
Financial assets
Financial assets at fair value
through profit or loss
Financial assets mandatorily
measured at fair value through
profit or loss	$ 168,548	$ 150,841
Financial assets at fair value
through other comprehensive
income
Designation of equity
instrument	$ 32,418	$ 25,388
Financial assets at amortized cost
Cash and cash equivalents	$ 2,719,155	$ 1,817,377
Financial assets at amortized
cost - current	136,704	140,906
Notes receivable	-	34
Accounts receivable	1,505,780	1,160,173
Other receivables	94,611	79,745
Time deposits
(shown as “other current assets
and other non-current assets”)	3,969	3,969
Guarantee deposits paid
(shown as “other non-current
assets”)	4,551	4,494
	$ 4,464,770	$ 3,206,698
Financial liabilities
Financial liabilities at amortized
cost
Short-term borrowings	$ 1,340,000	$ 270,000
Short-term notes and bills
payable	149,756	-
Notes payable	2,115	1,890
Accounts payable	2,281,658	2,134,680
Other payables	688,630	450,874
Guarantee deposits received
(shown as “other non-current
liabilities”)	6,831	10,067
	$ 4,468,990	$ 2,867,511
Lease liability	$ 72,929	$ 73,235

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• B. Financial risk management policies

• (a) The Company adopt comprehensive system of risk management and control to identify, measure and control all categories of risk, including market risk, credit risk, liquidity risk, and risk of cash flow, to make sure management is able to control and measure market risk, credit risk, liquidity risk, and risk of cash flow effectively.

• (b) In order to control all management objectives of market risk effectively, achieve optimal level of risk, maintain appropriate level of l iquidity and collectively manage all market risks, the Company will take factors such as consideration for the overall economic environment, status of competition and market value risks.

• C. Significant financial risks and degrees of financial risks

• (a) Market risk

Foreign exchange risk

• I. The Company operates internationally and is exposed to foreign exchange risk arising from the various currency, primarily with respect to the USD and RMB. Foreign exchange risk arises from future commercial transactions and recognized assets and liabilities.

• II. Management has set up a policy to require the Company to manage the foreign exchange risk against the functional currency. The Company is required to hedge the entire foreign exchange risk exposure with the Company treasury. The Company adopts forward foreign exchange contracts through the Company treasury to manage the foreign exchange risk from future commercial transactions and recognized assets and liabilities. The foreign exchange risk will exist when future commercial transactions and recognized assets and liabilities use the currency different from the functional currency of the Company.

• III. The Company’s businesses involve some non-functional currency operations (the Company’s and certain subsidiaries’ functional currency: NTD). 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 RMB:NTD Financial liabilities Monetary items USD:NTD JPY:NTD	December 31, 2020 Foreign currency amount (In thousands) Exchange rate Book value (NTD in thousands) $ 132,416 28.480 $ 3,771,208 125,949 4.377 551,279 $ 47,030 28.480 $ 1,339,414 62,800 0.276 17,352

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(Foreign currency: functional currency)	December 31, 2019
	Foreign currency amount (In thousands) Exchange rate Book value (NTD in thousands)
Financial assets Monetary items USD:NTD Financial liabilities Monetary items USD:NTD	$ 97,806 29.980 $ 2,932,224 $ 45,751 29.980 $ 1,371,615

• IV. The total exchange loss, including realized and unrealized, arising from significant foreign exchange variation on the monetary items held by the Group for the years ended December 31 ,2020 and 2019, amounted to $26,694 and $23,019, respectively.

• V. Analysis of foreign currency market risk arising fro m significant foreign exchange variation:

(Foreign currency: functionalcurrency)	Year ended December 31, 2020
	Sensitivityanalysis
	Degree of variation Effect on profitor loss Effect on other comprehensiveincome
Financial assets Monetary items USD:NTD RMB:NTD Financial liabilities Monetary items USD:NTD JPY:NTD (Foreign currency: functionalcurrency)	1% $ 37,712 $ - 1% 5,513 - 1% ($ 13,394) $ - 1% ( 174) - YearendedDecember31,2019
	Sensitivity analysis
	Degree of variation Effect on profitor loss Effect on other comprehensiveincome
Financial assets Monetary items USD:NTD Financial liabilities Monetary items USD:NTD	1% $ 29,322 $ - 1% ($ 13,716) $ -

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Price risk

• I. The Company’s equity securities, which are exposed to price risk, are the held financial assets at fair value through profit or loss and financial assets at fair value through other comprehensive income. To manage its price risk arising from investments in equity securities, the Company diversifies its portfolio. Diversification of the portfolio is done in accordance with the limits set by the Company.

• II. The Company’s investments in equity securities comprise shares and open-end funds issued by the domestic and foreign companies. The prices of equity securities would change due to the change of the future value of investee companies. If the prices of these eq uity securities had increased/decreased by 10% with all other variables held constant, post-tax profit for the years ended December 31, 2020 and 2019 would have increased/decreased by $16,855 and $15,084, respectively, as a result of gains/losses on equity securities classified as at fair value through profit or loss. Other components of equity would have increased/decreased by $3,242 and $2,539, respectively, as a result of other comprehensive income classified as equity investment at fair value through ot her comprehensive income.

Cash flow and fair value Interest rate risk

The Company’s main interest rate risk arises from short -term borrowings and short-term notes and bills payable. Borrowings with floating rates expose the Company to cash flow interest rate risk, but the majority of risk offset by cash and cash equivalents with floating rates. Borrowings with fixed rates expose the Company to fair value interest rate risk. The Company doesn’t have significant risk of change of interest rate due to borrowings with floating rates are all shorter than one year.

(b) Credit risk

• I. Credit risk refers to the risk of financial loss to the Company 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 financial instruments stated at amortized cost and debt instruments at fair value through profit or loss.

• II. The Company manages their credit risk taking into consideration the entire company’s concern. For banks and financial institutions, only these with high rating are accepted. According to the Company’s credit policy, each local entity in the Company is responsible for managing and analyzing the credit risk for each of

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their new clients before standard payment and delivery terms and conditions are offered. Internal risk control assesses the credit quality of the customers, considering their financial position, past experience and other factors. Individual risk limits are set based on internal or external ratings in accordance with limits set by the Board of Directors. The utilization of credit limits is regularly monitored.

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

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

• 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.

• 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 bankruptcy or other financial reorganization due to their financial difficulties;

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

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

• VII. The financial assets at amortized cost including time deposits, repurchase bonds and restricted time deposits. The banks are with high rating and don’t past due before. In addition to the above, the whole economic environment doesn’t change significant, so the risk of credit risk is low and the effect to financial statement is insignificant.

• VIII. The information about ageing analysis and collaterals of accounts receivable is provide in Note6(4). The Company request significant clients provide collaterals and other right of guarantee, therefore, the Company classifies customer’s accounts receivable in accordance with the nature of collaterals. The applies the simplified approach using loss rate methodology to estimate expected credit loss. In summary, the allowance for losses which the Company should recognize is minor at December 31, 2020 and 2019.

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• XI. Movements in relation to the Company applying the modified approach to provide loss allowance for accounts receivable is as follows:

At January 1 Provision for impairment Reversal of impairment At December 31	2020	2019
	$ 14,295 - ( 8,582) $ 5,713	$ 4,289 10,006 - $ 14,295

• (c) Liquidity risk

• I. Cash flow forecasting is performed in the operating entities of the Company and aggregated by Company treasury. Company treasury monitors rolling forecasts of the Company’s liquidity requirements to ensure it has sufficient cash to meet operational needs.

• II. Surplus cash held by the operating entities over and above balance required for working capital management should invest surplus cash in interest bearing current accounts, time deposits and marketable securities, choosing instruments with appropriate maturities or sufficient liquidity to provide sufficient head-room as determined by the above-mentioned forecasts.

• III. The table below analyses the Company’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. The amounts disclosed in the table are the contractual undiscounted cash flows.

Non-derivative financial liabilities:

December 31, 2020 Short-term borrowings Short-term notes and bills payable Notes payable Accounts payable Other payables Lease liability Guarantee deposits received Derivative financial liabilities:None.	Less than 1 year Between 1 and 5 years Over 5 years $ 1,340,000 $ - $ - 149,756 - - 2,115 - - 2,281,658 - - 688,630 - - 7,405 22,554 52,635 - - 6,831

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Non-derivative financial liabilities:

December 31, 2020 Short-term borrowings Notes payable Accounts payable Other payables Lease liability Guarantee deposits received Derivative financial liabilities:None.	Less than 1 year Between 1 and 5 years Over 5 years $ 270,000 $ - $ - 1,890 - - 2,134,680 - - 450,874 - - 7,760 19,411 56,605 - - 10,067

• (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 tak e place with sufficient frequency and volume to provide pricing information on an ongoing basis. The fair value of the Group’s investment in listed stocks, beneficiary certificates and debt securities is included in Level 1.

  • Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

• Level 3: Unobservable inputs for the asset or liability. The fair value of the Group’s investment in equity investment without active market is included in Level 3.

• B. Fair value information of investment property at cost is provided in Note 6(9).

• C. Financial instruments not measured at fair value of the Group including cash and cash equivalents, time deposit (over 3 months), notes receivable, accounts receivable, other receivables, guarantee deposits paid, short -term borrowings, short-term notes and bills payable, notes payable, accounts payable and other payables, lease liabilities (current and non-current) and guarantee deposits received are approximate to their fair values.

• 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 is as follows:

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

follows:
December 31, 2020 Assets Recurring fair value measurements Financial assets at fair value through profit or loss Equity securities Beneficiary certificates Debt securities Financial assets at fair value through other comprehensive income Equity securities Financial liabilities: None. December 31, 2019 Assets Recurring fair value measurements Financial assets at fair value through profit or loss Equity securities Beneficiary certificates Debt securities Financial assets at fair value through other comprehensive income Equity securities Financial liabilities: None.			Level 1	Level 2		Level 3	Total $ 72,557 58,904 37,087 32,418 $ 200,966 Total $ 63,257 53,488 34,096 25,388 $ 176,229
			$ 72,557 58,904 37,087 - $ 168,548 Level 1	$ - - - - $- Level 2		$ - - - 32,418
						$ 32,418 Level 3
			$ 63,257 53,488 34,096 - $ 150,841	$ - - - - $-		$ - - - 25,388
						$ 25,388

• (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	Open-endfund
Market quoted price	Closing price	Net asset value

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• 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 .

• 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 Company’s financial and non-financial instruments. Therefore, the estimated value derived using valuation model is adjusted accordingly with additional inputs, for example, model risk or liquidity risk and etc. In accordance with the Company’s management policies and relevant control procedures relating to the valuation models used for fair value measurement, manageme nt 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 a nd adjusted based on current market conditions.

• E. For the years ended December 31, 2020 and 2019, 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, 2020 and 2019:

December 31, 2020 and 2019:
At January 1 Valuation adjustment At December 31	Equity securities
	2020	2020
	$ 25,388 7,030 $ 32,418	$ 29,650 ( 4,262) $ 25,388

• G. Accounting segment is in charge of valuation procedures for fair value measurements being categorized 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.

~65~

• H. 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:

			Significant
	Fair value at	Valuation	unobservable	Range	Relationship of
	December 31, 2020 technique		input	(weighted average)	inputs to fair value
Non-derivative	equity instrument:
Unlisted shares	$ 32,418	Market -	Discount for	40%	the higher the
		comparable	lack of		discount for lack of
		companies	marketability		marketability, the
					lower the fair value
	Fair value at		Significant
	December 31,	Valuation	unobservable	Range	Relationship of
	2019	technique	input	(weighted average)	inputs to fair value
Non-derivative	equity instrument:
Unlisted shares	$ 25,388	Market -	Discount for	40%	the higher the
		comparable	lack of		discount for lack of
		companies	marketability		marketability, the
					lower the fair value

(4) Others

As of the reported date, the Company has assessed that COVID-19 has no adverse impact on the Company’s overall operating activities and financial statements. However, the Company will continue to pay attention to the development of the COVID-19 and its impact on the overall economic environment

13. Supplementary Disclosures

(1) Significant transactions informatio n

• 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 $300 million or 20% of paid-in capital or more: None.

• F. Disposal of real estate reaching $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: None.

• H. Receivables from related parties reaching $100 million or 20% of paid -in capital or more: None.

~66~

• I. Trading in derivative instruments undertaken during the reporting periods:

• None.

• J. Significant inter-company transactions during the reporting periods: Please refer to table 2.

(2) Information on investees

Names, locations and other information of investee companies (not including investees in Mainland China): Please refer to table 3.

(3) Information on investments in Mainland China

• A. Investee accounted for under the equity method of the Company, Elite Semiconductor (B.V.I.) Limited, which has been approved to establish Shanghai offices in Mainland China by Investment Commission of MOEA on June 18, 2009. The Shanghai office indirectly established by the Company was approved for cancellation by the Investment Commission of MOEA on November 17, 2020.

• B. Basic information: Please refer to table 4.

• C. Significant transactions, either directly or indirectly through a third area, with investee companies in the Mainland Area: None.

(4) Major shareholders informatio n

As of December 31, 2020, the Company did not have any shareholders with a shareholding ratio more than 5%.

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Elite Semiconductor Microelectronics Technology Inc.

Holding of marketable securities at the end of the period

December 31, 2020

Table 1

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

Securities held by	Name and category of marketable securities	Relationship with the securities issuer	General ledger account	As of December 31, 2020	As of December 31, 2020	As of December 31, 2020	As of December 31, 2020	Footnote
				Number of shares	Book value (Note)	Ownership(%)	Fair value (Note)
Elite Semiconductor Microelectronics Technology Inc.	Arima Lasers Corporation stock	The Company’s subsidiary is this company’s director	Financial assets at fair value through profit or loss	3,455,000	$ 72,209	12.26	$ 72,209
Elite Semiconductor Microelectronics Technology Inc.	King Yuan Electronics Corporation stock	None	Financial assets at fair value through profit or loss	10,000	348	0.00	348
Elite Semiconductor Microelectronics TechnologyInc.	HSBC FRN PERPETUAL bond	None	Financial assets at fair value through profit or loss	1,000,000	25,192	Not applicable	25,192
Elite Semiconductor Microelectronics Technology Inc.	ANZ FRN PERPETUAL bond	None	Financial assets at fair value through profit or loss	500,000	11,895	Not applicable	11,895
Elite Semiconductor Microelectronics Technology Inc.	BGF RENMINBI BOND FUND	None	Financial assets at fair value through profit or loss	127,986	58,904	Not applicable	58,904
Elite Semiconductor Microelectronics Technology Inc.	Turning Point Lasers Ltd. preferred stock	None	Financial assets at fair value through other comprehensive income	1,000,000	32,418	8.06	32,418
Elite Investment Services Ltd.	HSBC HLDGS PLC 6.20 PCT PREF SHARE SERIES A	None	Financial assets at fair value through profit or loss	20,000	14,303	Not applicable	14,303
Elite Investment Services Ltd.	HSBC ALL CHINA BOND FUND - AC(2802)	None	Financial assets at fair value through profit or loss	600,000	32,833	Not applicable	32,833
Charng Feng Investment Ltd.	King Yuan Electronics Corporation stock	None	Financial assets at fair value through profit or loss	10,000	348	0.00	348
Charng Feng Investment Ltd.	Arima Lasers Corporation stock	None	Financial assets at fair value through profit or loss	907,000	18,956	3.22	18,956
Charng Feng Investment Ltd.	Ushine Photonics Corporation stock	None	Financial assets at fair value through profit or loss	115,519	797	0.41	797
Charng Feng Investment Ltd.	Brightek Optoelectronic Corporation Ltd. stock	None	Financial assets at fair value through profit or loss	65,601	1,709	0.11	1,709
Charng Feng Investment Ltd.	M3 Technology Inc. stock	None	Financial assets at fair value through profit or loss	433,000	48,063	1.18	48,063
Charng Feng Investment Ltd.	M2 Communication Inc. stock	None	Financial assets at fair value through profit or loss	2,000,000	4,917	7.89	4,917
Charng Feng Investment Ltd.	Powerchip Semiconductor Manufacturing Corporation	None	Financial assets at fair value through profit or loss	1,500,000	75,000	0.05	75,000
Charng Feng Investment Ltd.	Turning Point Lasers Ltd. preferred stock	None	Financial assets at fair value through other comprehensive income	1,000,000	32,418	8.06	32,418
Jie Yong Investment Ltd.	Elite Semiconductor Microelectronics Technology Inc. stock	Parent company	Financial assets at fair value through other comprehensive income	14,154,000	915,764	4.95	915,764

Note: Valuation adjustment of financial assets and cumulative translation differences are included.

Elite Semiconductor Microelectronics Technology Inc.

Significant inter-company transactions during the reporting periods

Year ended December 31, 2020

Table 2

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

Number (Note 1)	Company name	Counterparty	Relationship (Note 2)	Transaction	Transaction	Transaction	Transaction
				General ledger account	Amount	Transaction terms	Percentage of consolidated total operating revenues or total assets (Note 3)
0	Elite Semiconductor Microelectronics Technology Inc.	Eon Silicon Solutions,Inc.USA	(1)	Research and development expenses	$ 76,375	Note 4	0.50%
0	Elite Semiconductor Microelectronics Technology Inc.	Elite Semiconductor Memory Technology Inc.	(1)	Other revenue	48,000	Note 4	0.31%

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:

(1) Parent company to subsidiary.

(2) Subsidiary to parent company.

(3) Subsidiary to subsidiary.

Note 3: Regarding percentage of transaction amount to consolidated total operating revenues or total assets, it is computed based on period-end balance of transaction to consolidated total assets for balance sheet accounts and based on accumulated transaction amount for the period to consolidated total operating revenues for income statement accounts.

Note 4: The transaction terms are decided by the two parties through negotiation. Note 5: Only transactions with related parties of NT$25 million or more are disclosed, and transactions with related parties will not be disclosed separately. Note 6: The transaction between parent company to subsidiary and subsidiaries were elminated when preparing consolidated financial statements.

Elite Semiconductor Microelectronics Technology Inc.

Information on investees (exclude investee in Mainland China)

Year ended December 31, 2020

Table 3

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

Investor	Investee	Location	Main business activities	Initial investment amount	Initial investment amount	Shares held as at December 31, 2020	Shares held as at December 31, 2020	Shares held as at December 31, 2020	Net income (loss) of the investee for the year ended December 31, 2020	Investment income (loss) recognized by the Company for the year ended December 31, 2020	Footnote
				Balance as at December 31, 2020	Balance as at December 31, 2019	Number of shares	Ownership (%)	Book value
Elite Semiconductor Microelectronics Technology Inc.	Elite Semiconductor Memory Technology Inc.	Taiwan	Research and development, production, sales and related consulting services of integrated circuit	$ 272	$ 272	100,000	100	$ 24,236	$ 9,712	$ 9,712
Elite Semiconductor Microelectronics Technology Inc.	Charng Feng Investment Ltd.	Taiwan	General investment	500,000	500,000	50,000,000	100	511,029	112,211	111,110	Note 2
Elite Semiconductor Microelectronics Technology Inc.	Elite Investment Services Ltd.	British Virgin Islands	General investment	427,200	427,200	15	100	620,500	( 7,222)	( 7,222)
Elite Semiconductor Microelectronics Technology Inc.	Elite Semiconductor (B.V.I.) Ltd.	British Virgin Islands	General investment	-	142,400	-	-	-	( 7,220)	( 7,220)	Note 3
Elite Semiconductor Microelectronics Technology Inc.	Jie Yong Investment Ltd.	Taiwan	General investment	270,000	270,000	3,600,000	41.86	136,983	13,823	( 138)
Elite Semiconductor Microelectronics Technology Inc.	Eon Silicon Solutions, Inc.USA	U.S.A.	Investigation and research of business situation and industrial technology	13,304	13,304	200,000	100	( 1,411)	( 240)	( 240)
Charng Feng Investment Ltd.	3R Semiconductor Technology Inc.	Taiwan	Product design, wholesale and retail of electronic materials, manufacturing of electronic components, information software services and international trade	69,407	69,407	10,000,000	100	21,953	( 567)	( 567)
Charng Feng Investment Ltd.	Elite Silicon Technology Inc.	Taiwan	Product design, wholesale and retail of electronic materials, manufacturing of electronic components, information software services and international trade	61,201	59,288	7,448,960	98.01	528	( 154)	( 154)
Charng Feng Investment Ltd.	Canyon Semiconductor Inc.	Taiwan	International trade, manufacturing of electronic components, product design and information software services	80,337	80,337	8,350,000	40.93	33,883	1,642	673

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Investor	Investee	Location	Main business activities	Initial investment amount		Shares held as at December 31, 2020			Net income (loss) of the investee for the year ended December 31, 2020	Investment income (loss) recognized by the Company for the year ended December 31, 2020	Footnote
				Balance as at December 31, 2020	Balance as at December 31, 2019	Number of shares	Ownership (%)	Book value
Charng Feng Investment Ltd.	Elite Innovation Japan Ltd.	Japan	Product design, wholesale and retail of electronic materials, manufacturing of electronic components, information software services and international trade	$ 2,111	$ 2,111	$ 200	100	2,195	$ 116	$ 116
Charng Feng Investment Ltd.	CHI Microelectronics Limited	Hong Kong	Trading	367	-	10,000	100	367	( 4)	( 4)	Note 4

Note 1: The foreign investment amount translated at the exchange rate as of December 31, 2020.

Note 2: The investment income/loss has been adjusted the unrealized gain/loss of upstream transactions.

Note 3: Elite Semiconductor (B.V.I.) Ltd. obtained a liquidated certificate from local regulatory authority on February 9, 2021, and obtained a liquidated letter from Investment Commission of MOEA on February 20, 2021. Note 4: CHI Microelectronics Limited. was established on August 31, 2020. The Company's subsidiary, Charng Feng Investment Ltd., obtained the investment amount of HKD 100,000 approved by the Investment Commission of MOEA on December 11, 2020.

Elite Semiconductor Microelectronics Technology Inc.

Information on investments in Mainland China

Year ended December 31, 2020

Table 4

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

Investee in Mainland China	Main business activities	Paid-in capital (Note 4)	Investment method (Note 1)	Accumulated amount of remittance from Taiwan to Mainland China as at January 1, 2020	Amount remitted from Taiwan to Mainland China/Amount remitted back to Taiwan for the year ended December 31, 2020	Amount remitted from Taiwan to Mainland China/Amount remitted back to Taiwan for the year ended December 31, 2020	Accumulated amount of remittance from Taiwan to Mainland China as at December 31, 2020	Net income (loss) of the investee for the year ended December 31, 2020	Ownership held by the Company (direct or indirect)	Investment income (loss) recognized by the Company for the year ended December 31, 2020 (Note 2)	Book value of investments in Mainland China as at December 31, 2020	Accumulated amount of investment income remittance back to Taiwan as at December 31, 2020	Footnote
					Remitted to Mainland China	Remitted back to Taiwan
Elite Semiconductor Microelectronics Technology (Shenzhen) Inc.	Trading of goods or technical services, develop and sale products of networking system, storage, and peripherals, technical consulting and services of integrated circuit, and after - sales service	$ 2,549	(1)	$ -	$1,424	$ -	$ 1,424	$ 1,224	100	$ 1,224	$ 4,619	$ -
Elite Semiconductor Microelectronics (Shanghai) Technology Inc.	Product design, wholesale and retail of electronic materials, information software services and international trade	5,696	(1)	-	5,696	-	5,696	581	100	581	6,633	-	Note 6
Company name Accumulated amount of remittance from Taiwan to Mainland China as at December 31, 2020 Investment amount approved by the Investment Commission of MOEA (Note 5) Ceiling of investments in Mainland China imposed by the Investment Commission of MOEA Charng Feng Investment Ltd. $ 7,120 $ 78,021 $ 300,000
Company name	Accumulated amount of remittance from Taiwan to Mainland China as at December 31, 2020	Investment amount approved by the Investment Commission of MOEA (Note 5)	Ceiling of investments in Mainland China imposed by the Investment Commission of MOEA
Charng Feng Investment Ltd.	$ 7,120	$ 78,021	$ 300,000

Note 1: The methods for engaging in investment in Mainland China include the following:

• (1) Direct investment in Mainland China.

• (2) Indirect investment in Mainland China through companies registered in a third region.

• (3) Other methods.

Note 2: Investment income (loss) was recognized based on financial statement prepared by each company which were audited by independent auditors.

Note 3: The amount of the statement should show as New Taiwan Dollars.

Note 4: Paid-in capital translated at the exchange rate as of December 31, 2020.

Note 5: The Company's subsidiary, Charng Feng Investment Ltd., obtained the revised investment amount of USD 39,485.42 and USD 2,500,000 approved by the Investment Commission, MOEA on February 6, 2020 and July 10, 2020.

Note 6: Elite Semiconductor Microelectronics (Shanghai) Technology Inc. was established on November 27, 2019. The Company's subsidiary, Charng Feng Investment Ltd., obtained the investment amount of USD 200,000 approved by the Investment Commission of MOEA on May 20, 2020.

Elite Semiconductor Microelectronics Technology Inc. Statement of Cash and Cash Equivalents December 31, 2020

(Expressed in thousands of New Taiwan dollars)

Statement 1 Item Petty cash Bank deposits Demand deposits - New Taiwan Dollar - Foreign currency Checking accounts deposits - New Taiwan Dollar Time deposits - Foreign currency Total	Description	Amount	Amount
	$ 115 142,534 USD 25,668,309.03 exchange rate 28.48 731,033 EUR 603.15 exchange rate 35.02 21 RMB 1,266,558.74 exchange rate 4.377 5,544 7 USD 45,500,000 exchange rate 28.48 1,295,840 RMB 124,300,000 exchange rate 4.377544,061 $ 2,719,155
			$ 2,719,155

Elite Semiconductor Microelectronics Technology Inc. Statement of Accounts Receivable December 31, 2020

Elite Semiconductor Microelectronics Technology Inc. Statement of Accounts Receivable December 31, 2020	Elite Semiconductor Microelectronics Technology Inc. Statement of Accounts Receivable December 31, 2020	Elite Semiconductor Microelectronics Technology Inc. Statement of Accounts Receivable December 31, 2020	Elite Semiconductor Microelectronics Technology Inc. Statement of Accounts Receivable December 31, 2020
(Expressed in thousands of New Taiwan dollars) Statement 2 Customer name Description Amount Note General customer: 1.WT Microelectronics Co., Ltd. $ 415,789 2.AVT International Ltd. 192,089 3.Realtek Singapore Private Limited 120,644 4.TP-Link Corporation Limited. 100,849 Others 682,122 The balance of each customer has not exceeded 5% of the accounts receivable. 1,511,493 Less: Allowance for bad debt ( 5,713) $ 1,505,780 The accounts receivable past due over one year amounted to $0.
	Description	Amount $ 415,789 192,089 120,644 100,849 682,122 1,511,493 ( 5,713) $ 1,505,780
			The balance of each customer has not exceeded 5% of the accounts receivable. The accounts receivable past due over one year amounted to $0.

Elite Semiconductor Microelectronics Technology Inc. Statement of Inventory December 31, 2020

(Expressed in thousands of New Taiwan dollars)

Statement 3 Item Description		Amount Note Cost Net realizable value	Amount Note Cost Net realizable value
Raw materials Work in progress Finished goods Inventory in transit Less: Allowance on market value decline and obsolete and slow- moving inventories		$ 138,104 4,724,546 1,199,284 6,481	$ 133,711 The net realizable value is net market value. 5,146,152 The net realizable value is net market value. 1,178,654 The net realizable value is net market value. 6,481 The replacement cost is net market value. $ 6,464,998
		6,068,415 ( 98,771) $ 5,969,644

Elite Semiconductor Microelectronics Technology Inc. Movement Statement of Investment Accounted for Under the Equity Method Year ended December 31, 2020 (Expressed in thousands of New Taiwan dollars)

Statement 4

Name	Beginning balance Increase (Note 1) Decrease (Note 1) Ending balance	Beginning balance Increase (Note 1) Decrease (Note 1) Ending balance	Beginning balance Increase (Note 1) Decrease (Note 1) Ending balance	Beginning balance Increase (Note 1) Decrease (Note 1) Ending balance	Beginning balance Increase (Note 1) Decrease (Note 1) Ending balance	Beginning balance Increase (Note 1) Decrease (Note 1) Ending balance	Market value or net equity value Basis of valuation For collateralized or pledge Note Amount Unit price Total price	Market value or net equity value Basis of valuation For collateralized or pledge Note Amount Unit price Total price	Market value or net equity value Basis of valuation For collateralized or pledge Note Amount Unit price Total price
	Number of shares		Amount Number of shares	Amount Number of shares Amount Number of shares Ownership			Amount Unit price
Elite Semiconductor Memory Technology Inc. Charng Feng Investment Ltd. Elite Investment Services Ltd. Elite Semiconductor (B.V.I.) Ltd. Jie Yong Investment Ltd. Eon Silicon Solutions Inc. USA	100,000 50,000,000 15 1,000 3,600,000 200,000		$ 30,179 394,670 627,721 26,627 147,009 ( 1,170) $ 1,225,036	- - - - - -	$ - - ($ 5,943) 100,000 100% 116,359 - - 50,000,000 100% - - ( 7,221) 15 100% - ( 1,000) ( 26,627) - - - - ( 10,026) 3,600,000 41.86% - - ( 241)200,000 100% $116,359 ($ 50,058)		$ 24,236 $ 242 511,029 10 620,500 41,366,667 - - 136,983 38 ( 1,411) ( 7) $ 1,291,337		$ 24,236 Equity method None 511,029 Equity method None 620,500 Equity method None - Equity method None 136,983 Equity method None ( 1,411) Equity method None $ 1,291,337

Note 1: The amount increased and decreased in the period comprise cumulative translation adjustments, valuation adjustment on financial assets and subsidiary own the Company’s share.

Elite Semiconductor Microelectronics Technology Inc. Movement Statement of Property, Plant and Equipment Year ended December 31, 2020 (Expressed in thousands of New Taiwan dollars)

Statement 5

Item	Beginning balance	Beginning balance	Increase	Decrease	Transfer Ending balance For collateralized orpledge Note	Transfer Ending balance For collateralized orpledge Note
Land Buildings and structures Machinery equipment Testing equipment Other equipment		$ 9,023 635,941 429,694 250,644 1,228,482	$ - 505 85,605 38,091 252,195	$ - - - ( 5,459) -	$ - - 2,719 1,455 -	$ 9,023 None 636,446 ＂ 518,018 ＂ 284,731 ＂ 1,480,677 ＂ $ 2,928,895
		$ 2,553,784	$ 376,396	($ 5,459)	$ 4,174

Elite Semiconductor Microelectronics Technology Inc. Movement Statement of Accumulated Depreciation of Property, Plant and Equipment Year ended December 31, 2020 (Expressed in thousands of New Taiwan dollars)

Statement 6 Item	Beginning balance	Beginning balance	Increase	Decrease	Transfer Ending balance Note
Buildings and structures Machinery equipment Testing equipment Other equipment	($ 364,888) ( 352,538) ( 148,491) ( 992,800)		($ 34,055) ( 22,509) ( 22,333) (220,727)	$ - - 5,459 -	$ - ($ 398,943) - ( 375,047) - ( 165,365) - (1,213,527) $- ($ 2,152,882)
		($ 1,858,717)	($ 299,624)	$ 5,459	$-

Elite Semiconductor Microelectronics Technology Inc. Statement of Accounts Payable December 31, 2020 (Expressed in thousands of New Taiwan dollars)

Statement 7 Customer name General customer: Powerchip Semiconductor Manufacturing Corporation ChipMOS Technologies Inc. Siliconware Precision Industries Co., Ltd. Others	Description		Amount $1,046,635 451,027 179,359 604,637 $2,281,658	Note
				The balance of each customer has not exceeded 5% of the accounts payable.

Elite Semiconductor Microelectronics Technology Inc. Statement of Operating Revenue Year ended December 31, 2020 (Expressed in thousands of New Taiwan dollars) Statement 8

Item Sales revenue Less: sales returns and discounts Net sales revenue	Quantities 1,999,004 thousands 6,256 thousands	Amount $ 15,315,841 ( 63,118) $ 15,252,723	Note

Elite Semiconductor Microelectronics Technology Inc. Statement of Operating Costs Year ended December 31, 2020

(Expressed in thousands of New Taiwan dollars)

Statement of Operating Costs Year ended December 31, 2020 (Expressed in thousands of New Taiwan dollars)
Statement 9 Item Direct material Raw material at beginning Add: material purchased for the year Less: transferred to expenses Raw material at the end Transferred to scrapped raw material Raw material consumed Direct labor Manufacturing overheads Manufacturing cost Work in progress at the beginning Add: work in progress purchased Less: transferred to expenses Work in progress at the end Cost of finished goods Add: finished goods at the beginning Finished goods purchased Transferred from expenses Less: transferred to expenses Finished goods at the end Others Total cost of goods sold Employees’ performance bonus Employees’ compensation Scrapped raw material Reversal of allowance on market value decline and obsolete and slow-moving inventories Total operating costs		Amount
		$ 156,518 4,630,399 ( 932) ( 138,104) (10,367)
		4,637,514 31,883 3,000,310
		7,669,707 4,013,286 5,978,635 ( 11,308) ( 4,724,546)
		12,925,774 963,140 7,913 40,118 ( 7,023) ( 1,199,284) ( 37,586)
		12,693,052 32,469 9,190 10,367 ( 69,991)
		$ 12,675,087

Elite Semiconductor Microelectronics Technology Inc. Statement of Manufacturing Overheads Year ended December 31, 2020 (Expressed in thousands of New Taiwan dollars) Statement 10 Item Description Amount Note Processing fee $ 2,476,947 Depreciation charge 225,295 The balance of each customer has not exceeded 5% of the Other expenses 298,068 manufacturing overheads. Total $ 3,000,310

Statement 11 Item	Elite Semiconductor Microelectronics Technology Inc. Statement of Selling Expenses Year ended December 31, 2020 (Expressed in thousands of New Taiwan dollars) Description Amount Note	Elite Semiconductor Microelectronics Technology Inc. Statement of Selling Expenses Year ended December 31, 2020 (Expressed in thousands of New Taiwan dollars) Description Amount Note	Elite Semiconductor Microelectronics Technology Inc. Statement of Selling Expenses Year ended December 31, 2020 (Expressed in thousands of New Taiwan dollars) Description Amount Note	Elite Semiconductor Microelectronics Technology Inc. Statement of Selling Expenses Year ended December 31, 2020 (Expressed in thousands of New Taiwan dollars) Description Amount Note
		Description
Salaries and wages Technical support service fee fee of import and export Other expenses Total				$ 131,014 51,599 32,143 58,398 The balance of each customer has not exceeded 5% of the selling expenses. $ 273,154

Statement 12 Item	Elite Semiconductor Microelectronics Technology Inc. Statement of Administrative Expenses Year ended December 31, 2020 (Expressed in thousands of New Taiwan dollars) Description Amount Note	Elite Semiconductor Microelectronics Technology Inc. Statement of Administrative Expenses Year ended December 31, 2020 (Expressed in thousands of New Taiwan dollars) Description Amount Note	Elite Semiconductor Microelectronics Technology Inc. Statement of Administrative Expenses Year ended December 31, 2020 (Expressed in thousands of New Taiwan dollars) Description Amount Note	Elite Semiconductor Microelectronics Technology Inc. Statement of Administrative Expenses Year ended December 31, 2020 (Expressed in thousands of New Taiwan dollars) Description Amount Note
		Description
Salaries and wages Labor fee Other expenses Total				$ 194,905 17,412 64,527 The balance of each customer has not exceeded 5% of the administrative expenses. $ 276,844

Statement 13 Item	Elite Semiconductor Microelectronics Technology Inc. Statement of Research and Development Expenses Year ended December 31, 2020 (Expressed in thousands of New Taiwan dollars) Description Amount Note	Elite Semiconductor Microelectronics Technology Inc. Statement of Research and Development Expenses Year ended December 31, 2020 (Expressed in thousands of New Taiwan dollars) Description Amount Note	Elite Semiconductor Microelectronics Technology Inc. Statement of Research and Development Expenses Year ended December 31, 2020 (Expressed in thousands of New Taiwan dollars) Description Amount Note	Elite Semiconductor Microelectronics Technology Inc. Statement of Research and Development Expenses Year ended December 31, 2020 (Expressed in thousands of New Taiwan dollars) Description Amount Note	Elite Semiconductor Microelectronics Technology Inc. Statement of Research and Development Expenses Year ended December 31, 2020 (Expressed in thousands of New Taiwan dollars) Description Amount Note
			Description
Salaries and wages Amortization charge Research and development expenses Depreciation charge Other expenses Total					$ 530,838 105,372 93,010 58,278 147,589 The balance of each customer has not exceeded 5% of the research and development expenses. $ 935,087

Elite Semiconductor Microelectronics Technology Inc. Summary of Employee Benefit, Depreciation and Amortization charges by Function Year ended December 31, 2020 (Expressed in thousands of New Taiwan dollars)

Statement 14

Function Nature	2020 2019	2020 2019	2020 2019	2020 2019	2020 2019	2020 2019
	Classified as operating costs	Classified as operating expenses	Total	Classified as operating costs	Classified as operating expenses	Total
Employee benefit expense
Wagesand salaries	134,384	840,819	975,203	108,164	636,126	744,290
Labor and health insurance fees	7,346	41,137	48,483	7,713	38,761	46,474
Pension costs	4,296	26,366	30,662	4,241	24,400	28,641
Director remuneration	-	15,938	15,938	-	7,326	7,326
Other employee benefit expense	2,694	12,456	15,150	2,680	11,652	14,332
Depreciationcharges	225,295	81,112	306,407	319,874	72,219	392,093
Amortization charges	5,098	106,303	111,401	8,404	75,822	84,226

Note:

1. As at December 31, 2020 and 2019, the number of the Company’s employee were 465 and 451, including 4 non-employee directors.

2. For the entity that its shares are listed on Taiwan Stock Exchange or traded in the Taipei Exchange, the following additional disclosures are required: (1) The average employee benefit expense for the current year was $2,320.

3. (“total employee benefit expense for the current year – total directors’ remuneration”/ “the number of employees in the current year – the number of non- employee directors”).

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Elite Semiconductor Microelectronics Technology Inc. Summary of Employee Benefit, Depreciation and Amortization charges by Function Year ended December 31, 2020

(Expressed in thousands of New Taiwan dollars)

Statement 14

The average employee benefit expense for the previous year was $1,865.

• (“total employee benefit expense for the previous year – total directors’ remuneration”/ “the number of employees in the previous year – the number of non- employee directors”).

• (2) The average employee salaries and wages for the current year was $2,115.

(total salaries and wages for the current year/ “the number of employees in the current year – the number of non- employee directors”).

• The average employee salaries and wages for the previous year was $1,665.

(total salaries and wages for the previous year/ “the number of employees in the previous year – the number of non- employee directors”)

• (3) The variation in the adjustments of the average employee salaries and wages was 27%.

• (“the average employee salaries and wages for the current year - the average employee salaries and wages for the previous year”/ the average employee salaries and wages for the previous year)

• (4) The supervisor’s remuneration for the current year was $0. The supervisor’s remuneration for the previous year was $461. (The Company founded audit committee on June, 2019.)

• (5) The Company’s compensation policies (including directors, supervisors, executive officers and employees).

According to the Company’s Articles of Incorporation, the Compensation Committee determine the salary for the directors, taking into account the

• extent and value of the services provided for the management of the Company and the standards of the industry within the R.O.C. then submitted to the Board of Directors for approval.

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Elite Semiconductor Microelectronics Technology Inc. Summary of Employee Benefit, Depreciation and Amortization charges by Function Year ended December 31, 2020 (Expressed in thousands of New Taiwan dollars)

Statement 14

The Company could set different salaries between independent directors and general directors. According to the Company’s Articles of independent directors, the salary for the independent directors should on Articles of Incorporation or been approved by stockholders’ meeting, and could set reasonable salaries that different from general directors.

The Company’s compensation policies of executive officers and employees are based on fixed salary of salary structure, including base salary, meal allowance, variable salary (including overtime wage and delay meal allowance), and bonus (including year-end bonus, supplemental wage). The salary of the position is accordance with the salary standards of the industry, responsibilities in the Company and the services provided for the operational objectives of the Company.

Besides operational performance, future business risk in industry and trend of development, the Company also take personal performance and services provided to the performance of the Company for reference to determine reasonable salary.

The performance assessment and rationality of performance about executive officers are reviewed by Compensation Committee and Board of Directors, and also adjust the system of salary through actual operating conditions and related laws.

In accordance with the Articles of Incorporation of the Company, a ratio of profit of the current year distributable, after covering accumulated losses, shall be distributed as employees’ compensation and directors’ remuneration. The ratio shall not be lower than 5% for employees’ compensation and 1% for directors’ remuneration.